Philippine National Bank v. Court of Appeals

G.R. No. 108630 (April 2, 1996)

PNB wrongly issued a check to Gonzaga; court ruled in favor of Tan, restoring attorney's fees.

Facts:

Private respondent Loreto Tan owned a parcel of land along the national highway in Mandalagan, Bacolod City. The government initiated expropriation proceedings against Tan and other property owners, leading to Civil Case No. 12924 in the Court of First Instance of Negros Occidental. On May 10, 1978, Tan filed a motion requesting the release of the expropriation price amounting to P32,480.00. The trial court subsequently ordered the Philippine National Bank (PNB) to release this amount, which was deposited with PNB by the government.

On May 24, 1978, PNB issued a manager's check for P32,480.00, which was delivered to Sonia Gonzaga without Tan's knowledge or consent. Gonzaga deposited the check into her account at Far East Bank and Trust Co. (FEBTC) and withdrew the funds. When Tan demanded payment from PNB, the bank refused, claiming that it had already paid Gonzaga based on a Special Power of Attorney (SPA) allegedly executed by Tan in her favor.

Tan executed an affidavit stating that he had never authorized Gonzaga to receive the funds. Despite this, PNB maintained that Gonzaga had presented a copy of the May 22, 1978 order and the SPA, which justified the delivery of the check to her. The trial court ordered PNB to pay Tan the amount, leading to a civil action initiated by Tan against PNB and its Assistant Branch Manager, Juan Tagamolila.

PNB filed a third-party complaint against the Gonzagas, but it was dismissed due to failure to serve summons. The trial court ruled in favor of Tan, ordering PNB and Tagamolila to pay the amount with legal interest, damages, and attorney's fees. PNB appealed the decision.

Legal Issues:

  1. Did the Special Power of Attorney (SPA) exist, and did it authorize Sonia Gonzaga to receive the payment on behalf of Loreto Tan?
  2. Was PNB liable for the payment to Tan despite the check being issued to Gonzaga?
  3. Was the award of attorney's fees justified, and should exemplary damages be granted?

Arguments:

  • Petitioner (PNB): PNB argued that the existence of the SPA was proven through witness testimonies and a certification from FEBTC, which allowed Gonzaga to encash the check. PNB contended that it had fulfilled its obligation by delivering the check to Gonzaga, who was authorized to receive it.

  • Respondent (Tan): Tan maintained that he never executed any SPA in favor of Gonzaga and that he had not authorized her to receive the funds. He argued that PNB failed to prove the existence of the SPA and that the check was never delivered to him, thus no payment had been made.

Court's Decision and Legal Reasoning:

The Supreme Court found PNB's petition unmeritorious. It emphasized that no payment had been made to Tan since the check was never delivered to him. Under Article 1233 of the Civil Code, a debt is not considered paid unless the obligation is completely fulfilled. The burden of proof for payment lies with the debtor, which in this case was PNB. The court noted that neither the SPA nor the check was presented in court, and the testimonies regarding the check were conflicting.

The court highlighted that the best evidence rule applied, necessitating the original SPA to determine whether Gonzaga was authorized to receive the payment. Since the original document was not produced, PNB's arguments regarding due payment failed.

Regarding attorney's fees, the court ruled that Tan was entitled to them as he was compelled to litigate due to PNB's unjustified refusal to pay. However, the court agreed with the appellate court's decision to delete the award for exemplary damages, as there was no evidence of bad faith or oppressive conduct by PNB, and no compensatory damages were awarded.

Significant Legal Principles Established:

  1. The burden of proof lies with the debtor to establish that payment has been made.
  2. The best evidence rule requires the original document to be presented when its contents are in dispute.
  3. Attorney's fees may be awarded when a party is compelled to litigate due to the unjustified acts of another party.
  4. Exemplary damages are not recoverable as a matter of right and require evidence of bad faith or oppressive conduct.