Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19190 November 29, 1922
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,
vs.
VENANCIO CONCEPCION, defendant-appellant.
Recaredo Ma. Calvo for appellant.
Attorney-General Villa-Real for appellee.

MALCOLM, J.:
By telegrams and a letter of confirmation to the manager of the Aparri branch of the Philippine National Bank, Venancio Concepcion, President of the
Philippine National Bank, between April 10, 1919, and May 7, 1919, authorized an extension of credit in favor of "Puno y Concepcion, S. en C." in the
amount of P300,000. This special authorization was essential in view of the memorandum order of President Concepcion dated May 17, 1918, limiting
the discretional power of the local manager at Aparri, Cagayan, to grant loans and discount negotiable documents to P5,000, which, in certain cases,
could be increased to P10,000. Pursuant to this authorization, credit aggregating P300,000, was granted the firm of "Puno y Concepcion, S. en C.," the
only security required consisting of six demand notes. The notes, together with the interest, were taken up and paid by July 17, 1919.
"Puno y Concepcion, S. en C." was a copartnership capitalized at P100,000. Anacleto Concepcion contributed P5,000; Clara Vda. de Concepcion,
P5,000; Miguel S. Concepcion, P20,000; Clemente Puno, P20,000; and Rosario San Agustin, "casada con Gral. Venancio Concepcion," P50,000.
Member Miguel S. Concepcion was the administrator of the company.
On the facts recounted, Venancio Concepcion, as President of the Philippine National Bank and as member of the board of directors of this bank, was
charged in the Court of First Instance of Cagayan with a violation of section 35 of Act No. 2747. He was found guilty by the Honorable Enrique V.
Filamor, Judge of First Instance, and was sentenced to imprisonment for one year and six months, to pay a fine of P3,000, with subsidiary imprisonment
in case of insolvency, and the costs.
Section 35 of Act No. 2747, effective on February 20, 1918, just mentioned, to which reference must hereafter repeatedly be made, reads as follows:
"The National Bank shall not, directly or indirectly, grant loans to any of the members of the board of directors of the bank nor to agents of the branch
banks." Section 49 of the same Act provides: "Any person who shall violate any of the provisions of this Act shall be punished by a fine not to exceed ten
thousand pesos, or by imprisonment not to exceed five years, or by both such fine and imprisonment." These two sections were in effect in 1919 when
the alleged unlawful acts took place, but were repealed by Act No. 2938, approved on January 30, 1921.
Counsel for the defense assign ten errors as having been committed by the trial court. These errors they have argued adroitly and exhaustively in their
printed brief, and again in oral argument. Attorney-General Villa-Real, in an exceptionally accurate and comprehensive brief, answers the proposition of
appellant one by one.
The question presented are reduced to their simplest elements in the opinion which follows:
I. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine
National Bank, a "loan" within the meaning of section 35 of Act No. 2747?
Counsel argue that the documents of record do not prove that authority to make a loan was given, but only show the concession of a credit. In this
statement of fact, counsel is correct, for the exhibits in question speak of a "credito" (credit) and not of a " prestamo" (loan).
The "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may
promise. (Donnell vs. Jones [1848], 13 Ala., 490; Bouvier's Law Dictionary.) A "loan" means the delivery by one party and the receipt by the other party
of a given sum of money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. (Payne vs. Gardiner [1864], 29 N. Y.,
146, 167.) The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit,"
II. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C.," by Venancio Concepcion, President of the Philippine
National Bank, a "loan" or a "discount"?
Counsel argue that while section 35 of Act No. 2747 prohibits the granting of a "loan," it does not prohibit what is commonly known as a "discount."
In a letter dated August 7, 1916, H. Parker Willis, then President of the National Bank, inquired of the Insular Auditor whether section 37 of Act No. 2612
was intended to apply to discounts as well as to loans. The ruling of the Acting Insular Auditor, dated August 11, 1916, was to the effect that said section
referred to loans alone, and placed no restriction upon discount transactions. It becomes material, therefore, to discover the distinction between a "loan"
and a "discount," and to ascertain if the instant transaction comes under the first or the latter denomination.
Discounts are favored by bankers because of their liquid nature, growing, as they do, out of an actual, live, transaction. But in its last analysis, to
discount a paper is only a mode of loaning money, with, however, these distinctions: (1) In a discount, interest is deducted in advance, while in a loan,
interest is taken at the expiration of a credit; (2) a discount is always on double-name paper; a loan is generally on single-name paper.
Conceding, without deciding, that, as ruled by the Insular Auditor, the law covers loans and not discounts, yet the conclusion is inevitable that the
demand notes signed by the firm "Puno y Concepcion, S. en C." were not discount paper but were mere evidences of indebtedness, because
(1) interest was not deducted from the face of the notes, but was paid when the notes fell due; and (2) they were single-name and not double-
name paper.
The facts of the instant case having relation to this phase of the argument are not essentially different from the facts in the Binalbagan Estate case. Just
as there it was declared that the operations constituted a loan and not a discount, so should we here lay down the same ruling.
III. Was the granting of a credit of P300,000 to the copartnership, "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine
National Bank, an "indirect loan" within the meaning of section 35 of Act No. 2747?
Counsel argue that a loan to the partnership "Puno y Concepcion, S. en C." was not an "indirect loan." In this connection, it should be recalled that the
wife of the defendant held one-half of the capital of this partnership.
In the interpretation and construction of statutes, the primary rule is to ascertain and give effect to the intention of the Legislature. In this instance, the
purpose of the Legislature is plainly to erect a wall of safety against temptation for a director of the bank. The prohibition against indirect loans is a
recognition of the familiar maxim that no man may serve two masters — that where personal interest clashes with fidelity to duty the latter almost always
suffers. If, therefore, it is shown that the husband is financially interested in the success or failure of his wife's business venture, a loan to partnership of
which the wife of a director is a member, falls within the prohibition.
Various provisions of the Civil serve to establish the familiar relationship called a conjugal partnership. (Articles 1315, 1393, 1401, 1407, 1408, and 1412
can be specially noted.) A loan, therefore, to a partnership of which the wife of a director of a bank is a member, is an indirect loan to such director.
That it was the intention of the Legislature to prohibit exactly such an occurrence is shown by the acknowledged fact that in this instance the defendant
was tempted to mingle his personal and family affairs with his official duties, and to permit the loan P300,000 to a partnership of no established
reputation and without asking for collateral security.
In the case of Lester and Wife vs. Howard Bank ([1870], 33 Md., 558; 3 Am. Rep., 211), the Supreme Court of Maryland said:
What then was the purpose of the law when it declared that no director or officer should borrow of the bank, and "if any director," etc., "shall be
convicted," etc., "of directly or indirectly violating this section he shall be punished by fine and imprisonment?" We say to protect the
stockholders, depositors and creditors of the bank, against the temptation to which the directors and officers might be exposed, and the power
which as such they must necessarily possess in the control and management of the bank, and the legislature unwilling to rely upon the implied
understanding that in assuming this relation they would not acquire any interest hostile or adverse to the most exact and faithful discharge of
duty, declared in express terms that they should not borrow, etc., of the bank.
In the case of People vs. Knapp ([1912], 206 N. Y., 373), relied upon in the Binalbagan Estate decision, it was said:
 We are of opinion the statute forbade the loan to his copartnership firm as well as to himself directly. The loan was made indirectly to him
through his firm.
IV. Could Venancio Concepcion, President of the Philippine National Bank, be convicted of a violation of section 35 of Act No. 2747 in relation with
section 49 of the same Act, when these portions of Act No. 2747 were repealed by Act No. 2938, prior to the finding of the information and the rendition
of the judgment?
As noted along toward the beginning of this opinion, section 49 of Act No. 2747, in relation to section 35 of the same Act, provides a punishment for any
person who shall violate any of the provisions of the Act. It is contended, however, by the appellant, that the repeal of these sections of Act No. 2747 by
Act No. 2938 has served to take away the basis for criminal prosecution.
This same question has been previously submitted and has received an answer adverse to such contention in the cases of United Stated vs.
Cuna ([1908], 12 Phil., 241); People vs. Concepcion ([1922], 43 Phil., 653); and Ong Chang Wing and Kwong Fok vs. United States ([1910], 218 U. S.,
272; 40 Phil., 1046). In other words, it has been the holding, and it must again be the holding, that where an Act of the Legislature which penalizes an
offense, such repeals a former Act which penalized the same offense, such repeal does not have the effect of thereafter depriving the courts of
jurisdiction to try, convict, and sentenced offenders charged with violations of the old law.
V. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine
National Bank, in violation of section 35 of Act No. 2747, penalized by this law?
Counsel argue that since the prohibition contained in section 35 of Act No. 2747 is on the bank, and since section 49 of said Act provides a punishment
not on the bank when it violates any provisions of the law, but on a person violating any provisions of the same, and imposing imprisonment as a part of
the penalty, the prohibition contained in said section 35 is without penal sanction. lawph!l.net

