savings account to cover the full amount of the check he
FIRST DIVISION issued. His deposits in both accounts totalled P51,304.91.[4]
[G.R. No. 141011. July 19, 2001]
CITYTRUST BANKING CORPORATION (now Bank of the
Philippine Islands), petitioner, vs. ISAGANI C.
VILLANUEVA, respondent.
[G.R. No. 141028. July 19, 2001]
ISAGANI C. VILLANUEVA, petitioner, vs. CITYTRUST BANKING
CORPORATION, respondent.
DECISION
DAVIDE, JR., C.J.:
In these consolidated cases, the Court is called upon to
determine whether the repeated dishonor of a check drawn
against a well-funded account but bearing the account number of
another depositor with the same name and surname as the drawer
would entitle the drawer to compensatory and moral damages and
to attorneys fees.
The antecedent facts are as follows:
Sometime in February 1984, Isagani C. Villanueva (hereafter
VILLANUEVA) opened a savings account and a current account
with Citytrust Banking Corporation (hereafter the BANK), which
were assigned account numbers 1-033-02337-1 and 33-00977-5,
respectively, with an automatic transfer arrangement.
On 21 May 1986, VILLANUEVA deposited some money in his
savings account with the BANKs Legaspi Village Branch in Makati,
Metro Manila. Realizing that he had run out of blank checks,
VILLANUEVA requested a new checkbook from one of the BANKs
customer service representatives. He then filled up a checkbook
requisition slip with the obligatory particulars, except for his
current account number which he could not remember. He
expressed his predicament to a lady customer service
representative of the BANK, who in turn assured him that she could
supply the information from the BANKs account records. After
signing the requisition slip, he gave it to her.[1]
Pia Rempillo, another customer service representative of the
BANK, saw VILLANUEVAs checkbook requisition slip. She took it
and proceeded to check the BANKs checkbook register which
contained all the names and account numbers of the BANKs clients
who were issued checkbooks. Upon seeing the name Isagani
Villanueva -- Account No. 33-00446-3 in the checkbook register,
Rempillo copied the aforesaid account number on the space
intended for it in VILLANUEVAs requisition slip.[2]
On 17 June 1986, VILLANUEVA received from the BANK his
requested checkbook. On the same day, he immediately signed
Check No. 396701 bearing the amount of P50,000 payable to the
order of Kingly Commodities Traders and Multi Resources, Inc.
(hereafter Kingly Commodities). VILLANUEVA thereafter delivered
the check to Helen Chu, his investment consultant at Kingly
Commodities, with his express instruction to use said check in
placing a trading order at Kingly Commodities future trading
business as soon as a favorable opportunity presented itself.[3]
Two days later, or on 19 June 1986, VILLANUEVA received a
call from Helen Chu, informing him that she had already placed a
trading order in his behalf and delivered the check to Kingly
Commodities. The check was deposited with the China Banking
Corporation. The next day, he deposited P31,600 in cash to his
However, on 23 June 1986, VILLANUEVAs Check No. 396701
was dishonored due to insufficiency of funds and disparity in the
signature. VILLANUEVA called Kingly Commodities and explained
that there was a mistake in the dishonor of the check because he
had sufficient funds. Forthwith on the same day, VILLANUEVA
called up the BANKs Legaspi Village Branch Operations Manager,
Maritess Gamboa, and inquired about the dishonor of his well-
funded check. Gamboa promised to look into the matter and
instructed VILLANUEVA to advise his payee, Kingly Commodities,
to re-deposit the check. Gamboa assured VILLANUEVA that the
check would be honored after the sufficiency of the funds was
ascertained.[5]
On 26 June 1986 at about 4:00 p.m., VILLANUEVA learned
that his check was again dishonored due to insufficiency of funds
and a stop- payment order he allegedly issued. Dismayed by the
turn of events, VILLANUEVA called up the BANK and inquired from
Gamboa the reason for the dishonor of his well-funded check and
the alleged stop-payment order which he never issued. Gamboa
promised to investigate the matter and to call VILLANUEVA in
fifteen (15) minutes.[6] In the meantime, she advised VILLANUEVA
to re-deposit the check.
VILLANUEVA then requested Lawrence Chin of Kingly
Commodities to give him until 5:30 p.m. that same day to make
good his P50,000 check. He then proceeded to the BANKs Legaspi
Village Branch Office, together with his investment consultant and
his trading partner, to personally inquire into the matter. They were
met by Marilou Genuino, the BANKs Branch Manager. There he
complained that his trading order was rejected because of the
dishonor of the check and that Kingly Commodities threatened to
close his trading account unless his check payment would be made
good before 5:30 p.m. that day. After making the necessary
investigation, Genuino related to VILLANUEVA that the reason for
the dishonor of the check was that the account number assigned
to his new checkbook was the account number of another
depositor also named Isagani Villanueva but with a different
middle initial.[7]
To resolve the matter, Genuino promised to send to Kingly
Commodities a managers check for P50,000 before 5:30 p.m., the
deadline given to VILLANUEVA. She also personally called Kingly
Commodities and explained the reason for the dishonor of the
check.[8]
On 30 June 1986, VILLANUEVA sent a letter[9] to the BANK
addressed to the President, Jose Facundo, demanding
indemnification for alleged losses and damages suffered by him as
a result of the dishonor of his well-funded check. He demanded
the amount of P70,000 as indemnification for actual damages in
the form of lost profits and P2 Million for moral and other
damages.
On 10 July 1986, in answer to VILLANUEVAs letter, Gregorio
Anonas III, the BANKs Senior Vice-President, apologized for the
unfortunate oversight, but reminded VILLANUEVA that the
dishonor of his check was due to his failure to state his current
account number in his requisition slip. Anonas further stated that
as soon as the mistake was discovered, the BANK promptly sent a
managers check to Kingly Commodities before 5:30 p.m. on 26
June 1986 to avoid any damage the dishonor of the check might
have caused.[10]
Failing to obtain from the BANK a favorable action on his
demand for indemnification, VILLANUEVA filed on 27 August 1986
a complaint for damages based on breach of contract and/or
quasi-delict before the Regional Trial Court of Makati City. The
case was docketed as Civil Case No. 14749 and was raffled to
Branch 63 thereof.
VILLANUEVA alleged in his complaint that the BANK
breached its contractual obligation to him as a depositor because
of its repeated dishonor of his valid and well-funded check. The
breach arose from the BANKs gross negligence and culpable
recklessness in supplying the wrong account number. As a
consequence, he suffered and sustained (1) actual damages
BANKING for MT Page 1 of 32
consisting of loss of profits in the amount of at least P240,000, for
he was not allowed to trade by Kingly Commodities; and (2) P2
Million as moral damages because of the intolerable physical
inconvenience, discomfort, extreme humiliation, indignities, etc.,
that he had borne before his peers and colleagues in the firm, his
trading partners, and the officers of Kingly Commodities. He
prayed for an additional award of P500,000 for exemplary
damages, attorneys fees, litigation expenses and costs of the
suit.[11]
In its answer, the BANK alleged that VILLANUEVA suffered no
actionable injury, much less damages, considering his blatant
irresponsibility in not remembering his current account number
and in failing to bring his checkbook re-order slip form on which
his account number was inscribed when he requested a new set of
checks. His negligence in verifying the account number of the new
set of checks issued to him also contributed to the dishonor of his
check. The BANK claimed that it acted in good faith when it twice
dishonored the check. It further asserted that VILLANUEVAs
negligence was the proximate cause of his self-proclaimed injury;
and the alleged losses and damages could not likewise be deemed
the natural and probable consequences of the BANKs breach of
obligation, had there been any.Finally, it claimed that VILLANUEVA
acted with malice in filing the case, and interposed counterclaims
of P500,000 as exemplary damages; P250,000 as attorneys fees;
and actual damages as may be determined by the court.[12]
After due proceedings, the trial court rendered on 3 July
1992 a decision[13] dismissing the complaint and the compulsory
counterclaim for lack of merit. To the trial court, the basic issue was
whether it was VILLANUEVAs or the BANKs negligence which was
the proximate cause of the formers alleged injury. After an
evaluation of the respective allegations and evidence of the
parties, the trial court found that VILLANUEVAs negligence set the
chain of events which resulted in his alleged losses and
damages. His negligence consisted in his failure to (a) indicate his
current account number when he filled up his requisition slip for a
new set of checks; (b) remember his account number; (c) bring the
used checkbook to which was attached the pre-order requisition
slip on which the account number was pre-indicated; (d) give the
requisition slip to the care and custody of a BANK officer or
employee instead of leaving the requisition slip on top of one of
the tables of the BANK; and (e) verify the account number of the
new set of checks when it was delivered to him. These omissions
directly resulted in the dishonor of his check drawn from an
account bearing the account number of another BANK client
whose name and surname were similar to his. VILLANUEVA then
must bear the consequent damages and losses he allegedly
suffered.
The trial court conceded, however, that the BANK was
negligent when it failed to supply VILLANUEVAs correct account
number despite its promise to do so; but its negligence was merely
contributory, which would have reduced the damages recoverable
by VILLANUEVA had the latter proved his claims for actual, moral
and exemplary damages, and attorneys fees.
Likewise, the trial court doubted that VILLANUEVA sustained
actual damages in the amount of P240,000 due to loss of profits as
averred in the complaint considering that his initial claim against
the BANK for actual loss was merely P70, 000[14] and the evidence
presented in support thereof was hearsay, unreliable and not the
best evidence.
VILLANUEVA appealed to the Court of Appeals. The appeal
was docketed as CA-G.R. CV No. 40931.
In his appeal, VILLANUEVA maintained that the BANK was
guilty of gross or culpable negligence amounting to bad faith
when its customer service representative furnished an erroneous
account number. He further contended that the same was the
proximate cause of the repeated dishonor of his check. He should,
therefore, be entitled to an award of actual, moral and exemplary
damages, including attorneys fees and costs of the suit.
The Court of Appeals, in its decision of 2 February
1999,[15] ruled that when the BANK voluntarily processed the
requisition slip without the requisite account number being
supplied by the applicant, it in effect took upon itself the
obligation to supply the correct account number. Thus, when the
new checkbook was released to VILLANUEVA on 17 June 1986, the
BANK was deemed to have waived any defect in the requisition slip
and estopped from putting the blame on VILLANUEVAs failure to
indicate his account number. VILLANUEVA had every right to
assume that everything was in order in his application for a new
checkbook; for, after all, he was banking with a world class
universal bank. The banking industry is imbued with public interest
and is mandated by law to serve its clients with extraordinary care
and diligence.
The Court of Appeals also considered the BANKs voluntary
processing of the requisition slip as the cause which in the natural
and continuous sequence, unbroken by any efficient intervening
cause, produced the injury and without which the result would not
have occurred.[16] However, although it conceded that the BANKs
negligence was not attended with malice and bad faith, it
nonetheless awarded moral damages in the amount of P100,000. It
also awarded attorneys fees in the amount of P50,000, since
VILLANUEVA was compelled to incur expenses to protect his
interests by reason of the unjustified act or omission of the
BANK. However, it rejected VILLANUEVAs claim for compensatory
damages and affirmed the trial courts finding thereon.
Upon the denial[17] of their respective motions for
reconsideration, both VILLANUEVA and the BANK appealed to us
by way of petition for review.
In its petition, the BANK ascribes to the Court of Appeals as
reversible errors its (1) reversal of the court a quos decision; (2)
declaration that the proximate and efficient cause of the injury
allegedly suffered by VILLANUEVA was the BANKs processing of
the checkbook and assigning an erroneous account number, and
not the negligent act of VILLANUEVA in leaving the checkbook
requisition slip on top of one of the desks with the account
number entry blank; and (3) award of moral damages and
attorneys fees despite the absence of a finding of bad faith on the
part of the BANK.
In his petition, VILLANUEVA asserts that the Court of Appeals
erred in holding that his actual losses in the amount of P234,059.04
was not sufficiently proved with reasonable certainty. Had his fully-
funded check not been dishonored twice, his four trading orders
with Kingly Commodities consisting of two (2) open sell positions
on 17 and 18 of June 1986 and two (2) settle buy orders on 26
June 1986 would have earned him profits in the amount he
claimed. He emphatically maintains that the loss had been
satisfactorily proved by the testimony of Helen Chu, his investment
consultant. Ms. Chus testimony was not controverted; hence, it
should have been considered and admitted as factually
true. Considering that his claim for actual damages has been
adequately established and that the BANK committed gross
negligence amounting to bad faith, his concomitant demand for
exemplary damages should likewise be awarded.
The issue of whether VILLANUEVA suffered actual or
compensatory damages in the form of loss of profits is
factual. Both the Court of Appeals and the trial court have
ascertained that VILLANUEVA was unable to prove his demand for
compensatory damages arising from loss. His evidence thereon
was found inadequate, uncorroborated, speculative, hearsay and
not the best evidence. Basic is the jurisprudential principle that in
determining actual damages, the court cannot rely on mere
assertions, speculations, conjectures or guesswork but must
depend on competent proof and on the best obtainable evidence
of the actual amount of the loss.[18] Actual damages cannot be
presumed but must be duly proved with reasonable certainty.[19]
It must also be stressed that the unanimity on the factual
ascertainment on this point by the trial court and the Court of
Appeals bars us from supplanting their finding and substituting it
with our own assessment. Well-entrenched in our jurisprudence is
the doctrine that the factual determinations of the lower courts are
conclusive and binding upon appellate courts and hence should
not be disturbed. None of the recognized exceptions to said
principle exists in this case to warrant a reexamination of such
BANKING for MT Page 2 of 32
finding. Besides, our jurisdiction in cases brought before us from SO ORDERED.
the Court of Appeals is limited to the review of errors of law.[20]

Nonetheless, is VILLANUEVA entitled to the moral damages

and attorneys fees granted by the Court of Appeals?
Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury.[21] Although
incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendants
wrongful act or omission.[22] Thus, case law establishes the
requisites for the award of moral damages, viz: (1) there must be
an injury, whether physical, mental or psychological, clearly
sustained by the claimant; (2) there must be a culpable act or
omission factually established; (3) the wrongful act or omission of
the defendant is the proximate cause of the injury sustained by the
claimant; and (4) the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code.[23]
It is beyond cavil that VILLANUEVA had sufficient funds for
the check. Had his account number been correct, the check would
not have been dishonored. Hence, we can say that VILLANUEVAs
injury arose from the dishonor of his well-funded check. We have
already ruled that the dishonor of the check does not entitle him
to compensatory damages. But, could the dishonor result in his
alleged intolerable physical inconvenience and discomfort, extreme
humiliation, indignities, etc, which he had borne before his peers,
trading partners and officers of Kingly Commodities? True, we find
that under the circumstances of this case, VILLANUEVA might have
suffered some form of inconvenience and discomfort as a result of
the dishonor of his check. However, the same could not have been
so grave or intolerable as he attempts to portray or impress upon
us.
Further, it is clear from the records that the BANK was able to
remedy the caveat of Kingly Commodities to VILLANUEVA that his
trading account would be closed at 5:30 p.m. on 26 June 1986. The
BANK was able to issue a managers check in favor of Kingly
Commodities before the deadline. It was able to likewise explain to
Kingly Commodities the circumstances surrounding the
unfortunate situation. Verily, the alleged embarrassment or
inconvenience caused to VILLANUEVA as a result of the incident
was timely and adequately contained, corrected, mitigated, if not
entirely eradicated. VILLANUEVA, thus, failed to support his claim
for moral damages. In short, none of the circumstances mentioned
in Article 2219 of the Civil Code exists to sanction the award for
moral damages.
The award of attorneys fees should likewise be deleted. The
general rule is that attorneys fees cannot be recovered as part of
damages because of the policy that no premium should be placed
on the right to litigate. They are not to be awarded every time a
party wins a suit. The power of the court to award attorneys fees
under Article 2208 of the Civil Code demands factual, legal and
equitable justification.Even when a claimant is compelled to litigate
with third persons or to incur expenses to protect his rights, still
attorneys fees may not be awarded where there is no sufficient
showing of bad faith in the parties persistence of a case other than
an erroneous conviction of the righteousness of his cause.[24]
In view of the foregoing discussion, we need not deliberate
on the dispute as to whether it was the BANKs or VILLANUEVAs
negligence which was the proximate cause of the latters injury
because, in the first place, he did not sustain any compensable
injury. If any damage had been suffered at all, it could be
equivalent to damnum absque injuria, i.e., damage without injury
or damage or injury inflicted without injustice, or loss or damage
without violation of a legal right, or a wrong done to a man for
which the law provides no remedy.[25]
WHEREFORE, the decision of the Court of Appeals in CA-G.R.
CV No. 40931 is hereby REVERSED, and the judgment of the
Regional Trial Court of Makati City, Branch 63, in Civil Case No.
14749 dismissing the complaint and the counterclaim is hereby
REINSTATED.
FIRST DIVISION
[G.R. No. 112392. February 29, 2000]
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF
APPEALS and BENJAMIN C. NAPIZA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the Decision[1] of the
Court of Appeals in CA-G.R. CV No. 37392 affirming in toto that of
the Regional Trial Court of Makati, Branch 139,[2] which dismissed
the complaint filed by petitioner Bank of the Philippine Islands
against private respondent Benjamin C. Napiza for sum of
money. Sdaad
On September 3, 1987, private respondent deposited in Foreign
Currency Deposit Unit (FCDU) Savings Account No. 028-
187[3] which he maintained in petitioner banks Buendia Avenue
Extension Branch, Continental Bank Managers Check No.
00014757[4] dated August 17, 1984, payable to "cash" in the
amount of Two Thousand Five Hundred Dollars ($2,500.00) and
duly endorsed by private respondent on its dorsal side.[5] It appears
that the check belonged to a certain Henry Chan who went to the
office of private respondent and requested him to deposit the
check in his dollar account by way of accommodation and for the
purpose of clearing the same. Private respondent acceded, and
agreed to deliver to Chan a signed blank withdrawal slip, with the
understanding that as soon as the check is cleared, both of them
would go to the bank to withdraw the amount of the check upon
private respondents presentation to the bank of his passbook.
Using the blank withdrawal slip given by private respondent to
Chan, on October 23, 1984, one Ruben Gayon, Jr. was able to
withdraw the amount of $2,541.67 from FCDU Savings Account No.
028-187. Notably, the withdrawal slip shows that the amount was
payable to Ramon A. de Guzman and Agnes C. de Guzman and
was duly initialed by the branch assistant manager, Teresita
Lindo.[6]
On November 20, 1984, petitioner received communication from
the Wells Fargo Bank International of New York that the said check
deposited by private respondent was a counterfeit check[7] because
it was "not of the type or style of checks issued by Continental
Bank International."[8] Consequently, Mr. Ariel Reyes, the manager
of petitioners Buendia Avenue Extension Branch, instructed one of
its employees, Benjamin D. Napiza IV, who is private respondents
son, to inform his father that the check bounced.[9] Reyes himself
sent a telegram to private respondent regarding the dishonor of
the check. In turn, private respondents son wrote to Reyes stating
that the check had been assigned "for encashment" to Ramon A.
de Guzman and/or Agnes C. de Guzman after it shall have been
cleared upon instruction of Chan. He also said that upon learning
of the dishonor of the check, his father immediately tried to
contact Chan but the latter was out of town.[10]
Private respondents son undertook to return the amount of
$2,500.00 to petitioner bank. On December 18, 1984, Reyes
reminded private respondent of his sons promise and warned that
should he fail to return that amount within seven (7) days, the
matter would be referred to the banks lawyers for appropriate
action to protect the banks interest.[11] This was followed by a letter
of the banks lawyer dated April 8, 1985 demanding the return of
the $2,500.00.[12]

No costs.

