banking consolidated cases

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FIRST DIVISION

[G.R. No. 112392. February 29, 2000]

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

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a petition for review on certiorariof the Decision[1]of the Court ofAppeals in CA-G.R. CV No. 37392 affirming in toto that of the Regional TrialCourt of Makati, Branch 139,[2] which dismissed the complaint filed bypetitioner Bank of the Philippine Islands against private respondent BenjaminC. Napiza for sum of money. Sdaad

On September 3, 1987, private respondent deposited in Foreign CurrencyDeposit Unit (FCDU) Savings Account No. 028-187 [3]

which he maintained in

petitioner banks Buendia Avenue Extension Branch, Continental BankManagers Check No. 00014757[4]

dated August 17, 1984, payable to "cash" inthe amount of Two Thousand Five Hundred Dollars ($2,500.00) and dulyendorsed by private respondent on its dorsal side.[5]

It appears that the checkbelonged to a certain Henry Chan who went to the office of private respondentand requested him to deposit the check in his dollar account by way ofaccommodation and for the purpose of clearing the same. Private respondentacceded, and agreed to deliver to Chan a signed blank withdrawal slip, withthe understanding that as soon as the check is cleared, both of them would goto the bank to withdraw the amount of the check upon private respondentspresentation to the bank of his passbook.

Using the blank withdrawal slip given by private respondent to Chan, onOctober 23, 1984, one Ruben Gayon, Jr. was able to withdraw the amount of$2,541.67 from FCDU Savings Account No. 028-187. Notably, the withdrawalslip shows that the amount was payable to Ramon A. de Guzman and AgnesC. de Guzman and was duly initialed by the branch assistant manager,Teresita Lindo.[6]

On November 20, 1984, petitioner received communication from the WellsFargo Bank International of New York that the said check deposited by privaterespondent was a counterfeit check[7]

because it was "not of the type or style ofchecks issued by Continental Bank International." [8]

Consequently, Mr. ArielReyes, the manager of petitioners Buendia Avenue Extension Branch,

instructed one of its employees, Benjamin D. Napiza IV, who is privaterespondents son, to inform his father that the check bounced. [9]

Reyes himself

sent a telegram to private respondent regarding the dishonor of the check. Inturn, private respondents son wrote to Reyes stating that the check had beenassigned "for encashment" to Ramon A. de Guzman and/or Agnes C. deGuzman after it shall have been cleared upon instruction of Chan. He also saidthat upon learning of the dishonor of the check, his father immediately tried tocontact Chan but the latter was out of town.[10]

Private respondents son undertook to return the amount of $2,500.00 to

petitioner bank. On December 18, 1984, Reyes reminded private respondentof his sons promise and warned that should he fail to return that amount withinseven (7) days, the matter would be referred to the banks lawyers forappropriate action to protect the banks interest.[11] This was followed by aletter of the banks lawyer dated April 8, 1985 demanding the return of the$2,500.00.[12]

In reply, private respondent wrote petitioners counsel on April 20,1985[13]

stating that he deposited the check "for clearing purposes" only toaccommodate Chan. He added:

"Further, please take notice that said check was deposited on

September 3, 1984 and withdrawn on October 23, 1984, or atotal period of fifty (50) days had elapsed at the time ofwithdrawal. Also, it may not be amiss to mention here that Imerely signed an authority to withdraw said deposit subject toits clearing, the reason why the transaction is not reflected inthe passbook of the account. Besides, I did not receive itsproceeds as may be gleaned from the withdrawal slip underthe captioned signature of recipient.

If at all, my obligation on the transaction is moral in nature,which (sic) I have been and is (sic) still exerting utmost andmaximum efforts to collect from Mr. Henry Chan who is

directly liable under the circumstances.Scsdaad

xxx......xxx......xxx."

On August 12, 1986, petitioner filed a complaint against private respondent,praying for the return of the amount of $2,500.00 or the prevailing pesoequivalent plus legal interest from date of demand to date of full payment, asum equivalent to 20% of the total amount due as attorney's fees, and litigationand/or costs of suit.

Private respondent filed his answer, admitting that he indeed signed a "blank"

withdrawal slip with the understanding that the amount deposited would bewithdrawn only after the check in question has been cleared. He likewise
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alleged that he instructed the party to whom he issued the signed blankwithdrawal slip to return it to him after the bank drafts clearance so that hecould lend that party his passbook for the purpose of withdrawing the amountof $2,500.00. However, without his knowledge, said party was able to withdrawthe amount of $2,541.67 from his dollar savings account through collusion withone of petitioners employees. Private respondent added that he had "giventhe Plaintiff fifty one (51) days with which to clear the bank draft in question."Petitioner should have disallowed the withdrawal because his passbook was

not presented. He claimed that petitioner had no one to blame except itself "forbeing grossly negligent;" in fact, it had allegedly admitted having paid theamount in the check "by mistake" x x x "if not altogether due to collusionand/or bad faith on the part of (its) employees." Charging petitioner with"apparent ignorance of routine bank procedures," by way of counterclaim,private respondent prayed for moral damages of P100,000.00, exemplarydamages of P50,000.00 and attorneys fees of 30% of whatever amount thatwould be awarded to him plus an honorarium of P500.00 per appearance incourt.

Private respondent also filed a motion for admission of a third party complaintagainst Chan. He alleged that "thru strategem and/or manipulation," Chan was

able to withdraw the amount of $2,500.00 even without private respondentspassbook. Thus, private respondent prayed that third party defendant Chan bemade to refund to him the amount withdrawn and to pay attorneys fees ofP5,000.00 plus P300.00 honorarium per appearance.

Petitioner filed a comment on the motion for leave of court to admit the thirdparty complaint, wherein it asserted that per paragraph 2 of the Rules andRegulations governing BPI savings accounts, private respondent alone wasliable "for the value of the credit given on account of the draft or checkdeposited." It contended that private respondent was estopped fromdisclaiming liability because he himself authorized the withdrawal of theamount by signing the withdrawal slip. Petitioner prayed for the denial of the

said motion so as not to unduly delay the disposition of the main caseasserting that private respondents claim could be ventilated in another case.

Private respondent replied that for the parties to obtain complete relief and toavoid multiplicity of suits, the motion to admit third party complaint should begranted. Meanwhile, the trial court issued orders on August 25, 1987 andOctober 28, 1987 directing private respondent to actively participate in locatingChan. After private respondent failed to comply, the trial court, on May 18,1988, dismissed the third party complaint without prejudice.

On November 4, 1991, a decision was rendered dismissing the complaint. Thelower court held that petitioner could not hold private respondent liable based

on the checks face value alone. To so hold him liable "would renderinutile therequirement of clearance from the drawee bank before the value of a

particular foreign check or draft can be credited to the account of a depositormaking such deposit." The lower court further held that "it was incumbent uponthe petitioner to credit the value of the check in question to the account of theprivate respondent only upon receipt of the notice of final payment andshould not have authorized the withdrawal from the latters account of thevalue or proceeds of the check." Having admitted that it committed a "mistake"in not waiting for the clearance of the check before authorizing the withdrawalof its value or proceeds, petitioner should suffer the resultant loss. Supremax

On appeal, the Court of Appeals affirmed the lower courts decision. Theappellate court held that petitioner committed "clear gross negligence" inallowing Ruben Gayon, Jr. to withdraw the money without presenting privaterespondents passbook and, before the check was cleared and in crediting theamount indicated therein in private respondents account. It stressed that themere deposit of a check in private respondents account did not mean that thecheck was already private respondents property. The check still had to becleared and its proceeds can only be withdrawn upon presentation of apassbook in accordance with the banks rules and regulations. Furthermore,petitioners contention that private respondent warranted the checksgenuineness by endorsing it is untenable for it would render useless the

clearance requirement. Likewise, the requirement of presentation of apassbook to ascertain the propriety of the accounting reflected would be ameaningless exercise. After all, these requirements are designed to protect thebank from deception or fraud.

