VOL.

230, MARCH 7, 1994 799

Moran vs. Court of Appeals

G.R. No. 105836. March 7, 1994.*

SPOUSES GEORGE MORAN and

LIBRADA P. MORAN, petitioners, vs. THE
HON. COURT OF APPEALS and
CITYTRUST BANKING CORPORATION,
respondents.
Banks; Negotiable Instruments; Checks; Words and Phrases; A check is a bill of exchange
drawn on a bank payable on demand.A check is a bill of exchange drawn on a bank payable
on demand. Thus, a check is a written order addressed to a bank or persons carrying on the
business of banking, by a party having money in their hands, requesting them to pay on
presentment, to a person named therein or to bearer or order, a named sum of money.

Same; Same; Same; The relationship between the bank and the depositor is that of a debtor and
creditor.Fixed savings and current deposits of money in bonks and similar institutions shall be
governed by the provisions concerning simple loan. In other words, the relationship between the
bank and the depositor is that of a debtor and creditor. By virtue of the contract of deposit
between the banker and its depositor, the banker agrees to pay checks drawn by the depositor
provided that said depositor has money in the hands of the bank.

Same; Same; Same; Failure of a bank to pay the check of a merchant or a trader, when the
deposit is sufficient, entitles the drawer to substantial damages without any proof of actual
damages.Hence, where the bank possesses funds of a depositor, it is bound to honor his checks
to the extent of the amount of his deposits. The failure of a bank to pay the check of a merchant
or a trader, when the deposit is sufficient, entitles the drawer to substantial damages without any
proof of actual damages. Conversely, a bank is not liable for its refusal to pay a check on account
of insufficient funds, notwithstanding the fact that a deposit may be made later in the day. Before
a bank depositor may maintain a suit to recover a specific amount from his bank, he must first
show that he had on deposit sufficient funds to meet his demand.

Same; Same; Same; Evidence; Presumption of regularity; In the absence of a contrary showing,
it n presumed that the acts in question were in conformity with the usual conduct of business.
Petitioners
________________
*
SECOND DIVISION.

800

800 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

argue that public respondent, by relying heavily on Rionistos testimony, failed to consider the
fact that the witness himself admitted that he had no personal knowledge surrounding the
dishonor of the two checks in question. Thus, although he knew the standard clearing procedure,
it does not necessarily mean that the same procedure was adopted with regard to the two checks.
We do not agree. Section 3(q), Rule 131 of the Rules of Court provides a disputable presumption
in law that the ordinary course of business has been followed. In the absence of a contrary
showing, it is presumed that the acts in question were in conformity with the usual conduct of
business. In the case at bar, petitioners failed to present countervailing evidence to rebut the
presumption that the checks involved underwent the same regular process for clearing of checks
followed by the bank since 1983.

Same; Same; Same; A check, as distinguished from an ordinary bill of exchange, is supposed to
be drawn against a previous deposit of funds for it is ordinarily intended for immediate payment.
Petitioners had no reason to complain, for they alone were at fault. A drawer must remember
his responsibilities every time he issues a check. He must personally keep track of his available
balance in the bank and not rely on the bank to notify him of the necessity to fund certain checks
he previously issued. A check, as distinguished from an ordinary bill of exchange, is supposed to
be drawn against a previous deposit of funds for it is ordinarily intended for immediate payment.

Same; Same; Same; A bank is under no obligation to make part payment on a check, up to only
the amount of the drawer s funds.A bank is under no obligation to make part payment on a
check, up to only the amount of the drawers funds, where the check is drawn for an amount
larger than what the drawer has on deposit. Such a practice of paying checks in part has never
existed. Upon partial payment, the check holder could not be called upon to surrender the check,
and the bank would be without a voucher affording a certain means of showing the payment. The
rule is based on commercial convenience, and any rule that would work such manifest
inconvenience should not be recognized A check is intended not only to transfer a light to the
amount named in it, but to serve the further purpose of affording evidence for the bank of the
payment of such amount when the check is taken up.

