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SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents.

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, 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 suprised to learn later that they had been dishonored for insufficient funds. 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. 4In 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. Serquinia 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 had 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 were 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 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 if 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 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.

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 in 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 indefference 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.

SAN CARLOS MILLING CO., LTD., plaintiff-appellant,


vs.
BANK OF THE PHILIPPINE ISLANDS and CHINA BANKING CORPORATION, defendants-appellees.

Plaintiff corporation, organized under the laws of the Territory of Hawaii, is authorized to engaged in business in the
Philippine Islands, and maintains its main office in these Islands in the City of Manila.

The business in the Philippine Islands was in the hands of Alfred D. Cooper, its agent under general power of attorney
with authority of substitution. The principal employee in the Manila office was one Joseph L. Wilson, to whom had been
given a general power of attorney but without power of substitution. In 1926 Cooper, desiring to go on vacation, gave
a general power of attorney to Newland Baldwin and at the same time revoked the power of Wilson relative to the
dealings with the Bank of the Philippine Islands, one of the banks in Manila in which plaintiff maintained a deposit.
About a year thereafter Wilson, conspiring together with one Alfredo Dolores, a messenger-clerk in plaintiff's Manila
office, sent a cable gram in code to the company in Honolulu requesting a telegraphic transfer to the China Banking
Corporation of Manila of $100,00. The money was transferred by cable, and upon its receipt the China Banking
Corporation, likewise a bank in which plaintiff maintained a deposit, sent an exchange contract to plaintiff corporation
offering the sum of P201,000, which was then the current rate of exchange. On this contract was forged the name of
Newland Baldwin and typed on the body of the contract was a note:lawphil.net

Please send us certified check in our favor when transfer is received.A manager's check on the China Banking
Corporation for P201,000 payable to San Carlos Milling Company or order was receipted for by Dolores. On
the same date, September 28, 1927, the manger's check was deposited with the Bank of the Philippine Islands
by the following endorsement:

For deposit only with Bank of the Philippine Islands, to credit of account of San Carlos Milling Co., Ltd.

By (Sgd.) NEWLAND BALDWIN


For Agent
The endorsement to which the name of Newland Baldwin was affixed was spurious.

The Bank of the Philippine Islands thereupon credited the current account of plaintiff in the sum of P201,000 and passed
the cashier's check in the ordinary course of business through the clearing house, where it was paid by the China
Banking Corporation. On the same day the cashier of the Bank of the Philippine Islands received a letter, purporting to
be signed by Newland Baldwin, directing that P200,000 in bills of various denominations, named in the letter, be packed
for shipment and delivery the next day. The next day, Dolores witnessed the counting and packing of the money, and
shortly afterwards returned with the check for the sum of P200,000, purporting to be signed by Newland Baldwin as
agent.

Plaintiff had frequently withdrawn currency for shipment to its mill from the Bank of the Philippine Islands but never in
so large an amount, and according to the record, never under the sole supervision of Dolores as the representative of
plaintiff. Before delivering the money, the bank asked Dolores for P1 to cover the cost of packing the money, and he
left the bank and shortly afterwards returned with another check for P1, purporting to be signed by Newland Baldwin.
Whereupon the money was turned over to Dolores, who took it to plaintiff's office, where he turned the money over to
Wilson and received as his share, P10,000.

Shortly thereafter the crime was discovered, and upon the defendant bank refusing to credit plaintiff with the amount
withdrawn by the two forged checks of P200,000 and P1, suit was brought against the Bank of the Philippine Islands,
and finally on the suggestion of the defendant bank, an amended complaint was filed by plaintiff against both the Bank
of the Philippine Islands and the China Banking Corporation. At the trial the China Banking Corporation contended that
they had drawn a check to the credit of the plaintiff company, that the check had been endorsed for deposit, and that
as the prior endorsement had in law been guaranteed by the Bank of the Philippine Islands, when they presented the
cashier's check to it for payment, the China Banking Corporation was absolved even if the endorsement of Newland
Baldwin on the check was a forgery.

The Bank of the Philippine Islands presented many special defenses, but in the main their contentions were that they
had been guilty of no negligence, that they had dealt with the accredited representatives of the company in the due
course of business, and that the loss was due to the dishonesty of plaintiff's employees and the negligence of plaintiff's
general agent. In plaintiff's Manila office, besides the general agent, Wilson, and Dolores, most of the time there was
employed a woman stenographer and cashier. The agent did not keep in his personal possession either the code-book
or the blank checks of either the Bank of the Philippine Islands or the China Banking Corporation. Baldwin was
authorized to draw checks on either of the depositaries. Wilson could draw checks in the name of the plaintiff on the
China Banking Corporation.

After trial in which much testimony was taken, the trial court held that the deposit of P201,000 in the Bank of the
Philippine Islands being the result of a forged endorsement, the relation of depositor and banker did not exist, but the
bank was only a gratuitous bailee; that the Bank of the Philippine Islands acted in good faith in the ordinary course of
its business, was not guilty of negligence, and therefore under article 1902 of the Civil Code which should control the
case, plaintiff could not recover; and that as the cause of loss was the criminal actions of Wilson and Dolores,
employees of plaintiff, and as Newland Baldwin, the agent, had not exercised adequate supervision over plaintiff's
Manila office, therefore plaintiff was guilty of negligence, which ground would likewise defeat recovery.From the
decision of the trial court absolving the defendants, plaintiff brings this appeal and makes nine assignments of error
which we do not deem it necessary to discuss in detail.

There is a mild assertion on the part of the defendant bank that the disputed signatures of Newland Baldwin were
genuine and that he had been in the habit of signing checks in blank and turning the checks so signed over to
Wilson.The proof as to the falsity of the questioned signatures of Baldwin places the matter beyond reasonable doubt,
nor is it believed that Baldwin signed checks in blank and turned them over to Wilson.

As to the China Banking Corporation, it will be seen that it drew its check payable to the order of plaintiff and delivered
it to plaintiff's agent who was authorized to receive it. A bank that cashes a check must know to whom it pays. In
connection with the cashier's check, this duty was therefore upon the Bank of the Philippine Islands, and the China
Banking Corporation was not bound to inspect and verify all endorsements of the check, even if some of them were
also those of depositors in that bank. It had a right to rely upon the endorsement of the Bank of the Philippine Islands
when it gave the latter bank credit for its own cashier's check. Even if we would treat the China Banking Corporation's
cashier's check the same as the check of a depositor and attempt to apply the doctrines of the Great Eastern Life
Insurance Co. vs. Hongkong & Shanghai Banking Corporation and National Bank (43 Phil., 678), and hold the China
Banking Corporation indebted to plaintiff, we would at the same time have to hold that the Bank of the Philippine Islands
was indebted to the China Banking Corporation in the same amount. As, however, the money was in fact paid to plaintiff
corporation, we must hold that the China Banking Corporation is indebted neither to plaintiff nor to the Bank of the
Philippine Islands, and the judgment of the lower court far as it absolves the China Banking Corporation from
responsibility is affirmed.

Returning to the relation between plaintiff and the Bank of the Philippine Islands, we will now consider the effect of the
deposit of P201,000. It must be noted that this was not a presenting of the check for cash payment but for deposit only.
It is a matter of general knowledge that most endorsements for deposit only, are informal. Most are by means of a
rubber stamp. The bank would have been justified in accepting the check for deposit even with only a typed
endorsement. It accepted the check and duly credited plaintiff's account with the amount on the face of the check.
Plaintiff was not harmed by the transaction as the only result was the removal of that sum of money from a bank from
which Wilson could have drawn it out in his own name to a bank where Wilson would not have authority to draw checks
and where funds could only be drawn out by the check of Baldwin.

Plaintiff in its letter of December 23, 1928, to the Bank of the Philippine Islands said in part:

". . . we now leave to demand that you pay over to us the entire amount of said manager's check of two
hundred one thousand (P201,000) pesos, together with interest thereon at the agreed rate of 3 ½ per cent per
annum on daily balances of our credit in account current with your bank to this date. In the event of your
refusal to pay, we shall claim interest at the legal rate of 6 per cent from and after the date of this demand
inasmuch as we desire to withdraw and make use of the money." Such language might well be treated as a
ratification of the deposit.

The contention of the bank that it was a gratuitous bailee is without merit. In the first place, it is absolutely contrary to
what the bank did. It did not take it up as a separate account but it transferred the credit to plaintiff's current account as
a depositor of that bank. Furthermore, banks are not gratuitous bailees of the funds deposited with them by their
customers. Banks are run for gain, and they solicit deposits in order that they can use the money for that very purpose.
In this case the action was neither gratuitous nor was it a bailment. On the other hand, we cannot agree with the theory
of plaintiff that the Bank of the Philippine Islands was an intermeddling bank. In the many cases cited by plaintiff where
the bank that cashed the forged endorsement was held as an intermeddler, in none was the claimant a regular depositor
of the bank, nor in any of the cases cited, was the endorsement for deposit only. It is therefore clear that the relation of
plaintiff with the Bank of the Philippine Islands in regard to this item of P201,000 was that of depositor and banker,
creditor and debtor.

We now come to consider the legal effect of payment by the bank to Dolores of the sum of P201,000, on two checks
on which the name of Baldwin was forged as drawer. As above stated, the fact that these signatures were forged is
beyond question. It is an elementary principle both of banking and of the Negotiable Instruments Law that —

A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered
as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account
of the depositor whose name was forged. (7 C.J., 683.)

There is no act of the plaintiff that led the Bank of the Philippine Islands astray. If it was in fact lulled into a false sense
of security, it was by the effrontery of Dolores, the messenger to whom it entrusted this large sum of money.The bank
paid out its money because it relied upon the genuineness of the purported signatures of Baldwin. These, they never
questioned at the time its employees should have used care. In fact, even today the bank represents that it has a relief
that they are genuine signatures. The signatures to the check being forged, under section 23 of the Negotiable
Instruments Law they are not a charge against plaintiff nor are the checks of any value to the defendant. It must
therefore be held that the proximate cause of loss was due to the negligence of the Bank of the Philippine Islands in
honoring and cashing the two forged checks. The judgment absolving the Bank of the Philippine Islands must therefore
be reversed, and a judgment entered in favor of plaintiff-appellant and against the Bank of the Philippine Islands,
defendant-appellee, for the sum of P200,001, with legal interest thereon from December 23,1928, until payment,
together with costs in both instances. So ordered.

AMERICAN EXPRESS INTERNATIONAL, INC., petitioner,


vs.
INTERMEDIATE APPELLATE COURT and JOSE M. ALEJANDRINO, respondents.

In October 1979, plaintiff applied with defendant at the latter's Hongkong office for a credit card, filing for said purpose
an application contained in Exhibits "C-1" and "C-2" Defendant wrote him, informing that to proceed with his application
defendant required formal confirmation of his income by a professional third party, such as accountant, solicitor or tax
agent, or, in lieu thereof, documentary evidence, like income tax assessment notice, etc., for submission to it (Exhibit
"A").

In response to Exhibit "A", plaintiff wrote defendant that if his account with the American Express International Banking
Corporation in Hongkong was not sufficient to qualify him for an American Express Credit Card, defendant could
consider his application withdrawn as he has no desire to submit papers regarding his income (Exhibit "B").

Waiving its requirements in Exhibit "A", defendant approved plaintiff 's application, sending him for said purpose a letter
of acceptance, marked in evidence as Exhibit "C", by plaintiff and Exhibit "1" by defendant. In his complaint and affidavit
in support thereof, plaintiff declared under oath that Exhibit "C" was accompanied only by his American Express Card
and nothing else. On the other hand, defendant claims in its Answer (Pars. 3-5) that said letter of acceptance was also
accompanied by a form agreement, marked as Annex "2" and later marked as Exhibit "2" during the trial, embodying
the conditions of the card.The principal factual issue, therefore is whether Exhibit "2" was actually furnished plaintiff.
As defendant claims that this document constitutes the contract with the plaintiff, it is clear that the burden of proof to
show receipt by plaintiff of said document rests upon defendant. Has defendant proved this by credible evidence? This
Court does not believe so, for the following reasons:

First, all the evidence of defendant on this point are the testimonies of witnesses Felixberto Bombast, Florencia Victoria
and Jason Lo. As to the first two, in synthesis, they declared, on direct examination, that it is the standard procedure in
all offices of American Express that when a credit card application is approved, a letter of acceptance together with a
credit card bearing the name of the cardholder, number of the card and period of its validity, and a printed form
agreement containing the conditions thereof are mailed to the accepted cardholder in a window envelope similar to
Exhibit "C-2" (later changed to Exhibit "E"). Because Bombast had resigned from defendant prior to his scheduled
testimony on August 1 9, 1982, it was agreed between the parties that his answers on direct examination would be
considered as if they were made by witness Victoria, provided they would be subject to the cross-examination of the
latter,.

The only testimony of Bombast that has any relation to the above factual issue is that as a matter of standard procedure
or policy, an approved cardholder is sent a letter of acceptance similar Exhibit "l" and is issued a credit card and a
separate printed form similar to Exhibit "2", concerning the handling of plaintiffs card account in Hongkong His
testimony, therefore, is based on pure assumption. The same is true with witness Victoria because she was never
posted in defendant's Hongkong office, except when she was assigned there for a one-month training in December
1980. The letter of acceptance of plaintiff's cardmembersip was sent by defendant ill October 1979 (TSN, pp. 6-7,
September 28, 1982 morning). Hence, her testimony that Exhibit "2" was enclosed with Exhibit "1" is also pure
supposition. Considering the big volume of correspondence handled daily as well as the 100,000 card accounts
serviced by defendant (tsn., pp. 31, 34, September 28, 1982, p.m.), this Court cannot exclude the possibility that the
omission to enclose Exhibit "2" was due to human error on the part of defendant's employees. Even defendant's
Hongkong lawyers (DEACONS) have not denied this possibility (Exhibit "U").

As to witness Jason Lo, his testimony that it was not possible that Exhibit "2" was not sent with Exhibit "1" and the credit
card because of the routine procedure in defendant's Hong Kong office, is likewise a pure assumption, for, as he himself
admitted on cross examination, he had no personal knowledge when Exhibit "1" was sent to plaintiff since this was the
work of the New Accounts and Mailing Departments with which he had nothing to do (TSN, pp. 28, 69, September 28,
1982, p.m.). Then also even if negligence at the New Accounts and Mailing Departments of defendant's Hongkong
office were to be ruled out, the possibility that the New Accounts Department deliberately omitted to make such
enclosure cannot be excluded because of the desire of defendant to capture plaintiff's patronage, as evidenced by the
waiver, in the case of plaintiff, of its usual requirements to show financial reliability listed in Exhibit "A-1." To have sent
plaintiff copy of Exhibit "2" might make him reject the card and lose the business which he could bring to defendant.
While the above are merely circumstantial, on the other hand, the fact remains that defendant has not produced ally
positive evidence to overcome plaintiffs claim that Exhibit "C" was not accompanied by any form agreement like Exhibit
"2" or Exhibit
"8-A".

