Cases - Banking Laws 1

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G.R. No. 112392 February 29, 2000

BANK OF THE PHILIPPINE ISLANDS, petitioner,vs.COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents.

YNARES-SANTIAGO, J.:

This is a petition for review on certiorariof the Decision1 of the Courtof Appeals in CA-G.R. CV No. 37392 affirming in toto that of theRegional Trial Court of Makati, Branch 139,2 which dismissed the

complaint filed by petitioner Bank of the Philippine Islands againstprivate respondent Benjamin C. Napiza for sum of money.

On September 3, 1987, private respondent deposited in ForeignCurrency Deposit Unit (FCDU) Savings Account No. 028-1873 whichhe maintained in petitioner bank's Buendia Avenue ExtensionBranch, Continental Bank Manager's Check No. 000147574 datedAugust 17, 1984, payable to "cash" in the amount of Two ThousandFive Hundred Dollars ($2,500.00) and duly endorsed by privaterespondent on its dorsal side.5 It appears that the check belonged toa certain Henry who went to the office of private respondent andrequested him to deposit the check in his dollar account by way ofaccommodation and for the purpose of clearing the same. Privaterespondent acceded, and agreed to deliver to Chan a signed blankwithdrawal slip, with the understanding that as soon as the check iscleared, both of them would go to the bank to withdraw the amountof the check upon private respondent's presentation to the bank of

his passbook.

Using the blank withdrawal slip given by private respondent toChan, on October 23, 1984, one Ruben Gayon, Jr. was able towithdraw the amount of $2,541.67 from FCDU Savings Account No.028-187. Notably, the withdrawal slip shows that the amount waspayable to Ramon A. de Guzman and Agnes C. de Guzman and wasduly initialed by the branch assistant manager, Teresita Lindo.6

On November 20, 1984, petitioner received communication from theWells Fargo Bank International of New York that the said checkdeposited by private respondent was a counterfeit check7 because itwas "not of the type or style of checks issued by Continental BankInternational."8 Consequently, Mr. Ariel Reyes, the manager ofpetitioner's Buendia Avenue Extension Branch, instructed one of itsemployees, Benjamin D. Napiza IV, who is private respondent's son,

to inform his father that the check bounced.9 Reyes himself sent atelegram to private respondent regarding the dishonor of the check.In turn, private respondent's son wrote to Reyes stating that thecheck been assigned "for encashment" to Ramon A. de Guzmanand/or Agnes C. de Guzman after it shall have been cleared uponinstruction of Chan. He also said that upon learning of the dishonorof the check, his father immediately tried to contact Chan but thelatter was out of town.10

Private respondent's son undertook to return the amount of$2,500.00 to petitioner bank. On December 18, 1984, Reyesreminded private respondent of his son's promise and warned thatshould he fail to return that amount within seven (7) days, thematter would be referred to the bank's lawyers for appropriateaction to protect the bank's interest.11 This was followed by a letterof the bank's lawyer dated April 8, 1985 demanding the return ofthe $2,500.00.12

In reply, private respondent wrote petitioner's counsel on April 20,198513 stating that he deposited the check "for clearing purposes"only to accommodate Chan. He added:

Further, please take notice that said check was depositedon September 3, 1984 and withdrawn on October 23, 1984,or a total period of fifty (50) days had elapsed at the timeof withdrawal. Also, it may not be amiss to mention herethat I merely signed an authority to withdraw said depositsubject to its clearing, the reason why the transaction isnot reflected in the passbook of the account. Besides, I didnot receive its proceeds as may be gleaned from thewithdrawal slip under the captioned signature ofrecipient.1wphi1.nt

If at all, my obligation on the transaction is moral innature, which (sic) I have been and is (sic) still exertingutmost and maximum efforts to collect from Mr. HenryChan who is directly liable under the circumstances.

x x x x x x x x x

On August 12, 1986, petitioner filed a complaint against privaterespondent, praying for the return of the amount of $2,500.00 orthe prevailing peso equivalent plus legal interest from date ofdemand to date of full payment, a sum equivalent to 20% of thetotal amount due as attorney's fees, and litigation and/or costs ofsuit.

Private respondent filed his answer, admitting that he indeed signeda "blank" withdrawal slip with the understanding that the amountdeposited would be withdrawn only after the check in question hasbeen cleared. He likewise alleged that he instructed the party towhom he issued the signed blank withdrawal slip to return it to himafter the bank draft's 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 withdrawthe amount of $2,541.67 from his dollar savings account throughcollusion with one of petitioner's employees. Private respondentadded that he had "given the Plaintiff fifty one (51) days with whichto clear the bank draft in question." Petitioner should havedisallowed 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 havpaid the amount in the check "by mistake" . . . "if not altogetto collusion and/or bad faith on the part of (its) employees."Charging petitioner with "apparent ignorance of routine bankprocedures," by way of counterclaim, private respondent praymoral damages of P100,000.00, exemplary damages of P50,0and attorney's fees of 30% of whatever amount that would beawarded to him plus an honorarium of P500.00 per appearancourt.

Private respondent also filed a motion for admission of a thirdcomplaint against Chan. He alleged that "thru strategem and/

manipulation," Chan was able to withdraw the amount of $2,5even without private respondent's passbook. Thus, privaterespondent prayed that third party defendant Chan be made trefund to him the amount withdrawn and to pay attorney's feP5,000.00 plus P300.00 honorarium per appearance.

Petitioner filed a comment on the motion for leave of court tothe third party complaint, whenever it asserted that per paragof the Rules and Regulations governing BPI savings accounts,private respondent alone was liable "for the value of the credon account of the draft or check deposited." It contended thaprivate respondent was estopped from disclaiming liability behe himself authorized the withdrawal of the amount by signinwithdrawal slip. Petitioner prayed for the denial of the said mso as not to unduly delay the disposition of the main case assthat private respondent's claim could be ventilated in another

Private respondent replied that for the parties to obtain comprelief and to avoid multiplicity of suits, the motion to admit thparty complaint should be granted. Meanwhile, the trial courtorders on August 25, 1987 and October 28, 1987 directing prrespondent to actively participate in locating Chan. After privarespondent failed to comply, the trial court, on May 18, 1988dismissed the third party complaint without prejudice.

On November 4, 1991, a decision was rendered dismissing thcomplaint. The lower court held that petitioner could not holdprivate respondent liable based on the check's face value aloso hold him liable "would render inutile the requirement of"clearance" from the drawee bank before the value of a particforeign check or draft can be credited to the account of a depmaking such deposit." The lower court further held that "it waincumbent upon the petitioner to credit the value of the checkquestion to the account of the private respondent only upon rof the notice of final paymentand should not have authorizedwithdrawal from the latter's account of the value or proceeds check." Having admitted that it committed a "mistake" in notwaiting for the clearance of the check before authorizing thewithdrawal of its value or proceeds, petitioner should suffer thresultant loss.


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On appeal, the Court of Appeals affirmed the lower court's decision.The appellate court held that petitioner committed "clears grossnegligence" in allowing Ruben Gayon, Jr. to withdraw the moneywithout presenting private respondent's passbook and, before thecheck was cleared and in crediting the amount indicated therein inprivate respondent's account. It stressed that the mere deposit of acheck in private respondent's account did not mean that the checkwas already private respondent's property. The check still had to becleared and its proceeds can only be withdrawn upon presentation ofa passbook in accordance with the bank's rules and regulations.Furthermore, petitioner's contention that private respondentwarranted the check's genuineness by endorsing it is untenable forit would render useless the clearance requirement. Likewise, the

requirement of presentation of a passbook to ascertain the proprietyof the accounting reflected would be a meaningless exercise. Afterall, these requirements are designed to protect the bank fromdeception or fraud.

The Court of Appeals cited the case ofRoman Catholic Bishop ofMalolos, Inc. v. IAC,14 where this Court stated that a personal checkis not legal tender or money, and held that the check deposited inthis case must be cleared before its value could be properlytransferred to private respondent's account.

