RA 8791
Declaration of Policy
G.R. No. 88013 March 19, 1990
SIMEX INTERNATIONAL (MANILA),
INCORPORATED, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and TRADERS
ROYAL BANK, respondents.
CRUZ, J.:
We are concerned in this case with the question of damages,
specifically moral and exemplary damages. The negligence of
the private respondent has already been established. All we
have to ascertain is whether the petitioner is entitled to the
said damages and, if so, in what amounts.
The parties agree on the basic facts. The petitioner is a private
corporation engaged in the exportation of food products. It
buys these products from various local suppliers and then
sells them abroad, particularly in the United States, Canada
and the Middle East. Most of its exports are purchased by the
petitioner on credit.
The petitioner was a depositor of the respondent bank and
maintained a checking account in its branch at Romulo
Avenue, Cubao, Quezon City. On May 25, 1981, the petitioner
deposited to its account in the said bank the amount of
P100,000.00, thus increasing its balance as of that date to
P190,380.74. 1 Subsequently, the petitioner issued several
checks against its deposit but was suprised to learn later that
they had been dishonored for insufficient funds.
The dishonored checks are the following:
1. Check No. 215391 dated May 29,
1981, in favor of California
Manufacturing Company, Inc. for
P16,480.00:
2. Check No. 215426 dated May 28,
1981, in favor of the Bureau of Internal
Revenue in the amount of P3,386.73:
3. Check No. 215451 dated June 4, 1981,
in favor of Mr. Greg Pedreño in the
amount of P7,080.00;
4. Check No. 215441 dated June 5, 1981,
in favor of Malabon Longlife Trading
Corporation in the amount of
P42,906.00:
5. Check No. 215474 dated June 10,
1981, in favor of Malabon Longlife
Trading Corporation in the amount of
P12,953.00:
6. Check No. 215477 dated June 9, 1981,
in favor of Sea-Land Services, Inc. in the
amount of P27,024.45:
7. Check No. 215412 dated June 10,
1981, in favor of Baguio Country Club
Corporation in the amount of P4,385.02:
and
Page 1 of 25
8. Check No. 215480 dated June 9, 1981,
in favor of Enriqueta Bayla in the
amount of P6,275.00. 2
As a consequence, the California Manufacturing Corporation
sent on June 9, 1981, a letter of demand to the petitioner,
threatening prosecution if the dishonored check issued to it
was not made good. It also withheld delivery of the order
made by the petitioner. Similar letters were sent to the
petitioner by the Malabon Long Life Trading, on June 15,
1981, and by the G. and U. Enterprises, on June 10, 1981.
Malabon also canceled the petitioner's credit line and
demanded that future payments be made by it in cash or
certified check. Meantime, action on the pending orders of the
petitioner with the other suppliers whose checks were
dishonored was also deferred.
The petitioner complained to the respondent bank on June 10,
1981. 3 Investigation disclosed that the sum of P100,000.00
deposited by the petitioner on May 25, 1981, had not been
credited to it. The error was rectified on June 17, 1981, and
the dishonored checks were paid after they were re-
deposited. 4
In its letter dated June 20, 1981, the petitioner demanded
reparation from the respondent bank for its "gross and
wanton negligence." This demand was not met. The petitioner
then filed a complaint in the then Court of First Instance of
Rizal claiming from the private respondent moral damages in
the sum of P1,000,000.00 and exemplary damages in the sum
of P500,000.00, plus 25% attorney's fees, and costs.
After trial, Judge Johnico G. Serquinia rendered judgment
holding that moral and exemplary damages were not called
for under the circumstances. However, observing that the
plaintiff's right had been violated, he ordered the defendant
to pay nominal damages in the amount of P20,000.00 plus
P5,000.00 attorney's fees and costs. 5 This decision was
affirmed in toto by the respondent court. 6
The respondent court found with the trial court that the
private respondent was guilty of negligence but agreed that
the petitioner was nevertheless not entitled to moral
damages. It said:
The essential ingredient of moral
damages is proof of bad faith (De
Aparicio vs. Parogurga, 150 SCRA 280).
Indeed, there was the omission by the
defendant-appellee bank to credit
appellant's deposit of P100,000.00 on
May 25, 1981. But the bank rectified its
records. It credited the said amount in
favor of plaintiff-appellant in less than a
month. The dishonored checks were
eventually paid. These circumstances
negate any imputation or insinuation of
malicious, fraudulent, wanton and gross
bad faith and negligence on the part of
the defendant-appellant.
It is this ruling that is faulted in the petition now before us.
This Court has carefully examined the facts of this case and
finds that it cannot share some of the conclusions of the lower
courts. It seems to us that the negligence of the private
respondent had been brushed off rather lightly as if it were a
minor infraction requiring no more than a slap on the wrist.
We feel it is not enough to say that the private respondent
rectified its records and credited the deposit in less than a
RA 8791
Declaration of Policy
month as if this were sufficient repentance. The error should
not have been committed in the first place. The respondent
bank has not even explained why it was committed at all. It is
true that the dishonored checks were, as the Court of Appeals
put it, "eventually" paid. However, this took almost a month
when, properly, the checks should have been paid
immediately upon presentment.
As the Court sees it, the initial carelessness of the respondent
bank, aggravated by the lack of promptitude in repairing its
error, justifies the grant of moral damages. This rather
lackadaisical attitude toward the complaining depositor
constituted the gross negligence, if not wanton bad faith, that
the respondent court said had not been established by the
petitioner.
We also note that while stressing the rectification made by the
respondent bank, the decision practically ignored the
prejudice suffered by the petitioner. This was simply glossed
over if not, indeed, disbelieved. The fact is that the petitioner's
credit line was canceled and its orders were not acted upon
pending receipt of actual payment by the suppliers. Its
business declined. Its reputation was tarnished. Its standing
was reduced in the business community. All this was due to
the fault of the respondent bank which was undeniably
remiss in its duty to the petitioner.
Article 2205 of the Civil Code provides that actual or
compensatory damages may be received "(2) for injury to the
plaintiff s business standing or commercial credit." There is
no question that the petitioner did sustain actual injury as a
result of the dishonored checks and that the existence of the
loss having been established "absolute certainty as to its
amount is not required." 7 Such injury should bolster all the
more the demand of the petitioner for moral damages and
justifies the examination by this Court of the validity and
reasonableness of the said claim.
We agree that moral damages are not awarded to penalize the
defendant but to compensate the plaintiff for the injuries he
may have suffered. 8 In the case at bar, the petitioner is
seeking such damages for the prejudice sustained by it as a
result of the private respondent's fault. The respondent court
said that the claimed losses are purely speculative and are not
supported by substantial evidence, but if failed to consider
that the amount of such losses need not be established with
exactitude precisely because of their nature. Moral damages
are not susceptible of pecuniary estimation. Article 2216 of
the Civil Code specifically provides that "no proof of
pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be
adjudicated." That is why the determination of the amount to
be awarded (except liquidated damages) is left to the sound
discretion of the court, according to "the circumstances of
each case."
From every viewpoint except that of the petitioner's, its claim
of moral damages in the amount of P1,000,000.00 is nothing
short of preposterous. Its business certainly is not that big, or
its name that prestigious, to sustain such an extravagant
pretense. Moreover, a corporation is not as a rule entitled to
moral damages because, not being a natural person, it cannot
experience physical suffering or such sentiments as wounded
feelings, serious anxiety, mental anguish and moral shock.
The only exception to this rule is where the corporation has a
good reputation that is debased, resulting in its social
humiliation. 9
We shall recognize that the petitioner did suffer injury
because of the private respondent's negligence that caused
the dishonor of the checks issued by it. The immediate
Page 2 of 25
consequence was that its prestige was impaired because of
the bouncing checks and confidence in it as a reliable debtor
was diminished. The private respondent makes much of the
one instance when the petitioner was sued in a collection
case, but that did not prove that it did not have a good
reputation that could not be marred, more so since that case
was ultimately settled. 10 It does not appear that, as the
private respondent would portray it, the petitioner is an
unsavory and disreputable entity that has no good name to
protect.
Considering all this, we feel that the award of nominal
damages in the sum of P20,000.00 was not the proper relief
to which the petitioner was entitled. Under Article 2221 of the
Civil Code, "nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss suffered
by him." As we have found that the petitioner has indeed
incurred loss through the fault of the private respondent, the
proper remedy is the award to it of moral damages, which we
impose, in our discretion, in the same amount of P20,000.00.
Now for the exemplary damages.
The pertinent provisions of the Civil Code are the following:
Art. 2229. Exemplary or corrective
damages are imposed, by way of
example or correction for the public
good, in addition to the moral,
temperate, liquidated or compensatory
damages.
Art. 2232. In contracts and quasi-
contracts, the court may award
exemplary damages if the defendant
acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
The banking system is an indispensable institution in the
modern world and plays a vital role in the economic life of
every civilized nation. Whether as mere passive entities for
the safekeeping and saving of money or as active instruments
of business and commerce, banks have become an ubiquitous
presence among the people, who have come to regard them
with respect and even gratitude and, most of all, confidence.
Thus, even the humble wage-earner has not hesitated to
entrust his life's savings to the bank of his choice, knowing
that they will be safe in its custody and will even earn some
interest for him. The ordinary person, with equal faith,
usually maintains a modest checking account for security and
convenience in the settling of his monthly bills and the
payment of ordinary expenses. As for business entities like
the petitioner, the bank is a trusted and active associate that
can help in the running of their affairs, not only in the form of
loans when needed but more often in the conduct of their day-
to-day transactions like the issuance or encashment of
checks.
In every case, the depositor expects the bank to treat his
account with the utmost fidelity, whether such account
consists only of a few hundred pesos or of millions. The bank
must record every single transaction accurately, down to the
last centavo, and as promptly as possible. This has to be done
if the account is to reflect at any given time the amount of
money the depositor can dispose of as he sees fit, confident
that the bank will deliver it as and to whomever he directs. A
blunder on the part of the bank, such as the dishonor of a
check without good reason, can cause the depositor not a little
RA 8791
Declaration of Policy

embarrassment if not also financial loss and perhaps even

civil and criminal litigation.

The point is that as a business affected with public interest

and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature
of their relationship. In the case at bar, it is obvious that the
respondent bank was remiss in that duty and violated that
relationship. What is especially deplorable is that, having
been informed of its error in not crediting the deposit in
question to the petitioner, the respondent bank did not
immediately correct it but did so only one week later or
twenty-three days after the deposit was made. It bears
repeating that the record does not contain any satisfactory
explanation of why the error was made in the first place and
why it was not corrected immediately after its discovery. Such
ineptness comes under the concept of the wanton manner
contemplated in the Civil Code that calls for the imposition of
exemplary damages.

After deliberating on this particular matter, the Court, in the

exercise of its discretion, hereby imposes upon the
respondent bank exemplary damages in the amount of
P50,000.00, "by way of example or correction for the public
good," in the words of the law. It is expected that this ruling
will serve as a warning and deterrent against the repetition of
the ineptness and indefference that has been displayed here,
lest the confidence of the public in the banking system be
further impaired.

ACCORDINGLY, the appealed judgment is hereby MODIFIED

and the private respondent is ordered to pay the petitioner,
in lieu of nominal damages, moral damages in the amount of
P20,000.00, and exemplary damages in the amount of
P50,000.00 plus the original award of attorney's fees in the
amount of P5,000.00, and costs.

SO ORDERED.