Second, the following circumstances, backed up by documentary evidence, have not been contradicted by defendant's
evidence, whether testimonial or documentary:

(1) In his letter, Exhibit "K", plaintiff presented serious charges relative to the Seattle incident, demanding adequate
compensation for his moral sufferings resulting from said incident. Far from invoking its rights under Exhibit "2" for its
defense, defendant's Hongkong Director of Operations apologized for the incident, claiming that it was due to
misunderstanding, and offered to explain to the people at the Bon Department Stole in Seattle the circumstances which
brought about the incident and to reinstate plaintiffs card account. This was an abnormal reaction by defendant who is
supposedly covered comprehensively by an agreement like Exhibit "2" which provides that the card remains the
property of American Express, that the latter can revoke the card- holder's right to use it at any time with qqqoi without
cause and without giving notice, that it can list revoked cards in the "Cancellation Bulletin" or otherwise inform firms
honoring the card as having been revoked cards in the "Cancellation Bulletin." The only logical explanation for this
reaction is that either defendant knew that plaintiff had riot been furnished Exhibit "2" or it had no proof he was so
furnished.

(2) When plaintiff replied to Exhibit "L" which is defendant's Hongkong office, instead of simply invoking the tightly
protective provisions of Exhibit "2", went to the trouble and expense of engaging local law firm (DEACONS) to answer
plaintiffs reply, Exhibit "M". This again is an unusual reaction for a party allegedly protected by the terms of Exhibit "2",
thus lending further support to plaintiffs claim that defendant failed to furnish him with a copy of such contract and,
therefore, is not bound by it.

(3) In response to Exhibit "M" DEACONS wrote plaintiff that when the card was forwarded to him, with it was dispatched
copy of the conditions of cardmembership, quoting in connection therewith Exhibit "U-2", which according to them, was
violated by plaintiff, for which violation card was cancelled (Exhibit "U"). All three witnesses presented by defendant
during the trial, however, were unanimous in declaring that Exhibit "2" is the standard form agreement that is furnished
to all approved American Express cardholders. From this, they assumed that Exhibit "2" must have been the form that
was sent to plaintiff with Exhibit "C". But when witness Jason Lo was asked on cross- examination to indicate from what
part of Exhibit "2" (tsn., pp. 73-74, September 28, 1982 a.m.), and that he Identified in Exhibit "2" did not tally verbatim
with Exhibit "U-2", And, later, when DEACONS were asked by defendant's counsel in this case where they had obtained
Exhibit "U-2", they explained that it was lifted from a card agreement payable in Hongkong dollars, (Exhibit "8", Exhibit
"8-A". which is a different document from Exhibit "2". This discrepancy in defendant's evidence leads this Court to
believe that there was not only one form agreement that could be sent to approved American Express cardholders. If
indeed this was the case, and Exhibits "U" and "G" point to it, then Exhibit "2" could not necessarily have been sent to
plaintiff, contrary to what is averred in the answer filed in the case. Since the whole theory of defendant in its Answer
is founded on the receipt of Exhibit "2" by plaintiff, which must be proved by positive evidence though then Exhibits "U"
and "G" destroyed said theory, defendant's main defense has collapsed. Considering that the form agreement that
supposedly goes with every credit card is but a separate printed paper which is not signed by the parties, it should not
really be difficult for defendant to concoct and print any kind of agreement that could save it from a big damage suit.

(4) Plaintiff testified, without any contradiction from defendant, that he was not so interested in an American Express
Credit Card, so much so that he refused to comply with the requirements demanded in Exhibit "A" and informed the
defendant accordingly (Exhibit "B"). Defendant's counsel himself recognized that plaintiff is a prudent and careful lawyer
and businessman and a former ambassador of long standing (tsn, pp. 3-4, August 25, 1981).<äre||anº•1àw> This Court
finds it difficult to believe that a person of such attributes would accept a credit card with the harsh conditions contained
in Exhibit "2" particularly when he was not even in need of it and the card is not even free.

Another defense put up by defendant is that plaintiff was duly notified as far back as February 1980 of the closure of
his account. According to defendant, the notification was conveyed thru Exhibit "6-C". On this said defense the facts
appears as follows:

The joining fee is $35 and the annual due, $35 (Exhibits "C-1 par. 12).

According to defendant, in November 1979, it mailed to plaintiff at his Philippine address a bill for US $70 for the joining
fee and the first annual due Annex "3" of the Answer and Exhibit "6"). Having again received no payment, it mailed to
him a January 1980 Statement of Account for the same amount (Annex "5" of the Answer and Exhibit "6-B"). As no
remittance was still made, defendant cancelled his account in February 1980 and mailed him a statement of account
which contains a notice of cancellation of account (Par. 10 of Answer, Exhibits "6-C" and "6-C-1").

On May 2, 1980, plaintiff received from Manila office of defendant, not by mail but thru FAR Corporation, a private
courier service outfit in Manila, defendant's statement of account, Exhibit "6-B" (Par. 8, Complaint; plaintiffs affidavit,
pars. 8 and 10); Exhibits "E" and "E-1 " thru "E-4") Defendant has not controverted this fact.

Immediately upon receipt of Exhibit "6- B" plaintiff sent defendant his check for US $70, together with the voucher stub
of Exhibit "6-B". This is not denied by defendant. In fact, it admits having received and collected said remittance (Pars.
11-12, Answer), but did not reinstate plaintiffs account. Instead it merely entered the payment as a credit in said account.
It did not inform plaintiff about this action. Defendant's reason for entering the payment as a credit was the plaintiffs
account was already closed but it is company policy of defendant to keep the US $70 just in case plaintiff had used his
card between February and April, 1980 (tsn, pp. 22, 26, September 28, 1982, a.m.).

In mid-August 1980, plaintiff received the July Statement of Account from defendant for US $70 (Par. 10, Complaint).
This is not controverted by defendant. Having previously paid a similar bill in May 1980 and as plaintiff had never used
his credit card, he wrote defendant, inquiring whether said bill was for a new charge and for what purpose. He did not
receive any reply (Plaintiffs affidavit, pp. 56).

According to plaintiff, on September 26, 1980, while in Seattle, Washington State, USA, believing his American Express
card was valid, he used it to buy a jacket and pants, worth $117, at Bon Department Store, the biggest in Seattle. The
sales clerk did not check his card with the Credit Department, evidently, because the purchase involved a small amount.
However, when he tried to buy a gold key chain, worth $451.11, thru his card, the sales clerk charge checked up the
card with the Credit Department. To his great shock and humiliation, plaintiff was told, in the presence of Philippine
Consul Landicho, that defendant's Seattle office would not allow the use of his credit card and that, instead, it requested
them to seize said card for surrender to defendant. Plaintiff angrily protested against such humiliating treatment, saying
that American Express had never informed him of the alleged cancellation of hat credit card and that there must have
been a mistake in defendant's records because he had never used the card elsewhere and that it was therefore
impossible for his account to be delinquent The lady incharge answered that she knew nothing about the case and was
just following orders. She then passed to plaintiff the phone so that he could speak personally to the American Express
agent (a. lady) who had ordered the seizure of the card. Plaintiff told the agent that he had never been informed of the
cancellation of his alleged delinquency. The agent replied that she was unable to tell the t as she did not have plaintiffs
file before her but that her instructions were to seize the card. Plaintiff asked the agent to verify his account because
he was sure that American Express had made a mistake and protested vigorously against the unfair, his irresponsible
and humiliating treatment being meted out to him, adding further that American Express would pay dearly for the false
charge and reckless manner in which it had ordered his card seized. Notwithstanding said protest, the agent ordered
the seizure of plaintiff's card. To avoid a public scandal which might have resulted in the calling of the police and a
formal investigation, plaintiff surrendered his card on the conditions he was given a receipt for it. The receipt is marked
as Exhibit "H". In the course of the argument over the seizure of the card, Consul Landicho Identified plaintiff to the
Credit Department people at the Bon Store, assured them of plaintiff's high social and financial standing both at home
and abroad, and stated that it was unlikely that someone home and abroad, with the stature of plaintiff would knowingly
use a cancelled card and thereby risk his reputation and integrity on items which cost but a few hundred dollars.The
Bon personnel regretted they could not be of help in the matter. (Plaintiff's affidavit , pp. 7-8). Defendant has not the
above mentioned evidence.

Upon plaintiff's return to the Philippines in late1980, he found waiting for him Exhibit "J" advising him that his card
account had a credit balance of US $70 and to apply for if so desired. Since his American Express card has been
cancelled for delinquency and had been seized in Seattle on September 26, 1980, plaintiff wrote defendant on
November 5, 1980, relating his humiliating and painful moral and emotional experience at the Bon Store, and
demanding satisfaction, including adequate compensation, for the terrible damage to his intergrity, prestige, reputation,
feeling, etc. His letter is marked Exhibit "K". The Director of Operations of Defendant's Hongkong office replied on
November 20, 1980, apologizing for plaintiff's "inconvenience' which he attributed to an unfortunate "misunderstanding."
He offered to write to the Bon Store to explain what had happened and to reopen plaintiffs card account. His answer is
marked Exhibit "L". On November 27, 1980, plaintiff wrote back, rejecting defendant's tender of apology for being not
only unsatisfactory but also adding insult to injury, besides being insulting to his intelligence, since Exhibit "L" implied
that plaintiff was to blame for the incident when it claimed that plaintiff had been informed of the cancellation of his
account. Defendant had conveniently omitted to explain why plaintiffs letter of August 15, 1980 (Exhibit "F") was not
answered or acted upon in any way by defendant. This letter is marked Exhibit "M" (Plaintiffs affidavit, p. 10).

An exchange of letters followed between plaintiff and defendant's Hongkong office, and, later, between him and
DEACONS on the dispute (Exhibit N,O, P, Q, U, V, W, X, & Y) as well as between plaintiff and President McCormick
of American Express, in an effort to settle the case amicably (Exhibits "R", "S" "T").

The efforts for extra-judicial settlement having failed, plaintiff commenced the present action on March 2, 1980. After
several extensions, defendant filed its Answer on April 14, 1980, to which plaintiff filed a Reply on April 20, 1980. (pp.
119-127, Rollo) As already stated, the trial court awarded private respondent Alejandrino P2,000,000 as moral damages
and P400,000 as exemplary damages for the humiliation and embarrassment he suffered at Bon Department Store in
Seattle, Washington, U.S.A.- as a result of petitioner's wanton and reckless negligence resulting in the breach of its
contract with him.
We agree with the trial court's imputation of negligence on the part of petitioner. But We also agree with the petitioner
that the damages awarded by the trial court were extremely excessive. While some moral anguish and embarrassment
must have been suffered by private respondent Alejandrino, we cannot say he was without fault. In November 1979,
petitioner mailed to Alejandrino at his Philippine address a bill for US $70 (joining fee of US $35 and a December 1979
account of US $35). When it did not receive any payment, petitioner sent Alejandrino another statement of account in
January 1980. As there was still no remittance made, petitioner cancelled Alejandrino's account in February 1980.
Alejandrino knew of this cancellation.

However, on May 2, 1980, Alejandrino received from the Manila office of petitioner, thru a private courier service,
another statement of account. This happened because the Hongkong office did not inform the Manila office of the status
of Alejandrino's account. That was truly a mistake on the part of petitioner, caused by its inexcusable negligence of
prematurely cancelling private respondent's account in February 1980 without prior verification from its Manila office.
Alejandrino sent to petitioner a check for US $70. Petitioner received the amount but it did not reinstate Alejandrino's
account. Instead it merely entered the payment as a credit in said account. Alejandrino was not informed about this
action taken by petitioner.

In August 1980, Alejandrino received the July 1980 statement of account for US $70. Having previously paid a similar
bill in May 1980, and not having ever used his credit card before, Alejandrino wrote petitioner inquiring what the bill was
for. He did not receive any reply. That was another and bigger, mistake by petitioner. That could have been the
opportunity for petitioner to correct any mistakes it might have committed. A simple explanation from petitioner could
have, once and for all, straightened out any misunderstanding. It even could have avoided the issue of whether or not
private respondent received, along with his credit card,; the Amex Agreement which contains this provision:

The Amex Card remains our property and we can revoke your right to use it at any time. We can do
this with or without cause and without giving you notice. (p. 21, Petition; p-41, Rollo)

On the other hand it is evident that Alejandrino's fault consists in his not having paid the original fee on time. True it is
that the succession of events betrayed confusion-that account is cancelled one day to be reinstated the next, so to
speak. Alejandrino inquired but there was no reply. Having received no reply, Alejandrino erroneously presumed that
his account with Amexco had been restored, or that there were no conditions to the credit agreement other than those
that appeared on the credit card. The absence of any categorical information about the account's cancellation did not
entitle Alejandrino to presume that the account had been reinstated. A person of Alejandrino's stature (he was a former
ambassador of the Republic) could have been more circumspect. He should have first definitely ascertained whether
the check for US $70 he sent to petitioner for the May 1980 statement of account indeed restored his standing with
petitioner, especially so that he knew that his account with petitioner had supposedly been cancelled three months
before, in February 1980. He was certainly mistaken when he thought that the invitation extended to him was a personal
one; it was clearly merely a form-letter. The salutation thereof did not bear his name but only the words: "Dear Pre-
Approved Applicant".

Now, the damages. Private respondent Alejandrino was awarded by the trial court the inconceivably large moral and
exemplary damages because of the alleged humiliation suffered by him when he was forced to surrender his credit
card at Bon Department in Seattle. But the people at Bon's Credit Department acted very politely towards Alejandrino.
The lady in charge who knew nothing about the case was just following orders. The lady offered the phone to
Alejandrino so that he could speak directly to the Amexco agent who ordered the seizure of his credit card. The Bon
personnel regretted the incident but could not be of help in the matter. As there are no pre-set spending limits to the
use of the Amexco credit card, petitioner could not be faulted for ordering the immediate seizure of private respondent's
credit card. Considering the large number of people availing themselves of the no pre-set spending privilege in the use
of the credit card, petitioner's only protection consists in its ability to stop with dispatch anyone wrongfully using the
Amex card. Whatever humiliation or embarrassment Alejandrino might have suffered on account of the seizure incident,
none was maliciously intended by the petitioner. In fact, upon Alejandrino's return to the Philippines and after the
Hongkong office learned of the seizure incident in Seattle, the Director of Operations of the Hongkong office apologized
to private respondent. The Director offered to write a letter of explanation to Bon Department Store. He even offered to
reopen Alejandrino's account. The offers were rejected by Alejandrino.