Without filing a motion for the reconsideration of the Court ofAppeals' Decision, petitioner filed this petition for reviewon certiorari, raising the following issues:

1. WHETHER OR NOT RESPONDENT NAPIZA IS LIABLEUNDER HIS WARRANTIES AS A GENERAL INDORSER.

2. WHETHER OR NOT A CONTRACT OF AGENCY WASCREATED BETWEEN RESPONDENT NAPIZA AND RUBENGAYON.

3. WHETHER OR NOT PETITIONER WAS GROSSLYNEGLIGENT IN ALLOWING THE WITHDRAWAL.

Petitioner claims that private respondent, having affixed hissignature at the dorsal side of the check, should be liable for theamount stated therein in accordance with the following provision ofthe Negotiable Instruments Law (Act No. 2031):

Sec. 66. Liability of general indorser. Every indorser whoindorses without qualification, warrants to all subsequentholders 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, itshall be accepted or paid, or both, as the case may be,according to its tenor, and that if it be dishonored, and thenecessary proceedings on dishonor be duly taken, he willpay the amount thereof to the holder, or to any subsequentindorser who may be compelled to pay it.

Sec. 65, on the other hand, provides for the following warranties ofa person negotiating an instrument by delivery or by qualified

indorsement: (a) that the instrument is genuine and in all respectswhat it purports to be; (b) that he has a good title to it, and (c) thatall prior parties had capacity to contract.15 In People v.Maniego,16 this Court described the liabilities of an indorser asfollows:

Appellant's contention that as mere indorser, she may notbe liable on account of the dishonor of the checks indorsedby her, is likewise untenable. Under the law, the holder orlast indorsee of a negotiable instrument has the right "toenforce payment of the instrument for the full amountthereof against all parties liable thereon. Among the"parties liable thereon." Is an indorser of theinstrument, i.e., "a person placing his signature upon aninstrument otherwise than as a maker, drawer oracceptor * * unless he clearly indicated by appropriate

words his intention to be bound in some other capacity."Such an indorser "who indorses without qualification," interalia "engages that on due presentment, * * (theinstrument) shall be accepted or paid, or both, as the casemay 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 anysubsequent indorser who may be compelled to pay it."Maniego may also be deemed an "accommodation party" inthe light of the facts, i.e., a person "who has signed theinstrument as maker, drawer, acceptor, or indorser,without receiving value thereof, and for the purpose oflending his name to some other person." As such, she isunder the law "liable on the instrument to a holder forvalue, notwithstanding such holder at the time of taking theinstrument knew * * (her) to be only an accommodationparty," 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 ofprincipal and surety, the accommodation party being thesurety.

It is thus clear that ordinarily private respondent may be held liableas an indorser of the check or even as an accommodationparty.17 However, to hold private respondent liable for the amount

of the check he deposited by the strict application of the law awithout considering the attending circumstances in the case wresult in an injustice and in the erosion of the public trust in tbanking system. The interest of justice thus demands lookingthe events that led to the encashment of the check.

Petitioner asserts that by signing the withdrawal slip, privaterespondent "presented the opportunity for the withdrawal of tamount in question." Petitioner relied "on the genuine signatuthe withdrawal slip, the personality of private respondent's sothe lapse of more than fifty (50) days from date of deposit ofContinental Bank draft, without the same being returned yet.

hold, however, that the propriety of the withdrawal should begauged by compliance with the rules thereon that both petitiobank and its depositors are duty-bound to observe.

In the passbook that petitioner issued to private respondent, following rules on withdrawal of deposits appear:

4. Withdrawals must be made by the depositor persobut in some exceptional circumstances, the Bank mawithdrawal by another upon the depositor's writtenauthority duly authenticated; and neither a deposit nwithdrawal will be permitted except upon the presenof the depositor's savings passbook, in which the amdeposited withdrawn shall be entered only by the Ba

5. Withdrawals may be made by draft, mail or telegr

transfer in currency of the account at the request of depositor in writing on the withdrawal slip or byauthenticated cable. Such request must indicate the of the payee/s, amount and the place where the funto be paid. Any stamp, transmission and other chargrelated to such withdrawals shall be for the account depositor and shall be paid by him/her upon demandWithdrawals may also be made in the form of travellchecks and in pesos. Withdrawals in the form of noteare allowed subject however, to their (availability).

6. Deposits shall not be subject to withdrawal by cheand may be withdrawal only in the manner above prupon presentation of the depositor's savings passboowith the withdrawal form supplied by the Bank at thecounter.19

Under these rules, to be able to withdraw from the savings acdeposit under the Philippine foreign currency deposit system, requisites must be presented to petitioner bank by the personwithdrawing an amount: (a) a duly filled-up withdrawal slip, athe depositor's passbook. Private respondent admits he signeblank withdrawal slip ostensibly in v iolation of Rule No. 6 requthat the request for withdrawal must name the payee, the am


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to be withdrawn and the place where such withdrawal should bemade. That the withdrawal slip was in fact a blank one with onlyprivate respondent's two signatures affixed on the proper spaces isbuttressed by petitioner's allegation in the instant petition that hadprivate respondent indicated therein the person authorized toreceive the money, then Ruben Gayon, Jr. could not have withdrawnany amount. Petitioner contends that "(I)n failing to do so (i.e.,naming his authorized agent), he practically authorized anypossessor thereof to write any amount and to collect the same."20

Such contention would have been valid if not for the fact that thewithdrawal 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, petitioner's personnel should have been dulywarned that Gayon, who was also employed in petitioner's BuendiaAve. Extension branch,21 was not the proper payee of the proceedsof the check. Otherwise, either Ramon or Agnes de Guzman shouldhave issued another authority to Gayon for such withdrawal. Ofcourse, at the dorsal side of the withdrawal slip is an "authority towithdraw" naming Gayon the person who can withdraw the amountindicated in the check. Private respondent does not deny havingsigned such authority. However, considering petitioner's clearadmission that the withdrawal slip was a blank one except forprivate respondent's signature, the unavoidable conclusion is thatthe typewritten name of "Ruben C. Gayon, Jr." was intercalated andthereafter it was signed by Gayon or whoever was allowed bypetitioner to withdraw the amount. Under these facts, there couldnot have been a principal-agent relationship between privaterespondent 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 correspondingforeign currency savings passbook by the depositor in person. Forwithdrawals thru a representative, depositor should accomplish theauthority at the back." The requirement of presentation of thepassbook when withdrawing an amount cannot be given mere lipservice even though the person making the withdrawal is authorizedby the depositor to do so. This is clear from Rule No. 6 set out bypetitioner so that, for the protection of the bank's interest and as areminder to the depositor, the withdrawal shall be entered in thedepositor's passbook. The fact that private respondent's passbookwas not presented during the withdrawal is evidenced by the entriestherein showing that the last transaction that he made with thebank was on September 3, 1984, the date he deposited thecontroversial check in the amount of $2,500.00.22

In allowing the withdrawal, petitioner likewise overlooked anotherrule that is printed in the passbook. Thus:

2. All deposits will be received as current funds and will berepaid in the same manner; provided, however, thatdeposits of drafts, checks, money orders, etc. will be

accented as subject to collection only and credited to theaccount only upon receipt of the notice of final payment.Collection charges by the Bank's foreign correspondent ineffecting such collection shall be for the account of thedepositor. If the account has sufficient balance, thecollection 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 theBank is required to return such proceeds, the provisionalentry therefor made by the Bank in the savings passbookand its records shall be deemed automatically cancelledregardless of the time that has elapsed, and whether or notthe defective items can be returned to the depositor; and

the Bank is hereby authorized to execute immediately thenecessary corrections, amendments or changes in itsrecord, as well as on the savings passbook at the firstopportunity to reflect such cancellation. (Emphasis andunderlining supplied.)

