INTERNATIONAL CORPORATE BANK v GUECO

FACTS:

Gueco spouses purchase a Nissan Sentra 1989 model car through a bank loan with the
International Corporate Bank (now Union Bank of the Philippines). They issued promissory notes and
mortgage over the car.

In default of the spouses to pay their loans, the Bank filed a case with Sum of Money with Prayer
for a Writ of replevin in the MTC of Pasay, consequently, served summons and fetch Dr. Gueco for a
meeting which resulted to a negotiation of the payment from 184,000 lowered to 154,000. Still, the car
was detained inside the bank’s compound for the non payment of the said negotiated amount.

The amount was lowered into 150,000 through a negotiation with an Auto Loan/Car collection
Head. A manager’s check of 150,000 was delivered by D. Gueco but the car was not released because of
his refusal to sign the Joint Motion to Dismiss which was considered by the bank as their SOP to effect a
compromise and to preclude future filing of claims, counterclaims or suits for damages.

Spouses filed a case with the MTC but was denied for lack of merit. They appealed to RTC which
ruled in favor of them and ordered the bank to return the car and to pay damages and cost of suit. The
CA also ruled in favor of the spouses, like the lower court, they also belive that fraud was instituted by
the bank when they require the spouses to sign the joint motion to dismiss.

ISSUE: Whether or not there was fraud on the part of the petitioner?

Held: None, the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional
evasion of the normal fulfillment of obligation. In this case, the court stated that there was no act of
fraud in the part of the bank wherein the said signing of motion to dismiss will moreover benefit the
spouses. True, petitioner may have been remiss in informing Dr. Gueco that the signing of a joint motion
to dismiss is a standard operating procedure of petitioner bank. However, this can not in anyway have
prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case
filed by petitioner against it before the lower court would be dismissed with prejudice. The joint motion
to dismiss was but a natural consequence of the compromise agreement and simply stated that Dr.
Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner's act of requiring Dr.
Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempt on the part of
petitioner to renege on the compromise agreement of the parties. It should, likewise, be noted that in
cases of breach of contract, moral damages may only be awarded when the breach was attended by
fraud or bad faith. The law presumes good faith. Dr. Gueco failed to present an iota of evidence to
overcome this presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco
from P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case.