While petitioner was not in bad faith, negligence caused the private respondent to suffer mental anguish, serious
anxiety, embarrassment and humiliation, for which he is entitled to recover reasonable moral damages (Article 2217,
Civil Code). Finally, the so-called prejudicial questions raised by Alejandrino, embodied in no less than eleven (11)
motions, submitting for resolution by this Court two issues: (a) whether the Supreme Court has jurisdiction to take
cognizance of petitioner's motion, filed on May 15, 1985, for extension of time to file a petition for review of the Court
of Appeals' resolution dated April 29, 1985, in view of Section 39 of B. P. Blg. 129, in relation to Section 5(2), Art. VIII
of the 1987 Constitution; and (b) whether this Court has jurisdiction to entertain the petition for review filed in this case,
without leave of court, -by waiving the requirement of Section 2, Rule 45, of the Rules of Court, and without the petition
containing an assignment of errors.

These are the incontrovertible procedural facts:

On May 7, 1985, petitioner received a copy of the, Court of Appeals' resolution dated April 29, 1985 which am . the
original decision of February 7, 1985 by restoring the damages granted by the trial court. Eight (8) days afterwards on
May 15, 1985, within the reglementary period, petitioner filed with this Court a motion for extension of 30 days counted
from May 16, 1985 within which to file its petition for review on June 10, 1985. This Court gave due course to the petition
for review in its resolution dated October 28, 1985.

The petition for review was seasonably filed. There is no infirmity in its filing. The appeal on questions of law to this
Court thru a petition for review on certiorari is governed by Rule 45 of the Rules of Court and Section 25 of the Interim
Rules, and not by B.P. Blg. 129. In fact, the Supreme Court is outside the scope of B.P. Blg. 129. Besides, there is
nothing sacred about the procedure of pleadings.This Court may go beyond the pleadings when the interest of justice
so warrants. It has the prerogative to suspend its rule for the same purpose. In the language of Mr. Justice Moreland,
"a litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement
and position, entraps and destroys the other. It is rather, a contest in which each contending party fully and fairly lays
before the court the facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that justice be done upon the merits. Technicality, when it deserts its proper office as
an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts." (Alonso
v. Villamor, et al., 16 Phil. 315)

WHEREFORE, the assailed decision of the then Intermediate Appellate Court (IAC) is hereby SET ASIDE, and a new
one is hereby rendered, ordering petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00)
Pesos as moral damages, with six (6%) percent interest thereon computed from the finality of this decision until paid.
No costs. SO ORDERED.

UNITED COCONUT PLANTERS BANK and LUIS MA. ONGSIAPCO, petitioners, vs. RUBEN E.
BASCO, respondent.

DECISION
This is a petition for review on certiorari assailing the Decision[1] of the Court of Appeals dated March 30, 2000,
affirming, with modifications, the Decision[2] of the Regional Trial Court (RTC), Makati City, Branch 146, which found
the petitioner bank liable for payment of damages and attorneys fees.
Respondent Ruben E. Basco had been employed with the petitioner United Coconut Planters Bank (UCPB) for
seventeen (17) years.[3] He was also a stockholder thereof and owned 804 common shares of stock at the par value
of P1.00.[4] He likewise maintained a checking account with the bank at its Las Pias Branch under Account No. 117-
001520-6.[5] Aside from his employment with the bank, the respondent also worked as an underwriter at the United
Coconut Planters Life Association (Coco Life), a subsidiary of UCPB since December, 1992.[6] The respondent also
solicited insurance policies from UCPB employees.
On June 19, 1995, the respondent received a letter from the UCPB informing him of the termination of his employment
with the bank for grave abuse of discretion and authority, and breach of trust in the conduct of his job as Bank
Operations Manager of its Olongapo Branch. The respondent thereafter filed a complaint for illegal dismissal, non-
payment of salaries, and damages against the bank in the National Labor Relations Commission (NLRC), docketed as
NLRC Cases Nos. 00-09-05354-92 and 00-09-05354-93. However, the respondent still frequented the UCPB main
office in Makati City to solicit insurance policies from the employees thereat. He also discussed the complaint he filed
against the bank with the said employees.[7]
The respondent was also employed by All-Asia Life Insurance Company as an underwriter. At one time, the lawyers of
the UCPB had an informal conference with him at the head office of the bank, during which the respondent was offered
money so that the case could be amicably settled. The respondent revealed the incident to some of the bank
employees.[8]
On November 15, 1995, Luis Ma. Ongsiapco, UCPB First Vice-President, Human Resource Division, issued a
Memorandum to Jesus Belanio, the Vice-President of the Security Department, informing him that the respondents
employment had been terminated as of June 19, 1995, that the latter filed charges against the bank and that the case
was still on-going. Ongsiapco instructed Belanio not to allow the respondent access to all bank premises. [9] Attached
to the Memorandum was a passport-size picture of the respondent. The next day, the security guards on duty were
directed to strictly impose the security procedure in conformity with Ongsiapcos Memorandum. [10]On December 7, 1995,
the respondent, through counsel, wrote Ongsiapco, requesting that such Memorandum be reconsidered, and that he
be allowed entry into the bank premises.[11]His counsel emphasized that

In the meantime, we are more concerned with your denying Mr. Basco access to all bank premises. As you may know, he is
currently connected with Cocolife as insurance agent. Given his 17-year tenure with your bank, he has established good
relationships with many UCPB employees, who comprise the main source of his solicitations. In the
course of his work as insurance agent, he needs free access to your bank premises, within reason, to add the unnecessary. Your
memorandum has effectively curtailed his livelihood and he is once again becoming a victim of another illegal termination, so to
speak. And Shakespeare said: You take his life when you do take the means whereby he lives.

Mr. Bascos work as an insurance agent directly benefits UCPB, Cocolifes mother company. He performs his work in your premises
peacefully without causing any disruption of bank operations. To deny him access to your premises for no reason except the
pendency of the labor case, the outcome of which is still in doubt his liability, if any, certainly has not been proven is a clear abuse
of right in violation of our clients rights. Denying him access to the bank, which is of a quasi-public nature, is an undue restriction
on his freedom of movement and right to make a livelihood, comprising gross violations of his basic human rights. (This is Human
Rights Week, ironically). We understand that Mr. Basco has been a stockholder of record of 804 common shares of the capital
stock of UCPB since July 1983. As such, he certainly deserves better treatment than the one he has been receiving from your office
regarding property he partly owns. He is a particle of corporate sovereignty. We doubt that you can impose the functional equivalent
of the penalty of destierro on our client who really wishes only to keep his small place in the sun, to survive and breathe. No activity
can be more legitimate than to toil for a living. Let us live and let live.[12]

In his reply dated December 12, 1995, Ongsiapco informed the respondent that his request could not be granted:

As you understand, we are a banking institution; and as such, we deal with matters involving confidences of clients. This is among
the many reasons why we, as a matter of policy, do not allow non-employees to have free access to areas where our employees
work. Of course, there are places where visitors may meet our officers and employees to discuss business matters; unfortunately,
we have limited areas where our officers and employees can entertain non-official matters. Furthermore, in keeping with good
business practices, the Bank prohibits solicitation, peddling and selling of goods, service and other commodities within its premises
as it disrupts the efficient performance and function of the employees.

Please be assured that it is farthest from our intention to discriminate against your client. In the same vein, it is highly improper for
us to carve exceptions to our policies simply to accommodate your clients business ventures.[13]

The respondent was undaunted. At 5:30 p.m. of December 21, 1995, he went to the office of Junne Cacay, the Assistant
Manager of the Makati Branch. Cacay was then having a conference with Bong Braganza, an officer of the UCPB Sucat
Branch. Cacay entertained the respondent although the latter did have an appointment. Cacay even informed him that
he had a friend who wanted to procure an insurance policy. [14] Momentarily, a security guard of the bank approached
the respondent and told him that it was already past office hours. He was also reminded not to stay longer than he
should in the bank premises.[15] Cacay told the guard that the respondent would be leaving shortly.[16] The respondent
was embarrassed and told Cacay that he was already leaving. [17]
At 1:30 p.m. of January 31, 1996, the respondent went to the UCPB Makati Branch to receive a check from Rene Jolo,
a bank employee, and to deposit money with the bank for a friend. [18] He seated himself on a sofa fronting the tellers
booth[19] where other people were also seated.[20] Meanwhile, two security guards approached the respondent. The
guards showed him the Ongsiapcos Memorandum and told him to leave the bank premises. The respondent pleaded
that he be allowed to finish his transaction before leaving. One of the security guards contacted the management and
was told to allow the respondent to finish his transaction with the bank.
Momentarily, Jose Regino Casil, an employee of the bank who was in the 7th floor of the building, was asked by Rene
Jolo to bring a check to the respondent, who was waiting in the lobby in front of the tellers booth. [21] Casil agreed and
went down to the ground floor of the building, through the elevator. He was standing in the working area near the
Automated Teller Machine (ATM) Section[22] in the ground floor when he saw the respondent standing near the
sofa[23] near the two security guards.[24] He motioned the respondent to come and get the check, but the security guard
tapped the respondent on the shoulder and prevented the latter from approaching Casil. The latter then walked towards
the respondent and handed him the check from Jolo.
Before leaving, the respondent requested the security guard to log his presence in the logbook. The guard did as
requested and the respondents presence was recorded in the logbook. [25]
On March 11, 1996, the respondent filed a complaint for damages against the petitioners UCPB and Ongsiapco in the
RTC of Manila, alleging inter alia, that

12. It is readily apparent from this exchange of correspondence that defendant bank' acknowledged reason for barring plaintiff from
its premises - the pending labor case is a mere pretense for its real vindictive and invidious intent: to prevent plaintiff, and plaintiff
alone, from carrying out his trade as an insurance agent among defendant banks employees, a practice openly and commonly
allowed and tolerated (encouraged even, for some favored proverbial sacred cows) in the bank premises, now being unjustly denied
to plaintiff on spurious grounds.

13. Defendants, to this day, have refused to act on plaintiffs claim to be allowed even in only the limited areas where [the banks]
officers and employees can entertain non-official matters and have maintained the policy banning plaintiff from all bank
premises. As he had dared exercised his legal right to question his dismissal, he is being penalized with a variation of destierro,
available in criminal cases where the standard however, after proper hearing, is much more stringent and based on more noble
grounds than mere pique or vindictiveness.

14. This appallingly discriminatory policy resulted in an incident on January 31, 1996 at 1:30 p.m. at defendant banks branch
located at its head office, which caused plaintiff tremendous undeserved humiliation, embarrassment, and loss of face. [26]

15. Defendants memorandum and the consequent acts of defendants security guards, together with defendant Ongsiapcos
disingenuous letter of December 12, 1995, are suggestive of malice and bad faith in derogation of plaintiffs right and dignity as a
human being and citizen of this country, which acts have caused him considerable undeserved embarrassment. Even if defendants,
for the sake of argument, may be acting within their rights, they cannot exercise same abusively, as they must, always, act with
justice and in good faith, and give plaintiff his due.[27]

The respondent prayed that, after trial, judgment be rendered in his favor, as follows:

WHEREFORE, it is respectfully prayed that judgment issue ordering defendants:

1. To rescind the directive to its agents barring plaintiff from all bank premises as embodied in the memorandum of November 15,
1995, and allow plaintiff access to the premises of defendant bank, including all its branches, which are open to members of the
general public, during reasonable hours, to be able to conduct lawful business without being subject to invidious discrimination;
and

2. To pay plaintiff P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 by way of attorneys fees.

Plaintiff likewise prays for costs, interest, the disbursements of this action, and such other further relief as may be deemed just and
equitable in the premises.[28]

In their Answer to the complaint, the petitioners interposed the following affirmative defenses:

9. Plaintiff had been employed as Branch Operations Officer, Olongapo Branch, of defendant United Coconut Planters Bank.

In or about the period May to June 1992, he was, together with other fellow officers and employees, investigated by the bank in
connection with various anomalies. As a result of the investigation, plaintiff was recommended terminated on findings of fraud and
abuse of discretion in the performance of his work. He was found by the banks Committee on Employee Discipline to have been
guilty of committing or taking part in the commission of the following:

a. Abuse of discretion in connection with actions taken beyond or outside the limits of his authority.
b. Borrowing money from a bank client.
c. Gross negligence or dereliction of duty in the implementation of bank policies or valid orders from
management.
d. Direct refusal or willful failure to perform, or delay in performing, an assigned task.
e. Fraud or willful breach of trust in the conduct of his work.
f. Falsification or forgery of bank records/documents.

10. Plaintiff thereafter decided to contest his termination by filing an action for illegal dismissal against the bank.
Despite the pendency of this litigation, plaintiff was reported visiting employees of the bank in their place of work during work
hours, and circulating false information concerning the status of his case against the bank, including alleged offers by management
of a monetary settlement for his illegal dismissal.

11. Defendants acted to protect the banks interest by preventing plaintiffs access to the banks offices, and at the same time informing
him of that decision.

Plaintiff purported to insist on seeing and talking to the banks employees despite this decision, claiming he needed to do this in
connection with his insurance solicitation activities, but the bank has not reconsidered.

12. The complaint states, and plaintiff has, no cause of action against defendants. [29]

The petitioners likewise interposed compulsory counterclaims for damages.

The Case for the Petitioners

The petitioners adduced evidence that a day or so before November 15, 1995, petitioner Ongsiapco was at the
10th floor of the main office of the bank where the training room of the Management Development Training Office was
located. Some of the banks management employees were then undergoing training. The bank also kept important
records in the said floor.When Ongsiapco passed by, he saw the respondent talking to some of the trainees. Ongsiapco
was surprised because non-participants in the training were not supposed to be in the premises. [30] Besides, the
respondent had been dismissed and had filed complaints against the bank with the NLRC. Ongsiapco was worried that
bank records could be purloined and employees could be hurt.
The next day, Ongsiapco contacted the training supervisor and inquired why the respondent was in the training
room the day before. The supervisor replied that he did not know why.[31]Thus, on November 15, 1995, Ongsiapco
issued a Memorandum to Belanio, the Vice-President for Security Services, directing the latter not to allow the
respondent access to the bank premises near the working area. [32] The said Memorandum was circulated by the Chief
of Security to the security guards and bank employees.
At about 12:30 p.m. on January 31, 1996, Security Guard Raul Caspe, a substitute for the regular guard who was
on leave, noticed the respondent seated on the sofa in front of the tellers booth. [33] Caspe notified his superior of the
respondents presence, and was instructed not to confront the respondent if the latter was going to make a deposit or
withdrawal.[34] Caspe was also instructed not to allow the respondent to go to the upper floors of the building. [35] The
respondent went to the tellers booth and, after a while, seated himself anew on the sofa.Momentarily, Caspe noticed
Casil, another employee of the bank who was at the working section of the Deposit Service Department (DSD),
motioning to the respondent to get the check. The latter stood up and proceeded in the direction of Casils
workstation. After the respondent had taken about six to seven paces from the sofa, Caspe and the company guard
approached him. The guards politely showed Ongsiapcos Memorandum to the respondent and told the latter that he
was not allowed to enter the DSD working area; it was lunch break and no outsider was allowed in that area. [36] The
respondent looked at the Memorandum and complied.
On May 29, 1998, the trial court rendered judgment in favor of the respondent. The fallo of the decision reads:

WHEREFORE, premises considered, defendants are hereby adjudged liable to plaintiff and orders them to rescind and set-aside
the Memorandum of November 15, 1995 and orders them to pay plaintiff the following:

1) the amount of P100,000.00 as moral damages;


2) the amount of P50,000.00 as exemplary damages;
3) P50,000.00 for and as attorneys fees;
4) Cost of suit.

