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[G.R. NO. 152720 : February 17, 2005]




A bank's gross negligence in dishonoring a well-funded check, aggravated by its unreasonable delay in repairing the error, calls for an award of moral and exemplary damages. The resulting injury to the check writer's reputation and peace of mind needs to be recognized and compensated.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse and set aside the March 28, 2001 Decision2 and the February 5, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 55002. The assailed Decision disposed as follows:

"WHEREFORE, the appeal is DISMISSED, with costs against defendant-appellant."4

The CA denied reconsideration in its February 5, 2002 Resolution.

The Facts

The facts are summarized by the CA as follows:

"Carmen Arrieta is a bank depositor of Solidbank Corporation under Checking Account No. 123-1996. On March 1990, Carmen issued SBC Check No. 0293984 (Exh. 'A') in the amount of P330.00 in the name of Lopue's Department Store in payment of her purchases from said store. When the check was deposited by the store to its account, the same was dishonored due to 'Account Closed' (Exh. 'B') despite the fact that at the time the check was presented for payment, Carmen's checking account was still active and backed up by a deposit of P1,275.20.

"As a consequence of the check's dishonor, Lopue's Department Store sent a demand letter to Carmen (Exh. 'C') threatening her with criminal prosecution unless she redeemed the check within five (5) days. To avoid criminal prosecution, Carmen paid P330.00 in cash to the store, plus a surcharge of P33.00 for the bouncing check, or a total of P363.00 (Exh. 'F') .

"Thereupon, Carmen filed a complaint against Solidbank Corporation for damages alleging that the bank, by its carelessness and recklessness in certifying that her account was closed despite the fact that it was still very much active and sufficiently funded, had destroyed her good name and reputation and prejudiced not only herself but also her family in the form of mental anguish, sleepless nights, wounded feelings and social humiliation. She prayed that she be awarded moral and exemplary damages as well as attorney's fees.

"In its answer, the bank claimed that Carmen, contrary to her undertaking as a depositor, failed to maintain the required balance of at least P1,000.00 on any day of the month. Moreover, she did not handle her account in a manner satisfactory to the bank. In view of her violations of the general terms and conditions governing the establishment and operation of a current account, Carmen's account was recommended for closure. In any event, the bank claimed good faith in declaring her account closed since one of the clerks, who substituted for the regular clerk, committed an honest mistake when he thought that the subject account was already closed when the ledger containing the said account could not be found.ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ

"After trial, the lower court rendered its decision holding that Solidbank Corporation was grossly negligent in failing to check whether or not Carmen's account was still open and viable at the time the transaction in question was made. Hence, the bank was liable to Carmen for moral and exemplary damages, as well as attorney's fees. It held that the bank was remiss in its duty to treat Carmen's account with the highest degree of care, considering the fiduciary nature of their relationship. The dispositive portion of the decision reads:

"WHEREFORE, the Court hereby renders judgment in favor of the plaintiff as against the defendant-bank, and defendant-bank is ordered to pay moral damages of P150,000.00; exemplary damages of P50,000.00; and attorney's fees of P20,000.00, plus costs.


Ruling of the Court of Appeals

The CA debunked the contention of the bank that the latter was not liable. According to petitioner, the dishonor of the check by reason of "Account Closed" was an honest mistake of its employee. The appellate court held that the error committed by the bank employee was imputable to the bank. Banks are obliged to treat the accounts of their depositors with meticulous care, regardless of the amount of the deposit. Failing in this duty, petitioner was found grossly negligent. The failure of the bank to immediately notify Respondent Carmen Arrieta of its unilateral closure of her account manifested bad faith, added the CA.ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ

The appellate court likewise affirmed the award of moral damages. It held that the bank's wrongful act was the proximate cause of Carmen's moral suffering. The CA ruled that the lack of malice and bad faith on the part of petitioner did not suffice to exculpate the latter from liability; the bank's gross negligence amounted to a wilful act. The trial court's award of exemplary damages and attorney's fees was sustained in view of respondent's entitlement to moral damages.

Hence, this Petition.6


Petitioner raises the following issues for our consideration:


Whether or not x x x respondents are entitled to recovery of moral and exemplary damages and attorney's fees.


Whether or not the award of moral and exemplary damages and attorney's fees is excessive, arbitrary and contrary to prevailing jurisprudence."7

The Court's Ruling

The Petition is partly meritorious.

Main Issue:

Petitioner's Liability for Damages

Petitioner contends that the award of moral damages was erroneous because of the failure of Respondent Carmen to establish that the dishonor of Check No. 0293984 on March 30, 1990 was the direct and only cause of the "social humiliation, extreme mental anguish, sleepless nights, and wounded feelings suffered by [her]." It referred to an occasion fifteen days before, on March 15, 1990, during which another check (Check No. 0293983) she had issued had likewise been dishonored.

