Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 136202 January 25, 2007
BANK O T!E P!"#"PP"NE "S#AN$S, Petitioner,
vs.
COURT O APPEA#S, ANNABE##E A. SA#A%AR, an& JU#"O R.
TEMP#ONUE'O, Respondents
D ! I S I O N
A%CUNA, J.:
This is a petition for revie" under Rule #$ of the Rules of !ourt see%in& the reversal of
the Decision
'
dated (pril ), '**+, and the Resolution
,
dated Nove-ber *, '**+, of the
!ourt of (ppeals in !(./.R. !V No. #,,#'.
The facts
)
are as follo"s0
(.(. Sala1ar !onstruction and n&ineerin& Services filed an action for a su- of -one2
"ith da-a&es a&ainst herein petitioner 3an% of the Philippine Islands 43PI5 on Dece-ber
$, '**' before 3ranch '$6 of the Re&ional Trial !ourt 4RT!5 of Pasi& !it2. The
co-plaint "as later a-ended b2 substitutin& the na-e of (nnabelle (. Sala1ar as the real
part2 in interest in place of (.(. Sala1ar !onstruction and n&ineerin& Services. Private
respondent Sala1ar pra2ed for the recover2 of the a-ount of T"o 7undred Si8t2.Seven
Thousand, Seven 7undred Seven Pesos and Sevent2 !entavos 4P,69,9:9.9:5 debited b2
petitioner 3PI fro- her account. She li%e"ise pra2ed for da-a&es and attorne2;s fees.
Petitioner 3PI, in its ans"er, alle&ed that on (u&ust )', '**', <ulio R. Te-plonuevo,
third.part2 defendant and herein also a private respondent, de-anded fro- the for-er
pa2-ent of the a-ount of T"o 7undred Si8t2.Seven Thousand, Si8 7undred Ninet2.
T"o Pesos and Fift2 !entavos 4P,69,6*,.$:5 representin& the a&&re&ate value of three
4)5 chec%s, "hich "ere alle&edl2 pa2able to hi-, but "hich "ere deposited "ith the
petitioner ban% to private respondent Sala1ar;s account 4(ccount No. :,:).''+9.695
"ithout his %no"led&e and correspondin& endorse-ent.
(cceptin& that Te-plonuevo;s clai- "as a valid one, petitioner 3PI fro1e (ccount No.
:,:'.:$++.#+ of (.(. Sala1ar and !onstruction and n&ineerin& Services, instead of
(ccount No. :,:).''+9.69 "here the chec%s "ere deposited, since this account "as
alread2 closed b2 private respondent Sala1ar or had an insufficient balance.
Private respondent Sala1ar "as advised to settle the -atter "ith Te-plonuevo but the2
did not arrive at an2 settle-ent. (s it appeared that private respondent Sala1ar "as not
entitled to the funds represented b2 the chec%s "hich "ere deposited and accepted for
deposit, petitioner 3PI decided to debit the a-ount of P,69,9:9.9: fro- her (ccount No.
:,:'.:$++.#+ and the su- of P,69,6*,.$: "as paid to Te-plonuevo b2 -eans of a
cashier;s chec%. The difference bet"een the value of the chec%s 4P,69,6*,.$:5 and the
a-ount actuall2 debited fro- her account 4P,69,9:9.9:5 represented ban% char&es in
connection "ith the issuance of a cashier;s chec% to Te-plonuevo.
In the ans"er to the third.part2 co-plaint, private respondent Te-plonuevo ad-itted the
pa2-ent to hi- of P,69,6*,.$: and ar&ued that said pa2-ent "as to correct the
-alicious deposit -ade b2 private respondent Sala1ar to her private account, and that
petitioner ban%;s ne&li&ence and tolerance re&ardin& the -atter "as violative of the
pri-ar2 and ordinar2 rules of ban%in&. 7e li%e"ise contended that the debitin& or ta%in&
of the rei-bursed a-ount fro- the account of private respondent Sala1ar b2 petitioner
3PI "as a -atter e8clusivel2 bet"een said parties and -a2 be pursuant to ban%in& rules
and re&ulations, but did not in an2 "a2 affect hi-. The debitin& fro- another account of
private respondent Sala1ar, considerin& that her other account "as effectivel2 closed, "as
not his concern.