The Court of Appeals cited the case ofRoman Catholic Bishop of Malolos, Inc.v. IAC,[14] where this Court stated that a personal check is not legal tender ormoney, and held that the check deposited in this case must be cleared beforeits value could be properly transferred to private respondent's account.

Without filing a motion for the reconsideration of the Court of AppealsDecision, petitioner filed this petition for review on certiorari, raising the

following issues:

1.......WHETHER OR NOT RESPONDENT NAPIZA ISLIABLE UNDER HIS WARRANTIES AS A GENERALINDORSER.

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

3.......WHETHER OR NOT PETITIONER WAS GROSSLY

NEGLIGENT IN ALLOWING THE WITHDRAWAL.
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Petitioner claims that private respondent, having affixed his signature at thedorsal side of the check, should be liable for the amount stated therein inaccordance with the following provision of the Negotiable Instruments Law (ActNo. 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, it shallbe accepted or paid, or both, as the case may be, accordingto its tenor, and that if it be dishonored, and the necessaryproceedings on dishonor be duly taken, he will pay theamount thereof to the holder, or to any subsequent indorserwho may be compelled to pay it."

Section 65, on the other hand, provides for the following warranties of aperson negotiating an instrument by delivery or by qualified indorsement: (a)that the instrument is genuine and in all respects what it purports to be; (b) thathe has a good title to it, and (c) that all prior parties had capacity to contract.[15]In People v. Maniego,[16] this Court described the liabilities of an indorser asfollows: Juris

"Appellants contention that as mere indorser, she may not beliable on account of the dishonor of the checks indorsed by

her, is likewise untenable. Under the law, the holder or lastindorsee of a negotiable instrument has the right to enforcepayment of the instrument for the full amount thereof againstall parties liable thereon. Among the parties liable thereon isan indorser of the instrument, i.e., a person placing hissignature upon an instrument otherwise than as a maker,drawer or acceptor * * unless he clearly indicated byappropriate words his intention to be bound in some othercapacity. Such an indorser who indorses withoutqualification, inter alia engages that on due presentment, * *(the instrument) shall be accepted or paid, or both, as thecase may be, according to its tenor, and that if it be

dishonored, and the necessary proceedings on dishonor beduly taken, he will pay the amount thereof to the holder, or

any subsequent indorser who may be compelled to pay it.Maniego may also be deemed an

accommodation party inthe light of the facts, i.e., a person who has signed theinstrument as maker, drawer, acceptor, or indorser, withoutreceiving value therefor, and for the purpose of lending hisname to some other person. As such, she is under the lawliable on the instrument to a holder for value, notwithstandingsuch holder at the time of taking the instrument knew * * (her)

to be only an accommodation party, although she has theright, after paying the holder, to obtain reimbursement fromthe party accommodated, since the relation between them isin effect that of principal and surety, the accommodation partybeing the surety."

It is thus clear that ordinarily private respondent may be held liable as anindorser of the check or even as an accommodation party. [17]

However, to holdprivate respondent liable for the amount of the check he deposited by the strictapplication of the law and without considering the attending circumstances inthe case would result in an injustice and in the erosion of the public trust in thebanking system. The interest of justice thus demands looking into the events

that led to the encashment of the check.

Petitioner asserts that by signing the withdrawal slip, private respondent"presented the opportunity for the withdrawal of the amount in question."Petitioner relied "on the genuine signature on the withdrawal slip, thepersonality of private respondents son and the lapse of more than fifty (50)days from date of deposit of the Continental Bank draft, without the samebeing returned yet."[18] We hold, however, that the propriety of the withdrawalshould be gauged by compliance with the rules thereon that both petitionerbank and its depositors are duty-bound to observe.

In the passbook that petitioner issued to private respondent, the following rules

on withdrawal of deposits appear:

"4.......Withdrawals must be made by the depositor personallybut in some exceptional circumstances, the Bank may allowwithdrawal by another upon the depositors written authorityduly authenticated; and neither a deposit nor a withdrawal willbe permitted except upon the presentation of the depositorssavings passbook, in which the amount deposited withdrawnshall be entered only by the Bank.

5.......Withdrawals may be made by draft, mail or telegraphictransfer in currency of the account at the request of thedepositor in writing on the withdrawal slip or by authenticated
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cable. Such request must indicate the name of the payee/s,amount and the place where the funds are to be paid. Anystamp, transmission and other charges related to suchwithdrawals shall be for the account of the depositor and shallbe paid by him/her upon demand. Withdrawals may also bemade in the form of travellers checks and in pesos.Withdrawals in the form of notes/bills are allowed subjecthowever, to their (availability).

6.......Deposits shall not be subject to withdrawal by check,and may be withdrawn only in the manner above provided,upon presentation of the depositors savings passbook andwith the withdrawal form supplied by the Bank at thecounter."[19]

Scjuris

Under these rules, to be able to withdraw from the savings account depositunder the Philippine foreign currency deposit system, two requisites must bepresented to petitioner bank by the person withdrawing an amount: (a) a dulyfilled-up withdrawal slip, and (b) the depositors passbook. Private respondentadmits that he signed a blank withdrawal slip ostensibly in violation of Rule No.

6 requiring that the request for withdrawal must name the payee, the amountto be withdrawn and the place where such withdrawal should be made. Thatthe withdrawal slip was in fact a blank one with only private respondents twosignatures affixed on the proper spaces is buttressed by petitioners allegationin the instant petition that had private respondent indicated therein the personauthorized to receive the money, then Ruben Gayon, Jr. could not havewithdrawn any amount. Petitioner contends that "(i)n failing to do so ( i.e.,naming his authorized agent), he practically authorized any possessor thereofto write any amount and to collect the same."[20]

Such contention would have been valid if not for the fact that the withdrawalslip itself indicates a special instruction that the amount is payable to

"Ramon

A. de Guzman &/or Agnes C. de Guzman." Such being the case, petitionerspersonnel should have been duly warned that Gayon, who was also employedin petitioners Buendia Ave. Extension branch,[21]was not the proper payee ofthe proceeds of the check. Otherwise, either Ramon or Agnes de Guzmanshould have issued another authority to Gayon for such withdrawal. Of course,at the dorsal side of the withdrawal slip is an "authority to withdraw" namingGayon the person who can withdraw the amount indicated in the check.Private respondent does not deny having signed such authority. However,considering petitioners clear admission that the withdrawal slip was a blankone except for private respondents signature, the unavoidable conclusion isthat the typewritten name of "Ruben C. Gayon, Jr." was intercalated andthereafter it was signed by Gayon or whoever was allowed by petitioner to

withdraw the amount. Under these facts, there could not have been a

principal-agent relationship between private respondent and Gayon so as torender the former liable for the amount withdrawn.

