negotiable inst cases.docx

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G.R. No. L-26001 October 29, 1968

PHILIPPINE NATIONAL BANK, petitioner,

vs.

THE COURT OF APPEALS and PHILIPPINECOMMERCIAL AND INDUSTRIAL BANK,respondents.

Tomas Besa, Jose B. Galang and Juan C. Jimenezfor petitioner.

San Juan, Africa & Benedicto for respondents.

CONCEPCION, C.J.:

The Philippine National Bank hereinafterreferred to as the PNB seeks the review bycertiorari of a decision of the Court of Appeals,which affirmed that of the Court of First Instanceof Manila, dismissing plaintiff's complaint againstthe Philippine Commercial and Industrial Bank hereinafter referred to as the PCIB for therecovery of P57,415.00.

A partial stipulation of facts entered into by theparties and the decision of the Court of Appealsshow that, on about January 15, 1962, one AugustoLim deposited in his current account with thePCIB branch at Padre Faura, Manila, GSIS Check

No. 645915- B, in the sum of P57,415.00, drawnagainst the PNB; that, following an established

banking practice in the Philippines, the check was,on the same date, forwarded, for clearing, throughthe Central Bank, to the PNB, which did not returnsaid check the next day, or at any other time, butretained it and paid its amount to the PCIB, as wellas debited it against the account of the GSIS in thePNB; that, subsequently, or on January 31, 1962,upon demand from the GSIS, said sum ofP57,415.00 was re-credited to the latter's account,for the reason that the signatures of its officers onthe check were forged; and that, thereupon, or onFebruary 2, 1962, the PNB demanded from thePCIB the refund of said sum, which the PCIBrefused to do. Hence, the present action against thePCIB, which was dismissed by the Court of FirstInstance of Manila, whose decision was, in turn,affirmed by the Court of Appeals.

It is not disputed that the signatures of the GeneralManager and the Auditor of the GSIS on the check,as drawer thereof, are forged; that the personnamed in the check as its payee was one MarianoD. Pulido, who purportedly indorsed it to oneManuel Go; that the check purports to have beenindorsed by Manuel Go to Augusto Lim, who, in

turn, deposited it with the PCIB, on January 15,1962; that, thereupon, the PCIB stamped thefollowing on the back of the check: "All priorindorsements and/or Lack of EndorsementGuaranteed, Philippine Commercial and IndustrialBank," Padre Faura Branch, Manila; that, on the

same date, the PCIB sent the check to the PNB, forclearance, through the Central Bank; and that, overtwo (2) months before, or on November 13, 1961,the GSIS had notified the PNB, whichacknowledged receipt of the notice, that said checkhad been lost, and, accordingly, requested that its

payment be stopped.

In its brief, the PNB maintains that the lower courterred: (1) in not finding the PCIB guilty ofnegligence; (2) in not finding that the indorsementsat the back of the check are forged; (3) in notfinding the PCIB liable to the PNB by virtue of theformer's warranty on the back of the check; (4) innot holding that "clearing" is not "acceptance", incontemplation of the Negotiable Instruments law;(5) in not finding that, since the check had not

been accepted by the PNB, the latter is entitled toreimbursement therefor; and (6) in denying thePNB's right to recover from the PCIB.

The first assignment of error will be discussed later,together with the last,with which it is interrelated.

As regards the second assignment of error, thePNB argues that, since the signatures of the drawerare forged, so must the signatures of the supposedindorsers be; but this conclusion does notnecessarily follow from said premise. Besides,there is absolutely no evidence, and the PNB hasnot even tried to prove that the aforementionedindorsements are spurious. Again, the PNBrefunded the amount of the check to the GSIS, onaccount of the forgery in the signatures, not of the

indorsers or supposed indorsers, but of the officersof the GSIS as drawer of the instrument. In otherwords, the question whether or not theindorsements have been falsified is immaterial tothe PNB's liability as a drawee, or to its right torecover from the PCIB,1 for, as against the drawee,the indorsement of an intermediate bank does notguarantee the signature of the drawer,2 since theforgery of the indorsement is not the cause of theloss.3

With respect to the warranty on the back of thecheck, to which the third assignment of error refers,it should be noted that the PCIB therebyguaranteed "all prior indorsements," not theauthenticity of the signatures of the officers of theGSIS who signed on its behalf, because the GSISis not an indorser of the check, but its drawer.4Said warranty is irrelevant, therefore, to the PNB'salleged right to recover from the PCIB. It could


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Ramon B. de los Reyes and Angel Ilagan forappellant.

SYLLABUS

1.NEGOTIABLE INSTRUMENTS; CHECKS;IMPLIED ACCEPTANCE BY THE DRAWEE;LIABILITY OF DRAWER AND DRAWEE. The request by the appellant bank as drawee, fromthe Bureau of Posts for photostatic copies of thecheck and the subsequent requirement by it for its

presentation to the provincial treasurer and theprovincial auditor for certification, amounted to animplied acceptance of the bank which therebyassumed the obligation of paying the check andholding sufficient deposit of the drawer for the

purpose. However, said obligation is merelysubsidiary, the drawer of the check being primarilyliable to pay the same.

D E C I S I O N

PARAS, J p:

In May, 1942, while the province of Samar was

still occupied by Japanese military forces, a checkwas issued by said province to Paulino M. Santos(then the postmaster of Borongan) for the sum ofP25,000, drawn against the Philippine NationalBank Cebu Branch. The payee negotiated thecheck with James McGuire, an American citizenand resident of the municipality of Borongan.After the liberation in 1946, James McGuire

presented the check to the municipal treasurer ofBorongan for payment, but the latter (who merelynoted it) was not able or did not choose to pay thesame. James McGuire wrote letters to the Bureauof Posts dated May 28 and August 5, 1948, andMarch 30, 1950 seeking payment of the check,which were in turn referred by the Director of theBureau of Posts to the Philippine National Bank onApril 21, 1950. On April 25, 1950, the Philippine

National Bank requested the Bureau of Posts tofurnish it with photostatic copies of the checkwhich were duly received by the bank on May 12,1950. As of this date the province of Samar stillhad a deposit of P84,287.47 in the Philippine

National Bank. On May 14, 1950, the latterrequested James McGuire to present the check tothe provincial treasurer and the provincial auditor

for certification in accordance with the circularissued by the Secretary of Finance of July 3, 1947.On August 22, 1950, James McGuire againrequested the Bureau of Posts to expeditecompliance with the requirement of the Philippine

National Bank so as to permit the encashment ofthe check. Before the check could be certified bythe authorities concerned as being in order and

entitled to priority of payment, the province ofSamar, on September 4, 1951, withdraw theamount of P83,504.07, leaving a balance of onlyP743.43. In the meantime, James McGuiretransferred his rights to the check to the herein

plaintiffs who, unable to cash it, filed in the Court

of First Instance of Samar on July 27, 1953, thepresent complaint against the province of Samarand the Philippine National Bank. After trial thecourt rendered a decision sentencing thedefendants to pay jointly and severally to the

plaintiffs the sum of P25,000, plus legal interestfrom May 1950, P1,000 as attorney's fees, and thecosts. Only the Philippine National Bank hasappealed.

The position of the appellant bank is that it did notissue the check and was merely called upon to paythe same upon being presented for encashment ifand when funds for the purpose were available;that it could not have paid said check because itwas never presented to it with the requiredcertification under the circular of the Secretary ofFinance of July 3, 1947; that the relation betweenthe appellant bank and the province of Samar wasthat of debtor and creditor, the debtor beingwithout power to inquire into the obligation of hiscreditor unless it had an interest in the same; thatthere is nothing in the records to show that theholder of the check ever requested the appellant

bank to withhold the amount of the check or everfiled, before the exhaustion of the deposit of the

province of Samar, any order from the courts orproper authorities to withhold the amount coveredby the check; that in any event, the appellant bankcannot be held solidarily liable, the province ofSamar being the drawee of the check and therefore

primarily liable to pay the same.

Appellant's contentions are in the main correct. Butin view of the fact that as early as May 12, 1950,upon its own request, it was furnished with

photostatic copies of the check in question; and onMay 14, 1950, it went to the trouble of requiringJames McGuire to present the check to the

provincial treasurer and provincial auditor fornecessary certification, it voluntarily assumed theobligation of holding so much of the deposit of the

province of Samar as would be sufficient to coverthe amount of the check, or before allowing thewithdrawal that exhausted said deposit, of makingthe necessary inquiry on the matter. In our opinion,an implied acceptance of the check by theappellant bank was thereby created. The request by

the appellant bank from the Bureau of Posts forphotostatic copies of the check and the subsequentrequirement by it for its presentation by JamesMcGuire to the provincial treasurer and the

provincial auditor for certification, would be anempty gesture if the appellant did not therebymean to assume the obligation of paying the checkand holding sufficient deposit of the drawer for the


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purpose. Even so, appellant's resulting obligation ismerely subsidiary, the province of Samar being

primarily liable to pay the check.