As correctly held by the Court of Appeals, in depositing the check inhis name, private respondent did not become the outright owner ofthe amount stated therein. Under the above rule, by depositing thecheck with petitioner, private respondent was, in a way, merelydesignating petitioner as the collecting bank. This is in consonancewith the rule that a negotiable instrument, such as a check, whethera manager's check or ordinary check, is not legal tender.23 As such,after receiving the deposit, under its own rules, petitioner shallcredit the amount in private respondent's account or infuse valuethereon only after the drawee bank shall have paid the amount of

the check or the check has been cleared for deposit. Again, this is inaccordance with ordinary banking practices and with this Court'spronouncement that "the collecting bank or last endorser generallysuffers the loss because has the duty to ascertain the genuinenessof all prior endorsements considering that the act of presenting thecheck for payment to the drawee is an assertion that the partymaking the presentment has done its duty to ascertain thegenuineness of the endorsements."24 The rule finds more meaning inthis case where the check involved is drawn on a foreign bank andtherefore collection is more difficult than when the drawee bank is alocal one even though the check in question is a manager's check. 25

In Banco Atlantico v. Auditor General,26 Banco Atlantico, acommercial bank in Madrid, Spain, paid the amounts represented inthree (3) checks to Virginia Boncan, the finance officer of thePhilippine Embassy in Madrid. The bank did so without previouslyclearing the checks with the drawee bank, the Philippine NationalBank in New York, on account of the "special treatment" thatBoncan received from the personnel of Banco Atlantico's foreigndepartment. The Court held that the encashment of the checkswithout prior clearance is "contrary to normal or ordinary bankingpractice specially so where the drawee bank is a foreign bank andthe amounts involved were large." Accordingly, the Court approvedthe Auditor General's denial of Banco Atlantico's claim for paymentof the value of the checks that was withdrawn by Boncan.

Said ruling brings to light the fact that the banking business iaffected with public interest. By the nature of its functions, a under obligation to treat the accounts of its depositors "withmeticulous care, always having in mind the fiduciary nature orelationship."27 As such, in dealing with its depositors, a bankexercise its functions not only with the diligence of a good fata family but it should do so with the highest degree of care.28

In the case at bar, petitioner, in allowing the withdrawal of prrespondent's deposit, failed to exercise the diligence of a goofather of a family. In total disregard of its own rules, petitionpersonnel negligently handled private respondent's account to

petitioner's detriment. As this Court once said on this matter:

Negligence is the omission to do something which areasonable man, guided by those considerations whiordinarily regulate the conduct of human affairs, wouor the doing of something which a prudent and reasoman would do. The seventy-eight (78)-year-old, yet relevant, case of Picart v. Smith, provides that test bwhich to determine the existence of negligence in aparticular case which may be stated as follows: Did defendant in doing the alleged negligent act use thatreasonable care and caution which an ordinarily prudperson would have used in the same situation? If nohe is guilty of negligence. The law here in effect adostandard supposed to be supplied by the imaginary of the discreet pater-familias of the Roman law. Theexistence of negligence in a given case is not de term

by reference to the personal judgment of the actor insituation before him. The law considers what would reckless, blameworthy, or negligent in the man of orintelligence and prudence and determines liability by

Petitioner violated its own rules by allowing the withdrawal ofamount that is definitely over and above the aggregate amouprivate respondent's dollar deposits that had yet to be clearebank's ledger on private respondent's account shows that befdeposited $2,500.00, private respondent had a balance of on$750.00.30 Upon private respondent's deposit of $2,500.00 oSeptember 3, 1984, that amount was credited in his ledger adeposit resulting in the corresponding total balance of$3,250.00.31 On September 10, 1984, the amount of $600.00the additional charges of $10.00 were indicated therein aswithdrawn thereby leaving a balance $2,640.00. On Septemb

1984, an interest of $11.59 was reflected in the ledger and onOctober 23, 1984, the amount of $2,541.67 was entered aswithdrawn with a balance of $109.92.32 On November 19, 198word "hold" was written beside the balance of $109.92.33 Thahave been the time when Reyes, petitioner's branch managerinformed unofficially of the fact that the check deposited was counterfeit, but petitioner's Buendia Ave. Extension Branch rea copy of the communication thereon from Wells Fargo BankInternational in New York the following day, November 20,


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1984.34 According to Reyes, Wells Fargo Bank International handledthe clearing of checks drawn against U.S. banks that were depositedwith petitioner.35

From these facts on record, it is at once apparent that petitioner'spersonnel allowed the withdrawal of an amount bigger than theoriginal deposit of $750.00 and the value of the check deposited inthe amount of $2,500.00 although they had not yet received noticefrom the clearing bank in the United States on whether or not thecheck was funded. Reyes' contention that after the lapse of the 35-day period the amount of a deposited check could be withdrawneven in the absence of a clearance thereon, otherwise it could take

a long time before a depositor could make a withdrawal,

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isuntenable. Said practice amounts to a disregard of the clearancerequirement of the banking system.

While it is true that private respondent's having signed a blankwithdrawal slip set in motion the events that resulted in thewithdrawal and encashment of the counterfeit check, the negligenceof petitioner's personnel was the proximate cause of the loss thatpetitioner sustained. Proximate cause, which is determined by amixed consideration of logic, common sense, policy and precedent,is "that cause, which, in natural and continuous sequence, unbrokenby any efficient intervening cause, p roduces the injury, and withoutwhich the result would not have occurred."37 The proximate cause ofthe withdrawal and eventual loss of the amount of $2,500.00 onpetitioner's part was its personnel's negligence in allowing suchwithdrawal in disregard of its own rules and the clearingrequirement in the banking system. In so doing, petitioner assumed

the risk of incurring a loss on account of a forged or counterfeitforeign check and hence, it should suffer the resultingdamage.1wphi1.nt

WHEREFORE, the petition for review on certiorariis DENIED. TheDecision of the Court of Appeals in CA-G.R. CV No. 37392 isAFFIRMED.

SO ORDERED.

G.R. No. 84281 May 27, 1994

CITYTRUST BANKING CORPORATION, petitioner,vs.THE INTERMEDIATE APPELLATE COURT and EMME

HERRERO, respondents.

VITUG,J.:

This case emanated from a complaint filed by private respondentEmme Herrero for damages against petitioner Citytrust BankingCorporation. In her complaint, private respondent averred that she,

a businesswoman, made regular deposits, starting September of1979, with petitioner Citytrust Banking Corporation at its Burgosbranch in Calamba, Laguna. On 15 May 1980, she deposited withpetitioner the amount of Thirty One Thousand Five Hundred Pesos(P31,500.00), in cash, in order to amply cover six (6) postdatedchecks she issued, viz:

Check No. Amount

007383 P1,507.00007384 1,262.00007387 4,299.00

007387 2,204.00007492 6,281.00007400 4,716.00

When presented for encashment upon maturity, all thechecks were dishonored due to "insufficient funds." The lastcheck No. 007400, however, was personally redeemed byprivate respondent in cash before it could be redeposited.

Petitioner, in its answer, asserted that it was due to privaterespondent's fault that her checks were dishonored. It averred thatinstead of stating her correct account number, i.e., 29000823, inher deposit slip, she inaccurately wrote 2900823.

The Regional Trial Court (Branch XXXIV) of Calamba, Laguna, on

27 February 1984, dismissed the complaint for lack of merit; thus:

WHEREFORE, judgment is hereby rendered in favor of thedefendant and against the plaintiff, DISMISSING thecomplaint for lack of merit, plaintiff is hereby adjudged topay the defendant reasonable attorney's fee in the amountof FIVE THOUSAND PESOS (P5,000.00) plus cost of suit.

Private respondent went to the Court of Appeals, which found theappeal meritorious. Hence, it rendered judgment, on 15 July 1988,reversing the trial court's decision. The appellate court ruled:

WHEREFORE, the judgment appealed from is REVERSEDand a new one entered thereby ordering defendant to payplaintiff nominal damages of P2,000.00, temperate andmoderate damages of P5,000.00, and attorney's fees of

P4,000.00.

The counterclaim of defendant is dismissed for lack ofmerit, with costs against him.

Petitioner Citytrust Banking Corporation is now before us in thispetition for review on certiorari.

Petitioner bank concedes that it is its obligation to honor checissued by private respondent which are sufficiently funded, bucontends, private respondent has also the duty to use her accaccordance with the rules of petitioner bank to which she hascontractually acceded. Among such rules, contained in its"brochures" governing current account deposits, is the followprinted provision:

In making a deposit . . . kindly insure accuracy in fildeposit slip forms as we hold ourselves free of any lifor loss due to an incorrect account number indicatedeposit slip although the name of the depositor is co

written.

Exactly the same issue was addressed by the appellate court,after its deliberations, made the following findings and conclu

We cannot uphold the position of defendant. For, evbe true that there was error on the part of the plaintomitting a "zero" in her account number, yet, it is a that her name, "Emme E. Herrero", is clearly writtensaid deposit slip (Exh. "B"). This is controlling indetermining in whose account the deposit is made oshould be posted. This is so because it is not likely tocommit an error in one's name than merely relying onumbers which are difficult to remember, especially number with eight (8) digits as the account numbersdefendant's depositors. We view the use of numbers

simply for the convenience of the bank but was neveintended to disregard the real name of its depositorsbank is engaged in business impressed with public inand it is its duty to protect in return its many clientsdepositors who transact business with it. It should nmatter of the bank alone receiving deposits, lending money and collecting interests. It is also its obligatiosee to it that all funds invested with it are properlyaccounted for and duly posted in its ledgers.