Page 3 of 25
RA 8791
Declaration of Policy
[G.R. No. 152720. February 17, 2005]
SOLIDBANK CORPORATION, petitioner, vs. Spouses
TEODULFO and CARMEN
ARRIETA, respondents.
DECISION
PANGANIBAN, J.:
A banks gross negligence in dishonoring a well-funded
check, aggravated by its unreasonable delay in repairing the
error, calls for an award of moral and exemplary damages.
The resulting injury to the check writers reputation and peace
of mind needs to be recognized and compensated.
The Case
Before us is a Petition for Review[1] under Rule 45 of the
Rules of Court, seeking to reverse and set aside the March 28,
2001 Decision[2] and the February 5, 2002 Resolution[3] of the
Court of Appeals (CA) in CA-GR CV No. 55002. The assailed
Decision disposed as follows:
WHEREFORE, the appeal is DISMISSED, with costs against
defendant-appellant.[4]
The CA denied reconsideration in its February 5, 2002
Resolution.
The Facts
The facts are summarized by the CA as follows:
Carmen Arrieta is a bank depositor of Solidbank Corporation
under Checking Account No. 123-1996. On March 1990,
Carmen issued SBC Check No. 0293984 (Exh. A) in the amount
of P330.00 in the name of Lopues Department Store in
payment of her purchases from said store. When the check
was deposited by the store to its account, the same was
dishonored due to Account Closed (Exh. B) despite the fact
that at the time the check was presented for payment,
Carmens checking account was still active and backed up by a
deposit of P1,275.20.
As a consequence of the checks dishonor, Lopues Department
Store sent a demand letter to Carmen (Exh. C) threatening her
with criminal prosecution unless she redeemed the check
within five (5) days. To avoid criminal prosecution, Carmen
paid P330.00 in cash to the store, plus a surcharge of P33.00
for the bouncing check, or a total of P363.00 (Exh. F).
Thereupon, Carmen filed a complaint against Solidbank
Corporation for damages alleging that the bank, by its
carelessness and recklessness in certifying that her account
was closed despite the fact that it was still very much active
and sufficiently funded, had destroyed her good name and
reputation and prejudiced not only herself but also her family
in the form of mental anguish, sleepless nights, wounded
feelings and social humiliation. She prayed that she be
awarded moral and exemplary damages as well as attorneys
fees.
In its answer, the bank claimed that Carmen, contrary to her
undertaking as a depositor, failed to maintain the required
balance of at least P1,000.00 on any day of the month.
Moreover, she did not handle her account in a manner
satisfactory to the bank. In view of her violations of the
Page 4 of 25
general terms and conditions governing the establishment
and operation of a current account, Carmens account was
recommended for closure. In any event, the bank claimed
good faith in declaring her account closed since one of the
clerks, who substituted for the regular clerk, committed an
honest mistake when he thought that the subject account was
already closed when the ledger containing the said account
could not be found.
After trial, the lower court rendered its decision holding that
Solidbank Corporation was grossly negligent in failing to
check whether or not Carmens account was still open and
viable at the time the transaction in question was made.
Hence, the bank was liable to Carmen for moral and
exemplary damages, as well as attorneys fees. It held that the
bank was remiss in its duty to treat Carmens account with the
highest degree of care, considering the fiduciary nature of
their relationship. The dispositive portion of the decision
reads:
WHEREFORE, the Court hereby renders judgment in favor of
the plaintiff as against the defendant-bank, and defendant-
bank is ordered to pay moral damages of P150,000.00;
exemplary damages of P50,000.00; and attorneys fees
of P20,000.00, plus costs.
SO ORDERED.[5]
Ruling of the Court of Appeals
The CA debunked the contention of the bank that the
latter was not liable. According to petitioner, the dishonor of
the check by reason of Account Closed was an honest mistake
of its employee. The appellate court held that the error
committed by the bank employee was imputable to the bank.
Banks are obliged to treat the accounts of their depositors
with meticulous care, regardless of the amount of the deposit.
Failing in this duty, petitioner was found grossly negligent.
The failure of the bank to immediately notify Respondent
Carmen Arrieta of its unilateral closure of her account
manifested bad faith, added the CA.
The appellate court likewise affirmed the award of
moral damages. It held that the banks wrongful act was the
proximate cause of Carmens moral suffering. The CA ruled
that the lack of malice and bad faith on the part of petitioner
did not suffice to exculpate the latter from liability; the banks
gross negligence amounted to a wilful act. The trial courts
award of exemplary damages and attorneys fees was
sustained in view of respondents entitlement to moral
damages.
Hence, this Petition.[6]
Issues
Petitioner raises the following issues for our
consideration:
I.
Whether or not x x x respondents are entitled to recovery of
moral and exemplary damages and attorneys fees.
II.
Whether or not the award of moral and exemplary damages
and attorneys fees is excessive, arbitrary and contrary to
prevailing jurisprudence.[7]
RA 8791
Declaration of Policy
The Courts Ruling
The Petition is partly meritorious.
Main Issue:
Petitioners Liability for Damages
Petitioner contends that the award of moral damages
was erroneous because of the failure of Respondent Carmen
to establish that the dishonor of Check No. 0293984 on March
30, 1990 was the direct and only cause of the social
humiliation, extreme mental anguish, sleepless nights, and
wounded feelings suffered by [her]. It referred to an occasion
fifteen days before, on March 15, 1990, during which another
check (Check No. 0293983) she had issued had likewise been
dishonored.
According to petitioner, highly illogical was her claim
that extreme mental anguish and social humiliation resulted
from the dishonor of Check No. 0293984, as she claimed none
from that of her prior Check No. 0293983, which had
allegedly been deposited by mistake by the payees wife. Given
the circumstances, petitioner adds that the dishonor of the
check -- subject of the present case -- did not really cause
respondent mental anguish, sleepless nights and besmirched
reputation; and that her institution of this case was clearly
motivated by opportunism.
We are not persuaded.
The fact that another check Carmen had issued was
previously dishonored does not necessarily imply that the
dishonor of a succeeding check can no longer cause moral
injury and personal hurt for which the aggrieved party may
claim damages. Such prior occurrence does not prove that
respondent does not have a good reputation that can be
besmirched.[8]
The reasons for and the circumstances surrounding the
previous issuance and eventual dishonor of Check No. 0293983
are totally separate -- the payee of the prior check was different
-- from that of Check No. 0293984, subject of present case.
Carmen had issued the earlier check to accommodate a
relative,[9] and the succeeding one to pay for goods purchased
from Lopues Department Store. That she might not have
suffered damages as a result of the first dishonored check
does not necessarily hold true for the second. In the light of
sufficient evidence showing that she indeed suffered damages
as a result of the dishonor of Check No. 0293984, petitioner
may not be exonerated from liability.
Case law[10] lays out the following conditions for the
award of moral damages: (1) there is an injury -- whether
physical, mental or psychological -- clearly sustained by the
claimant; (2) the culpable act or omission is factually
established; (3) the wrongful act or omission of the defendant
is the proximate cause of the injury sustained by the claimant;
and (4) the award of damages is predicated on any of the
cases stated in Article 2219[11] of the Civil Code.
In the instant case, all four requisites have been
established. First, these were the findings of the appellate
court: Carmen Arrieta is a bank depositor of Solidbank
Corporation of long standing. She works with the Central
Negros Electric Cooperative, Inc. (CENECO), as an executive
secretary and later as department secretary. She is a
deaconess of the Christian Alliance Church in Bacolod City.
These are positions which no doubt elevate her social
standing in the community. Understandably -- and as
sufficiently proven by her testimony -- she suffered mental
anguish, serious anxiety, besmirched reputation, wounded
feelings and social humiliation; and she suffered thus when
the people she worked with -- her friends, her family and even
Page 5 of 25
her daughters classmates -- learned and talked about her
bounced check.
Second, it is undisputed that the subject check was
adequately funded, but that petitioner wrongfully dishonored
it.
Third, Respondent Carmen was able to prove that
petitioners wrongful dishonor of her check was the proximate
cause of her embarrassment and humiliation in her
workplace, in her own home, and in the church where she
served as deaconess.
Proximate cause has been defined as any cause which,
in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the result complained of
and without which would not have occurred x x x.[12] It is
determined from the facts of each case upon combined
considerations of logic, common sense, policy and
precedent.[13] Clearly, had the bank accepted and honored the
check, Carmen would not have had to face the questions of --
and explain her predicament to -- her office mates, her
daughters, and the leaders and members of her church.
Furthermore, the CA was in agreement with the trial
court in ruling that her injury arose from the gross negligence
of petitioner in dishonoring her well-funded check.
Unanimity of the CA and the trial court in their factual
ascertainment of this point bars us from supplanting their
finding and substituting it with our own. Settled is the
doctrine that the factual determinations of the lower courts
are conclusive and binding upon this Court.[14] Verily, the
review of cases brought before the Supreme Court from the
Court of Appeals is limited to errors of law. [15] None of the
recognized exceptions to this principle has been shown to
exist.
Fourth, treating Carmens account as closed, merely
because the ledger could not be found was a reckless act that
could not simply be brushed off as an honest mistake. We
have repeatedly emphasized that the banking industry is
impressed with public interest. Consequently, the highest
degree of diligence is expected, and high standards of
integrity and performance are even required of it. By the
nature of its functions, a bank is under obligation to treat the
accounts of its depositors with meticulous care and always to
have in mind the fiduciary nature of its relationship with
them. [16]
Petitioners negligence here was so gross as to amount
to a wilful injury to Respondent Carmen. Article 21 of the Civil
Code states that any person who wilfully causes loss or injury
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the
damage. Further, Article 2219 provides for the recovery of
moral damages for acts referred to in the aforementioned
Article 21. Hence, the bank is liable for moral damages to
respondent.[17]
The foregoing notwithstanding, we find the sum
of P150,000 awarded by the lower courts excessive. Moral
damages are not intended to enrich the complainant at the
expense of the defendant.[18] Rather, these are awarded only
to enable the injured party to obtain means, diversions or
amusements that will serve to alleviate the moral suffering
that resulted by reason of the defendants culpable
action.[19] The purpose of such damages is essentially
indemnity or reparation, not punishment or correction. [20] In
other words, the award thereof is aimed at a restoration
within the limits of the possible, of the spiritual status quo
ante;[21] therefore, it must always reasonably approximate the
extent of injury and be proportional to the wrong
committed.[22]
RA 8791
Declaration of Policy

Accordingly, the award of moral damages must be

reduced to P20,000,[23] an amount commensurate with the
alleviation of the suffering caused by the dishonored check
that was issued for the amount of P330.

The law allows the grant of exemplary damages to set

an example for the public good.[24] The business of a bank is
affected with public interest; thus, it makes a sworn
profession of diligence and meticulousness in giving
irreproachable service.[25] For this reason, the bank should
guard against injury attributable to negligence or bad faith on
its part.[26] The banking sector must at all times maintain a
high level of meticulousness. The grant of exemplary damages
is justified[27] by the initial carelessness of petitioner,
aggravated by its lack of promptness in repairing its error. It
was only on August 30, 1990, or a period of five months from
the erroneous dishonor of the check, when it wrote Lopues
Department Store a letter acknowledging the banks
mistake.[28] In our view, however, the award of P50,000 is
excessive and should accordingly be reduced to P20,000.[29]

The award of attorneys fees in the amount of P20,000

is proper, for respondents were compelled to litigate to
protect their rights.[30]

WHEREFORE, the Petition is PARTLY GRANTED and

the assailed Decision MODIFIED. Petitioners are ORDERED to
pay respondents P20,000 as moral damages, P20,000 as
exemplary damages, and P20,000 as attorneys fees.

SO ORDERED.