It being understood that the obligation of the

appellant is merely subsidiary, the appealeddecision is hereby affirmed, without costs in thisinstance. So ordered.

Bautista Angelo, Labrador, Reyes, J. B. L.,Endencia and Felix, JJ., concur.

Separate Opinions

PADILLA, J., dissenting:

Under the facts of the case I do not believe theappellant bank is even subsidiarily liable. To holdthe bank liable the original check must have been

presented to it for payment and the bank shouldhave refused to honor or cash it. The fact that itrequested the Bureau of Posts to furnish it with

photostatic copies of the check shows that theoriginal check had not been presented to thedrawee (the bank) for payment. The request by the

bank for photostatic copies of the check did not, atthe time of the request, create any obligation on its

part to pay the amount of the check. Thesuggestion by the bank to James McGuire tosecure a certification of the check by the provincialtreasurer and auditor, in accordance with a circularof the Department of Finance dated 3 July 1947,also did not create an obligation on its part to paythe amount of the check. The subsequentwithdrawal by the Province of Samar of its deposit,thereby leaving a small balance insufficient to paythe check referred to if and when duly presentedfor payment, could not be prevented by the bankand if it had refused to allow the withdrawal the

bank might be held responsible for damages forrefusing to allow it. The only party liable for the

payment of the check is the Province of Samar, thedrawer. The Philippine National Bank, the drawee,should be held free from any liability, primarily orsubsidiarily. The judgment appealed from should

be modified by absolving the appellant from anyliability.

CEBU INTERNATIONAL FINANCECORPORATION, petitioner, vs. COURT OF

APPEALS, VICENTE ALEGRE, respondents.

Villanueva Pacis Mondragon & Cana Law Officesfor petitioner.

Marlito C. Altuna for private respondent.

SYNOPSIS

Petitioner, a quasi-banking institution engaged in

money market operations, was sued in RTCBranch 132 for collection of money by privaterespondent Alegre for its failure to pay a BPIcheck in the amount of P514,390.94 correspondingto the amount invested by him in the corporation

plus interest. BPI dishonored and kept the checkpending investigation of several counterfeit checksdrawn against petitioner's current account. WhenBPI deducted the full amount of the forged checks,including that issued to Alegre, petitioner sued inRTC Branch 147 BPI for collection. BPI, however,did not deliver to Alegre the amount deductedfrom petitioner's current account. The parties then

entered into a compromise agreement to the effectthat BPI will debit the amount of the check issuedto Alegre from petitioner's current accountrepresenting payment/discharge and that BPI willhave no more liability in case, petitioner isadjudged liable to Alegre. Meanwhile in thecollection suit filed by private respondent against

petitioner, the third party complaint against BPIwas dismissed on the ground that it is similar to itsancillary claim filed by petitioner against BPI.Judgment was thereafter rendered in favor ofAlegre. The decision was affirmed on appeal bythe Court of Appeals, hence, this recourse,

petitioner claiming that the check was validlydischarged under the Negotiable Instruments Lawwhen BPI debited the value of the check against

petitioner's current account and that the third partycomplaint was erroneously dismissed by the trialcourt. THcaDA

The Supreme Court held that deduction by BPI ofthe amount of the check issued to Alegre from

petitioner's current account did not operate as adischarge or payment of the instrument as the

value of the check was not delivered to the payee;that a compromise agreement which has the effectand authority of res judicata could not bind a partywho did not sign the agreement or avail of its

benefits; and that there is identity of parties andidentity of rights asserted in both the third partycomplaint and petitioner's ancillary claim in thetwo cases, and, therefore, any judgment that may

be rendered in one case will amount to res judicatain another.

SYLLABUS

1.CIVIL LAW; OBLIGATIONS ANDCONTRACTS; EXTINCTION OFOBLIGATION; DELIVERY OF BILLS OFEXCHANGE; SHALL PRODUCE EFFECT OFPAYMENT ONLY WHEN THEY HAVE BEEN


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ENCASHED; RULE APPLICABLE TO MONEYMARKET TRANSACTIONS. Article 1249 ofthe New Civil Code deals with a mode ofextinction of an obligation and expressly providesfor the medium in the "payment of debts." It

provides that: "The payment of debts in money

shall be made in the currency stipulated, and if it isnot possible to deliver such currency, then in thecurrency, which is legal tender in the Philippines.The delivery of promissory notes payable to order,or bills of exchange or other mercantile documentsshall produce the effect of payment only when theyhave been cashed, or when through the fault of thecreditor they have been impaired. In the meantime,the action derived from the original obligationshall be held in abeyance." As held in Perez vs.Court of Appeals, a "money market" is a marketdealing in standard short-term credit instruments(involving large amounts) where lenders and

borrowers do not deal directly with each other butthrough a middle man or dealer in open market. Ina money market transaction, the investor is alender who loans his money to a borrower througha middleman or dealer.

2.ID.; ID.; ID.; ID.; ID.; TRANSACTION INPRESENT CASE, A LOAN. In the case at bar,the money market transaction between the

petitioner and the private respondent is in thenature of a loan. In a loan transaction, the

obligation to pay a sum certain in money, may bepaid in money, which is the legal tender or, by theuse of a check. A check is not a legal tender, andtherefore cannot constitute valid tender of payment.In the case of Philippine Airlines, Inc. vs. Court ofAppeals, this Court held: "Since a negotiableinstrument is only a substitute for money and notmoney, the delivery of such an instrument does not,

by itself, operate as payment (citation omitted). Acheck, whether a manager's check or ordinarycheck, is not legal tender, and an offer of a checkin payment of a debt is not a valid tender of

payment and may be refused receipt by the obligee

or creditor. Mere delivery of checks does notdischarge the obligation under a judgment. Theobligation is not extinguished and remainssuspended until the payment by commercialdocument is actually realized (Art. 1249, CivilCode, par. 3.)"

3.ID.; ID.; COMPROMISE; COULD NOT BINDPARTY WHO DID NOT SIGN AGREEMENT

NOR AVAIL OF ITS BENEFITS. Acompromise is a contract whereby the parties, by

making reciprocal concessions, avoid a litigationor put an end to one already commenced. It is anagreement between two or more persons who, for

preventing or putting an end to a lawsuit, adjusttheir difficulties by mutual consent in the mannerwhich they agree on, and which everyone of them

prefers in the hope of gaining, balanced by thedanger of losing. The compromise agreement

could not bind a party who did not sign thecompromise agreement nor avail of its benefits.Thus, the stipulations in the compromiseagreement is unenforceable against Vicente Alegre,not a party thereto. His money could not be thesubject of an agreement between CIFC and BPI.

Although Alegre's money was in custody of thebank, the bank's possession of it was not in theconcept of an owner. BPI cannot validlyappropriate the money as its own.

4.REMEDIAL LAW; ACTIONS; BANKCANNOT MOTU PROPRIO CONFISCATEMONEY DUE PAYEE. BPI's confiscation ofAlegre's money constitutes garnishment withoutthe parties going through a valid proceeding incourt. Garnishment is an attachment by means ofwhich the plaintiff seeks to subject to his claim the

property of the defendant in the hands of a thirdperson or money owed to such third person or agarnishee to the defendant. The garnishment

procedure must be upon proper order of RTC-Makati, Branch 62, the court who had jurisdictionover the collection suit filed by BPI against Alegre.

5.CIVIL LAW; OBLIGATIONS ANDCONTRACTS; TENDER OF PAYMENT;INVOLVES POSITIVE ANDUNCONDITIONAL ACT OF OBLIGOR'S

OFFER OF LEGAL TENDER AS PAYMENT TOOBLIGEE AND DEMAND THAT THE LATTERACCEPT SAME.Tender of payment involves a

positive and unconditional act by the obligor ofoffering legal tender currency as payment to theobligee for the former's obligation and demandingthat the latter accept the same. Tender of paymentcannot be presumed by a mere inference fromsurrounding circumstances.

6.REMEDIAL LAW; ACTIONS; LITIS

PENDENTIA; REQUISITES.

For litispendentia to be a ground for the dismissal of anaction, the following requisites must concur: (a)identity of parties or at least such as to representthe same interest in both actions; (b) identity ofrights asserted and relief prayed for, the relief

being founded on the same acts; and (c) theidentity in the two cases should be such that the

judgment which may be rendered in one would,regardless of which party is successful, amount tores judicata in the other.