(fter trial, the RT! rendered a decision, the dispositive portion of "hich reads thus0
=7RFOR, pre-ises considered, >ud&-ent is hereb2 rendered in favor of the
plaintiff ?private respondent Sala1ar@ and a&ainst the defendant ?petitioner 3PI@ and
orderin& the latter to pa2 as follo"s0
'. The a-ount of P,69,9:9.9: "ith ',A interest thereon fro- Septe-ber '6,
'**' until the said a-ount is full2 paidB
,. The a-ount of P):,:::.:: as and for actual da-a&esB
). The a-ount of P$:,:::.:: as and for -oral da-a&esB
#. The a-ount of P$:,:::.:: as and for e8e-plar2 da-a&esB
$. The a-ount of P):,:::.:: as and for attorne2;s feesB and
6. !osts of suit.
The counterclai- is hereb2 ordered DISMISSD for lac% of factual basis.
The third.part2 co-plaint ?filed b2 petitioner@ is hereb2 li%e"ise ordered DISMISSD
for lac% of -erit.
Third.part2 defendant;s ?i.e., private respondent Te-plonuevo;s@ counterclai- is hereb2
li%e"ise DISMISSD for lac% of factual basis.
SO ORDRD.
#
On appeal, the !ourt of (ppeals 4!(5 affir-ed the decision of the RT! and held that
respondent Sala1ar "as entitled to the proceeds of the three 4)5 chec%s not"ithstandin&
the lac% of endorse-ent thereon b2 the pa2ee. The !( concluded that Sala1ar and
Te-plonuevo had previousl2 a&reed that the chec%s pa2able to <RT !onstruction and
Tradin&
$
actuall2 belon&ed to Sala1ar and "ould be deposited to her account, "ith
petitioner acCuiescin& to the arran&e-ent.
6

Petitioner therefore filed this petition on these &rounds0
I.
The !ourt of (ppeals co--itted reversible error in -isinterpretin& Section #* of the
Ne&otiable Instru-ents Da" and Section ) 4r and s5 of Rule ')' of the Ne" Rules on
vidence.
II.
The !ourt of (ppeals co--itted reversible error in NOT appl2in& the provisions of
(rticles ,,, ',9+ and ',*: of the !ivil !ode in favor of 3PI.
III.
The !ourt of (ppeals co--itted a reversible error in holdin&, based on a
-isapprehension of facts, that the account fro- "hich 3PI debited the a-ount of
P,69,9:9.9: belon&ed to a corporation "ith a separate and distinct personalit2.
IV.
The !ourt of (ppeals co--itted a reversible error in holdin&, based entirel2 on
speculations, sur-ises or con>ectures, that there "as an a&ree-ent bet"een S(D(E(R
and TMPDONFVO that chec%s pa2able to TMPDONFVO -a2 be deposited b2
S(D(E(R to her personal account and that 3PI "as priv2 to this a&ree-ent.
V.
The !ourt of (ppeals co--itted reversible error in holdin&, based entirel2 on
speculation, sur-ises or con>ectures, that S(D(E(R suffered &reat da-a&e and
pre>udice and that her business standin& "as eroded.
VI.
The !ourt of (ppeals erred in affir-in& instead of reversin& the decision of the lo"er
court a&ainst 3PI and dis-issin& S(D(E(R;s co-plaint.
VII.
The 7onorable !ourt erred in affir-in& the decision of the lo"er court dis-issin& the
third.part2 co-plaint of 3PI.
9
The issues center on the propriet2 of the deductions -ade b2 petitioner fro- private
respondent Sala1ar;s account. Stated other"ise, does a collectin& ban%, over the
ob>ections of its depositor, have the authorit2 to "ithdra" unilaterall2 fro- such
depositor;s account the a-ount it had previousl2 paid upon certain unendorsed order
instru-ents deposited b2 the depositor to another account that she later closedG
Petitioner ar&ues thus0
'. There is no presu-ption in la" that a chec% pa2able to order, "hen found in the
possession of a person "ho is neither a pa2ee nor the indorsee thereof, has been
la"full2 transferred for value. 7ence, the !( should not have presu-ed that
Sala1ar "as a transferee for value "ithin the conte-plation of Section #* of the
Ne&otiable Instru-ents Da",
+
as the latter applies onl2 to a holder defined under
Section '*'of the sa-e.