BANKING for MT Page 3 of 32

In reply, private respondent wrote petitioners counsel on April 20,
1985[13] stating that he deposited the check "for clearing purposes"
only to accommodate Chan. He added:
"Further, please take notice that said check was
deposited on September 3, 1984 and
withdrawn on October 23, 1984, or a total
period of fifty (50) days had elapsed at the time
of withdrawal. Also, it may not be amiss to
mention here that I merely signed an authority
to withdraw said deposit subject to its clearing,
the reason why the transaction is not reflected
in the passbook of the account. Besides, I did
not receive its proceeds as may be gleaned
from the withdrawal slip under the captioned
signature of recipient.
If at all, my obligation on the transaction is
moral in nature, which (sic) I have been and is
(sic) still exerting utmost and maximum efforts
to collect from Mr. Henry Chan who is directly
liable under the circumstances. Scsdaad
xxx......xxx......xxx."
On August 12, 1986, petitioner filed a complaint against private
respondent, praying for the return of the amount of $2,500.00 or
the prevailing peso equivalent plus legal interest from date of
demand to date of full payment, a sum equivalent to 20% of the
total amount due as attorney's fees, and litigation and/or costs of
suit.
Private respondent filed his answer, admitting that he indeed
signed a "blank" withdrawal slip with the understanding that the
amount deposited would be withdrawn only after the check in
question has been cleared. He likewise alleged that he instructed
the party to whom he issued the signed blank withdrawal slip to
return it to him after the bank drafts clearance so that he could
lend that party his passbook for the purpose of withdrawing the
amount of $2,500.00. However, without his knowledge, said party
was able to withdraw the amount of $2,541.67 from his dollar
savings account through collusion with one of petitioners
employees. Private respondent added that he had "given the
Plaintiff fifty one (51) days with which to clear the bank draft in
question." Petitioner should have disallowed the withdrawal
because his passbook was not presented. He claimed that
petitioner had no one to blame except itself "for being grossly
negligent;" in fact, it had allegedly admitted having paid the
amount in the check "by mistake" x x x "if not altogether due to
collusion and/or bad faith on the part of (its) employees." Charging
petitioner with "apparent ignorance of routine bank procedures,"
by way of counterclaim, private respondent prayed for moral
damages of P100,000.00, exemplary damages of P50,000.00 and
attorneys fees of 30% of whatever amount that would be awarded
to him plus an honorarium of P500.00 per appearance in court.
Private respondent also filed a motion for admission of a third
party complaint against Chan. He alleged that "thru strategem
and/or manipulation," Chan was able to withdraw the amount of
$2,500.00 even without private respondents passbook. Thus,
private respondent prayed that third party defendant Chan be
made to refund to him the amount withdrawn and to pay
attorneys fees of P5,000.00 plus P300.00 honorarium per
appearance.
Petitioner filed a comment on the motion for leave of court to
admit the third party complaint, wherein it asserted that per
paragraph 2 of the Rules and Regulations governing BPI savings
accounts, private respondent alone was liable "for the value of the
credit given on account of the draft or check deposited." It
contended that private respondent was estopped from disclaiming
liability because he himself authorized the withdrawal of the
amount by signing the withdrawal slip. Petitioner prayed for the
denial of the said motion so as not to unduly delay the disposition
of the main case asserting that private respondents claim could be
ventilated in another case.
Private respondent replied that for the parties to obtain complete
relief and to avoid multiplicity of suits, the motion to admit third
party complaint should be granted. Meanwhile, the trial court
issued orders on August 25, 1987 and October 28, 1987 directing
private respondent to actively participate in locating Chan. After
private respondent failed to comply, the trial court, on May 18,
1988, dismissed the third party complaint without prejudice.
On November 4, 1991, a decision was rendered dismissing the
complaint. The lower court held that petitioner could not hold
private respondent liable based on the checks face value alone. To
so hold him liable "would render inutile the requirement of
clearance from the drawee bank before the value of a particular
foreign check or draft can be credited to the account of a
depositor making such deposit." The lower court further held that
"it was incumbent upon the petitioner to credit the value of the
check in question to the account of the private respondent only
upon receipt of the notice of final payment and should not have
authorized the withdrawal from the latters account of the value or
proceeds of the check." Having admitted that it committed a
"mistake" in not waiting for the clearance of the check before
authorizing the withdrawal of its value or proceeds, petitioner
should suffer the resultant loss. Supremax
On appeal, the Court of Appeals affirmed the lower courts
decision. The appellate court held that petitioner committed "clear
gross negligence" in allowing Ruben Gayon, Jr. to withdraw the
money without presenting private respondents passbook and,
before the check was cleared and in crediting the amount
indicated therein in private respondents account. It stressed that
the mere deposit of a check in private respondents account did not
mean that the check was already private respondents property. The
check still had to be cleared and its proceeds can only be
withdrawn upon presentation of a passbook in accordance with
the banks rules and regulations. Furthermore, petitioners
contention that private respondent warranted the checks
genuineness by endorsing it is untenable for it would render
useless the clearance requirement. Likewise, the requirement of
presentation of a passbook to ascertain the propriety of the
accounting reflected would be a meaningless exercise. After all,
these requirements are designed to protect the bank from
deception or fraud.
The Court of Appeals cited the case of Roman Catholic Bishop of
Malolos, Inc. v. IAC,[14] where this Court stated that a personal check
is not legal tender or money, and held that the check deposited in
this case must be cleared before its value could be properly
transferred to private respondent's account.
Without filing a motion for the reconsideration of the Court of
Appeals Decision, petitioner filed this petition for review on
certiorari, raising the following issues:
1.......WHETHER OR NOT RESPONDENT NAPIZA
IS LIABLE UNDER HIS WARRANTIES AS A
GENERAL INDORSER.
2.......WHETHER OR NOT A CONTRACT OF
AGENCY WAS CREATED BETWEEN
RESPONDENT NAPIZA AND RUBEN GAYON.
3.......WHETHER OR NOT PETITIONER WAS
GROSSLY NEGLIGENT IN ALLOWING THE
WITHDRAWAL.
Petitioner claims that private respondent, having affixed his
signature at the dorsal side of the check, should be liable for the
amount stated therein in accordance with the following provision
of the Negotiable Instruments Law (Act No. 2031):
BANKING for MT Page 4 of 32
 "SEC. 66. Liability of general indorser. Every
indorser who indorses without qualification,
warrants to all subsequent holders in due
course
(a)......The matters and things mentioned in
subdivisions (a), (b), and (c) of the next
preceding section; and
(b)......That the instrument is at the time of his
indorsement, valid and subsisting.
And, in addition, he engages that on due
presentment, it shall be accepted or paid, or
both, as the case may be, according to its tenor,
and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will
pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to
pay it."
Section 65, on the other hand, provides for the following
warranties of a person negotiating an instrument by delivery or by
qualified indorsement: (a) that the instrument is genuine and in all
respects what it purports to be; (b) that he has a good title to it,
and (c) that all prior parties had capacity to contract.[15] In People v.
Maniego,[16] this Court described the liabilities of an indorser as
follows: Juris
"Appellants contention that as mere indorser,
she may not be liable on account of the
dishonor of the checks indorsed by her, is
likewise untenable. Under the law, the holder or
last indorsee of a negotiable instrument has the
right to enforce payment of the instrument for
the full amount thereof against all parties liable
thereon. Among the parties liable thereon is an
indorser of the instrument, i.e., a person placing
his signature upon an instrument otherwise
than as a maker, drawer or acceptor * * unless
he clearly indicated by appropriate words his
intention to be bound in some other capacity.
Such an indorser who indorses without
qualification, inter alia engages that on due
presentment, * * (the instrument) shall be
accepted or paid, or both, as the case may be,
according to its tenor, and that if it be
dishonored, and the necessary proceedings on
dishonor be duly taken, he will pay the amount
thereof to the holder, or any subsequent
indorser who may be compelled to pay it.
Maniego may also be deemed an
accommodation party in the light of the facts,
i.e., a person who has signed the instrument as
maker, drawer, acceptor, or indorser, without
receiving value therefor, and for the purpose of
lending his name to some other person. As
such, she is under the law liable on the
instrument to a holder for value,
notwithstanding such holder at the time of
taking the instrument knew * * (her) to be only
an accommodation party, although she has the
right, after paying the holder, to obtain
reimbursement from the party accommodated,
since the relation between them is in effect that
of principal and surety, the accommodation
party being the surety."
It is thus clear that ordinarily private respondent may be held liable
as an indorser of the check or even as an accommodation
party.[17] However, to hold private respondent liable for the amount
of the check he deposited by the strict application of the law and
without considering the attending circumstances in the case would
result in an injustice and in the erosion of the public trust in the
banking system. The interest of justice thus demands looking into
the events that led to the encashment of the check.
Petitioner asserts that by signing the withdrawal slip, private
respondent "presented the opportunity for the withdrawal of the
amount in question." Petitioner relied "on the genuine signature
on the withdrawal slip, the personality of private respondents son
and the lapse of more than fifty (50) days from date of deposit of
the Continental Bank draft, without the same being returned
yet."[18] We hold, however, that the propriety of the withdrawal
should be gauged by compliance with the rules thereon that both
petitioner bank and its depositors are duty-bound to observe.
In the passbook that petitioner issued to private respondent, the
following rules on withdrawal of deposits appear:
"4.......Withdrawals must be made by the
depositor personally but in some exceptional
circumstances, the Bank may allow withdrawal
by another upon the depositors written
authority duly authenticated; and neither a
deposit nor a withdrawal will be permitted
except upon the presentation of the depositors
savings passbook, in which the amount
deposited withdrawn shall be entered only by
the Bank.
5.......Withdrawals may be made by draft, mail
or telegraphic transfer in currency of the
account at the request of the depositor in
writing on the withdrawal slip or by
authenticated cable. Such request must indicate
the name of the payee/s, amount and the place
where the funds are to be paid. Any stamp,
transmission and other charges related to such
withdrawals shall be for the account of the
depositor and shall be paid by him/her upon
demand. Withdrawals may also be made in the
form of travellers checks and in pesos.
Withdrawals in the form of notes/bills are
allowed subject however, to their (availability).
6.......Deposits shall not be subject to
withdrawal by check, and may be withdrawn
only in the manner above provided, upon
presentation of the depositors savings
passbook and with the withdrawal form
supplied by the Bank at the counter."[19] Scjuris
Under these rules, to be able to withdraw from the savings account
deposit under the Philippine foreign currency deposit system, two
requisites must be presented to petitioner bank by the person
withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b)
the depositors passbook. Private respondent admits that he signed
a blank withdrawal slip ostensibly in violation of Rule No. 6
requiring that the request for withdrawal must name the payee, the
amount to be withdrawn and the place where such withdrawal
should be made. That the withdrawal slip was in fact a blank one
with only private respondents two signatures affixed on the proper
spaces is buttressed by petitioners allegation in the instant petition
that had private respondent indicated therein the person
authorized to receive the money, then Ruben Gayon, Jr. could not
have withdrawn any amount. Petitioner contends that "(i)n failing
to do so (i.e., naming his authorized agent), he practically
authorized any possessor thereof to write any amount and to
collect the same."[20]
Such contention would have been valid if not for the fact that the
withdrawal slip itself indicates a special instruction that the amount
is payable to "Ramon A. de Guzman &/or Agnes C. de Guzman."
Such being the case, petitioners personnel should have been duly
warned that Gayon, who was also employed in petitioners Buendia
Ave. Extension branch,[21] was not the proper payee of the
proceeds of the check. Otherwise, either Ramon or Agnes de
BANKING for MT Page 5 of 32
Guzman should have issued another authority to Gayon for such
withdrawal. Of course, at the dorsal side of the withdrawal slip is an
"authority to withdraw" naming Gayon the person who can
withdraw the amount indicated in the check. Private respondent
does not deny having signed such authority. However, considering
petitioners clear admission that the withdrawal slip was a blank
one except for private respondents signature, the unavoidable
conclusion is that the typewritten name of "Ruben C. Gayon, Jr."
was intercalated and thereafter it was signed by Gayon or whoever
was allowed by petitioner to withdraw the amount. Under these
facts, there could not have been a principal-agent relationship
between private respondent and Gayon so as to render the former
liable for the amount withdrawn.
Moreover, the withdrawal slip contains a boxed warning that
states: "This receipt must be signed and presented with the
corresponding foreign currency savings passbook by the depositor
in person. For withdrawals thru a representative, depositor should
accomplish the authority at the back." The requirement of
presentation of the passbook when withdrawing an amount cannot
be given mere lip service even though the person making the
withdrawal is authorized by the depositor to do so. This is clear
from Rule No. 6 set out by petitioner so that, for the protection of
the banks interest and as a reminder to the depositor, the
withdrawal shall be entered in the depositors passbook. The fact
that private respondents passbook was not presented during the
withdrawal is evidenced by the entries therein showing that the
last transaction that he made with the bank was on September 3,
1984, the date he deposited the controversial check in the amount
of $2,500.00.[22]
In allowing the withdrawal, petitioner likewise overlooked another
rule that is printed in the passbook. Thus:
"2.......All deposits will be received as current
funds and will be repaid in the same manner;
provided, however, that deposits
of drafts, checks, money orders, etc. will be
accepted as subject to collection only and
credited to the account only upon receipt of the
notice of final payment. Collection charges by
the Banks foreign correspondent in effecting
such collection shall be for the account of the
depositor. If the account has sufficient balance,
the collection shall be debited by the Bank
against the account. If, for any reason, the
proceeds of the deposited checks, drafts,
money orders, etc., cannot be collected or if the
Bank is required to return such proceeds, the
provisional entry therefor made by the Bank in
the savings passbook and its records shall be
deemed automatically cancelled regardless of
the time that has elapsed, and whether or not
the defective items can be returned to the
depositor; and the Bank is hereby authorized to
execute immediately the necessary corrections,
amendments or changes in its record, as well as
on the savings passbook at the first opportunity
to reflect such cancellation." (Italics and
underlining supplied.) Jurissc
As correctly held by the Court of Appeals, in depositing the check
in his name, private respondent did not become the outright
owner of the amount stated therein. Under the above rule, by
depositing the check with petitioner, private respondent was, in a
way, merely designating petitioner as the collecting bank. This is in
consonance with the rule that a negotiable instrument, such as a
check, whether a managers check or ordinary check, is not legal
tender.[23] As such, after receiving the deposit, under its own rules,
petitioner shall credit the amount in private respondents account
or infuse value thereon only after the drawee bank shall have paid
the amount of the check or the check has been cleared for deposit.
Again, this is in accordance with ordinary banking practices and
with this Courts pronouncement that "the collecting bank or last
endorser generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements considering
that the act of presenting the check for payment to the drawee is
an assertion that the party making the presentment has done its
duty to ascertain the genuineness of the endorsements."[24] The
rule finds more meaning in this case where the check involved is
drawn on a foreign bank and therefore collection is more difficult
than when the drawee bank is a local one even though the check
in question is a managers check.[25] Misjuris
In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a
commercial bank in Madrid, Spain, paid the amounts represented
in three (3) checks to Virginia Boncan, the finance officer of the
Philippine Embassy in Madrid. The bank did so without previously
clearing the checks with the drawee bank, the Philippine National
Bank in New York, on account of the "special treatment" that
Boncan received from the personnel of Banco Atlanticos foreign
department. The Court held that the encashment of the checks
without prior clearance is "contrary to normal or ordinary banking
practice specially so where the drawee bank is a foreign bank and
the amounts involved were large." Accordingly, the Court approved
the Auditor Generals denial of Banco Atlanticos claim for payment
of the value of the checks that was withdrawn by Boncan.
Said ruling brings to light the fact that the banking business is
affected with public interest. By the nature of its functions, a bank
is under obligation to treat the accounts of its depositors "with
meticulous care, always having in mind the fiduciary nature of their
relationship."[27] As such, in dealing with its depositors, a bank
should exercise its functions not only with the diligence of a good
father of a family but it should do so with the highest degree of
care.[28]
In the case at bar, petitioner, in allowing the withdrawal of private
respondents deposit, failed to exercise the diligence of a good
father of a family. In total disregard of its own rules, petitioners
personnel negligently handled private respondents account to
petitioners detriment. As this Court once said on this matter:
"Negligence is the omission to do something
which a reasonable man, guided by those
considerations which ordinarily regulate the
conduct of human affairs, would do, or the
doing of something which a prudent and
reasonable man would do. The seventy-eight
(78)-year-old, yet still relevant, case of Picart v.
Smith, provides the test by which to determine
the existence of negligence in a particular case
which may be stated as follows: Did the
defendant in doing the alleged negligent act
use that reasonable care and caution which an
ordinarily prudent person would have used in
the same situation? If not, then he is guilty of
negligence. The law here in effect adopts the
standard supposed to be supplied by the
imaginary conduct of the discreet pater-
familias of the Roman law. The existence of
negligence in a given case is not determined by
reference to the personal judgment of the actor
in the situation before him. The law considers
what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence
and prudence and determines liability by
that."[29]
Petitioner violated its own rules by allowing the withdrawal of an
amount that is definitely over and above the aggregate amount of
private respondents dollar deposits that had yet to be cleared. The
banks ledger on private respondents account shows that before he
deposited $2,500.00, private respondent had a balance of only
$750.00.[30] Upon private respondents deposit of $2,500.00 on
September 3, 1984, that amount was credited in his ledger as a
deposit resulting in the corresponding total balance of
$3,250.00.[31] On September 10, 1984, the amount of $600.00 and
the additional charges of $10.00 were indicated therein as
withdrawn thereby leaving a balance of $2,640.00. On September
BANKING for MT Page 6 of 32
30, 1984, an interest of $11.59 was reflected in the ledger and on
October 23, 1984, the amount of $2,541.67 was entered as
withdrawn with a balance of $109.92.[32] On November 19, 1984 the
word "hold" was written beside the balance of $109.92.[33] That
must have been the time when Reyes, petitioners branch manager,
was informed unofficially of the fact that the check deposited was
a counterfeit, but petitioners Buendia Ave. Extension Branch
received a copy of the communication thereon from Wells Fargo
Bank International in New York the following day, November 20,
1984.[34]According to Reyes, Wells Fargo Bank International
handled the clearing of checks drawn against U.S. banks that were
deposited with petitioner.[35] Jjlex
From these facts on record, it is at once apparent that petitioners
personnel allowed the withdrawal of an amount bigger than the
original deposit of $750.00 and the value of the check deposited in
the amount of $2,500.00 although they had not yet received notice
from the clearing bank in the United States on whether or not the
check was funded. Reyes contention that after the lapse of the 35-
day period the amount of a deposited check could be withdrawn
even in the absence of a clearance thereon, otherwise it could take
a long time before a depositor could make a withdrawal,[36] is
untenable. Said practice amounts to a disregard of the clearance
requirement of the banking system.
While it is true that private respondents having signed a blank
withdrawal slip set in motion the events that resulted in the
withdrawal and encashment of the counterfeit check, the
negligence of petitioners personnel was the proximate cause of the
loss that petitioner sustained. Proximate cause, which is
determined by a mixed consideration of logic, common sense,
policy and precedent, is "that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause,
produces the injury, and without which the result would not have
occurred."[37] The proximate cause of the withdrawal and eventual
loss of the amount of $2,500.00 on petitioners part was its
personnels negligence in allowing such withdrawal in disregard of
its own rules and the clearing requirement in the banking system.
In so doing, petitioner assumed the risk of incurring a loss on
account of a forged or counterfeit foreign check and hence, it
should suffer the resulting damage.
WHEREFORE, the petition for review on certiorari is DENIED. The
Decision of the Court of Appeals in CA-G.R. CV No. 37392 is
AFFIRMED.
SO ORDERED.
SECOND DIVISION
[G.R. No. 125536. March 16, 2000]
PRUDENTIAL BANK, petitioner, vs. COURT OF APPEALS and
LETICIA TUPASI-VALENZUELA joined by husband Francisco
Valenzuela, respondents. Ed-pm-is
DECISION
QUISUMBING, J.:
This appeal by certiorari under Rule 45 of the Rules of Court seeks
to annul and set aside the Decision dated January 31, 1996, and
the Resolution dated July 2, 1997, of the Court of Appeals in CA
G.R. CV No. 35532, which reversed the judgment of the Regional
Trial Court of Valenzuela, Metro Manila, Branch 171, in Civil Case
No. 2913-V-88, dismissing the private respondent's complaint for
damages.[1]
In setting aside the trial court's decision, the Court of Appeals
disposed as follows:
"WHEREFORE, the appealed decision is hereby
REVERSED and SET ASIDE and, another
rendered ordering the appellee bank to pay
appellant the sum of P100,000.00 by way of
moral damages; P50,000.00 by way of
exemplary damages, P50,000.00 for and as
attorney's fees; and to pay the costs. Jjs-c
SO ORDERED."[2]
The facts of the case on record are as follows:
Private respondent Leticia Tupasi-Valenzuela opened Savings
Account No. 5744 and Current Account No. 01016-3 in the
Valenzuela Branch of petitioner Prudential Bank, with automatic
transfer of funds from the savings account to the current account.
On June 1, 1988, herein private respondent deposited in her
savings account Check No. 666B (104561 of even date) the amount
of P35,271.60, drawn against the Philippine Commercial
International Bank (PCIB). Taking into account that deposit and a
series of withdrawals, private respondent as of June 21, 1988 had a
balance of P35,993.48 in her savings account and P776.93 in her
current account, or total deposits of P36,770.41, with petitioner. Sc-
jj
Thereafter, private respondent issued Prudential Bank Check No.
983395 in the amount of P11,500.00 post-dated June 20, 1988, in
favor of one Belen Legaspi. It was issued to Legaspi as payment for
jewelry which private respondent had purchased. Legaspi, who was
in jewelry trade, endorsed the check to one Philip Lhuillier, a
businessman also in the jewelry business. When Lhuillier deposited