7.ID.; ID.; COMPROMISE; HAS UPONPARTIES EFFECT AND AUTHORITY OF RESJUDICATA. The compromise agreement

between CIFC and BPI, categorically provided that"In case plaintiff is adjudged liable to VicenteAlegre in Civil Case No. 92-515 arising from thealleged dishonor of BPI Check No. 513397,

plaintiff (CIFC) cannot go after the defendant


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(BPI); otherwise stated, the defendant shall not beliable to the plaintiff." Clearly, this stipulationexpressed that CIFC had already abandoned anyfurther claim against BPI with respect to the valueof BPI Check No. 513397. To ask this Court toallow BPI to be a party in the case at bar, would

amount to res judicata and would violate terms ofthe compromise agreement between CIFC and BPI.The general rule is that a compromise has upon the

parties the effect and authority of res judicata, withrespect to the matter definitely stated therein, orwhich by implication from its terms should bedeemed to have been included therein. This holdstrue even if the agreement has not been judiciallyapproved. cSCTID

D E C I S I O N

QUISUMBING, J p:

This petition for review on certiorari assailsrespondent appellate court's Decision, 1 datedDecember 8, 1995, in CA G.R. CV No. 44085,which affirmed the ruling of the Regional TrialCourt of Makati, Branch 132. The dispositive

portion of the trial court's decision reads: cdrep

"WHEREFORE, judgment is hereby renderedordering defendant [herein petitioner] to pay

plaintiff [herein private respondent]:

"(1)the principal sum of P514,390.94 with legalinterest thereon computed from August 6, 1991until fully paid; and

"(2)the costs of suit.

SO ORDERED." 2

Based on the records, the following are thepertinent facts of the case:

Cebu International Finance Corporation (CIFC), aquasi-banking institution, is engaged in moneymarket operations.

On April 25, 1991, private respondent, VicenteAlegre, invested with CIFC, five hundred thousand(P500,000.00) pesos, in cash. Petitioner issued a

promissory note to mature on May 27, 1991. Thenote for five hundred sixteen thousand, twohundred thirty-eight pesos and sixty-seven

centavos (P516,238.67) covered privaterespondent's placement plus interest at twenty anda half (20.5%) percent for thirty-two (32) days.

On May 27, 1991, CIFC issued BPI Check No.

513397 (hereinafter the CHECK) for five hundredfourteen thousand, three hundred ninety pesos andninety-four centavos (P514,390.94) in favor of the

private respondent as proceeds of his maturedinvestment plus interest. The CHECK was drawnfrom petitioner's current account number 0011-0803-59, maintained with the Bank of thePhilippine Islands (BPI), main branch at MakatiCity.

On June 17, 1991, private respondent's wifedeposited the CHECK with Rizal CommercialBanking Corp. (RCBC), in Puerto Princesa,Palawan. BPI dishonored the CHECK with theannotation, that the "Check (is) Subject of anInvestigation." BPI took custody of the CHECK

pending an investigation of several counterfeitchecks drawn against CIFC's aforestated checkingaccount. BPI used the check to trace the

perpetrators of the forgery.

Immediately, private respondent notified CIFC ofthe dishonored CHECK and demanded, on severaloccasions, that he be paid in cash. CIFC refusedthe request, and instead instructed privaterespondent to wait for its ongoing bankreconciliation with BPI. Thereafter, privaterespondent, through counsel, made a formaldemand for the payment of his money market

placement. In turn, CIFC promised to replace theCHECK but required an impossible condition thatthe original must first be surrendered.

On February 25, 1992, private respondent Alegrefiled a complaint 3 for recovery of a sum of moneyagainst the petitioner with the Regional Trial Courtof Makati (RTC-Makati), Branch 132.

On July 13, 1992, CIFC sought to recover its lostfunds and formally filed against BPI, a separatecivil action 4 for collection of a sum of moneywith the RTC-Makati, Branch 147. The collection

suit alleged that BPI unlawfully deducted fromCIFC's checking account, counterfeit checksamounting to one million, seven hundred twenty-four thousand, three hundred sixty-four pesos andfifty-eight centavos (P1,724,364.58). The actionincluded the prayer to collect the amount of theCHECK paid to Vicente Alegre but dishonored byBPI.


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Meanwhile, in response to Alegre's complaint withRTC-Makati, Branch 132, CIFC filed a motion forleave of court to file a third-party complaintagainst BPI. BPI was impleaded by CIFC toenforce a right, for contribution and indemnity,with respect to Alegre's claim. CIFC asserted thatthe CHECK it issued in favor of Alegre wasgenuine, valid and sufficiently funded.

On July 23, 1992, the trial court granted CIFC'smotion. However, BPI moved to dismiss the third-

party complaint on the ground of pendency ofanother action with RTC-Makati, Branch 147.Acting on the motion, the trial court dismissed thethird-party complaint on November 4, 1992, afterfinding that the third party complaint filed by

CIFC against BPI is similar to its ancillary claimagainst the bank, filed with RTC-Makati Branch147. prcd

Thereafter, during the hearing by RTC-Makati,Branch 132, held on May 27, and June 22, 1993,Vito Arieta, Bank Manager of BPI, testified thatthe bank, indeed, dishonored the CHECK, retainedthe original copy and forwarded only a certifiedtrue copy to RCBC. When Arieta was recalled onJuly 20, 1993, he testified that on July 16, 1993,

BPI encashed and deducted the said amount fromthe account of CIFC, but the proceeds, as well asthe CHECK remained in BPI's custody. The bank'smove was in accordance with the CompromiseAgreement 5 it entered with CIFC to end thelitigation in RTC-Makati, Branch 147. Thecompromise agreement, which was submitted forthe approval of the said court, provided that:

"1.Defendant [BPI] shall pay to the plaintiff[CIFC] the amount of P1,724,364.58 plus P20,000litigation expenses as full and final settlement ofall of plaintiff's claims as contained in theAmended Complaint dated September 10, 1992.The aforementioned amount shall be credited to

plaintiff's current account No. 0011-0803-59maintained at defendant's Main Branch uponexecution of this Compromise Agreement.

"2.Thereupon, defendant shall debit the sum ofP514,390.94 from the aforesaid current accountrepresenting payment/discharge of BPI Check No.513397 payable to Vicente Alegre.

"3.In case plaintiff is adjudged liable to VicenteAlegre in Civil Case No. 92-515 arising from thealleged dishonor of BPI Check No. 513397,

plaintiff cannot go after the defendant: otherwisestated, the defendant shall not be liable to the

plaintiff. Plaintiff [CIFC] may however set-up the

defense of payment/discharge stipulated in par. 2above." 6

On July 27, 1993, BPI filed a separate collectionsuit 7 against Vicente Alegre with the RTC-Makati,

Branch 62. The complaint alleged that VicenteAlegre connived with certain Lina A. Pena andLita A. Anda and forged several checks of BPI'sclient, CIFC. The total amount of counterfeitchecks was P1,724,364.58. BPI prevented theencashment of some checks amounting to twohundred ninety five thousand, seven hundredseventy-five pesos and seven centavos(P295,775.07). BPI admitted that the CHECK,

payable to Vicente Alegre for P514,390.94, wasdeducted from BPI's claim, hence, the balance ofthe loss incurred by BPI was nine hundred fourteenthousand, one hundred ninety-eight pesos andfifty-seven centavos (P914,198.57), plus costs ofsuit for twenty thousand (P20,000.00) pesos. Therecords are silent on the outcome of this case.

On September 27, 1993, RTC-Makati, Branch 132,rendered judgment in favor of Vicente Alegre.

CIFC appealed from the adverse decision of thetrial court. The respondent court affirmed thedecision of the trial court.

Hence this appeal, 8 in which petitioner interposesthe following assignments of errors:

1.The Honorable Court of Appeals erred inaffirming the finding of the Honorable Trial Courtholding that petitioner was not discharged from theliability of paying the value of the subject check to

private respondent after BPI has debited the valuethereof against petitioner's current account.

2. The Honorable Court of Appeals erred inapplying the provisions of paragraph 2 of Article1249 of the Civil Code in the instant case. Theapplicable law being the Negotiable InstrumentsLaw.

3.The Honorable Court of Appeals erred inaffirming the Honorable Trial Court's findings thatthe petitioner was guilty of negligence and delay inthe performance of its obligation to the privaterespondent.

4.The Honorable Court of Appeals erred inaffirming the Honorable Trial Court's decision


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ordering petitioner to pay legal interest and thecost of suit.

5.The Honorable Court of Appeals erred inaffirming the Honorable Trial Court's dismissal of

petitioner's third-party complaint against BPI.

These issues may be synthesized into three: LLpr

1.WHETHER OR NOT ARTICLE 1249 OF THENEW CIVIL CODE APPLIES IN THE PRESENTCASE;

2.WHETHER OR NOT "BPI CHECK NO.513397" WAS VALIDLY DISCHARGED; and

3.WHETHER OR NOT THE DISMISSAL OFTHE THIRD PARTY COMPLAINT OFPETITIONER AGAINST BPI BY REASON OFLIS PENDENS WAS PROPER?