In the case before Us, We are not persuaded thatdefendant bank was not free from blame for the fiasthe first place, the teller should not have acceptedplaintiff's deposit without correcting the account numthe deposit slip which, obviously, was erroneous becas pointed out by defendant, it contained only sevendigits instead of eight (8). Second, the complete nam

plaintiff depositor appears in bold letters on the depo(Exh. "B"). There could be no mistaking in her namethat the deposit was made in her name, "Emma E.Herrero." In fact, defendant's teller should not have deposit slip to the computer knowing that her accounumber written thereon was wrong as it contained oseven (7) digits. As it happened, according to defendplaintiff's deposit had to be consigned to the suspen


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accounts pending verification. This, indeed, could havebeen avoided at the first instance had the teller ofdefendant bank performed her duties efficiently and well.For then she could have readily detected that the accountnumber in the name of "Emma E. Herrero" was erroneousand would be rejected by the computer. That is, or shouldbe, part of the training and standard operating procedure ofthe bank's employees. On the other hand, the depositorsare not concerned with banking procedure. That is theresponsibility of the bank and its employees. Depositors areonly concerned with the facility of depositing their money,earning interest thereon, if any, and withdrawingtherefrom, 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 forbearanceshould be commensurated with prompt, efficient andsatisfactory service.

Bank clients are supposed to rely on the services extendedby the bank, including the assurance that their deposits willbe duly credited them as soon as they are made. For, anydelay in crediting their account can be embarrassing tothem as in the case of p laintiff.

We agree with plaintiff that

. . . even in computerized systems of accounts,

ways and means are available whereby depositswith erroneous account numbers are properlycredited depositor's correct account numbers.They add that failure on the part of the defendantto do so is negligence for which they are liable. Asproof thereof plaintiff alludes to five particularincidents where plaintiff admittedly wronglyindicated her account number in her deposit slips(Exhs. "J", "L", "N", "O" and "P"), but werenevertheless properly credited her deposit (pp. 4-5, Decision).

We have already ruled in Mundin v. Far East Bank& Trust Co., AC-G.R. CV No. 03639, prom. Nov. 2,1985, quoting the court a quo in an almostidentical set of facts, that

Having accepted a deposit in the course of itsbusiness transactions, it behooved upondefendant bank to see to it and withoutrecklessness that the depositor wasaccurately credited therefor. To post a deposit insomebody else's name despite the name of thedepositor clearly written on the deposit slip isindeed sheer negligence which could have easily

been avoided if defendant bank exercised duediligence and circumspection in the acceptanceand posting of plaintiff's deposit.

We subscribe to the above disquisitions of the appellate court.In Simex International (Manila), Inc. vs. Court of Appeals, 183 SCRA360, reiterated in Bank of Philippine Islands vs. Intermediate

Appellate Court, 206 SCRA 408, we similarly said, in cautioningdepository banks on their fiduciary responsibility, that

In every case, the depositor expects the bank to treat hisaccount with utmost fidelity, whether such account consists

only of a few hundred pesos or of millions. The bank mustrecord every single transaction accurately, down to the lastcentavo, and as promptly as possible. This has to be done ifthe account is to reflect at any given time the amount ofmoney the depositor can dispose of as he sees fit, confidentthat the bank will deliver it as and to whomever he directs.A blunder on the part of the bank, such as the dishonor of acheck without good reason, can cause the depositor not alittle embarrassment if not also financial loss and perhapseven civil and criminal litigation.

The point is that as a business affected with public interestand because of the nature of its functions, the bank isunder obligation to treat the accounts of its depositors withmeticulous care, always having in mind the fiduciary natureof their relationship.

We agree with petitioner, however, that it is wrong to award, alongwith nominal damages, temperate or moderate damages. The twoawards are incompatible and cannot be granted concurrently.Nominal damages are given in order that a right of the plaintiff,which has been violated or invaded by the defendant, may bevindicated or recognized, and not for the purpose of indemnifyingthe plaintiff for any loss suffered by him (Art. 2221, New CivilCode; Manila Banking Corp. vs. Intermediate Appellate Court, 131SCRA 271). Temperate or moderate damages, which are more thannominal but less than compensatory damages, on the other hand,may be recovered when the court finds that some pecuniary losshas been suffered but its amount cannot, from the nature of thecase, be proved with reasonable certainty (Art. 2224, New CivilCode).

In the instant case, we also find need for vindicating the wrong doneon private respondent, and we accordingly agree with the Court ofAppeals in granting to her nominal damages but not in similarlyawarding temperate or moderate damages.

WHEREFORE, the appealed decision is MODIFIED by deleting theaward of temperate or moderate damages. In all other respects, theappellate court's decision is AFFIRMED. No costs in this instance.

SO ORDERED.

G.R. No. 112576 October 26, 1994

(CA-GR CV No. 26571)

METROPOLITAN BANK AND TRUST COMPANY, petitionervs.THE HON. COURT OF APPEALS, RURAL BANK OF PADREGARCIA, INC. and ISABEL R. KATIGBAK,respondents.

Makalintal, Barot, Torres & Ibarra for petitioner.

Fornier, Lava & Fornier for private respondents.

ROMERO,J.:

This petition for certiorariseeks to annul the decision of respoCourt of Appeals dated October 29, 1992 in CA GR CV No. affirming the decision of the Regional Trial Court of Lipa, Bata Branch XIII for damages, and the Resolution dated Novem1993 denying petitioner's motion for reconsideration of the afdecision.

The case emanated from a dispute between the Rural Bank oGarcia, Inc. (RBPG) and Metropolitan Bank and Trust Compan(MBTC) relative to a credit memorandum dated April 5, 1982 the Central Bank in the amount of P304,000.00 in favor of RB

The records show that Isabel Katigbak is the president and diof RBPG, owning 65% of the shares thereof. Metropolitan BanTrust Company (MBTC) is the rural bank's depository bank, wKatigbak maintains current accounts with MBTC's main office Makati as well as its Lipa City branch.

On April 6, 1982, MBTC received from the Central Bank a credmemo dated April 5, 1982 that its demand deposit account wcredited with P304,000.00 for the account of RBPG, represenloans granted by the Central Bank to RBPG. On the basis of scredit memo, Isabel Katigbak issued several checks against itaccount with MBTC in the total amount of P300,000.00, two (which (Metrobank Check Nos. 0069 and 0070) were payable Felipe C. Roque and Mrs. Eliza Roque for P25,000.00 each. Sachecks issued to Dr. and Mrs. Roque were deposited by the Rwith the Philippine Banking Corporation, Novaliches Branch inQuezon City. When these checks were forwarded to MBTC on 12, 1982 for payment (six (6) days from receipt of the CreditMemo), the checks were returned by MBTC with the annotatio


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"DAIF TNC" (Drawn Against Insufficient Funds Try NextClearing) so they were redeposited on April 14, 1982. Thesewere however again dishonored and returned unpaid for thefollowing reason: "DAIF TNC NO ADVICE FROM CB."

After the second dishonor of the two (2) checks, Dr. Felipe Roque, amember 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 aforesaidchecks.

On April 13, 1982, Isabel Katigbak who was in Hongkong on abusiness-vacation trip together with her sons Alfredo and Antonio,both of whom were also officers of RBPG, received overseas phonecalls from Mrs. Maris Katigbak-San Juan at her residence in SanLorenzo 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 itwas explained to Mr. Dungo that Mrs. San Juan was not in any wayconnected with RBPG.

Mrs. Katigbak testified that she informed Mrs. San Juan to requestdefendant MBTC to check and verify the records regarding theaforementioned Central Bank credit memo for P304,000.00 in favorof RBPG as she was certain that the checks were sufficiently coveredby 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, ThreeHundred Thousand na.") 1When Mrs. San Juan explained to him theneed to verify the records regarding the Central Bank memo, hemerely brushed it aside, telling her sarcastically that he was verysure that no such credit memo existed. Mrs. San Juan wasconstrained to place another long distance call to Mrs. Katigbak inHongkong that evening. Tense and angered, the Katigbaks had tocut short their Hongkong stay with their respective families and flewback to Manila, catching the first available flight on April 15, 1982.