Page 6 of 25
RA 8791
Declaration of Policy
G.R. No. 108555 December 20, 1994
RAMON TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and RIZAL
COMMERCIAL BANKING CORPORATION, respondents.
KAPUNAN, J.:
This petition seeks to set aside the decision of the Court of
Appeals dated January 12, 1993 in CA-G.R. CV No. 31083,
entitled Ramon Tan, plaintiff-appellee, vs. Rizal Commercial
Banking Corporation, defendant-appellant, reversing the
decision of the Regional Trial Court dated December 28, 1990
ordering respondent bank Rizal Commercial Banking
Corporation (RCBC), Binondo Branch, to pay petitioner
damages and attorney's fees in the amount of ONE MILLION
THIRTY FIVE THOUSAND (P1,035,000.00) PESOS.
The following are the uncontroverted facts:
Petitioner Ramon Tan, a trader-businessman and community
leader in Puerto Princesa, had maintained since 1976 Current
Account No. 109058068 with respondent bank's Binondo
branch. On March 11, 1988, to avoid carrying cash while
enroute to Manila, he secured a Cashier's Check No. L
406000126 from the Philippine Commercial Industrial Bank
(PCIB), Puerto Princesa branch, in the amount of Thirty
Thousand (P30,000.00) Pesos, payable to his order. He
deposited the check in his account with RCBC Binondo on
March 15. On the same day, RCBC erroneously sent the same
cashier's check for clearing to the Central Bank which was
returned for having been "missent" or "misrouted."1 The next
day, March 16, RCBC debited the amount covered by the same
cashier's check from the account of the petitioner.
Respondent bank at this time had not informed the petitioner
of its action which the latter claims he learned of only 42 days
after, specifically on March 16, when he received the bank's
debit memo.2 Relying on the common knowledge that a
cashier's check was as good as cash, that the usual banking
practice that local checks are cleared within three (3)
working days and regional checks within seven (7) working
days, and the fact that the cashier's check was accepted,
petitioner issued two (2) personal checks both dated March
18. Check No. 040719 in the name of Go Lac for Five Thousand
Five Hundred (P5,5000.00) Pesos was presented on April
25,3more than 30 days from petitioner's deposit date of the
cashier's check. Check
No. 040718 in the name of MS Development Trading
Corporation for Six Thousand Fifty-Three Pesos and Seventy
Centavos (P6,053.70) was returned twice on March 24, nine
(9) days from his deposit date and again on April 26, twenty-
two days after the day the cashier's check was deposited for
insufficiency of funds.4
Petitioner, alleging to have suffered humiliation and loss of
face in the business sector due to the bounced checks, filed a
complaint against RCBC for damages in the Regional Trial
Court of Palawan and Puerto Princesa, Branch 47, docketed
as Civil Case No. 2101.5
During the trial, petitioner sought to prove:
First, that it was RCBC's responsibility to call his attention
there and then that he had erroneously filled the wrong
deposit slip at the time he deposited the cashier's check with
the respondent bank's teller and it was negligence on RCBC's
part not to have done so;6
Page 7 of 25
Second, that RCBC had been remiss in the performance of its
obligation to the petitioner when it "missent" the cashier's
check to the Central Bank knowing, as it should, that the
source of the check, PCIB, Puerto Princesa Branch, is not
included in the areas required to be cleared by the Central
Bank, a fact known to the banking world and surely to the
respondent bank;7
Third, that RCBC upon knowing of its error in "missending"
the cashier's check to the Central Bank did not attempt to
rectify its "misclearing" error by clearing it seasonably with
PCIB, Puerto Princesa, thru its own RCBC Puerto Princesa
Branch with whom it had direct radio contact;8
Fourth, that as an old client, with twelve (12) years of good
standing then, RCBC should have given him more
consideration by exerting greater diligence in clearing the
check with PCIB, Puerto Princesa, to protect its client's
interest;9
Fifth, that RCBC failed to inform petitioner promptly that the
check had not been cleared, despite its debiting without delay
the amount covered by the check from the account of the
petitioner and hastily charging the latter service fees
immediately after the return of the "missent checks"; 10 and
Finally, that the bounced checks resulting from RCBC's
"misclearing" had put in doubt his credibility among his
business peers and sullied his reputation as a community
leader which he had painstakingly cultivated for years. His
community standing as a business-socio-civic leader was a
source of pride for him in his old age of 70. He cited being
Chairman of Palawan Boy Scout Council, 2-term President of
the Rotary Club of Puerto Princesa, member of Palawan
Chamber of Commerce and Industry, member of the
Monitoring Team of the Palawan Integrated Area
Development Project, member of Lion's Club, Philippine Rifle
Pistol Association and the Saturday Health Club to justify his
claim for moral damages.11
In its defense, RCBC disowning any negligence, put the blame
for the "misrouting" on the petitioner for using the wrong
check deposit slip. It insisted that the misuse of a local check
deposit slip, instead of a regional check deposit slip, triggered
the "misrouting" by RCBC of the cashier's check to the Central
Bank and it was petitioner's negligent "misuse" of a local
deposit slip which was the proximate cause of the
"misrouting," thus he should bear the consequence.12
RCBC alleged that it complied strictly with accepted banking
practice when it debited the amount of P30,000.00 against
petitioner's account since under Resolution No. 2202 dated
December 21, 1979 of the Monetary Board, it is a matter of
policy to prohibit the drawing against uncollected deposits
(DAUDS) except when the drawings are made against
uncollected deposits representing bank
manager's/cashier's/treasurer's checks, treasury warrants,
postal money orders and duly funded "on us" checks which
may be permitted at the discretion of each bank. 13 Without
crediting the P30,000.00 deposit, petitioner's balance before
and after was Two Thousand Seven Hundred
Ninety-Two Pesos and the (P2,792.88) Eighty-Eight
Centavos.14 Thus, it dishonored the two (2) checks amounting
to P11,553.70 since they were drawn against insufficient
funds. RCBC added that petitioner had no bills purchase (BP)
line which allows a depositor to receive or draw from
proceeds of a check without waiting it to be cleared. Besides,
RCBC maintained, had it forwarded the Cashier's Check to
PCIB Puerto Princesa, Palawan, it would take at least twenty
(20) working days for the cashier's check to be cleared and it
RA 8791
Declaration of Policy
would take the same length of time to clear the two (2)
personal checks of Tan.15
RCBC further asseverated it was merely acting as petitioner's
collecting agent and it assumed no responsibilitybeyond care
in selecting correspondents under the theory that where a
check is deposited with a collecting bank the relationship
created is that of agency and not creditor-debtor, thus it
cannot be liable.16
Finally, respondent claimed that serious attempts were made
to contact petitioner through the telephone numbers in the
signature specimen card of petitioner but to no avail. 17 The
Assistant Branch Accountant of RCBC Binondo Branch
testified that the first telephone number in the card had been
deleted from the phone company's list and that when RCBC
tried to contact petitioner's daughter Evelyn Tan-Banzon thru
a certain telephone number and when they asked for Evelyn
Tan, they were told there was no such person.18
The trial court rendered a decision on December 28, 1990 in
petitioner's favor, the dispositive portion 19 of which reads:
WHEREFORE, premises considered,
plaintiff having proven the allegations of
his verified complaint by
preponderance of evidence, the court
hereby renders judgment ordering
defendant bank, Binondo Branch,
Manila, to pay him damages and
attorney's fees in the total amount of
P1,035,000.00 Philippine Currency,
broken down as follows: P700,000.00 as
moral damages, P200,000.00 as
exemplary damages; P135,000.00
which is 15% of the sum herein
awarded to plaintiff, as attorney's fees
and to pay costs of suit.
For having failed to prove by any receipt
or writing to underpin it, plaintiff's
claim for actual damage is denied for
lack of merit.
IT IS SO ORDERED.
RCBC appealed to the Court of Appeals contending that the
trial court erred in holding RCBC liable to petitioner on
account of its alleged negligence and in awarding petitioner
moral and exemplary damages and attorney's fees.
The Court of Appeals on January 12, 1993 rendered a
decision 20 with the following decretal portion:
WHEREFORE, and upon all the
foregoing, the decision of the court
below is REVERSED and this complaint
is DISMISSED without pronouncement
as to cost.
The Court of Appeals' decision is based on the following
findings: 21
What appeared to have caused the
unfortunate incident was that the
plaintiff filled up the wrong deposit slip
which led to the sending of the check to
Page 8 of 25
the Central Bank when the clearing
should have been made elsewhere.
But the claim of the plaintiff that he was
not advised that the Cashier's check was
missent does not seem to be correct. The
evidence indicated that the defendant
bank thru its personnel had called him
up thru telephone in the number (No.
60-45-23) which he gave in his
specimen signature card. But it came
out, that said telephone number was no
longer active or was already deleted
from the list of telephone numbers.
There was an instruction on the part of
the plaintiff for the bank to contact his
daughter, Mrs. Evelyn Tan Banzon and
according to the plaintiff, she too, was
not contacted as per his instruction. The
evidence, however, indicated that Ms.
Evelyn Tan also could not be contacted
at the number supposed to pertain to
her as appeared in the specimen
signature card. In other words while
there was compliance with the
instructions given by the plaintiff but
said instructions were faulty. The
plaintiff as a customer of the bank is
under obligation to inform the
defendant of any changes in the
telephone numbers to be contacted in
the event of any exigency.
All in all, the facts indicate that the
refusal of RCBC to credit the amount of
P30,000.00 to the plaintiff's current
account is consistent with the accepted
banking practice. As the defendant bank
had claimed, under Resolution No. 2202
dated December 21, 1979 of the
Monetary Board, it had been
emphatically declared as a matter of
policy that no drawings should be made
against uncollected deposits except
when the drawings are made against
uncollected deposits representing bank
manager's/cashier's/treasurer's
checks, treasury warrants, postal
money orders, and duly funded "on-us"
checks as may be permitted at the
discretion of each bank.
It is clear that immediate payment
without awaiting clearance of a
cashier's check is discretionary with the
bank to whom the check is presented
and such being the case, the refusal to
allow it as in this case is not to be
equated with negligence in the basic
perception that discretion is not
demandable as a right. In the instant
case, prior to the deposit of P30,000.00,
the plaintiff's account appeared to be
only in the amount of P2,792.98. So the
two (2) checks issued by the plaintiff
amounting to P11,553.70 had to be
dishonored since they were drawn
against insufficient funds.
RA 8791
Declaration of Policy
What the plaintiff should have done,
before issuing the two (2) checks, was to
await the clearance of the Cashier's
check and his failure to do so is a fault
not ascribable to the defendant who
appeared under the circumstance
merely to have followed the usual
banking practice.
Petitioner now seeks to reverse the decision of the Court of
Appeals and affirm that of the lower court. He raises the
following errors:
1. THE HONORABLE COURT OF
APPEALS COMMITTED GROSS AND
MANIFEST ERROR IN CONCLUDING
THAT THE NEGLIGENCE WAS
ASCRIBABLE TO HEREIN PETITIONER.
2. THE HONORABLE COURT OF
APPEALS GRAVELY ABUSED ITS
DISCRETION IN FINDING THAT THE
RESPONDENT BANK HAD NOT BEEN
REMISS IN THE PERFORMANCE OF ITS
OBLIGATIONS TO HEREIN
PETITIONER.
3. THE HONORABLE COURT OF
APPEALS COMMITTED GROSS AND
MANIFEST ERROR AND GRAVE ABUSE
OF DISCRETION IN REVERSING THE
AWARD OF MORAL AND EXEMPLARY
DAMAGES TO THE PETITIONER.
4. THE HONORABLE COURT OF
APPEALS COMMITTED GROSS AND
MANIFEST ERROR AND GRAVE ABUSE
OF DISCRETION IN NOT AWARDING
ATTORNEY'S FEES TO PETITIONER.
In a most recent case decided by this Court, City Trust
Corporation v. The Intermediate Appellate Court, 22 involving
damages against City Trust Banking Corporation, the
depositor, instead of stating her correct account number
29000823 inaccurately wrote 2900823. Because of this error,
six postdated checks amounting to P20,209.00 she issued
were dishonored for insufficiency of funds. The Regional Trial
Court dismissed the complaint for lack of merit. The Court of
Appeals, however, found the appeal meritorious and ordered
the bank to pay nominal damages of P2,000.00, temperate
and moderate damages of P5,000.00 and attorney's fees of
P4,000.00. Upon review, this Court quoted with favor the
disquisition of the appellate court:
We cannot uphold the position of
defendant. For, even if it be true that
there was error on the part of the
plaintiff in omitting a zero in her
account number, yet, it is a fact that her
name, Emma E. Herrero, is clearly
written on said deposit slip (Exh. B).
This is controlling in determining in
whose account the deposit is made or
should be posted. This is so because it is
not likely to commit an error in one's
name that merely relying on numbers
which are difficult to remember,
especially a number with eight (8) digits
as the account numbers of defendant's
depositors. We view the use of numbers
Page 9 of 25
as simply for the convenience of the
bank but was never intended to
disregard the real name of its
depositors. The bank is engaged in
business impressed with public
interests, and it is its duty to protect in
return its many clients and depositors
who transact business with it. It should
not be a matter of the bank alone
receiving deposits, lending out money
and collecting interests. It is also its
obligation to see to it that all funds
invested with it are properly accounted
for and duly posted in its ledgers.
In the case before Us, we are not
persuaded that defendant bank was not
free from blame for the fiasco. In the
first place, the teller should not have
accepted plaintiff's deposit without
correcting the account number on the
deposit slip which, obviously, was
erroneous because, as pointed out by
defendant, it contained only seven (7)
digits instead of eight (8). Second, the
complete name of plaintiff depositor
appears in bold letters on the deposit
slip (Exh. B). There could be no
mistaking in her name, and that the
deposit was made in her name, Emma E.
Herrero. In fact, defendant's teller
should not have fed her deposit slip to
the computer knowing that her account
number written thereon was wrong as it
contained only seven (7) digits. As it
happened, according to defendant,
plaintiff's deposit had to be consigned to
the suspense accounts pending
verification. This, indeed, could have
been avoided at the first instance had the
teller of defendant bank performed her
duties efficiently and well. For then she
could have readily detected that the
account number in the name of Emma E.
Herrero was erroneous and would be
rejected by the computer. That is, or
should be, part of the training and
standard operating procedure of the
bank's employees. On the other hand, the
depositors are not concerned with
banking procedure. That is the
responsibility of the bank and its
employees. Depositors are only
concerned with the facility of depositing
their money, earning interest thereon, if
any, and withdrawing therefrom,
particularly businessmen, like plaintiff,
who are supposed to be always on-the-go.
Plaintiff's account is a current account
which should immediately be posted.
After all, it does not earn interest. At
least, the forbearance should be
commensurated with prompt, efficient
and satisfactory service.
Bank clients are supposed to rely on the
services extended by the bank, including
the assurance that their deposits will be
duly credited them as soon as they are
made. For, any delay in crediting their
account can be embarrassing to them as
in the case of plaintiff.
RA 8791
Declaration of Policy

