BANK OF THE PHILIPPINE ISLANDS vs.
SPOUSE REYNALDO and VICTORIA ROYECA,
G.R. No. 176664, July 21, 2008
FACTS:
On August 23, 1993, spouses Reynaldo and Victoria Royeca executed and delivered to Toyota
Shaw, Inc. a Promissory Note for P577,008.00 payable in 48 equal monthly installments. To
secure the payment of said Promissory Note, respondents executed a Chattel Mortgage in favor
of Toyota over a Toyota Corolla motor vehicle. Toyota, with notice to respondents, transferred all
its rights, title, and interest in the Chattel Mortgage to Far East Bank and Trust Company (FEBTC)
through a deed of assignment.
However, on March 14, 2000, FEBTC sent a formal demand to respondents asking for the
payment of four (4) monthly amortizations covering the period from May 18, 1997, to August 18,
1997, but the respondents refused to pay on the ground that they had already paid their obligation
to FEBTC. The respondents further claimed that they did not receive any notice from the drawee
banks or from FEBTC that these checks were dishonored.
Respondents alleged that they delivered to the Auto Financing Department of FEBTC eight (8)
postdated checks. They also averred that they did not received any notice from the drawee banks
or from FEBTC that these checks were dishonored, explaining that considering that the checks
were issued 3 years ago, they believed in good faith that their obligation had already been fully
paid.
The MeTC dismissed the case. On appeal, the Regional Trial Court set aside the MeTC Decision
and ordered the respondents to pay the amount claimed by the petitioner. The respondents then
elevated the case to the Court of Appeals through a petition for review, wherein they obtained a
favorable judgment when the CA set aside the RTC’s Decision and reinstated the decision of the
MeTC.
ISSUE: Whether or not the checks constitute valid tender of payment.
RULING:
No, because check is not a legal tender, and therefore, cannot constitute a valid tender of
payment. Since a negotiable instrument is only a substitute for money and not money, the delivery
of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not
discharge the obligation under a judgment. The obligation is not extinguished and remains
suspended until the payment by commercial document is actually realized.
The respondents failed to present proof that they delivered the checks to the petitioner and the
checks were encashed. They merely averred that they believed in good faith that the checks were
encashed because they were not notified of the dishonor of the checks and three years had
already lapsed since they issued the checks.
Because of failure of the respondents to present sufficient proof of payment, it was no longer
necessary for the petitioner to prove non-payment, particularly proof that the checks were
dishonored. The obligation to prove that the checks were not dishonored, but were in fact
encashed, fell upon the respondents who would benefit from such fact.
A notice of dishonor is required only to preserve the right of the payee to recover on the checks.
It should be noted that petitioner, as payee, did not have legal obligation to inform the respondents
of the dishonor of the checks. It preserves liability of the drawer and the indorsers on the
check, otherwise, if the payee fails to give notice to them, they are discharged from their
liability thereon, and the payee is precluded from enforcing payment on the check. The
respondents, therefore, cannot fault the petitioner for not notifying them of the non-payment of
the checks because whatever rights were transgressed by such omission belonged only to
the petitioner.
The Supreme Court finds that the evidence preponderates in favor of the petitioner. A promissory
note in the hands of the creditor is a proof of indebtedness rather than proof of payment. The
petitioner’s possession of the documents pertaining to the obligation strongly buttresses its claim
that the obligation has not been extinguished. The creditor’s possession of the evidence of debt
is proof that the debt has not been discharged.