Moreover, the withdrawal slip contains a boxed warning that states

: "Thisreceipt must be signed and presented with the corresponding foreign currencysavings passbook by the depositor in person. For withdrawals thru arepresentative, depositor should accomplish the authority at the back." Therequirement of presentation of the passbook when withdrawing an amount

cannot be given mere lip service even though the person making thewithdrawal is authorized by the depositor to do so. This is clear from Rule No.6 set out by petitioner so that, for the protection of the banks interest and as areminder to the depositor, the withdrawal shall be entered in the depositorspassbook. The fact that private respondents passbook was not presentedduring the withdrawal is evidenced by the entries therein showing that the lasttransaction that he made with the bank was on September 3, 1984, the datehe deposited the controversial check in the amount of $2,500.00.[22]

In allowing the withdrawal, petitioner likewise overlooked another rule that isprinted in the passbook. Thus:

"2.......All deposits will be received as current funds and will berepaid in the same manner; provided, however, that depositsof drafts, checks, money orders, etc. will be accepted assubject to collection only and credited to the account onlyupon receipt of the notice of final payment. Collection chargesby the Banks foreign correspondent in effecting suchcollection shall be for the account of the depositor. If theaccount has sufficient balance, the collection shall be debitedby the Bank against the account. If, for any reason, theproceeds of the deposited checks, drafts, money orders, etc.,cannot be collected or if the Bank is required to return suchproceeds, the provisional entry therefor made by the Bank in

the savings passbook and its records shall be deemedautomatically cancelled regardless of the time that haselapsed, and whether or not the defective items can bereturned to the depositor; and the Bank is hereby authorizedto execute immediately the necessary corrections,amendments or changes in its record, as well as on thesavings passbook at the first opportunity to reflect suchcancellation." (Italics and underlining supplied.) Jurissc

As correctly held by the Court of Appeals, in depositing the check in his name,private respondent did not become the outright owner of the amount statedtherein. Under the above rule, by depositing the check with petitioner, private

respondent was, in a way, merely designating petitioner as the collecting bank.This is in consonance with the rule that a negotiable instrument, such as a
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check, whether a managers check or ordinary check, is not legal tender.[23]

Assuch, after receiving the deposit, under its own rules, petitioner shall credit theamount in private respondents account or infuse value thereon only after thedrawee bank shall have paid the amount of the check or the check has beencleared for deposit. Again, this is in accordance with ordinary bankingpractices and with this Courts pronouncement that "the collecting bank or lastendorser generally suffers the loss because it has the duty to ascertain thegenuineness of all prior endorsements considering that the act of presentingthe check for payment to the drawee is an assertion that the party making thepresentment has done its duty to ascertain the genuineness of theendorsements."[24] The rule finds more meaning in this case where the checkinvolved is drawn on a foreign bank and therefore collection is more difficultthan when the drawee bank is a local one even though the check in question isa managers check.[25]Misjuris

In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a commercial bank inMadrid, Spain, paid the amounts represented in three (3) checks to VirginiaBoncan, the finance officer of the Philippine Embassy in Madrid. The bank didso without previously clearing the checks with the drawee bank, the PhilippineNational Bank in New York, on account of the "special treatment" that Boncan

received from the personnel of Banco Atlanticos foreign department. TheCourt held that the encashment of the checks without prior clearance is"contrary to normal or ordinary banking practice specially so where the draweebank is a foreign bank and the amounts involved were large." Accordingly, theCourt approved the Auditor Generals denial of Banco Atlanticos claim forpayment of the value of the checks that was withdrawn by Boncan.

Said ruling brings to light the fact that the banking business is affected withpublic interest. By the nature of its functions, a bank is under obligation to treatthe accounts of its depositors "with meticulous care, always having in mind thefiduciary nature of their relationship."[27]

As such, in dealing with its depositors,a bank should exercise its functions not only with the diligence of a good father

of a family but it should do so with the highest degree of care.[28]

In the case at bar, petitioner, in allowing the withdrawal of private respondentsdeposit, failed to exercise the diligence of a good father of a family. In totaldisregard of its own rules, petitioners personnel negligently handled privaterespondents account to petitioners detriment. As this Court once said on thismatter:

"Negligence is the omission to do something which areasonable man, guided by those considerations whichordinarily regulate the conduct of human affairs, would do, orthe doing of something which a prudent and reasonable man

would do. The seventy-eight (78)-year-old, yet still relevant,case of

Picart v. Smith, provides the test by which to

determine the existence of negligence in a particular casewhich may be stated as follows: Did the defendant in doingthe alleged negligent act use that reasonable care andcaution which an ordinarily prudent person would have usedin the same situation? If not, then he is guilty of negligence.The law here in effect adopts the standard supposed to besupplied by the imaginary conduct of the discreetpater-familias of the Roman law. The existence of negligence in agiven case is not determined by reference to the personal

judgment of the actor in the situation before him. The lawconsiders what would be reckless, blameworthy, or negligentin the man of ordinary intelligence and prudence anddetermines liability by that."[29]

Petitioner violated its own rules by allowing the withdrawal of an amount that isdefinitely over and above the aggregate amount of private respondents dollardeposits that had yet to be cleared. The banks ledger on private respondentsaccount shows that before he deposited $2,500.00, private respondent had abalance of only $750.00.[30]Upon private respondents deposit of $2,500.00 onSeptember 3, 1984, that amount was credited in his ledger as a deposit

resulting in the corresponding total balance of $3,250.00.[31]

On September 10,1984, the amount of $600.00 and the additional charges of $10.00 wereindicated therein as withdrawn thereby leaving a balance of $2,640.00. OnSeptember 30, 1984, an interest of $11.59 was reflected in the ledger and onOctober 23, 1984, the amount of $2,541.67 was entered as withdrawn with abalance of $109.92.[32] On November 19, 1984 the word "hold" was writtenbeside the balance of $109.92.[33] That must have been the time when Reyes,petitioners branch manager, was informed unofficially of the fact that thecheck deposited was a counterfeit, but petitioners Buendia Ave. ExtensionBranch received a copy of the communication thereon from Wells Fargo BankInternational in New York the following day, November 20, 1984.[34] Accordingto Reyes, Wells Fargo Bank International handled the clearing of checks

drawn against U.S. banks that were deposited with petitioner.

[35]

Jjlex

From these facts on record, it is at once apparent that petitioners personnelallowed the withdrawal of an amount bigger than the original deposit of$750.00 and the value of the check deposited in the amount of $2,500.00although they had not yet received notice from the clearing bank in the UnitedStates on whether or not the check was funded. Reyes contention that afterthe lapse of the 35-day period the amount of a deposited check could bewithdrawn even in the absence of a clearance thereon, otherwise it could takea long time before a depositor could make a withdrawal,[36] is untenable. Saidpractice amounts to a disregard of the clearance requirement of the bankingsystem.
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While it is true that private respondents having signed a blank withdrawal slipset in motion the events that resulted in the withdrawal and encashment of thecounterfeit check, the negligence of petitioners personnel was the proximatecause of the loss that petitioner sustained. Proximate cause, which isdetermined by a mixed consideration of logic, common sense, policy andprecedent, is "that cause, which, in natural and continuous sequence,unbroken by any efficient intervening cause, produces the injury, and withoutwhich the result would not have occurred."[37]The proximate cause of thewithdrawal and eventual loss of the amount of $2,500.00 on petitioners partwas its personnels negligence in allowing such withdrawal in disregard of itsown rules and the clearing requirement in the banking system. In so doing,petitioner assumed the risk of incurring a loss on account of a forged orcounterfeit foreign check and hence, it should suffer the resulting damage.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision ofthe Court of Appeals in CA-G.R. CV No. 37392 is AFFIRMED.

SO ORDERED. Ne

wRepublic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 84281 May 27, 1994

CITYTRUST BANKING CORPORATION, petitioner,vs.

THE INTERMEDIATE APPELLATE COURT and EMMEHERRERO, respondents.

Agcaoili and Associates for petitioner.

David B. Agoncillo for private respondent.

Humberto B. Basco, collaborating counsel for private respondent.