The point is that as a business affected not to be equated with negligence on its part. We find this
with public interest and because of the disturbing and unfortunate.
nature of its functions, the bank is under
obligation to treat the accounts of its
An ordinary check is not a mere undertaking to pay an
depositors with meticulous care, always
amount of money. There is an element of certainty or
having in mind the fiduciary nature of
assurance that it will be paid upon presentation that is why it
their relationship. (Emphasis supplied).
is perceived as a convenient substitute for currency in
commercial and financial transactions. The basis of the
In the light of the above-cited case, the respondent bank perception being confidence. Any practice that destroys that
cannot exculpate itself from liability by claiming that its confidence will impair the usefulness of the check as a
depositor "impliedly instructed" the bank to clear his check currency substitute and create havoc in trade circles and the
with the Central Bank by filling a local check deposit slip. Such banking community. 26
posture is disingenuous, to say the least. First, why would
RCBC follow a patently erroneous act born of ignorance or
Now, what was presented for deposit in the instant cases was
inattention or both. Second, bank transactions pass through a
not just an ordinary check but a cashier's check payable to the
succession of bank personnel whose duty is to check and
account of the depositor himself. A cashier's check is a
countercheck transactions for possible errors. In the instant
primary obligation of the issuing bank and accepted in
case, the teller should not have accepted the local deposit slip
advance by its mere issuance. 27 By its very nature, a cashier's
with the cashier's check that on its face was clearly a regional
check is the bank's order to pay drawn upon itself,
check without calling the depositor's attention to the mistake
committing in effect its total resources, integrity and honor
at the very moment this was presented to her. Neither should
behind the check. A cashier's check by its peculiar character
everyone else down the line who processed the same check
and general use in the commercial world is regarded
for clearing have allowed the check to be sent to Central Bank.
substantially to be as good as the money which it
Depositors do not pretend to be past master of banking
represents.28 In this case, therefore, PCIB by issuing the check
technicalities, much more of clearing procedures. As soon as
created an unconditional credit in favor of any collecting
their deposits are accepted by the bank teller, they wholly
bank.
repose trust in the bank personnel's mastery of banking, their
and the bank's sworn profession of diligence and
meticulousness in giving irreproachable service. All these considered, petitioner's reliance on the layman's
perception that a cashier's check is as good as cash is not
entirely misplaced, as it is rooted in practice, tradition, and
We do not subscribe to RCBC's assertion that petitioner's use
principle. We see no reason thus why this so-called discretion
of the wrong deposit slip was the proximate cause of the
was not exercised in favor of petitioner, specially since PCIB
clearing fiasco and so, petitioner must bear the consequence.
and RCBC are members of the same clearing house group
In Pilipinas Bank, v. CA, 23 this Court said:
relying on each other's solvency. RCBC could surely rely on
the solvency of PCIB when the latter issued its cashier's check.
The bank is not expected to be infallible
but, as correctly observed by
On the third and fourth issue, RCBC contends that moral
respondent Appellate Court, in this
damages cannot be recovered in an action for breach of
instance, it must bear the blame for not
contract since under Article 2219 of the New Civil Code, the
discovering the mistake of its teller
instant case is not among those enumerated. For an award of
despite the established procedure
moral damages in a breach of contract, it is imperative that
requiring the papers and bank books to
the party acted in bad faith or fraudulently as provided for in
pass through a battery of bank
Art. 2220 of the Civil Code, to wit:
personnel whose duty it is to check and
countercheck them for possible errors.
Apparently, the officials and employees Art. 2220. Willful injury to property may
tasked to do that did not perform their be a legal ground for awarding moral
duties with due care, . . . damages if the court should find that,
under the circumstances, such damages
are justly due. The same rule applies to
So it is in the instance case, where the conclusion is inevitable
breaches of contract where the
that respondent RCBC had been remiss in the performance of
defendant acted fraudulently or in bad
its duty and obligation to its client, as well as to itself. We
faith.
draw attention to the fact that the two dishonored checks
issued by petitioner, Check No. 040719 and Check
No. 040718 were presented for payment 24 more than 45 days In the absence of moral damages, RCBC argues, exemplary
from the day the cashier's check was deposited. This gave damages cannot be awarded under Art. 2225 of the same
RCBC more than ample time to have cleared the cashier's Code which states:
check had it corrected its "missending" the same upon return
from Central Bank using the correct slip this time so it can be
Exemplary damages or corrective
cleared properly. Instead, RCBC promptly debited the amount
damages are imposed, by way of
of P30,000.00 against petitioner's account and left it at that.
example or correction for the public
good, in addition to the moral,
We observe, likewise, that RCBC inquired about an Evelyn temperate, liquidated or compensatory
Tan but no Evelyn Tan-Banzon as specifically instructed in damages.
the same signature card. (Emphasis supplied) 25
We hold that petitioner has the right to recover moral
RCBC insists that immediate payment without awaiting damages even if the bank's negligence may not have been
clearance of a cashier's check is discretionary with the bank attended with malice and bad faith. In American Express
to whom the check is presented and such being the case, its International, Inc. v. IAC, 29 we held:
refusal to immediately pay the cashier's check in this case is

Page 10 of 25
RA 8791
Declaration of Policy

While petitioner was not in bad faith, its

negligence caused the private
respondent to suffer mental anguish,
serious anxiety, embarrassment and
humiliation, for which he is entitled to
recover, reasonable moral damages
(Art. 2217, Civil Code).

In Zenith Insurance Corporation v. CA, 30 we also said that

moral damages are not meant to enrich a complainant at the
expense of defendant. It is only intended to alleviate the moral
suffering he has undergone. In the instant case, we find the
award of P700,000.00 as moral damages excessive and,
accordingly, reduce it to one hundred thousand
(P100,000.00) pesos. We find the award of exemplary
damages of P200,000.00 unjustified in the absence of malice,
bad faith or gross negligence.31 The award of reasonable
attorney's fees is proper for the petitioner was compelled to
litigate to protect his interest.32

IN VIEW WHEREOF, we REVERSE the decision of respondent

Court of Appeals and hereby order private respondent RCBC,
Binondo Branch, to pay petitioner the amount of one hundred
thousand (P100,000.00) pesos as moral damages and the sum
of fifty thousand (P50,000.00) pesos as attorney's fees, plus
costs.

SO ORDERED.

Page 11 of 25
RA 8791
Declaration of Policy
G.R. No. 112576 October 26, 1994
(CA-GR CV No. 26571)
METROPOLITAN BANK AND TRUST COMPANY, petitioner,
vs.
THE HON. COURT OF APPEALS, RURAL BANK OF PADRE
GARCIA, INC. and ISABEL R. KATIGBAK, respondents.
ROMERO, J.:
This petition for certiorari seeks to annul the decision of
respondent Court of Appeals dated October 29, 1992 in CA —
GR CV No. 26571 affirming the decision of the Regional Trial
Court of Lipa, Batangas — Branch XIII for damages, and the
Resolution dated November 11, 1993 denying petitioner's
motion for reconsideration of the aforesaid decision.
The case emanated from a dispute between the Rural Bank of
Padre Garcia, Inc. (RBPG) and Metropolitan Bank and Trust
Company (MBTC) relative to a credit memorandum dated
April 5, 1982 from the Central Bank in the amount of
P304,000.00 in favor of RBPG.
The records show that Isabel Katigbak is the president and
director of RBPG, owning 65% of the shares thereof.
Metropolitan Bank and Trust Company (MBTC) is the rural
bank's depository bank, where Katigbak maintains current
accounts with MBTC's main office in Makati as well as its Lipa
City branch.
On April 6, 1982, MBTC received from the Central Bank a
credit memo dated April 5, 1982 that its demand deposit
account was credited with P304,000.00 for the account of
RBPG, representing loans granted by the Central Bank to
RBPG. On the basis of said credit memo, Isabel Katigbak
issued several checks against its account with MBTC in the
total amount of P300,000.00, two (2) of which (Metrobank
Check Nos. 0069 and 0070) were payable to Dr. Felipe C.
Roque and Mrs. Eliza Roque for P25,000.00 each. Said checks
issued to Dr. and Mrs. Roque were deposited by the Roques
with the Philippine Banking Corporation, Novaliches Branch
in Quezon City. When these checks were forwarded to MBTC
on April 12, 1982 for payment (six (6) days from receipt of
the Credit Memo), the checks were returned by MBTC with
the annotations "DAIF — TNC" (Drawn Against Insufficient
Funds — Try Next Clearing) so they were redeposited on
April 14, 1982. These
were however again dishonored and returned unpaid for the
following reason: "DAIF — TNC — NO ADVICE FROM CB."
After the second dishonor of the two (2) checks, Dr. Felipe
Roque, a member of the Board of Directors of Philippine
Banking Corporation, allegedly went to the Office of Antonio
Katigbak, an officer of RBPG, chiding him for the bouncing
checks. In order to appease the doctor, RBPG paid Dr. Roque
P50,000.00 in cash to replace the aforesaid checks.
On April 13, 1982, Isabel Katigbak who was in Hongkong on a
business-vacation trip together with her sons Alfredo and
Antonio, both of whom were also officers of RBPG, received
overseas phone calls from Mrs. Maris Katigbak-San Juan at
her residence in San Lorenzo Village, Makati, informing Isabel
Katigbak that a certain Mr. Rizal Dungo, Assistant Cashier of
MBTC insisted on talking to her (Mrs. San Juan), berating her
about the checks which bounced, saying "Nag-issue kayo ng
tseke, wala namang pondo," even if it was explained to Mr.
Dungo that Mrs. San Juan was not in any way connected with
RBPG.
Page 12 of 25
Mrs. Katigbak testified that she informed Mrs. San Juan to
request defendant MBTC to check and verify the records
regarding the aforementioned Central Bank credit memo for
P304,000.00 in favor of RBPG as she was certain that the
checks were sufficiently covered by the CB credit memo as
early as April 6, 1994, but the following day, Mrs. San Juan
received another insulting call from Mr. Dungo ("Bakit kayo
nag-issue ng tseke na wala namang pondo, Three Hundred
Thousand na.")1 When Mrs. San Juan explained to him the
need to verify the records regarding the Central Bank memo,
he merely brushed it aside, telling her sarcastically that he
was very sure that no such credit memo existed. Mrs. San Juan
was constrained to place another long distance call to Mrs.
Katigbak in Hongkong that evening. Tense and angered, the
Katigbaks had to cut short their Hongkong stay with their
respective families and flew back to Manila, catching the first
available flight on April 15, 1982.
Immediately upon arrival, Mrs. Katigbak called up MBTC,
through a
Mr. Cochico, for a re-examination of the records of MBTC
regarding the Central Bank credit memo dated April 5, 1982
for P304,000.00. Mr. Dungo, to whom Cochico handed over
the phone, allegedly arrogantly said: "Bakit kayo
magagalit, wala naman kayong pondo?" These remarks
allegedly so shocked Mrs. Katigbak that her blood pressure
rose to a dangerous level and she had to undergo medical
treatment at the Makati Medical Center for two (2) days.
Metrobank not only dishonored the checks issued by RBPG,
the latter was issued four (4) debit memos representing
service and penalty charges for the returned checks.
RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC
of Lipa, Batangas — Branch XIII against the Metropolitan
Bank and Trust Company for damages on April 26, 1983.
The ultimate facts as alleged by the defendant MBTC in its
answer are as follows: that on April 6, 1982, its messenger,
Elizer Gonzales, received from the Central Bank several credit
advices on rural bank accounts, which included that of
plaintiff RBPG in the amount of P304,000.00; that due to the
inadvertence of said messenger, the credit advice issued in
favor of plaintiff RBPG was not delivered to the department in
charge of processing the same; consequently, when MBTC
received from the clearing department the checks in question,
the stated balance in RBPG's account was only P5,498.58
which excluded the unprocessed credit advice of P304,000.00
resulting in the dishonor of the aforementioned checks; that
as regards the P304,000.00 which was
a re-discounting loan from the Central Bank, the same was
credited only on April 15, 1982 after the Central Bank finally
confirmed that a credit advice was indeed issued in favor of
RBPG; that after the confirmation, MBTC credited the amount
of the credit advice to plaintiff RBPG's account and thru its
officers, allegedly conveyed personally on two occasions its
apologies to plaintiffs to show that the bank and its officers
acted with no deliberate intent on their part to cause injury
or damage to plaintiffs, explaining the circumstances that
gave rise to the bouncing checks situation. Metrobank's
negligence arising from their messenger's misrouting of the
credit advice resulting in the return of the checks in question,
despite daily reporting of credit memos and a corresponding
daily radio message confirmation, (as shown by Exhibit "I,"
the Investigation Report of the bank's Mr. Valentino Elevado)
and Mr. Dungo's improper handling of clients led to the
messenger's dismissal from service and Mr. Dungo's transfer
from Metro Manila to Mindoro.
The threshold issue was whether or not, under the facts and
circumstances of the case, plaintiff may be allowed to recover
RA 8791
Declaration of Policy
actual, moral and exemplary damages, including attorney's
fees, litigation expenses and the costs of the suit. On August
25, 1989, the RTC of Lipa City rendered a decision2 in favor of
plaintiffs and against the defendant MBTC, ordering the latter
to:
1. pay plaintiff Isabel Katigbak
P50,000.00 as temperate damages;
2. pay P500,000.00 as moral damages,
considering that RBPG's credit standing
and business reputation were damaged
by the wrongful acts of defendant's
employees, coupled with the rude
treatment received by Isabel Katigbak at
the hands of Mr. Dungo, all of which
impelled her to seek medical treatment;
3. pay P100,000.00 as attorney's fees
and litigation expenses; and.
4. pay the costs of suit.
The lower court did not award actual damages in the amount
of P50,000.00 representing the amount of the two (2) checks
payable to Dr. Felipe C. Roque and Mrs. Elisa Roque for
P25,000 each, as it found no showing that Mr. Antonio
Katigbak who allegedly paid the amount was actually
reimbursed by plaintiff RBPG. Moreover, the court held that
no actual damages could have been suffered by plaintiff RBPG
because on April 15, 1982, the Central Bank credit advice in
the amount of P304,000 which included the two (2) checks
issued to the Roque spouses in the sum of P50,000.00 were
already credited to the account of RBPG and the service, as
well as penalty charges, were all reversed.
MBTC appealed from the decision to the Court of Appeals in
CA — GR CV No. 26571, alleging that the trial court erred in
awarding temperate and moral damages, as well as attorney's
fees, plus costs and expenses of litigation without factual or
legal basis therefor.
On October 29, 1992, the Court of Appeals rendered a
decision3 affirming that of the trial court, except for the
deletion of the award of temperate damages, the reduction of
moral damages from P500,000.00 to P50,000.00 in favor of
RBPG and P100,000.00 for Isabel Katigbak and P50,000.00, as
attorney's fees. Plaintiffs-appellees filed a motion for
reconsideration of the decision, questioning the deletion of
the award of temperate damages and the reduction of the
award of moral damages and attorney's fees. The motion was
denied.
MBTC filed this petition, presenting the following issues for
resolution:
1. whether or not private respondents
RBPG and Isabel Rodriguez are legally
entitled to moral damages and
attorney's fees, and
2. assuming that they are so entitled,
whether or not the amounts awarded
are excessive and unconscionable.
The petition is devoid of merit.
Page 13 of 25
The case at bench was instituted to seek damages caused by
the dishonor through negligence of respondent bank's checks
which were actually sufficiently funded, and the insults from
petitioner bank's officer directed against private respondent
Isabel R. Katigbak. The presence of malice and the evidence of
besmirched reputation or loss of credit and business
standing, as well as a reappraisal of its probative value,
involves factual matters which, having been already
thoroughly discussed and analyzed in the courts below, are
no longer reviewable here. While this rule admits of
exceptions, this case does not fall under any of these.
There is no merit in petitioner's argument that it should not
be considered negligent, much less be held liable for damages
on account of the inadvertence of its bank employee as Article
1173 of the Civil Code only requires it to exercise the diligence
of a good pater familias.
As borne out by the records, the dishonoring of the
respondent's checks committed through negligence by the
petitioner bank on April 6, 1982 was rectified only on April
15, 1992 or nine (9) days after receipt of the credit memo.
Clearly, petitioner bank was remiss in its duty and obligation
to treat private respondent's account with the highest degree
of care, considering the fiduciary nature of their relationship.
The bank is under obligation to treat the accounts of its
depositors with meticulous care, whether such account
consists only of a few hundred pesos or of millions. It must
bear the blame for failing to discover the mistake of its
employee despite the established procedure requiring bank
papers to pass through bank personnel whose duty it is to
check and countercheck them for possible
errors.4 Responsibility arising from negligence in the
performance of every kind of obligation is
demandable.5 While the bank's negligence may not have been
attended with malice and bad faith, nevertheless, it caused
serious anxiety, embarrassment and humiliation to private
respondents for which they are entitled to recover reasonable
moral damages.6
As the records bear out, insult was added to injury by
petitioner bank's issuance of debit memoranda representing
service and penalty charges for the returned checks, not to
mention the insulting remarks from its Assistant Cashier.
In the case of Leopoldo Araneta v. Bank of America,7 we held
that:
The financial credit of a businessman is
a prized and valuable asset, it being a
significant part of the foundation of his
business. Any adverse reflection
thereon constitutes some financial loss
to him. As stated in the case of Atlanta
National Bank vs. Davis, 96 Ga 334, 23 SE
190, citing 2 Morse Banks, Sec. 458, "it
can hardly be possible that a customer's
check can be wrongfully refused
payment without some impeachment of
his credit, which must in fact be an
actual injury, though he cannot, from the
nature of the case, furnish independent,
distinct proof thereof".
It was established that when Mrs. Katigbak learned that her
checks were not being honored and Mr. Dungo repeatedly
made the insulting phone calls, her wounded feelings and the
mental anguish suffered by her caused her blood pressure to
rise beyond normal limits, necessitating medical attendance
for two (2) days at a hospital.
RA 8791
Declaration of Policy

