VOL.

502, SEPTEMBER 15, 2006 119

Equitable PCI Bank vs. Ong

*
G.R. No. 156207. September 15, 2006.

EQUITABLE PCI BANK (the Banking Entity into which

Philippine Commercial International Bank was merged),
petitioner, vs. ROWENA ONG, respondent.

Actions; Judgments; Words and Phrases; A genuine issue is

an issue of fact which calls for the presentation of evidence, as
distinguished from an issue which is sham, fictitious, contrived
and pat-ently unsubstantiated so as not to constitute a genuine
issue of fact.

_____________

* FIRST DIVISION.

120

120 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

It has been held that a summary judgment is proper where,

upon a motion filed after the issues had been joined and on the
basis of the pleadings and papers filed, the court finds that
there is no genuine issue as to any material fact to except as to
the amount of damages. A genuine issue has been defined as an
issue of fact which calls for the presentation of evidence, as
distinguished from an issue which is sham, fictitious, contrived
and patently unsubstantial so as not to constitute a genuine
issue for trial. A court may grant summary judgment to settle
expeditiously a case if, on motion of either party, there appears
from the pleadings, depositions, admissions, and affidavits that
no important issues of fact are involved, except the amount of
damages. Rule 35, Section 3, of the Rules of Court provides two
requisites for summary judgment to be proper: (1) there must
be no genuine issue as to any material fact, except for the
amount of damages; and (2) the party presenting the motion for
summary judgment must be entitled to a judgment as a matter
of law.

Banks and Banking; Checks; Doctrine of Unjust

Enrichment; The fundamental doctrine of unjust enrichment is
the transfer of value without just cause or consideration, the
main objective being to prevent one to enrich himself at the
expense of another; A check which has been cleared and credited
to the account of the creditor shall be equivalent to a delivery to
the creditor of cash in an amount equal to the amount credited
to his account.On the matter of unjust enrichment, the
fundamental doctrine of unjust enrichment is the transfer of
value without just cause or consideration. The elements of this
doctrine are: enrichment on the part of the defendant;
impoverishment on the part of the plaintiff; and lack of cause.
The main objective is to prevent one to enrich himself at the
expense of another. It is based on the equitable postulate that it
is unjust for a person to retain benefit without paying for it. It
is well to stress that the check of Sarande had been cleared by
the PCI Bank for which reason the former issued the check to
Ong. A check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the
creditor of cash in an amount equal to the amount credited to
his account.

Same; Same; Managers Checks; Words and Phrases; A

managers check is an order of the bank to pay, drawn upon
itself, committing in effect its total resources, integrity and
honor behind its

121
 VOL. 502, SEPTEMBER 15, 2006 121

Equitable PCI Bank vs. Ong

issuance, and by its peculiar character and general use in

commerce, a managers check is regarded substantially to be as
good as the money it represents.Easily discernible is that
what Ong obtained from PCI Bank was not just any ordinary
check but a managers check. A managers check is an order of
the bank to pay, drawn upon itself, committing in effect its total
resources, integrity and honor behind its issuance. By its
peculiar character and general use in commerce, a managers
check is regarded substantially to be as good as the money it
represents. A managers check stands on the same footing as a
certified check. The effect of certification is found in Section
187, Negotiable Instruments Law. Sec. 187. Certification of
check; effect of.Where a check is certified by the bank on
which it is drawn, the certification is equivalent to an
acceptance.

Same; Same; The degree of diligence required of banks is

more than that of a good father of a family where the fiduciary
nature of their relationship with their depositors is concerned.
Section 2, of Republic Act No. 8791, The General Banking Law
of 2000 decrees: SEC. 2. Declaration of Policy.The State
recognizes the vital role of banks in providing an environment
conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high
standards of integrity and performance. In furtherance thereof,
the State shall promote and maintain a stable and efficient
banking and financial system that is globally competitive,
dynamic and responsive to the demands of a developing
economy. In Associated Bank v. Tan, 446 SCRA 282 (2004), it
was reiterated: x x x the degree of diligence required of banks
is more than that of a good father of a family where the
fiduciary nature of their relationship with their depositors is
concerned. Indeed, the banking business is vested with the
trust and confidence of the public; hence the appropriate
standard of diligence must be very high, if not the highest
degree of diligence.
 Damages; The requisites for an award of moral damages
are well-defined, thus, firstly, evidence of besmirched reputation
or physical, mental or psychological suffering sustained by the
claimant; secondly, a culpable act or omission factually
established; thirdly, proof that the wrongful act or omission of
the defendant is the proximate cause of the damages sustained
by the claimant; and, fourthly, that the case is predicated on any
of the instances expressed or envisioned by Articles 2219 and
2220 of the Civil Code.Moral damages