the check in his account with the PCIB, Pasay Branch, it was
dishonored for being drawn against insufficient funds. Lhuillier's
secretary informed the secretary of Legaspi of the dishonor. The
latter told the former to redeposit the check. Legaspi's secretary
tried to contact private respondent but to no avail.
Upon her return from the province, private respondent was
surprised to learn of the dishonor of the check. She went to the
Valenzuela Branch of Prudential Bank on July 4, 1988, to inquire
why her check was dishonored. She approached one Albert
Angeles Reyes, the officer in charge of current account, and
requested him for the ledger of her current account. Private
respondent discovered a debit of P300.00 penalty for the dishonor
of her Prudential Check No. 983395. She asked why her check was
dishonored when there were sufficient funds in her account as
reflected in her passbook. Reyes told her that there was no need to
review the passbook because the bank ledger was the best proof
that she did not have sufficient funds. Then, he abruptly faced his
typewriter and started typing. S-jcj
Later, it was found out that the check in the amount of P35,271.60
deposited by private respondent on June 1, 1988, was credited in
her savings account only on June 24, 1988, or after a period of 23
days. Thus the P11,500.00 check was redeposited by Lhuillier on
June 24, 1988, and properly cleared on June 27, 1988.
Because of this incident, the bank tried to mollify private
respondent by explaining to Legaspi and Lhuillier that the bank
was at fault. Since this was not the first incident private respondent
had experienced with the bank, private respondent was unmoved
by the bank's apologies and she commenced the present suit for
damages before the RTC of Valenzuela.
After trial, the court rendered a decision on August 30, 1991,
dismissing the complaint of private respondent, as well as the
counterclaim filed by the defendant, now petitioner.
Undeterred, private respondent appealed to the Court of Appeals.
On January 31, 1996, respondent appellate court rendered a
decision in her favor, setting aside the trial court's decision and
ordering herein petitioner to pay private respondent the sum of
P100,000.00 by way of moral damages; P50,000.00 exemplary
BANKING for MT Page 7 of 32
damages; P50,000.00 for and as attorney's fees; and to pay the
costs.[3]
Petitioner filed a timely motion for reconsideration but it was
denied. Hence, this petition, raising the following issues:
I. WHETHER OR NOT THE RESPONDENT COURT
OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DEVIATING FROM
ESTABLISHED JURISPRUDENCE IN REVERSING
THE DISMISSAL JUDGMENT OF THE TRIAL
COURT AND INSTEAD AWARDED MORAL
DAMAGES, EXEMPLARY DAMAGES AND
ATTORNEY'S FEES. Supr-eme
II. WHETHER OR NOT THE RESPONDENT
COURT OF APPEALS ACTED IN GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHERE, EVEN IN THE ABSENCE
OF EVIDENCE AS FOUND BY THE TRIAL COURT,
AWARDED MORAL DAMAGES IN THE AMOUNT
OF P100,000.00.
III. WHETHER OR NOT THE RESPONDENT
COURT OF APPEALS ACTED IN GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION, WHERE, EVEN IN THE ABSENCE
OF EVIDENCE AS FOUND BY THE TRIAL COURT,
AWARDED P50,000.00 BY WAY OF EXEMPLARY
DAMAGES. Co-urt
IV. WHETHER OR NOT THE RESPONDENT
COURT OF APPEALS ACTED WITH GRAVE
ABUSE OF DISCRETION WHERE EVEN IN THE
ABSENCE OF EVIDENCE, AWARDED
ATTORNEY'S FEES.
Simply stated, the issue is whether the respondent court erred and
gravely abused its discretion in awarding moral and exemplary
damages and attorney's fees to be paid by petitioner to private
respondent.
Petitioner claims that generally the factual findings of the lower
courts are final and binding upon this Court. However, there are
exceptions to this rule. One is where the trial court and the Court
of Appeals had arrived at diverse factual findings.[4] Petitioner faults
the respondent court from deviating from the basic rule that
finding of facts by the trial court is entitled to great weight,
because the trial court had the opportunity to observe the
deportment of witness and the evaluation of evidence presented
during the trial. Petitioner contends that the appellate court
gravely abused its discretion when it awarded damages to the
plaintiff, even in the face of lack of evidence to prove such
damages, as found by the trial court.
Firstly, petitioner questions the award of moral damages. It claims
that private respondent did not suffer any damage upon the
dishonor of the check. Petitioner avers it acted in good faith. It was
an honest mistake on its part, according to petitioner, when
misposting of private respondent's deposit on June 1, 1988,
happened. Further, petitioner contends that private respondent
may not "claim" damages because the petitioner's manager and
other employee had profusely apologized to private respondent
for the error. They offered to make restitution and apology to the
payee of the check, Legaspi, as well as the alleged endorsee,
Lhuillier. Regrettably, it was private respondent who declined the
offer and allegedly said, that there was nothing more to it, and that
the matter had been put to rest.[5]Jle-xj
Admittedly, as found by both the respondent appellate court and
the trial court, petitioner bank had committed a mistake. It
misposted private respondent's check deposit to another account
and delayed the posting of the same to the proper account of the
private respondent. The mistake resulted to the dishonor of the
private respondent's check. The trial court found "that the
misposting of plaintiffs check deposit to another account and the
delayed posting of the same to the account of the plaintiff is a
clear proof of lack of supervision on the part of the defendant
bank."[6] Similarly, the appellate court also found that "while it may
be true that the bank's negligence in dishonoring the properly
funded check of appellant might not have been attended with
malice and bad faith, as appellee [bank] submits, nevertheless, it is
the result of lack of due care and caution expected of an employee
of a firm engaged in so sensitive and accurately demanding task as
banking."[7]
In Simex International (Manila), Inc, vs. Court of Appeals, 183 SCRA
360, 367 (1990), and Bank of Philippine Islands vs. IAC, et al.,
206 SCRA 408, 412-413 (1992), this Court had occasion to stress
the fiduciary nature of the relationship between a bank and its
depositors and the extent of diligence expected of the former in
handling the accounts entrusted to its care, thus: Lex-juris
"In every case, the depositor expects the bank
to treat his account with the utmost fidelity,
whether such account consists only of a few
hundred pesos or of millions. The bank must
record every single transaction accurately,
down to the last centavo, and as promptly as
possible. This has to be done if the account is
to reflect at any given time the amount of
money the depositor can dispose of as he sees
fit, confident that the bank will deliver it as and
to whomever he directs. A blunder on the part
of bank, such as the dishonor of a check
without good reason, can cause the depositor
not a little embarrassment if not also financial
loss and perhaps even civil and criminal
litigation.
The point is that as a business affected with
public interest and because of the nature of its
functions, the bank is under obligation to treat
the account of its depositors with meticulous
care, always having in mind the fiduciary nature
of their relationship. x x x"
In the recent case of Philippine National Bank vs. Court of
Appeals,[8] we held that "a bank is under obligation to treat the
accounts of its depositors with meticulous care whether such
account consists only of a few hundred pesos or of millions of
pesos. Responsibility arising from negligence in the performance
of every kind of obligation is demandable. While petitioner's
negligence in this case may not have been attended with malice
and bad faith, nevertheless, it caused serious anxiety,
embarrassment and humiliation". Hence we ruled that the
offended party in said case was entitled to recover reasonable
moral damages.
Even if malice or bad faith was not sufficiently proved in the instant
case, the fact remains that petitioner has committed a serious
mistake. It dishonored the check issued by the private respondent
who turned out to have sufficient funds with petitioner. The bank's
negligence was the result of lack of due care and caution required
of managers and employees of a firm engaged in so sensitive and
demanding business as banking. Accordingly, the award of moral
damages by the respondent Court of Appeals could not be said to
be in error nor in grave abuse of its discretion. Juri-smis
There is no hard-and-fast rule in the determination of what would
be a fair amount of moral damages since each case must be
governed by its own peculiar facts. The yardstick should be that it
is not palpably and scandalously excessive. In our view, the award
of P100,000.00 is reasonable, considering the reputation and social
standing of private respondent Leticia T. Valenzuela.[9]
BANKING for MT Page 8 of 32
The law allows the grant of exemplary damages by way of example
for the public good.[10] The public relies on the banks' sworn
profession of diligence and meticulousness in giving
irreproachable service. The level of meticulousness must be
maintained at all times by the banking sector. Hence, the Court of
Appeals did not err in awarding exemplary damages. In our view,
however, the reduced amount of P20,000.00 is more
appropriate. Jj-juris
The award of attorney's fees is also proper when exemplary
damages are awarded and since private respondent was compelled
to engage the services of a lawyer and incurred expenses to
protect her interest.[11] The standards in fixing attorney's fees are:
(1) the amount and the character of the services rendered; (2)
labor, time and trouble involved; (3) the nature and importance of
the litigation and business in which the services were rendered; (4)
the responsibility imposed; (5) the amount of money and the value
of the property affected by the controversy or involved in the
employment; (6) the skill and the experience called for in the
performance of the services; (7) the professional character and the
social standing of the attorney; (8) the results secured, it being a
recognized rule that an attorney may properly charge a much
larger fee when it is contingent than when it is not.[12] In this case,
all the aforementioned weighed, and considering that the amount
involved in the controversy is only P36,770.41, the total deposit of
private respondent which was misposted by the bank, we find the
award of respondent court of P50,000.00 for attorney's fees,
excessive and reduce the same to P30,000.00.
WHEREFORE, the assailed DECISION of the Court of Appeals is
hereby AFFIRMED, with MODIFICATION. The petitioner is ordered
to pay P100,000.00 by way of moral damages in favor of private
respondent Leticia T. Valenzuela. It is further ordered to pay her
exemplary damages in the amount of P20,000.00 and P30,000.00,
attorney's fees. Jksm
Costs against petitioner.
SO ORDERED.
SECOND DIVISION
G.R. No. 121413 January 29, 2001
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly
INSULAR BANK OF ASIA AND AMERICA),petitioner,
vs.
COURT OF APPEALS and FORD PHILIPPINES, INC. and
CITIBANK, N.A., respondents.
G.R. No. 121479 January 29, 2001
FORD PHILIPPINES, INC., petitioner-plaintiff,
vs.
COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, respondents.
G.R. No. 128604 January 29, 2001
FORD PHILIPPINES, INC., petitioner,
vs.
CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL
BANK and COURT OF APPEALS, respondents.
QUISUMBING, J.:
These consolidated petitions involve several fraudulently
negotiated checks.
The original actions a quo were instituted by Ford Philippines to
recover from the drawee bank, CITIBANK, N.A. (Citibank) and
collecting bank, Philippine Commercial International Bank
(PCIBank) [formerly Insular Bank of Asia and America], the value of
several checks payable to the Commissioner of Internal Revenue,
which were embezzled allegedly by an organized
syndicate.1wphi1.nt
G.R. Nos. 121413 and 121479 are twin petitions for review of the
March 27, 1995 Decision1 of the Court of Appeals in CA-G.R. CV
No. 25017, entitled "Ford Philippines, Inc. vs. Citibank, N.A. and
Insular Bank of Asia and America (now Philipppine Commercial
International Bank), and the August 8, 1995 Resolution,2 ordering
the collecting bank, Philippine Commercial International Bank, to
pay the amount of Citibank Check No. SN-04867.
In G.R. No. 128604, petitioner Ford Philippines assails the October
15, 1996 Decision3 of the Court of Appeals and its March 5, 1997
Resolution4 in CA-G.R. No. 28430 entitled "Ford Philippines, Inc. vs.
Citibank, N.A. and Philippine Commercial International Bank,"
affirming in toto the judgment of the trial court holding the
defendant drawee bank, Citibank, N.A., solely liable to pay the
amount of P12,163,298.10 as damages for the misapplied proceeds
of the plaintiff's Citibanl Check Numbers SN-10597 and 16508.
I. G.R. Nos. 121413 and 121479
The stipulated facts submitted by the parties as accepted by the
Court of Appeals are as follows:
"On October 19, 1977, the plaintiff Ford drew and issued
its Citibank Check No. SN-04867 in the amount of
P4,746,114.41, in favor of the Commissioner of Internal
Revenue as payment of plaintiff;s percentage or
manufacturer's sales taxes for the third quarter of 1977.
The aforesaid check was deposited with the degendant
IBAA (now PCIBank) and was subsequently cleared at the
Central Bank. Upon presentment with the defendant
Citibank, the proceeds of the check was paid to IBAA as
collecting or depository bank.
The proceeds of the same Citibank check of the plaintiff
was never paid to or received by the payee thereof, the
Commissioner of Internal Revenue.
As a consequence, upon demand of the Bureau and/or
Commissioner of Internal Revenue, the plaintiff was
compelled to make a second payment to the Bureau of
Internal Revenue of its percentage/manufacturers' sales
taxes for the third quarter of 1977 and that said second
payment of plaintiff in the amount of P4,746,114.41 was
duly received by the Bureau of Internal Revenue.
It is further admitted by defendant Citibank that during
the time of the transactions in question, plaintiff had
been maintaining a checking account with defendant
Citibank; that Citibank Check No. SN-04867 which was
drawn and issued by the plaintiff in favor of the
Commissioner of Internal Revenue was a crossed check in
that, on its face were two parallel lines and written in
between said lines was the phrase "Payee's Account
Only"; and that defendant Citibank paid the full face
value of the check in the amount of P4,746,114.41 to the
defendant IBAA.
It has been duly established that for the payment of
plaintiff's percentage tax for the last quarter of 1977, the
Bureau of Internal Revenue issued Revenue Tax Receipt
No. 18747002, dated October 20, 1977, designating
therein in Muntinlupa, Metro Manila, as the authorized
agent bank of Metrobanl, Alabang branch to receive the
tax payment of the plaintiff.
BANKING for MT Page 9 of 32
 On December 19, 1977, plaintiff's Citibank Check No. SN-
04867, together with the Revenue Tax Receipt No.
18747002, was deposited with defendant IBAA, through
its Ermita Branch. The latter accepted the check and sent
it to the Central Clearing House for clearing on the samd
day, with the indorsement at the back "all prior
indorsements and/or lack of indorsements guaranteed."
Thereafter, defendant IBAA presented the check for
payment to defendant Citibank on same date, December
19, 1977, and the latter paid the face value of the check
in the amount of P4,746,114.41. Consequently, the
amount of P4,746,114.41 was debited in plaintiff's
account with the defendant Citibank and the check was
returned to the plaintiff.
Upon verification, plaintiff discovered that its Citibank
Check No. SN-04867 in the amount of P4,746,114.41 was
not paid to the Commissioner of Internal Revenue.
Hence, in separate letters dated October 26, 1979,
addressed to the defendants, the plaintiff notified the
latter that in case it will be re-assessed by the BIR for the
payment of the taxes covered by the said checks, then
plaintiff shall hold the defendants liable for
reimbursement of the face value of the same. Both
defendants denied liability and refused to pay.
In a letter dated February 28, 1980 by the Acting
Commissioner of Internal Revenue addressed to the
plaintiff - supposed to be Exhibit "D", the latter was
officially informed, among others, that its check in the
amount of P4, 746,114.41 was not paid to the
government or its authorized agent and instead
encashed by unauthorized persons, hence, plaintiff has to
pay the said amount within fifteen days from receipt of
the letter. Upon advice of the plaintiff's lawyers, plaintiff
on March 11, 1982, paid to the Bureau of Internal
Revenue, the amount of P4,746,114.41, representing
payment of plaintiff's percentage tax for the third quarter
of 1977.
As a consequence of defendant's refusal to reimburse
plaintiff of the payment it had made for the second time
to the BIR of its percentage taxes, plaintiff filed on
January 20, 1983 its original complaint before this Court.
On December 24, 1985, defendant IBAA was merged with
the Philippine Commercial International Bank (PCI Bank)
with the latter as the surviving entity.
Defendant Citibank maintains that; the payment it made
of plaintiff's Citibank Check No. SN-04867 in the amount
of P4,746,114.41 "was in due course"; it merely relied on
the clearing stamp of the depository/collecting bank, the
defendant IBAA that "all prior indorsements and/or lack
of indorsements guaranteed"; and the proximate cause of
plaintiff's injury is the gross negligence of defendant
IBAA in indorsing the plaintiff's Citibank check in
question.
It is admitted that on December 19, 1977 when the
proceeds of plaintiff's Citibank Check No. SN-048867 was
paid to defendant IBAA as collecting bank, plaintiff was
maintaining a checking account with defendant
Citibank."5
Although it was not among the stipulated facts, an investigation by
the National Bureau of Investigation (NBI) revealed that Citibank
Check No. SN-04867 was recalled by Godofredo Rivera, the
General Ledger Accountant of Ford. He purportedly needed to
hold back the check because there was an error in the computation
of the tax due to the Bureau of Internal Revenue (BIR). With
Rivera's instruction, PCIBank replaced the check with two of its own
Manager's Checks (MCs). Alleged members of a syndicate later
deposited the two MCs with the Pacific Banking Corporation.
Ford, with leave of court, filed a third-party complaint before the
trial court impleading Pacific Banking Corporation (PBC) and
Godofredo Rivera, as third party defendants. But the court
dismissed the complaint against PBC for lack of cause of action.
The course likewise dismissed the third-party complaint against
Godofredo Rivera because he could not be served with summons
as the NBI declared him as a "fugitive from justice".
On June 15, 1989, the trial court rendered its decision, as follows:
"Premises considered, judgment is hereby rendered as
follows:
"1. Ordering the defendants Citibank and IBAA
(now PCI Bank), jointly and severally, to pay the
plaintiff the amount of P4,746,114.41
representing the face value of plaintiff's
Citibank Check No. SN-04867, with interest
thereon at the legal rate starting January 20,
1983, the date when the original complaint was
filed until the amount is fully paid, plus costs;
"2. On defendant Citibank's cross-claim:
ordering the cross-defendant IBAA (now PCI
Bank) to reimburse defendant Citibank for
whatever amount the latter has paid or may pay
to the plaintiff in accordance with next
preceding paragraph;
"3. The counterclaims asserted by the
defendants against the plaintiff, as well as that
asserted by the cross-defendant against the
cross-claimant are dismissed, for lack of merits;
and
"4. With costs against the defendants.
SO ORDERED."6
Not satisfied with the said decision, both defendants, Citibank and
PCIBank, elevated their respective petitions for review on certiorari
to the Courts of Appeals. On March 27, 1995, the appellate court
issued its judgment as follows:
"WHEREFORE, in view of the foregoing, the court
AFFIRMS the appealed decision with modifications.
The court hereby renderes judgment:
1. Dismissing the complaint in Civil Case No.
49287 insofar as defendant Citibank N.A. is
concerned;
2. Ordering the defendant IBAA now PCI Bank
to pay the plaintiff the amount of P4,746,114.41
representing the face value of plaintiff's
Citibank Check No. SN-04867, with interest
thereon at the legal rate starting January 20,
1983, the date when the original complaint was
filed until the amount is fully paid;
3. Dismissing the counterclaims asserted by the
defendants against the plaintiff as well as that
asserted by the cross-defendant against the
cross-claimant, for lack of merits.
Costs against the defendant IBAA (now PCI
Bank).
IT IS SO ORDERED."7
BANKING for MT Page 10 of 32
PCI Bank moved to reconsider the above-quoted decision of the
Court of Appeals, while Ford filed a "Motion for Partial
Reconsideration." Both motions were denied for lack of merit.
Separately, PCIBank and Ford filed before this Court, petitions for
review by certiorari under Rule 45.
In G.R. No. 121413, PCIBank seeks the reversal of the decision and
resolution of the Twelfth Division of the Court of Appeals
contending that it merely acted on the instruction of Ford and such
casue of action had already prescribed.
PCIBank sets forth the following issues for consideration:
I. Did the respondent court err when, after finding that
the petitioner acted on the check drawn by respondent
Ford on the said respondent's instructions, it nevertheless
found the petitioner liable to the said respondent for the
full amount of the said check.
II. Did the respondent court err when it did not find
prescription in favor of the petitioner.8
In a counter move, Ford filed its petition docketed as G.R. No.
121479, questioning the same decision and resolution of the Court
of Appeals, and praying for the reinstatement in toto of the
decision of the trial court which found both PCIBank and Citibank
jointly and severally liable for the loss.
In G.R. No. 121479, appellant Ford presents the following
propositions for consideration:
I. Respondent Citibank is liable to petitioner Ford
considering that:
1. As drawee bank, respondent Citibank owes to
petitioner Ford, as the drawer of the subject
check and a depositor of respondent Citibank,
an absolute and contractual duty to pay the
proceeds of the subject check only to the payee
thereof, the Commissioner of Internal Revenue.
2. Respondent Citibank failed to observe its
duty as banker with respect to the subject
check, which was crossed and payable to
"Payee's Account Only."
3. Respondent Citibank raises an issue for the
first time on appeal; thus the same should not
be considered by the Honorable Court.
4. As correctly held by the trial court, there is no
evidence of gross negligence on the part of
petitioner Ford.9
II. PCI Bank is liable to petitioner Ford considering that:
1. There were no instructions from petitioner
Ford to deliver the proceeds of the subject
check to a person other than the payee named
therein, the Commissioner of the Bureau of
Internal Revenue; thus, PCIBank's only
obligation is to deliver the proceeds to the
Commissioner of the Bureau of Internal
Revenue.10
2. PCIBank which affixed its indorsement on the
subject check ("All prior indorsement and/or
lack of indorsement guaranteed"), is liable as
collecting bank.11
3. PCIBank is barred from raising issues of fact
in the instant proceedings.12
4. Petitioner Ford's cause of action had not
prescribed.13
II. G.R. No. 128604
The same sysndicate apparently embezzled the proceeds of checks
intended, this time, to settle Ford's percentage taxes appertaining
to the second quarter of 1978 and the first quarter of 1979.
The facts as narrated by the Court of Appeals are as follows:
Ford drew Citibank Check No. SN-10597 on July 19, 1978 in the
amount of P5,851,706.37 representing the percentage tax due for
the second quarter of 1978 payable to the Commissioner of
Internal Revenue. A BIR Revenue Tax Receipt No. 28645385 was
issued for the said purpose.
On April 20, 1979, Ford drew another Citibank Check No. SN-16508
in the amount of P6,311,591.73, representing the payment of
percentage tax for the first quarter of 1979 and payable to the
Commissioner of Internal Revenue. Again a BIR Revenue Tax
Receipt No. A-1697160 was issued for the said purpose.
Both checks were "crossed checks" and contain two diagonal lines
on its upper corner between, which were written the words
"payable to the payee's account only."
The checks never reached the payee, CIR. Thus, in a letter dated
February 28, 1980, the BIR, Region 4-B, demanded for the said tax
payments the corresponding periods above-mentioned.
As far as the BIR is concernced, the said two BIR Revenue Tax
Receipts were considered "fake and spurious". This anomaly was
confirmed by the NBI upon the initiative of the BIR. The findings
forced Ford to pay the BIR a new, while an action was filed against
Citibank and PCIBank for the recovery of the amount of Citibank
Check Numbers SN-10597 and 16508.
The Regional Trial Court of Makati, Branch 57, which tried the case,
made its findings on the modus operandi of the syndicate, as
follows:
"A certain Mr. Godofredo Rivera was employed by the
plaintiff FORD as its General Ledger Accountant. As such,
he prepared the plaintiff's check marked Ex. 'A' [Citibank
Check No. Sn-10597] for payment to the BIR. Instead,
however, fo delivering the same of the payee, he passed
on the check to a co-conspirator named Remberto Castro
who was a pro-manager of the San Andres Branch of
PCIB.* In connivance with one Winston Dulay, Castro
himself subsequently opened a Checking Account in the
name of a fictitious person denominated as 'Reynaldo
reyes' in the Meralco Branch of PCIBank where Dulay
works as Assistant Manager.
After an initial deposit of P100.00 to validate the account,
Castro deposited a worthless Bank of America Check in
exactly the same amount as the first FORD check (Exh.
"A", P5,851,706.37) while this worthless check was