Same; Same; Same; Banks letter written merely to maintain the goodwill and continued
patronage of a client could not be construed as an admission of liability.We agree with
respondent Court of Appeals in its assessment and interpretation of the nature of the letter of
801

VOL. 230, MARCH 7, 1994 801

Moran vs. Court of Appeals

Citytrust to Petrophil, dated December 16, 1983. As aptly and correctly stated by said court, x x
x the letter is not an admission of liability as it was written merely to maintain the goodwill and
continued patronage of plaintiff-appellants. (This) cannot be characterized as baseless,
considering the totality of the circumstances surrounding its writing. In the present case, the
actions taken by the bank after the incident clearly show that there was neither malice nor bad
faith, but rather a clear intent to mollify an obviously agitated client. Raul Diaz, the branch
manager, even went for this purpose to the Moran residence to facilitate their application for a
managers check. Later, he went to the Petrophil Corporation to personally redeem the checks.
Still later, the letter was sent by respondent bank to Petrophil explaining that the dishonor of the
checks was due to operational error. However, we reiterate, it would be a mistake to construe
that letter as an admission of guilt on the part of the bank. It knew that it was confronted with a
client who obviously was not willing to admit any fault on his part, although the facts show
otherwise. Thus, respondent bank ran the risk of losing the business of an important and
influential member of the financial community if it did not do anything to assuage the feelings of
petitioners.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Gonzales, Batiller, Bilog & Associates for petitioners.

Agcaoili & Associates for private respondent.

REGALADO, J.:

Petitioner spouses George and Librada Moran are the owners of the Wack-Wack Petron gasoline
station located at Shaw Boulevard, corner Old Wack-Wack Road, Mandaluyong, Metro Manila.
They regularly purchased bulk fuel and other related products from Petrophil Corporation on
cash on delivery (COD) basis. Orders for bulk fuel and other related products were made by
telephone and payments were effected by personal checks upon delivery.1

Petitioners maintained three joint accounts, namely one current account (No. 37-00066-7) and
two savings accounts, (Nos.

__________________
1
TSN, May 3, 1985, 6-8.

802

802 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

1037002387 and 1037001372) with the Shaw Boulevard branch of Citytrust Banking
Corporation. As a special privilege to the Morans, whom it considered as valued clients, the bank
allowed them to maintain a zero balance in their current account. Transfers from Savings
Account No. 1037002387 to their current account could be made only with their prior
authorization, but they gave written authority to Citytrust to automatically transfer funds from
their Savings Account No. 1037001372 to their Current Account No. 37-00066-7 at any time
whenever the funds in their current account were insufficient to meet withdrawals from said
current account. Such arrangement for automatic transfer of funds was called a pre-authorized
transfer (PAT) agreement.2

The PAT letter-agreement entered into by the parties on March 19, 1982 contained the following
provisions:

x x x

1. 1. The transfer may be effected on the day following the overdrawing of the current
account, but the check/s would be honored if the Ravings account has sufficient balance
to cover the overdraft.

2. 2. The regular charges on overdraft, and activity fees will be imposed by the Bank.

3. 3. This is merely an accommodation on our part and we have the right, at all times and
for any reason whatsoever, to refuse to effect transfer of funds at our sole and absolute
option and discretion, reserving our right to terminate this arrangement at any time
without written notice to you.

4. 4. You hold CITYTRUST free and harmless for any and all omissions or oversight in
executing this automatic transfer of funds; x x x3

x x x

On December 12, 1983, petitioners, through Librada Moran, drew a check (Citytrust No.
041960) for P50,576.00 payable to Petrophil Corporation.4 The next day, December 13, 1983,
petitioners, again through Librada Moran, issued another check (Citytrust No. 041962) in the
amount of P56,090.00 in favor of the
________________
2
Ibid., id., 18-24.
3
Exhibit P, Original Record, 260.
4
Exhibit D, ibid., 223.

803

VOL. 230, MARCH 7, 1994 803

Moran vs. Court of Appeals

same corporation.5 The total sum of the two checks was P106,666.00.

