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  • Equitable Banking v. IAC & Nell Co. Bank Liability

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    Ella Trias
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    Equitable Banking Corporation was sued by The Edward J. Nell Co. for the value of the second check that Casville Enterprises issued to Nell Co. as partial payment for equipment. Casville had applied for a letter of credit from Equitable but failed to meet the terms. Casville then issued checks to Nell Co., which it deposited into its account with Equitable. However, the checks were dishonored after Casals withdrew the funds. The Supreme Court ruled that Equitable was not liable as the payee on the check was not indicated with reasonable certainty due to ambiguity caused by Nell Co.

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    Case digest

    Original Title

    Equitable Banking v IAC

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    Equitable Banking Corporation was sued by The Edward J. Nell Co. for the value of the second check that Casville Enterprises issued to Nell Co. as partial payment for equipment. Casville had applied for a letter of credit from Equitable but failed to meet the terms. Casville then issued checks to Nell Co., which it deposited into its account with Equitable. However, the checks were dishonored after Casals withdrew the funds. The Supreme Court ruled that Equitable was not liable as the payee on the check was not indicated with reasonable certainty due to ambiguity caused by Nell Co.

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    60 views10 pages

    Equitable Banking v. IAC & Nell Co. Bank Liability

    Uploaded by

    Ella Trias
    Equitable Banking Corporation was sued by The Edward J. Nell Co. for the value of the second check that Casville Enterprises issued to Nell Co. as partial payment for equipment. Casville had applied for a letter of credit from Equitable but failed to meet the terms. Casville then issued checks to Nell Co., which it deposited into its account with Equitable. However, the checks were dishonored after Casals withdrew the funds. The Supreme Court ruled that Equitable was not liable as the payee on the check was not indicated with reasonable certainty due to ambiguity caused by Nell Co.

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    © All Rights Reserved
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    of 10

    EQUITABLE BANKING

    CORPORATION
    v.
    IAC & THE EDWARD J. NELL CO.

    FACTS OF THE CASE

    Casville
    Enterprises
    (Liberato
    Casals)
    Negotiation on manner
    of payment
    Cash payment
    Casville has a credit
    line with Equitable
    Promised to open a
    domestic letter of credit
    Demanded delivery of 1
    garret skidder to CDO

    2 Garret
    Skidders/
    Bulldozers at
    PhP 970,000

    The Edward J.
    Nell Co.

    Casville letter
    informing Nell Co. that:
    Casville issued
    2 postdated
    checks
    (P300,000) as
    partial payment
    and
    reimbursements

    Letter of credit approved


    P300,000: collateral
    P100,000: clear title of
    Estrada property to be
    used as security
    All payable to Equitable

    Nell Co. agreed to


    advance the payments

    1st check
    First National City Bank
    August 05,

    EQUITABLE BANKING CORPORATION

    76

    P 400.000

    Four hundred thousand pesos only

    Memorandum + Cash disbursement voucher + Covering Letter:


    A/C of Casville for Marginal deposit and payment of balance on
    Estrada property as security for opening L/C in favor of Edward
    Nell Co.

    APPLICATION FOR LETTER OF CREDIT


    Step 1: Casville
    wrote to
    Equitable to
    APPLY under
    terms &
    conditions
    Step 6: Casville
    SURRENDERED
    2 TCTs to Nell
    Co.

    Step 2:
    Equitable
    replied and
    said ready to
    open if follow
    its5:
    terms
    &
    Step
    Casville
    conditions
    ISSUED
    3 post
    dated checks
    for Nell Co.

    Step 3: Casville
    sent
    Equitables
    terms &
    conditions to
    Co. Co.
    StepNell
    4: Nell
    agreed again
    to ADVANCE
    lacking sum to
    Equitable

    2nd check
    First National City Bank
    August 05,

    EQUITABLE BANKING CORPORATION


    A/C CASVILLE ENTERPRISES

    76

    P 427.300

    Four hundred thousand twenty-seven and three hundred

    Covering Letter:
    A/C of Casville for Marginal deposit and payment of balance on
    Estrada property as security for opening L/C in favor of Edward
    Nell Co.

    more more facts

    Casals

    deposited check with Equitable


    Teller accepted and deposited it to
    Casvilles checking account
    Casals then withdrew the amount
    deposited
    3 checks of Casville dishonored
    Nell Co. inquired on status of letter of
    credit
    Equitable informed Nell Co:
    - no letter of credit was opened
    - Casville withdrew amount deposited
    Nell

    Co. filed a complaint

    ISSUE
    WON Equitable Banking
    Corporation is liable to Edward J.
    Nell Co. for the value of the 2nd
    check?

    RTC and IAC: Equitable


    is LIABLE.
    - Erronously credited
    to Casvilles account
    - A/C only indicated
    for whose account
    transaction was
    made
    - Teller should have
    been more cautious
    - Notation and cover
    letter explained
    purpose of check

    SC: Equitable is NOT LIABLE.


    - The payee was not
    indicated with reasonable
    certainty
    - Ambiguity construed
    against Nell Co who caused
    the ambiguity
    - Not non-negotiable
    - Nell Cos acts is the
    proximate cause for their
    loss (extremely accommodating,
    too confident on Casals capacity)

    Article 1377
    Civil Code
    The interpretation of obscure
    words or stipulations in a
    contract shall not favor the
    party who caused the
    obscurity.

    Thank you.

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