TOPIC Section 126

CASE NO. G.R. No. 92591

CASE NAME CITY TRUST BANKING CORP V CA & WILLIAM SAMARA

MEMBER MITCHELL

DOCTRINE
1. Sec. 126. Bill of exchange, defined. - A bill of exchange is an unconditional order in writing addressed by one
person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand
or at a fixed or determinable future time a sum certain in money to order or to bearer
2. A bank draft is a "bill of exchange drawn by a bank upon its correspondent bank, . . . issued at the solicitation of
a stranger who purchases and pays therefor.” It is also defined as an "order for payment of money.”
3. In the case at bar, Citytrust from which Samara purchased the bank draft, was the drawer of the draft through
which it ordered Marine Midland, the drawee bank, to pay the amount of US $40,000.00 in favor of Thai
International Airways, the payee.
- The drawee bank acting as a "payor" bank is solely liable for acts not done in accordance with the
instructions of the drawer bank or of the purchaser of the draft.
- The drawee bank (Marine Midland Bank in this case) has the burden of proving that it did not violate.
- Meanwhile, the drawer, if sued by the purchaser of the draft is liable for the act of debiting the customer's
account despite an instruction to stop payment. The drawer has the duty to prove that he complied with the
order to inform the drawee.

Parties: Drawer: Citytrust Banking Corp

Purchaser of the Bank Draft: William Samara
Drawee bank: Marine Midland Bank (bank in the United States)
Payee: Thai International Airways

RECIT-READY DIGEST (from Darvin’s; Pls do read the complete facts below for our dear Sir Mercado)
William Samara, an American doing business in the PH purchased a Bank Draft for $ 40,000.00 from
Citytrust Bank. The drawee bank was Marine Midland Bank (in the US) and the payee was Thai International
Airways. Samara executed a stop-payment order; Citytrust transmitted the order to Midland, w/c
acknowledged it. Citytrust therefore re-credited Samara’s account w/ the $ 40,000.00. Later on, Midland re-
debited Citytrust’s account, w/c led the latter to re-debit Samara’s account for the said amount. Samara
sued both Citytrust and Midland. The trial court ordered Citytrust and Midland to pay Samara, solidarily, $
40,000.00, w 12% interest, attorney’s fees and exemplary damages. Only Marine successfully perfected an
appeal; CA ordered it to pay nonetheless, but reduced the interest to 6% as well as the attorney’s fees, and
removed exemplary damages. Hence, Samara seeks to execute against Citytrust for the larger (unreduced)
amount. Citytrust claims that it should be benefited by the reduced amount.

A Draft is a bill of exchange. The drawee bank (Midland), acting as “payor” bank, is liable for acts not
done in accordance w/ the instructions of the drawer bank (Citytrust) and the purchaser of the Draft
(Samara). Likewise, the drawer bank should comply w/ the instructions of the purchaser of the Draft.
That being the case, the solidary liability of the said banks is sustained. However, considering that it
was Midland w/c caused the whole mess, the SC applied equity and allowed Citytrust to benefit from the
reduced liability adjudged in favor of Midland, despite the former’s failure to perfect an appeal. Otherwise,
unjust enrichment would ensue.

FACTS Facts from G.R. No. 82009 (1989 Case)

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 •
The complaint alleged that Samara, an American businessman in the Philippines, purchased a
US$40,000.00 demand draft from petitioner Citytrust Banking Corporation (Citytrust)
• A bank draft is a check drawn by a bank on its own funds in another bank; so Citytrust has drawn the
check against MARINE MIDLAND, (account ni Citytrust sa Marine Midland Bank yung account na
pagkukuhanan ng fund for the bank draft purchased by William Samara)
• He invested it in a joint venture with a certain Tony Mancuso for the purpose of bringing to the
Philippines some American entertainers.
• The draft was drawn against Marine Midland Bank in favor of Thai International Airways since
the amount represented the estimated cost of the air transportation of the entertainers.
• Sensing that Tony Mancuso was not going to fulfill his part of the agreement, Samara executed a
STOP-PAYMENT ORDER on December 23, 1980 and gave specific instructions to Citytrust to
immediately telex the same to its correspondent bank in America, Marine Midland.
• Both Citytrust and Marine Midland confirmed that the demand draft was not yet paid.
• Citytrust transmitted the message to Marine Midland the next day and followed it up with a cable
• Marine Midland claims to have received it on Jan. 14, 198, stating in its receipt the nonpayment order
and that it has not paid the bank draft
• Consequently, Citytrust re-credited the dollar account of the SAMARA in the amount of US$40,000.00.
• However, after a lapse of seven (7) months, Citytrust debited (meaning, binawasan) the said dollar
account of Samara in the amount of $40,000.00 upon realizing that Marine Midland had debited
the amount of $40,000.00 from the account of Citytrust.
• Samara filed a protest regarding the debiting of his dollar account and demanded the return of
the said amount.
• The complaint alleged that Tony Mancuso arrived in the Philippines in January 1981 and stayed in the
country up to the middle part of the same year.
• Samara claims he did not bother to collect from Mancuso the value of the bank draft inasmuch as
MANUSCO ASSURED HIM IT WAS NEVER ENCASHED
• Samara also alleged that Mancuso had, since then, left the Philippines for an unknown destination
thereby making it impossible to go after him.
• Citytrust filed an answer with counterclaim and cross claim on Jan. 4, 1984 while Marine Midland
filed its counterclaim and crossclaim on Jan. 16, 1984.