On December 14, 1983, Petrophil Corporation deposited the two aforementioned checks to its
account with the Pandacan branch of the Philippine National Bank (PNB), the collecting bank. In
turn, PNB, Pandacan branch presented them for clearing with the Philippine Clearing House
Corporation in the afternoon of the same day. The records show that on December 14, 1983,
Current Account No. 37-00066-7 had a zero balance, while Savings Account No. 1037001372
(covered by the PAT) had an available balance of P26,104.306 and Savings Account No.
1037002387 had an available balance of P43,268.39.7

At about ten oclock in the morning of the following day, December 15, 1983, petitioner George
Moran went to the bank, as was his regular practice, to personally oversee their daily transactions
with the bank. He deposited in their Savings Account No. 1037002387 the amounts of
P10,874.58 and P6,754.25,8 and he likewise deposited in their Savings Account No. 1037001372
the amounts of P5,900.00, P35,100.00 and P30.00.9 The amount of P40,000.00 was then
transferred by him from Savings Account No. 1037002387 to their current account by means of a
pro forma withdrawal form (a debit memorandum), which was provided by the bank, authorizing
the latter to make the necessary transfer. At the same time, the amount of P66,666.00 was
transferred from Savings Account No. 1037001372 to the same current account through the pre-
authorized transfer (PAT) agreement.10

Sometime on December 15 or 16, 1983, George Moran was informed by his wife, Librada, that
Petrophil refused to deliver their orders on a credit basis because the two checks they had
previously issued were dishonored upon presentment for payment. Apparently, the bank
dishonored the checks due to insufficiency of funds.11 The non-delivery of gasoline forced
petition-

________________
5
Exhibit E, ibid., 224.
6
Supra., Fn. 5.
7
Exhibit N, ibid., 254.
8
Exhibit B-1, ibid., 220.
9
Exhibit C-1, ibid., 222.
10
Supra., Fn. 5; TSN, June 7, 1985, 13-16.
11
TSN, June 7, 1986, 22-23.

804

804 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

ers to temporarily stop business operations, allegedly causing them to suffer loss of earnings. In
addition, Petrophil cancelled their credit accommodation, forcing them to pay for their purchases
in cash.12 George Moran, furious and upset, demanded an explanation from Raul Diaz, the branch
manager. Failing to get a sufficient explanation, he talked to a certain Villareal, a bank officer,
who allegedly told him that Amy Belen Ragodo, the customer service officer, had committed a
grave error.13

On December 16 or 17, 1983, Diaz went to the Moran residence to get the signatures of
petitioners on an application for a managers check so that the dishonored checks could be
redeemed. Diaz then went to Petrophil to personally present the checks in payment for the two
dishonored checks.14

In a chance meeting around May or June, 1984, George Moran learned from one Constancio
Magno, credit manager of Petrophil, that the latter received from Citytrust, through Diaz, a letter
dated December 16, 1983, notifying them that the two aforementioned checks were
inadvertently dishonored x x x due to operational error. Said letter was received by Petrophil
on January 4, 1984.15

On July 24, 1984, or a little over six months after the incident, petitioners, through counsel,
wrote Citytrust claiming that the banks dishonor of the checks caused them besmirched business
and personal reputation, shame and anxiety, hence they were contemplating the filing of the
necessary legal actions unless the bank issued a certification clearing their name and paid them
P1,000,000.00 as moral damages.16
The bank did not act favorably on their demands, hence petitioners filed a complaint for damages
on September 8, 1984, with the Regional Trial Court, Branch 159 at Pasig, Metro Manila, which
was docketed therein as Civil Case No. 51549. In turn, Citytrust filed a counterclaim for
damages, alleging that the case filed against it was unfounded and unjust.

_______________
12
Ibid., id., 38-40.
13
Ibid., id., 32-35.
14
Ibid., id., 36-37.
15
Ibid., id., 49-51.
16
Rollo, 70.

805

VOL. 230, MARCH 7, 1994 805

Moran vs. Court of Appeals

After trial, a decision dated October 9, 1989 was rendered by the trial court dismissing both the
complaint and the counterclaim.17 On appeal, the Court of Appeals rendered judgment in CA-
G.R. CV No. 25009 on October 9, 1989 affirming the decision of the trial court.18

We start with some basic and accepted rules, statutory and doctrinal. A check is a bill of
exchange drawn on a bank payable on demand.19 Thus, a check is a written order addressed to a
bank or persons carrying on the business of banking, by a party having money in their hands,
requesting them to pay on presentment, to a person named therein or to bearer or order, a named
sum of money.20

Fixed savings and current deposits of money in banks and similar institutions shall be governed
by the provisions concerning simple loan.21 In other words, the relationship between the bank
and the depositor is that of a debtor and creditor.22 By virtue of the contract of deposit between
the banker and its depositor, the banker agrees to pay checks drawn by the depositor provided
that said depositor has money in the hands of the bank.23