Immediately upon arrival, Mrs. Katigbak called up MBTC, through aMr. Cochico, for a re-examination of the records of MBTC regardingthe Central Bank credit memo dated April 5, 1982 for P304,000.00.Mr. Dungo, to whom Cochico handed over the phone, allegedlyarrogantly 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 medicaltreatment at the Makati Medical Center for two (2) days.

Metrobank not only dishonored the checks issued by RBPG, thelatter was issued four (4) debit memos representing service andpenalty charges for the returned checks.

RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC ofLipa, Batangas Branch XIII against the Metropolitan Bank andTrust Company for damages on April 26, 1983.

The ultimate facts as alleged by the defendant MBTC in its answerare as follows: that on April 6, 1982, its messenger, Elizer Gonzales,received from the Central Bank several credit advices on rural bankaccounts, which included that of plaintiff RBPG in the amount ofP304,000.00; that due to the inadvertence of said messenger, thecredit advice issued in favor of plaintiff RBPG was not delivered tothe 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 P5,498.58which excluded the unprocessed credit advice of P304,000.00resulting in the dishonor of the aforementioned checks; that asregards the P304,000.00 which wasa re-discounting loan from the Central Bank, the same was creditedonly on April 15, 1982 after the Central Bank finally confirmed that acredit advice was indeed issued in favor of RBPG; that after theconfirmation, MBTC credited the amount of the credit advice toplaintiff RBPG's account and thru its officers, allegedly conveyedpersonally on two occasions its apologies to plaintiffs to show thatthe bank and its officers acted with no deliberate intent on their partto cause injury or damage to plaintiffs, explaining the circumstancesthat gave rise to the bouncing checks situation. Metrobank'snegligence arising from their messenger's misrouting of the creditadvice resulting in the return of the checks in question, despite dailyreporting of credit memos and a corresponding daily radio messageconfirmation, (as shown by Exhibit "I," the Investigation Report of

the bank's Mr. Valentino Elevado) and Mr. Dungo's improperhandling of clients led to the messenger's dismissal from service andMr. Dungo's transfer from Metro Manila to Mindoro.

The threshold issue was whether or not, under the facts andcircumstances of the case, plaintiff may be allowed to recoveractual, 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 2in favor of plaintiffs andagainst the defendant MBTC, ordering the latter to:

1. pay plaintiff Isabel Katigbak P50,000.00 astemperate damages;

2. pay P500,000.00 as moral damages,considering that RBPG's credit standing and

business reputation were damaged by thewrongful acts of defendant's employees, coupledwith the rude treatment received by IsabelKatigbak at the hands of Mr. Dungo, all of whichimpelled her to seek medical treatment;

3. pay P100,000.00 as attorney's fees andlitigation expenses; and.

4. pay the costs of suit.

The lower court did not award actual damages in the amountP50,000.00 representing the amount of the two (2) checks p ato Dr. Felipe C. Roque and Mrs. Elisa Roque for P25,000 eachfound no showing that Mr. Antonio Katigbak who allegedly paamount was actually reimbursed by plaintiff RBPG. Moreover,court held that no actual damages could have been suffered bplaintiff RBPG because on April 15, 1982, the Central Bank cradvice in the amount of P304,000 which included the two (2)issued to the Roque spouses in the sum of P50,000.00 were acredited to the account of RBPG and the service, as well as pe

charges, were all reversed.

MBTC appealed from the decision to the Court of Appeals in CGR CV No. 26571, alleging that the trial court erred in awarditemperate and moral damages, as well as a ttorney's fees, pluand expenses of litigation without factual or legal basis theref

On October 29, 1992, the Court of Appeals rendered adecision 3affirming that of the trial court, except for the deletthe award of temperate damages, the reduction of moral damfrom P500,000.00 to P50,000.00 in favor of RBPG and P100,for Isabel Katigbak and P50,000.00, as attorney's fees. Plaintappellees filed a motion for reconsideration of the decision,questioning the deletion of the award of temperate damages reduction of the award of moral damages and attorney's feesmotion was denied.

MBTC filed this petition, presenting the following issues forresolution:

1. whether or not private respondents RBPGIsabel Rodriguez are legally entitled to mordamages and attorney's fees, and

2. assuming that they are so entitled, whetnot the amounts awarded are excessive andunconscionable.

The petition is devoid of merit.

The case at bench was instituted to seek damages caused by

dishonor through negligence of respondent bank's checks whiwere actually sufficiently funded, and the insults from petitionbank's officer directed against private respondent Isabel R.Katigbak. The presence of malice and the evidence of besmirreputation or loss of credit and business standing, as well as reappraisal of its probative value, involves factual matters whhaving been already thoroughly discussed and analyzed in thcourts below, are no longer reviewable here. While this rule aof exceptions, this case does not fall under any of these.


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There is no merit in petitioner's argument that it should not beconsidered negligent, much less be held liable for damages onaccount of the inadvertence of its bank employee as Article 1173 ofthe Civil Code only requires it to exercise the diligence of agood pater familias.

As borne out by the records, the dishonoring of the respondent'schecks committed through negligence by the petitioner bank onApril 6, 1982 was rectified only on April 15, 1992 or nine (9) daysafter receipt of the credit memo. Clearly, petitioner bank was remissin its duty and obligation to treat private respondent's account withthe highest degree of care, considering the fiduciary nature of their

relationship. The bank is under obligation to treat the accounts of itsdepositors with meticulous care, whether such account consists onlyof a few hundred pesos or of millions. It must bear the blame forfailing to discover the mistake of its employee despite theestablished procedure requiring bank papers to pass through bankpersonnel whose duty it is to check and countercheck them forpossible errors. 4Responsibility arising from negligence in theperformance of every kind of obligation is demandable. 5While thebank's negligence may not have been attended with malice and badfaith, nevertheless, it caused serious anxiety, embarrassment andhumiliation to private respondents for which they are entitled torecover reasonable moral damages. 6

As the records bear out, insult was added to injury by petitionerbank's issuance of debit memoranda representing service andpenalty charges for the returned checks, not to mention theinsulting remarks from its Assistant Cashier.

In the case ofLeopoldo Araneta v. Bank of America, 7we held that:

The financial credit of a businessman is a prizedand valuable asset, it being a significant part ofthe foundation of his business. Any adversereflection thereon constitutes some financial lossto him. As stated in the case ofAtlanta NationalBank vs. Davis, 96 Ga 334, 23 SE 190, citing 2Morse Banks, Sec. 458, "it can hardly be possiblethat a customer's check can be wrongfully refusedpayment without some impeachment of his credit,which must in fact be an actual injury, though hecannot, from the nature of the case, furnishindependent, distinct proof thereof".

It was established that when Mrs. Katigbak learned that her checkswere not being honored and Mr. Dungo repeatedly made theinsulting phone calls, her wounded feelings and the mental anguishsuffered by her caused her blood pressure to rise beyond normallimits, necessitating medical attendance for two (2) days at ahospital.

The damage to private respondents' reputation and social standingentitles them to moral damages. Moral damages include physicalsuffering, mental anguish, fright, serious anxiety, besmirchedreputation, wounded feelings, moral shock, social humiliation andsimilar injury. 8Temperate or moderate damages which are morethan nominal but less than compensatory damages, may berecovered when the court finds that some pecuniary loss has beensuffered but its amount cannot, from the nature of the case, beproved with certainty. 9Temperate damages may be allowed incases where from the nature of the case, definite proof of pecuniaryloss cannot be adduced, although the court is convinced that therehas been such loss. The appellate court, however, justified itsdeletion 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 factthat the amount allegedly suffered by Mrs. Katigbak is susceptible ofproof. 10

Moral and temperate damages which are not susceptible ofpecuniary estimation are not awarded to penalize the petitioner butto compensate the respondents for injuries suffered as a result ofthe former's fault and negligence, taking into account the latter'scredit and social standing in the banking community, particularlysince this is the very first time such humiliation has befallen privaterespondents. The amount of such losses need not be establishedwith exactitude, precisely due to their nature. 11

The carelessness of petitioner bank, aggravated by the lack ofpromptness in repairing the error and the arrogant attitude of thebank 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 servicesrendered by private respondent's counsel, both in the trial andappellate courts, the Court deems it just and equitable thatattorney's fees in the amount of P50,000.00 be awarded.