RTC ruling:
On March 4, 1986, RTC ruled in favor of Samara and held Marine Midland and Citytrust solidarity liable to
Samara The dispositive part of the decision of the trial court reads as follows:
"WHEREFORE, judgment is hereby rendered:
1. Ordering the defendants, jointly and severally, to pay the sum of $40,000.00, plus twelve percent
(12%) interest per annum from July 3, 1981, until full payment is made, and the further interest of 12%
per annum on the accrued interest from December 23, 1980, up to the filing of the complaint on October
4, 1983, inclusive; exemplary damages in the sum of P100,000.00 and the sum of P50,000.00 as
attorney's fees and costs;
2. Dismissing the defendants' counterclaims for lack of merit;
3. Ordering defendant Marine Midland to reimburse defendant Citytrust whatever amount the latter will be
made to pay the plaintiff by reason of this judgment and costs."
• RTC brushed aside Marine Midland's contention that it had already paid the bank draft of Samara
on Dec. 22, 1980 or before it received the stop payment order.
• It was not convinced regarding the denial of the confirmation made as to the non-payment of the bank
draft since the time it received the stop payment order.
• Marine Midland was held bound by its letters admitting knowledge of the stop payment order and
compliance with it.
• It also overruled the ground relied on by Citytrust in re-debiting Samara's dollar account, i.e., the discovery
that Marine Midland debited Citytrust's account before the stop payment order was given by Samara, this
being unjustifiable

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The following is procedural na, but included in case Sir asks it since it is the main basis of this Petition by Citytrust
and rephrased parts for easier comprehension.
• Only Marine filed an MR of the decision, which was denied. Citytrust did not do anything except to move
for a reconsideration of an order of execution of the judgment against it which was granted. Citytrust Bank
and Marine Midland filed SEPARATE appeals.
• CA dismissed the Citytrust Banking Corp’s appeal for being filed beyond the period for appeal.
• Citytrust questioned the dismissal of its appeal in the SC (in GR No 82009) and raised the ff issues:
o (1) whether he timely appeal of Marine Midland inured to petitioner's benefit; and o (2) whether
Samara was entitled to immediate execution even assuming the Citytrust’s appeal was indeed filed out
of time.
• Pending review of Citytrust’s appeal, in the appeal filed by Marine Midland, CA affirmed the
RTC WITH MODIFICATIONS, REDUCING THE RATE OF INTEREST AND ATTORNEY’S
FEES imposed
• SC denied the petition of Citytrust for lack of merit. In response to the allegation that the prescriptive
period for filing an appeal was also suspended as to Citytrust when Marine Midland filed a motion for
reconsideration, SC ruled that the rights and liabilities of the two defendants are not so interwoven as to
show similarity in defenses and warrant reversal of the judgment as to both.
• This Court stressed that although the Citytrust Banking and Marine Midland were solidarily liable, only
Marine Midland was ultimately held responsible for damages because it was the one ordered to
reimburse Citytrust for "whatever amount" Citytrust will be made to pay SAMARA by reason of
the judgment. Marine Midland was in fact acting only for itself in filing the appeal to the CA.
• Regarding the second issue, we held that Samara is entitled to immediate execution when the trial court
decision became final and executory as to Citytrust
• Citytrust contends that execution of the decision of his case, pending appeal of its codefendant, should
not be allowed to prevent an absurd result in case of possible reversal o SC held that the law is clear
that a final judgment must be executed against a defeated party. Since both defendants are jointly
and severally liable, it is irrelevant whether the co-defendant would be absolved.
• On August 7, 1989, the SC declared the decision in G.R. No. 82009 to be final and executory.
• On September 28, 1989, Samara filed a motion for execution which the trial court granted on October
23, 1989. Citytrust assailed the Order of Execution before the CA, but CA affirmed it.
• Citytrust alleges that the appellate court decision on Marine Midland’s appeal has superseded and rendered
functus oficio (no legal effect) the RTC decision invoked by Samara, and is applicable not only to Marine
Midland but also to the petitioner.
• Hence, the instant petition was filed on which raises the main issue of whether the CA committed
reversible error in ruling that the liability of Citytrust should be based on the original decision of the
trial court and not the modified one.c

