Lapreciosisima Vs Planters Development Bank
Lapreciosisima Vs Planters Development Bank
Lapreciosisima Vs Planters Development Bank
510 Phil. 51
CHICO-NAZARIO, J.:
Assailed in a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure are the decision[1] of the Court of Appeals dated 25 March 2002 that modified
the decision of the Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case
No. 245-0-83, dated 26 June 1997, deleting the awards of moral and exemplary damages
and finding that the mortgaged loan was deemed paid and enjoining foreclosure, as well
as reducing the awards for litigation fees and expenses, and its Resolution [2] dated 06 June
2003 denying petitioners Lapreciosisima Cagungun, et al.'s motion for reconsideration.
The antecedents are summarized by the Court of Appeals in its decision as follows:
On September 1, 1987, the spouses Vicente Cagungun and Lapreciosisima Cagungun (or
the Cagungun spouses) filed suit with the Regional Trial Court of Olongapo City against
the Country Development Bank (or COUNTRY), and which was docketed as Civil Case
No. 245-083 and assigned to Branch 74. Vicente Cagungun has since died and was
substituted as plaintiff on August 8, 1984 by their children. On the other hand COUNTRY
has entered into a merger and reflective of this the party defendant has been changed to
Planters Development Bank (or PLANTERS) on September 1, 1987.
COUNTRY had opened an extension office in Olongapo City, and among their first
customers were the Cagungun spouses who had diverse business interests in the locality.
They opened some accounts, and for two (2) of which they were issued Savings Passbook
No. 12241-16 in the name of Puring's Dry Goods and Savings Passbook No. 38470-29 in
the names of V/L Cagungun.
It was claimed by the Cagungun spouses and testified to by them and their daughter-in-
law Sarah Cagungun, that because of the exigencies of their businesses that required daily
deposits of the proceeds and of the trust that they have reposed with COUNTRY and its
personnel, they entrusted and left with them their said savings pass books. At least once
a day the Branch manager Ruperto Reyes or a certain Bong and Ding would come to get
their funds and with the agreement that these would be rounded off and deposited to
their account while the odd remainder would be applied to their loan. The arrangement
apparently went well, until March 1981 when the Cagungun spouses received a letter
from COUNTRY telling them that their loan is past due and payment was demanded . . .
or else. This prompted them to investigate, but this was tedious and difficult because of
lack of cooperation and even resistance from COUNTRY. But with the help of friends in
high places the Cagungun spouses were able to access and pry information that in the
year 1979 on the dates of October 8, 18, 20 and 31 and November 15, and December 4 and
8, with the use of withdrawal slips a total of P220,000.00 was withdrawn from their
Savings Passbook No. 12241-16. These withdrawals were invalid for no such withdrawal
was authorized, made or received by the depositors, and the signatures of Vicente
Cagungun on the slips were forgeries. This was confirmed by Arcadio Ramos, Chief of
the Questioned Documents Division of the NBI when these were subjected to
examination.
The side of PLANTERS was explicated by its employees, Internal Auditor Lilia Tactay,
Branch Manager Lolita Mendoza and Cashier Bella Lumanog. It was explained that the
withdrawal of P20,000.00 made on October 8, 1979 from Savings Account No. 12241-16
and the withdrawals of a total of P30,000.00 from several of the other accounts of the
spouses, were placed on time deposits on the same date by Vicente Cagungun in five (5)
accounts held with their children. The other said withdrawals from Savings Account No.
12241-16 were made by Vicente Cagungun in exchange for Manager's Checks made in
the names of payees Santiago Lee, Rosita Saldana, Benito Yap and Joaquin Aganda. [3]
The lower court ruled, among other things, that the withdrawals from Savings Account
No. 12241-16 through seven (7) withdrawal slips [4] amounting to P220,000.00 were not
made by petitioners as the alleged signatures of Vicente Cagungun, Jr. appearing therein
were falsified as confirmed by the National Bureau of Investigation Handwriting Expert
Arcadio Ramos. It likewise considered petitioners to have paid their mortgage loan in the
amount of P58,297.16 in view of their instruction to respondent to apply their funds in
Savings Account No. 38470-29 thereto which were adequate for this purpose.
