Negotiable Instrument cases

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Sps Moran vs CA

Facts: M who regularly purchased bulk fuel from P maintained 3 joint accounts

with Citytrust Bank, namely: Current Account o! " #CA"$, %a&ings Account o! "

#%A"$, and %a&ings Account o! ' #%A'$!

M had a pre(authori)ed transfer #PA*$ agreement with Citytrust wherein the former

ha&e written authority to the latter to automatically transfer funds from their %A"

to their CA" at any time whene&er the funds in their current account were

insu+cient to meet withdrawals from said current account!

n -ecember "', "./3, M drew a check for P01, 02!11 payable to P!

n -ecember "3, "./3, M issued another check in the amount of P0, 1.1!11 in

fa&or of the same!

n -ecember "4, "./3, P deposited the ' aforementioned check to its accountwith the PB! 5n turn, PB presented them for clearing and the record shows that

on -ecember "4, "./3, the accounts has insu+cient funds #CA" had a )ero

balance, while %A" 6co&ered by PA*7 had an a&ailable balance of P', "14!31 and

%A' had an a&ailable balance of P43, '/!3.$! 8ence the checks were

dishonoured!

n -ecember "0, "./3 at "1:11 AM, M went to the bank as was his regular

practice and deposited in their %A' the amounts of P"1, /24!0/ and P, 204!'0,

and he deposited likewise in the %A" the amounts of P0, .11!11, P30, "11!11 and

31!11! *he amount of P41,111!11 was then transferred by him from %A' to theirCA"! At the same time, the amount of P,!11 was transferred from %A" to the

same current account through PA* agreement!

%ometime on -ecember "0 or ", "./3 M was informed that that P refused to

deli&er their orders on a credit basis because the two checks they had pre&iously

issued were dishonored upon presentment for payment due to 9insu+ciency of

funds! *he non(deli&ery of orders forced petitioners to stop business operations,

allegedly causing them to su;er loss of earnings!

n -ecember " or "2, "./3, P got the signature of M on an application for amanager<s check so that the dishonoured checks could be redeemed and

presented the checks in payment for the two dishonoured checks!

n =uly '4, "./4, claimed P",111,111!11 for moral damages!

"



Issue: > the bank is liable for damages for its refusal to pay a check on

account of insu+cient funds considering the fact that a deposit may be made later

in the day!

8eld: o, Petitioners had no su+cient funds in their accounts when the bank

dishonoured the checks in ?uestion!

@irst, a check is a bill of echange drawn on a bank payable on demand! *hus, a

check is a written order addressed to a bank or persons carrying on the business

of banking, by a party ha&ing money in their hands, re?uesting them to pay on

presentment, to a person named therein or to bearer or order, a named sum of

money!

%econd, the relationship between the bank and the depositor is that of a debtor

and creditor! By &irtue of the contract of deposit between the banker and its

depositor, the banker agrees to pay checks drawn by the depositor pro&ided that

said depositor has money in the hands of the bank!

*hirdly, where the bank possesses funds of the depositor, it is bound to honor his

checks to the etent of the amount deposits! *he failure of a bank to pay the

check of a merchant or a trader, when the deposit is su+cient, entitles the drawer

to substantial damages without any proof of actual damages! Con&ersely, a bank

is not liable for its refusal to pay a check on account of insu+cient funds,notwithstanding the fact that a deposit may be made later in the day! Before a

bank depositor may maintain a suit to reco&er a specic amount form his bank, he

must rst show that he had on deposit su+cient funds to meet demand!

Considering the clearing process adopted, it is clear that the a&ailable balance on

-ecember "4, "./3 was used by the bank in determining whether or not there

was su+cient cash deposited to fund the two checks! >hen M<s checks were

dishonored due to insu+ciency of funds, the a&ailable balance of %A" which was

the subject of the PA* agreement was not enough to co&er either of the two

checks! n -ecember "4, "./3, when PB presented the checks for collection,

the a&ailable balance for %A" was only P', "14!31 while CA"had no a&ailable

balance! 5t was only on -ecember "0, "./3 at around "1:11 AM that the

necessary funds were deposited, which unfortunately was too late to pre&ent the

dishonour of the checks!

'



G.R. No. 88013 March 19, 1990

SIME IN!ERNA!I"NA# $MANI#A%, INC"R&"RA!E', petitioner, &s!

!(E ("N"RA)#E C"*R! "F A&&EA#S an+ !RA'ERS R"A#

)AN-, respondents!

CR*, J.:

>e are concerned in this case with the ?uestion of damages, specically moral

and eemplary damages! *he negligence of the pri&ate respondent has already

been established! All we ha&e to ascertain is whether the petitioner is entitled to

the said damages and, if so, in what amounts!

*he parties agree on the basic facts! *he petitioner is a pri&ate corporation

engaged in the eportation of food products! 5t buys these products from &arious

local suppliers and then sells them abroad, particularly in the nited %tates,

Canada and the Middle Dast! Most of its eports are purchased by the petitioner

on credit!

*he petitioner was a depositor of the respondent bank and maintained a checking

account in its branch at Eomulo A&enue, Cubao, Fue)on City! n May '0, "./",

the petitioner deposited to its account in the said bank the amount of

P"11,111!11, thus increasing its balance as of that date to

P".1,3/1!24! 1 %ubse?uently, the petitioner issued se&eral checks against its

deposit but was suprised to learn later that they had been dishonored forinsu+cient funds!

*he dishonored checks are the following:

"! Check o! '"03." dated May '., "./", in fa&or of California

Manufacturing Company, 5nc! for P",4/1!11:

'! Check o! '"04' dated May '/, "./", in fa&or of the Bureau of

5nternal Ee&enue in the amount of P3,3/!23:

3! Check o! '"040" dated =une 4, "./", in fa&or of Mr! Greg PedreHo

in the amount of P2,1/1!11I

4! Check o! '"044" dated =une 0, "./", in fa&or of Malabon Jonglife

*rading Corporation in the amount of P4',.1!11:

3



0! Check o! '"0424 dated =une "1, "./", in fa&or of Malabon Jonglife

*rading Corporation in the amount of P"',.03!11:

! Check o! '"0422 dated =une ., "./", in fa&or of %ea(Jand

%er&ices, 5nc! in the amount of P'2,1'4!40:

2! Check o! '"04"' dated =une "1, "./", in fa&or of Baguio Country

Club Corporation in the amount of P4,3/0!1': and

/! Check o! '"04/1 dated =une ., "./", in fa&or of Dnri?ueta Bayla in

the amount of P,'20!11! /

As a conse?uence, the California Manufacturing Corporation sent on =une ., "./",

a letter of demand to the petitioner, threatening prosecution if the dishonored

check issued to it was not made good! 5t also withheld deli&ery of the order made

by the petitioner! %imilar letters were sent to the petitioner by the Malabon Jong

Jife *rading, on =une "0, "./", and by the G! and ! Dnterprises, on =une "1, "./"!

Malabon also canceled the petitionerKs credit line and demanded that future

payments be made by it in cash or certied check! Meantime, action on the

pending orders of the petitioner with the other suppliers whose checks were

dishonored was also deferred!

*he petitioner complained to the respondent bank on =une "1,

"./"! 3 5n&estigation disclosed that the sum of P"11,111!11 deposited by the

petitioner on May '0, "./", had not been credited to it! *he error was rectied on =une "2, "./", and the dishonored checks were paid after they were re(

deposited!

5n its letter dated =une '1, "./", the petitioner demanded reparation from the

respondent bank for its Lgross and wanton negligence!L *his demand was not met!

*he petitioner then led a complaint in the then Court of @irst 5nstance of Ei)al

claiming from the pri&ate respondent moral damages in the sum of P",111,111!11

and eemplary damages in the sum of P011,111!11, plus '0 attorneyKs fees, and

costs!