WHEREFORE, the decision of respondent Court of Appeals isAFFIRMED in all respects.

SO ORDERED.

G.R. No. 147800. November 11, 2003

UNITED COCONUT PLANTERS BANK, petitioner, vs. TEOFILO

C. RAMOS, respondent.

D E C I S I O N

CALLEJO, SR.,J.:

Before us is a petition for review on certiorariof the March 30,2001 Decision[1]of the Court of Appeals in CA-G.R. CV No. 56737

which affirmed the Decision[2]of the Regional Trial Court (Makati City, Branch 148, in Civil Case No. 94-1822.

The Antecedents

On December 22, 1983, the petitioner United Coconut Bank (UCPB) granted a loan of P2,800,000 to ZamDevelopment Corporation (ZDC) with Venicio Ramos aSpouses Teofilo Ramos, Sr. and Amelita Ramos as sureties.Ramos, Sr. was the Executive Officer of the Iglesia ni CrMarch 1984, the petitioner granted an additional loan to ZDCwith Venicio Ramos and the Spouses Teofilo Ramos and Ramos as sureties.[3] However, the ZDC failed to pay its acc

the petitioner despite demands. The latter filed a complaint wRTC of Makati against the ZDC, Venicio Ramos and the STeofilo Ramos, Sr. for the collection of the corpoaccount. The case was docketed as Civil Case16453. On February 15, 1989, the RTC of Makati, Brancrendered judgment in favor of the petitioner and againdefendants. The decretal portion of the decision reads:

1. To pay plaintiff the sum of THREE MILLIONONE HUNDRED FIFTY THOUSAND PESOS(P3,150,000.00) plus interest, penalties andother charges;

2. To pay plaintiff the sum of P20,000.00 forattorneys fees; and

3. To pay the cost of suit.[4]

The decision became final and executory. On motionpetitioner, the court issued on December 18, 1990 a execution for the enforcement of its decision ordering DeputyPioquinto P. Villapaa to levy and attach all the real and pproperties belonging to the aforesaid defendants to sati

judgment.[5] In the writ of execution, the name of one defendants was correctly stated as Teofilo Ramos, Sr.

To help the Sheriff implement the writ, Atty. Cesar Bothe head of the Litigation and Enforcement Division (LED)petitioner, requested Eduardo C. Reniva, an appraiser petitioners Credit and Appraisal Investigation Department on July 17, 1992 to ascertain if the defendants had any leviaand personal property. The lawyer furnished Reniva with a Tax Declaration B-023-07600-R covering a property in City.[6]In the course of his investigation, Reniva found tproperty was a residential lot, identified as Lot 12, Block 5, OAvenue, Don Jose Subdivision, Quezon City, with an area square meters, covered by TCT No. 275167 (PR-13108) un

name of Teofilo C. Ramos, President and Chairman of the BDirectors of the Ramdustrial Corporation, married to RebRamos.[7]The property was covered by Tax Declaration No. 07600-R under the names of the said spouses. Reniva wenproperty to inspect it and to verify the identity of the thereof. He saw workers on the property construcbungalow.[8]However, he failed to talk to the owner property. Per information gathered from the neighborhood,
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confirmed that the Spouses Teofilo C. Ramos and Rebecca Ramosowned the property.

On July 22, 1992, Reniva submitted a report on his appraisal ofthe property. He stated therein that the fair market value of theproperty as of August 1, 1992 was P900,000 and that the ownerthereof was Teofilo C. Ramos, married to Rebecca Ramos. Whenappraised by the petitioner of the said report, the Sheriff prepared anotice of levy in Civil Case No. 16453 stating, inter alia, that thedefendants were Teofilo Ramos, Sr. and his wife Amelita Ramos andcaused the annotation thereof by the Register of Deeds on the saidtitle.[9]

Meanwhile, in August of 1993, Ramdustrial Corporation appliedfor a loan with the UCPB, a sister company of the petitioner, usingthe property covered by TCT No. 275167 (PR-13108) as collateraltherefor. The Ramdustrial Corporation intended to use the proceedsof the loan as additional capital as it needed to participate in abidding project of San Miguel Corporation.[10]In a meeting called forby the UCPB, the respondent was informed that upon verification, anotice of levy was annotated in TCT No. 275167 in favor of thepetitioner as plaintiff in Civil Case No. 16453, entitled UnitedCoconut Planters Bank v. Zamboanga Realty DevelopmentCorporation, Venicio A. Ramos and Teofilo Ramos, Sr. , because ofwhich the bank had to hold in abeyance any action on its loanapplication.

The respondent was shocked by the information. He was not aparty in the said case; neither was he aware that his property hadbeen levied by the sheriff in the said case. His blood temperaturerose so much that immediately after the meeting, he proceeded tohis doctor, Dr. Gatchalian, at the St. Lukes Medical Center, whogave the respondent the usual treatment and medication for cardio-vascular and hypertension problems.[11]

Upon advise from his lawyer, Atty. Carmelito Montano, therespondent executed an affidavit of denial[12]declaring that he andTeofilo Ramos, Sr., one of the judgment debtors in Civil Case No.16453, were not one and the same person. On September 30,1993, the respondent, through counsel, Atty. Carmelito A. Montano,wrote Sheriff Villapaa, informing him that a notice of levy wasannotated on the title of the residential lot of the respondent,covered by TCT No. 275167 (PR-13108); and that such annotationwas irregular and unlawful considering that the respondent was notTeofilo Ramos, Sr. ofIglesia ni Cristo, the defendant in Civil CaseNo. 16453. He demanded that Sheriff Villapaa cause thecancellation of the said annotation within five days from noticethereof, otherwise the respondent would take the appropriate civil,

criminal or administrative action against him. Appended theretowas the respondents affidavit of denial. For his part, SheriffVillapaa furnished the petitioner with a copy of the said letter.

In a conversation over the phone with Atty. CarmelitoMontano, Atty. Cesar Bordalba, the head of the petitioners LED,suggested that the respondent file the appropriate pleading in CivilCase No. 16453 to prove his claim that Atty. Montanos client,

Teofilo C. Ramos, was not defendant Teofilo Ramos, Sr., thedefendant in Civil Case No. 16453.

On October 21, 1993, the respondent was informed by theUCPB that Ramdustrial Corporations credit line applicationfor P2,000,000 had been approved.[13]Subsequently, onOctober 22,1993, the respondent, in his capacity as President and Chairman ofthe Board of Directors of Ramdustrial Corporation, and Rebecca F.Ramos executed a promissory note for the said amount payable tothe UCPB in installments for a period of 180days.[14]Simultaneously, the respondent and his wife Rebecca F.Ramos acted as sureties to the loan of RamdustrialCorporation.[15]However, the respondent was concerned because

when the proceeds of the loan were released, the bidding period forthe San Miguel Corporation project had already elapsed.[16]Asbusiness did not go well, Ramdustrial Corporation found it difficult topay the loan. It thus applied for an additional loan with the UCPBwhich was, however, denied. The corporation then applied for aloan with the Planters Development Bank (PDB), the proceeds ofwhich would be used to pay its account to the UCPB. Therespondent offered to use his property covered by TCT No. 275167as collateral for its loan. PDB agreed to pay off the outstanding loanobligation of Ramdustrial Corporation with UCPB, on the conditionthat the mortgage with the latter would be released. UCPBagreed. Pending negotiations with UCPB, the respondent discoveredthat the notice of levy annotated on TCT No. 275167 (PR-13108) atthe instance of the petitioner had not yet been cancelled.[17]Whenapprised thereof, PDB withheld the release of the loan pending thecancellation of the notice of levy. The account of RamdustrialCorporation with UCPB thus remained outstanding. The monthly

amortization on its loan from UCPB became due and remainedunpaid. When the respondent went to the petitioner for thecancellation of the notice of levy annotated on his title, thepetitioners counsel suggested to the respondent that he file amotion to cancel the levy on execution to enable the court to resolvethe issue. The petitioner assured the respondent that the motionwould not be opposed. Rather than wait for the petitioner to act,the respondent, through counsel, filed the said motion on April 8,1994. As promised, the petitioner did not oppose the motion. Thecourt granted the motion and issued an order on April 12,1994 ordering the Register of Deeds to cancel the levy. TheRegister of Deeds of Quezon City complied and cancelled the noticeof levy.[18]