coursed through PCIB's main office enroute to the
Central Bank for clearing, replaced this worthless check
with FORD's Exhibit 'A' and accordingly tampered the
accompanying documents to cover the replacement. As a
result, Exhibit 'A' was cleared by defendant CITIBANK,
and the fictitious deposit account of 'Reynaldo Reyes'
was credited at the PCIB Meralco Branch with the total
amount of the FORD check Exhibit 'A'. The same method
was again utilized by the syndicate in profiting from Exh.
'B' [Citibank Check No. SN-16508] which was
BANKING for MT Page 11 of 32
 subsequently pilfered by Alexis Marindo, Rivera's
Assistant at FORD.
From this 'Reynaldo Reyes' account, Castro drew various
checks distributing the sahres of the other participating
conspirators namely (1) CRISANTO BERNABE, the
mastermind who formulated the method for the
embezzlement; (2) RODOLFO R. DE LEON a customs
broker who negotiated the initial contact between
Bernabe, FORD's Godofredo Rivera and PCIB's Remberto
Castro; (3) JUAN VASTILLO who assisted de Leon in the
initial arrangements; (4) GODOFREDO RIVERA, FORD's
accountant who passed on the first check (Exhibit "A") to
Castro; (5) REMERTO CASTRO, PCIB's pro-manager at San
Andres who performed the switching of checks in the
clearing process and opened the fictitious Reynaldo
Reyes account at the PCIB Meralco Branch; (6) WINSTON
DULAY, PCIB's Assistant Manager at its Meralco Branch,
who assisted Castro in switching the checks in the
clearing process and facilitated the opening of the
fictitious Reynaldo Reyes' bank account; (7) ALEXIS
MARINDO, Rivera's Assistant at FORD, who gave the
second check (Exh. "B") to Castro; (8) ELEUTERIO
JIMENEZ, BIR Collection Agent who provided the fake
and spurious revenue tax receipts to make it appear that
the BIR had received FORD's tax payments.
Several other persons and entities were utilized by the
syndicate as conduits in the disbursements of the
proceeds of the two checks, but like the aforementioned
participants in the conspiracy, have not been impleaded
in the present case. The manner by which the said funds
were distributed among them are traceable from the
record of checks drawn against the original "Reynaldo
Reyes" account and indubitably identify the parties who
illegally benefited therefrom and readily indicate in what
amounts they did so."14
On December 9, 1988, Regional Trial Court of Makati, Branch 57,
held drawee-bank, Citibank, liable for the value of the two checks
while adsolving PCIBank from any liability, disposing as follows:
"WHEREFORE, judgment is hereby rendered sentencing
defendant CITIBANK to reimburse plaintiff FORD the total
amount of P12,163,298.10 prayed for in its complaint,
with 6% interest thereon from date of first written
demand until full payment, plus P300,000.00 attorney's
fees and expenses litigation, and to pay the defendant,
PCIB (on its counterclaim to crossclaim) the sum of
P300,000.00 as attorney's fees and costs of litigation, and
pay the costs.
SO ORDERED."15
Both Ford and Citibank appealed to the Court of Appeals which
affirmed, in toto, the decision of the trial court. Hence, this petition.
Petitioner Ford prays that judgment be rendered setting aside the
portion of the Court of Appeals decision and its resolution dated
March 5, 1997, with respect to the dismissal of the complaint
against PCIBank and holding Citibank solely responsible for the
proceeds of Citibank Check Numbers SN-10597 and 16508 for
P5,851,706.73 and P6,311,591.73 respectively.
Ford avers that the Court of Appeals erred in dismissing the
complaint against defendant PCIBank considering that:
I. Defendant PCIBank was clearly negligent when it failed
to exercise the diligence required to be exercised by it as
a banking insitution.
II. Defendant PCIBank clearly failed to observe the
diligence required in the selection and supervision of its
officers and employees.
III. Defendant PCIBank was, due to its negligence, clearly
liable for the loss or damage resulting to the plaintiff
Ford as a consequence of the substitution of the check
consistent with Section 5 of Central Bank Circular No. 580
series of 1977.
IV. Assuming arguedo that defedant PCIBank did not
accept, endorse or negotiate in due course the subject
checks, it is liable, under Article 2154 of the Civil Code, to
return the money which it admits having received, and
which was credited to it its Central bank account.16
The main issue presented for our consideration by these petitions
could be simplified as follows: Has petitioner Ford the right to
recover from the collecting bank (PCIBank) and the drawee bank
(Citibank) the value of the checks intended as payment to the
Commissioner of Internal Revenue? Or has Ford's cause of action
already prescribed?
Note that in these cases, the checks were drawn against the
drawee bank, but the title of the person negotiating the same was
allegedly defective because the instrument was obtained by fraud
and unlawful means, and the proceeds of the checks were not
remitted to the payee. It was established that instead of paying the
checks to the CIR, for the settlement of the approprite quarterly
percentage taxes of Ford, the checks were diverted and encashed
for the eventual distribution among the mmbers of the syndicate.
As to the unlawful negotiation of the check the applicable law is
Section 55 of the Negotiable Instruments Law (NIL), which
provides:
"When title defective -- The title of a person who
negotiates an instrument is defective within the meaning
of this Act when he obtained the instrument, or any
signature thereto, by fraud, duress, or fore and fear, or
other unlawful means, or for an illegal consideration, or
when he negotiates it in breach of faith or under such
circumstances as amount to a fraud."
Pursuant to this provision, it is vital to show that the negotiation is
made by the perpetator in breach of faith amounting to fraud. The
person negotiating the checks must have gone beyond the
authority given by his principal. If the principal could prove that
there was no negligence in the performance of his duties, he may
set up the personal defense to escape liability and recover from
other parties who. Though their own negligence, alowed the
commission of the crime.
In this case, we note that the direct perpetrators of the offense,
namely the embezzlers belonging to a syndicate, are now fugitives
from justice. They have, even if temporarily, escaped liability for the
embezzlement of millions of pesos. We are thus left only with the
task of determining who of the present parties before us must bear
the burden of loss of these millions. It all boils down to
thequestion of liability based on the degree of negligence among
the parties concerned.
Foremost, we must resolve whether the injured party, Ford, is guilty
of the "imputed contributory negligence" that would defeat its
claim for reimbursement, bearing ing mind that its employees,
Godofredo Rivera and Alexis Marindo, were among the members
of the syndicate.
Citibank points out that Ford allowed its very own employee,
Godofredo Rivera, to negotiate the checks to his co-conspirators,
instead of delivering them to the designated authorized collecting
bank (Metrobank-Alabang) of the payee, CIR. Citibank bewails the
fact that Ford was remiss in the supervision and control of its own
employees, inasmuch as it only discovered the syndicate's activities
through the information given by the payee of the checks after an
unreasonable period of time.
PCIBank also blames Ford of negligence when it allegedly
authorized Godofredo Rivera to divert the proceeds of Citibank
BANKING for MT Page 12 of 32
Check No. SN-04867, instead of using it to pay the BIR. As to the
subsequent run-around of unds of Citibank Check Nos. SN-10597
and 16508, PCIBank claims that the proximate cause of the damge
to Ford lies in its own officers and employees who carried out the
fradulent schemes and the transactions. These circumstances were
not checked by other officers of the company including its
comptroller or internal auditor. PCIBank contends that the inaction
of Ford despite the enormity of the amount involved was a sheer
negligence and stated that, as between two innocent persons, one
of whom must suffer the consequences of a breach of trust, the
one who made it possible, by his act of negligence, must bear the
loss.
For its part, Ford denies any negligence in the performance of its
duties. It avers that there was no evidence presented before the
trial court showing lack of diligence on the part of Ford. And, citing
the case of Gempesaw vs. Court of Appeals,17 Ford argues that even
if there was a finding therein that the drawer was negligent, the
drawee bank was still ordered to pay damages.
Furthermore, Ford contends the Godofredo rivera was not
authorized to make any representation in its behalf, specifically, to
divert the proceeds of the checks. It adds that Citibank raised the
issue of imputed negligence against Ford for the first time on
appeal. Thus, it should not be considered by this Court.
On this point, jurisprudence regarding the imputed negligence of
employer in a master-servant relationship is instructive. Since a
master may be held for his servant's wrongful act, the law imputes
to the master the act of the servant, and if that act is negligent or
wrongful and proximately results in injury to a third person, the
negligence or wrongful conduct is the negligence or wrongful
conduct of the master, for which he is liable.18 The general rule is
that if the master is injured by the negligence of a third person and
by the concuring contributory negligence of his own servant or
agent, the latter's negligence is imputed to his superior and will
defeat the superior's action against the third person, asuming, of
course that the contributory negligence was the proximate
cause of the injury of which complaint is made.19
Accordingly, we need to determine whether or not the action of
Godofredo Rivera, Ford's General Ledger Accountant, and/or Alexis
Marindo, his assistant, was the proximate cause of the loss or
damage. AS defined, proximate cause is that which, in the natural
and continuous sequence, unbroken by any efficient, intervening
cause produces the injury and without the result would not have
occurred.20
It appears that although the employees of Ford initiated the
transactions attributable to an organized syndicate, in our view,
their actions were not the proximate cause of encashing the checks
payable to the CIR. The degree of Ford's negligence, if any, could
not be characterized as the proximate cause of the injury to the
parties.
The Board of Directors of Ford, we note, did not confirm the
request of Godofredo Rivera to recall Citibank Check No. SN-
04867. Rivera's instruction to replace the said check with PCIBank's
Manager's Check was not in theordinary course of business which
could have prompted PCIBank to validate the same.
As to the preparation of Citibank Checks Nos. SN-10597 and
16508, it was established that these checks were made payable to
the CIR. Both were crossed checks. These checks were apparently
turned around by Ford's emploees, who were acting on their own
personal capacity.
Given these circumstances, the mere fact that the forgery was
committed by a drawer-payor's confidential employee or agent,
who by virtue of his position had unusual facilities for perpertrating
the fraud and imposing the forged paper upon the bank, does
notentitle the bank toshift the loss to the drawer-payor, in the
absence of some circumstance raising estoppel against the
drawer.21 This rule likewise applies to the checks fraudulently
negotiated or diverted by the confidential employees who hold
them in their possession.
With respect to the negligence of PCIBank in the payment of the
three checks involved, separately, the trial courts found variations
between the negotiation of Citibank Check No. SN-04867 and the
misapplication of total proceeds of Checks SN-10597 and 16508.
Therefore, we have to scrutinize, separately, PCIBank's share of
negligence when the syndicate achieved its ultimate agenda of
stealing the proceeds of these checks.
G.R. Nos. 121413 and 121479
Citibank Check No. SN-04867 was deposited at PCIBank through
its Ermita Branch. It was coursed through the ordinary banking
transaction, sent to Central Clearing with the indorsement at the
back "all prior indorsements and/or lack of indorsements
guaranteed," and was presented to Citibank for payment.
Thereafter PCIBank, instead of remitting the proceeds to the CIR,
prepared two of its Manager's checks and enabled the syndicate to
encash the same.
On record, PCIBank failed to verify the authority of Mr. Rivera to
negotiate the checks. The neglect of PCIBank employees to verify
whether his letter requesting for the replacement of the Citibank
Check No. SN-04867 was duly authorized, showed lack of care and
prudence required in the circumstances.
Furthermore, it was admitted that PCIBank is authorized to collect
the payment of taxpayers in behalf of the BIR. As an agent of BIR,
PCIBank is duty bound to consult its principal regarding the
unwarranted instructions given by the payor or its agent. As aptly
stated by the trial court, to wit:
"xxx. Since the questioned crossed check was deposited
with IBAA [now PCIBank], which claimed to be a
depository/collecting bank of BIR, it has the responsibility
to make sure that the check in question is deposited in
Payee's account only.
xxx xxx xxx
As agent of the BIR (the payee of the check), defendant
IBAA should receive instructions only from its principal
BIR and not from any other person especially so when
that person is not known to the defendant. It is very
imprudent on the part of the defendant IBAA to just rely
on the alleged telephone call of the one Godofredo
Rivera and in his signature considering that the plaintiff is
not a client of the defendant IBAA."
It is a well-settled rule that the relationship between the payee or
holder of commercial paper and the bank to which it is sent for
collection is, in the absence of an argreement to the contrary, that
of principal and agent.22 A bank which receives such paper for
collection is the agent of the payee or holder.23
Even considering arguendo, that the diversion of the amount of a
check payable to the collecting bank in behalf of the designated
payee may be allowed, still such diversion must be properly
authorized by the payor. Otherwise stated, the diversion can be
justified only by proof of authority from the drawer, or that the
drawer has clothed his agent with apparent authority to receive the
proceeds of such check.
Citibank further argues that PCI Bank's clearing stamp appearing at
the back of the questioned checks stating that ALL PRIOR
INDORSEMENTS AND/OR LACK OF INDORSEMENTS GURANTEED
should render PCIBank liable because it made it pass through the
clearing house and therefore Citibank had no other option but to
pay it. Thus, Citibank had no other option but to pay it. Thus,
Citibank assets that the proximate cause of Ford's injury is the
gross negligence of PCIBank. Since the questione dcrossed check
BANKING for MT Page 13 of 32
was deposited with PCIBank, which claimed to be a
depository/collecting bank of the BIR, it had the responsibility to
make sure that the check in questions is deposited in Payee's
account only.
Indeed, the crossing of the check with the phrase "Payee's Account
Only," is a warning that the check should be deposited only in the
account of the CIR. Thus, it is the duty of the collecting bank
PCIBank to ascertain that the check be deposited in payee's
account only. Therefore, it is the collecting bank (PCIBank) which is
bound to scruninize the check and to know its depositors before it
could make the clearing indorsement "all prior indorsements
and/or lack of indorsement guaranteed".
In Banco de Oro Savings and Mortgage Bank vs. Equitable Banking
Corporation,24 we ruled:
"Anent petitioner's liability on said instruments, this court
is in full accord with the ruling of the PCHC's Board of
Directors that:
'In presenting the checks for clearing and for payment,
the defendant made an express guarantee on the validity
of "all prior endorsements." Thus, stamped at the back of
the checks are the defedant's clear warranty: ALL PRIOR
ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS
GUARANTEED. Without such warranty, plaintiff would not
have paid on the checks.'
No amount of legal jargon can reverse the clear meaning
of defendant's warranty. As the warranty has proven to
be false and inaccurate, the defendant is liable for any
damage arising out of the falsity of its representation."25
Lastly, banking business requires that the one who first cashes and
negotiates the check must take some percautions to learn whether
or not it is genuine. And if the one cashing the check through
indifference or othe circumstance assists the forger in committing
the fraud, he should not be permitted to retain the proceeds of the
check from the drawee whose sole fault was that it did not
discover the forgery or the defect in the title of the person
negotiating the instrument before paying the check. For this
reason, a bank which cashes a check drawn upon another bank,
without requiring proof as to the identity of persons presenting it,
or making inquiries with regard to them, cannot hold the proceeds
against the drawee when the proceeds of the checks were
afterwards diverted to the hands of a third party. In such cases the
drawee bank has a right to believe that the cashing bank (or the
collecting bank) had, by the usual proper investigation, satisfied
itself of the authenticity of the negotiation of the checks. Thus, one
who encashed a check which had been forged or diverted and in
turn received payment thereon from the drawee, is guilty of
negligence which proximately contributed to the success of the
fraud practiced on the drawee bank. The latter may recover from
the holder the money paid on the check.26
Having established that the collecting bank's negligence is the
proximate cause of the loss, we conclude that PCIBank is liable in
the amount corresponding to the proceeds of Citibank Check No.
SN-04867.
G.R. No. 128604
The trial court and the Court of Appeals found that PCIBank had no
official act in the ordinary course of business that would attribute
to it the case of the embezzlement of Citibank Check Numbers SN-
10597 and 16508, because PCIBank did not actually receive nor
hold the two Ford checks at all. The trial court held, thus:
"Neither is there any proof that defendant PCIBank
contributed any official or conscious participation in the
process of the embezzlement. This Court is convinced
that the switching operation (involving the checks while
in transit for "clearing") were the clandestine or hidden
actuations performed by the members of the syndicate in
their own personl, covert and private capacity and done
without the knowledge of the defendant PCIBank"27
In this case, there was no evidence presented confirming the
conscious particiapation of PCIBank in the embezzlement. As a
general rule, however, a banking corporation is liable for the
wrongful or tortuous acts and declarations of its officers or agents
within the course and scope of their employment.28 A bank will be
held liable for the negligence of its officers or agents when acting
within the course and scope of their employment. It may be liable
for the tortuous acts of its officers even as regards that species of
tort of which malice is an essential element. In this case, we find a
situation where the PCIBank appears also to be the victim of the
scheme hatched by a syndicate in which its own management
employees had particiapted.
The pro-manager of San Andres Branch of PCIBank, Remberto
Castro, received Citibank Check Numbers SN-10597 and 16508. He
passed the checks to a co-conspirator, an Assistant Manager of
PCIBank's Meralco Branch, who helped Castro open a Checking
account of a fictitious person named "Reynaldo Reyes." Castro
deposited a worthless Bank of America Check in exactly the same
amount of Ford checks. The syndicate tampered with the checks
and succeeded in replacing the worthless checks and the eventual
encashment of Citibank Check Nos. SN 10597 and 16508. The
PCIBank Ptro-manager, Castro, and his co-conspirator Assistant
Manager apparently performed their activities using facilities in
their official capacity or authority but for their personal and private
gain or benefit.
A bank holding out its officers and agents as worthy of confidence
will not be permitted to profit by the frauds these officers or
agents were enabled to perpetrate in the apparent course of their
employment; nor will t be permitted to shirk its responsibility for
such frauds, even though no benefit may accrue to the bank
therefrom. For the general rule is that a bank is liable for the
fraudulent acts or representations of an officer or agent acting
within the course and apparent scope of his employment or
authority.29 And if an officer or employee of a bank, in his official
capacity, receives money to satisfy an evidence of indebetedness
lodged with his bank for collection, the bank is liable for his
misappropriation of such sum.30
Moreover, as correctly pointed out by Ford, Section 531 of Central
Bank Circular No. 580, Series of 1977 provides that any theft
affecting items in transit for clearing, shall be for the account of
sending bank, which in this case is PCIBank.
But in this case, responsibility for negligence does not lie on
PCIBank's shoulders alone.
The evidence on record shows that Citibank as drawee bank was
likewise negligent in the performance of its duties. Citibank failed
to establish that its payment of Ford's checjs were made in due
course and legally in order. In its defense, Citibank claims the
genuineness and due execution of said checks, considering that
Citibank (1) has no knowledge of any informity in the issuance of
the checks in question (2) coupled by the fact that said checks
were sufficiently funded and (3) the endorsement of the Payee or
lack thereof was guaranteed by PCI Bank (formerly IBAA), thus, it
has the obligation to honor and pay the same.
For its part, Ford contends that Citibank as the drawee bank owes
to Ford an absolute and contractual duty to pay the proceeds of
the subject check only to the payee thereof, the CIR. Citing Section
6232 of the Negotiable Instruments Law, Ford argues that by
accepting the instrument, the acceptro which is Citibank engages
that it will pay according to the tenor of its acceptance, and that it
will pay only to the payee, (the CIR), considering the fact that here
the check was crossed with annotation "Payees Account Only."
As ruled by the Court of Appeals, Citibank must likewise answer for
the damages incurred by Ford on Citibank Checks Numbers SN
BANKING for MT Page 14 of 32
10597 and 16508, because of the contractual relationship existing
between the two. Citibank, as the drawee bank breached its
contractual obligation with Ford and such degree of culpability
contributed to the damage caused to the latter. On this score, we
agree with the respondent court's ruling.
Citibank should have scrutinized Citibank Check Numbers SN
10597 and 16508 before paying the amount of the proceeds
thereof to the collecting bank of the BIR. One thing is clear from
the record: the clearing stamps at the back of Citibank Check Nos.
SN 10597 and 16508 do not bear any initials. Citibank failed to
notice and verify the absence of the clearing stamps. Had this been
duly examined, the switching of the worthless checks to Citibank
Check Nos. 10597 and 16508 would have been discovered in time.
For this reason, Citibank had indeed failed to perform what was
incumbent upon it, which is to ensure that the amount of the
checks should be paid only to its designated payee. The fact that
the drawee bank did not discover the irregularity seasonably, in
our view, consitutes negligence in carrying out the bank's duty to
its depositors. The point is that as a business affected with public
interest and because of the nature of its functions, the bank is
under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their
relationship.33
Thus, invoking the doctrine of comparative negligence, we are of
the view that both PCIBank and Citibank failed in their respective
obligations and both were negligent in the selection and
supervision of their employees resulting in the encashment of
Citibank Check Nos. SN 10597 AND 16508. Thus, we are
constrained to hold them equally liable for the loss of the proceeds
of said checks issued by Ford in favor of the CIR.
Time and again, we have stressed that banking business is so
impressed with public interest where the trust and confidence of
the public in general is of paramount umportance such that the
appropriate standard of diligence must be very high, if not the
highest, degree of diligence.34 A bank's liability as obligor is not
merely vicarious but primary, wherein the defense of exercise of
due diligence in the selection and supervision of its employees is
of no moment.35
36
Banks handle daily transactions involving millions of pesos. By
the very nature of their work the degree of responsibility, care and
trustworthiness expected of their employees and officials is far
greater than those of ordinary clerks and employees.37 Banks are
expected to exercise the highest degree of diligence in the
selection and supervision of their employees.38
On the issue of prescription, PCIBank claims that the action of Ford
had prescribed because of its inability to seek judicial relief
seasonably, considering that the alleged negligent act took place
prior to December 19, 1977 but the relief was sought only in 1983,
or seven years thereafter.
The statute of limitations begins to run when the bank gives the
depositor notice of the payment, which is ordinarily when the
check is returned to the alleged drawer as a voucher with a
statement of his account,39 and an action upon a check is ordinarily
governed by the statutory period applicable to instruments in
writing.40
Our laws on the matter provide that the action upon a written
contract must be brought within ten year from the time the right
of action accrues.41 hence, the reckoning time for the prescriptive
period begins when the instrument was issued and the
corresponding check was returned by the bank to its depositor
(normally a month thereafter). Applying the same rule, the cause of