After trial, =udge =ohnico G! %er?uinia rendered judgment holding that moral and

eemplary damages were not called for under the circumstances! 8owe&er,

obser&ing that the plainti;Ks right had been &iolated, he ordered the defendant to

pay nominal damages in the amount of P'1,111!11 plus P0,111!11 attorneyKs fees

and costs! *his decision was a+rmed in toto by the respondent court! 2

4



*he respondent court found with the trial court that the pri&ate respondent was

guilty of negligence but agreed that the petitioner was ne&ertheless not entitled

to moral damages! 5t said:

*he essential ingredient of moral damages is proof of bad faith #-e

Aparicio &s! Parogurga, "01 %CEA '/1$! 5ndeed, there was the

omission by the defendant(appellee bank to credit appellantKs deposit

of P"11,111!11 on May '0, "./"! But the bank rectied its records! 5t

credited the said amount in fa&or of plainti;(appellant in less than a

month! *he dishonored checks were e&entually paid! *hese

circumstances negate any imputation or insinuation of malicious,

fraudulent, wanton and gross bad faith and negligence on the part of

the defendant(appellant!

5t is this ruling that is faulted in the petition now before us!

*his Court has carefully eamined the facts of this case and nds that it cannot

share some of the conclusions of the lower courts! 5t seems to us that the

negligence of the pri&ate respondent had been brushed o; rather lightly as if it

were a minor infraction re?uiring no more than a slap on the wrist! >e feel it is not

enough to say that the pri&ate respondent rectied its records and credited the

deposit in less than a month as if this were su+cient repentance! *he error should

not ha&e been committed in the rst place! *he respondent bank has not e&en

eplained why it was committed at all! 5t is true that the dishonored checks were,

as the Court of Appeals put it, Le&entuallyL paid! 8owe&er, this took almost amonth when, properly, the checks should ha&e been paid immediately upon

presentment!

As the Court sees it, the initial carelessness of the respondent bank, aggra&ated

by the lack of promptitude in repairing its error, justies the grant of moral

damages! *his rather lackadaisical attitude toward the complaining depositor

constituted the gross negligence, if not wanton bad faith, that the respondent

court said had not been established by the petitioner!

>e also note that while stressing the rectication made by the respondent bank,

the decision practically ignored the prejudice su;ered by the petitioner! *his was

simply glossed o&er if not, indeed, disbelie&ed! *he fact is that the petitionerKs

credit line was canceled and its orders were not acted upon pending receipt of

actual payment by the suppliers! 5ts business declined! 5ts reputation was

tarnished! 5ts standing was reduced in the business community! All this was due to

0



the fault of the respondent bank which was undeniably remiss in its duty to the

petitioner!

Article ''10 of the Ci&il Code pro&ides that actual or compensatory damages may

be recei&ed L#'$ for injury to the plainti; s business standing or commercial

credit!L *here is no ?uestion that the petitioner did sustain actual injury as a result

of the dishonored checks and that the eistence of the loss ha&ing been

established Labsolute certainty as to its amount is not re?uired!L %uch injury

should bolster all the more the demand of the petitioner for moral damages and

justies the eamination by this Court of the &alidity and reasonableness of the

said claim!

>e agree that moral damages are not awarded to penali)e the defendant but to

compensate the plainti; for the injuries he may ha&e su;ered! 8 5n the case at bar,

the petitioner is seeking such damages for the prejudice sustained by it as a resultof the pri&ate respondentKs fault! *he respondent court said that the claimed

losses are purely speculati&e and are not supported by substantial e&idence, but if

failed to consider that the amount of such losses need not be established with

eactitude precisely because of their nature! Moral damages are not susceptible of

pecuniary estimation! Article ''" of the Ci&il Code specically pro&ides that Lno

proof of pecuniary loss is necessary in order that moral, nominal, temperate,

li?uidated or eemplary damages may be adjudicated!L *hat is why the

determination of the amount to be awarded #ecept li?uidated damages$ is left to

the sound discretion of the court, according to Lthe circumstances of each case!L

@rom e&ery &iewpoint ecept that of the petitionerKs, its claim of moral damages in

the amount of P",111,111!11 is nothing short of preposterous! 5ts business

certainly is not that big, or its name that prestigious, to sustain such an

etra&agant pretense! Moreo&er, a corporation is not as a rule entitled to moral

damages because, not being a natural person, it cannot eperience physical

su;ering or such sentiments as wounded feelings, serious aniety, mental anguish

and moral shock! *he only eception to this rule is where the corporation has a

good reputation that is debased, resulting in its social humiliation! 9

>e shall recogni)e that the petitioner did su;er injury because of the pri&ate

respondentKs negligence that caused the dishonor of the checks issued by it! *he

immediate conse?uence was that its prestige was impaired because of the

bouncing checks and condence in it as a reliable debtor was diminished! *he

pri&ate respondent makes much of the one instance when the petitioner was sued

in a collection case, but that did not pro&e that it did not ha&e a good reputation



that could not be marred, more so since that case was ultimately settled! 10 5t does

not appear that, as the pri&ate respondent would portray it, the petitioner is an

unsa&ory and disreputable entity that has no good name to protect!

Considering all this, we feel that the award of nominal damages in the sum of

P'1,111!11 was not the proper relief to which the petitioner was entitled! nder

Article '''" of the Ci&il Code, Lnominal damages are adjudicated in order that a

right of the plainti;, which has been &iolated or in&aded by the defendant, may be

&indicated or recogni)ed, and not for the purpose of indemnifying the plainti; for

any loss su;ered by him!L As we ha&e found that the petitioner has indeed

incurred loss through the fault of the pri&ate respondent, the proper remedy is the

award to it of moral damages, which we impose, in our discretion, in the same

amount of P'1,111!11!

ow for the eemplary damages!

*he pertinent pro&isions of the Ci&il Code are the following:

Art! '''.! Demplary or correcti&e damages are imposed, by way of

eample or correction for the public good, in addition to the moral,

temperate, li?uidated or compensatory damages!

Art! ''3'! 5n contracts and ?uasi(contracts, the court may award

eemplary damages if the defendant acted in a wanton, fraudulent,

reckless, oppressi&e, or male&olent manner!

*he banking system is an indispensable institution in the modern world and plays

a &ital role in the economic life of e&ery ci&ili)ed nation! >hether as mere passi&e

entities for the safekeeping and sa&ing of money or as acti&e instruments of

business and commerce, banks ha&e become an ubi?uitous presence among the

people, who ha&e come to regard them with respect and e&en gratitude and, most

of all, condence! *hus, e&en the humble wage(earner has not hesitated to

entrust his lifeKs sa&ings to the bank of his choice, knowing that they will be safe

in its custody and will e&en earn some interest for him! *he ordinary person, with

e?ual faith, usually maintains a modest checking account for security andcon&enience in the settling of his monthly bills and the payment of ordinary

epenses! As for business entities like the petitioner, the bank is a trusted and

acti&e associate that can help in the running of their a;airs, not only in the form of

loans when needed but more often in the conduct of their day(to(day transactions

like the issuance or encashment of checks!

2



5n e&ery case, the depositor epects the bank to treat his account with the utmost

delity, whether such account consists only of a few hundred pesos or of millions!

*he bank must record e&ery single transaction accurately, down to the last

centa&o, and as promptly as possible! *his has to be done if the account is to

reNect at any gi&en time the amount of money the depositor can dispose of as he

sees t, condent that the bank will deli&er it as and to whome&er he directs! A

blunder on the part of the bank, such as the dishonor of a check without good

reason, can cause the depositor not a little embarrassment if not also nancial

loss and perhaps e&en ci&il and criminal litigation!

*he point is that as a business a;ected with public interest and because of the

nature of its functions, the bank is under obligation to treat the accounts of its

depositors with meticulous care, always ha&ing in mind the duciary nature of

their relationship! 5n the case at bar, it is ob&ious that the respondent bank was

remiss in that duty and &iolated that relationship! >hat is especially deplorable isthat, ha&ing been informed of its error in not crediting the deposit in ?uestion to

the petitioner, the respondent bank did not immediately correct it but did so only

one week later or twenty(three days after the deposit was made! 5t bears

repeating that the record does not contain any satisfactory eplanation of why the

error was made in the rst place and why it was not corrected immediately after

its disco&ery! %uch ineptness comes under the concept of the wanton manner

contemplated in the Ci&il Code that calls for the imposition of eemplary

damages!