Defendants counterclaim is dismissed for lack of merit.

SO ORDERED.[37]
The trial court held that the petitioners abused their right; hence, were liable to the respondent for damages under
Article 19 of the New Civil Code.
The petitioners appealed the decision to the Court of Appeals and raised the following issues:

4.1 Did the appellants abuse their right when they issued the Memorandum?

4.2 Did the appellants abuse their right when Basco was asked to leave the bank premises, in implementation of the Memorandum,
on 21 December 1995?

4.3. Did the appellants abuse their right when Basco was asked to leave the bank premises, in implementation of the Memorandum,
on 31 January 1995?

4.4. Is Basco entitled to moral and exemplary damages and attorneys fees?

4.5. Are the appellants entitled to their counterclaim?[38]

The CA rendered a Decision on March 30, 2000, affirming the decision of the RTC with modifications. The CA
deleted the awards for moral and exemplary damages, but ordered the petitioner bank to pay nominal damages on its
finding that latter abused its right when its security guards stopped the respondent from proceeding to the working area
near the ATM section to get the check from Casil. The decretal portion of the decision reads:

WHEREFORE, the Decision of the Regional Trial Court dated May 29, 1998 is hereby MODIFIED as follows:

1. The awards for moral and exemplary damages are deleted;

2. The award for attorneys fees is deleted;

3. The order rescinding Memorandum dated November 15, 1995 is set aside; and

4. UCPB is ordered to pay nominal damages in the amount of P25,000.00 to plaintiff-appellee.

Costs de oficio.[39]

The Present Petition

The petitioners now raise the following issues before this Court:
I. Whether or not the appellate court erred when it found that UCPB excessively exercised its right to self-
help to the detriment of Basco as a depositor, when on January 31, 1996, its security personnel stopped
respondent from proceeding to the area restricted to UCPBs employees.
II. Whether or not the appellate court erred when it ruled that respondent is entitled to nominal damages.
III. Whether or not the appellate court erred when it did not award the petitioners valid and lawful
counterclaim.[40]
The core issues are the following: (a) whether or not the petitioner bank abused its right when it issued, through
petitioner Ongsiapco, the Memorandum barring the respondent access to all bank premises; (b) whether or not
petitioner bank is liable for nominal damages in view of the incident involving its security guard Caspe, who stopped
the respondent from proceeding to the working area of the ATM section to get the check from Casil; and (c) whether or
not the petitioner bank is entitled to damages on its counterclaim.

The Ruling of the Court


On the first issue, the petitioners aver that the petitioner bank has the right to prohibit the respondent from access
to all bank premises under Article 429 of the New Civil Code, which provides that:

Art. 429. The owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof.
For this purpose, he may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical
invasion or usurpation of his property.

The petitioners contend that the provision which enunciates the principle of self-help applies when there is a
legitimate necessity to personally or through another, prevent not only an unlawful, actual, but also a threatened
unlawful aggression or usurpation of its properties and records, and its personnel and customers/clients who are in its
premises. The petitioners assert that petitioner Ongsiapco issued his Memorandum dated November 15, 1995 because
the respondent had been dismissed from his employment for varied grave offenses; hence, his presence in the
premises of the bank posed a threat to the integrity of its records and to the persons of its personnel. Besides, the
petitioners contend, the respondent, while in the bank premises, conversed with bank employees about his complaint
for illegal dismissal against the petitioner bank then pending before the Labor Arbiter, including negotiations with the
petitioner banks counsels for an amicable settlement of the said case.
The respondent, for his part, avers that Article 429 of the New Civil Code does not give to the petitioner bank the
absolute right to exclude him, a stockholder and a depositor, from having access to the bank premises, absent any
clear and convincing evidence that his presence therein posed an imminent threat or peril to its property and records,
and the persons of its customers/clients.
We agree with the respondent bank that it has the right to exclude certain individuals from its premises or to limit
their access thereto as to time, to protect, not only its premises and records, but also the persons of its personnel and
its customers/clients while in the premises. After all, by its very nature, the business of the petitioner bank is so
impressed with public trust; banks are mandated to exercise a higher degree of diligence in the handling of its affairs
than that expected of an ordinary business enterprise.[41] Banks handle transactions involving millions of pesos and
properties worth considerable sums of money. The banking business will thrive only as long as it maintains the trust
and confidence of its customers/clients. Indeed, the very nature of their work, the degree of responsibility, care and
trustworthiness expected of officials and employees of the bank is far greater than those of ordinary officers and
employees in the other business firms.[42] Hence, no effort must be spared by banks and their officers and employees
to ensure and preserve the trust and confidence of the general public and its customers/clients, as well as the integrity
of its records and the safety and well being of its customers/clients while in its premises. For the said purpose, banks
may impose reasonable conditions or limitations to access by non-employees to its premises and records, such as the
exclusion of non-employees from the working areas for employees, even absent any imminent or actual unlawful
aggression on or an invasion of its properties or usurpation thereof, provided that such limitations are not contrary to
the law.[43]
It bears stressing that property rights must be considered, for many purposes, not as absolute, unrestricted
dominions but as an aggregation of qualified privileges, the limits of which are prescribed by the equality of rights, and
the correlation of rights and obligations necessary for the highest enjoyment of property by the entire community of
proprietors.[44] Indeed, in Rellosa vs. Pellosis,[45] we held that:

Petitioner might verily be the owner of the land, with the right to enjoy and to exclude any person from the enjoyment and disposal
thereof, but the exercise of these rights is not without limitations. The abuse of rights rule established in Article 19 of the Civil
Code requires every person to act with justice, to give everyone his due; and to observe honesty and good faith. When right is
exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed for which the actor
can be held accountable.

Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their
enjoyment and to such reasonable restraints established by law. [46]
In this case, the Memorandum of the petitioner Ongsiapco dated November 15, 1995, reads as follows:

MEMO TO : MR. JESUS M. BELANIO


Vice President
Security Department

R E : MR. RUBEN E. BASCO

Please be advised that Mr. Ruben E. Basco was terminated for a cause by the Bank on 19 June 1992. He filed charges against the bank and the case
is still on-going.
In view of this, he should not be allowed access to all bank premises.

(Sgd.) LUIS MA. ONGSIAPCO


First Vice President
Human Resource Division

16 November 1995

TO: ALL GUARDS ON DUTY

Strictly adhere/impose Security Procedure RE: Admission to Bank premises.

For your compliance.

(Signature) 11/16/95
JOSE G. TORIAGA[47]

On its face, the Memorandum barred the respondent, a stockholder of the petitioner bank and one of its
depositors, from gaining access to all bank premises under all circumstances.The said Memorandum is all-embracing
and admits of no exceptions whatsoever. Moreover, the security guards were enjoined to strictly implement the same.
We agree that the petitioner may prohibit non-employees from entering the working area of the ATM section.
However, under the said Memorandum, even if the respondent wished to go to the bank to encash a check drawn and
issued to him by a depositor of the petitioner bank in payment of an obligation, or to withdraw from his account therein,
or to transact business with the said bank and exercise his right as a depositor, he could not do so as he was barred
from entry into the bank. Even if the respondent wanted to go to the petitioner bank to confer with the corporate
secretary in connection with his shares of stock therein, he could not do so, since as stated in the Memorandum of
petitioner Ongsiapco, he would not be allowed access to all the bank premises. The said Memorandum, as worded,
violates the right of the respondent as a stockholder or a depositor of the petitioner bank, for being capricious and
arbitrary.
The Memorandum even contravenes Article XII, paragraph 4 (4.1 and 4.2) of the Code of Ethics issued by the
petitioner bank itself, which provides that one whose employment had been terminated by the petitioner bank may,
nevertheless, be allowed access to bank premises, thus:

4.1 As a client of the Bank in the transaction of a regular bank-client activity.

4.2 When the offending party is on official business concerning his employment with the Bank with the prior approval and
supervision of the Head of HRD or of the Division Head, or of the Branch Head in case of branches. [48]

For another, the Memorandum, as worded, is contrary to the intention of the petitioners. Evidently, the petitioners
did not intend to bar the respondent from access to all bank premises under all circumstances. When he testified,
petitioner Ongsiapco admitted that a bank employee whose services had been terminated may be allowed to see an
employee of the bank and may be allowed access to the bank premises under certain conditions, viz:
Petitioner Ongsiapco also testified that a former employee who is a customer/client of the petitioner bank also has
access to the bank premises, except those areas reserved for its officers and employees, such as the working
areas: It behooved the petitioners to revise such Memorandum to conform to its Code of Ethics and their intentions
when it was issued, absent facts and circumstances that occurred pendente lite which warrant the retention of the
Memorandum as presently worded.
On the second issue, the Court of Appeals ruled that the petitioner bank is liable for nominal damages to the respondent
despite its finding that the petitioners had the right to issue the Memorandum. The CA ratiocinated that the petitioner
bank should have allowed the respondent to walk towards the restricted area of the ATM section until they were sure
that he had entered such area, and only then could the guards enforce the Memorandum of petitioner Ongsiapco. The
Court of Appeals ruled that for such failure of the security guards, the petitioner bank thereby abused its right of self-
help and violated the respondent's right as one of its depositors:

With respect, however, to the second incident on January 31, 1996, it appears that although according to UCPB security personnel
they tried to stop plaintiff-appellee from proceeding to the stairs leading to the upper floors, which were limited to bank personnel
only (TSN, pp. 6-9, June 4, 1997), the said act exposed plaintiff-appellee to humiliation considering that it was done in full view
of other bank customers. UCPB security personnel should have waited until they were sure that plaintiff-appellee had entered the
restricted areas and then implemented the memorandum order by asking him to leave the premises. Technically, plaintiff-appellee
was still in the depositing area when UCPB security personnel approached him. In this case, UCPBs exercise of its right to self-
help was in excess and abusive to the detriment of the right of plaintiff-appellee as depositor of said Bank, hence, warranting the
award of nominal damages in favor of plaintiff-appellee. Nominal damages are adjudicated in order that a right of a plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying any loss
suffered by him (Japan Airlines vs. Court of Appeals, 294 SCRA 19).[51]

The petitioners contend that the respondent is not entitled to nominal damages and that the appellate court erred in so
ruling for the following reasons: (a) the respondent failed to prove that the petitioner bank violated any of his rights; (b)
the respondent did not suffer any humiliation because of the overt acts of the security guards; (c) even if the respondent
did suffer humiliation, there was no breach of duty committed by the petitioner bank since its security guards politely
asked the respondent not to proceed to the working area of the ATM section because they merely acted pursuant to
the Memorandum of petitioner Ongsiapco, and accordingly, under Article 429 of the New Civil Code, this is a case
of damnum absque injuria;[52] and (d) the respondent staged the whole incident so that he could create evidence to file
suit against the petitioners.
We rule in favor of the petitioners.
The evidence on record shows that Casil was in the working area of the ATM section on the ground floor when
he motioned the respondent to approach him and receive the check. The respondent then stood up and walked towards
the direction of Casil. Indubitably, the respondent was set to enter the working area, where non-employees were
prohibited entry; from there, the respondent could go up to the upper floors of the banks premises through the elevator
or the stairway. Caspe and the company guard had no other recourse but prevent the respondent from going to and
entering such working area. The security guards need not have waited for the respondent to actually commence
entering the working area before stopping the latter.Indeed, it would have been more embarrassing for the respondent
to have started walking to the working area only to be halted by two uniformed security guards and disallowed entry, in
full view of bank customers. It bears stressing that the security guards were polite to the respondent and even
apologized for any inconvenience caused him. The respondent could have just motioned to Casil to give him the check
at the lobby near the tellers booth, instead of proceeding to and entering the working area himself, which the respondent
knew to be an area off-limits to non-employees. He did not.
The respondent failed to adduce evidence other than his testimony that people in the ground floor of the petitioner bank
saw him being stopped from proceeding to the working area of the bank. Evidently, the respondent did not suffer
embarrassment, inconvenience or discomfort which, however, partakes of the nature of damnum absque injuria,
i.e. damage without injury or damage inflicted without injustice, or loss or damage without violation of legal rights, or a
wrong due to a pain for which the law provides no remedy. [53] Hence, the award of nominal damages by the Court of
Appeals should be deleted.
On the third issue, we now hold that the petitioner bank is not entitled to damages and attorneys fees as its
counterclaim. There is no evidence on record that the respondent acted in bad faith or with malice in filing his complaint
against the petitioners. Well-settled is the rule that the commencement of an action does not per se make the action
wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate.
We reiterate case law that if damages result from a partys exercise of a right, it is damnum absque injuria.[54] IN LIGHT
OF ALL THE FOREGOING, the petition is GRANTED.

BPI FAMILY SAVINGS BANK, INC., petitioner, vs. FIRST METRO INVESTMENT CORPORATION, respondent.
For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision[1] dated July 4, 1997 and Resolution[2] dated January 28, 1998 of the Court of Appeals
in CA-G.R. CV No. 44986, First Metro Investment Corporation vs. BPI Family Bank.
The facts as found by the trial court and affirmed by the Court of Appeals are as follows:
First Metro Investment Corporation (FMIC), respondent, is an investment house organized under Philippine
laws. Petitioner, Bank of Philippine Islands Family Savings Bank, Inc. is a banking corporation also organized under
Philippine laws.
On August 25, 1989, FMIC, through its Executive Vice President Antonio Ong, opened current account no. 8401-07473-
0 and deposited METROBANK check no. 898679 of P100 million with BPI Family Bank (BPI FB) San Francisco del
Monte Branch (Quezon City). Ong made the deposit upon request of his friend, Ador de Asis, a close acquaintance of
Jaime Sebastian, then Branch Manager of BPI FB San Francisco del Monte Branch. Sebastians aim was to increase
the deposit level in his Branch.
BPI FB, through Sebastian, guaranteed the payment of P14,667,687.01 representing 17% per annum interest of P100
million deposited by FMIC. The latter, in turn, assured BPI FB that it will maintain its deposit of P100 million for a period
of one year on condition that the interest of 17% per annum is paid in advance.This agreement between the parties
was reached through their communications in writing. Subsequently, BPI FB paid FMIC 17% interest or P14,667,687.01
upon clearance of the latters check deposit.
However, on August 29, 1989, on the basis of an Authority to Debit signed by Ong and Ma. Theresa David, Senior
Manager of FMIC, BPI FB transferred P80 million from FMICs current account to the savings account of Tevesteco
Arrastre Stevedoring, Inc. (Tevesteco).FMIC denied having authorized the transfer of its funds to Tevesteco, claiming
that the signatures of Ong and David were falsified. Thereupon, to recover immediately its deposit, FMIC, on September
12, 1989, issued BPI FB check no. 129077 for P86,057,646.72 payable to itself and drawn on its deposit with BPI FB
SFDM branch. But upon presentation for payment on September 13, 1989, BPI FB dishonored the check as it was
drawn against insufficient funds (DAIF).
Consequently, FMIC filed with the Regional Trial Court, Branch 146, Makati City Civil Case No. 89-5280 against BPI
FB. FMIC likewise caused the filing by the Office of the State Prosecutors of an Information for estafa against Ong, de
Asis, Sebastian and four others. However, the Information was dismissed on the basis of a demurrer to evidence filed
by the accused.
On October 1, 1993, the trial court rendered its Decision in Civil Case No. 89-5280, the dispositive portion of which
reads:

Premises considered, judgment is rendered in favor of plaintiff, ordering defendant to pay:

a. the amount of P80 million with interest at the legal rate from the time this complaint was filed less P14,667,678.01;

b. the amount of P100,000.00 as reasonable attorneys fees; and

c. the cost.