The answer is that when the corporation itself is forbidden to do an act, the prohibition extends to the board of directors, and to each director
separately and individually. (People vs. Concepcion, supra.)
VI. Does the alleged good faith of Venancio Concepcion, President of the Philippine National Bank, in extending the credit of P300,000 to the
copartnership "Puno y Concepcion, S. en C." constitute a legal defense?
Counsel argue that if defendant committed the acts of which he was convicted, it was because he was misled by rulings coming from the Insular Auditor.
It is furthermore stated that since the loans made to the copartnership "Puno y Concepcion, S. en C." have been paid, no loss has been suffered by the
Philippine National Bank.
Neither argument, even if conceded to be true, is conclusive. Under the statute which the defendant has violated, criminal intent is not necessarily
material. The doing of the inhibited act, inhibited on account of public policy and public interest, constitutes the crime. And, in this instance, as previously
demonstrated, the acts of the President of the Philippine National Bank do not fall within the purview of the rulings of the Insular Auditor, even conceding
that such rulings have controlling effect.
Morse, in his work, Banks and Banking, section 125, says:
It is fraud for directors to secure by means of their trust, and advantage not common to the other stockholders. The law will not allow private
profit from a trust, and will not listen to any proof of honest intent.
JUDGMENT
On a review of the evidence of record, with reference to the decision of the trial court, and the errors assigned by the appellant, and with reference to
previous decisions of this court on the same subject, we are irresistibly led to the conclusion that no reversible error was committed in the trial of this
case, and that the defendant has been proved guilty beyond a reasonable doubt of the crime charged in the information. The penalty imposed by the trial
judge falls within the limits of the punitive provisions of the law.
Judgment is affirmed, with the costs of this instance against the appellant. So ordered.
Araullo, C. J., Johnson, Street, Avanceña, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.

G.R. No. 154878 - CAROLYN M. GARCIA v. RICA MARIE S. THIO

FIRST DIVISION
[G.R. NO. 154878 : March 16, 2007]
CAROLYN M. GARCIA, Petitioner, v. RICA MARIE S. THIO, Respondent.
DECISION
CORONA, J.:
1 2 3
Assailed in this Petition for Review on Certiorari are the June 19, 2002 decision and August 20, 2002 resolution of the Court of Appeals (CA) in CA-
G.R. CV No. 56577 which set aside the February 28, 1997 decision of the Regional Trial Court (RTC) of Makati City, Branch 58.
4
Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garcia a crossed check dated February 24, 1995 in the
5
amount of US$100,000 payable to the order of a certain Marilou Santiago. Thereafter, petitioner received from respondent every month (specifically, on
6 7 8
March 24, April 26, June 26 and July 26, all in 1995) the amount of US$3,000 and P76,500 on July 26, August 26, September 26 and October 26,
1995.
9
In June 1995, respondent received from petitioner another crossed check dated June 29, 1995 in the amount of P500,000, also payable to the order of
10
Marilou Santiago. Consequently, petitioner received from respondent the amount of P20,000 every month on August 5, September 5, October 5 and
11
November 5, 1995.
According to petitioner, respondent failed to pay the principal amounts of the loans (US$100,000 and P500,000) when they fell due. Thus, on February
22, 1996, petitioner filed a complaint for sum of money and damages in the RTC of Makati City, Branch 58 against respondent, seeking to collect the
sums of US$100,000, with interest thereon at 3% a month from October 26, 1995 and P500,000, with interest thereon at 4% a month from November 5,
12
1995, plus attorney's fees and actual damages.
Petitioner alleged that on February 24, 1995, respondent borrowed from her the amount of US$100,000 with interest thereon at the rate of 3% per
13
month, which loan would mature on October 26, 1995. The amount of this loan was covered by the first check. On June 29, 1995, respondent again
14
borrowed the amount of P500,000 at an agreed monthly interest of 4%, the maturity date of which was on November 5, 1995. The amount of this loan
was covered by the second check. For both loans, no promissory note was executed since petitioner and respondent were close friends at the
15
time. Respondent paid the stipulated monthly interest for both loans but on their maturity dates, she failed to pay the principal amounts despite
16
repeated demands. ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

Respondent denied that she contracted the two loans with petitioner and countered that it was Marilou Santiago to whom petitioner lent the money. She
17
claimed she was merely asked by petitioner to give the crossed checks to Santiago. She issued the checks for P76,000 and P20,000 not as payment
18
of interest but to accommodate petitioner's request that respondent use her own checks instead of Santiago's.
19
In a decision dated February 28, 1997, the RTC ruled in favor of petitioner. It found that respondent borrowed from petitioner the amounts of
20
US$100,000 with monthly interest of 3% and P500,000 at a monthly interest of 4%:
WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in favor of [petitioner], sentencing
[respondent] to pay the former the amount of:
1. [US$100,000.00] or its peso equivalent with interest thereon at 3% per month from October 26, 1995 until fully paid;
2. P500,000.00 with interest thereon at 4% per month from November 5, 1995 until fully paid.
3. P100,000.00 as and for attorney's fees; and cralawlibrary

4. P50,000.00 as and for actual damages.

For lack of merit, [respondent's] counterclaim is perforce dismissed.
With costs against [respondent].
21
IT IS SO ORDERED.
On appeal, the CA reversed the decision of the RTC and ruled that there was no contract of loan between the parties:
A perusal of the record of the case shows that [petitioner] failed to substantiate her claim that [respondent] indeed borrowed money from her. There is
nothing in the record that shows that [respondent] received money from [petitioner]. What is evident is the fact that [respondent] received a
MetroBank [crossed] check dated February 24, 1995 in the sum of US$100,000.00, payable to the order of Marilou Santiago and a CityTrust [crossed]
check dated June 29, 1995 in the amount of P500,000.00, again payable to the order of Marilou Santiago, both of which were issued by [petitioner]. The
checks received by [respondent], being crossed, may not be encashed but only deposited in the bank by the payee thereof, that is, by Marilou
Santiago herself.
It must be noted that crossing a check has the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be
negotiated only once to one who has an account with the bank; (c) and the act of crossing the check serves as warning to the holder that the check has
been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due
course.
Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and delivery to the payee in contemplation of law since the latter is
not the person who could take the checks as a holder, i.e., as a payee or indorsee thereof, with intent to transfer title thereto. Neither could she be
deemed as an agent of Marilou Santiago with respect to the checks because she was merely facilitating the transactions between the former and
[petitioner].
With the foregoing circumstances, it may be fairly inferred that there were really no contracts of loan that existed between the parties. x x x (emphasis
22
supplied)
23
Hence this petition.
As a rule, only questions of law may be raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court. However, this case falls under
one of the exceptions, i.e., when the factual findings of the CA (which held that there were no contracts of loan between petitioner and respondent) and
24
the RTC (which held that there were contracts of loan) are contradictory.
The petition is impressed with merit.
25
A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract. This is evident in Art.
1934 of the Civil Code which provides:
An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself
shall not be perfected until the delivery of the object of the contract. (Emphasis supplied) cralawlibrary

Upon delivery of the object of the contract of loan (in this case the money received by the debtor when the checks were encashed) the debtor acquires
26
ownership of such money or loan proceeds and is bound to pay the creditor an equal amount.
It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable not to the order of respondent but to
the order of a certain Marilou Santiago. Thus the main question to be answered is: who borrowed money from petitioner - respondent or Santiago? cralaw library