*
,. Sala1ar failed to adduce sufficient evidence to prove that her possession of the
three chec%s "as la"ful despite her alle&ations that these chec%s "ere deposited
pursuant to a prior internal arran&e-ent "ith Te-plonuevo and that petitioner "as
priv2 to the arran&e-ent.
). The !( should have applied the !ivil !ode provisions on le&al co-pensation
because in deductin& the sub>ect a-ount fro- Sala1ar;s account, petitioner "as
-erel2 rectif2in& the undue pa2-ent it -ade upon the chec%s and e8ercisin& its
prero&ative to alter or -odif2 an erroneous credit entr2 in the re&ular course of its
business.
#. The debit of the a-ount fro- the account of (.(. Sala1ar !onstruction and
n&ineerin& Services "as proper even thou&h the value of the chec%s had been
ori&inall2 credited to the personal account of Sala1ar because (.(. Sala1ar
!onstruction and n&ineerin& Services, an unincorporated sin&le proprietorship,
had no separate and distinct personalit2 fro- Sala1ar.
$. (ssu-in& the deduction fro- Sala1ar;s account "as i-proper, the !( should
not have dis-issed petitioner;s third.part2 co-plaint a&ainst Te-plonuevo
because the latter "ould have the le&al dut2 to return to petitioner the proceeds of
the chec%s "hich he previousl2 received fro- it.
6. There "as no factual basis for the a"ard of da-a&es to Sala1ar.
The petition is partl2 -eritorious.
First, the issue raised b2 petitioner reCuires an inCuir2 into the factual findin&s -ade b2
the !(. The !(;s conclusion that the deductions fro- the ban% account of (.(. Sala1ar
!onstruction and n&ineerin& Services "ere i-proper ste--ed fro- its findin& that
there "as no ineffective pa2-ent to Sala1ar "hich "ould call for the e8ercise of
petitioner;s ri&ht to set off a&ainst the for-er;s ban% deposits. This findin&, in turn, "as
dra"n fro- the pleadin&s of the parties, the evidence adduced durin& trial and upon the
ad-issions and stipulations of fact -ade durin& the pre.trial, -ost si&nificantl2 the
follo"in&0
4a5 That Sala1ar previousl2 had in her possession the follo"in& chec%s0
4'5 Solid 3an% !hec% No. !3966$$6 dated <anuar2 ):, '**: in the
a-ount of P$9,9',.$:B
4,5 Solid 3an% !hec% No. !3+*+*9+ dated <ul2 )', '**: in the a-ount of
P$$,'+:.::B and,
4)5 Cuitable 3an%in& !orporation !hec% No. ),)+:6)+ dated (u&ust ,+,
'**: for the a-ount of P'$#,+::.::B
4b5 That these chec%s "hich had an a&&re&ate a-ount of P,69,6*,.$: "ere
pa2able to the order of <RT !onstruction and Tradin&, the na-e and st2le under
"hich Te-plonuevo does businessB
4c5 That despite the lac% of endorse-ent of the desi&nated pa2ee upon such
chec%s, Sala1ar "as able to deposit the chec%s in her personal savin&s account
"ith petitioner and encash the sa-eB
4d5 That petitioner accepted and paid the chec%s on three 4)5 separate occasions
over a span of ei&ht -onths in '**:B and
4e5 That Te-plonuevo onl2 protested the purportedl2 unauthori1ed encash-ent of
the chec%s after the lapse of one 2ear fro- the date of the last chec%.