SO ORDERED.

On appeal by both parties, the Court of Appeals rendered a Decision affirming the assailed Decision with modification, thus:
WHEREFORE, considering all the foregoing, this Court hereby modifies the decision of the trial court and adjudges BPI Family Bank liable to
First Metro Investment Corporation for the amount of P65,332,321.99 plus interest at 17% per annum from August 29, 1989 until fully
restored. Further, this 17% interest shall itself earn interest at 12% from October 4, 1989 until fully paid.

SO ORDERED.

BPI FB then filed a motion for reconsideration but was denied by the Court of Appeals.
In the instant petition, BPI FB ascribes to the Appellate Court the following assignments of error:
A. IN VALIDATING A CLEARLY ILLEGAL AND VOID AGREEMENT BETWEEN FMIC AND AN
OVERSTEPPING BRANCH MANAGER OF BPI FB, THE COURT OF APPEALS DECIDED THE
APPEALED CASE IN A MANNER NOT IN ACCORDANCE WITH LAW OR THE APPLICAPLE
DECISIONS OF THE HONORABLE COURT.
B. THE COURT OF APPEALS TOTALLY IGNORED THE JUDICIAL ADMISSIONS MADE BY FMIC WHEN
IT CHARACTERIZED THE TRANSACTION BETWEEN FMIC AND BPI FB AS A TIME DEPOSIT WHEN
IN FACT IT WAS AN INTEREST-BEARING CURRENT ACCOUNT WHICH, UNDER THE EXISTING
BANK REGULATIONS, WAS AN ILLEGAL TRANSACTION.
C. THE COURT OF APPEALS COMMITTED AN EGREGIOUS ERROR IN RULING THAT BPI FB
CLOTHED ITS BRANCH MANAGER WITH APPARENT AUTHORITY TO ENTER INTO SUCH A
PATENTLY ILLEGAL ARRANGEMENT.
D. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT REFUSED TO CONSIDER
THE NEGLIGENT ACTS COMMITTED BY FMIC ITSELF WHICH LED TO THE TRANSFER OF
THE P80 MILLION FROM THE FMIC ACCOUNT TO THE TEVESTECO ACCOUNT.
E. THE COURT OF APPEALS DID NOT ADHERE TO SETTLED JURISPRUDENCE WHEN IT ADJUDGED
BPI FB LIABLE TO FMIC FOR AN AMOUNT WHICH WAS MORE THAN WHAT WAS
CONTEMPLATED OR PRAYED FOR IN FMICS COMPLAINT, MOTION FOR RECONSIDERATION OF
THE TRIAL COURTS DECISION AND APPEAL BRIEF.
F. IN SUPPORT OF ITS ALTERNATIVE PRAYER, PETITIONER SUBMITS THAT THE COURT OF
APPEALS COMMITTED REVERSIBLE ERROR IN NOT ORDERING THE CONSOLIDATION OF THE
INSTANT CASE WITH THE TEVESTECO CASE WHICH IS STILL PENDING BEFORE
THE MAKATI REGIONAL TRIAL COURT.
Petitioner BPI FB contends that the Court of Appeals erred in awarding the 17% per annum interest corresponding
to the amount deposited by respondent FMIC. Petitioner insists that respondents deposit is not a special savings
account similar to a time deposit, but actually a demand deposit, withdrawable upon demand, proscribed from earning
interest under Central Bank Circular 777. Petitioner further contends that the transaction is not valid as its Branch
Manager, Jaime Sebastian, clearly overstepped his authority in entering into such an agreement with respondents
Executive Vice President. We hold that the parties did not intend the deposit to be treated as a demand deposit but
rather as an interest-earning time deposit not withdrawable any time. This is quite obvious from the communications
between Jaime Sebastian, petitioners Branch Manager, and Antonio Ong, respondents Executive Vice President. Both
agreed that the deposit of P100 million was non-withdrawable for one year upon payment in advance of the 17%
per annum interest. Respondents time deposit of P100 million was accepted by petitioner as shown by a deposit slip
prepared and signed by Ong himself who indicated therein the account number to which the deposit is to be credited,
the name of FMIC as depositor or account holder, the date of deposit, and the amount of P100 million as deposit in
check. Clearly, when respondent FMIC invested its money with petitioner BPI FB, they intended the P100 million as a
time deposit, to earn 17% per annum interest and to remain intact until its maturity date one year thereafter.
Ordinarily, a time deposit is defined as one the payment of which cannot legally be required within such a specified
number of days.[3] In contrast, demand deposits are all those liabilities of the Bangko Sentral and of other banks which
are denominated in Philippine currency and are subject to payment in legal tender upon demand by the
presentation of (depositors) checks.[4]
While it may be true that barely one month and seven days from the date of deposit, respondent FMIC demanded the
withdrawal of P86,057,646.72 through the issuance of a check payable to itself, the same was made as a result of the
fraudulent and unauthorized transfer by petitioner BPI FB of its P80 million deposit to Tevestecos savings
account. Certainly, such was a normal reaction of respondent as a depositor to petitioners failure in its fiduciary duty to
treat its account with the highest degree of care.
Under this circumstance, the withdrawal of deposit by respondent FMIC before the one-year maturity date did not
change the nature of its time deposit to one of demand deposit.On another tack, petitioners argument that Central Bank
regulations prohibit demand deposit from earning interest is bereft of merit.
Under Central Bank Circular No. 22, Series of 1994, demand deposits shall not be subject to any interest rate
ceiling. This, in effect, is an open authority to pay interest on demand deposits, such interest not being subject to any
rate ceiling.Likewise, time deposits are not subject to interest rate ceiling. In fact, the rate ceiling was abolished and
even allowed to float depending on the market conditions. Sections 1244 and 1244.1 of the Manual of Regulations of
the Central Bank of the Philippines provide:

Sec. 1244. Interest on time deposit. Time deposits shall not be subject to any interest rate ceiling.

Sec. 1244.1. Time of payment. Interest on time deposit may be paid at maturity or upon withdrawal or in advance. Provided,
however, That interest paid in advance shall not exceed the interest for one year.

Thus, even assuming that respondents account with petitioner is a demand deposit, still it would earn interest.
Going back to the unauthorized transfer of respondents funds to Tevesteco, in its attempt to evade any liability
therefor, petitioner now impugns the validity of the subject agreement on the ground that its Branch Manager, Jaime
Sebastian, overstepped the limits of his authority in accepting respondents deposit with 17% interest per annum. We
have held that if a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of an
apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against
any person who has dealt in good faith with the corporation through such agent, be estopped from denying such
authority.[5] We reiterated this doctrine in Prudential Bank vs. Court of Appeals,[6] thus:

A bank holding out its officers and agent as worthy of confidence will not be permitted to profit by the frauds they may thus be
enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds,
even though no benefit may accrue to the bank therefrom. Accordingly, a banking corporation is liable to innocent third persons
where the representation is made in the course of its business by an agent acting within the general scope of his authority even
though the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person for
his own ultimate benefit.

Petitioner maintains that respondent should have first inquired whether the deposit of P100 Million and the fixing of the
interest rate were pursuant to its (petitioners) internal procedures.Petitioners stance is a futile attempt to evade an
obligation clearly established by the intent of the parties. What transpires in the corporate board room is entirely an
internal matter. Hence, petitioner may not impute negligence on the part of respondents representative in failing to find
out the scope of authority of petitioners Branch Manager. Indeed, the public has the right to rely on the trustworthiness
of bank managers and their acts. Obviously, confidence in the banking system, which necessarily includes reliance on
bank managers, is vital in the economic life of our society. Significantly, the transaction was actually acknowledged and
ratified by petitioner when it paid respondent in advance the interest for one year. Thus, petitioner is estopped from
denying that it authorized its Branch Manager to enter into an agreement with respondents Executive Vice President
concerning the deposit with the corresponding 17% interest per annum.
Anent the award of interest, petitioner contends that such award is not in order as it had not been prayed for by
respondent in its complaint nor was it an issue agreed upon by the parties during the pre-trial of the case. Nonetheless,
the rule is well settled that when the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in writing, as in this
case. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded.[8] Besides, the matter of how much interest respondent is entitled to falls squarely within the issues framed
by the parties in their respective pleadings filed with the court a quo. At any rate, courts may indeed grant the relief
warranted by the allegations and proof even if no such specific relief is prayed for if only to conclude a complete
and thorough resolution of the issues involved.[9]
Finally, petitioner faults the Court of Appeals in not ordering the consolidation of Civil Case No. 89-4996 (filed by
petitioner against Tevesteco) with Civil Case No. 89-5280 (the instant case). According to petitioner, had there been
consolidation of these two cases, it would have been shown that the P80 Million transferred to Tevestecos account
were proceeds of a loan extended by respondent FMIC to Tevesteco. Suffice it to state that as found by both the trial
court and the Appellate Court, petitioners transfer of respondents P80M to Tevesteco was unauthorized and tainted
with fraud.
At this point, we must emphasize that this Court is not a trier of facts. Thus, we uphold the finding of both lower courts
that petitioner failed to exercise that degree of diligence required by the nature of its obligations to its depositors. A
bank is under obligation to treat the accounts of its depositors with meticulous care, whether such account consists
only of a few hundred pesos or of million of pesos. [10] Here, petitioner cannot claim it exercised such a degree of care
required of it and must, therefore, bear the consequence. WHEREFORE, the petition is DENIED. The assailed Decision
dated July 4, 1997 and the Resolution dated January 28, 1998 of the Court of Appeals in CA-G.R. CV No. 44986 are
hereby AFFIRMED. Costs against petitioner.

TRINIDAD J. FRANCISCO, plaintiff-appellee, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-


appellant.

The plaintiff, Trinidad J. Francisco, likewise appealed separately (L-18155), because the trial court did not award the
P535,000.00 damages and attorney's fees she claimed. Both appeals are, therefore, jointly treated in this decision.

The following facts are admitted by the parties: On 10 October 1956, the plaintiff, Trinidad J. Francisco, in consideration
of a loan in the amount of P400,000.00, out of which the sum of P336,100.00 was released to her, mortgaged in favor
of the defendant, Government Service Insurance System (hereinafter referred to as the System) a parcel of land
containing an area of 18,232 square meters, with twenty-one (21) bungalows, known as Vic-Mari Compound, located
at Baesa, Quezon City, payable within ten (10) years in monthly installments of P3,902.41, and with interest of 7% per
annum compounded monthly. On 6 January 1959, the System extrajudicially foreclosed the mortgage on the ground
that up to that date the plaintiff-mortgagor was in arrears on her monthly installments in the amount of P52,000.00.
Payments made by the plaintiff at the time of foreclosure amounted to P130,000.00. The System itself was the buyer
of the property in the foreclosure sale.

On 20 February 1959, the plaintiff's father, Atty. Vicente J. Francisco, sent a letter to the general manager of the
defendant corporation, Mr. Rodolfo P. Andal, the material portion of which recited as follows:

Yesterday, I was finally able to collect what the Government owed me and I now propose to pay said amount of P30,000
to the GSIS if it would agree that after such payment the foreclosure of my daughter's mortgage would be set aside. I
am aware that the amount of P30,000 which I offer to pay will not cover the total arrearage of P52,000 but as regards
the balance, I propose this arrangement: for the GSIS to take over the administration of the mortgaged property and to
collect the monthly installments, amounting to about P5,000, due on the unpaid purchase price of more than 31 lots
and houses therein and the monthly installments collected shall be applied to the payment of Miss Francisco's arrearage
until the same is fully covered. It is requested, however, that from the amount of the monthly installments collected, the
sum of P350.00 be deducted for necessary expenses, such as to pay the security guard, the street-caretaker, the
Meralco Bill for the street lights and sundry items.

It will be noted that the collectible income each month from the mortgaged property, which as I said consists of
installments amounting to about P5,000, is more than enough to cover the monthly amortization on Miss Francisco's
loan. Indeed, had she not encountered difficulties, due to unforeseen circumstances, in collecting the said installments,
she could have paid the amortizations as they fell due and there would have been really no need for the GSIS to resort
to foreclosure.

The proposed administration by the GSIS of the mortgaged property will continue even after Miss Francisco's account
shall have been kept up to date. However, once the arrears shall have been paid, whatever amount of the monthly
installments collected in excess of the amortization due on the loan will be turned over to Miss Francisco.

I make the foregoing proposal to show Francisco's sincere desire to work out any fair arrangement for the settlement
of her obligation. I trust that the GSIS, under the broadminded policies of your administration, would give it serious
consideration. Sincerely,. Vicente J. Francisco

On the same date, 20 February 1959, Atty. Francisco received a telegram:. On 28 February 1959, Atty. Francisco
remitted to the System, through Andal, a check for P30,000.00, with an accompanying letter, which reads:

I am sending you herewith BPI Check No. B-299484 for Thirty Thousand Pesos (P30,000.00) in accordance
with my letter of February 20th and your reply thereto of the same date, which reads:

GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY OF YOUR


DAUGHTER

xxx xxx xxx

The defendant received the amount of P30,000.00, and issued therefor its official receipt No. 1209874, dated 4 March
1959. It did not, however, take over the administration of the compound. In the meantime, the plaintiff received the
monthly payments of some of the occupants thereat; then on 4 March 1960, she remitted, through her father, the
amount of P44,121.29, representing the total monthly installments that she received from the occupants for the period
from March to December 1959 and January to February 1960, minus expenses and real estate taxes. The defendant
also received this amount, and issued the corresponding official receipt.

Remittances, all accompanied by letters, corresponding to the months of March, April, May, and June, 1960 and
totalling P24,604.81 were also sent by the plaintiff to the defendant from time to time, all of which were received and
duly receipted for. Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its assistant
general manager, and the other two letters, dated 19 and 26 February 1960, respectively, which were signed by Andal,
asking the plaintiff for a proposal for the payment of her indebtedness, since according to the System the one-year
period for redemption had expired. In reply, Atty. Francisco sent a letter, dated 11 March 1960, protesting against the
System's request for proposal of payment and inviting its attention to the concluded contract generated by his offer of
20 February 1959, and its acceptance by telegram of the same date, the compliance of the terms of the offer already
commenced by the plaintiff, and the misapplication by the System of the remittances she had made, and requesting
the proper corrections.