27
Petitioner insists that it was upon respondent's instruction that both checks were made payable to Santiago. She maintains that it was also upon
28
respondent's instruction that both checks were delivered to her (respondent) so that she could, in turn, deliver the same to Santiago. Furthermore, she
argues that once respondent received the checks, the latter had possession and control of them such that she had the choice to either forward them to
29
Santiago (who was already her debtor), to retain them or to return them to petitioner.
We agree with petitioner. Delivery is the act by which the res or substance thereof is placed within the actual or constructive possession or control of
30
another. Although respondent did not physically receive the proceeds of the checks, these instruments were placed in her control and possession
under an arrangement whereby she actually re-lent the amounts to Santiago.
Several factors support this conclusion.
31
First, respondent admitted that petitioner did not personally know Santiago. It was highly improbable that petitioner would grant two loans to a complete
stranger without requiring as much as promissory notes or any written acknowledgment of the debt considering that the amounts involved were quite big.
32
Respondent, on the other hand, already had transactions with Santiago at that time.
Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both parties' list of witnesses) testified that respondent's
plan was for petitioner to lend her money at a monthly interest rate of 3%, after which respondent would lend the same amount to Santiago at a higher
33
rate of 5% and realize a profit of 2%. This explained why respondent instructed petitioner to make the checks payable to Santiago. Respondent has not
shown any reason why Ruiz' testimony should not be believed.
Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of P76,000 each (peso equivalent of US$3,000) for eight
months to cover the monthly interest. For the P500,000 loan, she also issued her own checks in the amount of P20,000 each for four
34
months. According to respondent, she merely accommodated petitioner's request for her to issue her own checks to cover the interest payments since
35 36
petitioner was not personally acquainted with Santiago. She claimed, however, that Santiago would replace the checks with cash. Her explanation is
simply incredible. It is difficult to believe that respondent would put herself in a position where she would be compelled to pay interest, from her own
funds, for loans she allegedly did not contract. We declared in one case that:
In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to be believed, it must not only proceed from the
mouth of a credible witness, but must be credible in itself such as the common experience of mankind can approve as probable under the
circumstances. We have no test of the truth of human testimony except its conformity to our knowledge, observation, and experience. Whatever is
37
repugnant to these belongs to the miraculous, and is outside of juridical cognizance.
Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner, who was listed as one of her (Santiago's)
38
creditors.
39
Last, respondent inexplicably never presented Santiago as a witness to corroborate her story. The presumption is that "evidence willfully suppressed
40
would be adverse if produced." Respondent was not able to overturn this presumption.
We hold that the CA committed reversible error when it ruled that respondent did not borrow the amounts of US$100,000 and P500,000 from petitioner.
We instead agree with the ruling of the RTC making respondent liable for the principal amounts of the loans.
We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the US$100,000 and P500,000 loans respectively. There was
no written proof of the interest payable except for the verbal agreement that the loans would earn 3% and 4% interest per month. Article 1956 of the Civil
Code provides that "[n]o interest shall be due unless it has been expressly stipulated in writing."
Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to Article 2209 of the Civil Code. It is well-settled that:
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
41
subject to the provisions of Article 1169 of the Civil Code.
Hence, respondent is liable for the payment of legal interest per annum to be computed from November 21, 1995, the date when she received
42
petitioner's demand letter. From the finality of the decision until it is fully paid, the amount due shall earn interest at 12% per annum, the interim period
43
being deemed equivalent to a forbearance of credit.
The award of actual damages in the amount of P50,000 and P100,000 attorney's fees is deleted since the RTC decision did not explain the factual
bases for these damages.
WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20, 2002 resolution of the Court of Appeals in CA-G.R. CV
No. 56577 are REVERSED and SET ASIDE. The February 28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with
the MODIFICATION that respondent is directed to pay petitioner the amounts of US$100,000 and P500,000 at 12% per annum interest from November
21, 1995 until the finality of the decision. The total amount due as of the date of finality will earn interest of 12% per annum until fully paid. The award of
actual damages and attorney's fees is deleted.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-24968 April 27, 1972

SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.
Mabanag, Eliger and Associates and Saura, Magno and Associates for plaintiff-appellee.
Jesus A. Avanceña and Hilario G. Orsolino for defendant-appellant.

MAKALINTAL, J.:p
In Civil Case No. 55908 of the Court of First Instance of Manila, judgment was rendered on June 28, 1965 sentencing defendant Development Bank of the Philippines (DBP) to pay actual and consequential damages to plaintiff Saura Import and
Export Co., Inc. in the amount of P383,343.68, plus interest at the legal rate from the date the complaint was filed and attorney's fees in the amount of P5,000.00. The present appeal is from that judgment.

In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to the Rehabilitation Finance Corporation (RFC), before its
conversion into DBP, for an industrial loan of P500,000.00, to be used as follows: P250,000.00 for the construction of a factory building
(for the manufacture of jute sacks); P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and
P9,100.00 as additional working capital.
Parenthetically, it may be mentioned that the jute mill machinery had already been purchased by Saura on the strength of a letter of
credit extended by the Prudential Bank and Trust Co., and arrived in Davao City in July 1953; and that to secure its release without first
paying the draft, Saura, Inc. executed a trust receipt in favor of the said bank.
On January 7, 1954 RFC passed Resolution No. 145 approving the loan application for P500,000.00, to be secured by a first mortgage
on the factory building to be constructed, the land site thereof, and the machinery and equipment to be installed. Among the other terms
spelled out in the resolution were the following:
1. That the proceeds of the loan shall be utilized exclusively for the following purposes:
For construction of factory building P250,000.00
For payment of the balance of purchase
price of machinery and equipment 240,900.00
For working capital 9,100.00
T O T A L P500,000.00
4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto Caolboy and Gregoria Estabillo and China Engineers, Ltd. shall sign
the promissory notes jointly with the borrower-corporation;
5. That release shall be made at the discretion of the Rehabilitation Finance Corporation, subject to availability of funds, and as the
construction of the factory buildings progresses, to be certified to by an appraiser of this Corporation;"
Saura, Inc. was officially notified of the resolution on January 9, 1954. The day before, however, evidently having otherwise been
informed of its approval, Saura, Inc. wrote a letter to RFC, requesting a modification of the terms laid down by it, namely: that in lieu of
having China Engineers, Ltd. (which was willing to assume liability only to the extent of its stock subscription with Saura, Inc.) sign as
co-maker on the corresponding promissory notes, Saura, Inc. would put up a bond for P123,500.00, an amount equivalent to such
subscription; and that Maria S. Roca would be substituted for Inocencia Arellano as one of the other co-makers, having acquired the
latter's shares in Saura, Inc.
In view of such request RFC approved Resolution No. 736 on February 4, 1954, designating of the members of its Board of Governors,
for certain reasons stated in the resolution, "to reexamine all the aspects of this approved loan ... with special reference as to the
advisability of financing this particular project based on present conditions obtaining in the operations of jute mills, and to submit his
findings thereon at the next meeting of the Board."
On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had again agreed to act as co-signer for the loan, and asked that
the necessary documents be prepared in accordance with the terms and conditions specified in Resolution No. 145. In connection with
the reexamination of the project to be financed with the loan applied for, as stated in Resolution No. 736, the parties named their
respective committees of engineers and technical men to meet with each other and undertake the necessary studies, although in
appointing its own committee Saura, Inc. made the observation that the same "should not be taken as an acquiescence on (its) part to
novate, or accept new conditions to, the agreement already) entered into," referring to its acceptance of the terms and conditions
mentioned in Resolution No. 145.
On April 13, 1954 the loan documents were executed: the promissory note, with F.R. Halling, representing China Engineers, Ltd., as
one of the co-signers; and the corresponding deed of mortgage, which was duly registered on the following April 17.
It appears, however, that despite the formal execution of the loan agreement the reexamination contemplated in Resolution No. 736
proceeded. In a meeting of the RFC Board of Governors on June 10, 1954, at which Ramon Saura, President of Saura, Inc., was
present, it was decided to reduce the loan from P500,000.00 to P300,000.00. Resolution No. 3989 was approved as follows:
RESOLUTION No. 3989. Reducing the Loan Granted Saura Import & Export Co., Inc. under Resolution No. 145, C.S., from
P500,000.00 to P300,000.00. Pursuant to Bd. Res. No. 736, c.s., authorizing the re-examination of all the various aspects of the loan