Despite the cancellation of the notice of levy, the respondentfiled, on May 26, 1994, a complaint for damages against thepetitioner and Sheriff Villapaa before the RTC of Makati City, raffled

to Branch 148 and docketed as Civil Case No. 94-1822. Therein, therespondent (as plaintiff) alleged that he was the owner of a parcel ofland covered by TCT No. 275167; that Teofilo Ramos, Sr., one ofthe judgment debtors of UCPB in Civil Case No. 16453, was only hisnamesake; that without any legal basis, the petitioner and SheriffVillapaa caused the annotation of a notice to levy on the TCT of hisaforesaid property which caused the disapproval of his loan fromUCPB and, thus made him lose an opportunity to participate in thebidding of a considerable project; that by reason of such wrongful

annotation of notice of levy, he suffered sleepless nightsshock, mental anguish and almost a heart attack due to highpressure. He thus prayed:

WHEREFORE, premises considered, it is most respectfully prathe Honorable Regional Trial Court that a fter due hearing, judbe rendered in his favor by ordering defendants jointly andseverally, to pay as follows:

1. P3,000,000.00 as moral damages;

2. 300,000.00 as exemplary damages;

3. 200,000.00 as actual damages;

4. 200,000.00 as attorneys fees;

5. Cost of suit.[19]

In its answer, the petitioner, while admitting that it mmistake in causing the annotation of notice of levy on the TCTrespondent, denied that it was motivated by malice anfaith. The petitioner alleged that after ascertaining that itmade a mistake, it proposed that the respondent file a mocancel levy with a promise that it would not oppose thmotion. However, the respondent dilly-dallied and failed tosaid motion; forthwith, if any damages were sustained

respondent, it was because it took him quite a long time to motion. The petitioner should not thus be made to suffer consequences of the respondents delay.

The petitioner further asserted that it had no knowledthere were two persons bearing the same name Teofilo Rawas only when Sheriff Villapaa notified the petitioner that aTeofilo C. Ramos who appeared to be the registered owner No. 275167 that it learned for the first time the notice of levyrespondents property; forthwith, the petitioner held in abeyasale of the levied property at public auction; barred by the fathe respondent to file a third-party claim in Civil Case No. the petitioner could not cause the removal of the levy; thereof, it suggested to the respondent the filing of a mocancel levy and that the petitioner will not oppose such msurprisingly, it was only on April 12, 1994 that the respondesuch motion; the petitioner was thus surprised that the resp

filed an action for damages against it for his failure to setimely loan from the UCPB and PDB. The petitioner thus pray

WHEREFORE, in view of the foregoing premises, it is respectfprayed of this Honorable Court that judgment be rendered in of defendant UCPB, dismissing the complaint in toto and ordethe plaintiff to:
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1. pay moral damages in the amount of PESOS:THREE MILLION P3,000,000.00 and exemplarydamages in the amount of PESOS: FIVE HUNDREDTHOUSAND P500,000.00;

2. pay attorneys fees and litigation expenses in anamount of not less than PESOS: TWO HUNDREDTHOUSAND P200,000.00;

Other reliefs and remedies deemed just and equitable under thepremises are also prayed for.[20]

In the meantime, in 1995, PDB released the proceeds of theloan of Ramdustrial Corporation which the latter remitted to UCPB.

On March 4, 1997, the RTC rendered a decision in favor of therespondent. The complaint against Sheriff Villapaa was dismissedon the ground that he was merely performing his duties. Thedecretal part of the decision is herein quoted:

WHEREFORE, premises considered, judgment is hereby rendered infavor of the plaintiff and against the defendant UCPB, and the latteris hereby ordered to pay the following:

(1) P800,000.00 as moral damages;(2) P100,000.00 as exemplary damages;(3) P100,000.00 as attorneys fees;

(4) Cost of suit.[21]

The trial court found that contrary to the contention of thepetitioner, it acted with caution in looking for leviable properties ofthe judgment debtors/defendants in Civil Case No. 16453, itproceeded with haste as it did not take into consideration that thedefendant Teofilo Ramos was married to Amelita Ramos and had a

Sr. in his name, while the respondent was married to RebeccaRamos and had C for his middle initial. The investigationconducted by CAID appraiser Eduardo C. Reniva did not conclusivelyascertain if the respondent and Teofilo Ramos, Sr. were one and thesame person.

The trial court further stated that while it was RamdustrialCorporation which applied for a loan with UCPB and PDB, therespondent, as Chairman of Ramdustrial Corporation, with his wifeRebecca Ramos, signed in the promissory note and acted as suretieson the said obligations. Moreover, the property which was leviedwas the respondents only property where he and his familyresided. Thus, the thought of losing it for reasons not of his owndoing gave rise to his entitlement to moral damages.

The trial court further ruled that the mere fact that thepetitioner did not file an opposition to the respondents motion tocancel levy did not negate its negligence and bad faith. However,the court considered the cancellation of annotation of levy as a

mitigating factor on the damages caused to the respondent. Forfailure to show that he suffered actual damages, the court aquodismissed the respondents claim therefor.

Dissatisfied, the petitioner interposed an appeal to the Court ofAppeals (CA). On March 30, 2001, the CA rendered a decisionaffirming, in toto, the decision of the trial court, the decretal portionof which is herein quoted:

WHEREFORE, based on the foregoing premises, the assailed decisionis hereby AFFIRMED.[22]

The CA ruled that the petitioner was negligent in causing theannotation of notice of levy on the title of the petitioner for itsfailure to determine with certainty whether the defendant TeofiloRamos, Sr. in Civil Case No. 16453 was the registered owner of theproperty covered by TCT No. 275167, and to inform the sheriff thatthe registered owners of the property were the respondent and hiswife Rebecca Ramos, and thereafter request for the cancellation ofthe motion of levy on the property.

Disappointed, the petitioner filed this instant petition assigningthe following errors:

I

IN AFFIRMING THE TRIAL COURTS ORDER, THE COURT OFAPPEALS COMMITTED MANIFESTLY MISTAKEN INFERENCES ANDEGREGIOUS MISAPPREHENSION OF FACTS AND GRAVE ERRORS OF

LAW, CONSIDERING THAT:

A. ON THE EVIDENCE, THE BORROWER OFTHE LOAN, WHICH RESPONDENT RAMOSCLAIMED HE TRIED TO OBTAIN, WASRAMDUSTRIAL CORPORATION. HENCE,ANY DAMAGE RESULTING FROM THEANNOTATION WAS SUFFERED BY THECORPORATION AND NOT BY RESPONDENTRAMOS.

B. THE DELAY IN THE CANCELLATION OF THEANNOTATION WAS OF RESPONDENTRAMOSS (SIC) OWN DOING.

C. THE LOAN APPLICATIONS WITH UNITEDCOCONUT SAVINGS BANK AND PLANTERS

DEVELOPMENT BANK WERE GRANTEDPRIOR TO THE CANCELLATION OF THEANNOTATION ON THE TITLE OF THESUBJECT PROPERTY.

II

THE COURT OF APPEALS DECISION AFFIRMING THE TRIAL CAWARD OF MORAL DAMAGES TO RESPONDENT RAMOS IN THAMOUNT OF P800,000 ON A FINDING OF NEGLIGENCE ISCONTRARY TO LAW AND EVIDENCE.

A. UCPB WAS NOT NEGLIGENT WHEN CAUSED THE LEVY ON THE SUBJECPROPERTY.

B. AS A MATTER OF LAW, MORAL DAMAGCANNOT BE AWARDED ON A FINDING OMERE NEGLIGENCE.

C. IN ANY EVENT, THE AWARD OF MORDAMAGES TO RESPONDENT RAMOS WAUNREASONABLE AND OPPRESSIVE.

III

THE AWARD OF EXEMPLARY DAMAGES AND ATTORNEYS FEE

CONTRARY TO LAW SINCE THE AWARD OF MORAL DAMAGESIMPROPER IN THE FIRST PLACE.[23]

UCPB prayed that:

WHEREFORE, petitioner UNITED COCONUT PLANTERS BANKrespectfully prays that this Honorable Court render judgmentreversing and setting aside the Court of AppealsDecision datMarch 2001, and ordering the dismissal of respondent

RamosComplaintdated 05 May 1994.[24]

In his comment, the respondent alleged that the CA didin affirming, in toto, the decision of the trial court. He praythe petition be denied due course.

