SIMEX INTERNATIONAL vs.

CA

FACTS Petitioner is a private corporation engaged in the exportation of food products and
a depositor of Traders Royal Bank where they maintained a checking account and deposited
₱100,000.00, hence, increasing its balance to ₱190,380.74. Petitioner then issued several checks
against it deposit but was surprised to learn later that day that they had been dishonored of
insufficient funds. Consequently, a letter of demand were sent to petitioner threatening them of
prosecution if the dishonored checks issued to them was not made good and also withheld
delivery of the order made by the petitioner. The latter complained to TRB and the investigation
disclosed that the ₱100,000.00 deposited by the petitioner had not been credited to it. Error was
rectified and the dishonored checks were paid after they were re-deposited. Petitioner demanded
reparation from TRB for its gross and wanton negligence. When the demand was not met,
petitioner then filed a complaint in the Court of First Instance claiming from the TRB moral
damages of ₱1,000,000.00 and exemplary damages of ₱500,000.00 plus 25% of attorney’s fees
and loss.

ISSUE W/N Simex International is entitled for moral damages and exemplary damages
due to Traders Royal Bank’s negligence.

RULING Yes, 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 towards the complaining depositor constituted the gross negligence, if not wanton bad
faith, that the respondent court said had not been established by the petitioner. 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. In the case at bar, Simex International’s credit line
was cancelled and its orders were not acted upon pending receipt of actual payment by the
suppliers and its business declined. Its reputation was reduced in the business community, all due
to the fault of Traders Royal Bank, which was undeniably remiss in its duty to Simex
International.

ASSOCIATED BANK vs. HENRY TAN

FACTS Tan is a businessman and a regular depositor-creditor of Associated Bank

(now Westmont Bank). He deposited a post-dated UPCB Check of ₱101,000.00 issued by him
by a certain Willy Cheng, which was duly entered in his bank record. Allegedly, upon advice and
instruction of the Bank that the check was already cleared and backed up by sufficient funds, Tan
on the same day, withdrew a certain sum and deposited another making his existing balance to
₱107,793.45 because he issued several checks to his business partners. However, these partners
went back to him alleging that the checks he issued bounced for insufficiency of funds. Thus, he
informed the Bank to take initiative because he had sufficient funds, nonetheless, the Bank did
not bother to apologize. Hence, Tan filed a Complaint for Damages alleging his suppliers
decreased in number for lack of trust. The Bank, however, contends that Tan has no cause of
action because Associate Bank has the right to debit the account of Tan by reason of the dishonor
of the check deposited by him which was withdrawn prior to the clearing. Regional Trial Court
ruled in favor of Tan on the ground that the latter was not officially informed about the debiting
of the ₱101,000.00 from his existing balance, and the Bank merely allowed Tan to use the fund
prior clearance to merely accommodate him. Court of Appeals concurred and ruled that the Bank
acted contrary to its obligation to treat Tan’s account with meticulous care.

ISSUE W/N it was within the rights of Associated Bank, as a collecting bank, to debit the
account of its client for a dishonored check and it properly exercised the right of set-off.

RULING Yes, however it failed to exercise the highest degree of diligence in doing so
when it – 1) did not act with meticulous care in allowing the respondent to withdraw the amount
without proper clearing; and 2) when it failed to give proper notice to the respondent of the
debiting of his account. Consequently, petitioner bank is liable for damages. It is undisputed that
purportedly as an act of accommodation to a valued client, petitioner bank allowed the
withdrawal of the face value of the deposited check prior to its clearing. That act certainly
disregarded the clearance requirement of the banking system. Such practice is unusual, because a
check is not a legal tender or money; and its value can properly be transferred to a depositor’s
account only after the check has been cleared by the drawee bank. Under ordinary banking
practice, after receiving a check deposit, a bank either immediately credit the amount to a
depositor’s account; or infuse value to that account only after the drawee bank shall have paid on
such amount. Before the check shall have been cleared for deposit, the collecting bank can only
‘assume’ at its own risk that the check would be cleared and paid out. Reasonable business
practice and prudence, moreover, dictated that Associate Bank should not have authorized the
withdrawal by Tan of ₱240,000.00 as this amount was over and above his outstanding balance of
₱196,793.45. Further, the expressed reservation at the back of the slip which states that the bank
reserves the right to debit the account of the depositor does not exculpate it from liability as such
is contrary to its obligations to act in the highest degree of integrity and performance.