The damage to private respondents' reputation and social

standing entitles them to moral damages. Moral damages
include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation and similar injury.8 Temperate or
moderate damages which are more than nominal but less
than compensatory damages, may be recovered when the
court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with
certainty.9 Temperate damages may be allowed in cases
where from the nature of the case, definite proof of pecuniary
loss cannot be adduced, although the court is convinced that
there has been such loss. The appellate court, however,
justified its deletion when MBTC reasoned out that the
amount of P50,000.00 is not part of the relief prayed for in the
complaint, aside from the fact that the amount allegedly
suffered by Mrs. Katigbak is susceptible of proof. 10

Moral and temperate damages which are not susceptible of

pecuniary estimation are not awarded to penalize the
petitioner but to compensate the respondents for injuries
suffered as a result of the former's fault and negligence, taking
into account the latter's credit and social standing in the
banking community, particularly since this is the very first
time such humiliation has befallen private respondents. The
amount of such losses need not be established with
exactitude, precisely due to their nature. 11

The carelessness of petitioner bank, aggravated by the lack of

promptness in repairing the error and the arrogant attitude
of the bank officer handling the matter, justifies the grant of
moral damages, which are clearly not excessive and
unconscionable.

Moreover, considering the nature and extent of the services

rendered by private respondent's counsel, both in the trial
and appellate courts, the Court deems it just and equitable
that attorney's fees in the amount of P50,000.00 be awarded.

WHEREFORE, the decision of respondent Court of Appeals is

AFFIRMED in all respects.

SO ORDERED.

Page 14 of 25
RA 8791
Declaration of Policy

G.R. No. 116181 April 17, 1996 dishonored with interest thereon at the
legal rate per annum from November
16, 1989 until fully paid;
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS and CARMELO H. b) ordering defendant to pay plaintiff
FLORES, respondents. for the embarrassment caused him the
amount of P1,000,000.00 as moral
damages;
KAPUNAN, J.:p

c) ordering defendant to pay plaintiff

This is a Petition for Review on Certiorari under Rule 45 of the
the amount of P1,000,000.00 as
Revised Rules of Court assailing the decision and resolution
exemplary damages brought about by
of the respondent Court of Appeals in CA-G.R. CV No. 38281
the malevolent and malicious acts of the
dated 31 January 1994 and 5 July 1994, respectively, which
former;
affirmed the decision of the Regional Trial Court in Civil Case
No. Q-89-4033 declaring Philippine National Bank liable to
Carmelo H. Flores for damages. d) ordering defendant to pay plaintiff
the sum of P50,000.00 as attorney's
fees; and
The facts of the case are as follows:

e) ordering defendant to pay the costs of

On 11 July 1989, private respondent Carmelo H. Flores
the suit.
(Flores) purchased from petitioner at its Manila Pavilion
Hotel unit, two (2) manager's checks worth P500,000.00
each, paying a total of P1,000,040.00, including the service SO ORDERED. 11
charge.1 A receipt for said amount was issued by the
petitioner.2
Petitioner interposed an appeal with the respondent court,
docketed as CA-G.R. CV No. 38281 assigning the following
On 12 July 1989, Flores presented these checks at the Baguio errors, to wit:
Hyatt Casino unit of petitioner. Petitioner refused to encash
the checks but after a lengthy discussion, it agreed to encash
I
one (1) of the checks.3 However, it deferred the payment of
the other check until after Flores agreed that it be broken
down to five (5) manager's checks of P100,000.00 each. THE TRIAL COURT ERRED IN HOLDING
Furthermore, petitioner refused to encash one of the five ON THE BASIS OF THE RECEIPT
checks until after it is cleared by the Manila Pavilion Hotel MARKED EXH. "A" THAT IN
unit.4 Having no other option, Flores agreed to such an PURCHASING THE TWO MANAGER'S
arrangement. However, upon his return to Manila, he made CHECKS ON JULY 11, 1989, APPELLEE
representations to petitioner through its Malate Branch so FLORES PAID PNB P1,000,000.40
that the check may be encashed but to no avail. 5 Flores, DESPITE (1) THAT THE SAID RECEIPT
thereafter, wrote a letter to his counsel informing the latter of DOES NOT SHOW, OR AFFORD THE
the aforementioned events.6 A Formal Demand was made by BEST PROOF OF THE CORRECT
private respondent's counsel but petitioner persisted in its AMOUNT PAID BY FLORES TO PNB AND
refusal to honor the check.7 (2) THAT AS SHOWN BY
PREPONDERANT AND CONCLUSIVE
EVIDENCE, APPELLEE PAID PNB
Left with no other choice, Flores filed a case with the Regional
P900,040 ONLY IN ONE MANAGER'S
Trial Court of Quezon City, Branch 100, docketed as Civil Case
CHECK AND MONETARY BILLS.
No. Q-89- 4033.8

II
In its Answer with Compulsory Counterclaim, petitioner
insisted that only P900,000.00 and P40.00 bank charges were
actually paid by Flores when he purchased the two (2) THE TRIAL COURT ERRED IN
manager's checks worth P1,000,000.00. It alleged that due to AWARDING FLORES P1 MILLION
Flores' "demanding attitude and temper," petitioner's money MORAL DAMAGES, P1 MILLION
counter, Rowena Montes, who, at that time was still new at EXEMPLARY DAMAGES, AND P500,000
her job, made an error in good faith in issuing the receipt for (sic) ATTORNEY'S FEES DESPITE (1)
P1,000,040.00.9 The actuations of Flores allegedly distracted THAT PNB'S REFUSAL TO ENCASH THE
the personnel manning the unit. 10 P100,000 MANAGER'S CHECK (EXH.
"B") WAS JUSTIFIED, AS FLORES WAS
NEVER ENTITLED TO THE MONEY; (2)
After trial, the court rendered its decision on 5 May 1992, the
THAT THERE IS ABJECT ABSENCE OF
dispositive portion of which states:
EVIDENCE THAT PNB ACTED
FRAUDULENTLY OR MALICIOUSLY,
WHEREFORE, premises considered, EVEN AS GOOD FAITH IS PRESUMED;
judgment is hereby rendered in favor of AND (3) THAT FLORES' ALLEGED
the plaintiff and against the defendant EMBARRASSMENT FOR HIS FAILURE
Philippine National Bank as follows: TO PURCHASE A HOUSE AND LOT DUE
TO PNB'S REFUSAL TO ENCASH THE
WHOLE P1 MILLION 1S UNFOUNDED. 12
a) ordering the defendant to pay
plaintiff the sum of P100,000.00
representing the amount of the check