122

122 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

include physical suffering, mental anguish, fright, serious

anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if
they are the proximate result of the defendants wrongful act or
omission. The requisites for an award of moral damages are
well-defined, thus, firstly, evidence of besmirched reputation or
physical, mental or psychological suffering sustained by the
claimant; secondly, a culpable act or omission factually
established; thirdly, proof that the wrongful act or omission of
the defendant is the proximate cause of the damages sustained
by the claimant; and fourthly, that the case is predicated on any
of the instances expressed or envisioned by Article 2219 and
Article 2220 of the Civil Code. All these elements are present in
the instant case.

Proximate Cause; Words and Phrases; Proximate cause is

that cause which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.By refusing
to make good the managers check it has issued, Ong suffered
embarrassment and humiliation arising from the dishonor of
the said check. Secondly, the culpable act of PCI Bank in
having cleared the check of Serande and issuing the managers
check to Ong is undeniable. Thirdly, the proximate cause of the
loss is attributable to PCI Bank. Proximate cause is defined as
that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred.
In this case, the proximate cause of the loss is the act of PCI
Bank in having cleared the check of Sarande and its failure to
exercise that degree of diligence required of it under the law
which resulted in the loss to Ong.

Banks and Banking; Whether as mere passive entities for

the safe-keeping and saving of money or as active instruments of
business and commerce, banks have attained an ubiquitous
presence among the people, who have come to regard them with
respect and even gratitude and most of all, confidence.The law
allows the grant of exemplary damages to set an example for
the public good. The banking system has become an
indispensable institution in the modern world and plays a vital
role in the economic life of every civilized society. Whether as
mere passive entities for the safe-keeping and saving of money
or as active instruments of business and commerce,

123

VOL. 502, SEPTEMBER 15, 2006 123

Equitable PCI Bank vs. Ong

banks have attained an ubiquitous presence among the people,

who have come to regard them with respect and even gratitude
and most of all, confidence. For this reason, banks should guard
against injury attributable to negligence or bad faith on its
part. Without a doubt, it has been repeatedly emphasized that
since the banking business is impressed with public interest, of
paramount importance thereto is the trust and confidence of
the public in general. Consequently, the highest degree of
diligence is expected, and high standards of integrity and
performance are even required of it. Having failed in this
respect, the award of exemplary damages is warranted.
PETITION for review on certiorari of a decision of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Jowel T. Cloma for petitioner.
Roberto T. Sencio for respondent.

CHICO-NAZARIO, J.:

On 29 November 1991, Warliza Sarande deposited in her

account at Philippine Commercial International (PCI)
Bank Magsaysay Avenue, Santa Ana District, Davao
City Branch, under Account No. 8502-00347-6,
1
a PCI
Bank General Santos City Branch, TCBT Check No.
0249188 in the amount of P225,000.00. Upon inquiry by
Serande at PCI Bank on 5 December 1991 on whether
TCBT Check No. 0249188 had been cleared, she received
an affirmative answer. Relying on this assurance, she
issued two checks drawn against the proceeds of TCBT
Check No. 0249188. One of these was PCI Bank Check
No. 073661 dated 5 December 1991 for P132,000.00
which Sarande issued to respondent Rowena Ong owing
to a business transaction. On the same day, Ong
presented to PCI Bank Magsaysay Avenue Branch said
Check No. 073661, and instead of encashing it, requested
PCI Bank