granted the Saura Import & Export Co. under Resolution No. 145, c.s., for the purpose of financing the manufacture of jute sacks in
Davao, with special reference as to the advisability of financing this particular project based on present conditions obtaining in the
operation of jute mills, and after having heard Ramon E. Saura and after extensive discussion on the subject the Board, upon
recommendation of the Chairman, RESOLVED that the loan granted the Saura Import & Export Co. be REDUCED from P500,000 to
P300,000 and that releases up to P100,000 may be authorized as may be necessary from time to time to place the factory in actual
operation: PROVIDED that all terms and conditions of Resolution No. 145, c.s., not inconsistent herewith, shall remain in full force and
effect."
On June 19, 1954 another hitch developed. F.R. Halling, who had signed the promissory note for China Engineers Ltd. jointly and
severally with the other RFC that his company no longer to of the loan and therefore considered the same as cancelled as far as it was
concerned. A follow-up letter dated July 2 requested RFC that the registration of the mortgage be withdrawn.
In the meantime Saura, Inc. had written RFC requesting that the loan of P500,000.00 be granted. The request was denied by RFC,
which added in its letter-reply that it was "constrained to consider as cancelled the loan of P300,000.00 ... in view of a notification ...
from the China Engineers Ltd., expressing their desire to consider the loan insofar as they are concerned."
On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan and informed RFC that China Engineers, Ltd. "will at any
time reinstate their signature as co-signer of the note if RFC releases to us the P500,000.00 originally approved by you.".
On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan to the original amount of P500,000.00, "it appearing that
China Engineers, Ltd. is now willing to sign the promissory notes jointly with the borrower-corporation," but with the following proviso:
That in view of observations made of the shortage and high cost of imported raw materials, the Department of
Agriculture and Natural Resources shall certify to the following:
1. That the raw materials needed by the borrower-corporation to carry out its operation are available in the immediate
vicinity; and
2. That there is prospect of increased production thereof to provide adequately for the requirements of the factory."
The action thus taken was communicated to Saura, Inc. in a letter of RFC dated December 22, 1954, wherein it was explained that the
certification by the Department of Agriculture and Natural Resources was required "as the intention of the original approval (of the loan)
is to develop the manufacture of sacks on the basis of locally available raw materials." This point is important, and sheds light on the
subsequent actuations of the parties. Saura, Inc. does not deny that the factory he was building in Davao was for the manufacture of
bags from local raw materials. The cover page of its brochure (Exh. M) describes the project as a "Joint venture by and between the
Mindanao Industry Corporation and the Saura Import and Export Co., Inc. to finance, manage and operate a Kenaf mill plant, to
manufacture copra and corn bags, runners, floor mattings, carpets, draperies; out of 100% local raw materials, principal kenaf." The
explanatory note on page 1 of the same brochure states that, the venture "is the first serious attempt in this country to use 100% locally
grown raw materials notably kenaf which is presently grown commercially in theIsland of Mindanao where the proposed jutemill is
located ..."
This fact, according to defendant DBP, is what moved RFC to approve the loan application in the first place, and to require, in its
Resolution No. 9083, a certification from the Department of Agriculture and Natural Resources as to the availability of local raw
materials to provide adequately for the requirements of the factory. Saura, Inc. itself confirmed the defendant's stand impliedly in its
letter of January 21, 1955: (1) stating that according to a special study made by the Bureau of Forestry "kenaf will not be available in
sufficient quantity this year or probably even next year;" (2) requesting "assurances (from RFC) that my company and associates will be
able to bring in sufficient jute materials as may be necessary for the full operation of the jute mill;" and (3) asking that releases of the
loan be made as follows:
a) For the payment of the receipt for jute mill
machineries with the Prudential Bank &
Trust Company P250,000.00
(For immediate release)
b) For the purchase of materials and equip-
ment per attached list to enable the jute
mill to operate 182,413.91
c) For raw materials and labor 67,586.09
1) P25,000.00 to be released on the open-
ing of the letter of credit for raw jute
for $25,000.00.
2) P25,000.00 to be released upon arrival
of raw jute.
3) P17,586.09 to be released as soon as the
mill is ready to operate.
On January 25, 1955 RFC sent to Saura, Inc. the following reply:
Dear Sirs:
This is with reference to your letter of January 21, 1955, regarding the release of your loan under
consideration of P500,000. As stated in our letter of December 22, 1954, the releases of the loan, if
revived, are proposed to be made from time to time, subject to availability of funds towards the end
that the sack factory shall be placed in actual operating status. We shall be able to act on your
request for revised purpose and manner of releases upon re-appraisal of the securities offered for
the loan.
With respect to our requirement that the Department of Agriculture and Natural Resources certify
that the raw materials needed are available in the immediate vicinity and that there is prospect of
increased production thereof to provide adequately the requirements of the factory, we wish to
reiterate that the basis of the original approval is to develop the manufacture of sacks on the basis
of the locally available raw materials. Your statement that you will have to rely on the importation of
jute and your request that we give you assurance that your company will be able to bring in
sufficient jute materials as may be necessary for the operation of your factory, would not be in line
with our principle in approving the loan.
With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursue the matter further. Instead, it requested RFC to
cancel the mortgage, and so, on June 17, 1955 RFC executed the corresponding deed of cancellation and delivered it to Ramon F.
Saura himself as president of Saura, Inc.
It appears that the cancellation was requested to make way for the registration of a mortgage contract, executed on August 6, 1954,
over the same property in favor of the Prudential Bank and Trust Co., under which contract Saura, Inc. had up to December 31 of the
same year within which to pay its obligation on the trust receipt heretofore mentioned. It appears further that for failure to pay the said
obligation the Prudential Bank and Trust Co. sued Saura, Inc. on May 15, 1955.
On January 9, 1964, ahnost 9 years after the mortgage in favor of RFC was cancelled at the request of Saura, Inc., the latter
commenced the present suit for damages, alleging failure of RFC (as predecessor of the defendant DBP) to comply with its obligation
to release the proceeds of the loan applied for and approved, thereby preventing the plaintiff from completing or paying contractual
commitments it had entered into, in connection with its jute mill project.
The trial court rendered judgment for the plaintiff, ruling that there was a perfected contract between the parties and that the defendant
was guilty of breach thereof. The defendant pleaded below, and reiterates in this appeal: (1) that the plaintiff's cause of action had
prescribed, or that its claim had been waived or abandoned; (2) that there was no perfected contract; and (3) that assuming there was,
the plaintiff itself did not comply with the terms thereof.
We hold that there was indeed a perfected consensual contract, as recognized in Article 1934 of the Civil Code, which provides:
ART. 1954. An accepted promise to deliver something, by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall not be perferted until the delivery of the object of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the corresponding mortgage was executed and registered. But this fact alone falls short of resolving
the basic claim that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.
It should be noted that RFC entertained the loan application of Saura, Inc. on the assumption that the factory to be constructed would
utilize locally grown raw materials, principally kenaf. There is no serious dispute about this. It was in line with such assumption that
when RFC, by Resolution No. 9083 approved on December 17, 1954, restored the loan to the original amount of P500,000.00. it
imposed two conditions, to wit: "(1) that the raw materials needed by the borrower-corporation to carry out its operation are available in
the immediate vicinity; and (2) that there is prospect of increased production thereof to provide adequately for the requirements of the
factory." The imposition of those conditions was by no means a deviation from the terms of the agreement, but rather a step in its
implementation. There was nothing in said conditions that contradicted the terms laid down in RFC Resolution No. 145, passed on
January 7, 1954, namely — "that the proceeds of the loan shall be utilized exclusively for the following purposes: for construction of
factory building — P250,000.00; for payment of the balance of purchase price of machinery and equipment — P240,900.00; for working
capital — P9,100.00." Evidently Saura, Inc. realized that it could not meet the conditions required by RFC, and so wrote its letter of
January 21, 1955, stating that local jute "will not be able in sufficient quantity this year or probably next year," and asking that out of the
loan agreed upon the sum of P67,586.09 be released "for raw materials and labor." This was a deviation from the terms laid down in
Resolution No. 145 and embodied in the mortgage contract, implying as it did a diversion of part of the proceeds of the loan to purposes
other than those agreed upon.
When RFC turned down the request in its letter of January 25, 1955 the negotiations which had been going on for the implementation of
the agreement reached an impasse. Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead of doing so
and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled, which was done on June 15,
1

