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262 Phil. 387

FIRST DIVISION
G.R. NO. 88013, March 19, 1990
SIMEX INTERNATIONAL (MANILA), INCORPORATED,
PETITIONER, VS. THE HONORABLE COURT OF
APPEALS AND TRADERS ROYAL BANK, RESPONDENTS.
DECISION
CRUZ, J.:

We are concerned in this case with the question of damages, specifically moral and
exemplary damages.  The negligence of the private respondent has already been
established.  All we have to ascertain is whether the petitioner is entitled to the
said damages and, if so, in what amounts.

The parties agree on the basic facts.  The petitioner is a private corporation
engaged in the exportation of food products.  It buys these products from various
local suppliers and then sells them abroad, particularly in the United States,
Canada and the Middle East.  Most of its exports are purchased by the petitioner
on credit.
The petitioner was a depositor of the respondent bank and maintained a checking
account in its branch at Romulo Avenue, Cubao, Quezon City.  On May 25, 1981,
account in its branch at Romulo Avenue, Cubao, Quezon City.  On May 25, 1981,
the petitioner deposited to its account in the said bank the amount of
P100,000.00, thus increasing its balance as of that date to P190,380.74.[1]
Subsequently, the petitioner issued several checks against its deposit but was
surprised to learn later that they had been dishonored for insufficient funds.
The dishonored checks are the following:

1. Check No. 215391 dated May 29, 1981, in favor of California Manufacturing
Company, Inc. for P16,480.00;

2. Check No. 215426 dated May 28, 1981, in favor of the Bureau of Internal
Revenue in the amount of P3,386.73;
3. Check No. 215451 dated June 4, 1981, in favor of Mr. Greg Pedreño in the
amount of P7,080.00;

4. Check No. 215441 dated June 5, 1981, in favor of Malabon Longlife Trading
Corporation in the amount of P42,906.00;

5. Check No. 215474 dated June 10, 1981, in favor of Malabon Longlife
Trading Corporation in the amount of P12,953.00;
6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services, Inc. in
the amount of P27,024.45;
7. Check No. 215412 dated June 10, 1981, in favor of Baguio Country Club
Corporation in the amount of P4,386.02; and

8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in the
amount of P6,275.00.[2]
As a consequence, the California Manufacturing Corporation sent on June 9,
1981, a letter of demand to the petitioner, threatening prosecution if the
dishonored check issued to it was not made good.  It also withheld delivery of the
order made by the petitioner.  Similar letters were sent to the petitioner by the
Malabon Long Life Trading, on June 15, 1981, and by the G. and U. Enterprises,
on June 10, 1981.  Malabon also canceled the petitioner's credit line and
demanded that future payments be made by it in cash or certified check. 
Meantime, action on the pending orders of the petitioner with the other suppliers
whose checks were dishonored was also deferred.

The petitioner complained to the respondent bank on June 10, 1981.[3]

Investigation disclosed that the sum of P100,000.00 deposited by the petitioner on
May 25, 1981, had not been credited to it.  The error was rectified on June 17,
1981, and the dishonored checks were paid after they were re-deposited.[4]