Page 15 of 25
RA 8791
Declaration of Policy
On 31 January 1994, the Court of Appeals rendered the
questioned decision, the dispositive portion of which reads:
WHEREFORE, the appealed decision of
the lower court in Civil Case No. Q-89-
4033 is hereby AFFIRMED by the Court.
Costs against defendant-appellant.
SO ORDERED. 13
A motion for reconsideration was filed but it was likewise
denied in a resolution dated 5 July 1994, 14 thus, the present
action with petitioner raising the following issues, to wit:
I ours.)
WHETHER OR NOT THE CA ERRED IN
LAW IN HOLDING THAT, THE BEST
EVIDENCE TO SHOW WHETHER MR.
FLORES PAID THE PNB CASINO UNIT
P900,040 OR P1,000,040 IN
PURCHASING THE TWO MANAGER'S
CHECKS EACH WORTH P500,000 IS
THE RECEIPT FOR P1,000,040.
II
WHETHER OR NOT PNB CAN PRESENT
COMPETENT AND RELEVANT
EVIDENCE TO SUPPORT ITS
ALLEGATION IN THE ANSWER THAT
MR. FLORES ACTUALLY PAID P900,040
AND NOT P1,000,040 FOR THE
SUBJECT MANAGER'S CHECKS.
III
WHETHER OR NOT THE AWARD FOR
P1 MILLION MORAL DAMAGES, P1
MILLION EXEMPLARY DAMAGES, AND
P50,000 ATTORNEY'S FEES, AS
COMPARED TO THE ACTUAL CLAIM OF
P100,000 IS DISPROPORTIONATE AND
UNCONSCIONABLE. 15
We shall deal with the first and second issues raised by
petitioner together as they are interrelated.
Petitioner concedes that it issued the subject receipt for
P1,000,040.00 to Flores; yet, in the same breath, it
immediately counters that said receipt is not the best
evidence to prove how much money Flores actually paid for
the purchase of petitioner's manager's checks.
Further, petitioner insists that the issue in the instant case is
not the contents of the subject receipt but the exact amount
of money Flores paid to PNB, an inquiry which, petitioner
avers, allows the presentation of evidence aliunde.
Petitioner's contentions are unmeritorious.
A "receipt" is defined as:
A written and signed acknowledgment
that money has been paid or goods have
Page 16 of 25
been delivered. A receipt is merely
presumptive evidence and is not
conclusive.
A written acknowledgment that money
or a thing of value has been
received. Since a receipt is a mere
acknowledgment of payment, it may be
subject to explanation or contradiction. A
receipt may be used as evidence against
one just as any other declaration or
admission. A simple receipt not under
seal is presumptive evidence only and
may be rebutted or explained by other
evidence of mistake in giving it, or of
non-payment or of the circumstances
under which it was given. 16 (Emphasis
Although a receipt is not conclusive evidence, in the case at
bench, an exhaustive review of the records fails to disclose
any other evidence sufficient and strong enough to overturn
the acknowledgment embodied in petitioner's own receipt
(as to the amount of money it actually received).
Petitioner contends that it offered in court evidence of the
particulars or the actual denominations of the money it
received from Flores in exchange for its managerial checks.
However, aside from the self-serving testimonies of
petitioner's witnesses, we fail to discover any such evidence
in the records. In the words of the trial court:
After having thoroughly evaluated the
evidences (sic) on record, the Court
finds and so believes that plaintiff
indeed paid defendant the amount of
P1,000,040.00 when he purchased the
two (2) manager's checks worth (sic)
P1,000,000.00. This is clearly
manifested from the receipt issued by
the defendant wherein it explicitly
admits that the amount stated therein is
what plaintiff actually paid. While the
defendant does not dispute the receipt it
issued to the plaintiff, it endeavored to
prove that the actual amount involved in
the entire transaction is only
P900,000.00 that is P450,000.00
manager's check and P450,000.00 cash
by submitting in evidence, the
application forms filled up by the
plaintiff, Exhibits "1, 2, 3 and 4". As may
be readily seen, these application forms
relied upon by the defendant have no
probative value for they do not yield any
direct proof of payment. Besides
defendant even failed to adduce
concrete evidence showing that these
forms which were crumpled and
retrieved from the waste basket were
made the basis of the approval of the
purchased (sic) made. At any rate, the
Court finds such pieces of evidence not
only unconvincing but also self-
defeating in the light of the receipt, the
accuracy, correctness and due execution
of which was indubitably established. It
is a cardinal rule in the law on evidence
that the best proof of payment is the
receipt. 17 (Emphasis ours.)
RA 8791
Declaration of Policy
In Monfort v. Aguinaldo, 18 the receipts of payment, although
not exclusive, were deemed to be the best evidence. Thus:
That the best evidence for proving
payment is by the evidence of receipts
showing the same is also admitted.
What respondents claim is that there is
no rule which provides that payment
can only be proved by receipts. While
receipts are deemed to be the best
evidence, they are not exclusive. Other
evidence may be presented in lieu
thereof if they are not available, as in
case of loss, destruction or
disappearance. The fact of payment may
be established not only by documentary
evidence, but also by parol evidence (48
C.J. 727; Greenleaf, Law of Evidence, Vol.
II, p. 486; Jones on Evidence [1913] Vol.
II, p. 193), specially in civil cases where
preponderance of evidence is the rule.
Here respondents presented
documentary as well as oral evidence
which the Court of Appeals found to be
sufficient, and this finding is final.
In the instant case, petitioner's contention that Flores paid
P900,000.00 only instead of P1,000,000.00 (exclusive of bank
charges) in the following denominations: a manager's check
worth P450,000.00; P430,000.00 in P100.00 bills; and
P20,000.00 in P500.00 bills, was based solely on the
testimonies of petitioner's bank employees — the very ones
involved in the fiasco, 19 and not on any other independent
evidence. Hence, having failed to adduce sufficient rebuttal
evidence, petitioner is bound by the contents of the receipt it
issued to Flores. The subject receipt remains to be the
primary or best evidence or "that which affords the greatest
certainty of the fact in question. 20
On the issue of damages, we concur with the findings of the
trial court and the Court of Appeals, respectively:
Since there is no doubt as to the fact that
the plaintiff purchased from the
defendant bank two (2) manager's
check worth P500,000.00 each as this
was evidenced by an official receipt
(Exhibit "A"), then, following the above
jurisprudential ruling, the existence of
the manager's check (sic) created as
(sic) fiduciary relationship between the
defendant bank and the plaintiff and
therefore any breach thereof must be
borne by the negligent party. In this
case, the money counter who, among
her other duties, is in charge of counting
the money received from a client
purchasing a manager's check did not
perform her duty with diligence and due
care. This may be gathered from her
testimony that she did not wait for the
counting machine to finish counting the
money for the plaintiff is a VIP client and
he was in a hurry as he was tapping the
window (p. 37, T.S.N., August 28, 1990).
Equally negligent is Reynaldo Castor for
not doing anything when he noticed that
their money counters who entertained
the plaintiff were rattled. From these
unfolded facts, the so-called honest
mistake pleaded is therefore misplaced
and perforced, defendant must suffer
Page 17 of 25
the consequences of its own negligent
acts.
The records further show that plaintiff
is a prominent businessman, licensed
and engaged in the real estate business,
buying and selling houses and lots
under the business name and style CMS
Commercial. He is at the same time a
consultant of Dizon-Esguerra Real
Estate Company. Defendant treated him
as a valued and VIP client. Because of the
bank's refusal to encash the entire one
million face amount of his manager's
checks, he was so embarrassed for he
was not able to purchase a house and lot
in Monterroza Subdivision, Baguio City.
Significantly, the foregoing undisputed
facts made even more untenable
defendant's implicit supposition that
the subject manager's checks were not
intended for the purchase of a house or
for any business transaction but for
gambling.
Finally, since plaintiff was compelled to
litigate to protect its interest due to the
non-compliance of defendant's
obligation, he is therefore entitled to
attorney's fees (par. 5, article 2208, Civil
Code of the Philippines). 21
xxx xxx xxx
Appellee Flores narrated his woes to the
lower court when appellant bank
refused to honor his Manager's Checks
worth P1 Million because of the alleged
shortage in appellee's payment to the
effect that he had to go back and forth
the bank to encash said checks (pp. 16-
18, t.s.n., July 2, 1990), and that he lost a
deal of (sic) a house for sale in Baguio
City worth P1 Million as he could not
produce said amount withheld by the
appellant bank (p. 22, Id.,) Appellee
Flores further testified as to the effect of
the incident on his integrity as a
businessman as follows:
Yes, my integrity
and dependability
as a businessman
is highly doubted
in Baguio because
of the PNB refusal
to honor the two
(2) manager's
checks inspite of
them issuing me
the receipt. So,
whenever I make a
deal in house and
they would now
even doubt
whether I have the
money to buy the
house that I am
buying, it greatly
affected my
integrity as a
RA 8791
Declaration of Policy

businessman in P1,000,000.00 exemplary damages in addition to Flores'

Baguio. (p. 25, actual claim of P100,000.00 is "inordinately disproportionate
t.s.n., Id.) and unconscionable." 23

In the case of Makabali v. C.A., 157 SCRA Under the circumstances obtaining in the case at bench, we
253, the Supreme Court reiterated the rule that the award of moral and exemplary damages is
doctrine on the grant of moral and patently excessive and should be reduced to a reasonable
exemplary damages, as follows: amount. We take into consideration the following factors:

To begin with, First, Flores' contention that he lost the opportunity to

there is no hard purchase a house and lot in Baguio City due to petitioner's
and fast rule in the gross negligence is based solely on his own testimony and a
determination of mere general statement at that. The broker he named during
what would be a his cross-examination on 10 July 1990, a Mr. Nick Buendia
fair amount of was not even presented to confirm the aforementioned
moral damages, allegation:
since each case
must be governed
xxx xxx xxx
by its own peculiar
circumstances.
Q. You also stated
that this amount
Article 2217 of the
was intended for
Civil Code
the purchase of
recognizes that
the real estate
moral damages
property in
which include
Baguio, is that
physical suffering,
right?
mental anguish,
fright, serious
anxiety, A. Yes.
besmirched
reputation,
Q. Can you tell this
wounded feelings,
Honorable Court
moral shock, social
where is this
humiliation and
specific property
similar injury, are
located in Baguio?
incapable of
pecuniary
estimation. A. It is located in
Monterosa
Subdivision.
As to exemplary
damages, Article
2229 of the Civil Q. Can you tell us
Code provides that the number of the
such damages may street?
be imposed by
way of example or
A. It is within the
correction for the
Monterosa.
public good. While
exemplary
damages cannot Q. Can you identify
be recovered as a the name of the
matter of right, person with whom
they need not be you transacted?
proved, although
plaintiff must
A. Your Honor, I
show that he is
have the papers
entitled to moral,
and during the
temperate or
next hearing I will
compensatory
bring it.
damages before
the court may
consider the ATTY. D. VALDEZ:
question of
whether or not
Is that meant, Your
exemplary
Honor that we are
damages should
continuing the
be awarded. 22
cross examination
on the next
However, we give consideration to petitioner's allegation that hearing
the award of P1,000,000.00 moral damages and considering that

Page 18 of 25
RA 8791
Declaration of Policy

he will show a xxx xxx xxx

certain document.
Second, the award of moral damages in the amount of
Q. Can you not P1,000,000.00 is obviously not proportionate to the actual
reveal to us the losses of P100,000.00 sustained by Flores. In RCPI
name of the v. Rodriguez, 25 we ruled thus:
person with whom
you transacted?
. . . . Nevertheless, we find the award of
P100,000.00 as moral damages in favor
A. As I have said I of respondent Rodriguez excessive and
could not be unconscionable. In the case
guessing because of Prudenciado v. Alliance Transport
it was coursed System, Inc. (148 SCRA 440 [1987]) we
through another said: ". . . [I]t is undisputed that the trial
broker. courts are given discretion to determine
the amount of moral damages
(Alcantara v. Surro, 93 Phil. 472) and
And, this broker
that the Court of Appeals can only
usually did not tell
modify or change the amount awarded
you who is the
when they are palpably and
owner.
scandalously excessive "so as to indicate
that it was the result of passion,
Q. What I am prejudice or corruption on the part of
asking you is the the trial court" (Gellada v. Warner
person whom you Barnes & Co., Inc., 57 O.G. [4] 7347,
transacted and not 7358; Sadie v. Bachrach Motors Co., Inc.,
necessarily the 57 O.G. [4] 636 and Adone v. Bachrach
owner? We are Motor Co., Inc., 57 O.G. 656). But in more
supposed to know, recent cases where the awards of moral
Your Honor. and exemplary damages are far too
excessive compared to the actual losses
sustained by the aggrieved party, this
COURT:
Court ruled that they should be reduced
to more reasonable amounts. . . .
The name of the . (Emphasis ours.)
broker.
In other words, the moral damages awarded must be
A. The name of the commensurate with the loss or injury suffered.
broker, Your
Honor is Nick
Similarly, we have consistently declared that:
Buendia.

Moral damages though incapable of

Q. Do you know
pecuniary estimations, are in the
what
category of an award designed to
subsequently
compensate the claimant for actual
happened if there
injury suffered and not to impose a
was anything
penalty on the wrongdoer (San Andres
happened to that
v. Court of Appeals, 116 SCRA 85 [1982]
property that was
cited in Prudenciado v. Alliance
being sold?
Transport System, Inc. supra). 26

A. It was sold.
We, likewise, take this opportunity to stress that:

Q. To someone
. . . [M]oral damages are emphatically not
else?
intended to enrich a complainant at the
expense of the defendant. They are
A. Yes. awarded only to enable the injured
party to obtain means, diversion or
amusements that will serve to obviate
Q. At the time you
the moral suffering he has undergone,
were purchasing
by reason of the defendant's culpable
the manager's
action. Its award is aimed at the
checks for one
restoration, within the limits of the
(1M) million you
possible, of the spiritual status quo ante,
intended this as a
and it must be proportional to the
payment for the
suffering inflicted. 27 (Emphasis ours.)
property?