ZOMER DEVELOPMENT COMPANY vs. SPECIAL TWELFTH DIVISION

FACTS Zomer, a Philippine corporation, owned 3 parcels of land, which were

mortgaged to International Exchange Bank as security for its loan. When Zomer failed to pay its
indebtedness, IEB foreclosed on the properties. Auction was conducted, IEB emerged as the
highest bidder. Sherriff issued to it Certificates of Sale on 19 November 2001 and provided for a
period of redemption of 12 months from registration. Zomer filed a Complaint for Declaration of
Nullity of Sale, Certificate of Sale & TCTs and Declaration as Unconstitutional Section 47, R.A.
No. 8791. That the latter provision violates the right to equal protection since the law provides a
shorter period for redemption of 3 months or earlier to juridical entities compared to the 1 year
redemption period given to natural persons. This discrimination gives “undue advantage to
lenders who are non-banks.” Regional Trial Court dismissed the Complaint, Zomer appealed to
the Court of Appeals where the latter dismissed it as well and categorized the corporation’s
complaint as one for declaratory relief.

ISSUE W/N the Court of Appeals can be compelled by writ of mandamus to pass upon
the constitutionality of a statute.

RULING No, while the Complaint, while denominated as a Declaration of Nullity of Notice
of Sale, Certificate of Sale & TCTs and Declaration as Unconstitutional Section 47, R.A. No.
8791, was in reality – an action for Declaratory Relief. Where the grant of the latter is
discretionary on the courts. Courts may refuse to declare rights or to construe instruments if it
will not terminate the controversy or if it is unnecessary and improper under the circumstances.
A discretionary act cannot be the subject of a petition for mandamus. On the other hand,
petitioner in seeking the nullification of the foreclosure sale, questioned the validity of Section
47, R.A. No. 8791 insofar as the law limits the redemption period for juridical persons to only 3
months, wherein petitioner was a juridical entity affected by the shorter redemption period.
However, although the Regional Trial Courts have exclusive jurisdiction over actions for
declaratory relief, the Court of Appeals exercises appellate jurisdiction over final judgments of
the trial court. Thus, the CA may, in appeals of action for declaratory relief, apply Rule 63 of the
Rules of Court in resolving the appeal. The Court of Appeals, in deferring the question of the
validity of the said provision, cited Rule 63, Section 5 of the Rules of Court and held that to
resolve the petition “would be an empty discourse and will not terminate the controversy.” This
was an exercise of the CAs discretion. Contrary to the abovementioned, mandamus may issue
only to compel the performance of a ministerial duty. It cannot be issued to compel the
performance of a discretionary act.
Petitioner cannot file a petition to compel what is essentially a discretionary act on the
CA. what petitioner should have done was to file a petition for certiorari to question the exercise
of the CAs discretion. Unfortunately, petitioner filed the wrong remedy. As such, the petition
must be denied.

JOSE GO vs. BANKGO SENTRAL NG PILIPINAS

FACTS Go, the Director, President, and the CEO of the Orient Commercial
Banking Corporation (Orient Bank) was charged before the Regional Trial Court for the
violation of Section 83 of the General Banking Act. Go allegedly borrowed the deposits/funds of
the Orient Bank and/or acting as guarantor, indorser of obligor for loans to other persons. He
then used the borrowed deposits/funds in facilitating and granting and/or of credit lines/loans to
the New Zealand Accounts loans of ₱2.7 Billion. He completed the alleged transaction without
the written approval of the Board of Directors of said Orient Bank. Go then filed a motion to
quash the Information. He averred that the use of the word “and/or” meant that he was charged
for being either a borrower or a guarantor, or for being both, thus the charge does not constitute
an offense. Go claims that Section 83 of RA 337 only penalizes directors and officers who acted
either as borrower or as guarantor, but not as both. He also claimed that the Information did not
constitute an offense since the information failed to state the amount he purportedly borrowed.
According to Go, the second paragraph of Section 83, serves as an exception to the first
paragraph which allows the banks to extend credit accommodations to their directors, officers,
and stockholders, provided it is “limited to an amount equivalent to the respective outstanding
deposits and book value of the paid-in capital contribution in the bank.”

ISSUE W/N Go is liable under Section 83 of the General Banking Act.

RULING Yes, under Section 83 of RA 337, the following elements must be present to
constitute a violation of its first paragraph – 1) the offender is a director or officer of any banking
institution; 2) the offender, either directly or indirectly, for himself or as representative or agent
of another, performs any of the following acts – a) he borrows any of the deposits or funds of
such bank; or b) he becomes a guarantor, indorser, or surety for loans from such bank to others;
or c) he becomes in any manner an obligor for money borrowed from bank or loaned by it.; and
3) the offender has performed any of such acts without the written approval of the majority of the
directors of the bank, excluding the offender, as the director concerned.
A simple reading of the abovementioned elements easily rejects Go’s contention that the
law penalizes a bank director or officer only either for borrowing the bank’s deposits or funds or
for guarantying loans by the bank, but not for acting in both capacities. The essence of the crime
is becoming an obligor of the bank without securing the necessary written approval of the
majority of the bank’s directors.