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144 SUPREME COURT REPORTS ANNOTATED

Araneta vs. Bank of America

No. L-25414. July 30, 1971.

LEOPOLDO ARANETA, petitioner, vs. BANK OF AMERICA,

respondent.

Civil Code; Adverse reflection against financial credit is a material

loss; Temperate damages are awarded.—The financial credit of a
businessman is a prized and valuable asset, it

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Araneta vs. Bank of America

being a significant part of the foundation of his business. Any adverse

reflection thereon constitutes some material loss to him. As stated in the
case of Atlanta National Bank vs. Davis, 96 Ga 334, 23 SE 190, citing 2
Morse Banks, Sec. 458, “it can hardly be possible that a customer’s check
can be wrongfully refused payment without some impeachment of his
credit, which must in fact be an actual injury, though he cannot, from the
nature of the case, furnish independent, distinct proof thereof.”
Same; Concept of temperate damages.—In some States of the
American Union, temperate damages are allowed. There are cases where
from the nature of the case, definite proof of pecuniary loss cannot be
offered, although the court is convinced that there has been such loss. For
instance, injury to one’s commercial credit or to the goodwill of a business
firm is often hard to show with certainty in terms of money. Should damages
be denied for that reason? The judge should be empowered to calculate
moderate damages in such cases, rather than that the plaintiff should suffer,
without redress from the defendant’s wrongful act.
Same; Court may increase amount of attorney’s fees.—Considering the
nature and extent of the services rendered by the petitioner’s counsel both in
the trial and appellate courts, the amount should be increased to P4,000.
This may be done motu proprio by this Court under Article 2208 of the
Civil Code, which provides that attorney’s fees may be recovered in the
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instances therein enumerated and “in any other case where the Court deems
it first and equitable that attorney’s fees. . . should be recovered,” provided
the amount thereof be reasonable in all cases.
Remedial law; Review of the evidence and reappraisal of its probative
value is not within the appellate jurisdiction of the Supreme Court.—A
review of the evidence and a reappraisal of its probative value is not within
the appellate jurisdiction of this Court.

PETITION for review by certiorari of a decision of the Court of

Appeals. Alvendia, J.

The facts are stated in the opinion of the Court.

     Gatchalian & Sison for petitioner.
     Lichauco, Picazo & Agcaoili for respondent.

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Araneta vs. Bank of America

MAKALINTAL, J.:

Petition for review by certiorari of the decision of the Court of

Appeals in CA-G.R. No. L-34508-R modifying that of the Court of
First Instance of Manila in the Civil Case No. 52442.
Leopoldo Araneta, the petitioner herein, was a local merchant
engaged in the import and export business. On June 30, 1961 he
issued a check for $500 payable to cash and drawn against the San
Francisco main office of the Bank of America, where he had been
maintaining a dollar current account since 1948. At that time he had
a credit balance of $523.81 in his account, confirmed by the bank’s
assistant cashier in a letter to Araneta dated September 7, 1961.
However, when the check was received by the bank on September 8,
1961, a day after the date of the letter, it was dishonored and
stamped with the notation “Account Closed.”
Upon inquiry by Araneta as to why his check had been
dishonored, the Bank of America acknowledged that it was an error,
explaining that for some reason the check had been encoded with
wrong account number, and promising that “we shall make every
effort to see that this does not reoccur.” The bank sent a letter of
apology to the payee of the check, a Mr. Harry Gregory of
Hongkong, stating that “the check was returned through an error on
our part and should not reflect adversely upon Mr. Araneta.” In all
probability the matter would have been considered closed, but
another incident of a similar nature occurred later.
On May 25, and 31, 1962 Araneta issued Check No. 110 for $500
and Check No. 111 for $150, respectively, both payable to cash and
drawn against the Bank of America. These two checks were
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received by the bank on June 3, 1962. The first check appeared to

have come into the hands of Rufina Saldaña, who deposited it to her
account with the First National City Bank of New York, which in
turn