':
Petitioner concedes that "hen it credited the value of the chec%s to the account of private
respondent Sala1ar, it -ade a -ista%e because it failed to notice the lac% of endorse-ent
thereon b2 the desi&nated pa2ee. The !(, ho"ever, did not lend credence to this clai-
and concluded that petitioner;s actions "ere deliberate, in vie" of its ad-ission that the
H-ista%eH "as co--itted three ti-es on three separate occasions, indicatin&
acCuiescence to the internal arran&e-ent bet"een Sala1ar and Te-plonuevo. The !(
e8plained thus0
It "as Cuite apparent that the three chec%s "hich appellee Sala1ar deposited "ere not
indorsed. Three ti-es she deposited the- to her account and three ti-es the a-ounts
borne b2 these chec%s "ere credited to the sa-e. (nd in those separate occasions, the
ban% did not return the chec%s to her so that she could have the- indorsed. Neither did
the ban% Cuestion her as to "h2 she "as depositin& the chec%s to her account considerin&
that she "as not the pa2ee thereof, thus allo"in& us to co-e to the conclusion that
defendant.appellant 3PI "as full2 a"are that the proceeds of the three chec%s belon& to
appellee.
For if the ban% "as not priv2 to the a&ree-ent bet"een Sala1ar and Te-plonuevo, it is
-ost unli%el2 that appellant 3PI 4or an2 ban% for that -atter5 "ould have accepted the
chec%s for deposit on three separate ti-es nar2 an2 Cuestion. 3an%s are -ost finic%2 over
acceptin& chec%s for deposit "ithout the correspondin& indorse-ent b2 their pa2ee. In
fact, the2 hesitate to accept indorsed chec%s for deposit if the depositor is not one the2
%no" ver2 "ell.
''
The !( li%e"ise sustained Sala1ar;s position that she received the chec%s fro-
Te-plonuevo pursuant to an internal arran&e-ent bet"een the-, ratiocinatin& as follo"s0
If there "as indeed no arran&e-ent bet"een Te-plonuevo and the plaintiff over the three
Cuestioned chec%s, it baffles us "h2 it "as onl2 on (u&ust )', '**' or -ore than a 2ear
after the third and last chec% "as deposited that he de-anded for the refund of the total
a-ount of P,69,6*,.$:.
( prudent -an %no"in& that pa2-ent is due hi- "ould have de-anded pa2-ent b2 his
debtor fro- the -o-ent the sa-e beca-e due and de-andable. More so if the su-
involved runs in hundreds of thousand of pesos. 32 and lar&e, ever2 person, at the ver2
-o-ent he learns that he "as deprived of a thin& "hich ri&htfull2 belon&s to hi-, "ould
have created a bi& fuss. 7e "ould not have "aited for a 2ear "ithin "hich to do so. It is
-ost inconceivable that Te-plonuevo did not do this.
',
/enerall2, onl2 Cuestions of la" -a2 be raised in an appeal b2 certiorari under Rule #$
of the Rules of !ourt.
')
Factual findin&s of the !( are entitled to &reat "ei&ht and
respect, especiall2 "hen the !( affir-s the factual findin&s of the trial court.
'#
Such
Cuestions on "hether certain ite-s of evidence should be accorded probative value or
"ei&ht, or re>ected as feeble or spurious, or "hether or not the proofs on one side or the
other are clear and convincin& and adeCuate to establish a proposition in issue, are
Cuestions of fact. The sa-e holds true for Cuestions on "hether or not the bod2 of proofs
presented b2 a part2, "ei&hed and anal21ed in relation to contrar2 evidence sub-itted b2
the adverse part2 -a2 be said to be stron&, clear and convincin&, or "hether or not
inconsistencies in the bod2 of proofs of a part2 are of such &ravit2 as to >ustif2 refusin& to
&ive said proofs "ei&ht I all these are issues of fact "hich are not revie"able b2 the
!ourt.