_______________

1 The Consolidated Bank and Trust Corporation.

124

124 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

to convert the proceeds thereof into a managers check,

which the PCI Bank obliged. Whereupon, Ong was issued
PCI Bank Managers Check No. 10983 dated 5 December
1991 for the sum of P132,000.00, the value of Check No.
073661.
 The next day, 6 December 1991, Ong deposited PCI
Bank Managers Check No. 10983 in her account with
Equitable Banking Corporation Davao City Branch. On 9
December 1991, she received a check return-slip
informing her that PCI Bank had stopped the payment of
the said check on the ground of irregular issuance.
Despite several demands made by her to PCI Bank for
the payment of the amount in PCI Bank Managers
Check No. 10983, the same was met with refusal; thus,
Ong was constrained to file a Complaint for sum 2 of
money, damages and attorneys fees against PCI Bank.
From PCI Banks version, TCBT-General Santos City
Check No. 0249188 was returned on 5 December 1991 at
5:00 pm on the ground that the account against which it
was drawn was already closed. According to PCI Bank, it
immediately gave notice to Sarande and Ong about the
return of Check No. 0249188 and requested Ong to
return PCI Bank Managers Check No. 10983 inasmuch
as the return of Check No. 0249188 on the ground that
the account from which it was drawn had already been
closed resulted in a failure or want of consideration 3for
the issuance of PCI Bank Managers Check No. 10983.
After the pre-trial4 conference, Ong filed a motion for
summary judgment. Though they were duly furnished
with a copy of the motion for summary judgment, PCI
Bank and5
its counsel failed to appear at the scheduled
hearing. Neither did they file any written comment or
opposition thereto. The

_______________

2 Docketed as Civil Case No. 21458-92 filed before the Regional Trial
Court of Davao City Branch 14.
3 Records, p. 25.
4 Id. at p. 54.
5 Id., at p. 60.

125

VOL. 502, SEPTEMBER 15, 2006 125

Equitable PCI Bank vs. Ong
trial court thereafter ordered Ong to formally offer her
exhibits in writing, furnishing copies of the same to PCI6
Bank which was directed to file its comment or objection.
Ong complied with the Order of the trial court, but
PCI Bank failed to file any comment or objection within7
the period given to it despite receipt of the same order.
The trial court then granted the motion for summary
judgment and in its Order dated 2 March 1995, it held:

IN THE LIGHT OF THE FOREGOING, the motion for

summary judgment is GRANTED, ordering defendant
Philippine Commercial International Bank to pay the plaintiff
the amount of ONE HUNDRED THIRTY-TWO THOUSAND
PESOS (P132,000.00) equivalent to the amount of PCIB
Managers Check No. 10983.
Set the reception of the plaintiffs evidence
8
with respect to
the damages claimed in the complaint.

PCI Bank filed a Motion for Reconsideration which 9

the
trial court denied in its Order dated 11 April 1996. After
the reception of Ongs evidence in support of her10claim for
damages, the trial court rendered its Decision dated 3
May 1999 wherein it ruled:

IN LIGHT OF THE FOREGOING CONSIDERATION, and as

plaintiff has preponderantly established by competent evidence
her claims in the Complaint, judgment in hereby rendered for
the plaintiff against the defendant-bank ordering the latter:

1. To pay the plaintiff the sum of FIFTY THOUSAND

PESOS (P50,000.00) in the concept of moral damages;
2. To pay the plaintiff the sum of TWENTY THOUSAND
PESOS (P20,000.00) as exemplary damages;

_______________

6 Id.
7 Id., at p. 72.
8 Rollo, p. 268.
9 Records, p. 106.
10 Penned by Judge William M. Layague.
 126

126 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

3. To pay the plaintiff the sum of THREE THOUSAND

FIVE HUNDRED PESOS (P3,500.00) representing
actual expenses;
4. To pay the plaintiff the sum of TWENTY THOUSAND
PESOS (P20,000.00) as and for attorneys fees; and
11
5. To pay the costs.

From this decision, PCI Bank sought

12
recourse before the
Court of Appeals. In a Decision dated 29 October 2002,
the appellate court denied the appeal of PCI Bank and
affirmed the orders and decision of the trial court.
Unperturbed, PCI Bank then filed the present petition
for review before this Court and raised the following
issues:

1. WHETHER OR NOT THE COURT OF APPEALS

COMMITTED A GRAVE AND REVERSIBLE
ERROR WHEN IT SUSTAINED THE LOWER
COURTS ORDER DATED 2 MARCH 1999
GRANTING RESPONDENTS MOTION FOR
SUMMARY JUDGMENT NOTWITHSTANDING
THE GLARING FACT THAT THERE ARE
GENUINE, MATERIAL AND FACTUAL
ISSUES WHICH REQUIRE THE
PRESENTATION OF EVIDENCE.
2. WHETHER OR NOT THE COURT OF APPEALS
WAS IN ERROR WHEN IT SUSTAINED THE
LOWER COURTS DECISION DATED 3 MAY
1999 GRANTING THE RELIEFS PRAYED FOR
IN RESPONDENT ONGS COMPLAINT
INSPITE OF THE FACT THAT RESPONDENT
ONG WOULD BE UNJUSTLY ENRICHED AT
THE EXPENSE OF PETITIONER BANK, IF
PETITIONER BANK WOULD BE REQUIRED
TO PAY AN UNFUNDED CHECK.
 3. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED REVERSIBLE ERRORS WHEN
IT AFFIRMED THE COURT A QUOS
DECISION DATED 3 MAY 1999 AWARDING
DAMAGES TO RESPONDENT ONG AND
HOLDING THAT RESPONDENT ONG HAD
PREPONDERANTLY ESTABLISHED BY

_______________

11 Records, pp. 192-198.

12 Penned by Associate Justice Elvi John S. Asuncion with Associate
Justice Conrado M. Vasquez, Jr. and Sergio L. Pestao, concurring;
Rollo, pp. 255-262.

