G.R. No.

88013 March 19, 1990

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.   Subsequently, the petitioner issued several checks against its deposit but was
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suprised to learn later that they had been dishonored for insufficient funds.

The dishonored checks are the following:

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

2. Check No. 215426 dated May 28, 1981, in favor of the Bureau of Internal Revenue
in the amount of P3,386.73:

3. Check No. 215451 dated June 4, 1981, in favor of Mr. Greg Pedreño in the
amount of P7,080.00;

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

5. Check No. 215474 dated June 10, 1981, in favor of Malabon Longlife Trading
Corporation in the amount of P12,953.00:

6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services, Inc. in the
amount of P27,024.45:

7. Check No. 215412 dated June 10, 1981, in favor of Baguio Country Club
Corporation in the amount of P4,385.02: and

8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in the amount
of P6,275.00. 
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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.   Investigation disclosed that
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the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it.
The error was rectified on June 17, 1981, and the dishonored checks were paid after they were re-
deposited. 4

In its letter dated June 20, 1981, the petitioner demanded reparation from the 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.   This decision was affirmed in toto by the respondent
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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."   Such injury
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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.   In the case at bar, the petitioner is seeking such
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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. 
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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.   It does not appear that, as the
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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.

SO ORDERED.