'$

This rule, ho"ever, is not absolute and ad-its of certain e8ceptions, na-el20 a5 "hen the
conclusion is a findin& &rounded entirel2 on speculations, sur-ises, or con>ecturesB b5
"hen the inference -ade is -anifestl2 -ista%en, absurd, or i-possibleB c5 "hen there is a
&rave abuse of discretionB d5 "hen the >ud&-ent is based on a -isapprehension of factsB
e5 "hen the findin&s of fact are conflictin&B f5 "hen the !(, in -a%in& its findin&s, "ent
be2ond the issues of the case and the sa-e are contrar2 to the ad-issions of both
appellant and appelleeB &5 "hen the findin&s of the !( are contrar2 to those of the trial
courtB h5 "hen the findin&s of fact are conclusions "ithout citation of specific evidence
on "hich the2 are basedB i5 "hen the findin& of fact of the !( is pre-ised on the
supposed absence of evidence but is contradicted b2 the evidence on recordB and >5 "hen
the !( -anifestl2 overloo%ed certain relevant facts not disputed b2 the parties and
"hich, if properl2 considered, "ould >ustif2 a different conclusion.
'6
In the present case, the records do not support the findin& -ade b2 the !( and the trial
court that a prior arran&e-ent e8isted bet"een Sala1ar and Te-plonuevo re&ardin& the
transfer of o"nership of the chec%s. This fact is crucial as Sala1ar;s entitle-ent to the
value of the instru-ents is based on the assu-ption that she is a transferee "ithin the
conte-plation of Section #* of the Ne&otiable Instru-ents Da".
Section #* of the Ne&otiable Instru-ents Da" conte-plates a situation "hereb2 the
pa2ee or indorsee delivers a ne&otiable instru-ent for value "ithout indorsin& it, thus0
Transfer without indorsement; effect of. =here the holder of an instru-ent pa2able to his
order transfers it for value "ithout indorsin& it, the transfer vests in the transferee such
title as the transferor had therein, and the transferee acCuires in addition, the ri&ht to have
the indorse-ent of the transferor. 3ut for the purpose of deter-inin& "hether the
transferee is a holder in due course, the ne&otiation ta%es effect as of the ti-e "hen the
indorse-ent is actuall2 -ade.
'9
It bears stressin& that the above transaction is an eCuitable assi&n-ent and the transferee
acCuires the instru-ent sub>ect to defenses and eCuities available a-on& prior parties.
Thus, if the transferor had le&al title, the transferee acCuires such title and, in addition,
the ri&ht to have the indorse-ent of the transferor and also the ri&ht, as holder of the le&al
title, to -aintain le&al action a&ainst the -a%er or acceptor or other part2 liable to the
transferor. The underl2in& pre-ise of this provision, ho"ever, is that a valid transfer of
o"nership of the ne&otiable instru-ent in Cuestion has ta%en place.
Transferees in this situation do not en>o2 the presu-ption of o"nership in favor of
holders since the2 are neither pa2ees nor indorsees of such instru-ents. The "ei&ht of
authorit2 is that the -ere possession of a ne&otiable instru-ent does not in itself
conclusivel2 establish either the ri&ht of the possessor to receive pa2-ent, or of the ri&ht
of one "ho has -ade pa2-ent to be dischar&ed fro- liabilit2. Thus, so-ethin& -ore than
-ere possession b2 persons "ho are not pa2ees or indorsers of the instru-ent is
necessar2 to authori1e pa2-ent to the- in the absence of an2 other facts fro- "hich the
authorit2 to receive pa2-ent -a2 be inferred.
'+

The !( and the trial court sur-ised that the sub>ect chec%s belon&ed to private
respondent Sala1ar based on the pre.trial stipulation that Te-plonuevo incurred a one.
2ear dela2 in de-andin& rei-burse-ent for the proceeds of the sa-e. To the !ourt;s
-ind, ho"ever, such period of dela2 is not of such unreasonable len&th as to estop
Te-plonuevo fro- assertin& o"nership over the chec%s especiall2 considerin& that it "as
readil2 apparent on the face of the instru-ents
'*
that these "ere crossed chec%s.
In State Investment House v. IAC,
,:
the !ourt enu-erated the effects of crossin& a chec%,
thus0 4'5 that the chec% -a2 not be encashed but onl2 deposited in the ban%B 4,5 that the
chec% -a2 be ne&otiated onl2 once . to one "ho has an account "ith a ban%B and 4)5 that
the act of crossin& the chec% serves as a "arnin& to the holder that the chec% has been
issued for a definite purpose so that such holder -ust inCuire if the chec% has been
received pursuant to that purpose.