VITUG, J.:

This case emanated from a complaint filed by private respondent EmmeHerrero for damages against petitioner Citytrust Banking Corporation. In hercomplaint, private respondent averred that she, a businesswoman, maderegular deposits, starting September of 1979, with petitioner Citytrust BankingCorporation at its Burgos branch in Calamba, Laguna. On 15 May 1980, shedeposited with petitioner the amount of Thirty One Thousand Five HundredPesos (P31,500.00), in cash, in order to amply cover six (6) postdated checksshe issued, viz:

Check No. Amount

007383 P1,507.00007384 1,262.00007387 4,299.00007387 2,204.00007492 6,281.00007400 4,716.00

When presented for encashment upon maturity, all the checks weredishonored due to "insufficient funds." The last check No. 007400,

however, was personally redeemed by private respondent in cashbefore it could be redeposited.

Petitioner, in its answer, asserted that it was due to private respondent's faultthat her checks were dishonored. It averred that instead of stating her correctaccount number, i.e., 29000823, in her deposit slip, she inaccurately wrote2900823.

The Regional Trial Court (Branch XXXIV) of Calamba, Laguna, on27 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 to paythe defendant reasonable attorney's fee in the amount of FIVETHOUSAND PESOS (P5,000.00) plus cost of suit.

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

WHEREFORE, the judgment appealed from is REVERSEDand a new one entered thereby ordering defendant to pay

plaintiff nominal damages of P2,000.00, temperate and
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negligence for which they are liable. As proofthereof plaintiff alludes to five particularincidents where plaintiff admittedly wronglyindicated her account number in her depositslips(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 & TrustCo., AC-G.R. CV No. 03639, prom. Nov. 2, 1985, quoting thecourt a quo in an almost identical 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 adeposit in somebody else's name despite thename of the depositor clearly written on the

deposit slip is indeed sheer negligence whichcould have easily been avoided if defendantbank exercised due diligence andcircumspection in the acceptance andposting of plaintiff's deposit.

We subscribe to the above disquisitions of the appellate court. In SimexInternational (Manila), Inc. vs. Court of Appeals, 183 SCRA 360, reiteratedin Bank of Philippine Islands vs. Intermediate Appellate Court, 206 SCRA 408,we similarly said, in cautioning depository banks on their fiduciaryresponsibility, that

In every case, the depositor expects the bank to treat hisaccount with utmost fidelity, whether such account consistsonly 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. Ablunder 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 is underobligation to treat the accounts of its depositors withmeticulous care, always having in mind the fiduciary nature oftheir relationship.

We agree with petitioner, however, that it is wrong to award, along withnominal damages, temperate or moderate damages. The two awards are

incompatible and cannot be granted concurrently. Nominal damages are givenin order that a right of the plaintiff, which has been violated or invaded by thedefendant, may be vindicated or recognized, and not for the purpose ofindemnifying the plaintiff for any loss suffered by him (Art. 2221, New CivilCode; Manila Banking Corp. vs. Intermediate Appellate Court, 131 SCRA271). Temperate or moderate damages, which are more than nominal but lessthan compensatory damages, on the other hand, may be recovered when thecourt finds that some pecuniary loss has been suffered but its amount cannot,from the nature of the case, be proved with reasonable certainty (Art. 2224,New Civil Code).

In the instant case, we also find need for vindicating the wrong done on private

respondent, and we accordingly agree with the Court of Appeals in granting toher nominal damages but not in similarly awarding temperate or moderatedamages.

WHEREFORE, the appealed decision is MODIFIED by deleting the award oftemperate or moderate damages. In all other respects, the appellate court'sdecision is AFFIRMED. No costs in this instance.

SO ORDERED.

Feliciano, Bidin, Romero and Melo, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 112576 October 26, 1994

(CA-GR CV No. 26571)


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METROPOLITAN BANK AND TRUST COMPANY, petitioner,vs.THE HON. COURT OF APPEALS, RURAL BANK OF PADRE GARCIA, INC.and ISABEL R. KATIGBAK,respondents.

Makalintal, Barot, Torres & Ibarra for petitioner.

Fornier, Lava & Fornier for private respondents.

ROMERO, J.:

This petition forcertiorariseeks to annul the decision of respondent Court ofAppeals dated October 29, 1992 in CA GR CV No. 26571 affirming thedecision of the Regional Trial Court of Lipa, Batangas Branch XIII fordamages, and the Resolution dated November 11, 1993 denying petitioner'smotion for reconsideration of the aforesaid decision.

The case emanated from a dispute between the Rural Bank of Padre Garcia,Inc. (RBPG) and Metropolitan Bank and Trust Company (MBTC) relative to acredit memorandum dated April 5, 1982 from the Central Bank in the amountof P304,000.00 in favor of RBPG.

The records show that Isabel Katigbak is the president and director of RBPG,owning 65% of the shares thereof. Metropolitan Bank and Trust Company(MBTC) is the rural bank's depository bank, where Katigbak maintains currentaccounts with MBTC's main office in Makati as well as its Lipa City branch.

On April 6, 1982, MBTC received from the Central Bank a credit memo datedApril 5, 1982 that its demand deposit account was credited with P304,000.00

for the account of RBPG, representing loans granted by the Central Bank toRBPG. On the basis of said credit memo, Isabel Katigbak issued severalchecks against its account with MBTC in the total amount of P300,000.00, two(2) of which (Metrobank Check Nos. 0069 and 0070) were payable to Dr.Felipe C. Roque and Mrs. Eliza Roque for P25,000.00 each. Said checksissued to Dr. and Mrs. Roque were deposited by the Roques with thePhilippine Banking Corporation, Novaliches Branch in Quezon City. Whenthese checks were forwarded to MBTC on April 12, 1982 for payment (six (6)days from receipt of the Credit Memo), the checks were returned by MBTCwith the annotations "DAIF TNC" (Drawn Against Insufficient Funds TryNext Clearing) so they were redeposited on April 14, 1982. Thesewere however again dishonored and returned unpaid for the following reason:

"DAIF TNC NO ADVICE FROM CB."

After the second dishonor of the two (2) checks, Dr. Felipe Roque, a memberof the Board of Directors of Philippine Banking Corporation, allegedly went tothe Office of Antonio Katigbak, an officer of RBPG, chiding him for thebouncing checks. In order to appease the doctor, RBPG paid Dr. RoqueP50,000.00 in cash to replace the aforesaid checks.

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 phone calls from Mrs.Maris Katigbak-San Juan at her residence in San Lorenzo Village, Makati,informing Isabel Katigbak that a certain Mr. Rizal Dungo, Assistant Cashier ofMBTC insisted on talking to her (Mrs. San Juan), berating her about thechecks which bounced, saying "Nag-issue kayo ng tseke, wala namang

pondo," even if it was explained to Mr. Dungo that Mrs. San Juan was not inany way connected with RBPG.

Mrs. Katigbak testified that she informed Mrs. San Juan to request defendantMBTC to check and verify the records regarding the aforementioned CentralBank credit memo for P304,000.00 in favor of RBPG as she was certain thatthe checks were sufficiently covered by the CB credit memo as early as April

6, 1994, but the following day, Mrs. San Juan received another insulting callfrom Mr. Dungo ("Bakit kayo nag-issue ng tseke na wala namangpondo, Three Hundred Thousand na.") 1When Mrs. San Juan explained to himthe need to verify the records regarding the Central Bank memo, he merelybrushed it aside, telling her sarcastically that he was very sure that no suchcredit memo existed. Mrs. San Juan was constrained to place another longdistance call to Mrs. Katigbak in Hongkong that evening. Tense and angered,the Katigbaks had to cut short their Hongkong stay with their respectivefamilies and flew back to Manila, catching the first available flight on April 15,1982.