After deliberating on this particular matter, the Court, in the eercise of itsdiscretion, hereby imposes upon the respondent bank eemplary damages in the

amount of P01,111!11, Lby way of eample or correction for the public good,L in

the words of the law! 5t is epected that this ruling will ser&e as a warning and

deterrent against the repetition of the ineptness and inde;erence that has been

displayed here, lest the condence of the public in the banking system be further

impaired!

ACCE-5GJO, the appealed judgment is hereby M-5@5D- and the pri&ate

respondent is ordered to pay the petitioner, in lieu of nominal damages, moral

damages in the amount of P'1,111!11, and eemplary damages in the amount of

P01,111!11 plus the original award of attorneyKs fees in the amount of P0,111!11,

and costs!

/



egotiable 5nstruments Case -igest: Gempesaw ! CA #"..3$

Jessons Applicable: Promissory otes and Checks #egotiable 5nstruments Jaw$

@AC*%:

Gempesaw owns and operates four grocery stores

to pay their debts of her supplies, she draws checks against her

account

she signed each and e&ery crossed check without bothering to &erify

the accuracy of the checks against the corresponding in&oices because she

reposed full and implicit trust and condence on her bookkeeper!

although the Bank notied her of all checks presented to and paid by

the bank, petitioner did not &erify he correctness of the returned checks, much

less check if the payees actually recei&ed the checks in payment for the

supplies she recei&ed

5t was only after the lapse of more ' years that petitioner found out

about the fraudulent manipulations of her bookkeeper

o&ember 2, "./4: Gempesaw made a written demand on respondent

drawee Bank to credit her account with the money &alue of the /' checks

totalling P",'1/!1!/. for ha&ing been wrongfully charged against her

account

=anuary '3, "./0: Gempesaw led against Philippine Bank of

Communications #drawee Bank$ for reco&ery of the money &alue of /' checkscharged against the GempesawKs account on the ground that the payeesK

indorsements were forgeries

E*C: dismissed the complaint

CA: a+rmed

Gempesaw gross negligence Q promiate cause of the loss

5%%D: >R Gempesaw has a right to reco&er the amount attributable to the

forgeries

8DJ-: ! EDMA-D- to the trial court for the reception of e&idence to determinethe eact amount of loss su;ered by the petitioner, considering that she partly

beneted from the issuance of the ?uestioned checks since the obligation for

which she issued them were apparently etinguished, such that only the ecess

amount o&er and abo&e the total of these actual obligations must be considered

as loss of which one half must be paid by respondent drawee bank to herein

petitioner!

.



Petitioner completed the checks by signing them as drawer and thereafter

authori)ed her employee Alicia Galang to deli&er to payees

GE: drawee bank who has paid a check on which an indorsement has been

forged cannot charge the drawerKs account for the amount of said check

DS: where the drawer is guilty of such negligence which causes the bank to

honor such a check or checks!

nder the 5J, the only kind of indorsement which stops the further

negotiation of an instrument is a restricti&e indorsement which prohibits the

further negotiation thereof!

%ec! 3! >hen indorsement restricti&e! ( An indorsement is restricti&e which

either chanrobles &irtual law library

#a$ Prohibits further negotiation of the instrumentI or

5n this kind of restricti&e indorsement, the prohibition to transfer or

negotiate must be written in epress words at the back of the instrument, so

that any subse?uent party may be forewarned that ceases to be negotiable!

8owe&er, the restricti&e indorsee ac?uires the right to recei&e

payment and bring any action thereon as any indorser, but he can no longer

transfer his rights as such indorsee where the form of the indorsement does

not authori)e him to do so!

>hen it &iolated its internal rules that second endorsements are not to be

accepted without the appro&al of its branch managers and it did accept thesame upon the mere appro&al of Boon, a chief accountant, it contra&ened the

tenor of its obligation at the &ery least, if it were not actually guilty of fraud or

negligence

drawee Bank did not disco&er the irregularity with respect to the acceptance

of checks with second indorsement for deposit e&en without the appro&al of

the branch manager despite periodic inspection conducted by a team of

auditors from the main o+ce constitutes negligence on the part of the bank in

carrying out its obligations to its depositors

4G.R. No. 1990. "cto5er 18, /006

("NG-"NG AN' S(ANG(AI )AN-ING C"R&"RA!I"N #IMI!E', petitioner,

vs. CECI#IA 'IE CA!A#AN, respondent.

4G.R. No. 1991. "cto5er 18, /006

"1



(S)C IN!ERNA!I"NA# !R*S!EE #IMI!E', petitioner, vs. CECI#IA 'IE

CA!A#AN, respondent.

' E C I S I " N

A*S!RIA7MAR!INE, J.:

Before us are two petitions for re&iew on certiorari under Eule 40 of the Eules

of Court separately led by the 8ongkong and %hanghai Banking Corporation

Jimited #8%BAT$ and 8%BC 5nternational *rustee Jimited #8%BC *E%*DD$! *hey

seek the re&ersal of the consolidated -ecision,6"7 dated August "4, '113, of the

Court of Appeals #CA$ in CA(G!E! %P os! 2020 and 20202, which dismissed the

petitions for certiorari of herein petitioners assailing the rder, dated May "0,

'11', of the Eegional *rial Court, Branch 44, Bacolod City #E*C$ in Ci&il Case o!

1"(""32' that denied their respecti&e motions to dismiss the amended complaint

of respondent Cecilia -ie) Catalan!

*he factual antecedents are as follows:

n =anuary '., '11", respondent led before the E*C, a complaint for a sum of

money with damages against petitioner 8%BAT, docketed as Ci&il Case o! 1"(

""32', due to 8%BATs alleged wanton refusal to pay her the &alue of &e

8%BAT checks issued by @rederick Arthur *homson #*homson$ amounting to

8TU3,'11,111!11!6'7

n @ebruary 2, '11", summons was ser&ed on 8%BAT at

the Dnterprise Center, *ower 5, Ayala A&enue corner Paseo de Eoas

%t!, Makati City!637 8%BAT led a Motion for Dtension of *ime to @ile Answer or

Motion to -ismiss dated @ebruary '", '11"!647 *hen, it led a Motion to -ismiss,

dated March /, '11", on the grounds that #a$ the E*C has no jurisdiction o&er the

subject matter of the complaintI #b$ the E*C has not ac?uired jurisdiction for

failure of the plainti; to pay the correct ling or docket feesI #c$ the E*C has no

jurisdiction o&er the person of 8%BATI #d$ the complaint does not state a cause

of action against 8%BATI and #e$ plainti; engages in forum(shopping!607

n %eptember "1, '11", Catalan led an Amended Complaint impleading

petitioner 8%BC *E%*DD as co(defendant and in&oking Article ". of the Ci&il

Code as basis for her cause of action!67

*he Amended Complaint alleges:

""

http://sc.judiciary.gov.ph/jurisprudence/2004/oct2004/159590.htm#_ftn1














-efendants 8%BAT and 8%BC *E%*DD, doing business in the Philippines, are

corporations duly organi)ed under the laws of the British irgin 5slands with head

o+ce at " Gren&ille %treet, %t! 8elier =ersey, Channel 5slands and with branch

o+ces at Je&el "', " Fueens Eoad Central, 8ongkong and may be ser&ed with

summons and other court processes through their main o+ce in Manila with

address at 8%BC, the Dnterprise Center, *ower ", Ayala A&enue corner Paseo de

Eoas %treet, Makati City!