Thus, even if the dela2 in the de-and for rei-burse-ent is ta%en in con>unction "ith
Sala1ar;s possession of the chec%s, it cannot be said that the presu-ption of o"nership in
Te-plonuevo;s favor as the desi&nated pa2ee therein "as sufficientl2 overco-e. This is
consistent "ith the principle that if instru-ents pa2able to na-ed pa2ees or to their order
have not been indorsed in blan%, onl2 such pa2ees or their indorsees can be holders and
entitled to receive pa2-ent in their o"n ri&ht.
,'

The presu-ption under Section ')'4s5 of the Rules of !ourt statin& that a ne&otiable
instru-ent "as &iven for a sufficient consideration "ill not inure to the benefit of Sala1ar
because the ter- H&ivenH does not pertain -erel2 to a transfer of ph2sical possession of
the instru-ent. The phrase H&iven or indorsedH in the conte8t of a ne&otiable instru-ent
refers to the -anner in "hich such instru-ent -a2 be ne&otiated. Ne&otiable instru-ents
are ne&otiated b2 Htransfer to one person or another in such a -anner as to constitute the
transferee the (o)&*r thereof. If pa2able to bearer it is ne&otiated b2 deliver2. If pa2able
to order it is ne&otiated b2 the indorse-ent co-pleted b2 deliver2.H
,,
The present case
involves chec%s pa2able to order. Not bein& a +ay** or ,n&or-** of the chec%s, private
respondent Sala1ar could not be a (o)&*r thereof.
It is an e8ception to the &eneral rule for a pa2ee of an order instru-ent to transfer the
instru-ent "ithout indorse-ent. Precisel2 because the situation is abnor-al, it is but fair
to the -a%er and to prior holders to reCuire possessors to prove "ithout the aid of an
initial presu-ption in their favor, that the2 ca-e into possession b2 virtue of a le&iti-ate
transaction "ith the last holder.
,)
Sala1ar failed to dischar&e this burden, and the return of
the chec% proceeds to Te-plonuevo "as therefore "arranted under the circu-stances
despite the fact that Te-plonuevo -a2 not have clearl2 de-onstrated that he never
authori1ed Sala1ar to deposit the chec%s or to encash the sa-e. Note"orth2 also is the
fact that petitioner sta-ped on the bac% of the chec%s the "ords0 H(ll prior endorse-ents
andJor lac% of endorse-ents &uaranteed,H thereb2 -a%in& the assurance that it had
ascertained the &enuineness of all prior endorse-ents. 7avin& assu-ed the liabilit2 of a
&eneral indorser, petitioner;s liabilit2 to the desi&nated pa2ee cannot be denied.
!onseCuentl2, petitioner, as the collectin& ban%, had the ri&ht to debit Sala1ar;s account
for the value of the chec%s it previousl2 credited in her favor. It is of no -o-ent that the
account debited b2 petitioner "as different fro- the ori&inal account to "hich the
proceeds of the chec% "ere credited because both ad-ittedl2 belon&ed to Sala1ar, the
for-er bein& the account of the sole proprietorship "hich had no separate and distinct
personalit2 fro- her, and the latter bein& her personal account.
The ri&ht of set.off "as e8plained in Associated Bank v. Tan:
,#
( ban% &enerall2 has a ri&ht of set.off over the deposits therein for the pa2-ent of an2
"ithdra"als on the part of a depositor. The ri&ht of a collectin& ban% to debit a clientKs
account for the value of a dishonored chec% that has previousl2 been credited has fairl2
been established b2 >urisprudence. To be&in "ith, (rticle '*+: of the !ivil !ode provides
that H?f@i8ed, savin&s, and current deposits of -one2 in ban%s and si-ilar institutions
shall be &overned b2 the provisions concernin& si-ple loan.H
7ence, the relationship bet"een ban%s and depositors has been held to be that of creditor
and debtor. Thus, le&al co-pensation under (rticle ',9+ of the !ivil !ode -a2 ta%e
place H"hen all the reCuisites -entioned in (rticle ',9* are present,H as follo"s0
4'5 That each one of the obli&ors be bound principall2, and that he be at the sa-e
ti-e a principal creditor of the otherB
4,5 That both debts consist in a su- of -one2, or if the thin&s due are
consu-able, the2 be of the sa-e %ind, and also of the sa-e Cualit2 if the latter has
been statedB
4)5 That the t"o debts be dueB
4#5 That the2 be liCuidated and de-andableB
4$5 That over neither of the- there be an2 retention or controvers2, co--enced
b2 third persons and co--unicated in due ti-e to the debtor.