action for the recovery of the proceeds of Citibank Check No. SN
04867 would normally be a month after December 19, 1977, when
Citibank paid the face value of the check in the amount of
P4,746,114.41. Since the original complaint for the cause of action
was filed on January 20, 1984, barely six years had lapsed. Thus, we
conclude that Ford's cause of action to recover the amount of
Citibank Check No. SN 04867 was seasonably filed within the
period provided by law.
Finally, we also find thet Ford is not completely blameless in its
failure to detect the fraud. Failure on the part of the depositor to
examine its passbook, statements of account, and cancelled checks
and to give notice within a reasonable time (or as required by
statute) of any discrepancy which it may in the exercise of due care
and diligence find therein, serves to mitigate the banks' liability by
reducing the award of interest from twelve percent (12%) to six
percent (6%) per annum. As provided in Article 1172 of the Civil
Code of the Philippines, respondibility arising from negligence in
the performance of every kind of obligation is also demandable,
but such liability may be regulated by the courts, according to the
circumstances. In quasi-delicts, the contributory negligence of the
plaintiff shall reduce the damages that he may recover.42
WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 25017 are AFFIRMED. PCIBank, know
formerly as Insular Bank of Asia and America, id declared solely
responsible for the loss of the proceeds of Citibank Check No SN
04867 in the amount P4,746,114.41, which shall be paid together
with six percent (6%) interest thereon to Ford Philippines Inc. from
the date when the original complaint was filed until said amount is
fully paid.
However, the Decision and Resolution of the Court of Appeals in
CA-G.R. No. 28430 are MODIFIED as follows: PCIBank and Citibank
are adjudged liable for and must share the loss, (concerning the
proceeds of Citibank Check Numbers SN 10597 and 16508
totalling P12,163,298.10) on a fifty-fifty ratio, and each bank
is ORDERED to pay Ford Philippines Inc. P6,081,649.05, with six
percent (6%) interest thereon, from the date the complaint was
filed until full payment of said amount.1wphi1.nt
Costs against Philippine Commercial International Bank and
Citibank N.A.
SO ORDERED.
SECOND DIVISION
[G.R. No. 113236. March 5, 2001]
FIRESTONE TIRE & RUBBER COMPANY OF THE
PHILIPPINES, petitioner, vs., COURT OF APPEALS and
LUZON DEVELOPMENT BANK, respondents.
DECISION
QUISUMBING, J.:
This petition assails the decision[1] dated December 29, 1993
of the Court of Appeals in CA-G.R. CV No. 29546, which affirmed
the judgment[2] of the Regional Trial Court of Pasay City, Branch
113 in Civil Case No. PQ-7854-P, dismissing Firestones complaint
for damages.
The facts of this case, adopted by the CA and based on
findings by the trial court, are as follows:
[D]efendant is a banking corporation. It operates under a
certificate of authority issued by the Central Bank of the
Philippines, and among its activities, accepts savings and time
deposits. Said defendant had as one of its client-depositors the
Fojas-Arca Enterprises Company (Fojas-Arca for brevity). Fojas-Arca
maintaining a special savings account with the defendant, the
latter authorized and allowed withdrawals of funds therefrom
through the medium of special withdrawal slips. These are supplied
by the defendant to Fojas-Arca.
BANKING for MT Page 15 of 32
In January 1978, plaintiff and Fojas-Arca entered into a Franchised
Dealership Agreement (Exh. B) whereby Fojas-Arca has the
privilege to purchase on credit and sell plaintiffs products.
On January 14, 1978 up to May 15, 1978. Pursuant to the aforesaid
Agreement, Fojas-Arca purchased on credit Firestone products
from plaintiff with a total amount of P4,896,000.00. In payment of
these purchases, Fojas-Arca delivered to plaintiff six (6) special
withdrawal slips drawn upon the defendant. In turn, these were
deposited by the plaintiff with its current account with the
Citibank. All of them were honored and paid by the defendant. This
singular circumstance made plaintiff believe [sic] and relied [sic] on
the fact that the succeeding special withdrawal slips drawn upon
the defendant would be equally sufficiently funded. Relying on
such confidence and belief and as a direct consequence thereof,
plaintiff extended to Fojas-Arca other purchases on credit of its
products.
On the following dates Fojas-Arca purchased Firestone products
on credit (Exh. M, I, J, K) and delivered to plaintiff the
corresponding special withdrawal slips in payment thereof drawn
upon the defendant, to wit:
DATE WITHDRAWAL AMOUNT
SLIP NO.
June 15, 1978 42127 P1,198,092.80
July 15, 1978 42128 940,190.00
Aug. 15, 1978 42129 880,000.00
Sep. 15, 1978 42130 981,500.00
These were likewise deposited by plaintiff in its current account
with Citibank and in turn the Citibank forwarded it [sic] to the
defendant for payment and collection, as it had done in respect of
the previous special withdrawal slips. Out of these four (4)
withdrawal slips only withdrawal slip No. 42130 in the amount of
P981,500.00 was honored and paid by the defendant in October
1978. Because of the absence for a long period coupled with the
fact that defendant honored and paid withdrawal slips No. 42128
dated July 15, 1978, in the amount of P981,500.00 plaintiffs belief
was all the more strengthened that the other withdrawal slips were
likewise sufficiently funded, and that it had received full value and
payment of Fojas-Arcas credit purchased then outstanding at the
time. On this basis, plaintiff was induced to continue extending to
Fojas-Arca further purchase on credit of its products as per
agreement (Exh. B).
However, on December 14, 1978, plaintiff was informed by Citibank
that special withdrawal slips No. 42127 dated June 15, 1978 for
P1,198,092.80 and No. 42129 dated August 15, 1978 for
P880,000.00 were dishonored and not paid for the reason NO
ARRANGEMENT. As a consequence, the Citibank debited plaintiffs
account for the total sum of P2,078,092.80 representing the
aggregate amount of the above-two special withdrawal
slips. Under such situation, plaintiff averred that the pecuniary
losses it suffered is caused by and directly attributable to
defendants gross negligence.
On September 25, 1979, counsel of plaintiff served a written
demand upon the defendant for the satisfaction of the damages
suffered by it. And due to defendants refusal to pay plaintiffs claim,
plaintiff has been constrained to file this complaint, thereby
compelling plaintiff to incur litigation expenses and attorneys fees
which amount are recoverable from the defendant.
Controverting the foregoing asseverations of plaintiff, defendant
asserted, inter alia that the transactions mentioned by plaintiff are
that of plaintiff and Fojas-Arca only, [in] which defendant is not
involved; Vehemently, it was denied by defendant that the special
withdrawal slips were honored and treated as if it were checks, the
truth being that when the special withdrawal slips were received by
defendant, it only verified whether or not the signatures therein
were authentic, and whether or not the deposit level in the
passbook concurred with the savings ledger, and whether or not
the deposit is sufficient to cover the withdrawal; if plaintiff treated
the special withdrawal slips paid by Fojas-Arca as checks then
plaintiff has to blame itself for being grossly negligent in treating
the withdrawal slips as check when it is clearly stated therein that
the withdrawal slips are non-negotiable; that defendant is not a
privy to any of the transactions between Fojas-Arca and plaintiff
for which reason defendant is not duty bound to notify nor give
notice of anything to plaintiff. If at first defendant had given notice
to plaintiff it is merely an extension of usual bank courtesy to a
prospective client; that defendant is only dealing with its depositor
Fojas-Arca and not the plaintiff. In summation, defendant
categorically stated that plaintiff has no cause of action against it
(pp. 1-3, Dec.; pp. 368-370, id).[3]
Petitioners complaint[4] for a sum of money and damages
with the Regional Trial Court of Pasay City, Branch 113, docketed
as Civil Case No. 29546, was dismissed together with the
counterclaim of defendant.
Petitioner appealed the decision to the Court of Appeals. It
averred that respondent Luzon Development Bank was liable for
damages under Article 2176[5] in relation to Articles 19[6] and
20[7] of the Civil Code. As noted by the CA, petitioner alleged the
following tortious acts on the part of private respondent: 1) the
acceptance and payment of the special withdrawal slips without
the presentation of the depositors passbook thereby giving the
impression that the withdrawal slips are instruments payable upon
presentment; 2) giving the special withdrawal slips the general
appearance of checks; and 3) the failure of respondent bank to
seasonably warn petitioner that it would not honor two of the four
special withdrawal slips.
On December 29, 1993, the Court of Appeals promulgated its
assailed decision. It denied the appeal and affirmed the judgment
of the trial court. According to the appellate court, respondent
bank notified the depositor to present the passbook whenever it
received a collection note from another bank, belying petitioners
claim that respondent bank was negligent in not requiring a
passbook under the subject transaction. The appellate court also
found that the special withdrawal slips in question were not
purposely given the appearance of checks, contrary to petitioners
assertions, and thus should not have been mistaken for
checks. Lastly, the appellate court ruled that the respondent bank
was under no obligation to inform petitioner of the dishonor of the
special withdrawal slips, for to do so would have been a violation
of the law on the secrecy of bank deposits.
Hence, the instant petition, alleging the following assignment
of error:
25. The CA grievously erred in holding that
the [Luzon Development] Bank was free from
any fault or negligence regarding the dishonor,
or in failing to give fair and timely advice of the
dishonor, of the two intermediate LDB Slips and
in failing to award damages to Firestone
pursuant to Article 2176 of the New Civil Code.[8]
The issue for our consideration is whether or not respondent
bank should be held liable for damages suffered by petitioner, due
to its allegedly belated notice of non-payment of the subject
withdrawal slips.
The initial transaction in this case was between petitioner and
Fojas-Arca, whereby the latter purchased tires from the former with
special withdrawal slips drawn upon Fojas-Arcas special savings
account with respondent bank. Petitioner in turn deposited these
withdrawal slips with Citibank. The latter credited the same to
petitioners current account, then presented the slips for payment
to respondent bank. It was at this point that the bone of
contention arose.
On December 14, 1978, Citibank informed petitioner that
special withdrawal slips Nos. 42127 and 42129 dated June 15, 1978
and August 15, 1978, respectively, were refused payment by
respondent bank due to insufficiency of Fojas-Arcas funds on
deposit. That information came about six months from the time
Fojas-Arca purchased tires from petitioner using the subject
BANKING for MT Page 16 of 32
withdrawal slips. Citibank then debited the amount of these
withdrawal slips from petitioners account, causing the alleged
pecuniary damage subject of petitioners cause of action.
At the outset, we note that petitioner admits that the
withdrawal slips in question were non-negotiable.[9] Hence, the
rules governing the giving of immediate notice of dishonor of
negotiable instruments do not apply in this case.[10] Petitioner itself
concedes this point.[11] Thus, respondent bank was under no
obligation to give immediate notice that it would not make
payment on the subject withdrawal slips.Citibank should have
known that withdrawal slips were not negotiable instruments. It
could not expect these slips to be treated as checks by other
entities. Payment or notice of dishonor from respondent bank
could not be expected immediately, in contrast to the situation
involving checks.
In the case at bar, it appears that Citibank, with the
knowledge that respondent Luzon Development Bank, had
honored and paid the previous withdrawal slips, automatically
credited petitioners current account with the amount of the subject
withdrawal slips, then merely waited for the same to be honored
and paid by respondent bank. It presumed that the withdrawal
slips were good.
It bears stressing that Citibank could not have missed the
non-negotiable nature of the withdrawal slips. The essence of
negotiability which characterizes a negotiable paper as a credit
instrument lies in its freedom to circulate freely as a substitute for
money.[12] The withdrawal slips in question lacked this character.
A bank is under obligation to treat the accounts of its
depositors with meticulous care, whether such account consists
only of a few hundred pesos or of millions of pesos.[13] The fact
that the other withdrawal slips were honored and paid by
respondent bank was no license for Citibank to presume that
subsequent slips would be honored and paid immediately. By
doing so, it failed in its fiduciary duty to treat the accounts of its
clients with the highest degree of care.[14]
In the ordinary and usual course of banking operations,
current account deposits are accepted by the bank on the basis of
deposit slips prepared and signed by the depositor, or the latters
agent or representative, who indicates therein the current account
number to which the deposit is to be credited, the name of the
depositor or current account holder, the date of the deposit, and
the amount of the deposit either in cash or in check.[15]
The withdrawal slips deposited with petitioners current
account with Citibank were not checks, as petitioner
admits. Citibank was not bound to accept the withdrawal slips as a
valid mode of deposit. But having erroneously accepted them as
such, Citibank and petitioner as account-holder must bear the risks
attendant to the acceptance of these instruments. Petitioner and
Citibank could not now shift the risk and hold private respondent
liable for their admitted mistake.
WHEREFORE, the petition is DENIED and the decision of the
Court of Appeals in CA-G.R. CV No. 29546 is AFFIRMED. Costs
against petitioner.
SO ORDERED.
SECOND DIVISION
[G.R. No. 126152. September 28, 1999]
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF
APPEALS and LILY S. PUJOL, respondents.
DECISION
BELLOSILLO, J.:
PHILIPPINE NATIONAL BANK filed this petition for review
on certiorari under Rule 45 of the Rules of Court assailing the
Decision of the Court of Appeals[1] which affirmed the award of
damages by the Regional Trial Court, Branch 154, Pasig City in
favor of private respondent Lily S. Pujol.[2]
Sometime prior to 23 October 1990 private respondent Lily S.
Pujol opened with petitioner Philippine National Bank,
Mandaluyong Branch (PNB for brevity), an account denominated
as "Combo Account," a combination of Savings Account and
Current Account in private respondent's business name "Pujol
Trading," under which checks drawn against private respondents
checking account could be charged against her Savings Account
should the funds in her Current Account be insufficient to cover
the value of her checks. Hence, private respondent was issued by
petitioner a passbook on the front cover of which was typewritten
the words "Combo Deposit Plan."
On 23 October 1990, private respondent issued a check in
the amount of P30,000.00 in favor of her daughter-in-law, Dr.
Charisse M. Pujol. When issued and presented for payment, private
respondent had sufficient funds in her Savings Account. However,
petitioner dishonored her check allegedly for insufficiency of funds
and debited her account with P250.00 as penalty charge.
On 24 October 1990 private respondent issued another
check in the amount of P30,000.00 in favor of her daughter, Ms.
Venus P. De Ocampo. When issued and presented for payment
petitioner had sufficient funds in her Savings Account. But, this
notwithstanding, petitioner dishonored her check for insufficiency
of funds and debited her account with P250.00 as penalty
charge. On 4 November 1990, after realizing its mistake, petitioner
accepted and honored the second check for P30,000.00 and re-
credited to private respondents account the P250.00 previously
debited as penalty.
Private respondent Lily S. Pujol filed with the Regional Trial
Court of Pasig City a complaint for moral and exemplary damages
against petitioner for dishonoring her checks despite sufficiency of
her funds in the bank.
Petitioner admitted in its answer that private respondent
Pujol opened a "Combo Account," a combination of Savings
Account and Current Account, with its Mandaluyong branch. It
however justified the dishonor of the two (2) checks by claiming
that at the time of their issuance private respondent Pujols account
was not yet operational due to lack of documentary requirements,
to wit: (a) Certificate of Business Registration; (b) Permit to Operate
Business; (c) ID Card; and, (d) Combination Agreement. Petitioner
further alleged that despite the non-compliance with such
requirements petitioner placed the sign "Combo Flag" on
respondent Pujols account out of courtesy and
generosity. Petitioner also admitted that it later honored private
respondent's second check, debited the amount stated therein
from her account and re-credited the amount of P250.00 initially
charged as penalty.
On 27 September 1994 the trial court rendered a decision
ordering petitioner to pay private respondent Pujol moral damages
of P100,000.00 and attorneys fees of P20,000.00. It found that
private respondent suffered mental anguish and besmirched
reputation as a result of the dishonor of her checks, and that being
a former member of the judiciary who was expected to be the
embodiment of integrity and good behavior, she was subjected to
embarrassment due to the erroneous dishonor of her checks by
petitioner.
The Court of Appeals affirmed in toto the decision of the trial
court. Hence, petitioner comes to this Court alleging that the
appellate court erred (a) in holding that petitioner was estopped
from denying the existence of a "Combo Account" and the fact
that it was operational at the time of the issuance of the checks
because respondent Pujol was issued a Savings Account passbook
bearing the printed words "Combo Deposit Plan;" and, (b) in not
holding that the award by the trial court of moral damages
of P100,000.00 and attorneys fees of P20,000.00 was inordinately
disproportionate and unconscionable.
BANKING for MT Page 17 of 32
 We cannot sustain petitioner. Findings of fact and Damages are not intended to enrich the complainant at the
conclusions of the lower courts are entitled to great weight on expense of the defendant, and there is no hard-and-fast rule in the
appeal and will not be disturbed except for strong and cogent determination of what would be a fair amount of moral damages
reasons, and for that matter, the findings of the Court of Appeals since each case must be governed by its own peculiar facts. The
especially when they affirm the trial court, and which are supported yardstick should be that it is not palpably and scandalously
by substantial evidence, are almost beyond the power of review by excessive. In this case, the award of P100,000.00 is reasonable
the Supreme Court.[3] considering the reputation and social standing of private
respondent Pujol and applying our rulings in similar cases
Petitioner does not dispute the fact that private respondent involving banks negligence with regard to the accounts of their
Pujol maintained a Savings Account as well as a Current Account depositors.[9] The award of attorneys fees in the amount
with its Mandaluyong Branch and that private respondent applied of P20,000.00 is proper for respondent Pujol was compelled to
for a "Combination Deposit Plan" where checks issued against the litigate to protect her interest.[10]
Current Account of the drawer shall be charged automatically
against the latters Savings Account if her funds in the Current WHEREFORE, the petition is DENIED and the Decision of the
Account be insufficient to cover her checks. There was also no Court of Appeals which affirmed the award by the Regional Trial
question that the Savings Account passbook of respondent Pujol Court of Pasig City of moral damages of P100,000.00 and attorneys
contained the printed words "Combo Deposit Plan" without fees of P20,000.00 in favor of private respondent Lily S. Pujol is
qualification or condition that it would take effect only after AFFIRMED. Costs against petitioner.
submission of certain requirements. Although petitioner presented
evidence before the trial court to prove that the arrangement was SO ORDERED.
not yet operational at the time respondent Pujol issued the two (2)
checks, it failed to prove that she had actual knowledge that it was THIRD DIVISION
not yet operational at the time she issued the checks considering
that the passbook in her Savings Account already indicated the
words "Combo Deposit Plan." Hence, respondent Pujol had
justifiable reason to believe, based on the description in her G.R. No. 112576 October 26, 1994
passbook, that her accounts were effectively covered by the
arrangement during the issuance of the checks. Either by its own
(CA-GR CV No. 26571)
deliberate act, or its negligence in causing the "Combo Deposit
Plan" to be placed in the passbook, petitioner is considered
estopped to deny the existence of and perfection of the METROPOLITAN BANK AND TRUST COMPANY, petitioner,
combination deposit agreement with respondent Pujol. Estoppel in vs.
pais or equitable estoppel arises when one, by his acts, THE HON. COURT OF APPEALS, RURAL BANK OF PADRE
representations or admissions, or by his silence when he ought to GARCIA, INC. and ISABEL R. KATIGBAK, respondents.
speak out, intentionally or through culpable negligence, induces
another to believe certain facts to exist and such other rightfully Makalintal, Barot, Torres & Ibarra for petitioner.
relies and acts on such belief so that he will be prejudiced if the
former is permitted to deny the existence of such facts.[4] Fornier, Lava & Fornier for private respondents.
As found by the Court of Appeals, petitioner knew it
committed a mistake in dishonoring the checks of respondent
Pujol. This was based on the testimony of Pedro Lopez, petitioners
employee, that after the second check was dishonored, petitioner ROMERO, J.:
examined respondent Pujols account and learned that there was
sufficient funds in the Savings Account, and that only after the
This petition for certiorari seeks to annul the decision of
second check was dishonored did petitioner rectify its error.[5] The
respondent Court of Appeals dated October 29, 1992 in CA GR
appellate court also found that respondent Pujol, who is a retired
CV No. 26571 affirming the decision of the Regional Trial Court of
judge and community leader, issued the first check dated 23
Lipa, Batangas Branch XIII for damages, and the Resolution
October 1990 to her daughter-in-law, Dr. Charisse Pujol, who in
dated November 11, 1993 denying petitioner's motion for
turn indorsed the check to her mother. The latter needed the reconsideration of the aforesaid decision.
money to refloat two (2) of their vessels which sank during a
typhoon. When the check was dishonored for insufficient funds,
The case emanated from a dispute between the Rural Bank of
private respondents daughter-in-law confronted the former which
Padre Garcia, Inc. (RBPG) and Metropolitan Bank and Trust
subjected her to embarrassment and humiliation. Petitioner issued
Company (MBTC) relative to a credit memorandum dated April 5,
the second check dated 24 October 1990 to daughter Venus de
Ocampo as payment for the expenses of her round trip ticket to 1982 from the Central Bank in the amount of P304,000.00 in favor
of RBPG.
the United States which were shouldered by her son-in-law,
husband of Venus de Ocampo. When the second check was
initially dishonored for insufficiency of funds, she again suffered The records show that Isabel Katigbak is the president and director
serious anxiety and mental anguish that her son-in-law would no of RBPG, owning 65% of the shares thereof. Metropolitan Bank and
longer hold her in high esteem.[6] Trust Company (MBTC) is the rural bank's depository bank, where
Katigbak maintains current accounts with MBTC's main office in
This Court has ruled that a bank is under obligation to treat Makati as well as its Lipa City branch.
the accounts of its depositors with meticulous care whether such
account consists only of a few hundred pesos or of millions of
On April 6, 1982, MBTC received from the Central Bank a credit
pesos.Responsibility arising from negligence in the performance of
memo dated April 5, 1982 that its demand deposit account was
every kind of obligation is demandable. While petitioners
credited with P304,000.00 for the account of RBPG, representing
negligence in this case may not have been attended with malice
loans granted by the Central Bank to RBPG. On the basis of said
and bad faith, nevertheless, it caused serious anxiety,
credit memo, Isabel Katigbak issued several checks against its
embarrassment and humiliation to private respondent Lily S. Pujol
account with MBTC in the total amount of P300,000.00, two (2) of
for which she is entitled to recover reasonable moral damages.[7] In
which (Metrobank Check Nos. 0069 and 0070) were payable to Dr.
the case of Leopoldo Araneta v. Bank of America[8] we held that it
Felipe C. Roque and Mrs. Eliza Roque for P25,000.00 each. Said
can hardly be possible that a customers check can be wrongfully
checks issued to Dr. and Mrs. Roque were deposited by the Roques
refused payment without some impeachment of his credit which
with the Philippine Banking Corporation, Novaliches Branch in
must in fact be an actual injury, although he cannot, from the
Quezon City. When these checks were forwarded to MBTC on April
nature of the case, furnish independent and distinct proof thereof.
12, 1982 for payment (six (6) days from receipt of the Credit
Memo), the checks were returned by MBTC with the annotations