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Araneta vs. Bankof America

cleared it through the Federal Reserve Bank. The second check

appeared to have been cleared through the Wells Fargo Bank.
Despite the sufficiency of Araneta’s deposit balance to cover both
checks, they were again stamped with the notation “Account
Closed” and returned to the respective clearingbanks.
In the particular case of Check No. 110, it was actually paid by
the Bank of America to the First National City Bank. Subsequently,
however, the Bank of America, claiming that the payment had been
inadvertently made, returned the check to the First National City
Bank with the request that the amount thereof be credited back to the
Bank of America. In turn, the First National City Bank wrote to the
depositor of the check, Rufina Saldaña, informing her about its
return with the notation “Account Closed” and asking her consent to
the deduction of its amount from her deposit. However, before Mrs.
Saldaña’s reply could be received, the Bank of America recalled the
check from the First National City Bank and honored it.
In view of the foregoing incidents, Araneta, through counsel, sent
a letter to the Bank of America demanding damages in the sum of
$20,000. While admitting responsibility for the inconvenience
caused to Araneta, the bank claimed that the amount demanded was
excessive, and offered to pay the sum of P2,000.00. The offer was
rejected.
On December 11, 1962 Araneta filed the complaint in this case
against the Bank of America for the recovery of thefollowing:

1. Actual or compensatory P 30,000.00

damages..............................
2. Moral 20,000.00
damages..........................................................
3. Temperatedamages.................................................. 50,000.00
4. Exemplarydamages.................................................. 10,000.00
5. Attorney’sfees.......................................................... 10,000.00
       T O T A L .......................................... P120,000.00

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148 SUPREME COURT REPORTS ANNOTATED

Araneta vs. Bank of America

The judgment of the trial court awarded all the items prayed for, but
on appeal by the defendant the Court of Appeals eliminated the
award of compensatory and temperate damages and reduced the
moral damages to P8,-000.00, the exemplary damages to P1,000.00
and the attorney’s fees to P1,000.00.
Not satisfied with the decision of the appellate court, the plaintiff
filed the instant petition for review, alleging two reasons why it
should be allowed, as follows:

“(1) The Court of Appeals erred in holding that temperate

damages cannot be awarded without proof of actual
pecuniary loss. There is absolutely no legal basis for this
ruling; worse yet, it runs counter to the very provisions of
ART. 2216 of the New Civil Code and to the established
jurisprudence on the matter;
“(2) The Court of Appeals erred in not holding that moral
damages may be recovered as an item separate and distinct
from the damages recoverable for injury to business
standing and commercial credit. This involves the
application of paragraph (2) of Art. 2205 of the New Civil
Code which up to now has not yet received an authoritative
interpretation from the Supreme Court. x x x.”

In his brief, however, the petitioner assigned five (5) errors

committed by the appellate court, namely: (1) in concluding that the
petitioner, on the basis of the evidence, had not sufficiently proven
his claim for actual damages, where such evidence, both testimonial
and documentary, stands uncontradicted on the record; (2) in holding
that temperate damages cannot be awarded to the petitioner without
proof of actual pecuniary loss; (3) in not granting moral damages for
mental anguish, besmirched reputation, wounded feelings, social
humiliation, etc., separate and distinct from the damages recoverable
for injury to business reputation; (4) in reducing, without any
ostensible reason, the award of exemplary damages granted by the
lower court; and (5) in reducing, without special reason, the award
of attorney’s fees by the lower court.

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Araneta vs. Bank of America

We consider the second and third errors, as they present the issues
raised in the petition for review and on the basis of which it was

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given due course.

In disallowing the award of temperate damages, the Court of
Appeals ruled:

“In view of all the foregoing considerations we hold that the plaintiff has not
proven his claim that the two checks for $500 each were in partial payment
of two orders for jewels worth P50,000 each. He has likewise not proven the
actual damage which he claims he has suffered. And in view of the fact that
he has not proven the existence of the supposed contract for him to buy
jewels at a profit there is not even an occasion for an award of temperate
damages on this score.”

