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Equitable Banking Corporation vs Intermediate Appellate Court
Negotiable Instruments Law – Negotiable Instruments in General – 161 SCRA 518 – Certainty of Payee
In 1975, Liberato Casals, majority stockholder of Casville Enterprises, went to buy two garrett skidders (bulldozers) from Edward J. Nell Company amounting to P970,000.00. To pay the bulldozers, Casals agreed to open a letter of credit with the Equitable Banking Corporation. Pursuant to this, Nell Company shipped one of the bulldozers to Casville. Meanwile, Casville advised Nell Company that in order for the letter of credit to be opened, Casville needs to deposit P427,300.00 with Equitable Bank, and that since Casville is a little short, it requested Nell Company to pay the deposit in the meantime.
Nell Company agreed and so it eventually sent a check in the amount of P427,300.00. The check read:
Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE ENTERPRISES, INC.
Nell Company sent the check to Casville so that it would be the latter who could send it to Equitable Bank to cover the deposit in lieu of the letter of credit. Casals received the check, he went to Equitable Bank, and the teller received the check. The teller, instead of applying the amount as deposit in lieu of the letter of credit, credited the check to Casville’s account with Equitable Bank. Casals later withdrew all the P427,300.00 and appropriated it to himself.
ISSUE: Whether or not Equitable Bank is liable to cover for the loss.
HELD: No. The subject check was equivocal and patently ambiguous. Reading on the wordings of the check, the payee thereon ceased to be indicated with reasonable certainty in contravention of Section 8 of the Negotiable Instruments Law. As worded, it could be accepted as deposit to the account of the party named after the symbols “A/C,” or payable to the Bank as trustee, or as an agent, for Casville Enterprises, Inc., with the latter being the ultimate beneficiary. That ambiguity is to be taken contra proferentem that is, construed against Nell Company who caused the ambiguity and could have also avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code, provides:
Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.
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