BANKING for MT Page 18 of 32

"DAIF TNC" (Drawn Against Insufficient Funds Try Next
Clearing) so they were redeposited on April 14, 1982. These
were however again dishonored and returned unpaid for the
following reason: "DAIF TNC NO ADVICE FROM CB."
After the second dishonor of the two (2) checks, Dr. Felipe Roque,
a member of the Board of Directors of Philippine Banking
Corporation, allegedly went to the Office of Antonio Katigbak, an
officer of RBPG, chiding him for the bouncing checks. In order to
appease the doctor, RBPG paid Dr. Roque P50,000.00 in cash to
replace the aforesaid checks.
On April 13, 1982, Isabel Katigbak who was in Hongkong on a
business-vacation trip together with her sons Alfredo and Antonio,
both of whom were also officers of RBPG, received overseas phone
calls from Mrs. Maris Katigbak-San Juan at her residence in San
Lorenzo Village, Makati, informing Isabel Katigbak that a certain
Mr. Rizal Dungo, Assistant Cashier of MBTC insisted on talking to
her (Mrs. San Juan), berating her about the checks which bounced,
saying "Nag-issue kayo ng tseke, wala namang pondo," even if it
was explained to Mr. Dungo that Mrs. San Juan was not in any way
connected with RBPG.
Mrs. Katigbak testified that she informed Mrs. San Juan to request
defendant MBTC to check and verify the records regarding the
aforementioned Central Bank credit memo for P304,000.00 in favor
of RBPG as she was certain that the checks were sufficiently
covered by the CB credit memo as early as April 6, 1994, but the
following day, Mrs. San Juan received another insulting call from
Mr. Dungo ("Bakit kayo nag-issue ng tseke na wala namang
pondo, Three Hundred Thousand na.") 1 When Mrs. San Juan
explained to him the need to verify the records regarding the
Central Bank memo, he merely brushed it aside, telling her
sarcastically that he was very sure that no such credit memo
existed. Mrs. San Juan was constrained to place another long
distance call to Mrs. Katigbak in Hongkong that evening. Tense
and angered, the Katigbaks had to cut short their Hongkong stay
with their respective families and flew back to Manila, catching the
first available flight on April 15, 1982.
Immediately upon arrival, Mrs. Katigbak called up MBTC, through a
Mr. Cochico, for a re-examination of the records of MBTC
regarding the Central Bank credit memo dated April 5, 1982 for
P304,000.00. Mr. Dungo, to whom Cochico handed over the phone,
allegedly arrogantly said: "Bakit kayo magagalit, wala naman
kayong pondo?" These remarks allegedly so shocked Mrs. Katigbak
that her blood pressure rose to a dangerous level and she had to
undergo medical treatment at the Makati Medical Center for two
(2) days.
Metrobank not only dishonored the checks issued by RBPG, the
latter was issued four (4) debit memos representing service and
penalty charges for the returned checks.
RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC of
Lipa, Batangas Branch XIII against the Metropolitan Bank and
Trust Company for damages on April 26, 1983.
The ultimate facts as alleged by the defendant MBTC in its answer
are as follows: that on April 6, 1982, its messenger, Elizer Gonzales,
received from the Central Bank several credit advices on rural bank
accounts, which included that of plaintiff RBPG in the amount of
P304,000.00; that due to the inadvertence of said messenger, the
credit advice issued in favor of plaintiff RBPG was not delivered to
the department in charge of processing the same; consequently,
when MBTC received from the clearing department the checks in
question, the stated balance in RBPG's account was only P5,498.58
which excluded the unprocessed credit advice of P304,000.00
resulting in the dishonor of the aforementioned checks; that as
regards the P304,000.00 which was
a re-discounting loan from the Central Bank, the same was
credited only on April 15, 1982 after the Central Bank finally
confirmed that a credit advice was indeed issued in favor of RBPG;
that after the confirmation, MBTC credited the amount of the
credit advice to plaintiff RBPG's account and thru its officers,
allegedly conveyed personally on two occasions its apologies to
plaintiffs to show that the bank and its officers acted with no
deliberate intent on their part to cause injury or damage to
plaintiffs, explaining the circumstances that gave rise to the
bouncing checks situation. Metrobank's negligence arising from
their messenger's misrouting of the credit advice resulting in the
return of the checks in question, despite daily reporting of credit
memos and a corresponding daily radio message confirmation, (as
shown by Exhibit "I," the Investigation Report of the bank's Mr.
Valentino Elevado) and Mr. Dungo's improper handling of clients
led to the messenger's dismissal from service and Mr. Dungo's
transfer from Metro Manila to Mindoro.
The threshold issue was whether or not, under the facts and
circumstances of the case, plaintiff may be allowed to recover
actual, moral and exemplary damages, including attorney's fees,
litigation expenses and the costs of the suit. On August 25, 1989,
the RTC of Lipa City rendered a decision 2 in favor of plaintiffs and
against the defendant MBTC, ordering the latter to:
1. pay plaintiff Isabel Katigbak P50,000.00 as
temperate damages;
2. pay P500,000.00 as moral damages,
considering that RBPG's credit standing and
business reputation were damaged by the
wrongful acts of defendant's employees,
coupled with the rude treatment received by
Isabel Katigbak at the hands of Mr. Dungo, all
of which impelled her to seek medical
treatment;
3. pay P100,000.00 as attorney's fees and
litigation expenses; and.
4. pay the costs of suit.
The lower court did not award actual damages in the amount of
P50,000.00 representing the amount of the two (2) checks payable
to Dr. Felipe C. Roque and Mrs. Elisa Roque for P25,000 each, as it
found no showing that Mr. Antonio Katigbak who allegedly paid
the amount was actually reimbursed by plaintiff RBPG. Moreover,
the court held that no actual damages could have been suffered by
plaintiff RBPG because on April 15, 1982, the Central Bank credit
advice in the amount of P304,000 which included the two (2)
checks issued to the Roque spouses in the sum of P50,000.00 were
already credited to the account of RBPG and the service, as well as
penalty charges, were all reversed.
MBTC appealed from the decision to the Court of Appeals in CA
GR CV No. 26571, alleging that the trial court erred in awarding
temperate and moral damages, as well as attorney's fees, plus
costs and expenses of litigation without factual or legal basis
therefor.
On October 29, 1992, the Court of Appeals rendered a
decision 3 affirming that of the trial court, except for the deletion of
the award of temperate damages, the reduction of moral damages
from P500,000.00 to P50,000.00 in favor of RBPG and P100,000.00
for Isabel Katigbak and P50,000.00, as attorney's fees. Plaintiffs-
appellees filed a motion for reconsideration of the decision,
questioning the deletion of the award of temperate damages and
the reduction of the award of moral damages and attorney's fees.
The motion was denied.
MBTC filed this petition, presenting the following issues for
resolution:
1. whether or not private respondents RBPG
and Isabel Rodriguez are legally entitled to
moral damages and attorney's fees, and
BANKING for MT Page 19 of 32
 2. assuming that they are so entitled, whether
or not the amounts awarded are excessive and
unconscionable.
The petition is devoid of merit.
The case at bench was instituted to seek damages caused by the
dishonor through negligence of respondent bank's checks which
were actually sufficiently funded, and the insults from petitioner
bank's officer directed against private respondent Isabel R.
Katigbak. The presence of malice and the evidence of besmirched
reputation or loss of credit and business standing, as well as a
reappraisal of its probative value, involves factual matters which,
having been already thoroughly discussed and analyzed in the
courts below, are no longer reviewable here. While this rule admits
of exceptions, this case does not fall under any of these.
There is no merit in petitioner's argument that it should not be
considered negligent, much less be held liable for damages on
account of the inadvertence of its bank employee as Article 1173
of the Civil Code only requires it to exercise the diligence of a
good pater familias.
As borne out by the records, the dishonoring of the respondent's
checks committed through negligence by the petitioner bank on
April 6, 1982 was rectified only on April 15, 1992 or nine (9) days
after receipt of the credit memo. Clearly, petitioner bank was
remiss in its duty and obligation to treat private respondent's
account with the highest degree of care, considering the fiduciary
nature of their relationship. The bank is under obligation to treat
the accounts of its depositors with meticulous care, whether such
account consists only of a few hundred pesos or of millions. It must
bear the blame for failing to discover the mistake of its employee
despite the established procedure requiring bank papers to pass
through bank personnel whose duty it is to check and
countercheck them for possible errors. 4 Responsibility arising from
negligence in the performance of every kind of obligation is
demandable. 5 While the bank's negligence may not have been
attended with malice and bad faith, nevertheless, it caused serious
anxiety, embarrassment and humiliation to private respondents for
which they are entitled to recover reasonable moral damages. 6
As the records bear out, insult was added to injury by petitioner
bank's issuance of debit memoranda representing service and
penalty charges for the returned checks, not to mention the
insulting remarks from its Assistant Cashier.
In the case of Leopoldo Araneta v. Bank of America, 7 we held that:
The financial credit of a businessman is a prized
and valuable asset, it being a significant part of
the foundation of his business. Any adverse
reflection thereon constitutes some financial
loss to him. As stated in the case of Atlanta
National Bank vs. Davis, 96 Ga 334, 23 SE 190,
citing 2 Morse Banks, Sec. 458, "it can hardly be
possible that a customer's check can be
wrongfully refused payment without some
impeachment of his credit, which must in fact
be an actual injury, though he cannot, from the
nature of the case, furnish independent, distinct
proof thereof".
It was established that when Mrs. Katigbak learned that her checks
were not being honored and Mr. Dungo repeatedly made the
insulting phone calls, her wounded feelings and the mental
anguish suffered by her caused her blood pressure to rise beyond
normal limits, necessitating medical attendance for two (2) days at
a hospital.
The damage to private respondents' reputation and social standing
entitles them to moral damages. Moral damages include physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation and
similar injury. 8 Temperate or moderate damages which are more
than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be
proved with certainty. 9 Temperate damages may be allowed in
cases where from the nature of the case, definite proof of
pecuniary loss cannot be adduced, although the court is convinced
that there has been such loss. The appellate court, however,
justified its deletion when MBTC reasoned out that the amount of
P50,000.00 is not part of the relief prayed for in the complaint,
aside from the fact that the amount allegedly suffered by Mrs.
Katigbak is susceptible of proof. 10
Moral and temperate damages which are not susceptible of
pecuniary estimation are not awarded to penalize the petitioner
but to compensate the respondents for injuries suffered as a result
of the former's fault and negligence, taking into account the
latter's credit and social standing in the banking community,
particularly since this is the very first time such humiliation has
befallen private respondents. The amount of such losses need not
be established with exactitude, precisely due to their nature. 11
The carelessness of petitioner bank, aggravated by the lack of
promptness in repairing the error and the arrogant attitude of the
bank officer handling the matter, justifies the grant of moral
damages, which are clearly not excessive and unconscionable.
Moreover, considering the nature and extent of the services
rendered by private respondent's counsel, both in the trial and
appellate courts, the Court deems it just and equitable that
attorney's fees in the amount of P50,000.00 be awarded.
WHEREFORE, the decision of respondent Court of Appeals is
AFFIRMED in all respects.
SO ORDERED.
FIRST DIVISION
G.R. No. 108555 December 20, 1994
RAMON TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and RIZAL
COMMERCIAL BANKING CORPORATION, respondents.
Yulo, Quisumbing, Torres, Ali & Bello Law Offices for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
KAPUNAN, J.:
This petition seeks to set aside the decision of the Court of Appeals
dated January 12, 1993 in CA-G.R. CV No. 31083, entitled Ramon
Tan, plaintiff-appellee, vs. Rizal Commercial Banking
Corporation, defendant-appellant, reversing the decision of the
Regional Trial Court dated December 28, 1990 ordering
respondent bank Rizal Commercial Banking Corporation (RCBC),
Binondo Branch, to pay petitioner damages and attorney's fees in
the amount of ONE MILLION THIRTY FIVE THOUSAND
(P1,035,000.00) PESOS.
The following are the uncontroverted facts:
Petitioner Ramon Tan, a trader-businessman and community
leader in Puerto Princesa, had maintained since 1976 Current
BANKING for MT Page 20 of 32
Account No. 109058068 with respondent bank's Binondo branch.
On March 11, 1988, to avoid carrying cash while enroute to Manila,
he secured a Cashier's Check No. L 406000126 from the Philippine
Commercial Industrial Bank (PCIB), Puerto Princesa branch, in the
amount of Thirty Thousand (P30,000.00) Pesos, payable to his
order. He deposited the check in his account with RCBC Binondo
on March 15. On the same day, RCBC erroneously sent the same
cashier's check for clearing to the Central Bank which was returned
for having been "missent" or "misrouted." 1 The next day, March 16,
RCBC debited the amount covered by the same cashier's check
from the account of the petitioner. Respondent bank at this time
had not informed the petitioner of its action which the latter claims
he learned of only 42 days after, specifically on March 16, when he
received the bank's debit memo.2 Relying on the common
knowledge that a cashier's check was as good as cash, that the
usual banking practice that local checks are cleared within three (3)
working days and regional checks within seven (7) working days,
and the fact that the cashier's check was accepted, petitioner
issued two (2) personal checks both dated March 18. Check No.
040719 in the name of Go Lac for Five Thousand Five Hundred
(P5,5000.00) Pesos was presented on April 25, 3 more than 30 days
from petitioner's deposit date of the cashier's check. Check
No. 040718 in the name of MS Development Trading Corporation
for Six Thousand Fifty-Three Pesos and Seventy Centavos
(P6,053.70) was returned twice on March 24, nine (9) days from his
deposit date and again on April 26, twenty-two days after the day
the cashier's check was deposited for insufficiency of funds. 4
Petitioner, alleging to have suffered humiliation and loss of face in
the business sector due to the bounced checks, filed a complaint
against RCBC for damages in the Regional Trial Court of Palawan
and Puerto Princesa, Branch 47, docketed as Civil Case No. 2101. 5
During the trial, petitioner sought to prove:
First, that it was RCBC's responsibility to call his attention there and
then that he had erroneously filled the wrong deposit slip at the
time he deposited the cashier's check with the respondent bank's
teller and it was negligence on RCBC's part not to have done so; 6
Second, that RCBC had been remiss in the performance of its
obligation to the petitioner when it "missent" the cashier's check to
the Central Bank knowing, as it should, that the source of the
check, PCIB, Puerto Princesa Branch, is not included in the areas
required to be cleared by the Central Bank, a fact known to the
banking world and surely to the respondent bank; 7
Third, that RCBC upon knowing of its error in "missending" the
cashier's check to the Central Bank did not attempt to rectify its
"misclearing" error by clearing it seasonably with PCIB, Puerto
Princesa, thru its own RCBC Puerto Princesa Branch with whom it
had direct radio contact; 8
Fourth, that as an old client, with twelve (12) years of good
standing then, RCBC should have given him more consideration by
exerting greater diligence in clearing the check with PCIB, Puerto
Princesa, to protect its client's interest; 9
Fifth, that RCBC failed to inform petitioner promptly that the check
had not been cleared, despite its debiting without delay the
amount covered by the check from the account of the petitioner
and hastily charging the latter service fees immediately after the
return of the "missent checks"; 10 and
Finally, that the bounced checks resulting from RCBC's
"misclearing" had put in doubt his credibility among his business
peers and sullied his reputation as a community leader which he
had painstakingly cultivated for years. His community standing as a
business-socio-civic leader was a source of pride for him in his old
age of 70. He cited being Chairman of Palawan Boy Scout Council,
2-term President of the Rotary Club of Puerto Princesa, member of
Palawan Chamber of Commerce and Industry, member of the
Monitoring Team of the Palawan Integrated Area Development
Project, member of Lion's Club, Philippine Rifle Pistol Association
and the Saturday Health Club to justify his claim for moral
damages. 11
In its defense, RCBC disowning any negligence, put the blame for
the "misrouting" on the petitioner for using the wrong check
deposit slip. It insisted that the misuse of a local check deposit slip,
instead of a regional check deposit slip, triggered the "misrouting"
by RCBC of the cashier's check to the Central Bank and it was
petitioner's negligent "misuse" of a local deposit slip which was the
proximate cause of the "misrouting," thus he should bear the
consequence. 12
RCBC alleged that it complied strictly with accepted banking
practice when it debited the amount of P30,000.00 against
petitioner's account since under Resolution No. 2202 dated
December 21, 1979 of the Monetary Board, it is a matter of policy
to prohibit the drawing against uncollected deposits (DAUDS)
except when the drawings are made against uncollected deposits
representing bank manager's/cashier's/treasurer's checks, treasury
warrants, postal money orders and duly funded "on us" checks
which may be permitted at the discretion of each bank. 13Without
crediting the P30,000.00 deposit, petitioner's balance before and
after was Two Thousand Seven Hundred
Ninety-Two Pesos and the (P2,792.88) Eighty-Eight
Centavos. 14 Thus, it dishonored the two (2) checks amounting to
P11,553.70 since they were drawn against insufficient funds. RCBC
added that petitioner had no bills purchase (BP) line which allows a
depositor to receive or draw from proceeds of a check without
waiting it to be cleared. Besides, RCBC maintained, had it
forwarded the Cashier's Check to PCIB Puerto Princesa, Palawan, it
would take at least twenty (20) working days for the cashier's check
to be cleared and it would take the same length of time to clear
the two (2) personal checks of Tan. 15
RCBC further asseverated it was merely acting as petitioner's
collecting agent and it assumed no responsibility beyond care in
selecting correspondents under the theory that where a check is
deposited with a collecting bank the relationship created is that of
agency and not creditor-debtor, thus it cannot be liable. 16
Finally, respondent claimed that serious attempts were made to
contact petitioner through the telephone numbers in the signature
specimen card of petitioner but to no avail. 17 The Assistant Branch
Accountant of RCBC Binondo Branch testified that the first
telephone number in the card had been deleted from the phone
company's list and that when RCBC tried to contact petitioner's
daughter Evelyn Tan-Banzon thru a certain telephone number and
when they asked for Evelyn Tan, they were told there was no such
person. 18
The trial court rendered a decision on December 28, 1990 in
petitioner's favor, the dispositive portion 19 of which reads:
WHEREFORE, premises considered, plaintiff
having proven the allegations of his verified
complaint by preponderance of evidence, the
court hereby renders judgment ordering
defendant bank, Binondo Branch, Manila, to pay
him damages and attorney's fees in the total
amount of P1,035,000.00 Philippine Currency,
broken down as follows: P700,000.00 as moral
damages, P200,000.00 as exemplary damages;
P135,000.00 which is 15% of the sum herein
awarded to plaintiff, as attorney's fees and to
pay costs of suit.
For having failed to prove by any receipt or
writing to underpin it, plaintiff's claim for actual
damage is denied for lack of merit.
IT IS SO ORDERED.
RCBC appealed to the Court of Appeals contending that the trial
court erred in holding RCBC liable to petitioner on account of its
BANKING for MT Page 21 of 32
alleged negligence and in awarding petitioner moral and
exemplary damages and attorney's fees.
The Court of Appeals on January 12, 1993 rendered a
decision 20 with the following decretal portion:
WHEREFORE, and upon all the foregoing, the
decision of the court below is REVERSED and
this complaint is DISMISSED without
pronouncement as to cost.
The Court of Appeals' decision is based on the following
findings: 21
What appeared to have caused the unfortunate
incident was that the plaintiff filled up the
wrong deposit slip which led to the sending of
the check to the Central Bank when the clearing
should have been made elsewhere.
But the claim of the plaintiff that he was not
advised that the Cashier's check was missent
does not seem to be correct. The evidence
indicated that the defendant bank thru its
personnel had called him up thru telephone in
the number (No. 60-45-23) which he gave in his
specimen signature card. But it came out, that
said telephone number was no longer active or
was already deleted from the list of telephone
numbers.
There was an instruction on the part of the
plaintiff for the bank to contact his daughter,
Mrs. Evelyn Tan Banzon and according to the
plaintiff, she too, was not contacted as per his
instruction. The evidence, however, indicated
that Ms. Evelyn Tan also could not be contacted
at the number supposed to pertain to her as
appeared in the specimen signature card. In
other words while there was compliance with
the instructions given by the plaintiff but said
instructions were faulty. The plaintiff as a
customer of the bank is under obligation to
inform the defendant of any changes in the
telephone numbers to be contacted in the
event of any exigency.
All in all, the facts indicate that the refusal of
RCBC to credit the amount of P30,000.00 to the
plaintiff's current account is consistent with the
accepted banking practice. As the defendant
bank had claimed, under Resolution No. 2202
dated December 21, 1979 of the Monetary
Board, it had been emphatically declared as a
matter of policy that no drawings should be
made against uncollected deposits except when
the drawings are made against uncollected
deposits representing bank
manager's/cashier's/treasurer's checks, treasury
warrants, postal money orders, and duly funded
"on-us" checks as may be permitted at the
discretion of each bank.
It is clear that immediate payment without
awaiting clearance of a cashier's check is
discretionary with the bank to whom the check
is presented and such being the case, the
refusal to allow it as in this case is not to be
equated with negligence in the basic
perception that discretion is not demandable as
a right. In the instant case, prior to the deposit
of P30,000.00, the plaintiff's account appeared
to be only in the amount of P2,792.98. So the
two (2) checks issued by the plaintiff amounting
to P11,553.70 had to be dishonored since they
were drawn against insufficient funds.
What the plaintiff should have done, before
issuing the two (2) checks, was to await the
clearance of the Cashier's check and his failure
to do so is a fault not ascribable to the
defendant who appeared under the
circumstance merely to have followed the usual
banking practice.
Petitioner now seeks to reverse the decision of the Court of
Appeals and affirm that of the lower court. He raises the following
errors:
1. THE HONORABLE COURT OF APPEALS
COMMITTED GROSS AND MANIFEST ERROR IN
CONCLUDING THAT THE NEGLIGENCE WAS
ASCRIBABLE TO HEREIN PETITIONER.
2. THE HONORABLE COURT OF APPEALS
GRAVELY ABUSED ITS DISCRETION IN FINDING
THAT THE RESPONDENT BANK HAD NOT BEEN
REMISS IN THE PERFORMANCE OF ITS
OBLIGATIONS TO HEREIN PETITIONER.
3. THE HONORABLE COURT OF APPEALS
COMMITTED GROSS AND MANIFEST ERROR
AND GRAVE ABUSE OF DISCRETION IN
REVERSING THE AWARD OF MORAL AND
EXEMPLARY DAMAGES TO THE PETITIONER.
4. THE HONORABLE COURT OF APPEALS
COMMITTED GROSS AND MANIFEST ERROR
AND GRAVE ABUSE OF DISCRETION IN NOT
AWARDING ATTORNEY'S FEES TO PETITIONER.
In a most recent case decided by this Court, City Trust Corporation
v. The Intermediate Appellate Court, 22involving damages against
City Trust Banking Corporation, the depositor, instead of stating
her correct account number 29000823 inaccurately wrote 2900823.
Because of this error, six postdated checks amounting to
P20,209.00 she issued were dishonored for insufficiency of funds.
The Regional Trial Court dismissed the complaint for lack of merit.
The Court of Appeals, however, found the appeal meritorious and
ordered the bank to pay nominal damages of P2,000.00, temperate
and moderate damages of P5,000.00 and attorney's fees of
P4,000.00. Upon review, this Court quoted with favor the
disquisition of the appellate court:
We cannot uphold the position of defendant.
For, even if it be true that there was error on
the part of the plaintiff in omitting a zero in her
account number, yet, it is a fact that her name,
Emma E. Herrero, is clearly written on said
deposit slip (Exh. B). This is controlling in
determining in whose account the deposit is
made or should be posted. This is so because it
is not likely to commit an error in one's name
that merely relying on numbers which are
difficult to remember, especially a number with
eight (8) digits as the account numbers of
defendant's depositors. We view the use of
numbers as simply for the convenience of the
bank but was never intended to disregard the
real name of its depositors. The bank is
engaged in business impressed with public
interests, and it is its duty to protect in return
its many clients and depositors who transact
business with it. It should not be a matter of the
bank alone receiving deposits, lending out
money and collecting interests. It is also its
obligation to see to it that all funds invested
BANKING for MT Page 22 of 32
 with it are properly accounted for and duly
posted in its ledgers.
In the case before Us, we are not persuaded
that defendant bank was not free from blame
for the fiasco. In the first place, the teller should
not have accepted plaintiff's deposit without
correcting the account number on the deposit
slip which, obviously, was erroneous because,
as pointed out by defendant, it contained only
seven (7) digits instead of eight (8). Second, the
complete name of plaintiff depositor appears in
bold letters on the deposit slip (Exh. B). There
could be no mistaking in her name, and that
the deposit was made in her name, Emma E.
Herrero. In fact, defendant's teller should not
have fed her deposit slip to the computer
knowing that her account number written
thereon was wrong as it contained only seven
(7) digits. As it happened, according to
defendant, plaintiff's deposit had to be
consigned to the suspense accounts pending
verification. This, indeed, could have been
avoided at the first instance had the teller of
defendant bank performed her duties efficiently
and well. For then she could have readily
detected that the account number in the name
of Emma E. Herrero was erroneous and would
be rejected by the computer. That is, or should
be, part of the training and standard operating
procedure of the bank's employees. On the other
hand, the depositors are not concerned with
banking procedure. That is the responsibility of
the bank and its employees. Depositors are only
concerned with the facility of depositing their
money, earning interest thereon, if any, and
withdrawing therefrom, particularly
businessmen, like plaintiff, who are supposed to
be always on-the-go. Plaintiff's account is a
current account which should immediately be
posted. After all, it does not earn interest. At
least, the forbearance should be
commensurated with prompt, efficient and
satisfactory service.
Bank clients are supposed to rely on the services
extended by the bank, including the assurance
that their deposits will be duly credited them as
soon as they are made. For, any delay in
crediting their account can be embarrassing to
them as in the case of plaintiff.
The point is that as a business affected with
public interest and because of the nature of its
functions, the bank is under obligation to treat
the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature
of their relationship. (Emphasis supplied).
In the light of the above-cited case, the respondent bank cannot
exculpate itself from liability by claiming that its depositor
"impliedly instructed" the bank to clear his check with the Central
Bank by filling a local check deposit slip. Such posture is
disingenuous, to say the least. First, why would RCBC follow a
patently erroneous act born of ignorance or inattention or both.
Second, bank transactions pass through a succession of bank
personnel whose duty is to check and countercheck transactions
for possible errors. In the instant case, the teller should not have
accepted the local deposit slip with the cashier's check that on its
face was clearly a regional check without calling the depositor's
attention to the mistake at the very moment this was presented to
her. Neither should everyone else down the line who processed the
same check for clearing have allowed the check to be sent to
Central Bank. Depositors do not pretend to be past master of
banking technicalities, much more of clearing procedures. As soon
as their deposits are accepted by the bank teller, they wholly
repose trust in the bank personnel's mastery of banking, their and
the bank's sworn profession of diligence and meticulousness in
giving irreproachable service.
We do not subscribe to RCBC's assertion that petitioner's use of
the wrong deposit slip was the proximate cause of the clearing
fiasco and so, petitioner must bear the consequence. In Pilipinas
Bank, v. CA, 23 this Court said:
The bank is not expected to be infallible but, as
correctly observed by respondent Appellate
Court, in this instance, it must bear the blame
for not discovering the mistake of its teller
despite the established procedure requiring the
papers and bank books to pass through a
battery of bank personnel whose duty it is to
check and countercheck them for possible
errors. Apparently, the officials and employees
tasked to do that did not perform their duties
with due care, . . .
So it is in the instance case, where the conclusion is inevitable that
respondent RCBC had been remiss in the performance of its duty
and obligation to its client, as well as to itself. We draw attention to
the fact that the two dishonored checks issued by petitioner, Check
No. 040719 and Check
No. 040718 were presented for payment 24 more than 45 days
from the day the cashier's check was deposited. This gave RCBC
more than ample time to have cleared the cashier's check had it
corrected its "missending" the same upon return from Central Bank
using the correct slip this time so it can be cleared properly.
Instead, RCBC promptly debited the amount of P30,000.00 against
petitioner's account and left it at that.
We observe, likewise, that RCBC inquired about an Evelyn Tan but
no Evelyn Tan-Banzon as specifically instructed in the same
signature card. (Emphasis supplied) 25
RCBC insists that immediate payment without awaiting clearance
of a cashier's check is discretionary with the bank to whom the
check is presented and such being the case, its refusal to
immediately pay the cashier's check in this case is not to be
equated with negligence on its part. We find this disturbing and
unfortunate.
An ordinary check is not a mere undertaking to pay an amount of
money. There is an element of certainty or assurance that it will be
paid upon presentation that is why it is perceived as a convenient
substitute for currency in commercial and financial transactions.
The basis of the perception being confidence. Any practice that
destroys that confidence will impair the usefulness of the check as
a currency substitute and create havoc in trade circles and the
banking community. 26
Now, what was presented for deposit in the instant cases was not
just an ordinary check but a cashier's check payable to the account
of the depositor himself. A cashier's check is a primary obligation
of the issuing bank and accepted in advance by its mere