By letter, dated 31 May 1960, the defendant countered the preceding protest that, by all means, the plaintiff should pay
attorney's fees of P35,644.14, publication expenses, filing fee of P301.00, and surcharge of P23.64 for the foreclosure
work done; that the telegram should be disregarded in view of its failure to express the contents of the board resolution
due to the error of its minor employees in couching the correct wording of the telegram. A copy of the excerpts of the
resolution of the Board of Directors (No. 380, February 20, 1959) was attached to the letter, showing the approval of
Francisco's offer —
... subject to the condition that Mr. Vicente J. Francisco shall pay all expenses incurred by the GSIS in the
foreclosure of the mortgage.

Inasmuch as, according to the defendant, the remittances previously made by Atty. Francisco were allegedly not
sufficient to pay off her daughter's arrears, including attorney's fees incurred by the defendant in foreclosing the
mortgage, and the one-year period for redemption has expired, said defendant, on 5 July 1960, consolidated the title
to the compound in its name, and gave notice thereof to the plaintiff on 26 July 1960 and to each occupant of the
compound. Hence, the plaintiff instituted the present suit, for specific performance and damages. The defendant
answered, pleading that the binding acceptance of Francisco's offer was the resolution of the Board, and that Andal's
telegram, being erroneous, should be disregarded. After trial, the court below found that the offer of Atty. Francisco,
dated 20 February 1959, made on behalf of his daughter, had been unqualifiedly accepted, and was binding, and
rendered judgment as noted at the start of this opinion.

The defendant-appellant corporation assigns six (6) errors allegedly committed by the lower court, all of which, however,
are resolvable on the single issue as to whether or not the telegram generated a contract that is valid and binding upon
the parties. Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by
this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1äwphï1.ñët

We find no reason for altering the conclusion reached by the court below that the offer of compromise made by plaintiff
in the letter, Exhibit "A", had been validly accepted, and was binding on the defendant. The terms of the offer were
clear, and over the signature of defendant's general manager, Rodolfo Andal, plaintiff was informed telegraphically that
her proposal had been accepted. There was nothing in the telegram that hinted at any anomaly, or gave ground to
suspect its veracity, and the plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the
telegram was within Andal's apparent authority, but the defense is that he did not sign it, but that it was sent by the
Board Secretary in his name and without his knowledge. Assuming this to be true, how was appellee to know it?
Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-
bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This
Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —

In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it
presents itself to the third party with whom the contract is made. Naturally he can have little or no information as to
what occurs in corporate meetings; and he must necessarily rely upon the external manifestations of corporate consent.
The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed
upon it by its agents in accordance with law; and we would be sorry to announce a doctrine which would permit the
property of a man in the city of Paris to be whisked out of his hands and carried into a remote quarter of the earth
without recourse against the corporation whose name and authority had been used in the manner disclosed in this
case. As already observed, it is familiar doctrine that if a corporation knowingly permits one of its officers, or any other
agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power
to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such
agent, be estopped from denying his authority; and where it is said "if the corporation permits" this means the same as
"if the thing is permitted by the directing power of the corporation."

It has also been decided that — A very large part of the business of the country is carried on by corporations. It certainly
is not the practice of persons dealing with officers or agents who assume to act for such entities to insist on being
shown the resolution of the board of directors authorizing the particular officer or agent to transact the particular
business which he assumes to conduct. A person who knows that the officer or agent of the corporation habitually
transacts certain kinds of business for such corporation under circumstances which necessarily show knowledge on
the part of those charged with the conduct of the corporate business assumes, as he has the right to assume, that such
agent or officer is acting within the scope of his authority. (Curtis Land & Loan Co. vs. Interior Land Co., 137 Wis. 341,
118 N.W. 853, 129 Am. St. Rep. 1068; as cited in 2 Fletcher's Encyclopedia, Priv. Corp. 263, perm. Ed.)

Indeed, it is well-settled that — If a private corporation intentionally or negligently clothes its officers or agents with
apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as
to innocent third persons dealing in good faith with such officers or agents. (2 Fletcher's Encyclopedia, Priv. Corp. 255,
Perm. Ed.)

Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect
produced by the telegram..
The defendant-appellant does not disown the telegram, and even asserts that it came from its offices, as may be
gleaned from the letter, dated 31 May 1960, to Atty. Francisco, and signed "R. P. Andal, general manager by Leovigildo
Monasterial, legal counsel", wherein these phrases occur: "the telegram sent ... by this office" and "the
telegram we sent your" (emphasis supplied), but it alleges mistake in couching the correct wording. This alleged
mistake cannot be taken seriously, because while the telegram is dated 20 February 1959, the defendant informed
Atty. Francisco of the alleged mistake only on 31 May 1960, and all the while it accepted the various other remittances,
starting on 28 February 1959, sent by the plaintiff to it in compliance with her performance of her part of the new
contract. The inequity of permitting the System to deny its acceptance become more patent when account is taken of
the fact that in remitting the payment of P30,000 advanced by her father, plaintiff's letter to Mr. Andal quoted verbatim
the telegram of acceptance. This was in itself notice to the corporation of the terms of the allegedly unauthorized
telegram, for as Ballentine says:

Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his
employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether
he communicates such knowledge or not. (Ballentine, Law on Corporations, section 112.)

since a corporation cannot see, or know, anything except through its officers.

Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the telegram not
being in accordance with the true facts, as it now alleges. This silence, taken together with the unconditional acceptance
of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original agreement
(Civil Code, Art. 1393).

ART. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if,
with knowledge of the reason which renders the contract voidable and such reason having ceased, the person
who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.

Nowhere else do the circumstances call more insistently for the application of the equitable maxim that between two
innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss..

The defendant's assertion that the telegram came from it but that it was incorrectly worded renders unnecessary to
resolve the other point on controversy as to whether the said telegram constitutes an actionable document..Since the
terms offered by the plaintiff in the letter of 20 February 1959 (Exhibit "A") provided for the setting aside of the
foreclosure effected by the defendant System, the acceptance of the offer left the account of plaintiff in the same
condition as if no foreclosure had taken place. It follows, as the lower court has correctly held, that the right of the
System to collect attorneys' fees equivalent to 10% of the due (P35,694.14) and the expenses and charges of P3,300.00
may no longer be enforced, since by the express terms of the mortgage contract, these sums were collectible only "in
the event of foreclosure."

The court a quo also called attention to the unconscionability of defendant's charging the attorney's fees, totalling over
P35,000.00; and this point appears well-taken, considering that the foreclosure was merely extra-judicial, and the
attorneys' work was limited to requiring the sheriff to effectuate the foreclosure. However, in view of the parties'
agreement to set the same aside, with the consequential elimination of such incidental charges, the matter of
unreasonableness of the counsel fees need not be labored further.

Turning now to the plaintiff's separate appeal (Case G.R. No. L-18155): Her prayer for an award of actual or
compensatory damages for P83,333.33 is predicated on her alleged unrealized profits due to her inability to sell the
compound for the price of P750,000.00 offered by one Vicente Alunan, which sale was allegedly blocked because the
System consolidated the title to the property in its name. Plaintiff reckons the amount of P83,333.33 by placing the
actual value of the property at P666,666.67, a figure arrived at by assuming that the System's loan of P400,000.00
constitutes 60% of the actual value of the security. The court a quo correctly refused to award such actual or
compensatory damages because it could not determine with reasonable certainty the difference between the offered
price and the actual value of the property, for lack of competent evidence. Without proof we cannot assume, or take
judicial notice, as suggested by the plaintiff, that the practice of lending institutions in the country is to give out as loan
60% of the actual value of the collateral. Nor should we lose sight of the fact that the price offered by Alunan was
payable in installments covering five years, so that it may not actually represent true market values.

Nor was there error in the appealed decision in denying moral damages, not only on account of the plaintiff's failure to
take the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., as the decision holds, but
primarily because a breach of contract like that of defendant, not being malicious or fraudulent, does not warrant the
award of moral damages under Article 2220 of the Civil Code (Ventanilla vs. Centeno, L-14333, 28 Jan. 1961; Fores
vs. Miranda, L-12163, 4 March 1959). There is no basis for awarding exemplary damages either, because this species
of damages is only allowed in addition to moral, temperate, liquidated, or compensatory damages, none of which have
been allowed in this case, for reasons herein before discussed (Art. 2234, Civil Code; Velayo vs. Shell Co. of P.I., L-
7817, Res. July 30, 1957; Singson, et al. vs. Aragon and Lorza, L-5164, Jan. 27, 1953, 49 O.G. No. 2, 515).

As to attorneys' fees, we agree with the trial court's stand that in view of the absence of gross and evident bad faith in
defendant's refusal to satisfy the plaintiff's claim, and there being none of the other grounds enumerated in Article 2208
of the Civil Code, such absence precludes a recovery. The award of attorneys' fees is essentially discretionary in the
trial court, and no abuse of discretion has been shown. FOR THE FOREGOING REASONS, the appealed decision is
hereby affirmed, with costs against the defendant Government Service Insurance System, in G.R. No.L-18287.

PRUDENTIAL BANK, petitioner, vs. THE COURT OF APPEALS, AURORA CRUZ, respondents.

We deal here with another controversy involving the integrity of a bank.

The complaint in this case arose when private respondent Aurora F.


Cruz, * with her sister as co-depositor, invested P200,000.00 in Central Bank bills with the Prudential Bank at its branch
in Quezon Avenue, Quezon City, on June 23, 1986. The placement was for 63 days at 13.75% annual interest. For this
purpose, the amount of P196,122.88 was withdrawn from the depositors' Savings Account No. 2546 and applied to the
investment. The difference of P3,877.07 represented the pre-paid interest.

The transaction was evidenced by a Confirmation of Sale 1 delivered to Cruz two days later, together with a Debit
Memo2 in the amount withdrawn and applied to the confirmed sale. These documents were issued by Susan Quimbo,
the employee of the bank to whom Cruz was referred and who was apparently in charge of such transactions. 3

Upon maturity of the placement on August 25, 1986, Cruz returned to the bank to "roll-over" or renew her investment.
Quimbo, who again attended to her, prepared a Credit Memo 4 crediting the amount of P200,000.00 in Cruz's savings
account passbook. She also prepared a Debit Memo for the amount of P196,122.88 to cover the re-investment of
P200,000.00 minus the prepaid interest of P3,877.02. 5 This time, Cruz was asked to sign a Withdrawal Slip6 for
P196,122.98, representing the amount to be re-invested after deduction of the prepaid interest. Quimbo explained this
was a new requirement of the bank. Several days later, Cruz received another Confirmation of Sale 7 and a copy of the
Debit Memo.8

On October 27, 1986, Cruz returned to the bank and sought to withdraw her P200,000.00. After verification of her
records, however, she was informed that the investment appeared to have been already withdrawn by her on August
25, 1986. There was no copy on file of the Confirmation of Sale and the Debit Memo allegedly issued to her by Quimbo.
Quimbo herself was not available for questioning as she had not been reporting for the past week. Shocked by this
information, Cruz became hysterical and burst into tears. The branch manager, Roman Santos, assured her that he
would look into the matter.9 Every day thereafter, Cruz went to the bank to inquire about her request to withdraw her
investment. She received no definite answer, not even to the letter she wrote the bank which was received by Santos
himself. 10 Finally, Cruz sent the bank a demand letter dated November 12, 1986 for the amount of P200,000.00 plus
interest. 11 In a reply dated November 20, 1986, the bank's Vice President Lauro J. Jocson said that there appeared to
be an anomaly
and requested Cruz to defer court action as they hoped to settle the matter amicably. 12 Increasingly worried, Cruz sent
another letter reiterating her demand. 13 This time the reply of the bank was unequivocal and negative. She was told
that her request had to be denied because she had already withdrawn the amount she was claiming. 14

Cruz's reaction was to file a complaint for breach of contract against Prudential Bank in the Regional Trial Court of
Quezon City. She demanded the return of her money with interest, plus damages and attorney's fees. In its answer,
the bank denied liability, insisting that Cruz had withdrawn her investment. The bank also instituted a third-party
complaint against Quimbo, who did not file an answer and was declared in default. 15 The bank, however, did not
present any evidence against her.

After trial, Judge Rodolfo A. Ortiz rendered judgment in favor of the plaintiffs and disposed as follows:

ACCORDINGLY, judgment is hereby rendered ordering the defendant/third-party plaintiff to pay to


the plaintiffs the following amounts:
1. P200,000.00, plus interest thereon at the rate of 13.75% per annum from October 27, 1986, until
fully paid;

2. P30,000.00, as moral damages;

3. P20,000.00, as exemplary damages; and

4. P25,000.00, as reasonable attorney's fees.

The counterclaim and the third-party complaint of the defendant/third-party plaintiff are dismissed.

With costs against the defendant/third-party plaintiff.

The decision was affirmed in toto on appeal to the respondent court.

The judgment of the Court of Appeals 16 is now faulted in this petition, mainly on the ground that the bank should not
have been found liable for a quasi-delict when it was sued for breach of contract. The petition shall fail. The petitioner
is quibbling. It appears to be merely temporizing to delay enforcement of the liability clearly established against it.

The basic issues are factual. The private respondent claims she has not yet collected her investment of P200,000.00
and has submitted in proof of their contention the Confirmation of Sale and the Debit Memo issued to her by Quimbo
on the official forms of the bank. The petitioner denies her claim and points to the Withdrawal Slip, which it says Cruz
has not denied having signed. It also contends that the Confirmation of Sale and the Debit Memo are fake and should
not have been given credence by the lower courts.

The findings of the trial court on these issues have been affirmed by the respondent court and we see no reason to
disturb them. The petitioner has not shown that they have been reached arbitrarily or in disregard of the evidence of
record. On the contrary, we find substantial basis for the conclusion that the private respondents signed the Withdrawal
Slip only as part of the bank's new procedure of re-investment. She did not actually receive the amount indicated
therein, which she was made to understand was being re-invested in her name. The bank itself so assured her in the
Confirmation of Sale and the Debit Memo later issued to her by Quimbo.

17
Especially persuasive are the following observations of the trial court:

What is more, it could not be that plaintiff Aurora F. Cruz withdrew only the amount of P196,122.98
from their savings account, if her only intention was to make such a withdrawal. For, if, indeed, it was
the desire of the plaintiffs to withdraw their money from the defendant/third-party plaintiff, they could
have withdrawn an amount in round figures. Certainly, it is unbelievable that their withdrawal was in
the irregular amount of P196,122.98 if they really received it. On the contrary, this amount, which is
the price of the Central Bank bills rolled over, indicates that, as claimed by plaintiff Aurora F. Cruz,
she did not receive this money, but it was left by her with the defendant/third-party plaintiff in order
to buy Central Bank bills placement for another sixty-three (63) days, for which she signed a
withdrawal slip at the instance of third-party defendant Susan Quimbo who told her that it was a new
bank requirement for the roll-over of a matured placement which she trustingly believed.