This ruling is now assailed as erroneous and without legal basis. The
petitioner maintains that in an action by a depositor against a bank
for damages resulting from the wrongful dishonor of the depositor’s
checks, temperate damages for injury to business standing or
commercial credit may be recovered even in the absence of definite
proof of direct pecuniary loss to the plaintiff, a finding—as it was
found by the Court of Appeals—that the wrongful acts of the
respondent had adversely affected his credit being sufficient for the
purpose. The following provisions of the Civil Code are invoked:

“ART. 2205. Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of temporary or

permanent personal injury;
(2) For injury to the plaintiff’s business standing or commercial
credit.”

“ART. 2216. No proof of pecuniary loss is necessary in order that moral,

nominal, temperate, liquidated or exemplary damages may be adjudicated.
The assessment of such damages, except liquidated ones, is left to the
discretion of the court, according to the circumstances of each case.”

Also invoked by the petitioner is1 the case of Atlanta National Bank
vs. Davis, 96 Ga 334, 23 SE 190; and

________________

1 In this case the plaintiff, whose check was wrongfully dishonored by the bank,
was not required to prove special damages in order to recover substantial damages
since, the court

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the following citations in American Jurisprudence:

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“In some states what are called ‘temperate damages’ are allowed in certain
classes of cases, without proof of actual or special damages, where the
wrong done must in fact have caused actual damage to the plaintiff, though
from the nature of the case, he cannot furnish independent, distinct proof
thereof. Temperate damages are more than nominal damages, and, rather,
are such as would be a reasonable compensation for the injury sustained. x x
x.” (15 Am. Jur. 400)
“x x x. It has been generally, although not universally, held, in an action
based upon the wrongful act of a bank in dishonoring checks of a merchant
or trader having sufficient funds on deposit with the bank, that substantial
damages will be presumed to follow such act as a necessary and natural
consequence, and accordingly, that special damages need not be shown. One
of the reasons given for this rule is that the dishonor of a merchant’s or
trader’s check is tantamount or analogous, to a slander of his trade or
business, imputing to him insolvency or bad faith. x x x.” (10 Am. Jur. 2d.
545)

On the other hand the respondent argues that since the petitioner
invokes Article 2205 of the Civil Code, which speaks of actual or
compensatory damages for injury to business standing or
commercial credit, he may not claim them as temperate damages
and thereby dispense with proof of pecuniary loss under Article
2216. The respondent cites Article 2224, which provides that
“temperate or moderate damages, which are more than nominal but
less than compensatory damages may be recovered when the court
finds that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved with certainty,” and
contends that the petitioner failed to show any such loss in this case.
The question, therefore, is whether or not on the basis of the
findings of the Court of Appeals, there is reason to conclude that the
petitioner did sustain some pecuniary loss although no sufficient
proof of the amount thereof

________________

observed, such damages would naturally follow the dishonor of a check by a bank,
although they were probably not susceptible of independent distinct proof. The
plaintiff was awarded $200 as temperate damages.

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has been adduced. In rejecting the claim for temperate damages the
said Court referred specifically to the petitioner’s failure to prove
“the existence of a supposed contract for him to buy jewels at a
profit,” in connection with which he issued the two checks which

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were dishonored by the respondent. This may be true as far as it

goes, that is, with particular reference to the alleged loss in that
particular transaction. But it does not detract from the finding of the
same Court that actual damages had been suffered, thus:

“. . . Obviously, the check passed the hands of other banks since it was
cleared in the United States. The adverse reflection against the credit of
Araneta with said banks was not cured nor explained by the letter of
apology to Mr. Gregory.”

x      x      x

“. . .This incident obviously affected the credit of Araneta with Miss

Saldaña.

x      x      x

“However, in so far as the credit of Araneta with the First National City
Bank, with Miss Rufina Saldaña and with any other persons who may have
come to know about the refusal of the defendant to honor said checks, the
harm was done. . .”