%ometime in March "..2, *homson issued &e 8%BAT checks payable to

Catalan, to wit:

C8DCT ! -A*D AM*

/12/0' Mar! "0, "..2 U11,111!11

/12/03 Mar! "2, "..2 /11,111!11

/12/04 Mar! "2, "..2 11,111!11

/12/00 Mar! '', "..2 11,111!11

/12/0 Mar! '3, "..2 11,111!11

**AJ U3,'11,111!11

*he checks when deposited were returned by 8%BAT purportedly for reason

of payment stopped pending conrmation, despite the fact that the checks were

duly funded! n March "/, "..2, *homson wrote a letter to a certain Eicky

%ousa627 of 8%BAT conrming the checks he issued to Catalan and re?uesting

that all his checks be cleared! n March '1, "..2, *homson wrote another letter

to %ousa of 8%BAT re?uesting an ad&ice in writing to be sent to the Philippine

ational Bank, through the fastest means, that the checks he pre&iously issued to

Catalan were already cleared! *hereafter, Catalan demanded that 8%BAT make

good the checks issued by *homson! n May ", "..2, Marilou A! Jo)ada,

personal secretary and attorney(in(fact of *homson, wrote a letter to %ousa of 8%BAT informing him that 8%BATs failure to clear all the checks had saddened

*homson and re?uesting that the clearing of the checks be

facilitated! %ubse?uently, *homson died and Catalan forwarded her demand to

8%BC *E%*DD! Catalan sent photocopies of the returned checks to 8%BC

*E%*DD! ot satised, 8%BC *E%*DD through deceit and trickery, re?uired

Catalan, as a condition for the acceptance of the checks, to submit the original

"'





copies of the returned checks, purportedly, to hasten payment of her claim! 8%BC

*E%*DD succeeded in its calculated deception because on April '", "...,

Catalan and her former counsel went to 8ongkong at their own epense to

personally deli&er the originals of the returned checks to the o+cers of 8%BC

*E%*DD, anious of recei&ing the money &alue of the checks but 8%BC *E%*DD

despite receipt of the original checks, refused to pay Catalans claim! 8a&ing seen

and recei&ed the original of the checks, upon its re?uest, 8%BC *E%*DD is

deemed to ha&e impliedly accepted the checks! Moreo&er, the refusal of 8%BAT

and 8%BC *E%*DD to pay the checks is e?ui&alent to illegal free)ing of ones

deposit! n the assurance of 8%BC *E%*DD that her claim will soon be paid, as

she was made to belie&e that payments of the checks shall be made by 8%BC

*E%*DD upon sight, the unsuspecting Catalan left the originals of the checks with

8%BC *E%*DD and was gi&en only an acknowledgment receipt! Catalan made

se&eral demands and after se&eral more follow ups, on August ", "..., Phoeni

Jam, %enior ice President of 8%BC *E%*DD, in ob&ious disregard of her &alidclaim, informed Catalan that her claim is disappro&ed! o reason or eplanation

whatsoe&er was made why her claim was disappro&ed, neither were the checks

returned to her! Catalan appealed for fairness and understanding, in the hope that

8%BC *E%*DD would act fairly and justly on her claim but these demands were

met by a stonewall of silence! n =une ., '111, Catalan through counsel sent a

last and nal demand to 8%BC *E%*DD to remit the amount co&ered by the

checks but despite receipt of said letter, no payment was made! Clearly, the act of

the 8%BAT and 8%BC *E%*DD in refusing to honor and pay the checks &alidly

issued by *homson &iolates the abuse of rights principle under Article ". of the

Ci&il Code which re?uires that e&eryone must act with justice, gi&e e&eryone his

due and obser&e honesty and good faith! *he refusal of 8%BAT and 8%BC

*E%*DD to pay the checks without any &alid reason is intended solely to

prejudice and injure Catalan! >hen they declined payment of the checks despite

instructions of the drawer, *homson, to honor them, coupled with the fact that the

checks were duly funded, they acted in bad faith, thus causing damage to

Catalan! A person may not eercise his right unjustly or in a manner that is not in

keeping with honesty or good faith, otherwise he opens himself to liability for

abuse of right!6/7

Catalan prays that 8%BAT and 8%BC *E%*DD be ordered to

pay P'1,/4,111!11 representing the &alue of the &e checks at the rate of P!0'

per 8TU" as of =anuary '., '11" for the acts of 8%BAT and 8%BC *E%*DD in

refusing to pay the amount justly due her, in addition to moral and eemplary

damages, attorneys fees and litigation epenses!6.7

"3







n ctober ', '11", 8%BAT led a Motion to -ismiss Amended Complaint on

the grounds that: #a$ the E*C has no jurisdiction o&er the subject matter of the

complaint since the action is a money claim for a debt contracted by *homson

before his death which should ha&e been led in the estate or intestate

proceedings of *homsonI #b$ Catalan engages in forum shopping by ling the suit

and at the same time ling a claim in the probate proceeding led with another

branch of the E*CI #c$ the amended complaint states no cause of action against

8%BAT since it has no obligation to pay the checks as it has not accepted the

checks and Catalan did not re(deposit the checks or make a formal protestI #d$ the

E*C has not ac?uired jurisdiction o&er the person of 8%BAT for improper ser&ice

of summonsI and, #e$ it did not submit to the jurisdiction of the E*C by ling a

motion for etension of time to le a motion to dismiss!6"17

Meanwhile, on ctober "2, '11", summons for 8%BC *E%*DD was tendered

to the 5n 8ouse Counsel of 8%BAT #Makati Branch$ at the Dnterprise Center, *ower ", Ayala A&enue corner Paseo de Eoas, Makati! >ithout submitting itself to

the jurisdiction of the E*C, 8%BC *E%*DD led a %pecial Appearance for Motion to

-ismiss Amended Complaint, dated ctober '., '11", ?uestioning the jurisdiction

of the E*C o&er it!6""7 8%BC *E%*DD alleges that tender of summons through

8%BAT Makati did not confer upon the E*C jurisdiction o&er it because: #a$ it is a

corporation separate and distinct from 8%BATI #b$ it does not hold o+ce at the

8%BAT Makati or in any other place in the PhilippinesI #c$ it has not authori)ed

8%BAT Makati to recei&e summons for itI and, #d$ it has no resident agent upon

whom summons may be ser&ed because it does not transact business in the

Philippines!

%ubse?uently, 8%BC *E%*DD led a %ubmission, dated o&ember "0, '11",

attaching the A+da&it eecuted in 8ongkong by Phoeni Jam, %enior ice(

President of 8%BC *E%*DD, attesting to the fact that: "$ 8%BC *E%*DD has not

done nor is it doing business in the PhilippinesI '$ it does not maintain any o+ce

in Makati or anywhere in the PhilippinesI 3$ it has not appointed any agent in

PhilippinesI and 4$ 8%BAT Makati has no authority to recei&e any summons or

court processes for 8%BC *E%*DD!6"'7

n May "0, '11', the E*C issued an rder denying the two motions to dismiss!6"37 *he E*C held that it has jurisdiction o&er the subject matter of the action

because it is an action for damages under Article ". of the Ci&il Code for the acts

of unjustly refusing to honor the checks issued by *homson and not a money

claim against the estate of *homsonI that Catalan did not engage in forum(

shopping because the elements thereof are not attendant in the caseI that the

"4











?uestion of cause of action should be threshed out or &entilated during the

proceedings in the main action and after the plainti; and defendants ha&e

adduced e&idence in their fa&orI that it ac?uired jurisdiction o&er the person of

defendants because the ?uestion of whether a foreign corporation is doing

business or not in the Philippines cannot be a subject of a Motion to -ismiss but

should be &entilated in the trial on the meritsI and defendants &oluntarily

submitted to the jurisdiction of the E*C setting up in their Motions to -ismiss other

grounds aside from lack of jurisdiction!

8%BAT and 8%BC *E%*DD led separate motions for reconsideration6"47 but

both pro&ed futile as they were denied by the E*C in an rder dated -ecember

'1, '11'!6"07

n @ebruary '", '113, Catalan mo&ed to declare 8%BAT and 8%BC *E%*DD

in default for failure to le their answer to the amended complaint!

n March 0, '113, 8%BAT and 8%BC *E%*DD led separate petitions for

certiorari andRor prohibition with the CA, docketed as CA(G!E! %P os!