127

VOL. 502, SEPTEMBER 15, 2006 127

Equitable PCI Bank vs. Ong

COMPETENT EVIDENCE HER CLAIMS IN

THE COMPLAINT INSPITE OF THE FACT
THAT THE EVIDENCE ON RECORD DOES
NOT JUSTIFY THE AWARD OF DAMAGES.
4. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR WHEN
IT AFFIRMED THE LOWER COURTS
FACTUAL FINDING IN ITS DECISION DATED
3 MAY 1999 HOLDING RESPONDENT ONG A
HOLDER IN DUE COURSE INSPITE OF THE
FACT THAT THE REQUISITE OF GOOD
FAITH AND FOR VALUE IS LACKING AND
DESPITE THE ABSENCE OF A PROPER
TRIAL TO DETERMINE SUCH FACTUAL
ISSUE.
5. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR WHEN
IT UPHELD THE LOWER COURTS DECISION
DATED 3 MAY 1999 DENYING PETITIONER
EPCI BANKS COUNTERCLAIM INSPITE OF
 THE FACT THAT IT WAS SHOWN THAT
RESPONDENT
13
ONGS COMPLAINT LACKS
MERIT.

We affirm the Decision of the trial court and the Court of

Appeals.
The provision on summary judgment is found in
Section 1, Rule 35 of the 1997 Rules of Court:

SECTION 1. Summary judgment for claimant.A party

seeking to recover upon a claim, counterclaim, or cross-claim or
to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.

Thus, it has been held that a summary judgment is

proper where, upon a motion filed after the issues had
been joined and on the basis of the pleadings and papers
filed, the court finds that there is no genuine issue as to
any material fact to except as to the amount of damages.
A genuine issue has been defined as an issue of fact
which calls for the presentation of

_______________

13 Id., at pp. 471-472.

128

128 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

evidence, as distinguished from an issue which is sham,

fictitious, contrived and patently unsubstantial
14
so as not
to constitute a genuine issue for trial.
A court may grant summary judgment to settle
expeditiously a case if, on motion of either party, there
appears from the pleadings, depositions, admissions, and
affidavits that no important issues
15
of fact are involved,
except the amount of damages. Rule 35, Section 3, of the
Rules of Court provides two requisites for summary
judgment to be proper: (1) there must be no genuine
issue as to any material fact, except for the amount of
damages; and (2) the party presenting the motion for
summary judgment16
must be entitled to a judgment as a
matter of law.
Certainly, when the facts as pleaded appear
uncontested or undisputed, then theres no real or
genuine issue or question
17
as to the facts, and summary
judgment is called for.
By admitting it committed an error, clearing the check
of Sarande and issuing in favor of Ong not just any check
but a managers check for that matter, PCI Banks
liability is fixed. Under the circumstances, we find that
summary judgment was proper and a hearing would
serve no purpose. That summary judgment is
appropriate was incisively expounded by the trial court
when it made the following observation:

[D]efendant-bank had certified plaintiffs PCIB Check No.

073661 and since certification is equivalent to acceptance,
defendant-bank as drawee bank is bound on the instrument
upon certification and it

_______________

14 Ley Construction and Development Corporation v. Union Bank of

the Philippines, 389 Phil. 788, 798; 334 SCRA 443 (2000).
15 Cotabato Timberland Co. Inc. v. C. Alcantara and Sons, Inc., G.R.
No. 145469, 28 May 2004, 430 SCRA 227, 223.
16 Monetary Foods Corporation v. Eserjose, G.R. No. 153126, 11
September 2003, 410 SCRA 627, 633, citing Solidbank Corporation v.
Court of Appeals, 439 Phil. 23, 34; 379 SCRA 159 (2002).
17 Evadel Realty and Development Corporation v. Soriano,G.R. No.
144291, 20 April 2001, 357 SCRA 395, 401.

