G.R. No. 180257; February 23, 2011
EUSEBIO GONZALES, Petitioner, vs. PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK, EDNA OCAMPO, and ROBERTO NOCEDA, Respondents.

FACTS

Petitioner Eusebio Gonzales was a long-time client of respondent Philippine Commercial and International Bank (PCIB). In October 1992, PCIB granted him a Credit-On-Hand Loan Agreement (COHLA), allowing him to draw funds via check against his aggregate account deposits as collateral. He also maintained a Foreign Currency Deposit (FCD) with PCIB.
On three occasions—October 30, 1995, December 26, 1995, and January 3, 1996—Gonzales, together with the spouses Jose and Jocelyn Panlilio, obtained loans from PCIB totaling PhP 1,800,000, evidenced by three promissory notes. The promissory notes stipulated the solidary liability of Gonzales and the spouses Panlilio. A real estate mortgage over a property covered by TCT No. 38012, owned by Gonzales and the spouses Panlilio, secured the loans. The loan proceeds were received solely by the spouses Panlilio, who initially serviced the monthly interest through automatic debits from their PCIB account. However, they defaulted starting July 1998.
On September 30, 1998, Gonzales issued a check for PhP 250,000 in favor of Rene Unson, drawn against his COHLA. Before the check’s presentment, on October 7, 1998, PCIB terminated Gonzales’s credit line under the COHLA due to the unpaid loan interest dues. Consequently, when Unson presented the check for payment on October 13, 1998, PCIB dishonored it. PCIB also froze Gonzales’s FCD account. The dishonor caused a dispute between Gonzales and Unson, leading to Gonzales paying Unson in cash.
Gonzales demanded that PCIB honor the check and release his FCD, arguing the check was fully funded and that the spouses Panlilio were the actual borrowers. PCIB refused, citing the outstanding loan obligations. Gonzales filed a damages case against PCIB and its officers (Ocampo and Noceda) for the unjust dishonor of the check.
The Regional Trial Court (RTC) ruled in favor of PCIB, finding Gonzales solidarily liable on the promissory notes and that the check’s dishonor was justified due to the terminated credit line. The Court of Appeals affirmed the RTC decision.

ISSUE

1. Whether petitioner Eusebio Gonzales is solidarily liable with the spouses Panlilio for the three promissory notes covering the PhP 1,800,000 loan.
2. Whether respondent PCIB properly dishonored the check issued by Gonzales drawn against his COHLA.

RULING

1. On Solidary Liability: The Supreme Court AFFIRMED the findings of the lower courts. Gonzales is solidarily liable with the spouses Panlilio for the three promissory notes. The promissory notes clearly bore his signature alongside the other borrowers. Gonzales himself admitted he was an accommodation party for the spouses Panlilio to facilitate the loan’s release. As an accommodation party under the Negotiable Instruments Law, he is liable to a holder for value (PCIB) even if the holder knew he was only an accommodation party. His liability is primary and solidary with the principal borrowers. The fact that the loan proceeds went solely to the spouses Panlilio does not negate his contractual obligation under the notes.
2. On the Dishonor of the Check: The Supreme Court PARTLY MERITORIOUSLY GRANTED the petition on this issue. The Court held that while PCIB had the right to terminate the COHLA due to Gonzales’s default on the solidary loan obligation, the manner of dishonor was improper.
* Justification for Termination/Dishonor: The Court agreed that PCIB was justified in terminating the COHLA and dishonoring the check. The COHLA was a contract that could be revoked by the bank upon the client’s default on other obligations. Gonzales’s solidary liability for the unpaid loan interest constituted a valid default, allowing PCIB to revoke the credit line before the check was presented.
* Improper Manner of Dishonor (Liability for Damages): However, the Court found PCIB negligent and liable for damages for stamping the check with “ACCOUNT CLOSED” as the reason for dishonor. This notation was inaccurate and libelous per se under the circumstances. Gonzales’s checking account itself was not closed; only the credit line facility (COHLA) was revoked. The proper, non-defamatory notation should have been “Refer to Drawer.” The “Account Closed” stamp falsely implied Gonzales had no existing account, injuring his credit reputation. This negligence directly caused the humiliation and conflict with Unson, forcing Gonzales to pay in cash.
DISPOSITIVE: The Supreme Court MODIFIED the appealed decisions. It affirmed Gonzales’s solidary liability on the promissory notes and the justification for revoking the credit line. However, it REVERSED the finding that no damages were due. PCIB was held liable to Gonzales for moral damages, temperate damages, and attorney’s fees for the injury caused by its negligent and improper notation on the dishonored check. The case was remanded to the RTC to determine the exact amounts of damages.