20206"7 and 20202,6"27 respecti&ely!

%ubse?uently, 8%BAT and 8%BC *E%*DD led before the E*C separate

Answers ad cautelam, both dated March "/, '113, as a precaution against being

declared in default and without prejudice to the separate petitions for certiorari

andRor prohibition then pending with the CA!6"/7

Meanwhile, the two petitions for certiorari before the CA were consolidated

and after responsi&e pleadings were led, the cases were deemed submitted for

decision!

5n a consolidated -ecision dated August "4, '113, the CA dismissed the two

petitions for certiorari!6".7 *he CA held that the ling of petitioners answers before

the E*C rendered moot and academic the issue of the E*Cs lack of jurisdiction

o&er the person of the petitionersI that the E*C has jurisdiction o&er the subject

matter since it is one for damages under Article ". of the Ci&il Code for the

alleged unjust acts of petitioners and not a money claim against the estate of *homsonI and, that the amended complaint states a cause of action under Article

". of the Ci&il Code which could merit a fa&orable judgment if found to be

true! *he CA noted that Catalan may ha&e prayed for payment of the &alue of the

checks but ratiocinated that she merely used the &alue as basis for the

computation of the damages!

"0















8ence, the present petitions!

5n G!E! o! "0.0.1, 8%BAT submits the following assigned errors:

I.

*8D CE* @ APPDAJ% CMM5**D- %DE5% DEEE 5 8J-5G *8A* *8D

CE* A F, AC*5G A% A #%5C$ EDGJAE CE*, 8A% =E5%-5C*5 DE

*8D AMD-D- CMPJA5* %DDT5G * E-DE 8%BC *E%*DD, *8D DSDC*E

@ *8D -DCDA%D- @ED-DE5CT AE*8E *8M%, * PAO %B=DC* C8DCT%

5%%D- BO *8D JA*D @ED-DE5CT AE*8E *8M%, A-M5**D-JO 5 PAOMD* @

85% 5-DB*D-D%% * CA*AJA!

II.

*8D CE* @ APPDAJ% CMM5**D- %DE5% DEEE 5 8J-5G *8A* *8D

AMD-D- CMPJA5* -D% * %DDT * E-DE 8%BAT A- 8%BC

5*DEA*5AJ *E%*DD J5M5*D- * PAO *8D BJ5GA*5 @ *8D #%5C$

@ED-DE5CT AE*8E *8M% A% D5-DCD- BO *8D C8DCT%, B* PEAO% @E

-AMAGD% DF5AJD* E CMP*D- *8D BA%5% @ *8D AJD @ *8D

C8DCT% BDCA%D *8D -D@D-A*% @A5JD- * CMPJO >5*8 *8D MA-A*D% @

AE*5CJD ". @ *8D D> C55J C-D!

III.

*8D CE* @ APPDAJ% CMM5**D- %DE5% DEEE 5 8J-5G *8A*

AJJDGA*5% 5 *8D AMD-D- CMPJA5* MATD * A CA%D @ AC*5

>85C8 CJ- MDE5* A @AEABJD =-GMD* 5@ @- * BD *ED, E 5 *

8J-5G *8A* *8D AMD-D- CMPJA5* %*A*D% CA%D @ AC*5 AGA5%*

8%BAT, A% -EA>DD BAT!

I.

*8D CE* @ APPDAJ% CMM5**D- %DE5% DEEE 5 -5%EDGAE-5G *8D

@AC* *8A* CA*AJA DGAGD- 5 @EM %8PP5G BO @5J5G *8D AMD-D-CMPJA5* >85JD 8DE PD*5*5 @E *8D PEBA*D @ *8D %PP%D- >5JJ @

*8D -DCDA%D- @ED-DE5CT AE*8E *8M% 5% PD-5G >5*8 A*8DE

BEAC8 @ *8D CE* A F!

.

"



*8D CE* @ APPDAJ% CMM5**D- %DE5% DEEE 5 8J-5G *8A* 8%BAT

8A- %BM5**D- * *8D =E5%-5C*5 @ *8D CE* A F BO %BM5**5G A

A%>DE * *8D AMD-D- CMPJA5*!6'17

5n G!E! o! "0.0.", 8%BC *E%*DD also assigns the foregoing rst, second and

fth errors as its own!6'"7 5n addition, it claims that:

*8D CE* @ APPDAJ% CMM5**D- %DE5% DEEE 5 * E-DE5G *8D

-5%M5%%AJ @ *8D AMD-D- CMPJA5* AGA5%* 8%BC *E%*DD -D%P5*D *8D

@AC* 5* 8A% * BDD -JO %DED- >5*8 %MM%! 6''7

8%BAT and 8%BC *E%*DD contend in common that Catalan has no cause of

action for abuse of rights under Article ". of the Ci&il CodeI that her complaint,

under the guise of a claim for damages, is actually a money claim against the

estate of *homson arising from checks issued by the latter in her fa&or in payment

of indebtedness!

8%BAT claims that the money claim should be dismissed on the ground of

forum(shopping since Catalan also led a petition for probate of the alleged last

will of *homson before E*C, Branch 4/, Bacolod City, docketed as %pec! Proc o!

11(/.'! 5n addition, 8%BAT imputes error upon the CA in holding that by ling an

answer to the amended complaint, petitioners are estopped from ?uestioning the

jurisdiction of the E*C!

8%BC *E%*DD maintains that the E*C did not ac?uire jurisdiction o&er it forimproper ser&ice of summons!

5n her Comment, Catalan insists that her complaint is one for damages under

Article ". of the Ci&il Code for the wanton refusal to honor and pay the &alue of

&e checks issued by the *homson amounting to 8TU3,'11,111!11! %he argues

that the issue of jurisdiction has been rendered moot by petitioners participation

in the proceedings before the E*C!

%uccinctly, the issues boil down to the following:

"$ -oes the complaint state a cause of actionV

'$ -id Catalan engage in forum(shopping by ling the complaint for damages

when she also led a petition for probate of the alleged last will of *homson with

another branch of the E*CV and,

"2









3$ -id the E*C ac?uire jurisdiction o&er 8%BAT and 8%BC *E%*DDV Corollary

thereto, did the ling of the answer before the E*C render the issue of lack of

jurisdiction moot and academicV

>e shall resol&e the issue in seriatim!

Does the complaint state a cause of action against HSBANK and HSBC

TRUSTEE?

*he elementary test for failure to state a cause of action is whether the

complaint alleges facts which if true would justify the relief demanded! %tated

otherwise, may the court render a &alid judgment upon the facts alleged thereinV6'37 *he in?uiry is into the su+ciency, not the &eracity of the material allegations!6'47 5f the allegations in the complaint furnish su+cient basis on which it can be

maintained, it should not be dismissed regardless of the defense that may be

presented by the defendants!6'07

Catalan anchors her complaint for damages on Article ". of the Ci&il Code! 5t

speaks of the fundamental principle of law and human conduct that a person

Lmust in the e!ercise of his rights and in the performance of his duties act "ith

#ustice gi$e e$er% one his due and o&ser$e honest% and good faith!L 5t sets the

standards which may be obser&ed not only in the eercise of ones rights but also

in the performance of ones duties! >hen a right is eercised in a manner which

does not conform with the norms enshrined in Article ". and results in damage to

another, a legal wrong is thereby committed for which the wrongdoer must beheld responsible!6'7 But a right, though by itself legal because recogni)ed or

granted by law as such, may ne&ertheless become the source of some illegality! A

person should be protected only when he acts in the legitimate eercise of his

right, that is, when he acts with prudence and in good faithI but not when he acts

with negligence or abuse!6'27 *here is an abuse of right when it is eercised for the

only purpose of prejudicing or injuring another! *he eercise of a right must be in

accordance with the purpose for which it was established, and must not be

ecessi&e or unduly harshI there must be no intention to injure another!6'/7

*hus, in order to be liable under the abuse of rights principle, three elements

must concur, to wit: #a$ that there is a legal right or dutyI #b$ which is eercised in

bad faithI and #c$ for the sole intent of prejudicing or injuring another!6'.7

5n this instance, after carefully eamining the amended complaint, we are

con&inced that the allegations therein are in the nature of an action based on tort

"/

















under Article ". of the Ci&il Code! 5t is e&ident that Catalan is suing 8%BAT and

8%BC *E%*DD for unjustied and willful refusal to pay the &alue of the checks!