Hence, where the bank possesses funds of a depositor, it is bound to honor his checks to the
extent of the amount of his deposits. The failure of a bank to pay the check of a merchant or a
trader, when the deposit is sufficient, entitles the drawer to substantial damages without any
proof of actual damages.24
Conversely, a bank is not liable for its refusal to pay a check on account of insufficient funds,
notwithstanding the fact that a

_________________
17
Original Record, 423-429; per Judge Maria Alicia M. Austria.
18
Rollo, 60; Justice Reynato S. Puno, ponente; Justices Emeterio C. Cui and Salome A.
Montoya, concurring.
19
Section 185, Negotiable Instruments Law.
20
Martin, Philippine Commercial Laws, Vol. I, 1985 Ed., 375.
21
Article 1980, Civil Code.
22
Republic vs. Court of Appeals, et al., L-25012, July 22, 1975, 65 SCRA 186 reiterated in Siao
Tiao Hong vs. Commissioner of Internal Revenue, et al., G.R. No. 32075, September 1, 1992,
213 SCRA 164.
23
Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol.
I, 1987 Ed., 464.
24
Browning vs. Bank of Vernal, 60 Utah 197, 207 Pac. 462.

806

806 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

deposit may be made later in the day.25 Before a bank depositor may maintain a suit to recover a
specific amount from his bank, he must first show that he had on deposit sufficient funds to meet
his demand.26

The present action for damages accordingly hinges on the resolution of the inquiry as to whether
or not petitioners had sufficient funds in their accounts when the bank dishonored the checks in
question. In view of the factual findings of the two lower courts the correctness of which are
challenged by what appear to be plausible arguments, we feel that the same should properly be
resolved by us. This would necessarily require us to inquire into both the savings and current
accounts of petitioners in relation to the PAT arrangement.
On December 14, 1983, when PNB, Pandacan branch, presented the checks for collection, the
available balance for Savings Account No. 1037001372 was P26,104.30 while Current Account
No. 37-00066-7 expectedly had a zero balance. On December 15, 1983, at approximately ten
oclock in the morning, petitioners, through George Moran, learned that P26,666.00 from
Savings Account No. 1037001372 was transferred to their current account. Another P40,000.00
was transferred from Savings Account No. 1037002387 to the current account. Considering that
the transfers were by then sufficient to cover the two checks, it is asserted by petitioners that
such fact should have prevented the dishonor of the checks. It appears, however, that it was not
so.

As explained by respondent court in its decision, Gerard E. Rionisto, head of the centralized
clearing unit of Citytrust, detailed on the witness stand the standard clearing procedure adopted
by respondent bank and the Philippine Clearing House Corporation, to wit:

Q Let me again re-phrase the question. Most of (sic) these two checks issued by Mrs. Librada
Moran under the accounts of the plaintiffs with Citytrust Banking Corporation were drawn
dated December 12, 1983 and December 13, 1983

________________
25
Goldstein vs. Jefferson Title and Trust Co., 95 Pa. Super Ct., 167.
26
O.E. Eads vs. Commercial National Bank of Phoenix, 62 Am. Law Reports, 183.

807

VOL. 230, MARCH 7, 1994 807

Moran vs. Court of Appeals

(and) these two (2) checks were made payable to Petrophil Corporation. On record, Petrophil
Corporation presented these two (2) checks for clearing with PNB Pandacan Branch on
December 14, 1983. Now in accordance with the bank, what would happen with these checks
drawn with (sic) PNB on December 14, 1983?

A So these checks will now be presented by PNB with the Philippine Clearing House on
December 14, and then the Philippine Clearing House will process it until midnight of
December 14. Citytrust will send a clearing representative to the Philippine Clearing House
at around 2:00 oclock in the morning of December 15 and then get the checks. The checks
will now be processed at the Citytrust Computer at around 3:00 oclock in the morning of
 December 14 (sic) but it will be processed for balance of Citytrust as of December 14 because
for one, we have not opened on December 15 at 3:00 oclock. Under the clearing house rules,
we are supposed to process it on the date it was presented for clearing. (tsn, September 9,
1988, pp. 9-10).27