1955. The action thus taken by both parties was in the nature cf mutual desistance — what Manresa terms "mutuo disenso" — which is
a mode of extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can create a contract,
2

mutual disagreement by the parties can cause its extinguishment.

The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged breach of contract by RFC, or
even point out that the latter's stand was legally unjustified. Its request for cancellation of the mortgage carried no reservation of
whatever rights it believed it might have against RFC for the latter's non-compliance. In 1962 it even applied with DBP for another loan
to finance a rice and corn project, which application was disapproved. It was only in 1964, nine years after the loan agreement had
been cancelled at its own request, that Saura, Inc. brought this action for damages.All these circumstances demonstrate beyond doubt
that the said agreement had been extinguished by mutual desistance — and that on the initiative of the plaintiff-appellee itself.
With this view we take of the case, we find it unnecessary to consider and resolve the other issues raised in the respective briefs of the
parties.
WHEREFORE, the judgment appealed from is reversed and the complaint dismissed, with costs against the plaintiff-appellee.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 136202 January 25, 2007
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
COURT OF APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO, Respondents
DECISION
AZCUNA, J.:
1
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the Decision dated April 3, 1998, and the
2
Resolution dated November 9, 1998, of the Court of Appeals in CA-G.R. CV No. 42241.
3
The facts are as follows:
A.A. Salazar Construction and Engineering Services filed an action for a sum of money with damages against herein petitioner Bank of
the Philippine Islands (BPI) on December 5, 1991 before Branch 156 of the Regional Trial Court (RTC) of Pasig City. The complaint
was later amended by substituting the name of Annabelle A. Salazar as the real party in interest in place of A.A. Salazar Construction
and Engineering Services. Private respondent Salazar prayed for the recovery of the amount of Two Hundred Sixty-Seven Thousand,
Seven Hundred Seven Pesos and Seventy Centavos (P267,707.70) debited by petitioner BPI from her account. She likewise prayed for
damages and attorney’s fees.
Petitioner BPI, in its answer, alleged that on August 31, 1991, Julio R. Templonuevo, third-party defendant and herein also a private
respondent, demanded from the former payment of the amount of Two Hundred Sixty-Seven Thousand, Six Hundred Ninety-Two Pesos
and Fifty Centavos (P267,692.50) representing the aggregate value of three (3) checks, which were allegedly payable to him, but which
were deposited with the petitioner bank to private respondent Salazar’s account (Account No. 0203-1187-67) without his knowledge
and corresponding endorsement.
Accepting that Templonuevo’s claim was a valid one, petitioner BPI froze Account No. 0201-0588-48 of A.A. Salazar and Construction
and Engineering Services, instead of Account No. 0203-1187-67 where the checks were deposited, since this account was already
closed by private respondent Salazar or had an insufficient balance.
Private respondent Salazar was advised to settle the matter with Templonuevo but they did not arrive at any settlement. As it appeared
that private respondent Salazar was not entitled to the funds represented by the checks which were deposited and accepted for
deposit, petitioner BPI decided to debit the amount of P267,707.70 from her Account No. 0201-0588-48 and the sum of P267,692.50
was paid to Templonuevo by means of a cashier’s check. The difference between the value of the checks (P267,692.50) and the
amount actually debited from her account (P267,707.70) represented bank charges in connection with the issuance of a cashier’s
check to Templonuevo.
In the answer to the third-party complaint, private respondent Templonuevo admitted the payment to him of P267,692.50 and argued
that said payment was to correct the malicious deposit made by private respondent Salazar to her private account, and that petitioner
bank’s negligence and tolerance regarding the matter was violative of the primary and ordinary rules of banking. He likewise contended
that the debiting or taking of the reimbursed amount from the account of private respondent Salazar by petitioner BPI was a matter
exclusively between said parties and may be pursuant to banking rules and regulations, but did not in any way affect him. The debiting
from another account of private respondent Salazar, considering that her other account was effectively closed, was not his concern.
After trial, the RTC rendered a decision, the dispositive portion of which reads thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff [private respondent Salazar] and against the
defendant [petitioner BPI] and ordering the latter to pay as follows:
1. The amount of P267,707.70 with 12% interest thereon from September 16, 1991 until the said amount is fully paid;
2. The amount of P30,000.00 as and for actual damages;
3. The amount of P50,000.00 as and for moral damages;
4. The amount of P50,000.00 as and for exemplary damages;
5. The amount of P30,000.00 as and for attorney’s fees; and
6. Costs of suit.
The counterclaim is hereby ordered DISMISSED for lack of factual basis.
The third-party complaint [filed by petitioner] is hereby likewise ordered DISMISSED for lack of merit.
Third-party defendant’s [i.e., private respondent Templonuevo’s] counterclaim is hereby likewise DISMISSED for lack of factual basis.
4
SO ORDERED.
On appeal, the Court of Appeals (CA) affirmed the decision of the RTC and held that respondent Salazar was entitled to the proceeds
of the three (3) checks notwithstanding the lack of endorsement thereon by the payee. The CA concluded that Salazar and
5
Templonuevo had previously agreed that the checks payable to JRT Construction and Trading actually belonged to Salazar and would
6
be deposited to her account, with petitioner acquiescing to the arrangement.
Petitioner therefore filed this petition on these grounds:
I.
The Court of Appeals committed reversible error in misinterpreting Section 49 of the Negotiable Instruments Law and Section 3 (r and
s) of Rule 131 of the New Rules on Evidence.
II.
The Court of Appeals committed reversible error in NOT applying the provisions of Articles 22, 1278 and 1290 of the Civil Code in favor
of BPI.
III.
The Court of Appeals committed a reversible error in holding, based on a misapprehension of facts, that the account from which BPI
debited the amount of P267,707.70 belonged to a corporation with a separate and distinct personality.
IV.
The Court of Appeals committed a reversible error in holding, based entirely on speculations, surmises or conjectures, that there was
an agreement between SALAZAR and TEMPLONUEVO that checks payable to TEMPLONUEVO may be deposited by SALAZAR to
her personal account and that BPI was privy to this agreement.
V.
The Court of Appeals committed reversible error in holding, based entirely on speculation, surmises or conjectures, that SALAZAR
suffered great damage and prejudice and that her business standing was eroded.
VI.
The Court of Appeals erred in affirming instead of reversing the decision of the lower court against BPI and dismissing SALAZAR’s
complaint.
VII.
7
The Honorable Court erred in affirming the decision of the lower court dismissing the third-party complaint of BPI.
The issues center on the propriety of the deductions made by petitioner from private respondent Salazar’s account. Stated otherwise,
does a collecting bank, over the objections of its depositor, have the authority to withdraw unilaterally from such depositor’s account the
amount it had previously paid upon certain unendorsed order instruments deposited by the depositor to another account that she later
closed?
Petitioner argues thus:
1. There is no presumption in law that a check payable to order, when found in the possession of a person who is neither a
payee nor the indorsee thereof, has been lawfully transferred for value. Hence, the CA should not have presumed that Salazar
8
was a transferee for value within the contemplation of Section 49 of the Negotiable Instruments Law, as the latter applies only
9
to a holder defined under Section 191of the same.
2. Salazar failed to adduce sufficient evidence to prove that her possession of the three checks was lawful despite her
allegations that these checks were deposited pursuant to a prior internal arrangement with Templonuevo and that petitioner
was privy to the arrangement.
3. The CA should have applied the Civil Code provisions on legal compensation because in deducting the subject amount from
Salazar’s account, petitioner was merely rectifying the undue payment it made upon the checks and exercising its prerogative
to alter or modify an erroneous credit entry in the regular course of its business.
4. The debit of the amount from the account of A.A. Salazar Construction and Engineering Services was proper even though
the value of the checks had been originally credited to the personal account of Salazar because A.A. Salazar Construction and
Engineering Services, an unincorporated single proprietorship, had no separate and distinct personality from Salazar.
5. Assuming the deduction from Salazar’s account was improper, the CA should not have dismissed petitioner’s third-party
complaint against Templonuevo because the latter would have the legal duty to return to petitioner the proceeds of the checks
which he previously received from it.
6. There was no factual basis for the award of damages to Salazar.
The petition is partly meritorious.
First, the issue raised by petitioner requires an inquiry into the factual findings made by the CA. The CA’s conclusion that the deductions
from the bank account of A.A. Salazar Construction and Engineering Services were improper stemmed from its finding that there was
no ineffective payment to Salazar which would call for the exercise of petitioner’s right to set off against the former’s bank deposits. This
finding, in turn, was drawn from the pleadings of the parties, the evidence adduced during trial and upon the admissions and
stipulations of fact made during the pre-trial, most significantly the following:
(a) That Salazar previously had in her possession the following checks:
(1) Solid Bank Check No. CB766556 dated January 30, 1990 in the amount of P57,712.50;
(2) Solid Bank Check No. CB898978 dated July 31, 1990 in the amount of P55,180.00; and,
(3) Equitable Banking Corporation Check No. 32380638 dated August 28, 1990 for the amount of P154,800.00;
 (b) That these checks which had an aggregate amount of P267,692.50 were payable to the order of JRT Construction and
Trading, the name and style under which Templonuevo does business;
(c) That despite the lack of endorsement of the designated payee upon such checks, Salazar was able to deposit the checks
in her personal savings account with petitioner and encash the same;
(d) That petitioner accepted and paid the checks on three (3) separate occasions over a span of eight months in 1990; and
(e) That Templonuevo only protested the purportedly unauthorized encashment of the checks after the lapse of one year from
10
the date of the last check.
Petitioner concedes that when it credited the value of the checks to the account of private respondent Salazar, it made a mistake
because it failed to notice the lack of endorsement thereon by the designated payee. The CA, however, did not lend credence to this
claim and concluded that petitioner’s actions were deliberate, in view of its admission that the "mistake" was committed three times on
three separate occasions, indicating acquiescence to the internal arrangement between Salazar and Templonuevo. The CA explained
thus:
It was quite apparent that the three checks which appellee Salazar deposited were not indorsed. Three times she deposited them to her
account and three times the amounts borne by these checks were credited to the same. And in those separate occasions, the bank did
not return the checks to her so that she could have them indorsed. Neither did the bank question her as to why she was depositing the
checks to her account considering that she was not the payee thereof, thus allowing us to come to the conclusion that defendant-
appellant BPI was fully aware that the proceeds of the three checks belong to appellee.
For if the bank was not privy to the agreement between Salazar and Templonuevo, it is most unlikely that appellant BPI (or any bank for
that matter) would have accepted the checks for deposit on three separate times nary any question. Banks are most finicky over
accepting checks for deposit without the corresponding indorsement by their payee. In fact, they hesitate to accept indorsed checks for
11
deposit if the depositor is not one they know very well.
The CA likewise sustained Salazar’s position that she received the checks from Templonuevo pursuant to an internal arrangement
between them, ratiocinating as follows:
If there was indeed no arrangement between Templonuevo and the plaintiff over the three questioned checks, it baffles us why it was
only on August 31, 1991 or more than a year after the third and last check was deposited that he demanded for the refund of the total
amount of P267,692.50.
A prudent man knowing that payment is due him would have demanded payment by his debtor from the moment the same became due
and demandable. More so if the sum involved runs in hundreds of thousand of pesos. By and large, every person, at the very moment
he learns that he was deprived of a thing which rightfully belongs to him, would have created a big fuss. He would not have waited for a
12
year within which to do so. It is most inconceivable that Templonuevo did not do this.
13
Generally, only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of Court. Factual findings of the
14
CA are entitled to great weight and respect, especially when the CA affirms the factual findings of the trial court. Such questions on
whether certain items of evidence should be accorded probative value or weight, or rejected as feeble or spurious, or whether or not the
proofs on one side or the other are clear and convincing and adequate to establish a proposition in issue, are questions of fact. The
same holds true for questions on whether or not the body of proofs presented by a party, weighed and analyzed in relation to contrary