Indeed, the bank has not explained the remarkable coincidence that the amount indicated in the withdrawal slip
is exactly the same amount Cruz was re-investing after deducting therefrom the pre-paid interest.

The bank has also not, succeeded in impugning the authenticity of the Confirmation of Sale and the Debit Memo which
were made on its official, forms. These are admittedly not available to the general public or even its depositors and are
handled only by its personnel. Even assuming that they were not signed by its authorized officials, as it claims, there
was no obligation on the part of Cruz to verify their authority because she had the right to presume it. The documents
had been issued in the office of the bank itself and by its own employees with whom she had previously dealt. Such
dealings had not been questioned before, much leas invalidated. There was absolutely no reason why she should not
have accepted their authority to act on behalf of their employer.
It is also worthy of note — and wonder — that although the bank impleaded Quimbo in a third-party complaint, it did
not pursue its suit even when she failed to answer and was declared in default. The bank did not introduce evidence
against her although it could have done so under the rules. No less remarkably, it did not call on her to testify on its
behalf, considering that under the circumstances claimed by it, she would have been the best witness to show that
Cruz had actually withdrawn her P200,000.00 placement. Instead, the bank chose to rely on its other employees whose
testimony was less direct and categorical than the testimony Quimbo could have given.

We do not find that the Court of Appeals held the bank liable on a quasi-delict. The argument of the petitioner on this
issue is pallid, to say the least, consisting as it does only of the observation that the article cited by the respondent
court on the agent's liability falls under the heading in the Civil Code on quasi-delicts. On the other hand, the respondent
court clearly declared that:

The defendant/third-party plaintiff being liable for the return of the P200,000.00 placement of the
plaintiffs, the extent of the liability of the defendant/third-party plaintiff for damages resultant
thereof, which is contractual, is for all damages which may be reasonably attributed to the non-
performance of the obligation, . . .

xxx xxx xxx

Because of the bad faith of the defendant/third-party plaintiff in its breach of its contract with the
plaintiffs, the latter are, therefore, entitled to an award of moral damages . . . (Emphasis supplied)

There is no question that the petitioner was made liable for its failure or refusal to deliver to Cruz the amount she had
deposited with it and which she had a right to withdraw upon its maturity. That investment was acknowledged by its
own employees, who had the apparent authority to do so and so could legally bind it by its acts vis-a-vis Cruz. Whatever
might have happened to the investment — whether it was lost or stolen by whoever — was not the concern of the
depositor. It was the concern of the bank.

As far as Cruz was concerned, she had the right to withdraw her P200,000.00 placement when it matured pursuant to
the terms of her investment as acknowledged and reflected in the Confirmation of Sale. The failure of the bank to deliver
the amount to her pursuant to the Confirmation of Sale constituted its breach of their contract, for which it should be
held liable.

The liability of the principal for the acts of the agent is not even debatable. Law and jurisprudence are clearly and
absolutely against the petitioner.

Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself." This rule is affirmed by the Civil Code thus:

Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers.

Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent.
The agent's apparent representation yields to the principal's true representation and the contract is considered as
entered into between the principal and the third person. 18

A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts outside the scope of their authority. (9 c.q.s. p. 417) A bank
holding out its officers and agent as worthy of confidence will not be permitted to profit by the frauds they may thus be
enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for
such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing
his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit
(McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)
Application of these principles in especially necessary because banks have a fiduciary relationship with the public and
their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where
banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their
depositors. It would appear from the facts established in the case before us that the petitioner was less than eager to
present Quimbo at the trial or even to establish her liability although it made the initial effort — which it did not pursue
— to hold her answerable in the third-party complaint. What ever happened to her does not appear in the record. Her
absence from the proceedings feeds the suspicion of her possible misdeed, which the bank seems to have studiously
ignored by its insistence that the missing money had been actually withdrawn by Cruz. By such insistence, the bank is
absolving not only itself but also, in effect and by extension, the disappeared Quimbo who apparently has much to
explain.

We agree with the lower courts that the petitioner acted in bad faith in denying Cruz the obligation she was claiming
against it. It was obvious that an irregularity had been committed by the bank's personnel, but instead of repairing the
injury to Cruz by immediately restoring her money to her, it sought to gloss over the anomaly in its own operations.
Cruz naturally suffered anxious moments and mental anguish over the loss of the investment. The amount of
P200,000.00 is not small even by present standards. By unjustly withholding it from her on the unproved defense that
she had already withdrawn it, the bank violated the trust she had reposed in it and thus subjected itself to further liability
for moral and exemplary damages.

If a person dealing with a bank does not read the fine print in the contract, it is because he trusts the bank and relies
on its integrity. The ordinary customer applying for a loan or even making a deposit (and so himself extending the loan
to the bank) does not bother with the red tape requirements and the finicky conditions in the documents he signs. His
feeling is that he does not have to be wary of the bank because it will deal with him fairly and there is no reason to
suspect its motives. This is an attitude the bank must justify. While this is not to say that bank regulations are
meaningless or have no binding effect, they should, however, not be used for covering up the fault of bank employees
when they blunder or, worse, intentionally cheat him. The misdeeds of such employees must be readily acknowledged
and rectified without delay. The bank must always act in good faith. The ordinary customer does not feel the need for
a lawyer by his side every time he deals with a bank because he is certain that it is not a predator or a potential
adversary. The bank should show that there is really no reason for any apprehension because it truly deserves his faith
in it. WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED, with costs against the petitioner.
It is so ordered.

PACIFIC BANKING CORPORATION and CHESTER G. BABST, petitioners,


vs. THE COURT OF APPEALS, JOSEPH C. HART and ELEANOR HART, respondents.

On April 15, 1955, herein private respondents Joseph and Eleanor Hart discovered an area consisting of 480 hectares
of tidewater land in Tambac Gulf of Lingayen which had great potential for the cultivation of fish and saltmaking. They
organized Insular Farms Inc., applied for and, after eleven months, obtained a lease from the Department of Agriculture
for a period of 25 years, renewable for another 25 years.

Subsequently Joseph Hart approached businessman John Clarkin, then President of Pepsi-Cola Bottling Co. in Manila,
for financial assistance. On July 15, 1956, Joseph Hart and Clarkin signed a Memorandum of Agreement pursuant to
which: a) of 1,000 shares out-standing, Clarkin was issued 500 shares in his and his wife's name, one share to J. Lapid,
Clarkin's secretary, and nine shares in the name of the Harts were indorsed in blank and held by Clarkin so that he had
510 shares as against the Harts' 490; b) Hart was appointed President and General Manager as a result of which he
resigned as Acting Manager of the First National City Bank at the Port Area, giving up salary of P 1,125.00 a month
and related fringe benefits.

Due to financial difficulties, Insular Farms Inc. borrowed P 250,000.00 from Pacific Banking Corporation sometime in
July of 1956. On July 31, 1956 Insular Farms Inc. executed a Promissory Note of P 250,000.00 to the bank payable in
five equal annual installments, the first installment payable on or before July 1957. Said note provided that upon default
in the payment of any installment when due, all other installments shall become due and payable.

This loan was effected and the money released without any security except for the Continuing Guaranty executed on
July 18, 1956, of John Clarkin, who owned seven and half percent of the capital stock of the bank, and his wife
Helen.Unfortunately, the business floundered and while attempts were made to take in other partners, these proved
unsuccessful. Nevertheless, petitioner Pacific Banking Corporation and its then Executive Vice President, petitioner
Chester Babst, did not demand payment for the initial July 1957 installment nor of the entire obligation, but instead
opted for more collateral in addition to the guaranty of Clarkin.
As the business further deteriorated and the situation became desperate, Hart agreed to Clarkin's proposal that all
Insular Farms shares of stocks be pledged to petitioner bank in lieu of additional collateral and to insure an extension
of the period to pay the July 1957 installment. Said pledge was executed on February 19, 1958. Less than a month
later, on March 3,1958, Pacific Farms Inc, was organized to engage in the same business as Insular Farms Inc. The
next day, or on March 4, 1958, Pacific Banking Corporation, through petitioner Chester Babst wrote Insular Farms Inc.
giving the latter 48 hours to pay its entire obligation.

On March 7, 1958, Hart received notice that the pledged shares of stocks of Insular Farms Inc. would be sold at public
auction on March 10, 1958 at 8:00 A.M. to satisfy Insular Farms' obligation.On March 8, 1958, the private respondents
commenced the case below by filing a complaint for reconveyance and damages with prayer for writ of preliminary
injunction before the Court of First Instance of Manila docketed as Civil Case No. 35524. On the same date the Court
granted the prayer for a writ of pre- preliminary injunction. However, on March 19, 1958, the trial court, acting on the
urgent petitions for dissolution of preliminary injunction filed by petitioners PBC and Babst on March 11 and March
14,1958, respectively, lifted the writ of preliminary injunction.The next day, or on March 20, 1958 respondents Hart
received a notice from PBC signed by Babst that the shares of stocks of Insular Farms will be sold at public auction on
March 21,1958 at 8:00 A.M.

In the morning of March 21, 1958, PBC through its lawyer notary public sold the 1,000 shares of stocks of Insular Farms
to Pacific Farms for P 285,126.99. The latter then sold its shares of stocks to its own stockholders, who constituted
themselves as stockholders of Insular Farms and then resold back to Pacific Farms Inc. all of Insular Farms assets
except for a certificate of public convenience to operate an iceplant. On September 28, 1959 Joseph Hart filed another
case for I recovery of sum of money comprising his investments and earnings against Insular Farms, Inc. before the
Court of First Instance of Manila, docketed as Civil Case No. 41557.

The two cases below having been heard jointly, the court of origin through then Judge Serafin R. Cuevas rendered a
decision on August 3, 1972, the pertinent portions of which are as follows:

xxx xxx xxx

It is plaintiffs' contention that the sale by Pacific Banking Corporation of the shares of stock of plaintiffs to the Pacific
Farms on March 21, 1958 is void on the ground that when said shares were pledged to the bank it was done to cause
an indefinite extension of time to pay their obligation under the promissory note marked Exh. E. Plaintiffs observed that
under said promissory note marked Exh. E, no demand was made whatsoever by the bank for its payment. The bank
merely asked for more collateral in addition to Clarkin's continuing guarantee In other words, it is the view of the plaintiffs
that the pledge of said shares of stock upersed the terms and conditions of the promissory note marked Exh. E and
that the same was only to insure an indefinite extension on the part of the plaintiffs to pay their obligation under said
promissory note.

Plaintiffs accuse defendants of conspiracy or a unity of purpose in divesting said plaintiffs of their shares of stock and
relieving Clarkin of his guarantee and obligation to Hart as well as to enable the bank to recover its loan with a big profit
and Pacific Farms, of which Papa was President, to take over Insular Farms.

Plaintiffs contend that the purchase by Pacific Farms of the shares of stock of Insular Farms is void, the former having
been organized like the latter for the purpose of engaging in agriculture (Section 190-1/7 of the Corporation Law); and
that the transfer of all the substantial assets of Insular Farms to Pacific Farms for the nominal cost of P10,000.00 is in
violation of the Bulk Sales Law, plaintiffs and other creditors of Insular Farms not having been notified of said sale and
that said sale was not registered in accordance with said law (Bulk Sales Law) which in effect is in fraud of creditors.

As a result of defendant's acts, plaintiffs contend that they lost their 490 shares, the return of their 10 shares from
Clarkin and their exclusive and irrevocable right to preference in the purchase of Clarkin's 50% in Insular Farms not to
mention the mental anguish, pain, suffering and embarrassment on their part for which they are entitled to at least P
100,000.00 moral damages. They also claim that they have been deprived of their expected profits to be realized from
the operations and development of Insular Farms; the sum of P 112,500.00 representing salary and pecuniary benefits
of Joseph C. Hart from the First National City Bank of New York when he was required to resign by Clarkin, and finally,
Joseph C. Hart and his wife being the beneficial owners of 499 shares in Insular Farms that were pledged to the Pacific
Banking Corporation which was sold for P 142,176.37 to satisfy the obligation of Insular Farms, the latter became
indebted to plaintiffs for said amount with interest from March 21, 1958, the date of the auction sale.
On the other hand, defendant Pacific Banking Corporation contends that it merely exercised its legal right under the
law when it caused the foreclosure of the pledged (sic) executed by plaintiffs, together with defendant John P. Clarkin
to secure a loan of P 250,000.00, said loan having become overdue. True the payment of a note my be extended by
an oral agreement, but that agreement to extend the time of payment in order to be valid must be for a definite time
(Philippine Engineering Co. vs. Green, 48 Phil. 466,468). Such being the case, it is the opinion of the Court that plaintiffs
contention that there was an indefinite extension of time with respect to the payment of the loan in question appears to
be untenable. It cannot be admitted that the terms and conditions of the pledged (sic) superseded the terms and
conditions of the promissory note.

With respect to the charge of conspiracy or unity of purpose on the part of all defendants to divest plaintiffs of the latter's
shares of stock, relieving Clarkin of his guaranty and obligation to Hart, to enable the bank to recover its loan and to
enable Pacific Farms to take over Insular Farms, suffice it to state that the charge of conspiracy has not been sufficiently
established.

Considering plaintiffs' contention that the purchase by Pacific Farms of the shares of stock of Insular Farms and the
transfer of all of the substantial assets of Insular Farms to Pacific Farms are in violation of the Provisions of the Bulk
Sales Law, the Court cannot see its way in crediting plaintiffs' contention considering the prevailing jurisprudence on
the mater (People vs. Wong Szu Tung, 50 OG, pp. 48-57, 58-69, March 26,1954).

With respect, however, to the claim of plaintiff Joseph C. Hart for payment of salary as Director and General Manager
of Insular Farms for a period of almost one year at the rate of P 2,000.00 a month, the Court believes that said plaintiff
is entitled to said amount. On the basis of equity and there appearing sufficient proof that said plaintiff has served the
corporation not only as Director but as General Manager, the Court believes that he should be paid by the Insular
Farms, Inc. the sum of P 25,333.30, representing his salaries for the period March 1, 1957 to March 20,1958.

Again, with respect to the advances in the form of loans to the corporation made by plaintiff Joseph C. Hart, the Court
is of the opinion that he should be reimbursed and paid therefor, together with interest thereon from March 21, 1958,
or the sum of P 86,366.91. This is so because said loans were ratified by the Board of Directors of Insular Farms, Inc.
in a special meeting held on July 22, 1957. There is no showing that the aforesaid special meeting was irregularly or
improperly held.