Immediately upon arrival, Mrs. Katigbak called up MBTC, through a

Mr. Cochico, for a re-examination of the records of MBTC regarding theCentral Bank credit memo dated April 5, 1982 for P304,000.00. Mr. Dungo, towhom Cochico handed over the phone, allegedly arrogantly said: "Bakit kayomagagalit, wala naman kayong pondo?" These remarks allegedly so shockedMrs. Katigbak that her blood pressure rose to a dangerous level and she hadto undergo medical treatment at the Makati Medical Center for two (2) days.

Metrobank not only dishonored the checks issued by RBPG, the latter wasissued four (4) debit memos representing service and penalty charges for thereturned checks.


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RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC of Lipa,Batangas Branch XIII against the Metropolitan Bank and Trust Company fordamages on April 26, 1983.

The ultimate facts as alleged by the defendant MBTC in its answer are asfollows: that on April 6, 1982, its messenger, Elizer Gonzales, received fromthe Central Bank several credit advices on rural bank accounts, which includedthat of plaintiff RBPG in the amount of P304,000.00; that due to the

inadvertence of said messenger, the credit advice issued in favor of plaintiffRBPG was not delivered to the department in charge of processing the same;consequently, when MBTC received from the clearing department the checksin question, the stated balance in RBPG's account was only P5,498.58 whichexcluded the unprocessed credit advice of P304,000.00 resulting in thedishonor of the aforementioned checks; that as regards the P304,000.00which wasa re-discounting loan from the Central Bank, the same was credited only on

April 15, 1982 after the Central Bank finally confirmed that a credit advice wasindeed issued in favor of RBPG; that after the confirmation, MBTC credited theamount of the credit advice to plaintiff RBPG's account and thru its officers,allegedly conveyed personally on two occasions its apologies to plaintiffs to

show that the bank and its officers acted with no deliberate intent on their partto cause injury or damage to plaintiffs, explaining the circumstances that gaverise to the bouncing checks situation. Metrobank's negligence arising fromtheir messenger's misrouting of the credit advice resulting in the return of thechecks in question, despite daily reporting of credit memos and acorresponding daily radio message confirmation, (as shown by Exhibit "I," theInvestigation Report of the bank's Mr. Valentino Elevado) and Mr. Dungo'simproper handling 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 and circumstances ofthe case, plaintiff may be allowed to recover actual, moral and exemplary

damages, including attorney's fees, litigation expenses and the costs of thesuit. On August 25, 1989, the RTC of Lipa City rendered a decision 2in favor ofplaintiffs and against the defendant MBTC, ordering the latter to:

1. pay plaintiff Isabel Katigbak P50,000.00 as temperatedamages;

2. pay P500,000.00 as moral damages, considering thatRBPG's credit standing and business reputation weredamaged by the wrongful acts of defendant's employees,coupled with the rude treatment received by Isabel Katigbakat the hands of Mr. Dungo, all of which impelled her to seek

medical treatment;

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

4. pay the costs of suit.

The lower court did not award actual damages in the amount of P50,000.00representing the amount of the two (2) checks payable to Dr. Felipe C. Roqueand Mrs. Elisa Roque for P25,000 each, as it found no showing that Mr.

Antonio Katigbak who allegedly paid the amount was actually reimbursed byplaintiff RBPG. Moreover, the court held that no actual damages could havebeen suffered by plaintiff RBPG because on April 15, 1982, the Central Bankcredit advice in the amount of P304,000 which included the two (2) checksissued to the Roque spouses in the sum of P50,000.00 were already creditedto the account of RBPG and the service, as well as penalty charges, were allreversed.

MBTC appealed from the decision to the Court of Appeals in CA GR CVNo. 26571, alleging that the trial court erred in awarding temperate and moraldamages, as well as attorney's fees, plus costs and expenses of litigationwithout factual or legal basis therefor.

On October 29, 1992, the Court of Appeals rendered a decision 3affirming thatof the trial court, except for the deletion of the award of temperate damages,the reduction of moral damages from P500,000.00 to P50,000.00 in favor ofRBPG and P100,000.00 for Isabel Katigbak and P50,000.00, as attorney'sfees. Plaintiffs-appellees filed a motion for reconsideration of the decision,questioning the deletion of the award of temperate damages and the reductionof the award of moral damages and attorney's fees. The motion was denied.

MBTC filed this petition, presenting the following issues for resolution:

1. whether or not private respondents RBPG and IsabelRodriguez are legally entitled to moral damages andattorney's fees, and

2. assuming that they are so entitled, whether or not theamounts awarded are excessive and unconscionable.

The petition is devoid of merit.

The case at bench was instituted to seek damages caused by the dishonorthrough negligence of respondent bank's checks which were actuallysufficiently funded, and the insults from petitioner bank's officer directed

against private respondent Isabel R. Katigbak. The presence of malice and theevidence of besmirched reputation or loss of credit and business standing, as


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well as a reappraisal of its probative value, involves factual matters which,having been already thoroughly discussed and analyzed in the courts below,are no longer reviewable here. While this rule admits of exceptions, this casedoes not fall under any of these.

There is no merit in petitioner's argument that it should not be considerednegligent, much less be held liable for damages on account of theinadvertence of its bank employee as Article 1173 of the Civil Code only

requires it to exercise the diligence of a good pater familias.

As borne out by the records, the dishonoring of the respondent's checkscommitted through negligence by the petitioner bank on April 6, 1982 wasrectified only on April 15, 1992 or nine (9) days after receipt of the creditmemo. Clearly, petitioner bank was remiss in its duty and obligation to treatprivate respondent's account with the highest degree of care, considering thefiduciary nature of their relationship. The bank is under obligation to treat theaccounts of its depositors with meticulous care, whether such account consistsonly of a few hundred pesos or of millions. It must bear the blame for failing todiscover the mistake of its employee despite the established procedurerequiring bank papers to pass through bank personnel whose duty it is to

check and countercheck them for possible errors.4

Responsibility arising fromnegligence in the performance of every kind of obligation isdemandable. 5While the bank's negligence may not have been attended withmalice and bad faith, nevertheless, it caused serious anxiety, embarrassmentand humiliation to private respondents for which they are entitled to recoverreasonable moral damages. 6

As the records bear out, insult was added to injury by petitioner bank'sissuance of debit memoranda representing service and penalty charges for thereturned checks, not to mention the insulting remarks from its AssistantCashier.

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

The financial credit of a businessman is a prized and valuableasset, it being a significant part of the foundation of hisbusiness. Any adverse reflection thereon constitutes somefinancial loss to him. As stated in the case ofAtlanta NationalBank vs. Davis, 96 Ga 334, 23 SE 190, citing 2 Morse Banks,Sec. 458, "it can hardly be possible that a customer's checkcan be wrongfully refused payment without someimpeachment of his credit, which must in fact be an actualinjury, though he cannot, from the nature of the case, furnishindependent, distinct proof thereof".

It was established that when Mrs. Katigbak learned that her checks were notbeing honored and Mr. Dungo repeatedly made the insulting phone calls, herwounded feelings and the mental anguish suffered by her caused her bloodpressure to rise beyond normal limits, necessitating medical attendance fortwo (2) days at a hospital.

The damage to private respondents' reputation and social standing entitlesthem to moral damages. Moral damages include physical suffering, mental

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

Moral and temperate damages which are not susceptible of pecuniaryestimation are not awarded to penalize the petitioner but to compensate therespondents for injuries suffered as a result of the former's fault andnegligence, taking into account the latter's credit and social standing in thebanking community, particularly since this is the very first time such humiliationhas befallen private respondents. The amount of such losses need not beestablished with exactitude, precisely due to their nature. 11

The carelessness of petitioner bank, aggravated by the lack of promptness inrepairing the error and the arrogant attitude of the bank officer handling thematter, justifies the grant of moral damages, which are clearly not excessive

and unconscionable.