According to petitioner, highly illogical was her claim that extreme mental anguish and social humiliation resulted from the dishonor of Check No. 0293984, as she claimed none from that of her prior Check No. 0293983, which had allegedly been deposited by mistake by the payee's wife. Given the circumstances, petitioner adds that the dishonor of the check - - subject of the present case - - did not really cause respondent mental anguish, sleepless nights and besmirched reputation; and that her institution of this case was clearly motivated by opportunism.

We are not persuaded.

The fact that another check Carmen had issued was previously dishonored does not necessarily imply that the dishonor of a succeeding check can no longer cause moral injury and personal hurt for which the aggrieved party may claim damages. Such prior occurrence does not prove that respondent does not have a good reputation that can be besmirched.8

The reasons for and the circumstances surrounding the previous issuance and eventual dishonor of Check No. 0293983 are totally separate - - the payee of the prior check was different - - from that of Check No. 0293984, subject of present case. Carmen had issued the earlier check to accommodate a relative,9 and the succeeding one to pay for goods purchased from Lopue's Department Store. That she might not have suffered damages as a result of the first dishonored check does not necessarily hold true for the second. In the light of sufficient evidence showing that she indeed suffered damages as a result of the dishonor of Check No. 0293984, petitioner may not be exonerated from liability.

Case law10 lays out the following conditions for the award of moral damages: (1) there is an injury - - whether physical, mental or psychological - - clearly sustained by the claimant; (2) the culpable act or omission is factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article 221911 of the Civil Code.

In the instant case, all four requisites have been established.ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ

First, these were the findings of the appellate court: "Carmen Arrieta is a bank depositor of Solidbank Corporation of long standing. She works with the Central Negros Electric Cooperative, Inc. (CENECO), as an executive secretary and later as department secretary. She is a deaconess of the Christian Alliance Church in Bacolod City. These are positions which no doubt elevate her social standing in the community." Understandably - - and as sufficiently proven by her testimony - - she suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation; and she suffered thus when the people she worked with - - her friends, her family and even her daughter's classmates - - learned and talked about her bounced check.

Second, it is undisputed that the subject check was adequately funded, but that petitioner wrongfully dishonored it.

Third, Respondent Carmen was able to prove that petitioner's wrongful dishonor of her check was the proximate cause of her embarrassment and humiliation in her workplace, in her own home, and in the church where she served as deaconess.

Proximate cause has been defined as "any cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the result complained of and without which would not have occurred x x x."12 It is determined from the facts of each case upon combined considerations of logic, common sense, policy and precedent.13 Clearly, had the bank accepted and honored the check, Carmen would not have had to face the questions of - - and explain her predicament to - - her office mates, her daughters, and the leaders and members of her church.

Furthermore, the CA was in agreement with the trial court in ruling that her injury arose from the gross negligence of petitioner in dishonoring her well-funded check.

Unanimity of the CA and the trial court in their factual ascertainment of this point bars us from supplanting their finding and substituting it with our own. Settled is the doctrine that the factual determinations of the lower courts are conclusive and binding upon this Court.14 Verily, the review of cases brought before the Supreme Court from the Court of Appeals is limited to errors of law.15 None of the recognized exceptions to this principle has been shown to exist.

Fourth, treating Carmen's account as closed, merely because the ledger could not be found was a reckless act that could not simply be brushed off as an honest mistake. We have repeatedly emphasized that the banking industry is impressed with public interest. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care and always to have in mind the fiduciary nature of its relationship with them.16

Petitioner's negligence here was so gross as to amount to a wilful injury to Respondent Carmen. Article 21 of the Civil Code states that "any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." Further, Article 2219 provides for the recovery of moral damages for acts referred to in the aforementioned Article 21. Hence, the bank is liable for moral damages to respondent.17

The foregoing notwithstanding, we find the sum of P150,000 awarded by the lower courts excessive. Moral damages are not intended to enrich the complainant at the expense of the defendant.18 Rather, these are awarded only to enable the injured party to obtain "means, diversions or amusements" that will serve to alleviate the moral suffering that resulted by reason of the defendant's culpable action.19 The purpose of such damages is essentially indemnity or reparation, not punishment or correction.20 In other words, the award thereof is aimed at a restoration within the limits of the possible, of the spiritual status quo ante;21 therefore, it must always reasonably approximate the extent of injury and be proportional to the wrong committed.22

Accordingly, the award of moral damages must be reduced to P20,000,23 an amount commensurate with the alleviation of the suffering caused by the dishonored check that was issued for the amount of P330.

The law allows the grant of exemplary damages to set an example for the public good.24 The business of a bank is affected with public interest; thus, it makes a sworn profession of diligence and meticulousness in giving irreproachable service.25 For this reason, the bank should guard against injury attributable to negligence or bad faith on its part.26 The banking sector must at all times maintain a high level of meticulousness. The grant of exemplary damages is justified27 by the initial carelessness of petitioner, aggravated by its lack of promptness in repairing its error. It was only on August 30, 1990, or a period of five months from the erroneous dishonor of the check, when it wrote Lopue's Department Store a letter acknowledging the bank's mistake.28 In our view, however, the award of P50,000 is excessive and should accordingly be reduced to P20,000.29

The award of attorney's fees in the amount of P20,000 is proper, for respondents were compelled to litigate to protect their rights.30

WHEREFORE, the Petition is PARTLY GRANTED and the assailed Decision MODIFIED. Petitioners are ORDERED to pay respondents P20,000 as moral damages, P20,000 as exemplary damages, and P20,000 as attorney's fees.


Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

Garcia, J., no part. Concurred in the assailed decision.


1 Rollo, pp. 14-37.

2 Annex "A" of Petition; id., pp. 38-49. First Division. Penned by Justice Oswaldo D. Agcaoili and concurred in by Justices Cancio C. Garcia (Division chairman and now a member of this Court) and Elvi John S. Asuncion (member).

3 Annex "C" of Petition; id., p. 68.

4 CA Decision, p. 11; id., p. 48.

5 CA Decision, pp. 1-3; id., pp. 38-40.

6 This case was deemed submitted for decision on June 18, 2003, upon this Court's receipt of petitioner's Memorandum, signed by Atty. Segundo Y. Chua. Respondents' Memorandum, signed by Atty. Romeo B. Esuerte, was received by this Court on May 30, 2003.

7 Petitioner's Memorandum, p. 3; rollo, p. 171.

8 See Simex International (Manila), Inc. v. Court of Appeals, 183 SCRA 360, March 19, 1990.

9 See Brief for the Defendant-Appellant, p. 11; rollo, p. 60.

10 United Coconut Planters Bank v. Ramos, 415 SCRA 596, November 11, 2003; Cathay Pacific Airways, Ltd. v. Spouses Vazquez, 399 SCRA 207, March 14, 2003; Citytrust Banking Corporation v. Villanueva, 361 SCRA 446, July 19, 2001; Expertravel and Tours, Inc. v. Court of Appeals, 309 SCRA 141, June 25, 1999.

11 Art. 2219. Moral damages may be recovered in the following analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

(10) Acts and actions referred in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.

x x x

12 Pilipinas Bank v. Court of Appeals, 234 SCRA 435, 439, July 25, 1994, per Puno, J.

13 Bank of the Philippine Islands v. Court of Appeals, 326 SCRA 641, February 29, 2000; Philippine Bank of Commerce v. Court of Appeals, 269 SCRA 695, March 14, 1997 (citing Sangco, Torts and Damages [1993], Vol. I, p. 8).

14 Flores v. Uy, 368 SCRA 347, October 26, 2001; Metropolitan Bank v. Wong, supra; Philippine National Bank v. Court of Appeals, supra; Boneng v. People, 204 SCRA 252, March 4, 1999; Philippine Airlines, Inc. v. CA, 275 SCRA 621, July 17, 1997; Kierulf v. Court of Appeals, 336 Phil. 414, March 13, 1997.

15 Philippine Banking Corporation v. Court of Appeals, 419 SCRA 61, January 13, 2004; Kierulf v. Court of Appeals, supra.

16 Bank of the Philippine Islands v. Casa Montessori Internationale, GR No. 149454, May 28, 2004.

17 Metropolitan Bank v. Wong, 359 SCRA 608, June 26, 2001; Prudential Bank v. CA, 384 Phil. 817, March 16, 2000; Cavite Development Bank v. Lim, 324 SCRA 346, February 1, 2000; Philippine National Bank v. Court of Appeals, 315 SCRA 309, September 28, 1999; Metropolitan Bank and Trust Company v. Court of Appeals, 237 SCRA 761, October 26, 1994.

18 Samson v. Bank of the Philippine Islands, 405 SCRA 607, July 10, 2003; Flores v. Uy, supra; Philippine National Bank v. Court of Appeals, supra.

19 Quisumbing v. Manila Electric Company, 380 SCRA 195, April 3, 2002.

20 Samson v. Bank of the Philippine Islands, supra; Flores v. Uy, supra; Simex International (Manila), Inc. v. Court of Appeals, supra.

21 Kierulf v. Court of Appeals, supra.

22 Makabali v. Court of Appeals, 157 SCRA 253, January 22, 1988.

23 Simex International (Manila), Inc. v. Court of Appeals, supra; Guilatco v. City of Dagupan, 171 SCRA 382, March 21, 1989.

24 Article 2229, Civil Code.

25 Philippine Banking Corporation v. Court of Appeals, 419 SCRA 487, January 15, 2004; United Coconut Planters Bank v. Ramos, 415 SCRA 596, November 11, 2003; Bank of the Philippine Islands v. Court of Appeals, supra; Simex International (Manila), Inc. v. Court of Appeals, supra.

26 Ibid.

27 Simex International (Manila), Inc. v. Court of Appeals, supra.

28 Respondents' Memorandum, p. 18; rollo, p. 147.

29 Cavite Development Bank v. Lim, supra; Prudential Bank v. Court of Appeals, 328 SCRA 264, March 16, 2000.

30 Prudential Bank v. Court of Appeals, supra; Philippine National Bank v. Court of Appeals, supra.

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