For not applying the savings of petitioners in Savings Account No. 38470-29 as payment
to their loan, thereby causing the threatened foreclosure of the real estate mortgage over
their house and lot, and for allowing the unauthorized withdrawals from Savings
Account No. 12241-16 through falsified withdrawal slips, the lower court held
respondent liable to pay moral damages. For ignoring the two (2) demand letters of
petitioners, the demand letter of petitioners' counsel and the representations made by
Pampanga Gov. Estelito Mendoza and Central Bank Governor Jaime Laya, and for the
attempt to cover up the misdeeds of its employees constituting malice and bad faith,
respondent was also ordered to pay exemplary damages as an example to others. On
account of these acts, respondent was also ordered to pay attorney's fees and the cost of
suit.
In its decision[5] dated 26 June 1997, the lower court disposed of the case in this wise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant as follows:
1.) Enjoining the defendant from foreclosing the mortgage of plaintiffs property located
at No. 88 Gordon Avenue, Pag-asa, Olongapo City;
2.) Ordering the defendant to pay plaintiffs the amount of P220,000.00 actual damages
representing the total amount withdrawn from their accounts plus twelve (12%) per cent
interest per annum from the date of the filing of the complaint until it shall have been
fully paid;
3.) Considering plaintiffs mortgaged account in the amount of P58,297.16 to have been
paid;
4.) Ordering the defendant to pay plaintiffs the amount of P300,000.00 moral damages;
5.) Ordering the defendant to pay plaintiffs the amount of P300,000.00 exemplary
damages; and
6.) Ordering defendant to pay plaintiffs the amount of P50,000.00 litigation expense,
P50,000.00 attorney's fee plus the cost of suit. [6]
Aggrieved, respondent appealed to the Court of Appeals.
The Court of Appeals agreed that money was withdrawn from the deposits of petitioners
without their authority or knowledge, and that this was done by one or some of the
personnel of respondent. However, it held that petitioners are not free from the obligation
to pay the admitted loan (P58,297.16) for though the same was not paid for failure of
respondent to comply with the instruction to apply the remainder of the sums deposited
to their loan, it remained admittedly an unpaid obligation. It removed the awards for
moral and exemplary damages and reduced the awards for attorney's fees and litigation
expenses.
The Court of Appeals promulgated its decision on 25 March 2002, the dispositive portion
of which reads:
WHEREFORE, the appealed decision is AFFIRMED, but with these MODIFICATONS (a)
the dispositions in Par. 1 and Par. 3 of the fallo deeming the mortgaged loan paid and
enjoining foreclosure, are DELETED; (b) the disposition in Par. 4 and Par. 5 of the fallo
awarding moral and exemplary damages, are DELETED; and (c) the awards of litigation
fees and expenses are REDUCED to a combined P30,000.00. [7]
The motion for reconsideration filed by petitioners was denied in a resolution dated 06
June 2003.[8]
Petitioners are now before us assailing the Decision and Resolution of the Court of
Appeals when the latter:
On 06 December 2004, the Court gave due course to the petition and required the parties
to submit their respective memoranda within thirty (30) days from notice. [12] Both parties
complied.[13]
We first discuss the deletion made by the Court of Appeals of the awards of moral
damages and exemplary damages.