The issues posed for our resolution are the followiwhether or not the petitioner acted negligently in causannotation of levy on the title of the respondent; (b) if so, wor not the respondent was the real party-in-interest as plafile an action for damages against the petitioner considering tloan applicant with UCPB and PDB was RAMDUCORPORATION; (c) if so, whether or not the respondent is to moral damages, exemplary damages and attorneys fees.

On the first issue, we rule that the petitioner acted negwhen it caused the annotation of the notice of levy in T

275167.

It bears stressing that the petitioner is a banking corpoa financial institution with power to issue its promissoryintended to circulate as money (known as bank notes); or tothe money ofothers on general deposit, to form a joint fushall be used by the institution for its own benefit, for one oof the purposes of making temporary loans and discounts, of
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in notes, foreign and domestic bills of exchange, coin bullion,credits, and the remission of money; or with both these powers, andwith the privileges, in addition to these basic powers, of receivingspecial deposits, and making collection for the holders of negotiablepaper, if the institution sees fit to engage in such business .[25]Infunding these businesses, the bank invests the money that it holdsin trust of its depositors. For this reason, we have held that thebusiness of a bank is one affected with public interest, for whichreason the bank should guard against loss due to negligence or badfaith.[26]In approving the loan of an applicant, the bank concernsitself with proper informations regarding its debtors. The petitioner,as a bank and a financial institution engaged in the grant of loans, isexpected to ascertain and verify the identities of the persons it

transacts business with.[27]In this case, the petitioner knew that thesureties to the loan granted to ZDC and the defendants in Civil CaseNo. 94-1822 were the Spouses Teofilo Ramos, Sr. and AmelitaRamos. The names of the Spouses Teofilo Ramos, Sr. and AmelitaRamos were specified in the writ of execution issued by the trialcourt.

The petitioner, with Atty. Bordalba as the Chief of LED andhandling lawyer of Civil Case No. 16453, in coordination with thesheriff, caused the annotation of notice of levy in the respondentstitle despite its knowledge that the property was owned by therespondent and his wife Rebecca Ramos, who were not privies tothe loan availment of ZDC nor parties-defendants in Civil Case No.16453. Even when the respondent informed the petitioner, throughcounsel, that the property levied by the sheriff was owned by therespondent, the petitioner failed to have the annotation cancelled bythe Register of Deeds.

In determining whether or not the petitioner acted negligently,the constant test is: Did the defendant in doing the negligent actuse that reasonable care and caution which an ordinarily prudentperson would have used in the same situation? If not, then he isguilty of negligence.[28]Considering the testimonial anddocumentary evidence on record, we are convinced that thepetitioner failed to act with the reasonable care and caution whichan ordinarily prudent person would have used in the same situation.

The petitioner has access to more facilities in confirming theidentity of their judgment debtors. It should have acted morecautiously, especially since some uncertainty had been reported bythe appraiser whom the petitioner had tasked to makeverifications. It appears that the petitioner treated the uncertaintyraised by appraiser Eduardo C. Reniva as a flimsy matter. It placedmore importance on the information regarding the marketability andmarket value of the property, utterly disregarding the identity of theregistered owner thereof.

It should not be amiss to note that the judgment debtorsname was Teofilo Ramos, Sr. We note, as the Supreme Court ofWashington in 1909 had, that a legal name consists of one givenname and one surname or family name, and a mistake in a middlename is not regarded as of consequence. However, since the use ofinitials, instead of a given name, before a surname, has become a

practice, the necessity that these initials be all given and correctlygiven in court proceedings has become of importance in every case,and in many, absolutely essential to a correct designation of theperson intended.[29]A middle name is very important or evendecisive in a case in which the issue is as between two persons whohave the same first name and surname, did the act complained of,or is injured or sued or the like.[30]

In this case, the name of the judgment debtor in Civil Case No.16453 was Teofilo Ramos, Sr., as appearing in the judgment of thecourt and in the writ of execution issued by the trial court. Thename of the owner of the property covered by TCT No. 275167 wasTeofilo C. Ramos. It behooved the petitioner to ascertain whether

the defendant Teofilo Ramos, Sr. in Civil Case No. 16453 was thesame person who appeared as the owner of the property covered bythe said title. If the petitioner had done so, it would have surelydiscovered that the respondent was not the surety and the

judgment debtor in Civil Case No. 16453. The petitioner failed to doso, and merely assumed that the respondent and the judgmentdebtor Teofilo Ramos, Sr. were one and the same person.

In sum, we find that the petitioner acted negligently in causingthe annotation of notice of levy in the title of the herein respondent,and that its negligence was the proximate cause of the damagessustained by the respondent.

On the second issue, the petitioner insists that the respondentis not the real party-in-interest to file the action for damages, as hewas not the one who applied for a loan from UCPB and PDB butRamdustrial Corporation, of which he was merely the President andChairman of the Board of Directors.

We do not agree. The respondent very clearly stated in hiscomplaint that as a result of the unlawful levy by the petitioner ofhis property, he suffered sleepless nights, moral shock, and almosta heart attack due to high blood pressure.[31]

It must be underscored that the registered owner of theproperty which was unlawfully levied by the petitioner is therespondent. As owner of the property, the respondent has the rightto enjoy, encumber and dispose of his property without otherlimitations than those established by law. The owner also has aright of action against the holder and possessor of the thing in orderto recover it.[32]Necessarily, upon the annotation of the notice oflevy on the TCT, his right to use, encumber and dispose of hisproperty was diminished, if not negated. He could no longermortgage the same or use it as collateral for a loan.

Arising from his right of ownership over the said property is acause of action against persons or parties who have disturbed hisrights as an owner.[33]As an owner, he is one who would bebenefited or injured by the judgment, or who is entitled to the availsof the suit[34]for an action for damages against one who disturbedhis right of ownership.

Hence, regardless of the fact that the respondent was not theloan applicant with the UCPB and PDB, as the registered owner of

the property whose ownership had been unlawfully disturblimited by the unlawful annotation of notice of levy on his Trespondent had the legal standing to file the said actdamages. In both instances, the respondents property was collateral of the loans applied for by RamCorporation. Moreover, the respondent, together with his wa surety of the aforesaid loans.

While it is true that the loss of business opportunities be used as a reason for an action for damages arising frombusiness opportunities caused by the negligent act of the petthe respondent, as a registered owner whose right of ownersbeen disturbed and limited, clearly has the legal personal

cause of action to file an action for damages. Not evrespondents failure to have the annotation cancelled immafter he came to know of the said wrongful levy negates his caction.

On the third issue, for the award of moral damagegranted, the following must exist: (1) there must be anclearly sustained by the claimant, whether physical, mepsychological; (2) there must be a culpable act or omission festablished; (3) the wrongful act or omission of the defendanproximate cause of the injury sustained by the claimant; andaward for damages is predicated on any of the cases stArticle 2219 of the Civil Code.[35]

In the case at bar, although the respondent was not tapplicant and the business opportunities lost were thRamdustrial Corporation, all four requisites were establishethe respondent sustained injuries in that his physical hea

cardio-vascular ailment were aggravated; his fear that his oonly property would be foreclosed, hounded him endlessly; reputation as mortgagor had been tarnished. Seconannotation of notice of levy on the TCT of the private respwas wrongful, arising as it did from the petitioners negligen

allowing the levy without verifying the identity of its judebtor. Third, such wrongful levy was the proximate causerespondents misery. Fourth, the award for damages is preon Article 2219 of the Civil Code, particularly, number 10 the

Although the respondent was able to establish the petinegligence, we cannot, however, allow the award for exedamages, absent the private respondents failure to show tpetitioner acted with malice and bad faith. It is a requisitegrant of exemplary damages that the act of the offender maccompanied by bad faith or done in a wanton, fraudumalevolent manner.[37]

Attorneys fees may be awarded when a party is comp

litigate or to incur expenses to protect his interest by reasounjustified act of the other party. In this case, the respondcompelled to engage the services of counsel and to incur exof litigation in order to protect his interest to the subject pagainst the petitioners unlawful levy. The award is reasonview of the time it has taken this case to be resolved.[38]
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