8%BAT is being sued for unwarranted failure to pay the checks

notwithstanding the repeated assurance of the drawer *homson as to the

authenticity of the checks and fre?uent directi&es to pay the &alue thereof to

Catalan! 8er allegations in the complaint that the gross inaction of 8%BAT on

*homsons instructions, as well as its e&ident failure to inform Catalan of the

reason for its continued inaction and non(payment of the checks, smack of

insouciance on its part, are su+cient statements of clear abuse of right for which

it may be held liable to Catalan for any damages she incurred resulting

therefrom! 8%BATs actions, or lack thereof, pre&ented Catalan from seeking

further redress with *homson for the reco&ery of her claim while the latter was

ali&e!

8%BAT claims that Catalan has no cause of action because under %ection "/.

of the egotiable 5nstruments Jaw, a check of itself does not operate as an

assignment of any part of the funds to the credit of the drawer with the bank, and

the bank is not liable to the holder unless and until it accepts or certies

it! 8owe&er, 8%BAT is not being sued on the &alue of the check itself but for how

it acted in relation to Catalans claim for payment despite the repeated directi&es

of the drawer *homson to recogni)e the check the latter issued! Catalan may ha&e

prayed that she be paid the &alue of the checks but it is aiomatic that what

determines the nature of an action, as well as which court has jurisdiction o&er it,

are the allegations of the complaint, irrespecti&e of whether or not the plainti; isentitled to reco&er upon all or some of the claims asserted therein!6317

Anent 8%BC *E%*DD, it is being sued for the baseless rejection of Catalans

claim! >hen Catalan parted with the checks as a re?uirement for the processing

of her claim, e&en going to the etent of tra&eling to 8ongkong to deli&er

personally the checks, 8%BC *E%*DD summarily disappro&ed her claim with nary

a reason! 8%BC *E%*DD ga&e no heed to Catalans incessant appeals for an

eplanation! 8er pleas fell on deaf and uncaring corporate ears! Clearly, 8%BC

*E%*DDs acts are anathema to the prescription for human conduct enshrined in

Article ". of the Ci&il Code!

Did Catalan engage in forum'shopping?

5t has been held that forum(shopping eists where a litigant sues the same

party against whom another action or actions for the alleged &iolation of the same

right and the enforcement of the same relief isRare still pending, the defense

".





of litis pendentia in one case is a bar to the othersI and, a nal judgment in one

would constitute res #udicata and thus would cause the dismissal of the rest!63"7

*hus, there is forum(shopping when there eist: a$ identity of parties, or at

least such parties as represent the same interests in both actions, b$ identity of

rights asserted and relief prayed for, the relief being founded on the same facts,

and c$ the identity of the two preceding particulars is such that any judgment

rendered in the pending case, regardless of which party is successful would

amount to res #udicata in the other!63'7

Applying the foregoing re?uisites to the case before us in relation to %pec! Proc

o! 11(/.', the probate proceeding brought by Catalan before E*C, Branch 4/,

Bacolod City, it is ob&ious that forum(shopping does not eist!

*here is no identity of parties! 8%BAT is not a party in the probate

proceeding! 8%BC *E%*DD is only a party in the probate proceeding because it is

the eecutor and trustee named in the 8ongkong will of *homson! 8%BC *E%*DD

is representing the interest of the estate of *homson and not its own corporate

interest!

>ith respect to the second and third re?uisites, a scrutiny of the entirety of the

allegations of the amended complaint in this case re&eals that the rights asserted

and reliefs prayed for therein are di;erent from those pleaded in the probate

proceeding, such that a judgment in one case would not bar the prosecution of the

other case! erily, there can be no forum(shopping where in one proceeding aparty raises a claim for damages based on tort and, in another proceeding a party

seeks the allowance of an alleged last will based on ones claim as an heir! After

all, the merits of the action for damages is not to be determined in the probate

proceeding and &ice &ersa! ndeniably, the facts or e&idence as would support

and establish the two causes of action are not the same!6337 Conse?uently,

8%BATs reliance on the principle of forum(shopping is clearly misplaced!

Did the RTC ac(uire #urisdiction o$er HSBANK and HSBC TRUSTEE?

*he Eules of Court pro&ides that a court generally ac?uires jurisdiction o&er aperson through either a &alid ser&ice of summons in the manner re?uired by law

or the persons &oluntary appearance in court!6347

5n holding that it ac?uired jurisdiction o&er 8%BAT and 8%BC *E%*DD, the

E*C held that both &oluntarily submitted to the jurisdiction of the court by setting

up in their Motions to -ismiss other grounds aside from lack of jurisdiction! n the

'1











other hand, the CA ruled that 8%BAT and 8%BC *E%*DD are estopped from

challenging the jurisdiction of the E*C because they led their respecti&e answers

before the E*C!

>e nd that both lower courts o&erlooked %ection '1 of Eule "4 of the "..2

Eules of Ci&il Procedure which pro&ides that the inclusion in a motion to dismiss of

other grounds aside from lack of jurisdiction o&er the person of the defendant

shall not be deemed a &oluntary appearance! onetheless, such omission does

not aid 8%BATs case!

5t must be noted that 8%BAT initially led a Motion for Dtension of *ime to

@ile Answer or Motion to -ismiss!63078%BAT already in&oked the E*Cs jurisdiction

o&er it by praying that its motion for etension of time to le answer or a motion

to dismiss be granted! *he Court has held that the ling of motions seeking

a+rmati&e relief, such as, to admit answer, for additional time to le answer, forreconsideration of a default judgment, and to lift order of default with motion for

reconsideration, are considered &oluntary submission to the jurisdiction of the

court)637 Conse?uently, 8%BATs epressed reser&ation in its Answer ad

cautelam that it led the same as a mere precaution against &eing declared in

default and "ithout pre#udice to the *etition for Certiorari and+or *rohi&ition !!!

no" pending &efore the Court of Appeals6327 to assail the jurisdiction of the E*C

o&er it is of no moment! 8a&ing earlier in&oked the jurisdiction of the E*C to

secure a+rmati&e relief in its motion for additional time to le answer or motion to

dismiss, 8%BAT, e;ecti&ely submitted &oluntarily to the jurisdiction of the E*C

and is thereby estopped from asserting otherwise, e&en before this Court!

5n contrast, the ling by 8%BC *E%*DD of a motion to dismiss cannot be

considered a &oluntary submission to the jurisdiction of the E*C! 5t was a

conditional appearance, entered precisely to ?uestion the regularity of the ser&ice

of summons! 5t is settled that a party who makes a special appearance in court

challenging the jurisdiction of said court,e)g), in&alidity of the ser&ice of summons,

cannot be considered to ha&e submitted himself to the jurisdiction of the court!63/7 8%BC *E%*DD has been consistent in all its pleadings in assailing the ser&ice

of summons and the jurisdiction of the E*C o&er it! *hus, 8%BC *E%*DD cannot

be declared in estoppel when it led an Answer ad cautelam before the E*C while

its petition for certiorari was pending before the CA! %uch answer did not render

the petition for certiorari before the CA moot and academic! *he Answer of 8%BC

*E%*DD was only led to pre&ent any declaration that it had by its inaction

wai&ed the right to le responsi&e pleadings!

'"











Admittedly, 8%BC *E%*DD is a foreign corporation, organi)ed and eisting

under the laws of the British irgin 5slands! @or proper ser&ice of summons on

foreign corporations, %ection "' of Eule "4 of the Ee&ised Eules of Court pro&ides:

%DC! "'! Ser$ice upon foreign pri$ate #uridical entit% ! >hen the defendant is a

foreign pri&ate juridical entity which has transacted business in the Philippines,

ser&ice may be made on its resident agent designated in accordance with law for

that purpose, or if there be no such agent, on the go&ernment o+cial designated

by law to that e;ect, or on any of its o+cers or agents within the Philippines!