On the first issue, petitioner contends that theprovisions of the Negotiable Instruments Law(NIL) are the pertinent laws to govern its moneymarket transaction with private respondent, andnot paragraph 2 of Article 1249 of the Civil Code.Petitioner stresses that it had already beendischarged from the liability of paying the value ofthe CHECK due to the following circumstances:

"1) There was "ACCEPTANCE" of the subjectcheck by BPI, the drawee bank, as defined underthe Negotiable Instruments Law, and therefore,BPI, the drawee bank, became primarily liable forthe payment of the check, and consequently, the

drawer, herein petitioner, was discharged from itsliability thereon;

2)Moreover, BPI, the drawee bank, has not validlyDISHONORED the subject check; and,

3)The act of BPI, the drawee bank ofdebiting/deducting the value of the check from

petitioner's account amounted to and/or constituteda discharge of the drawer's (petitioner's) liability

under the instrument/subject check." 9

Petitioner cites Section 137 of the NegotiableInstruments Law, which states:

"Liability of drawee retaining or destroying bill Where a drawee to whom a bill is delivered foracceptance destroys the same, or refuses withintwenty-four hours after such delivery or such other

period as the holder may allow, to return the billaccepted or non-accepted to the Holder, he will be

deemed to have accepted the same."

Petitioner asserts that since BPI accepted theinstrument, the bank became primarily liable forthe payment of the CHECK. Consequently, whenBPI offset the value of CHECK against the lossesfrom the forged checks allegedly committed by the

private respondent, the check was deemed paid.

Article 1249 of the New Civil Code deals with a

mode of extinction of an obligation and expresslyprovides for the medium in the "payment of debts."It provides that:

"The payment of debts in money shall be made inthe currency stipulated, and if it is not possible todeliver such currency, then in the currency, whichis legal tender in the Philippines.

The delivery of promissory notes payable to order,

or bills of exchange or other mercantile documentsshall produce the effect of payment only when theyhave been cashed, or when through the fault of thecreditor they have been impaired.

In the meantime, the action derived from theoriginal obligation shall be held in abeyance."

Considering the nature of a money markettransaction, the above-quoted provision should be

applied in the present controversy. As held inPerez vs. Court of Appeals, 10 a "money market isa market dealing in standardized short-term creditinstruments (involving large amounts) wherelenders and borrowers do not deal directly witheach other but through a middle man or dealer inopen market. In a money market transaction, theinvestor is a lender who loans his money to a

borrower through a middleman or dealer. 11

In the case at bar, the money market transactionbetween the petitioner and the private respondentis in the nature of a loan. The private respondentaccepted the CHECK, instead of requiring

payment in money. Yet, when he presented it toRCBC for encashment, as early as June 17, 1991,the same was dishonored by non-acceptance, withBPI's annotation: "Check (is) subject of aninvestigation." These facts were testified to byBPI's manager. Under these circumstances, and


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after the notice of dishonor, 12 the holder has animmediate right of recourse against the drawer, 13and consequently could immediately file an actionfor the recovery of the value of the check.

In a loan transaction, the obligation to pay a sumcertain in money may be paid in money, which isthe legal tender or, by the use of a check. A checkis not a legal tender, and therefore cannotconstitute valid tender of payment. In the case ofPhilippine Airlines, Inc. vs. Court of Appeals, 14this Court held:

"Since a negotiable instrument is only a substitutefor money and not money, the delivery of such aninstrument does not, by itself, operate as payment(citation omitted). A check, whether a manager'scheck or ordinary check, is not legal tender, and anoffer of a check in payment of a debt is not a validtender of payment and may be refused receipt bythe obligee or creditor. Mere delivery of checksdoes not discharge the obligation under a judgment.The obligation is not extinguished and remainssuspended until the payment by commercialdocument is actually realized (Art. 1249, CivilCode, par. 3.)" 15

Turning now to the second issue, when the bankdeducted the amount of the CHECK from CIFC'scurrent account, this did not ipso facto operate as adischarge or payment of the instrument. Althoughthe value of the CHECK was deducted from thefunds of CIFC, it was not delivered to the payee,Vicente Alegre. Instead, BPI offset the amountagainst the losses it incurred from forgeries ofCIFC checks, allegedly committed by Alegre. Theconfiscation of the value of the check was agreed

upon by CIFC and BPI. The parties intended toamicably settle the collection suit filed by CIFCwith the RTC-Makati, Branch 147, by enteringinto a compromise agreement, which reads:

xxx xxx xxx

"2.Thereupon, defendant shall debit the sum ofP514,390.94 from the aforesaid current accountrepresenting payment/discharge of BPI Check No.

513397 payable to Vicente Alegre. cdtai

"3.In case plaintiff is adjudged liable to VicenteAlegre in Civil Case No. 92-515 arising from thealleged dishonor of BPI Check No. 513397,

plaintiff cannot go after the defendant; otherwisestated, the defendant shall not be liable to the

plaintiff. Plaintiff however (sic) set-up the defenseof payment/discharge stipulated in par. 2 above."16

A compromise is a contract whereby the parties,

by making reciprocal concessions, avoid alitigation or put an end to one already commenced.17 It is an agreement between two or more personswho, for preventing or putting an end to a lawsuit,adjust their difficulties by mutual consent in themanner which they agree on, and which everyoneof them prefers in the hope of gaining, balanced bythe danger of losing. 18 The compromiseagreement could not bind a party who did not signthe compromise agreement nor avail of its benefits.19 Thus, the stipulations in the compromiseagreement is unenforceable against Vicente Alegre,not a party thereto. His money could not be thesubject of an agreement between CIFC and BPI.Although Alegre's money was in custody of the

bank, the bank's possession of it was not in theconcept of an owner. BPI cannot validlyappropriate the money as its own. The codaladmonition on this issue is clear:

"ARTICLE 1317

"No one may contract in the name of anotherwithout being authorized by the latter, or unless hehas by law a right to represent him.

"A Contract entered into in the name of another byone who has no authority or legal representation,or who has acted beyond his powers, shall beunenforceable, unless it is ratified, expressly orimpliedly, by the person on whose behalf it has

been executed, before it is revoked by the othercontracting party." 20

BPI's confiscation of Alegre's money constitutesgarnishment without the parties going through avalid proceeding in court. Garnishment is anattachment by means of which the plaintiff seeksto subject to his claim the property of thedefendant in the hands of a third person or moneyowed to such third person or a garnishee to thedefendant. 21 The garnishment procedure must beupon proper order of RTC-Makati, Branch 62, thecourt who had jurisdiction over the collection suitfiled by BPI against Alegre. In effect, CIFC has

not yet tendered a valid payment of its obligationto the private respondent. Tender of paymentinvolves a positive and unconditional act by theobligor of offering legal tender currency as

payment to the obligee for the former's obligationand demanding that the latter accept the same. 22Tender of payment cannot be presumed by a mereinference from surrounding circumstances.


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With regard to the third issue, for litis pendentia tobe a ground for the dismissal of an action, thefollowing requisites must concur: (a) identity of

parties or at least such as to represent the sameinterest in both actions; (b) identity of rightsasserted and relief prayed for, the relief beingfounded on the same acts; and (c) the identity inthe two cases should be such that the judgmentwhich may be rendered in one would, regardless ofwhich party is successful, amount to res judicata inthe other. 23

The trial court's ruling as adopted by therespondent court states, thus:

"A perusal of the complaint in Civil Case No. 92-

1940, entitled Cebu International FinanceCorporation vs. Bank of the Philippine Islands now

pending before Branch 147 of this Court and theThird Party Complaint in the instant case wouldreadily show that the parties are not only identical

but also the cause of action being asserted, whichis the recovery of the value of BPI Check No.513397 is the same. In Civil Case No. 92-1940 andin the Third Party Complaint the rights assertedand relief prayed for, the reliefs being founded onthe facts, are identical.

xxx xxx xxx

WHEREFORE, the motion to dismiss is grantedand consequently, the Third Party Complaint ishereby ordered dismissed on ground of lis

pendens." 24

We agree with the observation of the respondentcourt that, as between the third party claim filed bythe petitioner against BPI in Civil Case No. 92-515and petitioner's ancillary claim against the bank inCivil Case No. 92-1940, there is identity of partiesas well as identity of rights asserted, and that any

judgment that may be rendered in one case willamount to res judicata in another. LibLex

The compromise agreement between CIFC andBPI, categorically provided that "In case plaintiffis adjudged liable to Vicente Alegre in Civil Case

No. 92-515 arising from the alleged dishonor ofBPI Check No. 513397, plaintiff (CIFC) cannot go

after the defendant (BPI); otherwise stated, thedefendant shall not be liable to the plaintiff." 25Clearly, this stipulation expressed that CIFC hadalready abandoned any further claim against BPIwith respect to the value of BPI Check No. 513397.To ask this Court to allow BPI to be a party in thecase at bar, would amount to res judicata andwould violate terms of the compromise agreement

between CIFC and BPI. The general rule is that acompromise has upon the parties the effect andauthority of res judicata, with respect to the matterdefinitely stated therein, or which by implicationfrom its terms should be deemed to have beenincluded therein. 26 This holds true even if the

agreement has not been judicially approved. 27

WHEREFORE, the instant petition is herebyDENIED. The Decision of the Court of Appeals inCA-G.R. CV No. 44085 is AFFIRMED. Costsagainst petitioner.