Moreover, considering the nature and extent of the services rendered byprivate respondent's counsel, both in the trial and appellate courts, the Courtdeems it just and equitable that attorney's fees in the amount of P50,000.00 beawarded.

WHEREFORE, the decision of respondent Court of Appeals is AFFIRMED inall respects.

SO ORDERED.

SECOND DIVISION


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[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, 2001Decision[1] of the Court of Appeals in CA-G.R. CV No. 56737 which affirmedthe Decision[2] of the Regional Trial Court (RTC) of Makati City, Branch 148, inCivil Case No. 94-1822.

The Antecedents

On December 22, 1983, the petitioner United Coconut Planters Bank(UCPB) granted a loan of P2,800,000 to Zamboanga DevelopmentCorporation (ZDC) with Venicio Ramos and the Spouses Teofilo Ramos, Sr.and Amelita Ramos as sureties. Teofilo Ramos, Sr. was the Executive Officerof the Iglesia ni Cristo. In March 1984, the petitioner granted an additionalloan to ZDC, again with Venicio Ramos and the Spouses Teofilo Ramos and

Amelita Ramos as sureties.[3] However, the ZDC failed to pay its account tothe petitioner despite demands. The latter filed a complaint with the RTC ofMakati against the ZDC, Venicio Ramos and the Spouses Teofilo Ramos, Sr.for the collection of the corporations account. The case was docketed as CivilCase No. 16453. On February 15, 1989, the RTC of Makati, Branch 134,rendered judgment in favor of the petitioner and against the defendants. The

decretal portion of the decision reads:

1. To pay plaintiff the sum of THREE MILLION ONE

HUNDRED FIFTY THOUSAND PESOS (P3,150,000.00)

plus interest, penalties and other charges;

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

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

The decision became final and executory. On motion of the petitioner,the court issued on December 18, 1990 a writ of execution for the enforcementof its decision ordering Deputy Sheriff Pioquinto P. Villapaa to levy and attachall the real and personal properties belonging to the aforesaid defendants tosatisfy the judgment.[5] In the writ of execution, the name of one of the

defendants was correctly stated as Teofilo Ramos, Sr.

To help the Sheriff implement the writ, Atty. Cesar Bordalba, the head ofthe Litigation and Enforcement Division (LED) of the petitioner, requestedEduardo C. Reniva, an appraiser of the petitioners Credit and AppraisalInvestigation Department (CAID) on July 17, 1992 to ascertain if thedefendants had any leviable real and personal property. The lawyer furnishedReniva with a copy of Tax Declaration B-023-07600-R covering a propertyinQuezon City.[6]In the course of his investigation, Reniva found that theproperty was a residential lot, identified as Lot 12, Block 5, Ocampo Avenue,Don Jose Subdivision, Quezon City, with an area of 400 square meters,covered by TCT No. 275167 (PR-13108) under the name of Teofilo C. Ramos,President and Chairman of the Board of Directors of the RamdustrialCorporation, married to Rebecca F. Ramos. [7] The property was covered byTax Declaration No. B-023-07600-R under the names of the saidspouses. Reniva went to the property to inspect it and to verify the identity ofthe owner thereof. He saw workers on the property constructing a bungalow.[8]However, he failed to talk to the owner of the property. Per informationgathered from the neighborhood, Reniva confirmed that the Spouses TeofiloC. Ramos and Rebecca Ramos owned the property.

On July 22, 1992, Reniva submitted a report on his appraisal of theproperty. He stated therein that the fair market value of the property as

of August 1, 1992 was P900,000 and that the owner thereof was Teofilo C.Ramos, married to Rebecca Ramos. When appraised by the petitioner of thesaid report, the Sheriff prepared a notice of levy in Civil Case No. 16453stating, inter alia, that the defendants were Teofilo Ramos, Sr. and his wife

Amelita Ramos and caused the annotation thereof by the Register of Deedson the said title.[9]

Meanwhile, in August of 1993, Ramdustrial Corporation applied for a loanwith the UCPB, a sister company of the petitioner, using the property coveredby TCT No. 275167 (PR-13108) as collateral therefor. The RamdustrialCorporation intended to use the proceeds of the loan as additional capital as itneeded to participate in a bidding project of San Miguel Corporation. [10]In ameeting called for by the UCPB, the respondent was informed that uponverification, a notice of levy was annotated in TCT No. 275167 in favor of thepetitioner as plaintiff in Civil Case No. 16453, entitled United Coconut PlantersBank v. Zamboanga Realty Development Corporation, Venicio A. Ramos andTeofilo Ramos, Sr., because of which the bank had to hold in abeyance anyaction on its loan application.

The respondent was shocked by the information. He was not a party inthe said case; neither was he aware that his property had been levied by thesheriff in the said case. His blood temperature rose so much that immediatelyafter the meeting, he proceeded to his doctor, Dr. Gatchalian, at the St. LukesMedical Center, who gave the respondent the usual treatment and medicationfor cardio-vascular and hypertension problems. [11]
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Upon advise from his lawyer, Atty. Carmelito Montano, the respondentexecuted an affidavit of denial[12]declaring that he and Teofilo Ramos, Sr., oneof the judgment debtors in Civil Case No. 16453, were not one and the sameperson. On September 30, 1993, the respondent, through counsel, Atty.Carmelito A. Montano, wrote Sheriff Villapaa, informing him that a notice oflevy was annotated on the title of the residential lot of the respondent, coveredby TCT No. 275167 (PR-13108); and that such annotation was irregular andunlawful considering that the respondent was not Teofilo Ramos, Sr. ofIglesiani Cristo, the defendant in Civil Case No. 16453. He demanded that SheriffVillapaa cause the cancellation of the said annotation within five days fromnotice thereof, otherwise the respondent would take the appropriate civil,criminal or administrative action against him. Appended thereto was therespondents affidavit of denial. For his part, Sheriff Villapaa furnished thepetitioner with a copy of the said letter.

In a conversation over the phone with Atty. Carmelito Montano, Atty.Cesar Bordalba, the head of the petitioners LED, suggested that therespondent file the appropriate pleading in Civil Case No. 16453 to prove hisclaim that Atty. Montanos client, Teofilo C. Ramos, was not defendant TeofiloRamos, Sr., the defendant in Civil Case No. 16453.

On October 21, 1993, the respondent was informed by the UCPB thatRamdustrial Corporations credit line application for P2,000,000 had beenapproved.[13]Subsequently, on October 22, 1993, the respondent, in hiscapacity as President and Chairman of the Board of Directors of RamdustrialCorporation, and Rebecca F. Ramos executed a promissory note for the saidamount payable to the UCPB in installments for a period of 180 days.[14]Simultaneously, the respondent and his wife Rebecca F. Ramos acted assureties to the loan of Ramdustrial Corporation.[15]However, the respondentwas concerned because when the proceeds of the loan were released, thebidding period for the San Miguel Corporation project had already elapsed.[16]As business did not go well, Ramdustrial Corporation found it difficult to paythe loan. It thus applied for an additional loan with the UCPB which was,however, denied. The corporation then applied for a loan with the PlantersDevelopment Bank (PDB), the proceeds of which would be used to pay itsaccount to the UCPB. The respondent offered to use his property covered byTCT No. 275167 as collateral for its loan. PDB agreed to pay off theoutstanding loan obligation of Ramdustrial Corporation with UCPB, on thecondition that the mortgage with the latter would be released. UCPBagreed. Pending negotiations with UCPB, the respondent discovered that thenotice of levy annotated on TCT No. 275167 (PR-13108) at the instance of thepetitioner had not yet been cancelled. [17]When apprised thereof, PDB withheldthe release of the loan pending the cancellation of the notice of levy. Theaccount of Ramdustrial Corporation with UCPB thus remainedoutstanding. The monthly amortization on its loan from UCPB became dueand remained unpaid. When the respondent went to the petitioner for thecancellation of the notice of levy annotated on his title, the petitioners counsel

suggested to the respondent that he file a motion to cancel the levy onexecution to enable the court to resolve the issue. The petitioner assured therespondent that the motion would not be opposed. Rather than wait for thepetitioner to act, the respondent, through counsel, filed the said motion on April8, 1994. As promised, the petitioner did not oppose the motion. The courtgranted the motion and issued an order on April 12, 1994 ordering theRegister of Deeds to cancel the levy. The Register of Deeds of Quezon Citycomplied and cancelled the notice of levy.[18]