Petitioners maintain that the Court of Appeals erred in removing the award of moral
damages considering that it is settled jurisprudence that the same should be awarded
when the injured party suffers mental anguish and serious anxiety. They contend that the
Court of Appeals failed to appreciate the torment they suffered from the time they
noticed their deposits were not properly recorded until the receipt of respondent's letter
threatening the foreclosure of their residential house and lot for a loan of P58,000.00. They
narrated that respondent bank refused to give them copies of the ledgers of their deposits
as well as copies of the withdrawal slips. Despite the intercession of Pampanga Governor
Estelito Mendoza and Central Bank Governor Jaime Laya, respondent did not give them
copies of the ledgers and withdrawal slips. It was only after the Chief of the Criminal
Investigation Service (CIS) of the Philippine Constabulary sent two of his investigators,
whom they authorized to look into the records of their deposits, that they received copies
thereof. They discovered therein that the sum of P220,000.00 was withdrawn from their
accounts by respondent bank through its employees by falsifying the signatures of
Vicente Cagungun, Jr. in seven withdrawal slips. Despite the forgeries, they refused to
acknowledge its liability. Thus, on 07 September 1983, in order to protect their rights,
petitioners were forced to file the instant case with prayer for issuance of a temporary
restraining order and/or writ of preliminary injunction to enjoin the foreclosure of their
property. Petitioners insist that respondent, in allowing withdrawals in their savings
account without their authority or knowledge, is guilty of gross negligence to which it is
liable for moral damages.
On the other hand, respondent maintains that the Court of Appeals was correct in
deleting the award of moral damages.
From the foregoing reasons advanced by respondent bank, it is apparent that it is trying
to pass all the blame on petitioners for the unauthorized withdrawals amounting to
P220,000.00 and the non-applications of deposits to their loan.
This cannot be. The fact that petitioners left the custody of their passbooks to respondent,
through its employee O-I-C Ruperto Reyes, and that they entrusted to Bong or Ding their
deposits will not excuse respondent from being liable. Petitioners did these things
because they trusted and depended on respondent to take care of their accounts with it.
If respondent bank was really strict in enforcing the banking rule that the passbook must
be kept by the depositor, why did it not do so? For its failure, any anomaly or damage
that might result therefrom should be borne by it.
We, likewise, find untenable respondent's contention that petitioners should have
presented O-I-C Ruperto Reyes, Bong or Ding as witnesses to clear the air. On the
contrary, it should have been respondent's duty to present these persons they being their
employees. It should have presented these people, especially O-I-C Ruperto Reyes, who
had custody of the passbooks, to explain why unauthorized withdrawals were made and
why the instruction to apply petitioners' deposit to their loan was not complied with.
The bank was indeed grossly negligent when it allowed the sum of P220,000.00 to be
withdrawn through falsified withdrawal slips without petitioners' authority and
knowledge and its failure to comply with petitioners' instruction to apply their deposits
on their loan. In so doing, respondent bank breached the trust that petitioners reposed on
it.
We agree in the findings of the two courts below that the unauthorized transactions were
committed by one or some of the employees of respondent bank for which it should be
liable. The evidence showed that respondent did not exercise the degree of diligence it
ought to have exercised in dealing with its clients -- diligence higher than that of a good
father of a family. If only respondent exercised such diligence, no anomaly or irregularity
would have happened.
In the case of Philippine National Bank v. Pike,[14] we discussed the degree of diligence
imposed on banks as follows:
With banks, the degree of diligence required, contrary to the position of petitioner PNB,
is more than that of a good father of a family considering that the business of banking is
imbued with public interest due to the nature of their functions. The stability of banks
largely depends on the confidence of the people in the honesty and efficiency of banks.
Thus, the law imposes on banks a high degree of obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of banking.
Section 2 of Republic Act No. 8791, which took effect on 13 June 2000, makes a categorical
declaration that the State recognizes the "fiduciary nature of banking that requires high
standards of integrity and performance."
Though passed long after the unauthorized withdrawals in this case, the aforequoted
provision is a statutory affirmation of Supreme Court decisions already in esse at the time
of such withdrawals. We elucidated in the 1990 case of Simex International, Inc. v. Court of
Appeals that "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."
