Firestone Tire & Rubber Co of the Phils v. CA

Firestone Tire & Rubber Company of the Phils vs. CA [G.R. No. 113236. March 5, 2001] Ponente: Quisumbing

Issue: 1.

WON withdrawal slips are negotiable.

2.

WON Luzon Development Bank should be held liable for damages suffered by Firestone due to its allegedly belated notice of non-payment of the subject withdrawal slips.

Facts: In January 1978, Firestone Tire & Rubber Company of the Philippines (“Firestone” for brevity) entered into a “Franchised Dealership Agreement” with Fojas-Arca Enterprises Company (“Fojas-Arca”), whereby the latter has the privilege to

Held: 1.

No. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a

purchase on credit and sell Firestone’s products.

substitute for money. The withdrawal slips in question lacked this character.

From January 14, 1978 to May 15, 1978, Fojas-Arca purchased on credit Firestone products with a total amount of P4,896,000. In payment for the said purchases., Fojas-Arca delivered six special withdrawal slips drawn upon Luzon Development Bank. Consequently, these were deposited by Firestone in its current account with Citibank. Since, all of them were honored and paid, Firestone believed and relied on the fact that succeeding withdrawal slips drawn upon the said bank would be equally funded. Relying on such confidence and belief, Firestone extended to Fojas-Arca

2.

No. Since the withdrawal slips in question were non-negotiable, the rules governing the giving of immediate notice of dishonor of instruments do not apply. Respondent bank was under no obligation to give immediate notice that it would not make payment on the subject withdrawal slips. Citibank should have known that withdrawal slips were not negotiable instruments and it could not expect these slips to be treated as checks by other entities.

other purchases on credit of its products. The withdrawal slips deposited with Citibank were not checks so it was not However, on December 14, 1978, Firestone was informed by Citibank that special withdrawal slips No. 42127 dated June 15, 1978 for P1,198,092.80 and No. 42129 dated August 15, 1978 for P880,000 were dishonored and not paid for the reason ‘NO ARRANGEMENT’. As a consequence, Citibank debited Firestone’s account for the total sum of P2,078,092.80. As a result, Firestone averred that it suffered pecuniary losses directly attributable to the gross negligence of Luzon Development Bank. Firestone filed a complaint against the said bank when it refused to pay damages. However, the trial court dismissed the said complaint while the Court of Appeals denied plaintiff’s appeal and affirmed the trial court’s judgment. Hence, this petition for review on certiorari.

bound to accept the withdrawal slips as valid mode of deposit. But having erroneously accepted them as such, Citibank and Firestone must bear the risks attendant to the acceptance of these instruments and they could not shift the risk and hold respondent bank liable for their mistake.