129

VOL. 502, SEPTEMBER 15, 2006 129

Equitable PCI Bank vs. Ong
is immaterial to such liability in favor of the plaintiff who is a
holder in due course whether the drawer (Warliza Sarande) had
funds or not with the defendant-bank (Security vs. State Bank,
154 N.W. 282) or the drawer was indebted to the bank for more
than the amount of the check (Nat. Bank vs. Schmelz, Nat.
Bank, 116 S.E. 880) as the certifying bank as all the liabilities
under Sec. 62 of the Negotiable Instruments Law which refers
to liability of acceptor (Title Guarantee vs. Emadee Realty
Corp., 240 N.Y. 36).
It may be true that plaintiffs PCIB Check No. 073661 for
P132,000.00 which was paid to her by Warliza Sarande was
actually not funded but since plaintiff became a holder in due
course, defendant-bank cannot interpose a defense of want or
lack of consideration because that defense is equitable or
personal and cannot prosper against a holder in due course
pursuant to Section 28 of the Negotiable Instruments Law.
Therefore, when the aforementioned check was endorsed and
presented by the plaintiff and certified to and accepted by
defendant-bank in the purchase of PCIB Managers Check No.
1983 in the 18amount of P132,000.00, there was a valid
consideration.

The property of summary judgment was further

explained by this Court when it pronounced that:

The theory of summary judgment is that although an answer

may on its face appear to tender issuesrequiring trialyet if
it is demonstrated by affidavits, depositions, or admissions that
those issues are not genuine, but sham or fictitious, the Court
is unjustified in dispensing with the trial and rendering
summary judgment for plaintiff. The court is expected to act
chiefly on the basis of the affidavits, depositions, admissions
submitted by the movant, and those of the other party in
opposition thereto. The hearing contemplated (with 10-day
notice) is for the purpose of determining whether the issues are
genuine or not, not to receive evidence on the issues set up in
the pleadings. A hearing is not thus de riguer. The matter may
be resolved, and usually is, on the basis of affidavits,
depositions, admissions. This is not to say that a hearing may
be regarded

_______________
 18 Records, p. 77.

130

130 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

as a superfluity. It is not, and the Court

19
has plenary discretion
to determine the necessity therefor.

The second and fourth issues are inter-related and so

they shall be resolved together. The second issue has
reference to PCI Banks claim of unjust enrichment on
the part of Ong if it would be compelled to make good the
managers check it had issued. As asserted by PCI Bank
under the fourth issue, Ong is not a holder in due course
because the managers check was drawn against a closed
account; therefore, the same was issued without
consideration.
On the matter of unjust enrichment, the fundamental
doctrine of unjust enrichment is the transfer of value
without just cause or consideration. The elements of this
doctrine are: enrichment on the part of the defendant;
impoverishment on the part of the plaintiff; and lack of
cause. The main objective is to prevent 20
one to enrich
himself at the expense of another. It is based on the
equitable postulate that it is 21unjust for a person to retain
benefit without paying for it. It is well to stress that the
check of Sarande had been cleared by the PCI Bank for
which reason the former issued the check to Ong A check
which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor of
cash in 22
an amount equal to the amount credited to his
account.

_______________

19 Carcon Development Corporation v. Court of Appeals, G.R. No.

88218, 19 December 1989, 180 SCRA 348, 352.
20 P.C. Javier and Sons, Inc. v. Court of Appeals, G.R. No. 129552, 29
June 2005, 462 SCRA 36, 47, citing De Leon v. Santiago Syjuco, Inc., 90
Phil. 311 (1951).
21 Soler v. Court of Appeals, G.R. No. 123892, 21 May 2001, 358
SCRA 57, 64.
22 Section 32 of Presidential Decree No. 72 (Amending Republic Act
Numbered Two Hundred and Sixty-Five, entitled, The Central Bank
Act), states:

SEC. 32. Section sixty-three of the same Act is hereby amended to read as
follows:

131

VOL. 502, SEPTEMBER 15, 2006 131

Equitable PCI Bank vs. Ong

Having cleared the check earlier, PCI Bank, therefore,

became liable to Ong and it cannot allege want or failure
of consideration between it and Sarande. Under settled
jurisprudence, Ong is a stranger as regards23
the
transaction between PCI Bank and Sarande.
PCI Bank next insists that since there was no
consideration for the issuance of the managers check,
ergo, Ong is not a holder in due course. This claim is
equally without basis. Pertinent provisions of the
Negotiable Instruments Law are hereunder quoted:

SECTION 52. What constitutes a holder in due course.A

holder in due course is a holder who has taken the instrument
under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue,
and without notice it had been previously dishonored, if
such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no
notice of any infirmity in the instrument or defect in the
title of the person negotiating it.