Likewise, in the case of The Consolidated Bank and Trust Corporation v. Court of
Appeals, we clarified that said fiduciary relationship means that the bank's obligation to
observe "highest standards of integrity and performance" is deemed written into every
deposit agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father of a
family. Article 1172 of the New Civil Code states that the degree of diligence required of
an obligor is that prescribed by law or contract, and absent such stipulation then the
diligence of a family. In every case, the depositor expects the bank to treat his account
with utmost fidelity, whether such accounts consists only of a few hundred pesos or of
millions of pesos.
Settled is the rule that gross negligence of a bank in the handling of its client's deposit
amounts to bad faith that calls for an award of moral damages. Moral damages are meant
to compensate the claimant for any physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injuries unjustly caused. [15]
In the case at bar, the failure of the bank to prevent seven unauthorized withdrawals from
the deposits of petitioners and its non-compliance with petitioners' instructions
regarding the loan payments constitute gross negligence which justifies the award of
moral damages. As employer, respondent is liable for the negligence or misdeed of its
employees which caused petitioners to have sleepless nights thinking about the
threatened foreclosure of their house and lot. In addition, the way respondent gave
petitioners a hard time in securing copies of their withdrawal slips and ledgers of their
deposits is an indication of bad faith. Respondent could have easily cooperated with
petitioners by immediately furnishing the latter with documents they wanted. This was
not to be. Written communications from petitioners' lawyers and from the Central Bank
Governor were not sufficient in order that respondent will provide petitioners with the
documents they needed. It was only after two agents of the CIS of the Philippine
Constabulary went to the bank that respondent was obliged to give petitioners what they
were asking for.
In culpa contractual or breach of contract, as in the case[16] before us, moral damages are
recoverable only if the defendant has acted fraudulently or in bad faith, [17] or is found
guilty of gross negligence amounting to bad faith, or in wanton disregard of his
contractual obligations.[18]
In fine, the requisites on award of moral damages would require, firstly, evidence of
besmirched reputation or physical, mental or psychological suffering sustained by the
claimant; secondly, a culpable act or omission factually established; thirdly, proof that
the wrongful act or omission of the defendant is the proximate cause of the damages
sustained by the claimant; and fourthly, that the case is predicated on any of the instances
expressed or envisioned by Article 2219[19] and Article 2220 of the Civil Code. [20] All these
elements are present in the instant case.
Anent the removal by the Court of Appeals of the award of exemplary damages, we find
the same to be not in order.
The law allows the grant of exemplary damages to set an example for the public
good.[23] The banking system has become an indispensable institution in the modern
world and plays a vital role in the economic life of every civilized society. Whether as
mere passive entities for the safe-keeping and saving of money or as active instruments
of business and commerce, banks have attained a ubiquitous presence among the people,
who have come to regard them with respect and even gratitude and most of all,
confidence.[24] For this reason, banks should guard against injury attributable to
negligence or bad faith on its part. [25] The award of exemplary damages is warranted by
the failure of respondent bank to prevent the unauthorized withdrawals from petitioners'
deposits and its failure to properly apply the latter's deposits to their loan. We, however,
find the P300,000.00 awarded by the lower court to be excessive and should accordingly
be reduced to P50,000.00.
On the matter of attorney's fees and expenses of litigation, it is settled that the reasons or
grounds for the award thereof must be set forth in the decision of the court. [26] An award
of attorney's fees, being an exception from the policy of not putting a premium or a
penalty on the right to litigate, has since been limited to the grounds specified by
law.[27] Article 2208[28] of the Civil Code enumerates the instances where attorney's fees
and expenses of litigation can be recovered.
In the case at bar, the RTC clearly stated in its decision that petitioners are entitled to
attorney's fees and litigation expenses because they were compelled to litigate in order to
protect their interest. We agree. Moreover, there being an award for exemplary damages,
it follows that there should be an award of attorney's fees and litigation expenses.
However, the awards of P50,000.00 for attorney's fees and P50,000.00 for litigation
expenses by the RTC are too much, while the award of P30,000.00 of the Court of Appeals
for both is too small. In as much as this case has been pending for more than twenty (20)
years, the award of P25,000.00 for each will be sufficient.