ALLIED BANKINGCORPORATION,petitioner,vs. COURT OF APPEALS

and POTENCIANO L.

GALANIDA,respondents.

Ocampo Tejada Guevarra & Associates forpetitioner.

The Solicitor General for public respondents.

Loreto M. Durano for private respondent.

SYNOPSIS

Respondent Galanida was assistant manager whenhe was dismissed by petitioner Allied Bank forrefusing an order to transfer to another branch.Hence, the issue on the legality of such dismissal.

The transfer of an employee is within the ambit ofthe employer's prerogatives, for valid reasonsaccording to the requirement of the business, and

provided that the transfer does not result indemotion in rank or diminution of the employee'sremunerations.'Here, the constant transfer of bank

personnel with accounting responsibilities fromone branch to another is a standard practice ofAllied Bank, and the Bangko Sentral ng Pilipinas'Manual of Regulations for Banks also require therotation of these personnel. Galanida was wellaware of this, as it was a condition which heconsented to in his employment. And neither wasthe transfer in the nature of a demotion. His refusalto obey a valid transfer order constitutes willfuldisobedience of a lawful order of an employer.Thus, he was dismissed for just cause under Art.282 (a) of the Labor Code, and he was not entitledto reinstatement or to separation pay.

SYLLABUS

1.LEGAL ETHICS; CODE OF PROFESSIONALRESPONSIBILITY; DUTY OF LAWYER TOCITE THE RULINGS OF THE SUPREMECOURT ACCURATELY. The syllabus of


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cases in official or unofficial reports of SupremeCourt decisions or resolutions is not the work ofthe Court, nor does it state this Court's decision.The syllabus is simply the work of the reporterwho gives his understanding of the decision. Thereporter writes the syllabus for the convenience of

lawyers in reading the reports. A syllabus is not apart of the court's decision. A counsel should notcite a syllabus in place of the carefully consideredtext in the decision of the Court. In the presentcase, Labor Arbiter Almirante and Atty. Durano

began by quoting from Dosch, but substituted aportion of the decision with a headnote from theSCRA syllabus, which they even underscored. Inshort, they deliberately made the quote from theSCRA syllabus appear as the words of theSupreme Court. We admonish them for what is atthe least patent carelessness, if not an outrightattempt to mislead the parties and the courts taking

cognizance of this case. Rule 10.02, Canon 10 ofthe Code of Professional Responsibility mandatesthat a lawyer shall not knowingly misquote ormisrepresent the text of a decision or authority. Itis the duty of all officers of the court to cite therulings and decisions of the Supreme Courtaccurately.

2.REMEDIAL LAW; EVIDENCE; FACTUALFINDINGS OF COURT OF APPEALSAFFIRMING FINDINGS OF NLRC,ACCORDED GREAT WEIGHT AND

FINALITY; EXCEPTIONS.

We accord greatweight and even finality to the factual findings ofthe Court of Appeals, particularly when theyaffirm the findings of the NLRC or the lowercourts. However, there are recognized exceptionsto this rule. These exceptions are: (1) when thefindings are grounded on speculation, surmise andconjecture; (2) when the inference made ismanifestly mistaken, absurd or impossible; (3)when there is grave abuse of discretion in theappreciation of facts; (4) when the factual findingsof the trial and appellate courts are conflicting; (5)when the Court of Appeals, in making its findings,

has gone beyond the issues of the case and suchfindings are contrary to the admissions of bothappellant and appellee; (6) when the judgment ofthe appellate court is premised on amisapprehension of facts or when it has failed toconsider certain relevant facts which, if properlyconsidered, will justify a different conclusion; (7)when the findings of fact are conclusions withoutcitation of specific evidence on which they are

based; and (8) when the findings of fact of theCourt of Appeals are premised on the absence ofevidence but are contradicted by the evidence onrecord.

3.LABOR AND SOCIAL LEGISLATION;TERMINATION OF EMPLOYMENT; ILLEGALDISMISSAL; TRANSFER OF EMPLOYEEMUST BE PROVED NECESSARY BY THEEMPLOYER.The rule is that the transfer of anemployee ordinarily lies within the ambit of theemployer's prerogatives. The employer exercises

the prerogative to transfer an employee for validreasons and according to the requirement of its

business, provided the transfer does not result indemotion in rank or diminution of the employee'ssalary, benefits and other privileges. In illegaldismissal cases, the employer has the burden of

showing that the transfer is not unnecessary,inconvenient and prejudicial to the displacedemployee. The constant transfer of bank officersand personnel with accounting responsibilitiesfrom one branch to another is a standard practiceof Allied Bank, which has more than a hundred

branches throughout the country. Allied Bank doesthis primarily for internal control. It also enables

bank employees to gain the necessary experiencefor eventual promotion. TheBangko Sentral ngPilipinas, in its Manual of Regulations for Banksand Other Financial Intermediaries, requires therotation of these personnel. The Manual directs

that the "duties of personnel handling cash,securities and bookkeeping records should berotated" and that such rotation "should be irregular,unannounced and long enough to permit disclosureof any irregularities or manipulations." Galanidawas well aware of Allied Bank's policy of

periodically transferring personnel to differentbranches. As the Court of Appeals found,assignment to the different branches of AlliedBank was a condition of Galanida's employment.Galanida consented to this condition when hesigned the Notice of Personnel Action. Theevidence on record contradicts the charge thatAllied Bank discriminated against Galanida andwas in bad faith when it ordered his transfer. Theemployer has the prerogative, based on itsassessment of the employees' qualifications andcompetence, to rotate them in the various areas ofits business operations to ascertain where they willfunction with maximum benefit to the company.

Neither was Galanida's transfer in the nature of ademotion.

4.ID.; ID.; UNFAIR LABOR PRACTICE; NOTPRESENT IN CASE AT BAR. There is also no

basis for the finding that Allied Bank was guilty ofunfair labor practice in dismissing Galanida.Unfair labor practices relate only to violations of"the constitutional right of workers and employeesto self-organization" and are limited to the actsenumerated in Article 248 of the Labor Code, noneof which applies to the present case. There is noevidence that Galanida took part in forming aunion, or even that a union existed in Allied Bank.

5.ID.; ID.; DISMISSAL JUST CAUSE;WILLFUL DISOBEDIENCE OF A LAWFULORDER OF AN EMPLOYER; PRESENT WHENEMPLOYEE REFUSED VALID TRANSFERORDER. The refusal to obey a valid transferorder constitutes willful disobedience of a lawfulorder of an employer. Employees may object to,negotiate and seek redress against employers forrules or orders that they regard as unjust or illegal.However, until and unless these roles or orders aredeclared illegal or improper by competent


12/28

authority, the employees ignore or disobey them attheir peril. For Galanida's continued refusal toobey Allied Bank's transfer orders, we hold thatthe bank dismissed Galanida for just cause inaccordance with Article 282 (a) of the Labor Code.Galanida is thus not entitled to reinstatement or to

separation pay.

6.ID.; ID.; ID.; REQUIREMENTS. To beeffective, a dismissal must comply with Section 2(d), Rule 1, Book VI of the Omnibus Rules'Implementing the Labor Code ("Omnibus Rules"),which provides: For termination of employment

based on just causes as defined in Article 282 ofthe Labor Code: (i) A written notice served on theemployee specifying the ground or grounds oftermination, and giving said employee reasonableopportunity within which to explain his side. (ii) Ahearing or conference during which the employee

concerned, with the assistance of counsel if he sodesires is given opportunity to respond to thecharge, present his evidence, or rebut the evidence

presented against him. (iii) A written notice oftermination served on the employee indicating thatupon due consideration of all the circumstances,grounds have been established to justify histermination.

7.ID.; ID.; ID.; ID.; HEARING; DOES NOTREQUIRE ACTUAL HEARING. On therequirement of a hearing, this Court has held that

the essence of due process is simply an opportunityto be heard. An actual hearing is not necessary.The exchange of several letters, in whichGalanida's wife, a lawyer with the CityProsecutor's Office, assisted him, gave Galanida anopportunity to respond to the charges against him.