Despite the cancellation of the notice of levy, the respondent filed,on May 26, 1994, a complaint for damages against the petitioner and SheriffVillapaa before the RTC of Makati City, raffled to Branch 148 and docketedas Civil Case No. 94-1822. Therein, the respondent (as plaintiff) alleged thathe was the owner of a parcel of land covered by TCT No. 275167; that TeofiloRamos, Sr., one of the judgment debtors of UCPB in Civil Case No. 16453,was only his namesake; that without any legal basis, the petitioner and SheriffVillapaa caused the annotation of a notice to levy on the TCT of his aforesaidproperty which caused the disapproval of his loan from UCPB and, thus madehim lose an opportunity to participate in the bidding of a considerable project;that by reason of such wrongful annotation of notice of levy, he sufferedsleepless nights, moral shock, mental anguish and almost a heart attack due

to high blood pressure. He thus prayed:

WHEREFORE, premises considered, it is most respectfully prayed of the Honorable

Regional Trial Court that after due hearing, judgment be rendered in his favor by

ordering defendants jointly and severally, 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 made a mistake incausing the annotation of notice of levy on the TCT of the respondent, deniedthat it was motivated by malice and bad faith. The petitioner alleged that afterascertaining that it indeed made a mistake, it proposed that the respondent filea motion to cancel levy with a promise that it would not oppose the saidmotion. However, the respondent dilly-dallied and failed to file the said motion;forthwith, if any damages were sustained by the respondent, it was because it
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took him quite a long time to file the motion. The petitioner should not thus bemade to suffer for the consequences of the respondents delay.

The petitioner further asserted that it had no knowledge that there weretwo persons bearing the same name Teofilo Ramos; it was only when SheriffVillapaa notified the petitioner that a certain Teofilo C. Ramos who appearedto be the registered owner of TCT No. 275167 that it learned for the first timethe notice of levy on the respondents property; forthwith, the petitioner held inabeyance the sale of the levied property at public auction; barred by the failure

of the respondent to file a third-party claim in Civil Case No. 16453, thepetitioner could not cause the removal of the levy; in lieu thereof, it suggestedto the respondent the filing of a motion to cancel levy and that the petitionerwill not oppose such motion; surprisingly, it was only on April 12, 1994 that therespondent filed such motion; the petitioner was thus surprised that therespondent filed an action for damages against it for his failure to secure atimely loan from the UCPB and PDB. The petitioner thus prayed:

WHEREFORE, in view of the foregoing premises, it is respectfully prayed of this

Honorable Court that judgment be rendered in favor of defendant UCPB, dismissing

the complaint in toto and ordering the plaintiff to:

1. pay moral damages in the amount of PESOS: THREE

MILLION P3,000,000.00 and exemplary damages in the amount

of PESOS: FIVE HUNDRED THOUSAND P500,000.00;

2. pay attorneys fees and litigation expenses in an amount of not less

than PESOS: TWO HUNDRED THOUSAND P200,000.00;

Other reliefs and remedies deemed just and equitable under the premises are also

prayed for.[20]

In the meantime, in 1995, PDB released the proceeds of the loan 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 dismissed on theground that he was merely performing his duties. The decretal part of thedecision is herein quoted:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendant UCPB, and the latter is 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 the petitioner, itacted with caution in looking for leviable properties of the judgmentdebtors/defendants in Civil Case No. 16453, it proceeded with haste as it didnot take into consideration that the defendant Teofilo Ramos was married to

Amelita Ramos and had a Sr. in his name, while the respondent was marriedto Rebecca Ramos and had C for his middle initial. The investigation

conducted by CAID appraiser Eduardo C. Reniva did not conclusivelyascertain if the respondent and Teofilo Ramos, Sr. were one and the sameperson.

The trial court further stated that while it was Ramdustrial Corporationwhich applied for a loan with UCPB and PDB, the respondent, as Chairman ofRamdustrial Corporation, with his wife Rebecca Ramos, signed in thepromissory note and acted as sureties on the said obligations. Moreover, theproperty which was levied was the respondents only property where he andhis family resided. 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 the petitioner did not

file an opposition to the respondents motion to cancel levy did not negate itsnegligence and bad faith. However, the court considered the cancellation ofannotation of levy as a mitigating factor on the damages caused to therespondent. For failure to show that he suffered actual damages, the court aquo dismissed the respondents claim therefor.

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

WHEREFORE, based on the foregoing premises, the assailed decision is hereby

AFFIRMED.[22]

The CA ruled that the petitioner was negligent in causing the annotationof notice of levy on the title of the petitioner for its failure to determine withcertainty whether the defendant Teofilo Ramos, Sr. in Civil Case No. 16453was the registered owner of the property covered by TCT No. 275167, and toinform the sheriff that the registered owners of the property were therespondent and his wife Rebecca Ramos, and thereafter request for thecancellation of the motion of levy on the property.

Disappointed, the petitioner filed this instant petition assigning thefollowing errors:

I
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IN AFFIRMING THE TRIAL COURTS ORDER, THE COURT OF APPEALS

COMMITTED MANIFESTLY MISTAKEN INFERENCES AND EGREGIOUS

MISAPPREHENSION OF FACTS AND GRAVE ERRORS OF LAW,

CONSIDERING THAT:

A. ON THE EVIDENCE, THE BORROWER OF THELOAN, WHICH RESPONDENT RAMOS CLAIMED HETRIED TO OBTAIN, WAS RAMDUSTRIAL

CORPORATION. HENCE, ANY DAMAGERESULTING FROM THE ANNOTATION WASSUFFERED BY THE CORPORATION AND NOT BYRESPONDENT RAMOS.

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

C. THE LOAN APPLICATIONS WITH UNITEDCOCONUT SAVINGS BANK AND PLANTERSDEVELOPMENT BANK WERE GRANTED PRIOR TOTHE CANCELLATION OF THE ANNOTATION ON

THE TITLE OF THE SUBJECT PROPERTY.II

THE COURT OF APPEALS DECISION AFFIRMING THE TRIAL COURTS

AWARD OF MORAL DAMAGES TO RESPONDENT RAMOS IN THE

AMOUNT OF P800,000 ON A FINDING OF NEGLIGENCE IS CONTRARY TO

LAW AND EVIDENCE.

A. UCPB WAS NOT NEGLIGENT WHEN IT CAUSEDTHE LEVY ON THE SUBJECT PROPERTY.

B. AS A MATTER OF LAW, MORAL DAMAGES CANNOTBE AWARDED ON A FINDING OF MERENEGLIGENCE.

C. IN ANY EVENT, THE AWARD OF MORAL DAMAGESTO RESPONDENT RAMOS WAS UNREASONABLE

AND OPPRESSIVE.