The same law provides further:

_______________

SEC. 63. Legal character.Checks representing deposit money do not have

legal tender power and their acceptance in the payment of debts, both public
and private, is at the option of the creditor: Provided, however, that a check
which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account. (O.G. No. 50, Vol. 68, p. 46; emphasis supplied.)

23 Hector M. De Leon, Jr., THE PHILIPPINE NEGOTIABLE

INSTRUMENTS LAW (and Allied Laws) Annotated (2004 ed.), p. 223,
citing National Bank v. Picornell, 46 Phil. 716 (1922).

132

132 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

Sec. 24. Presumption of consideration.Every negotiable

instrument is deemed prima facie to have been issued for a
valuable consideration; and every person whose signature
appears thereon to have become a party thereto for value.
Sec. 26. What constitutes holder for value.Where value has
at any time been given for the instrument, the holder is deemed
a holder for value in respect to all parties who become such
prior to that time.
Sec. 28. Effect of want of consideration.Absence or failure
of consideration is a matter of defense as against any person
not a holder in due course; and partial failure of consideration
is a defense pro tanto, whether the failure is an ascertained and
liquidated amount or otherwise.

Easily discernible is that what Ong obtained from PCI

Bank was not just any ordinary check but a managers
check. A managers check is an order of the bank to pay,
drawn upon itself, committing in effect its total
resources, integrity and honor behind its issuance. By its
peculiar character and general use in commerce, a
managers check is regarded 24
substantially to be as good
as the money it represents.
A managers25check stands on the same footing as a
certified check. The effect of certification is found in
Section 187, Negotiable Instruments Law.

Sec. 187. Certification of check; effect of.Where a check is

certified by the bank on which
26
it is drawn, the certification is
equivalent to an acceptance.

The effect of issuing a managers check was

incontrovertibly elucidated when we declared that:

_______________

24 Tan v. Court of Appeals, G.R. No. 108555, 20 December 1994, 239

SCRA 310, 322, cited in BPI v. Court of Appeals, G.R. No. 112392, 29
February 2000, 326 SCRA 641.
25 Supra note 21 at p. 411.
26 Id.

133

VOL. 502, SEPTEMBER 15, 2006 133

Equitable PCI Bank vs. Ong

A managers check is one drawn by the banks manager upon

the bank itself. It is similar to a cashiers check both as to effect
and use. A cashiers check is a check of the banks cashier on
his own or another check. In effect, it is a bill of exchange
drawn by the cashier of a bank upon the bank itself, and
accepted in advance by the act of its issuance. It is really the
banks own check and may be treated as a promissory note with
the bank as a maker. The check becomes the primary obligation
of the bank which issues it and constitutes its written promise
to pay upon demand. The27 mere issuance of it is considered an
acceptance thereof. x x x.

In the case
28
of New Pacific Timber & Supply Co., Inc. v.
Seneris:

[S]ince the said check had been certified by the drawee bank,
by the certification, the funds represented by the check are
transferred from the credit of the maker to that of the payee or
holder, and for all intents and purposes, the latter becomes the
depositor of the drawee bank, with rights and duties of one in
such situation. Where a check is certified by the bank on which
it is drawn, the certification is equivalent to acceptance. Said
certification implies that the check is drawn upon sufficient
funds in the hands of the drawee, that they have been set apart
for its satisfaction, and that they shall be so applied whenever
the check is presented for payment. It is an understanding that
the check is good then, and shall continue good, and this
agreement is as binding on the bank as its notes circulation, a
certificate of deposit payable to the order of depositor, or any
other obligation it can assume. The object of certifying a check,
as regards both parties, is to enable the holder to use it as
money. When the holder procures the check to be certified, the
check operates as an assignment of a part of the funds to the
creditors. Hence, the exception to the rule enunciated under
Section 63 of the Central Bank Act to the effect that a check
which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor in cash
in an amount equal to the amount credited to his account shall
apply in this case x x x.

_______________

27 International Corporate Bank v. Gueco, G.R. No. 141968, 12

February 2001, 351 SCRA 516, 528.
28 G.R. No. L-41764, 19 December 1980, 101 SCRA 686, 693.