8.ID.; ID.; ID.; ID.; NOTICE OFTERMINATION; MEMO INFORMINGEMPLOYER'S DECISION TO DISMISSEMPLOYEE; SUFFICIENT. A cursory readingof the Memo will show that it unequivocallyinformed Galanida of Allied Bank's decision todismiss him. The statement, "please be informedthat the Bank has terminated yourserviceseffective September 1, 1994 andconsidered whatever benefit, if any, that you areentitled [to] as forfeited xxx" is plainly worded andneeds no interpretation. The Memo also discussedthe findings of the Investigation Committee thatserved as grounds for Galanida's dismissal. TheMemo referred to Galanida's "open defiance andrefusal" to transfer first to the Bacolod City branchand then to the Tagbilaran City branch. The Memoalso mentioned his continued refusal to report for

work despite the denial of his application foradditional vacation leave. The Memo also refutedGalanida's charges of discrimination and demotion,and concluded that he had violated Article XII ofthe bank's Employee Discipline Policy andProcedure. The Memo, although captioned"Transfer and Reassignment," did not preclude itfrom being a notice of termination. The Court hasheld that the nature of an instrument is

characterized not by the title given to it but by itsbody and contents.

9.ID.; ID.; ID.; ID.; ID.; EFFECTIVE ONLY

UPON RECEIPT THEREOF.

To be effective, awritten notice of termination must beservedon theemployee. Allied Bank could not terminateGalanida on 1 September 1994 because he had notreceived as of that date the notice of Allied Bank'sdecision to dismiss him. Galanida's dismissal couldonly take effect on 5 October 1994, upon hisreceipt of the Memo. For this reason, Galanida isentitled to backwages for the period from 1September 1994 to 4 October 1994. Under thecircumstances, we also find an award of P10,000in nominal damages proper. Courts award nominaldamages to recognize or vindicate the right of a

person that another has violated. The law entitlesGalanida to receive timely notice of Allied Bank'sdecision to dismiss him. Allied Bank should haveexercised more care in issuing the notice oftermination.

D E C I S I O N

CARPIO,Jp:

The Case

Before the Court is a petition for review1 assailingthe Decision2 of 27 April 2000 and the Resolutionof 8 August 2000 of the Court of Appeals in CA-G.R. SP No. 51451. The Court of Appeals upheldthe Decision3 of 18 September 1998 and theResolution of 24 December 1998 of the NationalLabor Relations Commission ("NLRC") in NLRCCase No. V-000180-98. The NLRC modified theDecision dated 23 December 1997 of Labor

Arbiter Dominador A. Almirante ("Labor Arbiter")in NLRC Case No. RAB VII-05-0545-94 holdingthat Allied Banking Corporation ("Allied Bank")illegally dismissed Potenciano L. Galanida("Galanida"). The NLRC awarded Galanidaseparation pay, backwages, moral and exemplarydamages, and other amounts totalingP1,264,933.33.

Antecedent Facts

For a background of this case, we quote in partfrom the Decision of the Court of Appeals:

Private respondent PotencianoGalanida was hired by

petitioner Allied BankingCorporation on 11 January1978 and rose from accountant-

book(k)eeper to assistantmanager in 1991. His
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appointment was covered by a"Notice of Personnel Action"which provides as one of theconditions of employment the

provision on petitioner's right totransfer employees:

"REGULARAPPOINTMENT: . . .It is understood thatthe bank reserves theright to transfer orassign you to otherdepartments or

branches of the bank asthe need arises and inthe interest ofmaintaining smoothand uninterrupted

service to the public."

Private respondent waspromoted several times and wastransferred to several branchesas follows:

"a)January, 1978 toMarch, 1982

Tagbilaran City

Branch

"b)April, 1982 to May,1984

Lapulapu City Branch

"c)June, 1984

Mandaue City Branch

"d)July, 1984 to April,

1986

Tagbilaran CityBranch

"e)May, 1986 to May,1987

Dumaguete CityBranch

"f)June, 1987 to

August, 1987

Carbon Branch, CebuCity

"g)September, 1987 toSept. 1989

Lapulapu City Branch,Cebu

"h)October, 1989 toSept. 1992

Carbon Branch, CebuCity

"i)October 1992 toSept. 1994

Jakosalem RegionalBranch,

Cebu City: (Rollo, p.47)

Effecting a rotation/movementof officers assigned in the Cebuhomebase, petitioner listedrespondent as second in theorder of priority of assistantmanagers to be assignedoutside of Cebu City having

been stationed in Cebu forseven years already. Privaterespondent manifested hisrefusal to be transferred toBacolod City in a letter dated19 April 1994 citing as reason

parental obligations, expenses,and the anguish that wouldresult if he is away from hisfamily. He then filed acomplaint before the LaborArbiter for constructivedismissal.

Subsequently, petitioner bankinformed private respondent(Rollo, p. 86) that he was toreport to the Tagbilaran City

Branch effective 23 May 1994.Private respondent refused. In aletter dated 13 June 1994,

petitioner warned and requiredof private respondent asfollows:

"There is nodiscrimination in yourtransfer. In fact, amongthe officers mentioned,only you have refusedthe new assignmentciting difficulty ofworking away fromyour family as if theother officersconcerned do notsuffer the same

predicament. Toexempt you from the


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officer transfer wouldresult in favoritism inyour favor anddiscrimination asagainst the otherofficers concerned.

"In furtherance ofmaintaining a smoothand uninterruptedservice to the public,and in accordance withthe Bank's order of

priority of rotating itsaccountants' places ofassignments, you arewell aware thatRoberto Isla,AM/Accountant,

assigned in Cebu formore than ten (10) years,was, on February 14,1994, reassigned toIligan City Branch andthen to Cagayan deOro City Branch onJune 8, 1994. Hence,your objection on theground of your lengthof service is withoutmerit.

xxx xxx xxx

"As discussed, yourrefusal to followinstruction concerningyour transfer andreassignment toBacolod City and toTagbilaran City is

penalized under ArticleXII of the Bank'sEmployee DisciplinePolicy and Procedure[which] provides:

'XII Transfer andReassignment

Refusal to followinstruction concerningtransfers andreassignments.

First and subsequent

offenses

The penalty may rangefrom suspension todismissal asdetermined bymanagement. Theemployee shall be

required to complywith the order oftransfer andreassignment, if the

penalty is nottermination of

employment.'

"In view of theforegoing, pleaseexplain in writingwithin three (3) daysfrom receipt hereofwhy no disciplinaryaction should be metedagainst you for yourhaving refused tofollow instructionsconcerning the

foregoing transfer andreassignment." . . .4

On 16 June 1994, Galanida replied that "(w)hetherthe bank's penalty for my refusal be Suspension orDismissal . . . it will all the more establish andfortify my complaint now pending at NLRC, RAB7."5 In the same letter, he charged Allied Bankwith discrimination and favoritism in ordering histransfer, thus:

. . . What I cannot decipher now

under the headship ofMr.Olveda is management'sdiscriminatory act oftransferring only the longstaying accountants of Cebu inthe guise of its exercise ofmanagement prerogative whenin truth and in fact, the ulteriormotive is to accommodatesome new officers who happento enjoy favorable connectionwith management. How can the

bank ever justify the transfer ofMelinda T. Co, a new officerwho had experienced beingassigned outside of Cebu formore than a year only toTabunok Branch? If the

purpose is for check andbalance, is managementimplying that Melinda Co can

better carry out such functionover Mr. Larry Sabelino, whois a seasoned and experiencedaccountant or any of the Metro

Cebu accountants for thatmatter? Isn't this act ofmanagement an obviousdisplay of favoritism? . . .6

On 5 October 1994, Galanida received an inter-office communication7 ("Memo") dated 8September 1994 from Allied Bank's Vice-
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President for Personnel, Mr. Leonso C. Pe. TheMemo informed Galanida that Allied Bank hadterminated his services effective 1 September 1994.The reasons given for the dismissal were: (1)Galanida's continued refusal to be transferred fromthe Jakosalem, Cebu City branch; and (2) his

refusal to report for work despite the denial of hisapplication for additional vacation leave. Thesalient portion of the Memo reads:

Therefore, your refusal tofollow instruction concerningyour transfer and reassignmentto Bacolod City and toTagbilaran City is without any

justifiable reason andconstituted violations of ArticleXII of the Bank's EDPP . . .

In view of the foregoing,pleasebe informed that the Bank has

terminated your services

effective September 1, 1994 andconsidered whatever benefit, ifany, that you are entitled asforfeited in accordance with 04,V Administrative Penalties,

page 6 of the Bank's EDPPwhich provides as follows:

"04.Dismissal.

Dismissal is apermanent separationfor cause . . .

Notice of terminationshall be issued by theInvestigationCommittee subject tothe confirmation of thePresident or hisauthorized

representative asofficer/employee whois terminated for causeshall not be eligible toreceive any benefitarising from her/hisemployment with theBank or to termination

pay."