In its letter dated June 20, 1981, the petitioner demanded reparation from the
In its letter dated June 20, 1981, the petitioner demanded reparation from the
respondent bank for its "gross and wanton negligence." This demand was not
met.  The petitioner then filed a complaint in the then Court of First Instance of
Rizal claiming from the private respondent moral damages in the sum of
P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25%
attorney's fees, and costs.
After trial, Judge Johnico G. Serquiña rendered judgment holding that moral and
exemplary damages were not called for under the circumstances.  However,
observing that the plaintiff's right had been violated, he ordered the defendant to
pay nominal damages in the amount of P20,000.00 plus P5,000.00 attorney's fees
and costs.[5] This decision was affirmed in toto by the respondent court.[6]
The respondent court found with the trial court that the private respondent was
guilty of negligence but agreed that the petitioner was nevertheless not entitled to
moral damages.  It said:
The essential ingredient of moral damages is proof of bad faith (De
Aparicio vs. Parogurga, 150 SCRA 280).  Indeed, there was the omission
by the defendant-appellee bank to credit appellant's deposit of
P100,000.00 on May 25, 1981.  But the bank rectified its records.  It
credited the said amount in favor of plaintiff-appellant in less than a
month.  The dishonored checks were eventually paid.  These
circumstances negate any imputation or insinuation of malicious,
fraudulent, wanton and gross bad faith and negligence on the part of
the defendant-appellant.
It is this ruling that is faulted in the petition now before us.
This Court has carefully examined the facts of this case and finds that it cannot
share some of the conclusions of the lower courts.  It seems to us that the
negligence of the private respondent has been brushed off rather lightly as if it
were a minor infraction requiring no more than a slap on the wrist.  We feel it is
not enough to say that the private respondent rectified its records and credited the
deposit in less than a month as if this mere sufficient repentance.  The error
should not have been committed in the first place.  The respondent bank has not
even explained why it was committed at all.  It is true that the dishonored checks
were, as the Court of Appeals put it, "eventually" paid.  However, this took almost
a month when, properly, the checks should have been paid immediately upon
presentment.
As the Court sees it, the initial carelessness of the respondent bank, aggravated by
the lack of promptitude in repairing its error, justifies the grant of moral damages. 
This 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.
We also note that while stressing the rectification made by the respondent bank,
the decision practically ignored the prejudice suffered by the petitioner.  This was
the decision practically ignored the prejudice suffered by the petitioner.  This was
simply glossed over if not, indeed, disbelieved.  The fact is that the petitioner's
credit line was canceled and its orders were not acted upon pending receipt of
actual payment by the suppliers.  Its business declined.  Its reputation was
tarnished.  Its standing was reduced in the business community.  All this was due
to the fault of the respondent bank which was undeniably remiss in its duty to the
petitioner.
Article 2205 of the Civil Code provides that actual or compensatory damages may
be received "(2) for injury to the plaintiff’s business standing or commercial
credit." There is no question that the petitioner did sustain actual injury as a result
of the dishonored checks and that the existence of the loss having been
established "absolute certainty as to its amount is not required."[7] Such injury
should bolster all the more the demand of the petitioner for moral damages and
justifies the examination by this Court of the validity and reasonableness of the
said claim.
We agree that moral damages are not awarded to penalize the defendant but to
compensate the plaintiff for the injuries he may have suffered.[8] In the case at
bar, the petitioner is seeking such damages for the prejudice sustained by it as a
result of the private respondent's fault.  The respondent court said that the
claimed losses are purely speculative and are not supported by substantial
evidence, but it failed to consider that the amount of such losses need not be
established with exactitude, precisely because of their nature.  Moral damages are
not susceptible of pecuniary estimation.  Article 2216 of the Civil Code specifically
provides that "no proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages may be adjudicated." That is
why the determination of the amount to be awarded (except liquidated damages)
is left to the sound discretion of the court, according to "the circumstances of
each case."
From every viewpoint except that of the petitioner's, its claim of moral damages in
the amount of P1,000,000.00 is nothing short of preposterous.  Its business
certainly is not that big, or its name that prestigious, to sustain such an extravagant
pretense.  Moreover, a corporation is not as a rule entitled to moral damages
because, not being a natural person, it cannot experience physical suffering or
such sentiments as wounded feelings, serious anxiety, mental anguish and moral
shock.  The only exception to this rule is where the corporation has a good
reputation that is debased, resulting in its social humiliation.[9]
We shall recognize that the petitioner did suffer injury because of the private
respondent's negligence that caused the dishonor of the checks issued by it.  The
immediate consequence was that its prestige was impaired because of the
bouncing checks and confidence in it as a reliable debtor was diminished.  The
private respondent makes much of the one instance when the petitioner was sued
in a collection case, but that did not prove that it did not have a good reputation
that could not be marred, more so since that case was ultimately settled.[10] It does
not appear that, as the private respondent would portray it, the petitioner is an
not appear that, as the private respondent would portray it, the petitioner is an
unsavory 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
P20,000.00 was not the proper relief to which the petitioner was entitled.  Under
Article 2221 of the Civil Code, "nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff for
any loss suffered by him." As we have found that the petitioner has indeed
incurred loss through the fault of the private respondent, the proper remedy is the
award to it of moral damages, which we impose, in our discretion, in the same
amount of P20,000.00.
Now for the exemplary damages.
The pertinent provisions of the Civil Code are the following:
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.

Art. 2232.  In contracts and quasi-contracts, the court may award

exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
The banking system is an indispensable institution in the modern world and plays
a vital role in the economic life of every civilized nation.  Whether as mere passive
entities for the safekeeping and saving of money or as active instruments of
business and commerce, banks have become an ubiquitous presence among the
people, who have come to regard them with respect and even gratitude and, most
of all, confidence.  Thus, even the humble wage-earner has not hesitated to
entrust his life's savings to the bank of his choice, knowing that they will be safe in
its custody and will even earn some interest for him.  The ordinary person, with
equal faith, usually maintains a modest checking account for security and
convenience in the settling of his monthly bills and the payment of ordinary
expenses.  As for business entities like the petitioner, the bank is a trusted and
active associate that can help in the running of their affairs, 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.
In every case, the depositor expects the bank to treat his account with the utmost
fidelity, whether such account consists only of a few hundred pesos or of
millions.  The bank must record every single transaction accurately, down to the
last centavo, and as promptly as possible.  This has to be done if the account is to
reflect at any given time the amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and to whomever 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 financial loss
and perhaps even civil and criminal litigation.
and perhaps even civil and criminal litigation.
The point is that as a business affected 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 having in mind the fiduciary nature of
their relationship.  In the case at bar, it is obvious that the respondent bank was
remiss in that duty and violated that relationship.  What is especially deplorable is
that, having been informed of its error not crediting the deposit in question 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.  It bears repeating that
the record does not contain any satisfactory explanation of why the error was
made in the first place and why it was not corrected immediately after its
discovery.  Such ineptness comes under the concept of the wanton manner
contemplated in the Civil Code that calls for the imposition of exemplary
damages.
After deliberating on this particular matter, the Court, in the exercise of its
discretion, hereby imposes upon the respondent bank exemplary damages in the
amount of P50,000.00, "by way of example or correction for the public good," in
the words of the law.  It is expected that this ruling will serve as a warning and
deterrent against the repetition of the ineptness and indifference that has been
displayed here, lest the confidence of the public in the banking system be further
impaired.
ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private
respondent is ordered to pay the petitioner, in lieu of nominal damages, moral
damages in the amount of P20,000.00, and exemplary damages in the amount of
P50,000.00 plus the original award of attorney's fees in the amount of P5,000.00,
and costs.

SO ORDERED.
Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

[1] Rollo, p. 4.
[2] Exhibits 1-a to 1-h.
[3] Rollo, p. 6.
[4] Ibid., pp. 6-7.
[5] Id., p. 24.
[6] Victor, J., with Ejercito and Pe, JJ., concurring.
[7] Cerrano v. Tan Chuco, 38 Phil. 392.
[8] Dee Hua Liong Electrical Equipment Corporation v. Reyes, 145 SCRA 713; San Andres
v. Court of Appeals, 116 SCRA 81.
[9] Mambulao Lumber Co. v. Philippine National Bank, 22 SCRA 359.
[10] Rollo, pp. 38-41.

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