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SC decision clarifies use of manager’s checks

Posted in Laws, Supreme Court Decisions by Erineus on February 11, 2009

The Supreme Court (SC) has ordered the Security Bank and Trust Co. to pay P4 million, excluding interest of six percent a year from 1981, to the Rizal Commercial Banking Corp. representing the balance of the P8 million manager’s check issued by SBTC and encashed by RCBC.

In a decision written by Senior Justice Leonardo A. Quisumbing, the SC said that “the questioned check issued by SBTC is not just an ordinary check but a manager’s check – one that is drawn by a bank’s manager upon the bank itself.”

“As the bank’s own check, a manager’s check becomes the primary obligation of the bank and is accepted in advance by the act of its issuance,” it said.

Justices Renato C. Corona, Conchita Carpio Morales, Dante O. Tinga, and Teresita J. Leonardo de Castro concurred in the decision.

With the ruling, the SC affirmed the decision of the Court of Appeals (CA) that upheld with modification the order issued by the Makati City regional trial court (RTC) in favor of RCBC.

The case arose from the issuance by the SBTC on Jan. 9, 1981 a manager’s check for P8 million payable to “Cash” as proceeds of the loan granted to Guidon Construction and Development Corp. (GCDC).

On the same day, the P8 million check was deposited by Continental Manufacturing Corp. (CMC) in its current account with RCBC. In turn, RCBC honored the check and allowed CMC to withdraw the amount covered by the check.

On Jan. 10, 1981, GCDC issued a “stop payment order” to SBTC claiming that the P8 million check was released to a third party by mistake. Consequently, SBTC dishonored and returned the manager’s check to RCBC.

On Feb. 13, 1981, RCBC filed a complaint for damages against SBTC. In the meantime, the P8 million check was equally divided between, and credited to, RCBC and SBTC in line with the rules of the Philippine Clearing House.

In a decision by the trial court on May 9, 2000, SBTC was ordered to pay RCBC P4 million in actual damages and P100,000 in lawyer’s fees. On appeal to the CA, the appellate court affirmed the trial court’s ruling with modification to the effect that SBTC should pay interests of six per cent annually from 1981 until fully paid. Both RCBC and SBTC elevated the case to the SC.

“In our considered view, SBTC cannot escape liability by invoking Monetary Board Resolution No. 2202 that prohibits drawings against uncollected deposits. (R. G. Panaligan)

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