Considering the clearing process adopted, as explained in the aforequoted testimony, it is clear
that the available balance on December 14, 1983 was used by the bank in determining whether or
not there was sufficient cash deposited to fund the two checks, although what was stamped on
the dorsal side of the two checks in question was DAIF/12-15-83, since December 15, 1983
was the actual date when the checks were processed. As earlier stated, when petitioners checks
were dishonored due to insufficiency of funds, the available balance of Savings Account No.
1037001372, which was the subject of the PAT agreement, was not enough to cover either of the
two checks. On December 14, 1983, when PNB, Pandacan branch presented the checks for
collection, the available balance for Savings Account No. 1037001372, to repeat, was only
P26,104.30 while Current Account No. 37-0006-7 had no available balance. It was only on
December 15, 1983 at around ten oclock in the morning that the necessary funds were
deposited, which unfortunately was too late to prevent the dishonor of the checks.

Petitioners argue that public respondent, by relying heavily

_________________
27
Annex A, Petition; Rollo, 55.

808

808 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

on Rionistos testimony, failed to consider the fact that the witness himself admitted that he had
no personal knowledge surrounding the dishonor of the two checks in question. Thus, although
he knew the standard clearing procedure, it does not necessarily mean that the same procedure
was adopted with regard to the two checks.

We do not agree. Section 3(q), Rule 131 of the Rules of Court provides a disputable presumption
in law that the ordinary course of business has been followed. In the absence of a contrary
showing, it is presumed that the acts in question were in conformity with the usual conduct of
business. In the case at bar, petitioners failed to present countervailing evidence to rebut the
presumption that the checks involved underwent the same regular process for clearing of checks
followed by the bank since 1983.
Petitioners had no reason to complain, for they alone were at fault. A drawer must remember his
responsibilities every time he issues a check. He must personally keep track of his available
balance in the bank and not rely on the bank to notify him of the necessity to fund certain checks
he previously issued. A check, as distinguished from an ordinary bill of exchange, is supposed to
be drawn against a previous deposit of funds for it is ordinarily intended for immediate
payment.28

Moreover, between the time of the issuance of said checks on December 12 and 13 and the time
of their presentment on December 14, petitioners had, at the very least, twenty-four hours to
replenish their balances in the bank.

As previously noted, it was only during business hours in the morning of December 15, 1983,
that P66,666.00 was automatically transferred from Savings Account No. 1037001372 to Current
Account No. 37-00066-7, and another P40,000.00 was transferred from Savings Account No.
1037002387 to the same current account by a debit memorandum. Petitioners argue that if indeed
the checks were dishonored in the early morning of December 15, 1983, the bank would not have
automatically transferred P66,666.00 to said current account. They theorize that the checks
having already been dishonored, there was no necessity to put

_________________
28
De Leon, The Law on Negotiable Instruments, 1989 Ed., 230-231.

809

VOL. 230, MARCH 7, 1994 809

Moran vs. Court of Appeals

into effect the pre-authorized transfer agreement.

That theory is incorrect. When the transfers from both savings accounts to the current account
were made, they were done in the hope that the checks may be retrieved, thus preventing their
dishonor. Unfortunately, respondent bank did not succeed in effectuating its good intentions. The
transfers were made to preserve its relations with petitioners whom it knew were valued clients,
hence it wanted to prevent the dishonor of their checks, if the same was at all possible. Although
not admitting fault, it tried its best to make sure that the checks would not bounce.

Under similar circumstances, it was held in Whitman vs. First National Bank29 that a bank
performs its full duty where, upon the receipt of a check drawn against an account in which there
are insufficient funds to pay it in full, it endeavors to induce the drawer to make good his account
so that the check can be paid, and failing in this, it protests the check on the following morning
and notifies its correspondent bank by telegraph of the protest. It cannot, therefore, be held liable
to the payee and holder of the check for not protesting it upon the day when it was received. In
fact, the court added that the bank did more than it was required to do by making an effort to
induce the drawer to deposit sufficient money to make the check good, and by notifying its
correspondent of the dishonor of the check by telegram.