134

134 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

By accepting PCI Bank Check No. 073661 issued by

Sarande to Ong and issuing in turn a managers check in
exchange thereof, PCI Bank assumed the liabilities of an
acceptor under Section 62 of the Negotiable Instruments
Law which states:

Sec. 62. Liability of acceptor.The acceptor by accepting the

instruments engages that he will pay it according to the tenor
of his acceptance; and admits
 (a) The existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the
instrument; and
(b) The existence of the payee and his then capacity to
indorse.

With the above jurisprudential basis, the issues on Ong

being not a holder in due course and failure or want of
consideration for PCI Banks issuance of the managers
check is out of sync.
Section 2, of Republic Act No. 8791, The General
Banking Law of 2000 decrees:

SEC. 2. Declaration of Policy.The State recognizes the vital

role of banks in providing an environment conducive to the
sustained development of the national economy and the
fiduciary nature of banking that requires high standards of
integrity and performance. In furtherance thereof, the State
shall promote and maintain a stable and efficient banking and
financial system that is globally competitive, dynamic and
responsive to the demands of a developing economy.
29
In Associated Bank v. Tan, it was reiterated:

x x x the degree of diligence required of banks is more than

that of a good father of a family where the fiduciary nature of
their relationship with their depositors is concerned. Indeed,
the banking

_______________

29 G.R. No. 156940, 14 December 2004, 446 SCRA 282, 291, citing
Philippine Bank of Commerce v. Court of Appeals, 336 Phil. 667, 681;
269 SCRA 695, 708 (1997).

135

VOL. 502, SEPTEMBER 15, 2006 135

Equitable PCI Bank vs. Ong
business is vested with the trust and confidence of the public;
hence the appropriate standard of diligence must be very high,
if not the highest degree of diligence.

Measured against these standards, the next question

that needs to be addressed is: Did PCI Bank exercise the
requisite degree of diligence required of it? From all
indications, it did not. PCI Bank distinctly made the
following uncontested admission:

1. On 29 November 1991, one Warliza Sarande

deposited to her savings account with PCI Banks
Magsaysay Avenue Branch, TCBT-General
Santos Branch Check No. 0249188 for
P225,000.00. Said check, however, was
inadvertently sent by PCI Bank through local
clearing when it should have been sent through
inter-regional clearing since the check was drawn
at0 TCBT-General Santos City.
2. On 5 December 1991, Warliza Sarande inquired
whether TCBT Check No. 0249188 had been
cleared. Not having received any advice from the
drawee bank within the regular clearing period
for the return of locally cleared checks, and
unaware then of the error of not having sent the
check through inter-regional clearing, PCI Bank
advised her that
30
Check No. 024188 is treated as
cleared. x x x. (Emphasis supplied.)

From the foregoing, it is palpable and readily apparent

that31PCI Bank failed to exercise the highest degree of
care required of it under the law.
In the32 case of Philippine National Bank v. Court of
Appeals, we declared:

_______________

30 Records, p. 24.
31 Philippine Bank of Commerce v. Court of Appeals, supra note 27.
32 326 Phil. 326, 347; 256 SCRA 309, 323 (1996), citing Bautista v.
Mangaldan Rural Bank, Inc., G.R. No. 100755, 10 February 1994, 230
SCRA 16, 21 and Simex International (Manila), Inc. v. Court of
Appeals, G.R. No. 88013, 19 March 1990, 183 SCRA 360, 366-367.

136

136 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

The banking system has become an indispensable institution

in the modern world and plays a vital role in the economic life
of every civilized society. Whether as mere passive entities for
the safekeeping and saving of money or as active instruments
of business and commerce, banks have attained an ubiquitous
presence among the people, who have come to regard them with
respect and even gratitude and, most of all, confidence.

Having settled the other issues, we now resolve the

question on the award of moral and exemplary damages
by the trial court to the respondent.
Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they
are the proximate
33
result of the defendants wrongful act
or omission. The requisites for an award of moral
damages are well-defined, thus, firstly, evidence of
besmirched reputation or physical, mental or
psychological suffering sustained by the claimant;
secondly, a culpable act or omission factually established;
thirdly, proof that the wrongful act or omission of the
defendant is the proximate cause of the damages
sustained by the claimant; and fourthly, that the case is
predicated on any of 34the instances expressed or
envisioned by Article 2219 and Article

_______________

33 Article 2217, Civil Code.

34 Art. 2219. Moral damages may be recovered in the following and
analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;