It is because of the foregoing reasons that we have had to

A. Yes. 24
constantly remind the courts to desist from awarding
excessive damages disproportionate to the peculiar

Page 19 of 25
RA 8791
Declaration of Policy

circumstances of the case. "Judicial discretion granted to the

courts in the assessment of damages must always be
exercised with balanced restraint and measured
objectivity." 28

Finally, we find petitioner's act of issuing the manager's

checks and corresponding receipt before payment thereof
was completely counted reckless and grossly negligent. It is
an appalling breach of bank procedures and must never be
repeated.

In Bautista v. Mangaldan Rural Bank, Inc., 29 we stated, thus:.

The banking system has become an

indispensable institution in the modern
world and plays a vital role in the
economic life of every civilized society.
Whether as mere passive entities for the
safe-keeping and saving of money or as
active instruments of business and
commerce, banks have attained an
unbiquitous presence among the
people, who have come to regard them
with respect and even gratitude and,
most of all, confidence. (Simex
International [Manila], Inc. vs. Court of
Appeals, G.R. No. 88013, March 19,
1990, 183 SCRA 360).

However, the award of P1,000,000.00 exemplary damages is

also far too excessive and should likewise be reduced to an
equitable level. Exemplary damages are imposed not to
enrich one party or impoverish another but to serve as a
deterrent against or as a negative incentive to curb socially
deleterious actions. 30

Therefore, based on the foregoing discussion, the award of

moral damages is reduced to P100,000.00 and the exemplary
damages is likewise reduced to P25,000.00.

We see no reason to disturb the award of attorney's fees in

the amount of P50,000.00. We concur with the findings of the
Court of Appeals on this matter:

As for the award of attorney's fees, We

find the same in order considering that
"defendant acted in gross and evident
bad faith in refusing to satisfy the
plaintiffs plainly valid, just and
demandable claim" (Art. 2208 [5], New
Civil Code), and it is just and equitable to
award plaintiff-appellee his attorney's
fees (Art. 2208 [11], id.). 31

WHEREFORE, premises considered, the assailed decision is

hereby MODIFIED as follows:

1. The award of moral damages is reduced from

P1,000,000.00 to P100,000.00; and

2. The award of exemplary damages is reduced from

P1,000,000.00 to P25,000.00.

In all other respects, the assailed decision is hereby

AFFIRMED.

SO ORDERED.

Page 20 of 25
RA 8791
Declaration of Policy
[G.R. No. 112392. February 29, 2000]
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT
OF APPEALS and BENJAMIN C. NAPIZA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the Decision[1] of
the Court of Appeals in CA-G.R. CV No. 37392 affirming in
toto that of the Regional Trial Court of Makati, Branch
139,[2] which dismissed the complaint filed by petitioner Bank
of the Philippine Islands against private respondent Benjamin
C. Napiza for sum of money. Sdaad
On September 3, 1987, private respondent deposited in
Foreign Currency Deposit Unit (FCDU) Savings Account No.
028-187[3] which he maintained in petitioner banks Buendia
Avenue Extension Branch, Continental Bank Managers Check
No. 00014757[4] dated August 17, 1984, payable to "cash" in
the amount of Two Thousand Five Hundred Dollars
($2,500.00) and duly endorsed by private respondent on its
dorsal side.[5] It appears that the check belonged to a certain
Henry Chan who went to the office of private respondent and
requested him to deposit the check in his dollar account by
way of accommodation and for the purpose of clearing the
same. Private respondent acceded, and agreed to deliver to
Chan a signed blank withdrawal slip, with the understanding
that as soon as the check is cleared, both of them would go to
the bank to withdraw the amount of the check upon private
respondents presentation to the bank of his passbook.
Using the blank withdrawal slip given by private respondent
to Chan, on October 23, 1984, one Ruben Gayon, Jr. was able
to withdraw the amount of $2,541.67 from FCDU Savings
Account No. 028-187. Notably, the withdrawal slip shows that
the amount was payable to Ramon A. de Guzman and Agnes
C. de Guzman and was duly initialed by the branch assistant
manager, Teresita Lindo.[6]
On November 20, 1984, petitioner received communication
from the Wells Fargo Bank International of New York that the
said check deposited by private respondent was a counterfeit
check[7] because it was "not of the type or style of checks
issued by Continental Bank International."[8] Consequently,
Mr. Ariel Reyes, the manager of petitioners Buendia Avenue
Extension Branch, instructed one of its employees, Benjamin
D. Napiza IV, who is private respondents son, to inform his
father that the check bounced.[9] Reyes himself sent a
telegram to private respondent regarding the dishonor of the
check. In turn, private respondents son wrote to Reyes stating
that the check had been assigned "for encashment" to Ramon
A. de Guzman and/or Agnes C. de Guzman after it shall have
been cleared upon instruction of Chan. He also said that upon
learning of the dishonor of the check, his father immediately
tried to contact Chan but the latter was out of town.[10]
Private respondents son undertook to return the amount of
$2,500.00 to petitioner bank. On December 18, 1984, Reyes
reminded private respondent of his sons promise and warned
that should he fail to return that amount within seven (7)
days, the matter would be referred to the banks lawyers for
appropriate action to protect the banks interest.[11] This was
followed by a letter of the banks lawyer dated April 8, 1985
demanding the return of the $2,500.00.[12]
Page 21 of 25
In reply, private respondent wrote petitioners counsel on
April 20, 1985[13] stating that he deposited the check "for
clearing purposes" only to accommodate Chan. He added:
"Further, please take notice that said
check was deposited on September 3,
1984 and withdrawn on October 23,
1984, or a total period of fifty (50) days
had elapsed at the time of withdrawal.
Also, it may not be amiss to mention
here that I merely signed an authority to
withdraw said deposit subject to its
clearing, the reason why the transaction
is not reflected in the passbook of the
account. Besides, I did not receive its
proceeds as may be gleaned from the
withdrawal slip under the captioned
signature of recipient.
If at all, my obligation on the transaction
is moral in nature, which (sic) I have
been and is (sic) still exerting utmost
and maximum efforts to collect from Mr.
Henry Chan who is directly liable under
the circumstances. Scsdaad
xxx......xxx......xxx."
On August 12, 1986, petitioner filed a complaint against
private respondent, praying for the return of the amount of
$2,500.00 or the prevailing peso equivalent plus legal interest
from date of demand to date of full payment, a sum equivalent
to 20% of the total amount due as attorney's fees, and
litigation and/or costs of suit.
Private respondent filed his answer, admitting that he indeed
signed a "blank" withdrawal slip with the understanding that
the amount deposited would be withdrawn only after the
check in question has been cleared. He likewise alleged that
he instructed the party to whom he issued the signed blank
withdrawal slip to return it to him after the bank drafts
clearance so that he could lend that party his passbook for the
purpose of withdrawing the amount of $2,500.00. However,
without his knowledge, said party was able to withdraw the
amount of $2,541.67 from his dollar savings account through
collusion with one of petitioners employees. Private
respondent added that he had "given the Plaintiff fifty one
(51) days with which to clear the bank draft in question."
Petitioner should have disallowed the withdrawal because
his passbook was not presented. He claimed that petitioner
had no one to blame except itself "for being grossly
negligent;" in fact, it had allegedly admitted having paid the
amount in the check "by mistake" x x x "if not altogether due
to collusion and/or bad faith on the part of (its) employees."
Charging petitioner with "apparent ignorance of routine bank
procedures," by way of counterclaim, private respondent
prayed for moral damages of P100,000.00, exemplary
damages of P50,000.00 and attorneys fees of 30% of
whatever amount that would be awarded to him plus an
honorarium of P500.00 per appearance in court.
Private respondent also filed a motion for admission of a third
party complaint against Chan. He alleged that "thru strategem
and/or manipulation," Chan was able to withdraw the
amount of $2,500.00 even without private respondents
passbook. Thus, private respondent prayed that third party
defendant Chan be made to refund to him the amount
withdrawn and to pay attorneys fees of P5,000.00 plus
P300.00 honorarium per appearance.
RA 8791
Declaration of Policy

Petitioner filed a comment on the motion for leave of court to 1.......WHETHER OR NOT RESPONDENT
admit the third party complaint, wherein it asserted that per NAPIZA IS LIABLE UNDER HIS
paragraph 2 of the Rules and Regulations governing BPI WARRANTIES AS A GENERAL
savings accounts, private respondent alone was liable "for the INDORSER.
value of the credit given on account of the draft or check
deposited." It contended that private respondent was
2.......WHETHER OR NOT A CONTRACT
estopped from disclaiming liability because he himself
OF AGENCY WAS CREATED BETWEEN
authorized the withdrawal of the amount by signing the
RESPONDENT NAPIZA AND RUBEN
withdrawal slip. Petitioner prayed for the denial of the said
GAYON.
motion so as not to unduly delay the disposition of the main
case asserting that private respondents claim could be
ventilated in another case. 3.......WHETHER OR NOT PETITIONER
WAS GROSSLY NEGLIGENT IN
ALLOWING THE WITHDRAWAL.
Private respondent replied that for the parties to obtain
complete relief and to avoid multiplicity of suits, the motion
to admit third party complaint should be granted. Meanwhile, Petitioner claims that private respondent, having affixed his
the trial court issued orders on August 25, 1987 and October signature at the dorsal side of the check, should be liable for
28, 1987 directing private respondent to actively participate the amount stated therein in accordance with the following
in locating Chan. After private respondent failed to comply, provision of the Negotiable Instruments Law (Act No. 2031):
the trial court, on May 18, 1988, dismissed the third party
complaint without prejudice.
"SEC. 66. Liability of general
indorser. Every indorser who indorses
On November 4, 1991, a decision was rendered dismissing without qualification, warrants to all
the complaint. The lower court held that petitioner could not subsequent holders in due course
hold private respondent liable based on the checks face value
alone. To so hold him liable "would render inutile the
(a)......The matters and things
requirement of clearance from the drawee bank before the
mentioned in subdivisions (a), (b), and
value of a particular foreign check or draft can be credited to
(c) of the next preceding section; and
the account of a depositor making such deposit." The lower
court further held that "it was incumbent upon the petitioner
to credit the value of the check in question to the account of (b)......That the instrument is at the time
the private respondent only upon receipt of the notice of final of his indorsement, valid and subsisting.
payment and should not have authorized the withdrawal
from the latters account of the value or proceeds of the
And, in addition, he engages that on due
check." Having admitted that it committed a "mistake" in not
presentment, it shall be accepted or
waiting for the clearance of the check before authorizing the
paid, or both, as the case may be,
withdrawal of its value or proceeds, petitioner should suffer
according to its tenor, and that if it be
the resultant loss. Supremax
dishonored, and the necessary
proceedings on dishonor be duly taken,
On appeal, the Court of Appeals affirmed the lower courts he will pay the amount thereof to the
decision. The appellate court held that petitioner committed holder, or to any subsequent indorser
"clear gross negligence" in allowing Ruben Gayon, Jr. to who may be compelled to pay it."
withdraw the money without presenting private respondents
passbook and, before the check was cleared and in crediting
Section 65, on the other hand, provides for the following
the amount indicated therein in private respondents account.
warranties of a person negotiating an instrument by delivery
It stressed that the mere deposit of a check in private
or by qualified indorsement: (a) that the instrument is
respondents account did not mean that the check was already
genuine and in all respects what it purports to be; (b) that he
private respondents property. The check still had to be
has a good title to it, and (c) that all prior parties had capacity
cleared and its proceeds can only be withdrawn upon
to contract.[15] In People v. Maniego,[16] this Court described
presentation of a passbook in accordance with the banks
the liabilities of an indorser as follows: Juris
rules and regulations. Furthermore, petitioners contention
that private respondent warranted the checks genuineness
by endorsing it is untenable for it would render useless the "Appellants contention that as mere
clearance requirement. Likewise, the requirement of indorser, she may not be liable on
presentation of a passbook to ascertain the propriety of the account of the dishonor of the checks
accounting reflected would be a meaningless exercise. After indorsed by her, is likewise untenable.
all, these requirements are designed to protect the bank from Under the law, the holder or last
deception or fraud. indorsee of a negotiable instrument has
the right to enforce payment of the
instrument for the full amount thereof
The Court of Appeals cited the case of Roman Catholic Bishop
against all parties liable thereon. Among
of Malolos, Inc. v. IAC,[14] where this Court stated that a
the parties liable thereon is an indorser
personal check is not legal tender or money, and held that the
of the instrument, i.e., a person placing
check deposited in this case must be cleared before its value
his signature upon an instrument
could be properly transferred to private respondent's
otherwise than as a maker, drawer or
account.
acceptor * * unless he clearly indicated
by appropriate words his intention to be
Without filing a motion for the reconsideration of the Court of bound in some other capacity. Such an
Appeals Decision, petitioner filed this petition for review on indorser who indorses without
certiorari, raising the following issues: qualification, inter alia engages that on
due presentment, * * (the instrument)
shall be accepted or paid, or both, as the