=hile, ho"ever, it is conceded that petitioner had the ri&ht of set.off over the a-ount it
paid to Te-plonuevo a&ainst the deposit of Sala1ar, the issue of "hether it acted
>udiciousl2 is an entirel2 different -atter.
,$
(s businesses affected "ith public interest,
and because of the nature of their functions, ban%s are under obli&ation to treat the
accounts of their depositors "ith -eticulous care, al"a2s havin& in -ind the fiduciar2
nature of their relationship.
,6
In this re&ard, petitioner "as clearl2 re-iss in its dut2 to
private respondent Sala1ar as its depositor.
To be&in "ith, the irre&ularit2 appeared plainl2 on the face of the chec%s. Despite the
obvious lac% of indorse-ent thereon, petitioner per-itted the encash-ent of these chec%s
three ti-es on three separate occasions. This ne&ates petitioner;s clai- that it -erel2
-ade a -ista%e in creditin& the value of the chec%s to Sala1ar;s account and instead
bolsters the conclusion of the !( that petitioner reco&ni1ed Sala1ar;s clai- of o"nership
of chec%s and acted deliberatel2 in pa2in& the sa-e, contrar2 to ordinar2 ban%in& polic2
and practice. It -ust be e-phasi1ed that the la" i-poses a dut2 of dili&ence on the
collectin& ban% to scrutini1e chec%s deposited "ith it, for the purpose of deter-inin& their
&enuineness and re&ularit2. The collectin& ban%, bein& pri-aril2 en&a&ed in ban%in&,
holds itself out to the public as the e8pert on this field, and the la" thus holds it to a hi&h
standard of conduct.
,9
The ta%in& and collection of a chec% "ithout the proper
indorse-ent a-ount to a conversion of the chec% b2 the ban%.
,+

More i-portantl2, ho"ever, solel2 upon the pro-ptin& of Te-plonuevo, and "ith full
%no"led&e of the bre"in& dispute bet"een Sala1ar and Te-plonuevo, petitioner debited
the account held in the na-e of the sole proprietorship of Sala1ar "ithout even servin&
due notice upon her. This ran contrar2 to petitioner;s assurances to private respondent
Sala1ar that the account "ould re-ain untouched, pendin& the resolution of the
controvers2 bet"een her and Te-plonuevo.
,*
In this connection, the !( cited the letter
dated Septe-ber $, '**' of Mr. Manuel (blan, Senior Mana&er of petitioner ban%;s
Pasi&JOrti&as branch, to private respondent Sala1ar infor-in& her that her account had
been fro1en, thus0
Fro- the tenor of the letter of Manuel (blan, it is safe to conclude that (ccount No.
:,:'.:$++.#+ "ill re-ain fro1en or untouched until herein ?Sala1ar@ has settled -atters
"ith Te-plonuevo. 3ut, in an une8pected -ove, in less than t"o "ee%s 4eleven da2s to
be precise5 fro- the ti-e that letter "as "ritten, ?petitioner@ ban% issued a cashier;s chec%
in the na-e of <ulio R. Te-plonuevo of the <.R.T. !onstruction and Tradin& for the su-
of P,69,6*,.$: 48hibit H+H5 and debited said a-ount fro- Ms. (rcilla;s account No.
:,:'.:$++.#+ "hich "as supposed to be fro1en or controlled. Such a -ove b2 3PI is, to
Our -inds, a clear case of ne&li&ence, if not a fraudulent, "anton and rec%less disre&ard
of the ri&ht of its depositor.