evidence submitted by the adverse party may be said to be strong, clear and convincing, or whether or not inconsistencies in the body
of proofs of a party are of such gravity as to justify refusing to give said proofs weight – all these are issues of fact which are not
15
reviewable by the Court.
This rule, however, is not absolute and admits of certain exceptions, namely: a) when the conclusion is a finding grounded entirely on
speculations, surmises, or conjectures; b) when the inference made is manifestly mistaken, absurd, or impossible; c) when there is a
grave abuse of discretion; d) when the judgment is based on a misapprehension of facts; e) when the findings of fact are conflicting; f)
when the CA, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant
and appellee; g) when the findings of the CA are contrary to those of the trial court; h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; i) when the finding of fact of the CA is premised on the supposed absence of
evidence but is contradicted by the evidence on record; and j) when the CA manifestly overlooked certain relevant facts not disputed by
16
the parties and which, if properly considered, would justify a different conclusion.
In the present case, the records do not support the finding made by the CA and the trial court that a prior arrangement existed between
Salazar and Templonuevo regarding the transfer of ownership of the checks. This fact is crucial as Salazar’s entitlement to the value of
the instruments is based on the assumption that she is a transferee within the contemplation of Section 49 of the Negotiable
Instruments Law.
Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee or indorsee delivers a negotiable instrument
for value without indorsing it, thus:
Transfer without indorsement; effect of- Where the holder of an instrument payable to his order transfers it for value without indorsing it,
the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes
17
effect as of the time when the indorsement is actually made.
It bears stressing that the above transaction is an equitable assignment and the transferee acquires the instrument subject to defenses
and equities available among prior parties. Thus, if the transferor had legal title, the transferee acquires such title and, in addition, the
right to have the indorsement of the transferor and also the right, as holder of the legal title, to maintain legal action against the maker
or acceptor or other party liable to the transferor. The underlying premise of this provision, however, is that a valid transfer of ownership
of the negotiable instrument in question has taken place.
Transferees in this situation do not enjoy the presumption of ownership in favor of holders since they are neither payees nor indorsees
of such instruments. The weight of authority is that the mere possession of a negotiable instrument does not in itself conclusively
establish either the right of the possessor to receive payment, or of the right of one who has made payment to be discharged from
liability. Thus, something more than mere possession by persons who are not payees or indorsers of the instrument is necessary to
18
authorize payment to them in the absence of any other facts from which the authority to receive payment may be inferred.
The CA and the trial court surmised that the subject checks belonged to private respondent Salazar based on the pre-trial stipulation
that Templonuevo incurred a one-year delay in demanding reimbursement for the proceeds of the same. To the Court’s mind, however,
such period of delay is not of such unreasonable length as to estop Templonuevo from asserting ownership over the checks especially
19
considering that it was readily apparent on the face of the instruments that these were crossed checks.
20
In State Investment House v. IAC, the Court enumerated the effects of crossing a check, thus: (1) that the check may not be encashed
but only deposited in the bank; (2) that the check may be negotiated only once - to one who has an account with a bank; and (3) that
the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that such
holder must inquire if the check has been received pursuant to that purpose.
Thus, even if the delay in the demand for reimbursement is taken in conjunction with Salazar’s possession of the checks, it cannot be
said that the presumption of ownership in Templonuevo’s favor as the designated payee therein was sufficiently overcome. This is
consistent with the principle that if instruments payable to named payees or to their order have not been indorsed in blank, only such
21
payees or their indorsees can be holders and entitled to receive payment in their own right.
The presumption under Section 131(s) of the Rules of Court stating that a negotiable instrument was given for a sufficient consideration
will not inure to the benefit of Salazar because the term "given" does not pertain merely to a transfer of physical possession of the
instrument. The phrase "given or indorsed" in the context of a negotiable instrument refers to the manner in which such instrument may
be negotiated. Negotiable instruments are negotiated by "transfer to one person or another in such a manner as to constitute the
transferee the holder thereof. If payable to bearer it is negotiated by delivery. If payable to order it is negotiated by the indorsement
22
completed by delivery." The present case involves checks payable to order. Not being a payee or indorsee of the checks, private
respondent Salazar could not be a holder thereof.
It is an exception to the general rule for a payee of an order instrument to transfer the instrument without indorsement. Precisely
because the situation is abnormal, it is but fair to the maker and to prior holders to require possessors to prove without the aid of an
23
initial presumption in their favor, that they came into possession by virtue of a legitimate transaction with the last holder. Salazar failed
to discharge this burden, and the return of the check proceeds to Templonuevo was therefore warranted under the circumstances
despite the fact that Templonuevo may not have clearly demonstrated that he never authorized Salazar to deposit the checks or to
encash the same. Noteworthy also is the fact that petitioner stamped on the back of the checks the words: "All prior endorsements
and/or lack of endorsements guaranteed," thereby making the assurance that it had ascertained the genuineness of all prior
endorsements. Having assumed the liability of a general indorser, petitioner’s liability to the designated payee cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit Salazar’s account for the value of the checks it previously
credited in her favor. It is of no moment that the account debited by petitioner was different from the original account to which the
proceeds of the check were credited because both admittedly belonged to Salazar, the former being the account of the sole
proprietorship which had no separate and distinct personality from her, and the latter being her personal account.
24
The right of set-off was explained in Associated Bank v. Tan:
A bank generally has a right of set-off over the deposits therein for the payment of any withdrawals on the part of a depositor. The right
of a collecting bank to debit a client's account for the value of a dishonored check that has previously been credited has fairly been
established by jurisprudence. To begin with, Article 1980 of the Civil Code provides that "[f]ixed, savings, and current deposits of money
in banks and similar institutions shall be governed by the provisions concerning simple loan."
Hence, the relationship between banks and depositors has been held to be that of creditor and debtor. Thus, legal compensation under
Article 1278 of the Civil Code may take place "when all the requisites mentioned in Article 1279 are present," as follows:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the
same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due
time to the debtor.
While, however, it is conceded that petitioner had the right of set-off over the amount it paid to Templonuevo against the deposit of
25
Salazar, the issue of whether it acted judiciously is an entirely different matter. As businesses affected with public interest, and
because of the nature of their functions, banks are under obligation to treat the accounts of their depositors with meticulous care,
26
always having in mind the fiduciary nature of their relationship. In this regard, petitioner was clearly remiss in its duty to private
respondent Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks. Despite the obvious lack of indorsement thereon, petitioner
permitted the encashment of these checks three times on three separate occasions. This negates petitioner’s claim that it merely made
a mistake in crediting the value of the checks to Salazar’s account and instead bolsters the conclusion of the CA that petitioner
recognized Salazar’s claim of ownership of checks and acted deliberately in paying the same, contrary to ordinary banking policy and
practice. It must be emphasized that the law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it, for
the purpose of determining their genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to
27
the public as the expert on this field, and the law thus holds it to a high standard of conduct. The taking and collection of a check
28
without the proper indorsement amount to a conversion of the check by the bank.
More importantly, however, solely upon the prompting of Templonuevo, and with full knowledge of the brewing dispute between Salazar
and Templonuevo, petitioner debited the account held in the name of the sole proprietorship of Salazar without even serving due notice
upon her. This ran contrary to petitioner’s assurances to private respondent Salazar that the account would remain untouched, pending
29
the resolution of the controversy between her and Templonuevo. In this connection, the CA cited the letter dated September 5, 1991 of
Mr. Manuel Ablan, Senior Manager of petitioner bank’s Pasig/Ortigas branch, to private respondent Salazar informing her that her
account had been frozen, thus:
From the tenor of the letter of Manuel Ablan, it is safe to conclude that Account No. 0201-0588-48 will remain frozen or untouched until
herein [Salazar] has settled matters with Templonuevo. But, in an unexpected move, in less than two weeks (eleven days to be precise)
from the time that letter was written, [petitioner] bank issued a cashier’s check in the name of Julio R. Templonuevo of the J.R.T.
Construction and Trading for the sum of P267,692.50 (Exhibit "8") and debited said amount from Ms. Arcilla’s account No. 0201-0588-
48 which was supposed to be frozen or controlled. Such a move by BPI is, to Our minds, a clear case of negligence, if not a fraudulent,
wanton and reckless disregard of the right of its depositor.
The records further bear out the fact that respondent Salazar had issued several checks drawn against the account of A.A. Salazar
Construction and Engineering Services prior to any notice of deduction being served. The CA sustained private respondent Salazar’s
claim of damages in this regard:
The act of the bank in freezing and later debiting the amount of P267,692.50 from the account of A.A. Salazar Construction and
Engineering Services caused plaintiff-appellee great damage and prejudice particularly when she had already issued checks drawn
against the said account. As can be expected, the said checks bounced. To prove this, plaintiff-appellee presented as exhibits
30
photocopies of checks dated September 8, 1991, October 28, 1991, and November 14, 1991 (Exhibits "D", "E" and "F" respectively)
These checks, it must be emphasized, were subsequently dishonored, thereby causing private respondent Salazar undue
embarrassment and inflicting damage to her standing in the business community. Under the circumstances, she was clearly not given
the opportunity to protect her interest when petitioner unilaterally withdrew the above amount from her account without informing her
that it had already done so.
For the above reasons, the Court finds no reason to disturb the award of damages granted by the CA against petitioner. This whole
incident would have been avoided had petitioner adhered to the standard of diligence expected of one engaged in the banking
business. A depositor has the right to recover reasonable moral damages even if the bank’s negligence may not have been attended
31
with malice and bad faith, if the former suffered mental anguish, serious anxiety, embarrassment and humiliation. Moral damages are
not meant to enrich a complainant at the expense of defendant. It is only intended to alleviate the moral suffering she has undergone.
The award of exemplary damages is justified, on the other hand, when the acts of the bank are attended by malice, bad faith or gross
negligence. The award of reasonable attorney’s fees is proper where exemplary damages are awarded. It is proper where depositors
32
are compelled to litigate to protect their interest.
WHEREFORE, the petition is partially GRANTED. The assailed Decision dated April 3, 1998 and Resolution dated April 3, 1998
rendered by the Court of Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it ordered petitioner Bank of the Philippine
Islands to return the amount of Two Hundred Sixty-seven Thousand Seven Hundred and Seven and 70/100 Pesos (P267,707.70) to
respondent Annabelle A. Salazar, which portion is REVERSED and SET ASIDE. In all other respects, the same are AFFIRMED.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 174269 May 8, 2009
POLO S. PANTALEON, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC., Respondent.
DECISION
TINGA, J.:
The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and son Adrian Roberto, joined an escorted tour of Western Europe
organized by Trafalgar Tours of Europe, Ltd., in October of 1991. The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the second
to the last day of the tour. As the group had arrived late in the city, they failed to engage in any sight-seeing. Instead, it was agreed upon that they would
start early the next day to see the entire city before ending the tour.
The following day, the last day of the tour, the group arrived at the Coster Diamond House in Amsterdam around 10 minutes before 9:00 a.m. The group
had agreed that the visit to Coster should end by 9:30 a.m. to allow enough time to take in a guided city tour of Amsterdam. The group was ushered into
1