III

THE AWARD OF EXEMPLARY DAMAGES AND ATTORNEYS FEES IS

CONTRARY TO LAW SINCE THE AWARD OF MORAL DAMAGES WAS

IMPROPER IN THE FIRST PLACE.[23]

UCPB prayed that:

WHEREFORE, petitioner UNITED COCONUT PLANTERS BANK respectfully

prays that this Honorable Court render judgment reversing and setting aside the

Court of Appeals Decision dated 30 March 2001, and ordering the dismissal of

respondent Ramos Complaintdated 05 May 1994.[24]

In his comment, the respondent alleged that the CA did not err inaffirming, in toto, the decision of the trial court. He prayed that the petition bedenied due course.

The issues posed for our resolution are the following: (a) whether or notthe petitioner acted negligently in causing the annotation of levy on the title ofthe respondent; (b) if so, whether or not the respondent was the real party-in-interest as plaintiff to file an action for damages against the petitionerconsidering that the loan applicant with UCPB and PDB was RAMDUSTRIALCORPORATION; (c) if so, whether or not the respondent is entitled to moraldamages, exemplary damages and attorneys fees.

On the first issue, we rule that the petitioner acted negligently when itcaused the annotation of the notice of levy in TCT No. 275167.

It bears stressing that the petitioner is a banking corporation, a financialinstitution with power to issue its promissory notes intended to circulate asmoney (known as bank notes); or to receive the money ofothers on generaldeposit, to form a joint fund that shall be used by the institution for its ownbenefit, for one or more of the purposes of making temporary loans anddiscounts, of dealing in notes, foreign and domestic bills of exchange, coinbullion, credits, and the remission of money; or with both these powers, andwith the privileges, in addition to these basic powers, of receiving specialdeposits, and making collection for the holders of negotiable paper, if theinstitution sees fit to engage in such business. [25]In funding these businesses,the bank invests the money that it holds in trust of its depositors. For thisreason, we have held that the business of a bank is one affected with publicinterest, for which reason the bank should guard against loss due tonegligence or bad faith.[26]In approving the loan of an applicant, the bankconcerns itself with proper informations regarding its debtors. The petitioner,as a bank and a financial institution engaged in the grant of loans, is expectedto ascertain and verify the identities of the persons it transacts business with.[27]In this case, the petitioner knew that the sureties to the loan granted to ZDCand the defendants in Civil Case No. 94-1822 were the Spouses TeofiloRamos, Sr. and Amelita Ramos. The names of the Spouses Teofilo Ramos,Sr. and Amelita Ramos were specified in the writ of execution issued by thetrial court.

The petitioner, with Atty. Bordalba as the Chief of LED and handlinglawyer of Civil Case No. 16453, in coordination with the sheriff, caused theannotation of notice of levy in the respondents title despite its knowledge that

the property was owned by the respondent and his wife Rebecca Ramos, whowere not privies to the loan availment of ZDC nor parties-defendants in Civil
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Case No. 16453. Even when the respondent informed the petitioner, throughcounsel, that the property levied by the sheriff was owned by the respondent,the petitioner failed to have the annotation cancelled by the Register of Deeds.

In determining whether or not the petitioner acted negligently, theconstant test is: Did the defendant in doing the negligent act use thatreasonable care and caution which an ordinarily prudent person would haveused in the same situation? If not, then he is guilty of negligence.[28] Considering the testimonial and documentary evidence on

record, we are convinced that the petitioner failed to act with the reasonablecare and caution which an ordinarily prudent person would have used in thesame situation.

The petitioner has access to more facilities in confirming the identity oftheir judgment debtors. It should have acted more cautiously, especially sincesome uncertainty had been reported by the appraiser whom the petitioner hadtasked to make verifications. It appears that the petitioner treated theuncertainty raised by appraiser Eduardo C. Reniva as a flimsy matter. Itplaced more importance on the information regarding the marketability andmarket value of the property, utterly disregarding the identity of the registeredowner thereof.

It should not be amiss to note that the judgment debtors name wasTeofilo Ramos, Sr. We note, as the Supreme Court of Washington in 1909had, that a legal name consists of one given name and one surname or familyname, and a mistake in a middle name is not regarded as ofconsequence. However, since the use of initials, instead of a given name,before a surname, has become a practice, the necessity that these initials beall given and correctly given in court proceedings has become of importance inevery case, and in many, absolutely essential to a correct designation of theperson intended.[29]A middle name is very important or even decisive in a casein which the issue is as between two persons who have the same first nameand 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. 16453was Teofilo Ramos, Sr., as appearing in the judgment of the court and in thewrit of execution issued by the trial court. The name of the owner of theproperty covered by TCT No. 275167 was Teofilo C. Ramos. It behooved thepetitioner to ascertain whether the defendant Teofilo Ramos, Sr. in Civil CaseNo. 16453 was the same person who appeared as the owner of the propertycovered by the said title. If the petitioner had done so, it would have surelydiscovered that the respondent was not the surety and the judgment debtor inCivil Case No. 16453. The petitioner failed to do so, and merely assumed thatthe respondent and the judgment debtor Teofilo Ramos, Sr. were one and thesame person.

In sum, we find that the petitioner acted negligently in causing the

annotation of notice of levy in the title of the herein respondent, and that its

negligence was the proximate cause of the damages sustained by therespondent.

On the second issue, the petitioner insists that the respondent is not thereal party-in-interest to file the action for damages, as he was not the one whoapplied for a loan from UCPB and PDB but Ramdustrial Corporation, of whichhe was merely the President and Chairman of the Board of Directors.

We do not agree. The respondent very clearly stated in his complaint

that as a result of the unlawful levy by the petitioner of his property, hesuffered sleepless nights, moral shock, and almost a heart attack due to highblood pressure.[31]

It must be underscored that the registered owner of the property whichwas unlawfully levied by the petitioner is the respondent. As owner of theproperty, the respondent has the right to enjoy, encumber and dispose of hisproperty without other limitations than those established by law. The owneralso has a right of action against the holder and possessor of the thing in orderto recover it.[32] Necessarily, upon the annotation of the notice of levy on theTCT, his right to use, encumber and dispose of his property was diminished, ifnot negated. He could no longer mortgage the same or use it as collateral fora loan.

Arising from his right of ownership over the said property is a cause ofaction against persons or parties who have disturbed his rights as an owner.[33]As an owner, he is one who would be benefited or injured by the judgment,or who is entitled to the avails of the suit [34] for an action for damages againstone who disturbed his right of ownership.

Hence, regardless of the fact that the respondent was not the loanapplicant with the UCPB and PDB, as the registered owner of the propertywhose ownership had been unlawfully disturbed and limited by the unlawfulannotation of notice of levy on his TCT, the respondent had the legal standingto file the said action for damages. In both instances, the respondentsproperty was used as collateral of the loans applied for by RamdustrialCorporation. Moreover, the respondent, together with his wife, was a surety ofthe aforesaid loans.

While it is true that the loss of business opportunities cannot be used as areason for an action for damages arising from loss of business opportunitiescaused by the negligent act of the petitioner, the respondent, as a registeredowner whose right of ownership had been disturbed and limited, clearly hasthe legal personality and cause of action to file an action for damages. Noteven the respondents failure to have the annotation cancelled immediatelyafter he came to know of the said wrongful levy negates his cause of action.

On the third issue, for the award of moral damages to be granted, thefollowing must exist: (1) there must be an injury clearly sustained by theclaimant, whether physical, mental or psychological; (2) there must be a
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culpable act or omission factually established; (3) the wrongful act or omissionof the defendant is the proximate cause of the injury sustained by the claimant;and (4) the award for damages is predicated on any of the cases stated in

Article 2219 of the Civil Code.[35]

In the case at bar, although the respondent was not the loan applicantand the business opportunities lost were those of Ramdustrial Corporation, allfour requisites were established. First, the respondent sustained injuries inthat his physical

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