5n ,rench -il .ill .achiner% Co) /nc) $s) Court of Appeals,63.7 we had occasion

to rule that it is not enough to merely allege in the complaint that a defendant

foreign corporation is doing business! @or purposes of the rule on summons, the

fact of doing business must rst be Lesta&lished &% appropriate allegations in the

complaint L and the court in determining such fact need not go beyond theallegations therein!6417

*he allegations in the amended complaint subject of the present cases did not

su+ciently show the fact of 8%BC *E%*DDs doing business in the Philippines! 5t

does not appear at all that 8%BC *E%*DD had performed any act which would

gi&e the general public the impression that it had been engaging, or intends to

engage in its ordinary and usual business undertakings in the country! Absent

from the amended complaint is an allegation that 8%BC *E%*DD had performed

any act in the country that would place it within the sphere of the courts

jurisdiction!

>e ha&e held that a general allegation, standing alone, that a party is doing

business in the Philippines does not make it soI a conclusion of fact or law cannot

be deri&ed from the unsubstantiated assertions of parties notwithstanding the

demands of con&enience or dispatch in legal actions, otherwise, the Court would

be guilty of sorceryI etracting substance out of nothingness!64"7

Besides, there is no allegation in the amended complaint that 8%BAT is the

domestic agent of 8%BC *E%*DD to warrant ser&ice of summons upon it! *hus,

the summons tendered to the 5n 8ouse Counsel of 8%BAT #Makati Branch$ for

8%BC *E%*DD was clearly improper!

*here being no proper ser&ice of summons, the E*C cannot take cogni)ance of

the case against 8%BC *E%*DD for lack of jurisdiction o&er it! Any proceeding

undertaken by the E*C is therefore null and &oid!64'7 Accordingly, the complaint

against 8%BC *E%*DD should ha&e been dismissed for lack of jurisdiction o&er it!

''

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http://sc.judiciary.gov.ph/jurisprudence/1998/sept%201998/126477.htm







(EREF"RE, the petition in G!E! o! "0.0.1 is -D5D-! *he -ecision of the

Court of Appeals, dated August "4, '113, in CA(G!E! %P o! 20202 dismissing the

petition for certiorari of the 8ongkong and %hanghai Banking Corporation Jimited

is A@@5EMD-!

*he petition in G!E! o! "0.0." is GEA*D-! *he -ecision of the Court of

Appeals, dated August "4, '113, in CA(G!E! %P o! 2020 dismissing the petition

for certiorari of the 8%BC 5nternational *rustee Jimited is EDDE%D- and %D*

A%5-D! *he Eegional *rial Court, Branch 44, Bacolod City is declared without

jurisdiction to take cogni)ance of Ci&il Case o! 1"(""32' against the 8%BC

5nternational *rustee Jimited, and all its orders and issuances with respect to the

latter are hereby AJJD- and %D* A%5-D! *he said Eegional *rial Court is

hereby E-DED- to -D%5%* from maintaining further proceedings against the

8%BC 5nternational *rustee Jimited in the case aforestated!

S" "R'ERE'

4G.R. No. 1//0. Fe5ruar 1, /006

S"#I')AN- C"R&"RA!I"N, petitioner, vs. Spouses !E"'*#F" an+

CARMEN ARRIE!A,respondents.

' E C I S I " N

&ANGANI)AN, J.:

A banks gross negligence in dishonoring a well(funded check, aggra&ated by

its unreasonable delay in repairing the error, calls for an award of moral and

eemplary damages! *he resulting injury to the check writers reputation and

peace of mind needs to be recogni)ed and compensated!

!he Case

Before us is a Petition for Ee&iew6"7 under Eule 40 of the Eules of Court, seeking

to re&erse and set aside the March '/, '11" -ecision6'7 and the @ebruary 0, '11'

Eesolution637 of the Court of Appeals #CA$ in CA(GE C o! 0011'! *he assailed

-ecision disposed as follows:

'3

http://sc.judiciary.gov.ph/jurisprudence/2005/feb2005/152720.htm#_ftn1








(EREF"RE, the appeal is 'ISMISSE', with costs against defendant(appellant!647

*he CA denied reconsideration in its @ebruary 0, '11' Eesolution!

!he Facts

*he facts are summari)ed by the CA as follows:

Carmen Arrieta is a bank depositor of %olidbank Corporation under Checking

Account o! "'3("..! n March "..1, Carmen issued %BC Check o! 1'.3./4

#Dh! A$ in the amount of P331!11 in the name of Jopues -epartment %tore in

payment of her purchases from said store! >hen the check was deposited by the

store to its account, the same was dishonored due to Account Closed #Dh! B$

despite the fact that at the time the check was presented for payment, Carmens

checking account was still acti&e and backed up by a deposit of P",'20!'1!

As a conse?uence of the checks dishonor, Jopues -epartment %tore sent a

demand letter to Carmen #Dh! C$ threatening her with criminal prosecution unless

she redeemed the check within &e #0$ days! *o a&oid criminal prosecution,

Carmen paid P331!11 in cash to the store, plus a surcharge of P33!11 for the

bouncing check, or a total of P33!11 #Dh! @$!

*hereupon, Carmen led a complaint against %olidbank Corporation for damages

alleging that the bank, by its carelessness and recklessness in certifying that her

account was closed despite the fact that it was still &ery much acti&e and

su+ciently funded, had destroyed her good name and reputation and prejudiced

not only herself but also her family in the form of mental anguish, sleepless

nights, wounded feelings and social humiliation! %he prayed that she be awarded

moral and eemplary damages as well as attorneys fees!

5n its answer, the bank claimed that Carmen, contrary to her undertaking as a

depositor, failed to maintain the re?uired balance of at least P",111!11 on any dayof the month! Moreo&er, she did not handle her account in a manner satisfactory

to the bank! 5n &iew of her &iolations of the general terms and conditions

go&erning the establishment and operation of a current account, Carmens account

was recommended for closure! 5n any e&ent, the bank claimed good faith in

declaring her account closed since one of the clerks, who substituted for the

regular clerk, committed an honest mistake when he thought that the subject

'4





account was already closed when the ledger containing the said account could not

be found!

After trial, the lower court rendered its decision holding that %olidbank Corporation

was grossly negligent in failing to check whether or not Carmens account was still

open and &iable at the time the transaction in ?uestion was made! 8ence, the

bank was liable to Carmen for moral and eemplary damages, as well as attorneys

fees! 5t held that the bank was remiss in its duty to treat Carmens account with

the highest degree of care, considering the duciary nature of their relationship!

*he dispositi&e portion of the decision reads:

>8DED@ED, the Court hereby renders judgment in fa&or of the plainti; as

against the defendant(bank, and defendant(bank is ordered to pay moral

damages of P"01,111!11I eemplary damages of P01,111!11I and attorneys fees

of P'1,111!11, plus costs!

% E-DED-!607

Ru;<n= o> the Court o> Appea;s

*he CA debunked the contention of the bank that the latter was not liable!

According to petitioner, the dishonor of the check by reason of Account Closed

was an honest mistake of its employee! *he appellate court held that the errorcommitted by the bank employee was imputable to the bank! Banks are obliged to

treat the accounts of their depositors with meticulous care, regardless of the

amount of the deposit! @ailing in this duty, petitioner was found grossly negligent!

*he failure of the bank to immediately notify Eespondent Carmen Arrieta of its

unilateral closure of her account manifested bad faith, added the CA!

*he appellate court likewise a+rmed the award of moral damages! 5t held that

the banks wrongful act was the proimate cause of Carmens moral su;ering! *he

CA ruled that the lack of malice and bad faith on the part of petitioner did not

su+ce to eculpate the latter from liabilityI the banks gross negligence amountedto a wilful act! *he trial courts award of eemplary damages and attorneys fees

was sustained in &iew of respondents entitlement to moral damages!