Coster shortly before 9:00 a.m., and listened to a lecture on the art of diamond polishing that lasted for around ten minutes. Afterwards, the group was
led to the store’s showroom to allow them to select items for purchase. Mrs. Pantaleon had already planned to purchase even before the tour began a
2

2.5 karat diamond brilliant cut, and she found a diamond close enough in approximation that she decided to buy. Mrs. Pantaleon also selected for
3

purchase a pendant and a chain, all of which totaled U.S. $13,826.00.

To pay for these purchases, Pantaleon presented his American Express credit card together with his passport to the Coster sales clerk. This occurred at
around 9:15 a.m., or 15 minutes before the tour group was slated to depart from the store. The sales clerk took the card’s imprint, and asked Pantaleon
to sign the charge slip. The charge purchase was then referred electronically to respondent’s Amsterdam office at 9:20 a.m.
Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet been approved. His son, who had already boarded the tour bus,
soon returned to Coster and informed the other members of the Pantaleon family that the entire tour group was waiting for them. As it was already 9:40
a.m., and he was already worried about further inconveniencing the tour group, Pantaleon asked the store clerk to cancel the sale. The store manager
though asked plaintiff to wait a few more minutes. After 15 minutes, the store manager informed Pantaleon that respondent had demanded bank
references. Pantaleon supplied the names of his depositary banks, then instructed his daughter to return to the bus and apologize to the tour group for
the delay.
At around 10:00 a.m, or around 45 minutes after Pantaleon had presented his AmexCard, and 30 minutes after the tour group was supposed to have left
the store, Coster decided to release the items even without respondent’s approval of the purchase. The spouses Pantaleon returned to the bus. It is
4

alleged that their offers of apology were met by their tourmates with stony silence. The tour group’s visible irritation was aggravated when the tour guide
announced that the city tour of Amsterdam was to be canceled due to lack of remaining time, as they had to catch a 3:00 p.m. ferry at Calais, Belgium to
5

London. Mrs. Pantaleon ended up weeping, while her husband had to take a tranquilizer to calm his nerves.
It later emerged that Pantaleon’s purchase was first transmitted for approval to respondent’s Amsterdam office at 9:20 a.m., Amsterdam time, then
6

referred to respondent’s Manila office at 9:33 a.m, then finally approved at 10:19 a.m., Amsterdam time. The Approval Code was transmitted to
respondent’s Amsterdam office at 10:38 a.m., several minutes after petitioner had already left Coster, and 78 minutes from the time the purchases were
electronically transmitted by the jewelry store to respondent’s Amsterdam office.
After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before returning to Manila on 12 November 1992. While in
the United States, Pantaleon continued to use his AmEx card, several times without hassle or delay, but with two other incidents similar to the
Amsterdam brouhaha. On 30 October 1991, Pantaleon purchased golf equipment amounting to US $1,475.00 using his AmEx card, but he cancelled his
credit card purchase and borrowed money instead from a friend, after more than 30 minutes had transpired without the purchase having been approved.
On 3 November 1991, Pantaleon used the card to purchase children’s shoes worth $87.00 at a store in Boston, and it took 20 minutes before this
transaction was approved by respondent.
7

On 4 March 1992, after coming back to Manila, Pantaleon sent a letter through counsel to the respondent, demanding an apology for the
"inconvenience, humiliation and embarrassment he and his family thereby suffered" for respondent’s refusal to provide credit authorization for the
8 9

aforementioned purchases. In response, respondent sent a letter dated 24 March 1992, stating among others that the delay in authorizing the purchase
from Coster was attributable to the circumstance that the charged purchase of US $13,826.00 "was out of the usual charge purchase pattern
10

established." Since respondent refused to accede to Pantaleon’s demand for an apology, the aggrieved cardholder instituted an action for damages
11

with the Regional Trial Court (RTC) of Makati City, Branch 145. Pantaleon prayed that he be awarded ₱2,000,000.00, as moral damages; ₱500,000.00,
12

as exemplary damages; ₱100,000.00, as attorney’s fees; and ₱50,000.00 as litigation expenses.

13

On 5 August 1996, the Makati City RTC rendered a decision in favor of Pantaleon, awarding him ₱500,000.00 as moral damages, ₱300,000.00 as
exemplary damages, ₱100,000.00 as attorney’s fees, and ₱85,233.01 as expenses of litigation. Respondent filed a Notice of Appeal, while Pantaleon 14

moved for partial reconsideration, praying that the trial court award the increased amount of moral and exemplary damages he had prayed for. The RTC
15

denied Pantaleon’s motion for partial reconsideration, and thereafter gave due course to respondent’s Notice of Appeal.
16

On 18 August 2006, the Court of Appeals rendered a decision reversing the award of damages in favor of Pantaleon, holding that respondent had not
breached its obligations to petitioner. Hence, this petition.
The key question is whether respondent, in connection with the aforementioned transactions, had committed a breach of its obligations to Pantaleon. In
addition, Pantaleon submits that even assuming that respondent had not been in breach of its obligations, it still remained liable for damages under
Article 21 of the Civil Code.
The RTC had concluded, based on the testimonial representations of Pantaleon and respondent’s credit authorizer, Edgardo Jaurigue, that the normal
approval time for purchases was "a matter of seconds." Based on that standard, respondent had been in clear delay with respect to the three subject
transactions. As it appears, the Court of Appeals conceded that there had been delay on the part of respondent in approving the purchases. However, it
made two critical conclusions in favor of respondent. First, the appellate court ruled that the delay was not attended by bad faith, malice, or gross
negligence. Second, it ruled that respondent "had exercised diligent efforts to effect the approval" of the purchases, which were "not in accordance with
the charge pattern" petitioner had established for himself, as exemplified by the fact that at Coster, he was "making his very first single charge purchase
of US$13,826," and "the record of [petitioner]’s past spending with [respondent] at the time does not favorably support his ability to pay for such
17

purchase."
On the premise that there was an obligation on the part of respondent "to approve or disapprove with dispatch the charge purchase," petitioner argues
that the failure to timely approve or disapprove the purchase constituted mora solvendi on the part of respondent in the performance of its obligation. For
its part, respondent characterizes the depiction by petitioner of its obligation to him as "to approve purchases instantaneously or in a matter of seconds."
Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default are that the obligation is demandable and liquidated; the
18

debtor delays performance; and the creditor judicially or extrajudicially requires the debtor’s performance. Petitioner asserts that the Court of Appeals
had wrongly applied the principle of mora accipiendi, which relates to delay on the part of the obligee in accepting the performance of the obligation by
the obligor. The requisites of mora accipiendi are: an offer of performance by the debtor who has the required capacity; the offer must be to comply with
19

the prestation as it should be performed; and the creditor refuses the performance without just cause. The error of the appellate court, argues petitioner,
is in relying on the invocation by respondent of "just cause" for the delay, since while just cause is determinative of mora accipiendi, it is not so with the
case of mora solvendi.
We can see the possible source of confusion as to which type of mora to appreciate. Generally, the relationship between a credit card provider and its
20