issuance. 27 By its very nature, a cashier's check is the bank's order
to pay drawn upon itself, committing in effect its total resources,
integrity and honor behind the check. A cashier's check by its
peculiar character and general use in the commercial world
is regarded substantially to be as good as the money which it
represents.28 In this case, therefore, PCIB by issuing the check
created an unconditional credit in favor of any collecting bank.
All these considered, petitioner's reliance on the layman's
perception that a cashier's check is as good as cash is not entirely
misplaced, as it is rooted in practice, tradition, and principle. We
see no reason thus why this so-called discretion was not exercised
in favor of petitioner, specially since PCIB and RCBC are members
of the same clearing house group relying on each other's solvency.
BANKING for MT Page 23 of 32
RCBC could surely rely on the solvency of PCIB when the latter
issued its cashier's check.
On the third and fourth issue, RCBC contends that moral damages
cannot be recovered in an action for breach of contract since
under Article 2219 of the New Civil Code, the instant case is not
among those enumerated. For an award of moral damages in a
breach of contract, it is imperative that the party acted in bad faith
or fraudulently as provided for in Art. 2220 of the Civil Code, to wit:
Art. 2220. Willful injury to property may be a
legal ground for awarding moral damages if the
court should find that, under the circumstances,
such damages are justly due. The same rule
applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
In the absence of moral damages, RCBC argues, exemplary
damages cannot be awarded under Art. 2225 of the same Code
which states:
Exemplary damages or corrective damages are
imposed, by way of example or correction for
the public good, in addition to the moral,
temperate, liquidated or compensatory
damages.
We hold that petitioner has the right to recover moral damages
even if the bank's negligence may not have been attended with
malice and bad faith. In American Express International, Inc. v.
IAC, 29 we held:
While petitioner was not in bad faith, its
negligence caused the private respondent to
suffer mental anguish, serious anxiety,
embarrassment and humiliation, for which he is
entitled to recover, reasonable moral damages
(Art. 2217, Civil Code).
In Zenith Insurance Corporation v. CA, 30 we also said that moral
damages are not meant to enrich a complainant at the expense of
defendant. It is only intended to alleviate the moral suffering he
has undergone. In the instant case, we find the award of
P700,000.00 as moral damages excessive and, accordingly, reduce
it to one hundred thousand (P100,000.00) pesos. We find the
award of exemplary damages of P200,000.00 unjustified in the
absence of malice, bad faith or gross negligence. 31 The award of
reasonable attorney's fees is proper for the petitioner was
compelled to litigate to protect his interest. 32
IN VIEW WHEREOF, we REVERSE the decision of respondent Court
of Appeals and hereby order private respondent RCBC, Binondo
Branch, to pay petitioner the amount of one hundred thousand
(P100,000.00) pesos as moral damages and the sum of fifty
thousand (P50,000.00) pesos as attorney's fees, plus costs.
SO ORDERED.
FIRST DIVISION
G.R. No. 116181 April 17, 1996
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS and CARMELO H. FLORES, respondents.
KAPUNAN, J.:p
This is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court assailing the decision and resolution of the
respondent Court of Appeals in CA-G.R. CV No. 38281 dated 31
January 1994 and 5 July 1994, respectively, which affirmed the
decision of the Regional Trial Court in Civil Case No. Q-89-4033
declaring Philippine National Bank liable to Carmelo H. Flores for
damages.
The facts of the case are as follows:
On 11 July 1989, private respondent Carmelo H. Flores (Flores)
purchased from petitioner at its Manila Pavilion Hotel unit, two (2)
manager's checks worth P500,000.00 each, paying a total of
P1,000,040.00, including the service charge. 1 A receipt for said
amount was issued by the petitioner. 2
On 12 July 1989, Flores presented these checks at the Baguio Hyatt
Casino unit of petitioner. Petitioner refused to encash the checks
but after a lengthy discussion, it agreed to encash one (1) of the
checks. 3 However, it deferred the payment of the other check until
after Flores agreed that it be broken down to five (5) manager's
checks of P100,000.00 each. Furthermore, petitioner refused to
encash one of the five checks until after it is cleared by the Manila
Pavilion Hotel unit. 4 Having no other option, Flores agreed to such
an arrangement. However, upon his return to Manila, he made
representations to petitioner through its Malate Branch so that the
check may be encashed but to no avail. 5 Flores, thereafter, wrote a
letter to his counsel informing the latter of the aforementioned
events. 6 A Formal Demand was made by private respondent's
counsel but petitioner persisted in its refusal to honor the check. 7
Left with no other choice, Flores filed a case with the Regional Trial
Court of Quezon City, Branch 100, docketed as Civil Case No. Q-
89- 4033. 8
In its Answer with Compulsory Counterclaim, petitioner insisted
that only P900,000.00 and P40.00 bank charges were actually paid
by Flores when he purchased the two (2) manager's checks worth
P1,000,000.00. It alleged that due to Flores' "demanding attitude
and temper," petitioner's money counter, Rowena Montes, who, at
that time was still new at her job, made an error in good faith in
issuing the receipt for P1,000,040.00. 9 The actuations of Flores
allegedly distracted the personnel manning the unit. 10
After trial, the court rendered its decision on 5 May 1992, the
dispositive portion of which states:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiff and
against the defendant Philippine National Bank
as follows:
a) ordering the defendant to pay plaintiff the
sum of P100,000.00 representing the amount of
the check dishonored with interest thereon at
the legal rate per annum from November 16,
1989 until fully paid;
b) ordering defendant to pay plaintiff for the
embarrassment caused him the amount of
P1,000,000.00 as moral damages;
c) ordering defendant to pay plaintiff the
amount of P1,000,000.00 as exemplary
damages brought about by the malevolent and
malicious acts of the former;
d) ordering defendant to pay plaintiff the sum
of P50,000.00 as attorney's fees; and
e) ordering defendant to pay the costs of the
suit.
BANKING for MT Page 24 of 32
 SO ORDERED. 11
Petitioner interposed an appeal with the respondent court,
docketed as CA-G.R. CV No. 38281 assigning the following errors,
to wit:
I ACTUAL CLAIM OF P100,000 IS
THE TRIAL COURT ERRED IN HOLDING ON THE
BASIS OF THE RECEIPT MARKED EXH. "A" THAT
IN PURCHASING THE TWO MANAGER'S
CHECKS ON JULY 11, 1989, APPELLEE FLORES
PAID PNB P1,000,000.40 DESPITE (1) THAT THE
SAID RECEIPT DOES NOT SHOW, OR AFFORD
THE BEST PROOF OF THE CORRECT AMOUNT
PAID BY FLORES TO PNB AND (2) THAT AS
SHOWN BY PREPONDERANT AND
CONCLUSIVE EVIDENCE, APPELLEE PAID PNB
P900,040 ONLY IN ONE MANAGER'S CHECK
AND MONETARY BILLS.
II
THE TRIAL COURT ERRED IN AWARDING
FLORES P1 MILLION MORAL DAMAGES, P1
MILLION EXEMPLARY DAMAGES, AND
P500,000 (sic) ATTORNEY'S FEES DESPITE (1)
THAT PNB'S REFUSAL TO ENCASH THE
P100,000 MANAGER'S CHECK (EXH. "B") WAS
JUSTIFIED, AS FLORES WAS NEVER ENTITLED
TO THE MONEY; (2) THAT THERE IS ABJECT
ABSENCE OF EVIDENCE THAT PNB ACTED
FRAUDULENTLY OR MALICIOUSLY, EVEN AS
GOOD FAITH IS PRESUMED; AND (3) THAT
FLORES' ALLEGED EMBARRASSMENT FOR HIS
FAILURE TO PURCHASE A HOUSE AND LOT
DUE TO PNB'S REFUSAL TO ENCASH THE
WHOLE P1 MILLION 1S UNFOUNDED. 12
On 31 January 1994, the Court of Appeals rendered the questioned
decision, the dispositive portion of which reads:
WHEREFORE, the appealed decision of the
lower court in Civil Case No. Q-89-4033 is
hereby AFFIRMED by the Court.
Costs against defendant-appellant.
SO ORDERED. 13
A motion for reconsideration was filed but it was likewise denied in
a resolution dated 5 July 1994, 14 thus, the present action with
petitioner raising the following issues, to wit:
I from Flores in exchange for its managerial checks. However, aside
WHETHER OR NOT THE CA ERRED IN LAW IN
HOLDING THAT, THE BEST EVIDENCE TO SHOW
WHETHER MR. FLORES PAID THE PNB CASINO
UNIT P900,040 OR P1,000,040 IN PURCHASING
THE TWO MANAGER'S CHECKS EACH WORTH
P500,000 IS THE RECEIPT FOR P1,000,040.
II
WHETHER OR NOT PNB CAN PRESENT
COMPETENT AND RELEVANT EVIDENCE TO
SUPPORT ITS ALLEGATION IN THE ANSWER
THAT MR. FLORES ACTUALLY PAID P900,040
AND NOT P1,000,040 FOR THE SUBJECT
MANAGER'S CHECKS.
III
WHETHER OR NOT THE AWARD FOR P1
MILLION MORAL DAMAGES, P1 MILLION
EXEMPLARY DAMAGES, AND P50,000
ATTORNEY'S FEES, AS COMPARED TO THE
DISPROPORTIONATE AND
UNCONSCIONABLE. 15
We shall deal with the first and second issues raised by petitioner
together as they are interrelated.
Petitioner concedes that it issued the subject receipt for
P1,000,040.00 to Flores; yet, in the same breath, it immediately
counters that said receipt is not the best evidence to prove how
much money Flores actually paid for the purchase of petitioner's
manager's checks.
Further, petitioner insists that the issue in the instant case is not
the contents of the subject receipt but the exact amount of money
Flores paid to PNB, an inquiry which, petitioner avers, allows the
presentation of evidence aliunde.
Petitioner's contentions are unmeritorious.
A "receipt" is defined as:
A written and signed acknowledgment that
money has been paid or goods have been
delivered. A receipt is merely presumptive
evidence and is not conclusive.
A written acknowledgment that money or a
thing of value has been received. Since a receipt
is a mere acknowledgment of payment, it may
be subject to explanation or contradiction. A
receipt may be used as evidence against one
just as any other declaration or admission. A
simple receipt not under seal is presumptive
evidence only and may be rebutted or
explained by other evidence of mistake in
giving it, or of non-payment or of the
circumstances under which it was
given. 16 (Emphasis ours.)
Although a receipt is not conclusive evidence, in the case at bench,
an exhaustive review of the records fails to disclose any other
evidence sufficient and strong enough to overturn the
acknowledgment embodied in petitioner's own receipt (as to the
amount of money it actually received).
Petitioner contends that it offered in court evidence of the
particulars or the actual denominations of the money it received
from the self-serving testimonies of petitioner's witnesses, we fail
to discover any such evidence in the records. In the words of the
trial court:
After having thoroughly evaluated the
evidences (sic) on record, the Court finds and so
believes that plaintiff indeed paid defendant
the amount of P1,000,040.00 when he
purchased the two (2) manager's checks worth
(sic) P1,000,000.00. This is clearly manifested
from the receipt issued by the defendant
wherein it explicitly admits that the amount
stated therein is what plaintiff actually
paid. While the defendant does not dispute the
receipt it issued to the plaintiff, it endeavored to
prove that the actual amount involved in the
entire transaction is only P900,000.00 that is
P450,000.00 manager's check and P450,000.00
BANKING for MT Page 25 of 32
 cash by submitting in evidence, the application
forms filled up by the plaintiff, Exhibits "1, 2, 3
and 4". As may be readily seen, these application
forms relied upon by the defendant have no
probative value for they do not yield any direct
proof of payment. Besides defendant even failed
to adduce concrete evidence showing that
these forms which were crumpled and retrieved
from the waste basket were made the basis of
the approval of the purchased (sic) made. At
any rate, the Court finds such pieces of
evidence not only unconvincing but also self-
defeating in the light of the receipt, the
accuracy, correctness and due execution of
which was indubitably established. It is a
cardinal rule in the law on evidence that the
best proof of payment is the
receipt. 17 (Emphasis ours.)
In Monfort v. Aguinaldo, 18 the receipts of payment, although not
exclusive, were deemed to be the best evidence. Thus:
That the best evidence for proving payment is
by the evidence of receipts showing the same is
also admitted. What respondents claim is that
there is no rule which provides that payment
can only be proved by receipts. While receipts
are deemed to be the best evidence, they are
not exclusive. Other evidence may be presented
in lieu thereof if they are not available, as in
case of loss, destruction or disappearance. The
fact of payment may be established not only by
documentary evidence, but also by parol
evidence (48 C.J. 727; Greenleaf, Law of
Evidence, Vol. II, p. 486; Jones on Evidence
[1913] Vol. II, p. 193), specially in civil cases
where preponderance of evidence is the rule.
Here respondents presented documentary as
well as oral evidence which the Court of
Appeals found to be sufficient, and this finding
is final.
In the instant case, petitioner's contention that Flores paid
P900,000.00 only instead of P1,000,000.00 (exclusive of bank
charges) in the following denominations: a manager's check worth
P450,000.00; P430,000.00 in P100.00 bills; and P20,000.00 in
P500.00 bills, was based solely on the testimonies of petitioner's
bank employees the very ones involved in the fiasco, 19 and not
on any other independent evidence. Hence, having failed to
adduce sufficient rebuttal evidence, petitioner is bound by the
contents of the receipt it issued to Flores. The subject receipt
remains to be the primary or best evidence or "that which affords
the greatest certainty of the fact in question. 20
On the issue of damages, we concur with the findings of the trial
court and the Court of Appeals, respectively:
Since there is no doubt as to the fact that the
plaintiff purchased from the defendant bank
two (2) manager's check worth P500,000.00
each as this was evidenced by an official receipt
(Exhibit "A"), then, following the above
jurisprudential ruling, the existence of the
manager's check (sic) created as (sic) fiduciary
relationship between the defendant bank and
the plaintiff and therefore any breach thereof
must be borne by the negligent party. In this
case, the money counter who, among her other
duties, is in charge of counting the money
received from a client purchasing a manager's
check did not perform her duty with diligence
and due care. This may be gathered from her
testimony that she did not wait for the counting
machine to finish counting the money for the
plaintiff is a VIP client and he was in a hurry as
he was tapping the window (p. 37, T.S.N.,
August 28, 1990). Equally negligent is Reynaldo
Castor for not doing anything when he noticed
that their money counters who entertained the
plaintiff were rattled. From these unfolded facts,
the so-called honest mistake pleaded is
therefore misplaced and perforced, defendant
must suffer the consequences of its own
negligent acts.
The records further show that plaintiff is a
prominent businessman, licensed and engaged
in the real estate business, buying and selling
houses and lots under the business name and
style CMS Commercial. He is at the same time a
consultant of Dizon-Esguerra Real Estate
Company. Defendant treated him as a valued
and VIP client. Because of the bank's refusal to
encash the entire one million face amount of
his manager's checks, he was so embarrassed
for he was not able to purchase a house and lot
in Monterroza Subdivision, Baguio City.
Significantly, the foregoing undisputed facts
made even more untenable defendant's implicit
supposition that the subject manager's checks
were not intended for the purchase of a house
or for any business transaction but for
gambling.
Finally, since plaintiff was compelled to litigate
to protect its interest due to the non-
compliance of defendant's obligation, he is
therefore entitled to attorney's fees (par. 5,
article 2208, Civil Code of the Philippines). 21
xxx xxx xxx
Appellee Flores narrated his woes to the lower
court when appellant bank refused to honor his
Manager's Checks worth P1 Million because of
the alleged shortage in appellee's payment to
the effect that he had to go back and forth the
bank to encash said checks (pp. 16-18, t.s.n.,
July 2, 1990), and that he lost a deal of (sic) a
house for sale in Baguio City worth P1 Million
as he could not produce said amount withheld
by the appellant bank (p. 22, Id.,) Appellee
Flores further testified as to the effect of the
incident on his integrity as a businessman as
follows:
Yes, my integrity and
dependability as a
businessman is highly
doubted in Baguio because
of the PNB refusal to honor
the two (2) manager's
checks inspite of them
issuing me the receipt. So,
whenever I make a deal in
house and they would now
even doubt whether I have
the money to buy the house
that I am buying, it greatly
affected my integrity as a
businessman in Baguio. (p.
25, t.s.n., Id.)
In the case of Makabali v. C.A., 157 SCRA 253,
the Supreme Court reiterated the doctrine on
the grant of moral and exemplary damages, as
follows:
BANKING for MT Page 26 of 32
 To begin with, there is no
hard and fast rule in the
determination of what
would be a fair amount of
moral damages, since each
case must be governed by
its own peculiar
circumstances.
Article 2217 of the Civil
Code recognizes that moral
damages which include
physical suffering, mental
anguish, fright, serious
anxiety, besmirched
reputation, wounded
feelings, moral shock, social
humiliation and similar
injury, are incapable of
pecuniary estimation.
As to exemplary damages,
Article 2229 of the Civil
Code provides that such
damages may be imposed
by way of example or
correction for the public
good. While exemplary
damages cannot be
recovered as a matter of
right, they need not be
proved, although plaintiff
must show that he is
entitled to moral, temperate
or compensatory damages
before the court may
consider the question of
whether or not exemplary
damages should be
awarded. 22
However, we give consideration to petitioner's allegation that the
award of P1,000,000.00 moral damages and P1,000,000.00
exemplary damages in addition to Flores' actual claim of
P100,000.00 is "inordinately disproportionate and
unconscionable." 23
Under the circumstances obtaining in the case at bench, we rule
that the award of moral and exemplary damages is patently
excessive and should be reduced to a reasonable amount. We take
into consideration the following factors:
First, Flores' contention that he lost the opportunity to purchase a
house and lot in Baguio City due to petitioner's gross negligence is
based solely on his own testimony and a mere general statement
at that. The broker he named during his cross-examination on 10
July 1990, a Mr. Nick Buendia was not even presented to confirm
the aforementioned allegation:
xxx xxx xxx
Q. You also stated that this
amount was intended for
the purchase of the real
estate property in Baguio, is
that right?
A. Yes.
Q. Can you tell this
Honorable Court where is
this specific property located
in Baguio?
A. It is located in Monterosa
Subdivision.
Q. Can you tell us the
number of the street?
A. It is within the Monterosa.
Q. Can you identify the
name of the person with
whom you transacted?
A. Your Honor, I have the
papers and during the next
hearing I will bring it.
ATTY. D. VALDEZ:
Is that meant, Your Honor
that we are continuing the
cross examination on the
next hearing considering
that he will show a certain
document.
Q. Can you not reveal to us
the name of the person with
whom you transacted?
A. As I have said I could not
be guessing because it was
coursed through another
broker.
And, this broker usually did
not tell you who is the
owner.
Q. What I am asking you is
the person whom you
transacted and not
necessarily the owner? We
are supposed to know, Your
Honor.
COURT:
The name of the broker.
A. The name of the broker,
Your Honor is Nick Buendia.
Q. Do you know what
subsequently happened if
there was anything
happened to that property
that was being sold?
A. It was sold.
Q. To someone else?
A. Yes.
Q. At the time you were
purchasing the manager's
checks for one (1M) million
you intended this as a
payment for the property?
A. Yes. 24
BANKING for MT Page 27 of 32
 xxx xxx xxx
Second, the award of moral damages in the amount of
P1,000,000.00 is obviously not proportionate to the actual losses of
P100,000.00 sustained by Flores. In RCPI v. Rodriguez, 25 we ruled
thus:
. . . . Nevertheless, we find the award of
P100,000.00 as moral damages in favor of
respondent Rodriguez excessive and
unconscionable. In the case of Prudenciado
v. Alliance Transport System, Inc. (148 SCRA 440
[1987]) we said: ". . . [I]t is undisputed that the
trial courts are given discretion to determine
the amount of moral damages (Alcantara v.
Surro, 93 Phil. 472) and that the Court of
Appeals can only modify or change the amount
awarded when they are palpably and
scandalously excessive "so as to indicate that it
was the result of passion, prejudice or
corruption on the part of the trial court"
(Gellada v. Warner Barnes & Co., Inc., 57 O.G.
[4] 7347, 7358; Sadie v. Bachrach Motors Co.,
Inc., 57 O.G. [4] 636 and Adone v. Bachrach
Motor Co., Inc., 57 O.G. 656). But in more recent
cases where the awards of moral and exemplary
damages are far too excessive compared to the
actual losses sustained by the aggrieved party,
this Court ruled that they should be reduced to
more reasonable amounts. . . . . (Emphasis ours.)
In other words, the moral damages awarded must be
commensurate with the loss or injury suffered.
Similarly, we have consistently declared that:
Moral damages though incapable of pecuniary
estimations, are in the category of an award
designed to compensate the claimant for actual
injury suffered and not to impose a penalty on
the wrongdoer (San Andres v. Court of Appeals,
116 SCRA 85 [1982] cited in Prudenciado v.
Alliance Transport System, Inc. supra). 26
We, likewise, take this opportunity to stress that:
. . . [M]oral damages are emphatically not
intended to enrich a complainant at the expense
of the defendant. They are awarded only to
enable the injured party to obtain means,
diversion or amusements that will serve to
obviate the moral suffering he has undergone,
by reason of the defendant's culpable action. Its
award is aimed at the restoration, within the
limits of the possible, of the spiritual status quo
ante, and it must be proportional to the
suffering inflicted. 27 (Emphasis ours.)
It is because of the foregoing reasons that we have had to
constantly remind the courts to desist from awarding excessive
damages disproportionate to the peculiar circumstances of the
case. "Judicial discretion granted to the courts in the assessment of
damages must always be exercised with balanced restraint and
measured objectivity." 28
Finally, we find petitioner's act of issuing the manager's checks and
corresponding receipt before payment thereof was completely
counted reckless and grossly negligent. It is an appalling breach of
bank procedures and must never be repeated.
In Bautista v. Mangaldan Rural Bank, Inc., 29 we stated, thus:.
The banking system has become an
indispensable institution in the modern world
and plays a vital role in the economic life of
every civilized society. Whether as mere passive
entities for the safe-keeping and saving of
money or as active instruments of business and
commerce, banks have attained an unbiquitous
presence among the people, who have come to
regard them with respect and even gratitude
and, most of all, confidence. (Simex
International [Manila], Inc. vs. Court of Appeals,
G.R. No. 88013, March 19, 1990, 183 SCRA 360).
However, the award of P1,000,000.00 exemplary damages is also
far too excessive and should likewise be reduced to an equitable
level. Exemplary damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a
negative incentive to curb socially deleterious actions. 30
Therefore, based on the foregoing discussion, the award of moral
damages is reduced to P100,000.00 and the exemplary damages is
likewise reduced to P25,000.00.
We see no reason to disturb the award of attorney's fees in the
amount of P50,000.00. We concur with the findings of the Court of
Appeals on this matter:
As for the award of attorney's fees, We find the
same in order considering that "defendant
acted in gross and evident bad faith in refusing
to satisfy the plaintiffs plainly valid, just and
demandable claim" (Art. 2208 [5], New Civil
Code), and it is just and equitable to award
plaintiff-appellee his attorney's fees (Art. 2208
[11], id.). 31
WHEREFORE, premises considered, the assailed decision is hereby
MODIFIED as follows:
1. The award of moral damages is reduced from P1,000,000.00 to
P100,000.00; and
2. The award of exemplary damages is reduced from P1,000,000.00
to P25,000.00.
In all other respects, the assailed decision is hereby AFFIRMED.
SO ORDERED.
FIRST DIVISION
G.R. No. 97626 March 14, 1997
PHILIPPINE BANK OF COMMERCE, now absorbed by
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, ROGELIO
LACSON, DIGNA DE LEON, MARIA ANGELITA PASCUAL, et
al., petitioners,
vs.
THE COURT OF APPEALS, ROMMEL'S MARKETING CORP.,
represented by ROMEO LIPANA, its President & General
Manager, respondents.
HERMOSISIMA, JR., J.:
Challenged in this petition for review is the Decision dated
February 28, 1991 1 rendered by public respondent Court of
Appeals which affirmed the Decision dated November 15, 1985 of
the Regional Trial Court, National Capital Judicial Region, Branch
CLX (160), Pasig City, in Civil Case No. 27288 entitled "Rommel's
BANKING for MT Page 28 of 32
Marketing Corporation, etc. v. Philippine Bank of Commerce, now
absorbed by Philippine Commercial and Industrial Bank."
The case stemmed from a complaint filed by the private
respondent Rommel's Marketing Corporation (RMC for brevity),
represented by its President and General Manager Romeo Lipana,
to recover from the former Philippine Bank of Commerce (PBC for
brevity), now absorbed by the Philippine Commercial International
Bank, the sum of P304,979.74 representing various deposits it had
made in its current account with said bank but which were not
credited to its account, and were instead deposited to the account
of one Bienvenido Cotas, allegedly due to the gross and
inexcusable negligence of the petitioner bank.
RMC maintained two (2) separate current accounts, Current
Account Nos. 53-01980-3 and 53-01748-7, with the Pasig Branch
of PBC in connection with its business of selling appliances.
In the ordinary and usual course of banking operations, current
account deposits are accepted by the bank on the basis of deposit
slips prepared and signed by the depositor, or the latter's agent or
representative, who indicates therein the current account number
to which the deposit is to be credited, the name of the depositor
or current account holder, the date of the deposit, and the amount
of the deposit either in cash or checks. The deposit slip has an
upper portion or stub, which is detached and given to the
depositor or his agent; the lower portion is retained by the bank. In
some instances, however, the deposit slips are prepared in
duplicate by the depositor. The original of the deposit slip is
retained by the bank, while the duplicate copy is returned or given
to the depositor.
From May 5, 1975 to July 16, 1976, petitioner Romeo Lipana claims
to have entrusted RMC funds in the form of cash totalling
P304,979.74 to his secretary, Irene Yabut, for the purpose of
depositing said funds in the current accounts of RMC with PBC. It
turned out, however, that these deposits, on all occasions, were not
credited to RMC's account but were instead deposited to Account
No. 53-01734-7 of Yabut's husband, Bienvenido Cotas who likewise
maintains an account with the same bank. During this period,
petitioner bank had, however, been regularly furnishing private
respondent with monthly statements showing its current accounts
balances. Unfortunately, it had never been the practice of Romeo
Lipana to check these monthly statements of account reposing
complete trust and confidence on petitioner bank.
Irene Yabut's modus operandi is far from complicated. She would
accomplish two (2) copies of the deposit slip, an original and a
duplicate. The original showed the name of her husband as
depositor and his current account number. On the duplicate copy
was written the account number of her husband but the name of
the account holder was left blank. PBC's teller, Azucena Mabayad,
would, however, validate and stamp both the original and the
duplicate of these deposit slips retaining only the original copy
despite the lack of information on the duplicate slip. The second
copy was kept by Irene Yabut allegedly for record purposes. After
validation, Yabut would then fill up the name of RMC in the space
left blank in the duplicate copy and change the account number
written thereon, which is that of her husband's, and make it appear
to be RMC's account number, i.e., C.A. No. 53-01980-3. With the
daily remittance records also prepared by Ms. Yabut and submitted
to private respondent RMC together with the validated duplicate
slips with the latter's name and account number, she made her
company believe that all the while the amounts she deposited
were being credited to its account when, in truth and in fact, they
were being deposited by her and credited by the petitioner bank in
the account of Cotas. This went on in a span of more than one (1)
year without private respondent's knowledge.
Upon discovery of the loss of its funds, RMC demanded from
petitioner bank the return of its money, but as its demand went
unheeded, it filed a collection suit before the Regional Trial Court
of Pasig, Branch 160. The trial court found petitioner bank
negligent and ruled as follows:
WHEREFORE, judgment is hereby rendered
sentencing defendant Philippine Bank of
Commerce, now absorbed by defendant
Philippine Commercial & Industrial Bank, and
defendant Azucena Mabayad to pay the
plaintiff, jointly and severally, and without
prejudice to any criminal action which may be
instituted if found warranted:
1. The sum of P304,979.72, representing
plaintiffs lost deposit, plus interest thereon at
the legal rate from the filing of the complaint;
2. A sum equivalent to 14% thereof, as
exemplary damages;
3. A sum equivalent to 25% of the total amount
due, as and for attorney's fees; and
4. Costs.
Defendants' counterclaim is hereby dismissed
for lack of merit. 2
On appeal, the appellate court affirmed the foregoing decision
with modifications, viz:
WHEREFORE, the decision appealed from
herein is MODIFIED in the sense that the
awards of exemplary damages and attorney's
fees specified therein are eliminated and
instead, appellants are ordered to pay plaintiff,
in addition to the principal sum of P304,979.74
representing plaintiff's lost deposit plus legal
interest thereon from the filing of the
complaint, P25,000.00 attorney's fees and costs
in the lower court as well as in this Court. 3
Hence, this petition anchored on the following grounds:
1) The proximate cause of the loss is the
negligence of respondent Rommel Marketing
Corporation and Romeo Lipana in entrusting
cash to a dishonest employee.
2) The failure of respondent Rommel Marketing
Corporation to cross-check the bank's
statements of account with its own records
during the entire period of more than one (1)
year is the proximate cause of the commission
of subsequent frauds and misappropriation
committed by Ms. Irene Yabut.
3) The duplicate copies of the deposit slips
presented by respondent Rommel Marketing
Corporation are falsified and are not proof that
the amounts appearing thereon were deposited
to respondent Rommel Marketing
Corporation's account with the bank,
4) The duplicate copies of the deposit slips
were used by Ms. Irene Yabut to cover up her
fraudulent acts against respondent Rommel
Marketing Corporation, and not as records of
deposits she made with the bank. 4
The petition has no merit.
Simply put, the main issue posited before us is: What is the
proximate cause of the loss, to the tune of P304,979.74, suffered by
the private respondent RMC petitioner bank's negligence or
that of private respondent's?
BANKING for MT Page 29 of 32
Petitioners submit that the proximate cause of the loss is the tell us Mrs. Mabayad your
negligence of respondent RMC and Romeo Lipana in entrusting important duties and
cash to a dishonest employee in the person of Ms. Irene functions?
Yabut. 5 According to them, it was impossible for the bank to know
that the money deposited by Ms. Irene Yabut belong to RMC; A: I accept current and
neither was the bank forewarned by RMC that Yabut will be savings deposits from
depositing cash to its account. Thus, it was impossible for the bank depositors and
to know the fraudulent design of Yabut considering that her encashments.
husband, Bienvenido Cotas, also maintained an account with the
bank. For the bank to inquire into the ownership of the cash
Q: Now in the handling of
deposited by Ms. Irene Yabut would be irregular. Otherwise stated,
current account deposits of
it was RMC's negligence in entrusting cash to a dishonest
bank clients, could you tell
employee which provided Ms. Irene Yabut the opportunity to
us the procedure you
defraud RMC. 6
follow?