ISSUE/S and HELD

Whether the trial court properly adjudged Citytrust Banking Corp and Marine Midland bank as solidarity liable
from the drawer-drawee relationship in the draft transaction—NO
RATIO
- SC does not agree with Citytrust’s claim: that the decision on the appeal filed by Midland modifying the RTC
decision has rendered the original RTC decision without legal effect and that such decision on the appeal should
also benefit Citytrust.
- However, no solidary liability as between them existed from the drawer-drawee relationship in the draft
transaction. It was the trial court judgment that created a solidary obligation to pay the private respondent certain
sums. The solidary obligation imposed by the RTC had a three-fold purpose:
- The RTC judgment, however, does not alter the fact that the respective defenses of the co-defendants are distinct
on trial and even on appeal.
- Citytrust and Marine Midland were not in privity with each other in a transaction involving payment
through a bank draft.
- A bank draft is a "bill of exchange drawn by a bank upon its correspondent bank, . . .

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 issued at the solicitation of a stranger who purchases and pays therefor"
- It is also defined as an "order for payment of money."
- Citytrust from which Samara purchased the bank draft, was the drawer of the draft through which it ordered
Marine Midland, the drawee bank, to pay the amount of US $40,000.00 in favor of Thai International Airways,
the payee.
- The drawee bank acting as a "payor" bank is solely liable for acts not done in accordance with the
instructions of the drawer bank or of the purchaser of the draft.
- The drawee bank has the burden of proving that it did not violate.
- Meanwhile, the drawer, if sued by the purchaser of the draft is liable for the act of debiting the customer's
account despite an instruction to stop payment. The drawer has the duty to prove that he complied with
the order to inform the drawee.
- There are 2 final judgments arising from one and the same basic claim of Mr. Samara. The obligations arising from the
same stop payment order on the same U.S. $40,000.00 bank draft are sought to be enforced by the 2 conflicting final
and executory judgments. We cannot enforce one judgment while allowing a violation of the other. We apply basic
principles of justice and equity.
- the Court cannot close its eyes to the inexplicable situation where Samara would be given a choice of executing his claim for
US $40,000.00 plus bigger interest (compounded), exemplary damages, and attorney's fees from petitioner Citytrust, or US
$40,000.00 plus a smaller sum inclusive of simple interest and reduced attorney's fees from Marine Midland.
- It is clear from the records that "the draft was not paid or cashed before the receipt of the stop payment order by Marine
Midland" but was certainly paid at some other date as evidenced by a reconciliation entry showing a debit of the
corresponding amount in the books of Marine Midland. Furthermore, there was substantial evidence to show that Marine
Midland is the one actually responsible for the personal injury to Samara
- Considering the above circumstances, the Court will not allow the absurd situation where a co-defendant who is
adjudged to be primarily liable for sums of money and for tort would be charged for an amount lesser than what its
co-defendant is bound to pay to the common creditor and allowed to collect from the first codefendant.
- Such runs counter to the principle of solidarity in obligations as between co-defendants established by a judgment for
recovery of sum of money and damages. Substantial justice shall not allow Marine Midland, which is the source of the injury
afflicted, to be unjustly enriched either by the direct execution against him of the judgment for the reduced amount or by the
indirect execution by way of reimbursement at a later time.c
- The modification made by the CA which ordered not only Marine Midland (the appellant therein) but both
"defendants jointly and severally" to pay the new amount.
- Though, as a matter of procedure, the modification shall be applied only to the appellant Marine, substantial justice
and equity also demand that we re- interpret the decision to refer to petitioner Citytrust as well. There exists a strong
and compelling reason to warrant an exception to the rule that a judgment creditor is entitled to execution of a final
and executory judgment against a party especially if that party failed to appeal.

DISPOSTIVE PORTION
Wherefore, the decision of the CA (January) as well as the resolution denying reconsideration are hereby
REVERSED and SET ASIDE. The court a quo is ordered to effect execution of its judgment subject to the
modifications supplied by the CA (in favor of Marine Midland Bank) in its judgment on February 23, 1989.