137

VOL. 502, SEPTEMBER 15, 2006 137

Equitable PCI Bank vs. Ong

35
2220 of the Civil36
Code. All these elements are present in
the instant case.
In the first place, by refusing to make good the
managers check it has issued, Ong suffered
embarrassment and humiliation
37
arising from the
dishonor of the said check. Secondly, the culpable act of
PCI Bank in having cleared the check of Serande and
issuing the managers check to Ong is undeniable.
Thirdly, the proximate cause of the loss is attributable to
PCI Bank. Proximate cause is defined as that cause
which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury, 38and
without which the result would not have occurred. In
this case, the proximate cause of the loss is the act of PCI
Bank in having cleared the check of Sarande and its
failure to exercise that degree of diligence required of it
under the law which resulted in the loss to Ong.
On exemplary damages, Article 2229 of the Civil Code
states:

Art. 2229. Exemplary or corrective damages are imposed, by

way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages.

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

35 Art. 2220. Willful injury to property may be a legal ground for

awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad
faith.
36 Cagungun v. Planters Development Bank, G.R. No. 158674, 17
October 2005, 473 SCRA 259, 272-273.
37 TSN, 28 August 1997, p. 11; Records, p. 171.
38 Phil. Bank of Commerce v. Court of Appeals, supra note 27, cited
in Bank of the Philippine Islands v. Casa Montessori Internationale,
G.R. No. 149454, 28 May 2004, 430 SCRA 261, 287.

138

138 SUPREME COURT REPORTS ANNOTATED

Equitable PCI Bank vs. Ong

The law allows the grant of exemplary damages to set an

example for the public good. The banking system has
become an indispensable institution in the modern world
and plays a vital role in the economic life of every
civilized society. Whether as mere passive entities for the
safe-keeping and saving of money or as active
instruments of business and commerce, banks have
attained an ubiquitous presence among the people, who
have come to regard them with respect and even
gratitude and most of all, confidence. For this reason,
banks should guard against injury 39
attributable to
negligence or bad faith on its part. Without a doubt, it
has been repeatedly emphasized that since the banking
business is impressed with public interest, of paramount
importance thereto is the trust and confidence of the
public in general. Consequently, the highest degree of
diligence is expected, and high standards
40
of integrity and
performance are even required of it. Having failed in
this respect, the award of exemplary damages is
warranted.
Article 2216 of the Civil Code provides:
ART. 2216. No proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages
may be adjudicated. The assessment of such damages, except
liquidated ones, is left to the discretion of the court, according
to the circumstances of each case.

Based on the above provision, the determination of the

amount to be awarded (except liquidated damages) is left
to the sound discretion of 41the court according to the
circumstances of each case. In the case before us, we
find that the award of moral damages in the amount of
P50,000.00 and

_______________

39 Cagungun v. Planters Development Bank, supra note 36 at pp.

273-274.
40 Bank of the Philippine Islands v. Casa Montessori Internationale,
supra note 38.
41 Simex International (Manila), Inc. v. Court of Appeals, supra note
32.

139

VOL. 502, SEPTEMBER 15, 2006 139

Equitable PCI Bank vs. Ong

exemplary damages in the amount of P20,000.00 is

reasonable and justified.
With the above disquisition, there is no necessity of
further discussing the last issue on the PCI Banks
counterclaim based on the supposed lack of merit of
Ongs complaint.
WHEREFORE, premises considered, the Petition is
DENIED and the Decision of the Court of Appeals dated
29 October 2002 in CA-G.R. CV No. 65000 affirming the
Decision dated 3 May 1999, of the Regional Trial Court of
Davao City, Branch 14, in Civil Case No. 21458-92, are
AFFIRMED.
SO ORDERED.
 Panganiban (C.J., Chairperson), Ynares-
Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.

Petition denied, judgment affirmed.

Notes.The rule on summary judgment does not vest

in the court summary jurisdiction to try issues on
pleadings and affidavits but gives the court limited
authority to enter summary judgment only if it clearly
appears that there is no genuine issue of material fact.
(Velasco vs. Court of Appeals, 329 SCRA 392 [2000])
Upon a motion for summary judgment, the sole
function of the court is to determine whether or not there
is an issue of fact to be tried, and any doubt as to the
existence of an issue of fact must be resolved against the
movantcourts are quite critical of the papers presented
by the moving party but not of the papers in opposition
thereto. If the defense relied upon by the defendant is
legally sufficient and does not appear patently sham, the
motion for summary judgment should be denied. (Garcia
vs. Court of Appeals, 336 SCRA 475 [2000])

o0o

140

Copyright 2017 Central Book Supply, Inc. All rights reserved.