The financial credit of a businessman is a prized and valuable asset,

it being a significant part of the foundation of his business. Any
adverse reflection thereon constitutes some material loss to him. As
stated in the case Atlanta National Bank vs. Davis, supra, citing 2
Morse Banks, Sec. 458, “it can hardly be possible that a customer’s
check can be wrongfully refused payment without some
impeachment of his credit, which must in fact be an actual injury,
though he cannot, from the nature of the case, furnish independent,
distinct proof thereof.”
Tne Code Commission, in explaining the concept of temperate
damages under Article 2224, makes the following comment:

“In some States of the American Union, temperate damages are allowed.
There are cases where from the nature of

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the case, definite proof of pecuniary loss cannot be offered, although the
court is convinced that there has been such loss. For instance, injury to one’s
commercial credit or to the goodwill of a business firm is often hard to show
with certainty in terms of money. Should damages be denied for that reason?
The judge should be empowered to calculate moderate damages in such
cases, rather than that the plaintiff should suffer, without redress from the
defendant’s wrongful act.”

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The petitioner, as found by the Court of Appeals, is a merchant of

long standing and good reputation in the Philippines. Some of his
record is cited in the decision appealed from. We are of the opinion
that his claim for temperate damages is legally justified. Considering
all the circumstances, including the rather small size of the
petitioner’s account with the respondent, the amounts of the checks
which were wrongfully dishonored, and the fact that the respondent
tried to rectify the error soon after it was discovered, although the
rectification came after the damage had been caused, we believe that
an award of P5,000 by way of temperate damages is sufficient.
Under the third error assigned by the petitioner in his brief, which
is the second of the two reasons relieve upon in his petition for
review, he contends that moral damages should have been granted
for the injury to his business standing or commercial credit,
separately from his wounded feelings and mental anguish. It is true
that under Article 2217 of the Civil Code, “besmirched reputation”
is a ground upon which moral damages may be claimed, but the
Court of Appeals did take this element into consideration in
adjudging the sum of P8,000 in his favor. We quote from the
decision:

“. . . the damages to his reputation as an established and well known

international trader entitled him to recover moral damages.”

x      x      x

“. . . It was likewise established that when plaintiff learned that his

checks were not honored by the drawee Bank, his wounded feelings and the
mental anguish suffered by him caused his blood pressure to rise beyond
normal limits, thereby

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necessitating medical attendance for an extended period.”

The trial court awarded attorney’s fees in the amount of P10,000.

This was reduced by the Court of Appeals to only P1,000.
Considering the nature and extent of the services rendered by the
petitioner’s counsel both in the trial and appellate courts, the amount
should be increased to P4,000. This may be done motu proprio by
this Court under Article 2208 of the Civil Code, which provides that
attorney’s fees may be recovered in the instances therein enumerated
and “in any other case where the Court deems, it first and equitable
that attorney’s fees . . . should be re-covered,” provided the amount
thereof be reasonable in all cases.

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We do not entertain the first and fourth errors assigned by the

petitioner. Neither of them was raised and ruled upon as reasons for
the allowance of his petition for review, as required by Section 2 of
Rule 45. Besides, the first error involves a question of fact and calls
for a review of the evidence and a reappraisal of its probative value
—a task not within the appellate jurisdiction of this case. And with
respect to the fourth error, while there was gross negligence on the
part of the respondent, the record shows, as hereinbefore observed,
that it tried to rectify its error soon after the same was discovered,
although not in time to prevent the damage to the petitioner.
WHEREFORE, the judgment of the Court of Appeals is modified
by awarding temperate damages to the petitioner in the sum of
P5,000 and increasing the attorney’s fees to P4,000; and is affirmed
in all other respects. Costs against the respondent.

          Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro,

Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.
     Dizon, J., is on leave.

Judgment affirmed with modifications.

———————

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