8ence, this Petition!67

Issues

'0







Petitioner raises the following issues for our consideration:

I.

>hether or not respondents are entitled to reco&ery of moral and eemplary

damages and attorneys fees!

II.

>hether or not the award of moral and eemplary damages and attorneys fees is

ecessi&e, arbitrary and contrary to pre&ailing jurisprudence!627

!he Courts Ru;<n=

*he Petition is partly meritorious!

Ma<n Issue:

Petitioners Liability for Damages

Petitioner contends that the award of moral damages was erroneous because

of the failure of Eespondent Carmen to establish that the dishonor of Check o!

1'.3./4 on March 31, "..1 was the direct and only cause of the social

humiliation, etreme mental anguish, sleepless nights, and wounded feelings

su;ered by 6her7! 5t referred to an occasion fteen days before, on March "0,

"..1, during which another check #Check o! 1'.3./3$ she had issued had

likewise been dishonored!

According to petitioner, highly illogical was her claim that etreme mental

anguish and social humiliation resulted from the dishonor of Check o! 1'.3./4,

as she claimed none from that of her prior Check o! 1'.3./3, which had

allegedly been deposited by mistake by the payees wife! Gi&en the circumstances,

petitioner adds that the dishonor of the check (( subject of the present case (( did

not really cause respondent mental anguish, sleepless nights and besmirched

reputationI and that her institution of this case was clearly moti&ated byopportunism!

>e are not persuaded!

*he fact that another check Carmen had issued was pre&iously dishonored

does not necessarily imply that the dishonor of a succeeding check can no longer

'





cause moral injury and personal hurt for which the aggrie&ed party may claim

damages! %uch prior occurrence does not pro&e that respondent does not ha&e a

good reputation that can be besmirched!6/7

*he reasons for and the circumstances surrounding the pre&ious issuance and

e&entual dishonor of Check o! 1'.3./3 are totally separate (( the payee of the

prior check was di;erent (( from that of Check o! 1'.3./4, subject of present

case! Carmen had issued the earlier check to accommodate a relati&e, 6.7 and the

succeeding one to pay for goods purchased from Jopues -epartment %tore! *hat

she might not ha&e su;ered damages as a result of the rst dishonored check

does not necessarily hold true for the second! 5n the light of su+cient e&idence

showing that she indeed su;ered damages as a result of the dishonor of Check

o! 1'.3./4, petitioner may not be eonerated from liability!

Case law

6"17

lays out the following conditions for the award of moral damages:#"$ there is an injury (( whether physical, mental or psychological (( clearly

sustained by the claimantI #'$ the culpable act or omission is factually

establishedI #3$ the wrongful act or omission of the defendant is the proimate

cause of the injury sustained by the claimantI and #4$ the award of damages is

predicated on any of the cases stated in Article ''".6""7 of the Ci&il Code!

5n the instant case, all four re?uisites ha&e been established! ,irst , these were

the ndings of the appellate court: Carmen Arrieta is a bank depositor of

%olidbank Corporation of long standing! %he works with the Central egros Dlectric

Cooperati&e, 5nc! #CDDC$, as an eecuti&e secretary and later as departmentsecretary! %he is a deaconess of the Christian Alliance Church in Bacolod City!

*hese are positions which no doubt ele&ate her social standing in the community!

nderstandably (( and as su+ciently pro&en by her testimony (( she su;ered

mental anguish, serious aniety, besmirched reputation, wounded feelings and

social humiliationI and she su;ered thus when the people she worked with (( her

friends, her family and e&en her daughters classmates (( learned and talked about

her bounced check!

Second, it is undisputed that the subject check was ade?uately funded, but

that petitioner wrongfully dishonored it!

Third, Eespondent Carmen was able to pro&e that petitioners wrongful

dishonor of her check was the proimate cause of her embarrassment and

humiliation in her workplace, in her own home, and in the church where she

ser&ed as deaconess!

'2











Proimate cause has been dened as any cause which, in natural and

continuous se?uence, unbroken by any e+cient inter&ening cause, produces the

result complained of and without which would not ha&e occurred ! 6"'7 5t is

determined from the facts of each case upon combined considerations of logic,

common sense, policy and precedent!6"37Clearly, had the bank accepted and

honored the check, Carmen would not ha&e had to face the ?uestions of (( and

eplain her predicament to (( her o+ce mates, her daughters, and the leaders and

members of her church!

@urthermore, the CA was in agreement with the trial court in ruling that her

injury arose from the gross negligence of petitioner in dishonoring her well(funded

check!

nanimity of the CA and the trial court in their factual ascertainment of this

point bars us from supplanting their nding and substituting it with our own!%ettled is the doctrine that the factual determinations of the lower courts are

conclusi&e and binding upon this Court!6"47 erily, the re&iew of cases brought

before the %upreme Court from the Court of Appeals is limited to errors of law!6"07 one of the recogni)ed eceptions to this principle has been shown to eist!

,ourth, treating Carmens account as closed, merely because the ledger could

not be found was a reckless act that could not simply be brushed o; as an honest

mistake! >e ha&e repeatedly emphasi)ed that the banking industry is impressed

with public interest! Conse?uently, the highest degree of diligence is epected,

and high standards of integrity and performance are e&en re?uired of it! By thenature of its functions, a bank is under obligation to treat the accounts of its

depositors with meticulous care and always to ha&e in mind the duciary nature of

its relationship with them! 6"7

Petitioners negligence here was so gross as to amount to a wilful injury to

Eespondent Carmen! Article '" of the Ci&il Code states that any person who

wilfully causes loss or injury to another in a manner that is contrary to morals,

good customs or public policy shall compensate the latter for the damage!

@urther, Article ''". pro&ides for the reco&ery of moral damages for acts referred

to in the aforementioned Article '"! 8ence, the bank is liable for moral damages

to respondent!6"27

*he foregoing notwithstanding, we nd the sum of P"01,111 awarded by the

lower courts ecessi&e! Moral damages are not intended to enrich the complainant

at the epense of the defendant!6"/7 Eather, these are awarded only to enable the

injured party to obtain means, di&ersions or amusements that will ser&e to

'/

















alle&iate the moral su;ering that resulted by reason of the defendants culpable

action!6".7 *he purpose of such damages is essentially indemnity or reparation, not

punishment or correction!6'17 5n other words, the award thereof is aimed at a

restoration within the limits of the possible, of the spiritual status (uo anteI6'"7 therefore, it must always reasonably approimate the etent of injury and be

proportional to the wrong committed!6''7

Accordingly, the award of moral damages must be reduced to P'1,111,6'37 an

amount commensurate with the alle&iation of the su;ering caused by the

dishonored check that was issued for the amount of P331!

*he law allows the grant of eemplary damages to set an eample for the

public good!6'47 *he business of a bank is a;ected with public interestI thus, it

makes a sworn profession of diligence and meticulousness in gi&ing irreproachable

ser&ice!

6'07

@or this reason, the bank should guard against injury attributable tonegligence or bad faith on its part!6'7 *he banking sector must at all times

maintain a high le&el of meticulousness! *he grant of eemplary damages is

justied6'27by the initial carelessness of petitioner, aggra&ated by its lack of

promptness in repairing its error! 5t was only on August 31, "..1, or a period of

&e months from the erroneous dishonor of the check, when it wrote Jopues

-epartment %tore a letter acknowledging the banks mistake!6'/7 5n our &iew,

howe&er, the award of P01,111 is ecessi&e and should accordingly be reduced

to P'1,111!6'.7

*he award of attorneys fees in the amount of P'1,111 is proper, forrespondents were compelled to litigate to protect their rights!6317

(EREF"RE, the Petition is *ART01 2RANTED and the assailed

-ecision .-D/,/ED) Petitioners are -RDEREDto pay respondents P'1,111 as moral

damages, P'1,111 as eemplary damages, and P'1,111 as attorneys fees!

























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