Private respondent, on the other hand, maintains that the

A: The client or depositor or
proximate cause of the loss was the negligent act of the bank, thru
the authorized representative
its teller Ms. Azucena Mabayad, in validating the deposit slips, both
prepares a deposit slip by
original and duplicate, presented by Ms. Yabut to Ms. Mabayad,
filling up the deposit slip with
notwithstanding the fact that one of the deposit slips was not
the name, the account
completely accomplished.
number, the date, the cash
breakdown, if it is deposited
We sustain the private respondent. for cash, and the check
number, the amount and
Our law on quasi-delicts states: then he signs the deposit slip.

Art. 2176. Whoever by act or omission causes Q: Now, how many deposit
damage to another, there being fault or slips do you normally
negligence, is obliged to pay for the damage require in accomplishing
done. Such fault or negligence, if there is no current account deposit,
pre-existing contractual relation between the Mrs. Mabayad?
parties, is called a quasi-delict and is governed
by the provisions of this Chapter. A: The bank requires only
one copy of the deposit
There are three elements of a quasi-delict: (a) damages suffered by although some of our clients
the plaintiff; (b) fault or negligence of the defendant, or some prepare the deposit slip in
other person for whose acts he must respond; and (c) the duplicate.
connection of cause and effect between the fault or negligence of
the defendant and the damages incurred by the plaintiff. 7 Q: Now in accomplishing
current account deposits
In the case at bench, there is no dispute as to the damage suffered from your clients, what do
by the private respondent (plaintiff in the trial court) RMC in the you issue to the depositor to
amount of P304,979.74. It is in ascribing fault or negligence which evidence the deposit made?
caused the damage where the parties point to each other as the
culprit. A: We issue or we give to
the clients the depositor's
Negligence is the omission to do something which a reasonable stub as a receipt of the
man, guided by those considerations which ordinarily regulate the deposit.
conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would do. The seventy-eight Q: And who prepares the
(78)-year-old, yet still relevant, case of Picart v. Smith, 8 provides deposit slip?
the test by which to determine the existence of negligence in a
particular case which may be stated as follows: Did the defendant
A: The depositor or the
in doing the alleged negligent act use that reasonable care and
authorized representative
caution which an ordinarily prudent person would have used in the
sir?
same situation? If not, then he is guilty of negligence. The law here
in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. Q: Where does the
The existence of negligence in a given case is not determined by depositor's stub comes (sic)
reference to the personal judgment of the actor in the situation from Mrs. Mabayad, is it
before him. The law considers what would be reckless, with the deposit slip?
blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that. A: The depositor's stub is
connected with the deposit
Applying the above test, it appears that the bank's teller, Ms. slip or the bank's copy. In a
Azucena Mabayad, was negligent in validating, officially stamping deposit slip, the upper
and signing all the deposit slips prepared and presented by Ms. portion is the depositor's
Yabut, despite the glaring fact that the duplicate copy was not stub and the lower portion
completely accomplished contrary to the self-imposed procedure is the bank's copy, and you
of the bank with respect to the proper validation of deposit slips, can detach the bank's copy
original or duplicate, as testified to by Ms. Mabayad herself, thus: from the depositor's stub by
tearing it sir.

Q: Now, as teller of PCIB,

Pasig Branch, will you please

BANKING for MT Page 30 of 32

 Q: Now what do you do
upon presentment of the
deposit slip by the depositor
or the depositor's
authorized representative?
A: We see to it that the
deposit slip 9 is properly
accomplished and then we
count the money and then
we tally it with the deposit
slip sir.
Q: Now is the depositor's
stub which you issued to
your clients validated?
A: Yes, sir. 10 [Emphasis ours]
Clearly, Ms. Mabayad failed to observe this very
important procedure. The fact that the duplicate slip was
not compulsorily required by the bank in accepting
deposits should not relieve the petitioner bank of
responsibility. The odd circumstance alone that such
duplicate copy lacked one vital information that of the
name of the account holder should have already put
Ms. Mabayad on guard. Rather than readily validating the
incomplete duplicate copy, she should have proceeded
more cautiously by being more probing as to the true
reason why the name of the account holder in the
duplicate slip was left blank while that in the original was
filled up. She should not have been so naive in accepting
hook, line and sinker the too shallow excuse of Ms. Irene
Yabut to the effect that since the duplicate copy was only
for her personal record, she would simply fill up the blank
space later on. 11 A "reasonable man of ordinary
prudence" 12 would not have given credence to such
explanation and would have insisted that the space left
blank be filled up as a condition for validation.
Unfortunately, this was not how bank teller Mabayad
proceeded thus resulting in huge losses to the private
respondent.
Negligence here lies not only on the part of Ms. Mabayad but also
on the part of the bank itself in its lackadaisical selection and
supervision of Ms. Mabayad. This was exemplified in the testimony
of Mr. Romeo Bonifacio, then Manager of the Pasig Branch of the
petitioner bank and now its Vice-President, to the effect that, while
he ordered the investigation of the incident, he never came to
know that blank deposit slips were validated in total disregard of
the bank's validation procedures, viz:
Q: Did he ever tell you that
one of your cashiers affixed
the stamp mark of the bank
on the deposit slips and
they validated the same with
the machine, the fact that
those deposit slips were
unfilled up, is there any
report similar to that?
A: No, it was not the cashier
but the teller.
Q: The teller validated the
blank deposit slip?
A: No it was not reported.
Q: You did not know that any
one in the bank tellers or
cashiers validated the blank
deposit slip?
A: I am not aware of that.
Q: It is only now that you are
aware of that?
A: Yes, sir. 13
Prescinding from the above, public respondent Court of Appeals
aptly observed:
xxx xxx xxx
It was in fact only when he testified in this case
in February, 1983, or after the lapse of more
than seven (7) years counted from the period
when the funds in question were deposited in
plaintiff's accounts (May, 1975 to July, 1976)
that bank manager Bonifacio admittedly
became aware of the practice of his teller
Mabayad of validating blank deposit slips.
Undoubtedly, this is gross, wanton, and
inexcusable negligence in the appellant bank's
supervision of its employees. 14
It was this negligence of Ms. Azucena Mabayad, coupled by the
negligence of the petitioner bank in the selection and supervision
of its bank teller, which was the proximate cause of the loss
suffered by the private respondent, and not the latter's act of
entrusting cash to a dishonest employee, as insisted by the
petitioners.
Proximate cause is determined on the facts of each case upon
mixed considerations of logic, common sense, policy and
precedent. 15 Vda. de Bataclan v. Medina, 16 reiterated in the case
of Bank of the Phil. Islands v. Court of Appeals, 17 defines proximate
cause as "that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury,
and without which the result would not have occurred. . . ." In this
case, absent the act of Ms. Mabayad in negligently validating the
incomplete duplicate copy of the deposit slip, Ms. Irene Yabut
would not have the facility with which to perpetrate her fraudulent
scheme with impunity. Apropos, once again, is the pronouncement
made by the respondent appellate court, to wit:
. . . . Even if Yabut had the fraudulent intention
to misappropriate the funds entrusted to her by
plaintiff, she would not have been able to
deposit those funds in her husband's current
account, and then make plaintiff believe that it
was in the latter's accounts wherein she had
deposited them, had it not been for bank teller
Mabayad's aforesaid gross and reckless
negligence. The latter's negligence was thus the
proximate, immediate and efficient cause that
brought about the loss claimed by plaintiff in
this case, and the failure of plaintiff to discover
the same soon enough by failing to scrutinize
the monthly statements of account being sent
to it by appellant bank could not have
prevented the fraud and misappropriation
which Irene Yabut had already completed when
she deposited plaintiff's money to the account
of her husband instead of to the latter's
accounts. 18
Furthermore, under the doctrine of "last clear chance" (also
referred to, at times as "supervening negligence" or as "discovered
peril"), petitioner bank was indeed the culpable party. This
doctrine, in essence, states that where both parties are negligent,
but the negligent act of one is appreciably later in time than that
of the other, or when it is impossible to determine whose fault or
negligence should be attributed to the incident, the one who had
the last clear opportunity to avoid the impending harm and failed
to do so is chargeable with the consequences thereof. 19 Stated
BANKING for MT Page 31 of 32
differently, the rule would also mean that an antecedent
negligence of a person does not preclude the recovery of damages
for the supervening negligence of, or bar a defense against liability
sought by another, if the latter, who had the last fair chance, could
have avoided the impending harm by the exercise of due
diligence. 20 Here, assuming that private respondent RMC was
negligent in entrusting cash to a dishonest employee, thus
providing the latter with the opportunity to defraud the company,
as advanced by the petitioner, yet it cannot be denied that the
petitioner bank, thru its teller, had the last clear opportunity to
avert the injury incurred by its client, simply by faithfully observing
their self-imposed validation procedure.
At this juncture, it is worth to discuss the degree of diligence ought
to be exercised by banks in dealing with their clients.
The New Civil Code provides:
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which
is required by the nature of the obligation and
corresponds with the circumstances of the
persons, of the time and of the place. When
negligence shows bad faith, the provisions of
articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a good
father of a family shall be required. (1104a)
In the case of banks, however, the degree of diligence required is
more than that of a good father of a family. Considering the
fiduciary nature of their relationship with their depositors, banks
are duty bound to treat the accounts of their clients with
the highest degree of care. 21
more than one (1) year covering various deposits, common human
experience dictates that the same would not have been possible
without any form of collusion between Ms. Yabut and bank teller
Mabayad. Ms. Mabayad was negligent in the performance of her
duties as bank teller nonetheless. Thus, the petitioners are entitled
to claim reimbursement from her for whatever they shall be
ordered to pay in this case.
The foregoing notwithstanding, it cannot be denied that, indeed,
private respondent was likewise negligent in not checking its
monthly statements of account. Had it done so, the company
would have been alerted to the series of frauds being committed
against RMC by its secretary. The damage would definitely not
have ballooned to such an amount if only RMC, particularly Romeo
Lipana, had exercised even a little vigilance in their financial affairs.
This omission by RMC amounts to contributory negligence which
shall mitigate the damages that may be awarded to the private
respondent 23 under Article 2179 of the New Civil Code, to wit:
. . . When the plaintiff's own negligence was the
immediate and proximate cause of his injury, he
cannot recover damages. But if his negligence
was only contributory, the immediate and
proximate cause of the injury being the
defendant's lack of due care, the plaintiff may
recover damages, but the courts shall mitigate
the damages to be awarded.
In view of this, we believe that the demands of
substantial justice are satisfied by allocating the damage
on a 60-40 ratio. Thus, 40% of the damage awarded by
the respondent appellate court, except the award of
P25,000.00 attorney's fees, shall be borne by private
respondent RMC; only the balance of 60% needs to be
paid by the petitioners. The award of attorney's fees shall
be borne exclusively by the petitioners.

WHEREFORE, the decision of the respondent Court of Appeals is

As elucidated in Simex International (Manila), Inc. v. Court of
modified by reducing the amount of actual damages private
Appeals, 22 in every case, the depositor expects the bank to treat
respondent is entitled to by 40%. Petitioners may recover from Ms.
his account with the utmost fidelity, whether such account consists
Azucena Mabayad the amount they would pay the private
only of a few hundred pesos or of millions. The bank must record
respondent. Private respondent shall have recourse against Ms.
every single transaction accurately, down to the last centavo, and
Irene Yabut. In all other respects, the appellate court's decision is
as promptly as possible. This has to be done if the account is to
AFFIRMED.
reflect at any given time the amount of money the depositor can
dispose as he sees fit, confident that the bank will deliver it as and
to whomever he directs. A blunder on the part of the bank, such as Proportionate costs.
the failure to duly credit him his deposits as soon as they are
made, can cause the depositor not a little embarrassment if not SO ORDERED.
financial loss and perhaps even civil and criminal litigation.

The point is that as a business affected with public interest and

because of the nature of its functions, the bank is under obligation
to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship. In the case
before us, it is apparent that the petitioner bank was remiss in that
duty and violated that relationship.

Petitioners nevertheless aver that the failure of respondent RMC to

cross-check the bank's statements of account with its own records
during the entire period of more than one (1) year is the proximate
cause of the commission of subsequent frauds and
misappropriation committed by Ms. Irene Yabut.

We do not agree.

While it is true that had private respondent checked the monthly

statements of account sent by the petitioner bank to RMC, the
latter would have discovered the loss early on, such cannot be
used by the petitioners to escape liability. This omission on the
part of the private respondent does not change the fact that were
it not for the wanton and reckless negligence of the petitioners'
employee in validating the incomplete duplicate deposit slips
presented by Ms. Irene Yabut, the loss would not have occurred.
Considering, however, that the fraud was committed in a span of

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