The Court having maintained that the auction sale conducted by the Bank's Notary Public which resulted in the purchase
by Pacific Farms of the 1,000 shares of stock of Insular Farms, 490 of which were owned by plaintiffs, to be valid, the
Court cannot approve the claim of plaintiffs for the reconveyance to them of said 490 shares of stock of Insular Farms.
If there is anybody to answer for the pledging of said shares of stock to the bank, there is no one except the defendant
John Clarkin who induced plaintiff to do so. Again, it is noteworthy to note that Clarkin owned and controlled 501 shares
of said outstanding shares of stock and have not made any claim for the reconveyance of the same.

In view of the foregoing, judgment is hereby rendered in favor of plaintiffs and against defendant Insular Farms, Inc.,
sentencing the latter to pay the former the sum of P 25,333.30, representing unpaid salaries to plaintiff Joseph C. Hart;
the further sum of P 86,366.91 representing loans made by plaintiffs to Insular Farms, Inc. and attorney's fees
equivalent to 10% of the amount due plaintiffs.

With respect to the other claims of plaintiffs, the same are hereby denied in the same manner that all counter-claims
filed against said Plaintiff are dismissed. Likewise, Francisco T. Papa's cross-claim against defendant Pacific Farms,
Inc. is, as it is hereby, ordered dismissed for insufficiency of evidence. (pp. 462-467 of the Record on Appeal [p. 83,
Rollo])

Dissatisfied with the foregoing decision, private respondents appealed the two consolidated cases to the Court of
Appeals contending that:

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS' CONTENTION TO THE EFFECT THAT THERE
WAS AN INDEFINITE EXTENSION OF TIME WITH RESPECT TO THE PAYMENT OF THE LOAN IN
QUESTION "APPEARS TO BE UNTENABLE

II
THE LOWER COURT ERRED IN HOLDING THAT THE SALE BY THE PACIFIC BANKING CORPORATION OF
THE SHARES OF STOCKS OF PLAINTIFFS WITH THE PACIFIC FARMS, INC. ON MARCH 21, 1958 IS VALID.

III

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS' CHARGE OF CONSPIRACY AGAINST THE
DEFENDANTS HAS NOT BEEN SUFFICIENTLY ESTABLISHED."

IV

THE LOWER COURT ERRED IN NOT HOLDING DEFENDANTS LIABLE FOR DAMAGES CAUSED TO THE
PLAINTIFFS BY THEIR INDIVIDUAL AND COLLECTIVE ACTS WHICH ARE CONTRARY TO THE
PROVISIONS OF THE CIVIL CODE ON HUMAN RELATIONS.

THE LOWER COURT WAS CORRECT IN HOLDING THAT "IF THERE IS ANYBODY TO ANSWER FOR THE
PLEDGE OF SAID SHARES OF STOCK TO THE BANK, THERE IS NO ONE EXCEPT DEFENDANT JOHN P.
CLARKIN WHO INDUCED PLAINTIFFS TO DO SO", BUT ERRED IN NOT FINDING DEFENDANT JOHN P.
CLARKIN LIABLE AS PRAYED FOR IN PLAINTIFFS' COMPLAINT." (pp. 9-10, Rollo)

On December 9, 1986, the Court of Appeals rendered its assailed decision, the dispositive portion of which follows:

IN VIEW WHEREOF, judgment modified, such that defendant Babst and defendant Pacific Banking are both
condemned in their primary capacity to pay unto Hart the sum of P l00,000.00 with legal interest from the date of the
foreclosure sale on 19 February 1958 until fully paid, plus P 15,000.00 as attorney's fees, also to earn legal interest
from the date of the filing of Civil Case Nos. 35524, until fully paid, plus the costs, but subject to reimbursement of
Pacific Banking from Babst whatever Pacific Banking should pay unto Hart on account of this judgment, the other
defendants are absolved with no more pronouncement as to costs with respect to them. (pp. 62-63, Rollo)

Hence this petition with petitioners contending that:

a. Respondent Court of Appeals committed a grave error in not applying in favor of the herein petitioner the clear
unequivocal ruling of this Honorable Court in the case of Philippine Engineering vs. Green, 48 Phil. 466, that "an
agreement to extend the time of payment in order to be valid must be for a definite time," which was relied upon by the
trial court in overruling the private respondents' claim that petitioners had granted them orally an indefinite extension of
time to pay the loan.

b. Respondent Court of Appeals committed a grave error in finding that petitioner bank agreed to an indefinite extension
of time to pay the loan on the basis of the testimony of private respondent Hart contained in his deposition which was
admitted in evidence over the petitioners' objection; and that said finding is clearly violative of parol evidence rule.

c. Respondent Court of Appeals committed a grave error in ignoring the legal presumption of good faith established by
Article 527 of the New Civil Code when it imputed bad faith to petitioner in foreclosing the pledge and in not considering
the issue to have been finally disposed of by the trial court in its resolution, dated March 19, 1958 dissolving the writ of
preliminary injunction and expressly allowing the foreclosure sale.

d. Respondent Court of Appeals committed a grave error in condemning petitioners to pay damages to private
respondents notwithstanding that petitioner bank merely exercised a right under the law in foreclosing the pledge.

e. Respondent Court of Appeals committed a grave error in holding petitioner Chester G. Babst personally liable to
private respondents under Articles 2180 and 2181 of the New civil Code.

f. Respondent Court of Appeals committed a grave error in sentencing petitioner Chester G. Babst to reimburse his co-
petitioner bank, whatever amounts the latter may be required to pay the private respondents on account of the
judgment, notwithstanding that said bank had not filed a cross-claim against him and there was absolutely no litigation
between them. (pp. 14-15, Rollo)
We find for the respondents on the following grounds:

First, petitioners allege that the Court of Appeals erred in deviating from the principle and rule of stare decisis by not
applying in favor of petitioners the ruling in the case of Philippine Engineering v. Green (48 Phil. 466) that "an agreement
to extend the time of payment in order to be valid must be for a definite time" which was relied upon by the trial court
in overruling the private respondents' claim that the petitioners had granted them orally an indefinite extension of time
to pay the loan.

A reading of the Philippine Engineering Co. case shows that the authority quoted from (i.e. 8 Corpus Juris 425-429)
was not the ground used by the Court in not giving credit to therein defendant's statement as to the purported agreement
for an indefinite extension of time for the payment of the note. The principle relied upon in that case was the dead man's
statute. The Court stated that the reason for not believing the purported agreement for extension of time to pay the note
was that there was no sufficient proof of the purported agreement because:

Here we have only the defendant's statement as to the purported agreement for an indefinite period
of grace, with one now dead. Such proof falls far short of satisfying the rules of evidence. (Phil.
Engineering v. Green, 48 Phil. p. 468)

In the case at bar, the parties to the purported agreement, Hart and Babst, were still alive, and both testified in the trial
court regarding the purported extension. Their testimonies are in fact, quoted in the decision of the respondent Court
of Appeals (pp. 49-54, Rollo).

We also note, that the rule which states that there can be no valid extension of time by oral agreement unless the
extension is for a definite time, is not absolute but admits of qualifications and exceptions. The general rule is that an
agreement to extend the time of payment, in order to be valid, must be for a definite time, although it seems that no
precise date be fixed, it being sufficient that the time can be readily determined. (8 C.J. 425)

In case the period of extension is not precise, the provisions of Article 1197 of the Civil Code should apply. In this case,
there was an agreement to extend the payment of the loan, including the first installment thereon which was due on or
before July 1957. As the Court of Appeals stated:

...-and here, this court is rather well convinced that Hart had been given the assurance by the conduct
of Babst, Executive Vice President of Pacific Bank, that payment would not as yet be pressed, and
under 1197 New Civil Code, the meaning must be that there having been intended a period to pay
modifying the fixed period in original promissory note, really, the cause of action of Pacific Bank
would have been to ask the Courts for the fixing of the term; (pp. 59-60, Rollo)

The pledge executed as collateral security on February 9, 1958 no longer contained the provision on an installment of
P 50,000.00 due on or before July 1957. This can mean no other thing than that the time of payment of the said
installment of P 50,000.00 was extended. It is settled that bills and notes may be varied by subsequent agreement.
Thus, conditions may be introduced and arrangements made changing the terms of payment (10 CJS 758). The
agreement for extension of the parties is clearly indicated and may be inferred from the acts and declarations of the
parties, as testified to in court (pp. 49-52, Rollo).

The pledge constituted on February 19, 1958 on the shares of stocks of Insular Farms, Inc. was sufficient consideration
for the extension, considering that this pledge was the additional collateral required by Pacific Banking in addition to
the continuing guarantee of Clarkin. Petitioners contend that the admission of Joseph Hart's testimony regarding the
extension of time to pay, over the petitioners' objections, was violative of the parol evidence rule. This argument is
untenable in view of the fact that Hart's testimony regarding the oral agreement for extension of time to pay was admitted
in evidence without objection from petitioner Babst when the same was first offered as evidence before the trial court.
Without need therefore of a lengthy discussion of the background facts on this issue, and even granting that said
testimony violated the parol evidence rule, it was nevertheless properly admitted for failure of petitioner to timely object
to the same. Well settled is the rule that failure to object to parol evidence constitutes a waiver to the admissibility of
said parol evidence (see Talosig v. Vda. de Niebe, 43 SCRA 472).

Petitioners likewise argue that the Court of Appeals erred in ignoring the presumption of good faith provided in Art. 527
of the Civil Code when it imputed bad faith to petitioners in foreclosing the pledge, They argue in support thereof that
the extrajudicial foreclosure was held only after it was sanctioned by the trial court; and that the main ground alleged
by the private respondents against the foreclosure was the alleged grant by Pacific Banking Corporation of an indefinite
extension of time to pay the obligation; that private respondents did not adduce any evidence to prove the grant of
extension, for which reason the trial court did not believe that there was such a grant, that in view thereof, the foreclosure
which even the Court of Appeals considered as valid, cannot be considered to have been done in bad faith. The
presumption of good faith of possession provided in Article 527, is only a presumption juris tantum Said presumption
cannot stand in the light of the evidence to the contrary in the record.

It was established that there was an agreement to extend indefinitely the payment of the installment of P50,000.00 in
July 1957 as provided in the promissory note. Consequently, Pacific Banking Corporation was precluded from enforcing
the payment of the said installment of July 1957, before the expiration of the indefinite period of extension, which period
had to be fixed by the court as provided in Art. 1197 of the Civil Code (10 CJS p. 7611, citing Drake vs. Pueblo Nat.
Bank, 96 P. 999, 44 Colo. 49).

Even the pledge which modified the fixed period in the original promissory note, did not provide for dates of payment
of installments, nor of any fixed date of maturity of the whole amount of indebtedness. Accordingly, the date of maturity
of the indebtedness should be as may be determined by the proper court under Art. 1197 of the Civil Code. Hence, the
disputed foreclosure and the subsequent sale were premature. The whole indebtedness was guaranteed by the
continuing guaranty of Clarkin, who had a corresponding deposit with Pacific Banking which guaranty and deposit,
Babst and Charles Chua, president of Pacific Banking, had actual knowledge of.

The Court of Appeals noted that no demand for payment of the P50,000.00 was made right after it allegedly fell due. It
was only on March 4, 1958 or 13 days after the execution of the pledge instrument on February 19,1958 that PBC
presented its demand for payment to Insular Farms. As found by the Court of Appeals, there was really no investigation
of Insular Farms' ability to pay the loan after the pledge was executed but before the demand for payment, considering
that the latter was made barely two weeks after the execution of the pledge.

The inconsistency of the petitioner's position vis-a-vis the evidence on record is apparent. According to Babst, the
investigation was made by Mr. Joseph Tupaz, who rendered his report (TSN, IX: 6-9, C Babst). The report, however,
as found by the Court of Appeals,, was dated August 28, 1957 way before the pledge was executed on February 19,
1958. Babst also Identified an auditor's report by Sycip, Gorres and Velayo dated March 17, 1958. The first paragraph
of the report states that the auditors went to inspect Insular Farms pursuant to a request of Babst dated March 5, 1958
that is, as found by the Court of Appeals just one day after Babst had through his letter of March 4,1958, threatened
Insular Farms, Clarkin and Hart, with the remedies available to Pacific Bank if the whole loan was not paid within 48
hours. This can also mean that the investigation by the auditing firm was a well conceived subterfuge, when all the
while, foreclosure was already intended against private respondents.

On account of the foregoing, the Court of Appeals concluded that the foreclosure was an act of bad faith:

5th-Foregoing cannot but convince this Court that the foreclosure was not an act of good faith on the
part of the Pacific Banking for it must be bound by the acts or representations, active or tacit of its
agent or its Executive Vice-President Babst, ... (pp. 56-57, Rollo)

Petitioners furthermore claim that the Court of Appeals erred in ordering them to pay damages to private respondents
as they were merely exercising a light under the law in foreclosing the pledge. They also argue that assuming that
private respondent suffered damages on account of the foreclosure, such damages would be aminimum absque injuria,
the damage having been caused by the lawful and proper exercise of the right to foreclosure, and an act of prudence
on the part of Pacific Banking Corporation to protect its own interests and those of its depositors.

In the light of the above discussion and our finding that the foreclosure sale was premature and done in bad faith,
petitioners are liable for damages arising from a quasi-delict. We see no compelling reason to set aside the findings of
the respondent court on this matter. Finally, the petitioners claim that it was error for the respondent court to hold
petitioner Chester G. Babst personally liable to private respondents under Articles 2180 and 2181 of the Civil Code.
Petitioners also contend that it was error to order Chester G. Babst to reimburse Pacific Banking whatever Pacific
Banking may be required to pay the private respondents, inasmuch as Pacific Banking has not filed a cross claim
against Chester G. Babst.

The Court of Appeals applied Article 2180 of the Civil Code, under which, "employers shall be liable for the damages
caused by their employees ... acting within the scope of their assigned tasks." Chester G. Babst, as admitted, was
Executive Vice-President of Pacific Banking Corporation and "acted only upon direction by the Board of Directors of
the Pacific Banking Corporation." (p. 127, Rollo) The appellate court also applied Article 2181 of the same Code which
provides that "whoever pays for the damages caused by his dependents or employees may recover from the latter what
he has paid or delivered in satisfaction of the claim." (Art. 2181, Civil Code)

It must be noted, however, that as between Pacific Banking and Babst, the law merely gives the employer a right to
reimbursement from the employee for what is paid to the private respondent. Article 2181 does not make recovery from
the employee a mandatory requirement. A right to relief shall be recognized only when the party concerned asserts it
through a proper pleading filed in court. In this case, the employer, Pacific Banking Corporation did not manifest any
claim against Babst by filing a cross-claim before the trial court; thus, it cannot make its light automatically enforceable.
Babst was made a party to the case upon the complaint of the private respondents in his official capacity as Executive
Vice President of the bank. In the absence of a cross-claim against Babst, the court has no basis for enforcing a right
against him to which his co-defendant may be entitled. We leave the matter to the two petitioners' own internal
arrangements or actions should the bank decide to charge its own officer.

WHEREFORE, the petition for review on certiorari is DISMISSED subject to a MODIFICATION with respect to the
personal liability of petitioner Chester G. Babst to Pacific Banking Corporation which is SET ASIDE.