card holders is that of creditor-debtor, with the card company as the creditor extending loans and credit to the card holder, who as debtor is obliged to
repay the creditor. This relationship already takes exception to the general rule that as between a bank and its depositors, the bank is deemed as the
 21

debtor while the depositor is considered as the creditor. Petitioner is asking us, not baselessly, to again shift perspectives and again see the credit card
company as the debtor/obligor, insofar as it has the obligation to the customer as creditor/obligee to act promptly on its purchases on credit.
Ultimately, petitioner’s perspective appears more sensible than if we were to still regard respondent as the creditor in the context of this cause of action.
If there was delay on the part of respondent in its normal role as creditor to the cardholder, such delay would not have been in the acceptance of the
performance of the debtor’s obligation (i.e., the repayment of the debt), but it would be delay in the extension of the credit in the first place. Such delay
would not fall under mora accipiendi, which contemplates that the obligation of the debtor, such as the actual purchases on credit, has already been
constituted. Herein, the establishment of the debt itself (purchases on credit of the jewelry) had not yet been perfected, as it remained pending the
approval or consent of the respondent credit card company.
Still, in order for us to appreciate that respondent was in mora solvendi, we will have to first recognize that there was indeed an obligation on the part of
respondent to act on petitioner’s purchases with "timely dispatch," or for the purposes of this case, within a period significantly less than the one hour it
apparently took before the purchase at Coster was finally approved.
The findings of the trial court, to our mind, amply established that the tardiness on the part of respondent in acting on petitioner’s purchase at Coster did
constitute culpable delay on its part in complying with its obligation to act promptly on its customer’s purchase request, whether such action be favorable
or unfavorable. We quote the trial court, thus:
As to the first issue, both parties have testified that normal approval time for purchases was a matter of seconds.
Plaintiff testified that his personal experience with the use of the card was that except for the three charge purchases subject of this case, approvals of
his charge purchases were always obtained in a matter of seconds.
Defendant’s credit authorizer Edgardo Jaurique likewise testified:
Q. – You also testified that on normal occasions, the normal approval time for charges would be 3 to 4 seconds?
A. – Yes, Ma’am.
Both parties likewise presented evidence that the processing and approval of plaintiff’s charge purchase at the Coster Diamond House was way beyond
the normal approval time of a "matter of seconds".
Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15 a.m. and by the time he had to leave the store at 10:05 a.m., no
approval had yet been received. In fact, the Credit Authorization System (CAS) record of defendant at Phoenix Amex shows that defendant’s
Amsterdam office received the request to approve plaintiff’s charge purchase at 9:20 a.m., Amsterdam time or 01:20, Phoenix time, and that the
defendant relayed its approval to Coster at 10:38 a.m., Amsterdam time, or 2:38, Phoenix time, or a total time lapse of one hour and [18] minutes. And
even then, the approval was conditional as it directed in computerese [sic] "Positive Identification of Card holder necessary further charges require bank
information due to high exposure. By Jack Manila."
The delay in the processing is apparent to be undue as shown from the frantic successive queries of Amexco Amsterdam which reads: "US$13,826.
Cardmember buying jewels. ID seen. Advise how long will this take?" They were sent at 01:33, 01:37, 01:40, 01:45, 01:52 and 02:08, all times Phoenix.
Manila Amexco could be unaware of the need for speed in resolving the charge purchase referred to it, yet it sat on its hand, unconcerned.
xxx
To repeat, the Credit Authorization System (CAS) record on the Amsterdam transaction shows how Amexco Netherlands viewed the delay as unusually
frustrating. In sequence expressed in Phoenix time from 01:20 when the charge purchased was referred for authorization, defendants own record
shows:
01:22 – the authorization is referred to Manila Amexco
01:32 – Netherlands gives information that the identification of the cardmember has been presented and he is buying jewelries worth US
$13,826.
01:33 – Netherlands asks "How long will this take?"
02:08 – Netherlands is still asking "How long will this take?"
The Court is convinced that defendants delay constitute[s] breach of its contractual obligation to act on his use of the card abroad "with special
22

handling." (Citations omitted)

xxx
Notwithstanding the popular notion that credit card purchases are approved "within seconds," there really is no strict, legally determinative point of
demarcation on how long must it take for a credit card company to approve or disapprove a customer’s purchase, much less one specifically contracted
upon by the parties. Yet this is one of those instances when "you’d know it when you’d see it," and one hour appears to be an awfully long, patently
unreasonable length of time to approve or disapprove a credit card purchase. It is long enough time for the customer to walk to a bank a kilometer away,
withdraw money over the counter, and return to the store.
Notably, petitioner frames the obligation of respondent as "to approve or disapprove" the purchase "in timely dispatch," and not "to approve the purchase
instantaneously or within seconds." Certainly, had respondent disapproved petitioner’s purchase "within seconds" or within a timely manner, this
particular action would have never seen the light of day. Petitioner and his family would have returned to the bus without delay – internally humiliated
perhaps over the rejection of his card – yet spared the shame of being held accountable by newly-made friends for making them miss the chance to tour
the city of Amsterdam.
We do not wish do dispute that respondent has the right, if not the obligation, to verify whether the credit it is extending upon on a particular purchase
was indeed contracted by the cardholder, and that the cardholder is within his means to make such transaction. The culpable failure of respondent
herein is not the failure to timely approve petitioner’s purchase, but the more elemental failure to timely act on the same, whether favorably or
unfavorably. Even assuming that respondent’s credit authorizers did not have sufficient basis on hand to make a judgment, we see no reason why
respondent could not have promptly informed petitioner the reason for the delay, and duly advised him that resolving the same could take some time. In
that way, petitioner would have had informed basis on whether or not to pursue the transaction at Coster, given the attending circumstances. Instead,
petitioner was left uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced to confront the wrath of foreign folk.
Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad faith, and the court should find that under the
circumstances, such damages are due. The findings of the trial court are ample in establishing the bad faith and unjustified neglect of respondent,
23

attributable in particular to the "dilly-dallying" of respondent’s Manila credit authorizer, Edgardo Jaurique. Wrote the trial court:
While it is true that the Cardmembership Agreement, which defendant prepared, is silent as to the amount of time it should take defendant to grant
authorization for a charge purchase, defendant acknowledged that the normal time for approval should only be three to four seconds. Specially so with
cards used abroad which requires "special handling", meaning with priority. Otherwise, the object of credit or charge cards would be lost; it would be so
inconvenient to use that buyers and consumers would be better off carrying bundles of currency or traveller’s checks, which can be delivered and
accepted quickly. Such right was not accorded to plaintiff in the instances complained off for reasons known only to defendant at that time. This, to the
24

Court’s mind, amounts to a wanton and deliberate refusal to comply with its contractual obligations, or at least abuse of its rights, under the contract.
xxx
The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it alleges to have consumed more than one hour to
simply go over plaintiff’s past credit history with defendant, his payment record and his credit and bank references, when all such data are already stored
and readily available from its computer. This Court also takes note of the fact that there is nothing in plaintiff’s billing history that would warrant the
imprudent suspension of action by defendant in processing the purchase. Defendant’s witness Jaurique admits:
Q. – But did you discover that he did not have any outstanding account?
A. – Nothing in arrears at that time.
Q. – You were well aware of this fact on this very date?
A. – Yes, sir.
25

Mr. Jaurique further testified that there were no "delinquencies" in plaintiff’s account.
It should be emphasized that the reason why petitioner is entitled to damages is not simply because respondent incurred delay, but because the delay,
for which culpability lies under Article 1170, led to the particular injuries under Article 2217 of the Civil Code for which moral damages are
26

remunerative. Moral damages do not avail to soothe the plaints of the simply impatient, so this decision should not be cause for relief for those who
time the length of their credit card transactions with a stopwatch. The somewhat unusual attending circumstances to the purchase at Coster – that there
was a deadline for the completion of that purchase by petitioner before any delay would redound to the injury of his several traveling companions – gave
rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained by the petitioner, as concluded by the
27

RTC. Those circumstances are fairly unusual, and should not give rise to a general entitlement for damages under a more mundane set of facts.
We sustain the amount of moral damages awarded to petitioner by the RTC. There is no hard-and-fast rule in determining what would be a fair and
reasonable amount of moral damages, since each case must be governed by its own peculiar facts, however, it must be commensurate to the loss or
28

injury suffered. Petitioner’s original prayer for ₱5,000,000.00 for moral damages is excessive under the circumstances, and the amount awarded by the
trial court of ₱500,000.00 in moral damages more seemly. 1avvphi1

Likewise, we deem exemplary damages available under the circumstances, and the amount of ₱300,000.00 appropriate. There is similarly no cause
though to disturb the determined award of ₱100,000.00 as attorney’s fees, and ₱85,233.01 as expenses of litigation.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the Regional
Trial Court of Makati, Branch 145 in Civil Case No. 92-1665 is hereby REINSTATED. Costs against respondent.
SO ORDERED.