It is understood that thetermination of your serviceshall be without prejudice to

whatever legal remedies whichthe Bank may have alreadyundertaken and/or willundertake against you.

Please be guided accordingly.(Emphasis supplied)8

The Ruling of the Labor Arbiter

After several hearings, the Labor Arbiter held thatAllied Bank had abused its management

prerogative in ordering the transfer of Galanida toits Bacolod and Tagbilaran branches. In ruling that

Galanida's refusal to transfer did not amount toinsubordination, the Labor Arbiter misquotedthisCourt's decision inDosch v. NLRC,9 thus:

As a general rule, the right totransfer or reassign anemployee is recognized as anemployer's exclusive right andthe prerogative of management(Abbott Laboratories vs. NLRC,154 SCRA 713 [1987]).

The exercise of this right, is nothowever, absolute. It hascertain limitations. Thus,inHelmut Dosch vs. NLRC, etal. 123 SCRA 296 (1983), theSupreme Court, ruled:

"While it may be truethat the right totransfer or reassign anemployee is anemployer's exclusiveright and the

prerogative ofmanagement,such rightis not absolute. Theright of an employer tofreely select ordischarge his employeeis limited by the

paramount policepower . . . for therelations betweencapital and labor arenot merely contractual

but impressed withpublic interest. . . . Andneither capital norlabor shall actoppressively againsteach other. IaESCH

Refusal to obey a

transfer order cannotbe considered

insubordination where

employee cited reasonfor said refusal,

such (sic) as that ofbeing away from the

family."10 (Emphasissupplied by the LaborArbiter)

The Labor Arbiter reasoned that Galanida'stransfer was inconvenient and prejudicial because
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Galanida would have to incur additional expensesfor board, lodging and travel. On the other hand,the Labor Arbiter held that Allied Bank failed toshow any business urgency that would justify thetransfer.

The Labor Arbiter also gave credence toGalanida's claim that Allied Bank gave Ms. Cospecial treatment. The Labor Arbiter stated thatAllied Bank deliberately left out Ms. Co's namefrom the list of accountants transferred to Cebu ascontained in Allied Bank's letter dated 13 June1994. However, Mr. Regidor Olveda, AlliedBank's Vice President for Operations Accounting,testified that the bank transferred Ms. Co to theTabunok, Cebu branch within the first half of 1994.

Still, the Labor Arbiter declined to award Galanidaback wages because he was not entirely free fromblame. Since another bank had already employedGalanida, the Labor Arbiter granted Galanidaseparation pay in lieu of reinstatement. Thedispositive portion of the Labor Arbiter's Decisionof 23 December 1997 provides:

WHEREFORE, premisesconsidered, judgment is herebyrendered ordering respondentAllied Banking Corporation to

pay complainant the aggregatetotal amount of Three HundredTwenty Four Thousand Pesos(P324,000.00) representing thefollowing awards:

a)Separation pay forP272,000.00;

b)Quarter bonus for 1994 P16,000.00;

c)13th month pay for 1994

P16,000.00;

d)Refund of contribution toProvident FundP20,000.00.

SO ORDERED.11

The Ruling of the NLRC

On appeal, the NLRC likewise ruled that AlliedBank terminated Galanida without just cause. The

NLRC agreed that the transfer order wasunreasonable and unjustified, considering thefamily considerations mentioned by Galanida. The

NLRC characterized the transfer as a demotionsince the Bacolod and Tagbilaran branches weresmaller than the Jakosalem branch, a regionaloffice, and because the bank wanted Galanida, anassistant manager, to replace an assistant

accountant in the Tagbilaran branch. The NLRCfound unlawful discrimination since Allied Bankdid not transfer several junior accountants in Cebu.The NLRC also held that Allied Bank gave Ms. Cospecial treatment by assigning her to Cebu eventhough she had worked for the bank for less than

two years.

The NLRC ruled that Galanida's termination wasillegal for lack of due process. The NLRC statedthat Allied Bank did not conduct any hearing. The

NLRC declared that Allied Bank failed to send atermination notice, as required by law for a validtermination. The Memo merely stated that AlliedBank would issue a notice of termination, but the

bank did not issue any notice.

The NLRC concluded that Allied Bank dismissedGalanida in bad faith, tantamount to an unfairlabor practice as the dismissal underminedGalanida's right to security of tenure and equal

protection of the laws. On these grounds, theNLRC promulgated its Decision of 18 September1998, the relevant portion of which states:

In this particular case, We viewas impractical, unrealistic andno longer advantageous to both

parties to order reinstatement ofthe complainant. . . . For lack ofsufficient basis, We deny the

claim for 1994 quarter bonus.Likewise, no attorney's fees isawarded as counsels forcomplainant-appellee are fromthe City Prosecutor's Office ofCebu.

WHEREFORE, premisesconsidered, the decision of theLabor Arbiter dated December23, 1997 is hereby MODIFIED

by increasing the award ofseparation pay and granting inaddition thereto backwages,moral and exemplary damages.The respondent-appellant,ALLIED BANKINGCORPORATION, is thusordered to pay to hereincomplainant-appellee,POTENCIANO L.GALANIDA, the followingamounts:

a)P336,000.00,

representingseparation pay

b)P833,600.00,representing

backwages
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c)P5,333.23representing

proportional1994 13thmonth pay

d)P20,000.00representingrefund ofProvidentFundContribution

e)P50,000.00representingmoraldamages

f)P20,000.00representingexemplarydamages

========

P1,264,933.33 TOTALAWARD

All other claims are dismissedfor lack of basis. The otherrespondents are dropped forlack of sufficient basis that theyacted in excess of theircorporate powers.

SO ORDERED.12

Allied Bank filed a motion for reconsiderationwhich the NLRC denied in its Resolution of 24December 1998.13

Dissatisfied, Allied Bank filed a petition for reviewquestioning the Decision and Resolution of the

NLRC before the Court of Appeals.

The Ruling of the Court of Appeals

CitingDosch v. NLRC,14 the Court of Appealsheld that Galanida's refusal to comply with thetransfer orders did not warrant his dismissal. Theappellate court ruled that the transfer from aregional office to the smaller Bacolod orTagbilaran branches was effectively a demotion.The appellate court agreed that Allied Bank did notafford Galanida procedural due process because

there was no hearing and no notice of termination.The Memo merely stated that the bank would issuea notice of termination but there was no suchnotice.

The Court of Appeals affirmed the ruling of theNLRC in its Decision of 27 April 2000, thus:

WHEREFORE, for lack ofmerit, the petition isDISMISSED and the assailedDecision of public respondent

NLRC is AFFIRMED.

SO ORDERED.15

Allied Bank filed a motion for reconsiderationwhich the appellate court denied in its Resolutionof 8 August 2000.16

On 26 April 2001, Allied Bank appealed theappellate court's decision and resolution to theSupreme Court. Allied Bank prayed that theSupreme Court: (1) issue a temporary restrainingorder or writ of preliminary injunction ex parte torestrain the implementation or execution of the

questioned Decision and Resolution; (2) declareGalanida's termination as valid and legal; (3) setaside the Court of Appeals' Decision andResolution; (4) make permanent the restrainingorder or preliminary injunction; (5) order Galanidato pay the costs; and (6) order other equitablereliefs.

The Issues

Allied Bank raises the following issues:

1.WHETHER UNDER THEFACTS PRESENTEDTHERE IS LEGALBASIS INPETITIONER'SEXERCISE OF ITSMANAGEMENTPREROGATIVE.

2.WHETHER PRIVATERESPONDENT'SVIOLATIONS OFCOMPANY RULES

CONSTITUTE AGROUND TOWARRANT THEPENALTY OFDISMISSAL.

3.WHETHER UNDER THEFACTS PRESENTED,THERE IS LEGALBASIS TO HOLDTHAT ALLIEDBANK AFFORDEDPRIVATERESPONDENT THEREQUIRED DUEPROCESS.

4.WHETHER UNDER THEFACTS, THERE ISLEGAL BASIS TOHOLD THAT
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PRIVATERESPONDENTCANNOT RECOVERANY MONETARYAWARD.17

In sum, Allied Bank argues that the transfer ofGalanida was a valid exercise of its management

prerogative. Allied Bank contends that Galanida'scontinued refusal to obey the transfer ordersconstituted willful disobedience or insubordination,which is a just cause for termination under theLabor Code.

On the other hand, Galanida defended his right torefuse the transfer order. The memorandum forGalanida filed with this Court, prepared by Atty.Loreto M. Durano, again misquoted the Court'sruling inDosch v. NLRC, thus:

. . . His [Galanida's] refusal totransfer falls well within theruling of the Supreme CourtinHelmut Dosch vs. NLRC, etal., 123 SCRA 296 (1983)quoted as follows:

xxx xxx xxx

Refusal to obey a

transfer order cannot

be consideredinsubordination where

employee cited reasonfor said refusal, such

as that of being awayfrom the family."18

The Ruling of the Court

The petition is partly meritorious.