Petitioners maintain that at the time the checks were dishonored, they had already deposited
sufficient funds to cover said checks. To prove their point, petitioners quoted in their petition the
following testimony of said witness Rionisto, to wit:

Q Now according to you, you would receive the checks from (being deposited to) the collecting
bank which in this particular example was the Pandacan Branch of PNB which in turn will
deliver it to the Philippine Clearing House and the Philippine Clearing House will deliver it to
your office around 12:00 oclock in the evening of December . . .?

A Around 2:00 oclock of December 15. We sent a clearing representative.

Q And the checks will be processed in accordance with the balance available as of December
14?

_________________
29
35 Pa. Super Ct., 125 (1907).

810

810 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

A Yes, sir.

Q And naturally you will place there drawn against insufficient funds, December 14, 1983?

A Yes, sir.
Q Are you sure about that?

A Yes, sir. x x x (tsn, September 9, 1988, p. 14).30

Obviously, witness Rionisto was merely confused as to the dates (December 14 and 15) because
it did not jibe with his previous testimony, wherein he categorically stated that the checks will
now be processed at the Citytrust Computer at around 3:00 in the morning of December 14 (sic)
but it will be processed for balance of Citytrust as of December 14 because for one, we have not
opened on December 15 at 3:00 oclock. Under the clearing house rules, we are supposed to
process it on the date it was presented for clearing.31 Analyzing the procedure he had previously
explained, and analyzing his testimony in its entirety and not in truncated portions, it would
logically and ineluctably appear that he actually meant December 15, and not December 14.

In the early morning of every business day, prior to banking hours, the various branches of
Citytrust would receive a computer printout called the rejected transactions report from the
head office. The report contains, among others, a listing of checks to be funded. When
Citytrust, Shaw Boulevard branch, received said report in the early morning of December 15,
1983, the two checks involved were included in the checks to be funded. That report was used
by the bank as its basis in dishonoring the two checks in question. Petitioner contends that the
bank erred when it did so because on previous occasions, the report was merely used by the bank
as a basis for determining whether or not it was necessary to notify them of the need to deposit
certain amounts in their accounts.

Amy Belen Rogado, a bank employee, testified that she would normally copy the details stated
in the report and transfer it on a pink slip. These pink slips were then given to George Moran.
In turn, George Moran testified that he would deposit the necessary

_________________
30
Rollo, 17.
31
Supra., Fn. 23.

811

VOL. 230, MARCH 7, 1994 811

Moran vs. Court of Appeals

funds stated in the pink slips. As a matter of fact, so petitioner asseverated, not a single check
written on the notices was ever dishonored after he had funded said checks with the bank. Thus,
petitioner argues, the checks were not yet dishonored after the bank received the report in the
early morning of December 15, 1983.

Said argument does not persuade. If ever petitioners on previous occasions were given notices
every time a check was presented for clearing and payment and there were no adequate funds in
their accounts, these were, at most, mere accommodations on the part of respondent bank. It was
not a requirement or a general banking practice, hence non-compliance therewith could not lay
the bank open to blame or rebuke. Legally, the bank had all the right to dishonor the checks
because there were no sufficient funds to speak of in the first place. If the demand is by check, a
drawer musts have to his credit enough to cover the demand. If his credit with the bank is less
than the amount on the face of the check, the bank may lawfully refuse payment.32

Pursuing this matter further, the bank could also not be faulted for not accepting either of the two
checks. The first check issued was in the amount of P50,576.00, while the second one was for
P56,090.00. Savings Account No. 1037001372 then had a balance of only P26,104.30. This
being the case, Citytrust could not be expected to accept for payment either one of the two
checks nor partially honor one check.

A bank is under no obligation to make part payment on a check, up to only the amount of the
drawers funds, where the check is drawn for an amount larger than what the drawer has on
deposit. Such a practice of paying checks in part has never existed. Upon partial payment, the
check holder could not be called upon to surrender the check, and the bank would be without a
voucher affording a certain means of showing the payment. The rule is based on commercial
convenience, and any rule that would work such manifest inconvenience should not be
recognized. A check is intended not only to transfer a right to the amount named in it, but to
serve the further purpose of affording

_________________
32
O.E. Eads vs. Commercial National Bank of Phoenix, 62 A.L.R. 183.

812

812 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

evidence for the bank of the payment of such amount when the check is taken up.33