Page 22 of 25
RA 8791
Declaration of Policy

case may be, according to its tenor, and
that if it be dishonored, and the
necessary proceedings on dishonor be
duly taken, he will pay the amount
thereof to the holder, or any subsequent
indorser who may be compelled to pay
it. Maniego may also be deemed an
accommodation party in the light of the
facts, i.e., a person who has signed the
instrument as maker, drawer, acceptor,
or indorser, without receiving value
therefor, and for the purpose of lending
his name to some other person. As such,
she is under the law liable on the
instrument to a holder for value,
notwithstanding such holder at the time
of taking the instrument knew * * (her)
to be only an accommodation party,
although she has the right, after paying
the holder, to obtain reimbursement
from the party accommodated, since the
relation between them is in effect that of
principal and surety, the
accommodation party being the surety."
It is thus clear that ordinarily private respondent may be held
liable as an indorser of the check or even as an
accommodation party.[17] However, to hold private
respondent liable for the amount of the check he deposited by
the strict application of the law and without considering the
attending circumstances in the case would result in an
injustice and in the erosion of the public trust in the banking
system. The interest of justice thus demands looking into the
events that led to the encashment of the check.
shall be for the account of the depositor
and shall be paid by him/her upon
demand. Withdrawals may also be made
in the form of travellers checks and in
pesos. Withdrawals in the form of
notes/bills are allowed subject
however, to their (availability).
6.......Deposits shall not be subject to
withdrawal by check, and may be
withdrawn only in the manner above
provided, upon presentation of the
depositors savings passbook and with
the withdrawal form supplied by the
Bank at the counter."[19] Scjuris
Under these rules, to be able to withdraw from the savings
account deposit under the Philippine foreign currency
deposit system, two requisites must be presented to
petitioner bank by the person withdrawing an amount: (a) a
duly filled-up withdrawal slip, and (b) the depositors
passbook. Private respondent admits that he signed a blank
withdrawal slip ostensibly in violation of Rule No. 6 requiring
that the request for withdrawal must name the payee, the
amount to be withdrawn and the place where such
withdrawal should be made. That the withdrawal slip was in
fact a blank one with only private respondents two signatures
affixed on the proper spaces is buttressed by petitioners
allegation in the instant petition that had private respondent
indicated therein the person authorized to receive the money,
then Ruben Gayon, Jr. could not have withdrawn any amount.
Petitioner contends that "(i)n failing to do so (i.e., naming his
authorized agent), he practically authorized any possessor
thereof to write any amount and to collect the same."[20]

Petitioner asserts that by signing the withdrawal slip, private

Such contention would have been valid if not for the fact that
respondent "presented the opportunity for the withdrawal of
the withdrawal slip itself indicates a special instruction that
the amount in question." Petitioner relied "on the genuine
the amount is payable to "Ramon A. de Guzman &/or Agnes C.
signature on the withdrawal slip, the personality of private
de Guzman." Such being the case, petitioners personnel
respondents son and the lapse of more than fifty (50) days
should have been duly warned that Gayon, who was also
from date of deposit of the Continental Bank draft, without
employed in petitioners Buendia Ave. Extension
the same being returned yet."[18] We hold, however, that the
branch,[21] was not the proper payee of the proceeds of the
propriety of the withdrawal should be gauged by compliance
check. Otherwise, either Ramon or Agnes de Guzman should
with the rules thereon that both petitioner bank and its
have issued another authority to Gayon for such withdrawal.
depositors are duty-bound to observe.
Of course, at the dorsal side of the withdrawal slip is an
"authority to withdraw" naming Gayon the person who can
In the passbook that petitioner issued to private respondent, withdraw the amount indicated in the check. Private
the following rules on withdrawal of deposits appear: respondent does not deny having signed such authority.
However, considering petitioners clear admission that the
withdrawal slip was a blank one except for private
"4.......Withdrawals must be made by the
respondents signature, the unavoidable conclusion is that the
depositor personally but in some
typewritten name of "Ruben C. Gayon, Jr." was intercalated
exceptional circumstances, the Bank
and thereafter it was signed by Gayon or whoever was
may allow withdrawal by another upon
allowed by petitioner to withdraw the amount. Under these
the depositors written authority duly
facts, there could not have been a principal-agent relationship
authenticated; and neither a deposit nor
between private respondent and Gayon so as to render the
a withdrawal will be permitted except
former liable for the amount withdrawn.
upon the presentation of the depositors
savings passbook, in which the amount
deposited withdrawn shall be entered Moreover, the withdrawal slip contains a boxed warning that
only by the Bank. states: "This receipt must be signed and presented with the
corresponding foreign currency savings passbook by the
depositor in person. For withdrawals thru a representative,
5.......Withdrawals may be made by
depositor should accomplish the authority at the back." The
draft, mail or telegraphic transfer in
requirement of presentation of the passbook when
currency of the account at the request of
withdrawing an amount cannot be given mere lip service
the depositor in writing on the
even though the person making the withdrawal is authorized
withdrawal slip or by authenticated
by the depositor to do so. This is clear from Rule No. 6 set out
cable. Such request must indicate the
by petitioner so that, for the protection of the banks interest
name of the payee/s, amount and the
and as a reminder to the depositor, the withdrawal shall be
place where the funds are to be paid.
entered in the depositors passbook. The fact that private
Any stamp, transmission and other
respondents passbook was not presented during the
charges related to such withdrawals
withdrawal is evidenced by the entries therein showing that

Page 23 of 25
RA 8791
Declaration of Policy
the last transaction that he made with the bank was on
September 3, 1984, the date he deposited the controversial
check in the amount of $2,500.00.[22]
In allowing the withdrawal, petitioner likewise overlooked
another rule that is printed in the passbook. Thus:
"2.......All deposits will be received as
current funds and will be repaid in the
same manner; provided, however,
that deposits of drafts, checks, money
orders, etc. will be accepted as subject to
collection only and credited to the
account only upon receipt of the notice of
final payment. Collection charges by the
Banks foreign correspondent in
effecting such collection shall be for the
account of the depositor. If the account
has sufficient balance, the collection
shall be debited by the Bank against the
account. If, for any reason, the proceeds
of the deposited checks, drafts, money
orders, etc., cannot be collected or if the
Bank is required to return such
proceeds, the provisional entry therefor
made by the Bank in the savings
passbook and its records shall be
deemed automatically cancelled
regardless of the time that has elapsed,
and whether or not the defective items
can be returned to the depositor; and
the Bank is hereby authorized to
execute immediately the necessary
corrections, amendments or changes in
its record, as well as on the savings
passbook at the first opportunity to
reflect such cancellation." (Italics and
underlining supplied.) Jurissc
As correctly held by the Court of Appeals, in depositing the
check in his name, private respondent did not become the
outright owner of the amount stated therein. Under the above
rule, by depositing the check with petitioner, private
respondent was, in a way, merely designating petitioner as
the collecting bank. This is in consonance with the rule that a
negotiable instrument, such as a check, whether a managers
check or ordinary check, is not legal tender.[23] As such, after
receiving the deposit, under its own rules, petitioner shall
credit the amount in private respondents account or infuse
value thereon only after the drawee bank shall have paid the
amount of the check or the check has been cleared for deposit.
Again, this is in accordance with ordinary banking practices
and with this Courts pronouncement that "the collecting bank
or last endorser generally suffers the loss because it has the
duty to ascertain the genuineness of all prior endorsements
considering that the act of presenting the check for payment
to the drawee is an assertion that the party making the
presentment has done its duty to ascertain the genuineness
of the endorsements."[24] The rule finds more meaning in this
case where the check involved is drawn on a foreign bank and
therefore collection is more difficult than when the drawee
bank is a local one even though the check in question is a
managers check.[25] Misjuris
In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a
commercial bank in Madrid, Spain, paid the amounts
represented in three (3) checks to Virginia Boncan, the
finance officer of the Philippine Embassy in Madrid. The bank
did so without previously clearing the checks with the drawee
bank, the Philippine National Bank in New York, on account
of the "special treatment" that Boncan received from the
personnel of Banco Atlanticos foreign department. The Court
Page 24 of 25
held that the encashment of the checks without prior
clearance is "contrary to normal or ordinary banking practice
specially so where the drawee bank is a foreign bank and the
amounts involved were large." Accordingly, the Court
approved the Auditor Generals denial of Banco Atlanticos
claim for payment of the value of the checks that was
withdrawn by Boncan.
Said ruling brings to light the fact that the banking business is
affected with public interest. By the nature of its functions, a
bank is under obligation to treat the accounts of its depositors
"with meticulous care, always having in mind the fiduciary
nature of their relationship."[27] As such, in dealing with its
depositors, a bank should exercise its functions not only with
the diligence of a good father of a family but it should do so
with the highest degree of care.[28]
In the case at bar, petitioner, in allowing the withdrawal of
private respondents deposit, failed to exercise the diligence of
a good father of a family. In total disregard of its own rules,
petitioners personnel negligently handled private
respondents account to petitioners detriment. As this Court
once said on this matter:
"Negligence is the omission to do
something which a reasonable man,
guided by those considerations which
ordinarily regulate the conduct of
human affairs, would do, or the doing of
something which a prudent and
reasonable man would do. The seventy-
eight (78)-year-old, yet still relevant,
case of Picart v. Smith, provides the test
by which to determine the existence of
negligence in a particular case which
may be stated as follows: Did the
defendant in doing the alleged negligent
act use that reasonable care and caution
which an ordinarily prudent person
would have used in the same situation?
If not, then he is guilty of negligence. The
law here in effect adopts the standard
supposed to be supplied by the
imaginary conduct of the discreet pater-
familias of the Roman law. The existence
of negligence in a given case is not
determined by reference to the personal
judgment of the actor in the situation
before him. The law considers what
would be reckless, blameworthy, or
negligent in the man of ordinary
intelligence and prudence and
determines liability by that."[29]
Petitioner violated its own rules by allowing the withdrawal
of an amount that is definitely over and above the aggregate
amount of private respondents dollar deposits that had yet to
be cleared. The banks ledger on private respondents account
shows that before he deposited $2,500.00, private
respondent had a balance of only $750.00.[30] Upon private
respondents deposit of $2,500.00 on September 3, 1984, that
amount was credited in his ledger as a deposit resulting in the
corresponding total balance of $3,250.00.[31] On September
10, 1984, the amount of $600.00 and the additional charges
of $10.00 were indicated therein as withdrawn thereby
leaving a balance of $2,640.00. On September 30, 1984, an
interest of $11.59 was reflected in the ledger and on October
23, 1984, the amount of $2,541.67 was entered as withdrawn
with a balance of $109.92.[32] On November 19, 1984 the word
"hold" was written beside the balance of $109.92.[33] That
must have been the time when Reyes, petitioners branch
manager, was informed unofficially of the fact that the check
RA 8791
Declaration of Policy

deposited was a counterfeit, but petitioners Buendia Ave.

Extension Branch received a copy of the communication
thereon from Wells Fargo Bank International in New York the
following day, November 20, 1984.[34] According to Reyes,
Wells Fargo Bank International handled the clearing of checks
drawn against U.S. banks that were deposited with
petitioner.[35] Jjlex

From these facts on record, it is at once apparent that

petitioners personnel allowed the withdrawal of an amount
bigger than the original deposit of $750.00 and the value of
the check deposited in the amount of $2,500.00 although they
had not yet received notice from the clearing bank in the
United States on whether or not the check was funded. Reyes
contention that after the lapse of the 35-day period the
amount of a deposited check could be withdrawn even in the
absence of a clearance thereon, otherwise it could take a long
time before a depositor could make a withdrawal,[36] is
untenable. Said practice amounts to a disregard of the
clearance requirement of the banking system.

While it is true that private respondents having signed a blank

withdrawal slip set in motion the events that resulted in the
withdrawal and encashment of the counterfeit check, the
negligence of petitioners personnel was the proximate cause
of the loss that petitioner sustained. Proximate cause, which
is determined by a mixed consideration of logic, common
sense, policy and precedent, is "that cause, which, in natural
and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the
result would not have occurred."[37] The proximate cause of
the withdrawal and eventual loss of the amount of $2,500.00
on petitioners part was its personnels negligence in allowing
such withdrawal in disregard of its own rules and the clearing
requirement in the banking system. In so doing, petitioner
assumed the risk of incurring a loss on account of a forged or
counterfeit foreign check and hence, it should suffer the
resulting damage.

WHEREFORE, the petition for review on certiorari is

DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 37392 is AFFIRMED.

SO ORDERED. Newmiso

Page 25 of 25