Preliminary Matter: Misquoting Decisions of

the Supreme Court

The memorandum prepared by Atty. Durano and,worse, the assailed Decision of the Labor Arbiter,

both misquotedthe Supreme Court's rulinginDosch v. NLRC. The Court held inDosch:

We cannot agree to Northwest'ssubmission that petitioner wasguilty of disobedience andinsubordination whichrespondent Commission

sustained. The only piece ofevidence on which Northwest

bases the charge ofcontumacious refusal is

petitioner's letter dated August28, 1975 to R.C. Jenkinswherein petitioneracknowledged receipt of theformer's memorandum dated

August 18, 1975, appreciatedhis promotion to Director ofInternational Sales but at thesame time regretted "that at thistime for personal reasons andreasons of my family, I am

unable to accept the transferfrom the Philippines" andthereafter expressed his

preference to remain in hisposition, saying: "I would,therefore, prefer to remain inmy position of Manager-Philippines until such time thatmy services in that capacity areno longer required by

Northwest Airlines." From thisevidence, We cannot discerneven the slightest hint of

defiance, much less implyinsubordination on the part of

petitioner.19

The phrase "[r]efusal to obey a transfer ordercannot be considered insubordination whereemployee cited reason for said refusal, such as thatof being away from the family" does not appearanywhere in theDoschdecision. Galanida'scounsel lifted the erroneous phrase from one of theitalicized lines in thesyllabusofDoschfound in theSupreme Court Reports Annotated ("SCRA").

The syllabus of cases in official or unofficialreports of Supreme Court decisions or resolutionsis not the work of the Court, nor does it state thisCourt's decision. The syllabus is simply the workof the reporter who gives his understanding of thedecision. The reporter writes the syllabus for theconvenience of lawyers in reading the reports. Asyllabus is not a part of the court's decision. 20 Acounsel should not cite a syllabus in place of thecarefully considered text in the decision of theCourt.

In the present case, Labor Arbiter Almirante andAtty. Durano began by quoting fromDosch, butsubstituted a portion of the decision with aheadnote from the SCRA syllabus, which theyeven underscored. In short, they deliberately madethe quote from the SCRA syllabus appear as thewords of the Supreme Court. We admonish themfor what is at the least patent carelessness, if not anoutright attempt to mislead the parties and thecourts taking cognizance of this case. Rule 10.02,Canon 10 of the Code of ProfessionalResponsibility mandates that a lawyer shall not

knowingly misquote or misrepresent the text of adecision for authority. It is the duty of all officersof the court to cite the rulings and decisions of theSupreme Court accurately.21
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Whether Galanida was dismissed for just

cause

We accord great weight and even finality to thefactual findings of the Court of Appeals,

particularly when they affirm the findings of the

NLRC or the lower courts. However, there arerecognized exceptions to this rule. Theseexceptions are: (1) when the findings are groundedon speculation, surmise and conjecture; (2) whenthe inference made is manifestly mistaken, absurdor impossible; (3) when there is grave, abuse ofdiscretion in the appreciation of facts; (4) when thefactual findings of the trial and appellate courts areconflicting; (5) when the Court of Appeals, inmaking its findings, has gone beyond the issues ofthe case and such findings are contrary to theadmissions of both appellant and appellee; (6)when the judgment of the appellate court is

premised on a misapprehension of facts or when ithas failed to consider certain relevant facts which,if properly considered, will justify a differentconclusion; (7) when the findings of fact areconclusions without citation of specific evidenceon which they are based; and (8) when the findingsof fact of the Court of Appeals are premised on theabsence of evidence but are contradicted by theevidence on record.22 After a scrutiny of therecords, we find that some of these exceptionsobtain in the present case.

The rule is that the transfer of an employeeordinarily lies within the ambit of the employer's

prerogatives.23 The employer exercises theprerogative to transfer an employee for validreasons and according to the requirement of its

business, provided the transfer does not result indemotion in rank or diminution of the employee'ssalary, benefits and other privileges.24In illegaldismissal cases, the employer has the burden ofshowing that the transfer is not unnecessary,inconvenient and prejudicial to the displacedemployee.25

The constant transfer of bank officers andpersonnel with accounting responsibilities fromone branch to another is a standard practice ofAllied Bank, which has more than a hundred

branches throughout the country.26 Allied Bankdoes this primarily for internal control. It alsoenables bank employees to gain the necessaryexperience for eventual promotion. TheBangkoSentral ng Pilipinas, in its Manual of Regulationsfor Banks and Other FinancialIntermediaries,27requires the rotation of these

personnel. The Manual directs that the "duties of

personnel, handling cash, securities andbookkeeping records should be rotated" and thatsuch rotation "should be irregular, unannouncedand long enough to permit disclosure of anyirregularities or manipulations."28

Galanida was well aware of Allied Bank's policyof periodically transferring personnel to different

branches. As the Court of Appeals found,assignment to the different branches of AlliedBank was a condition of Galanida's employment.Galanida consented to this condition when hesigned the Notice of Personnel Action.29

The evidence on record contradicts the charge thatAllied Bank discriminated against Galanida andwas in bad faith when it ordered his transfer.Allied Bank's letter of 13 June 199430 showedthat at least 14 accounting officers and personnelfrom various branches, including Galanida, weretransferred to other branches. Allied Bank did notsingle out Galanida. The same letter explained thatGalanida was second in line for assignment outsideCebu because he had been in Cebu for seven yearsalready. The person first in line, Assistant ManagerRoberto Isla, who had been in Cebu for more thanten years, had already transferred to a branch in

Cagayan de Oro City. We note that none of theother transferees joined Galanida in his complaintor corroborated his allegations of widespreaddiscrimination and favoritism.

As regards Ms. Co, Galanida's letter of 16 June1994 itself showed that her assignment to Cebuwas not in any way related to Galanida's transfer.Ms. Co was supposed to replace a certain LarrySabelino in the Tabunok branch. The employer hasthe prerogative, based on its assessment of theemployees' qualifications and competence, to

rotate them in the various areas of its businessoperations to ascertain where they will functionwith maximum benefit to the company.31

Neither was Galanida's transfer in the nature of ademotion. Galanida did not present evidenceshowing that the transfer would diminish his salary,

benefits or other privileges. Instead, Allied Bank'sletter of 13 June 1994 assured Galanida that hewould not suffer any reduction in rank or grade,and that the transfer would involve the same rank,duties and obligations. Mr. Olveda explained thisfurther in the affidavit he submitted to the LaborArbiter, thus:

19.There is no demotion inposition/rank or diminution ofcomplainant's salary, benefitsand other privileges as thetransfer/assignment of branchofficers is premised on therole/functions that they willassume in the management andoperations of the branch, asshown below:

(a)The Branch Accountant, ascontroller of the branch isresponsible for the properdischarge of the functions ofthe accounting section of the

branch, review ofdocumentation/proper
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accounting and control oftransaction. As such, theaccounting functions in the

branch can be assumed by anyof the following officers withthe rank of: Senior

Manager/Acctg.;Manager/Acctg.; Senior Asst.Manager/Acctg.; Asst.Manager/Acctg.; Accountant orAsst. Accountant.

xxx xxx xxx

20.The transfer/assignment ofbranch officer from one branch,to another branch/office islateral in nature and carrieswith it the same position/rank,salary, benefits and other

privileges. Theassignment/transfer is for theofficer to assume the functionsrelative to his job and NOT the

position/rank of the officer tobe replaced.

There is also no basis for the finding that AlliedBank was guilty of unfair labor practice indismissing Galanida. Unfair labor practices relateonly to violations of "the constitutional right of

workers and employees to self-organization"32and are limited to the actsenumerated in Article 248 of the Labor Code, noneof which applies to the present case. There is noevidence that Galanida took part in forming aunion, or even that a union existed in Allied Bank.

This leaves the issue of whether Galanida couldvalidly refuse the transfer orders on the ground of

parental obligations, additional expenses, and theanguish he would suffer if assigned away from hisfamily.

The Court has ruled on this issue before. In thecase ofHomeowners Savings and LoanAssociation, Inc. v. NLRC,33 we held:

The acceptability of theproposition that transfer madeby an employer for an illicit orunderhanded purpose i.e., todefeat an employee's right toself-organization, to rid himselfof an undesirable worker, or to

penalize an employee for union

activities

cannot be upheldis self-evident and cannot begainsaid. The difficulty lies inthe situation where no suchillicit, improper or underhanded

purpose can be ascribed to theemployer, the objection to thetransfer being grounded solely

upon the personalinconvenience or hardship thatwill be caused to the employee

by reason of the transfer. Whatthen?

This was the very

negotiable inst cases.docx

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