Banks cannot 'unreasonably refuse' payment from borrowers — SC
Banks cannot unreasonably refuse payment from borrowers who may face higher interest and additional charges if these are not accepted, the Supreme Court (SC) said.
In a 21-page decision, the SC Third Division ordered a bank to accept the check tendered by couple Engracio Castañeda and Lourdes Castañeda as full payment for their personal loan of P2.6 million.
The case stemmed from the bank’s refusal to accept the couple’s checks as payment for their personal loan and one company loan.
According to the court, the couple borrowed P2.6 million from the bank. They were also the surety in three other corporate loans with an amount of P86.8 million.
The couple later gave the bank a check for P2.6 million for their personal loan and another P6 million for one one of the corporate loans.
The court, however, said the bank refused to accept the checks as full payment. It combined the two checks and applied the total amount to all four loans.
This led the couple to file a case against the bank.
The regional trial court and the Court of Appeals both ruled that the bank should have applied the P2.6 million check to the couple’s personal loan.
This was affirmed by the Supreme Court.
The court stressed that the couple and the companies have separate and distinct personalities and cannot be held liable for the other’s obligations.
“It is indeed a basic doctrine in corporation law that corporations have separate and distinct personality from their offices and stockholders. Thus, the payment made by spouses Castañeda for their personal loan cannot be applied to the corporate loans,” the SC said.
The SC reminded the bank that it is mandated to exercise its right in good faith.
“[I]nsisting on applying the payment to loans that are not yet due and demandable, while allowing the subject loan to remain delinquent and continue to accumulate interest and other charges, even if the payment is sufficient to fully satisfy the latter, is not keeping in good faith,” it said.
The court also ordered the bank to pay the couple P2 million moral damages and P2 million exemplary damages as well as P50,000 in attorney’s fees.
The decision was promulgated in August 2024 but published only in January 2025.—LDF, GMA Integrated News