Petitioners claim that the Court of Appeals erred in deleting the portions of the RTC
decision declaring their mortgage loan paid and enjoining foreclosure. They insist that
they were able to prove that the amounts of P30,000.00 and P118,000.00 were respectively
withdrawn from their accounts (SA No. 38470-29 and No. 12241-16) and that same were
not applied as payment for their loan. They maintain that by adding together said
amounts, the sum thereof is sufficient to pay their loan and to consider the real estate
mortgage as discharged.
Looking at the complaint filed by petitioners, there is no allegation that said amounts
were withdrawn from their accounts and that same were not applied as payments for
their loan. Petitioners likewise did not ask in their prayer that said amounts be returned
to them or that they be used to off-set their indebtedness to respondent. Moreover, when
petitioners tried to prove this allegation, counsel for respondent objected [29] and
attempted to have the testimony thereon stricken off the record on the ground of allegata
et probata.[30]
Under Section 5, Rule 10 of the Revised Rules of Court,[31] if evidence is objected to at the
trial on the ground that it is not within the issues made by the pleadings, the Court may
allow the pleadings to be amended freely when the presentation of the merits of the action
will be subserved thereby and the admission of such evidence would not prejudice the
objecting party in maintaining his action or defense upon the merit. Said section reads:
SO ORDERED.
[1]CA Rollo, pp. 91-98; Penned by Associate Justice Roberto A. Barrios with Associate
Justices Ma. Alicia Austria-Martinez (now Associate Justice of this Court) and Bienvenido
L. Reyes, concurring.
Samson, Jr. v. Bank of the Philippine Islands, G.R. No. 150487, 10 July 2003, 405 SCRA
[15]
607.
[16] The provisions of the New Civil Code on simple loan govern the contract between a
bank and its depositor. Specifically, Article 1980 categorically provides that ". . . savings .
. . deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loan." Thus, the relationship between a bank and its depositor is that
of a debtor-creditor, the depositor being the creditor as it lends the bank money, and the
bank is the debtor which agrees to pay the depositor on demand.
Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are justly
due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
Philippine Telegraph & Telephone Corporation v. Court of Appeals, G.R. No. 139268,
[18]
[19] Art. 2219. Moral damages may be recovered in the following and analogous cases:
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this
article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order named.
Philippine Telegraph & Telephone Corporation v. Court of Appeals, supra, note 18;
[20]
Citytrust Banking Corporation (now Bank of the Philippine Islands) v. Villanueva, G.R.
No. 141011, 19 July 2001, 361 SCRA 446.
Prudential Bank v. Court of Appeals, G.R. No. 125536, 16 March 2000, 328 SCRA 264;
[21]
Philippine National Bank v. Court of Appeals, G.R. No. 126152, 28 September 1999, 315
SCRA 309; Samson, Jr. v. Bank of the Philippine Islands, supra, note 15.
2004, 419 SCRA 487; Samson, Jr. v. Bank of the Philippine Islands, supra note 15;
Philippine National Bank v. Court of Appeals, ibid.
[24] Bautista v. Mangaldan Rural Bank, Inc., G.R. No. 100755, 10 February 1994, 230 SCRA
16.
Solidbank Corporation v. Arrieta, G.R. No. 152720, 17 February 2005, 451 SCRA 711,
[25]
722.
[26] Cipriano v. Court of Appeals, G.R. No. 107968, 30 October 1996, 263 SCRA 711.
[27] Olan v. Court of Appeals, G.R. No. 126848, 12 March 1998, 287 SCRA 504.
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
[28]
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim;
(8) In actions for indemnity under workmen's compensation and employer's liability
laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
A rule of procedure whereby only matters alleged in the pleadings may be proved
[30]
(Robles v. Del Rosario, 100 Phil. 891) cited in Philippine Law Dictionary by Moreno, 2nd
Ed., p. 35.