On the other hand, assuming arguendo that Savings Account No. 1037002387, which is not
covered by a pre-arranged automatic transfer agreement, had enough amount deposited to cover
both checks (which is not so in this case), the bank still had no obligation to honor said checks as
there was then no authority given to it to make the transfer of funds. Where a depositor has two
accounts with a bank, an open account and a savings account, and draws a check upon the open
account for more money than the account contains, the bank may rightfully refuse to pay the
check, and is under no duty to make up the deficiency from the savings account.34

We agree with respondent Court of Appeals in its assessment and interpretation of the nature of
the letter of Citytrust to Petrophil, dated December 16, 1983. As aptly and correctly stated by
said court, x x x the letter is not an admission of liability as it was written merely to maintain
the goodwill and continued patronage of plaintiff-appellants. (This) cannot be characterized as
baseless, considering the totality of the circumstances surrounding its writing.35

In the present case, the actions taken by the bank after the incident clearly show that there was
neither malice nor bad faith, but rather a clear intent to mollify an obviously agitated client. Raul
Diaz, the branch manager, even went for this purpose to the Moran residence to facilitate their
application for a managers check. Later, he went to the Petrophil Corporation to personally
redeem the checks. Still later, the letter was sent by respondent bank to Petrophil explaining that
the dishonor of the checks was due to operational error. However, we reiterate, it would be a
mistake to construe that letter as an admission of guilt on the part of the bank. It knew that it was
confronted with a client who obviously was not willing to admit any fault on his part, although
the facts show otherwise. Thus, respondent bank ran the risk of

_________________
33
Id., loc. cit.
34
Nauful vs. National Loan and Exchange Bank of Columbia, 97 S.E. Reporter, 843.
35
Annex A, Petition; Rollo, 59.

813

VOL. 230, MARCH 7, 1994 813

Moran vs. Court of Appeals

losing the business of an important and influential member of the financial community if it did
not do anything to assuage the feelings of petitioners.

It will be recalled that the credit standing of the Morans with Petrophil Corporation was
involved, which fact, more than anything, displeased them, to say the least. On demand of
petitioners that their names be cleared, the bank considered it more prudent to send the letter. It
never realized that it would thereafter be used by petitioners as one of the bases of their legal
action. It will be noted that there was no reason for the bank to send the letter to Petrophil
Corporation since the latter was not a client nor was it demanding any explanation. Clearly,
therefore, the letter was merely intended to accommodate the request of the Morans and was part
of the series of damage-control measures taken by the bank to placate petitioners.

Respondent Court of Appeals perceptively observed that all these somehow pacified plaintiffs-
appellants (herein petitioners) for they did not thereafter take immediate punitive action against
the defendant-appellee (herein private respondent). As pointed out by the court a quo, it took
plaintiffs-appellants about six (6) months after the dishonor of the checks to demand that
defendant-appellee pay them P1,000,000.00 as damages. At that time, plaintiffs-appellants had
discovered the letter of Mr. Diaz attributing the dishonor of their checks to operational error.
The attempt to unduly ride on the letter of Mr. Diaz speaks for itself.36

On the above premises which irresistibly commend themselves to our acceptance, we find no
cogent and sufficient reason to award actual, moral, or exemplary damages to petitioners.
Although we take judicial notice of the fact that there is a fiduciary relationship between a bank
and its depositors, as well as the extent of diligence expected of it in handling the accounts
entrusted to its care,37 the bank may not be held responsible for such damages in the absence of
fraud, bad faith, malice, or

__________________
36
Ibid.; id., 60.
37
Bank of the Philippine Islands vs. Intermediate Appellate Court, et al., G.R. No. 69162,
February 21, 1992, 206 SCRA 408.

814

814 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

wanton attitude.38

WHEREFORE, finding no reversible error in the judgment appealed from, the same is hereby
AFFIRMED, with costs against petitioners.

SO ORDERED.

Narvasa (C.J., Chairman), Padilla and Nocon, JJ., concur.

Puno, J., No part.

Appealed judgment affirmed.

Note.An insolvent banking institution which has been ordered closed by the Central Bank
cannot be held liable to pay interest on bank deposits (Fidelity Savings and Mortgage Bank vs.
Cenzon, 184 SCRA 141 [1990]).

o0o

__________________
38
Fidelity Savings and Mortgage Bank vs. Cenzon, G.R. No. L-46208, April 5, 1990, 184 SCRA
141.

815