The records further bear out the fact that respondent Sala1ar had issued several chec%s
dra"n a&ainst the account of (.(. Sala1ar !onstruction and n&ineerin& Services prior to
an2 notice of deduction bein& served. The !( sustained private respondent Sala1ar;s
clai- of da-a&es in this re&ard0
The act of the ban% in free1in& and later debitin& the a-ount of P,69,6*,.$: fro- the
account of (.(. Sala1ar !onstruction and n&ineerin& Services caused plaintiff.appellee
&reat da-a&e and pre>udice particularl2 "hen she had alread2 issued chec%s dra"n
a&ainst the said account. (s can be e8pected, the said chec%s bounced. To prove this,
plaintiff.appellee presented as e8hibits photocopies of chec%s dated Septe-ber +, '**',
October ,+, '**', and Nove-ber '#, '**' 48hibits HDH, HH and HFH respectivel25
):

These chec%s, it -ust be e-phasi1ed, "ere subseCuentl2 dishonored, thereb2 causin&
private respondent Sala1ar undue e-barrass-ent and inflictin& da-a&e to her standin& in
the business co--unit2. Fnder the circu-stances, she "as clearl2 not &iven the
opportunit2 to protect her interest "hen petitioner unilaterall2 "ithdre" the above
a-ount fro- her account "ithout infor-in& her that it had alread2 done so.
For the above reasons, the !ourt finds no reason to disturb the a"ard of da-a&es &ranted
b2 the !( a&ainst petitioner. This "hole incident "ould have been avoided had petitioner
adhered to the standard of dili&ence e8pected of one en&a&ed in the ban%in& business. (
depositor has the ri&ht to recover reasonable -oral da-a&es even if the ban%;s ne&li&ence
-a2 not have been attended "ith -alice and bad faith, if the for-er suffered -ental
an&uish, serious an8iet2, e-barrass-ent and hu-iliation.
)'
Moral da-a&es are not -eant
to enrich a co-plainant at the e8pense of defendant. It is onl2 intended to alleviate the
-oral sufferin& she has under&one. The a"ard of e8e-plar2 da-a&es is >ustified, on the
other hand, "hen the acts of the ban% are attended b2 -alice, bad faith or &ross
ne&li&ence. The a"ard of reasonable attorne2;s fees is proper "here e8e-plar2 da-a&es
are a"arded. It is proper "here depositors are co-pelled to liti&ate to protect their
interest.
),

.!EREORE, the petition is partiall2 GRANTE$. The assailed Decision dated (pril
), '**+ and Resolution dated (pril ), '**+ rendered b2 the !ourt of (ppeals in !(./.R.
!V No. #,,#' are MO$""E$ insofar as it ordered petitioner 3an% of the Philippine
Islands to return the a-ount of T"o 7undred Si8t2.seven Thousand Seven 7undred and
Seven and 9:J':: Pesos 4P,69,9:9.9:5 to respondent (nnabelle (. Sala1ar, "hich
portion is RE'ERSE$ and SET AS"$E. In all other respects, the sa-e are
A"RME$.
No costs.
SO ORDRD.
A$O#O S. A%CUNA
(ssociate <ustice
.E CONCUR/
RE0NATO S. PUNO
!hairperson
!hief <ustice
ANGE#"NA SAN$O'A#1GUT"ERRE%
(ssociate <ustice
RENATO C. CORONA
(sscociate <ustice
CANC"O C. GARC"A
(ssociate <ustice
C E R T " " C A T " O N
Pursuant to Section '), (rticle VIII of the !onstitution, it is hereb2 certified that the
conclusions in the above Decision had been reached in consultation before the case "as
assi&ned to the "riter of the opinion of the !ourt;s Division.
RE0NATO S. PUNO
!hief <ustice
oo2no2*-
'
!( Rollo, pp. '::.''6.
,
Rollo, p. $9.
)
!( Rollo, pp. '::.':$.
#
Records, pp. ),).),#.
$
Private respondent Te-plonuevo ad-itted that he "as doin& business under the
na-e and st2le, H<RT
!onstruction and Tradin&.H See Records, p.!".
6
Rollo, p. ':6.
9
Id. at ',.').
+
Infra note '9.
*
Sec. '*'. Definition and -eanin& of ter-s. . In this (ct, unless the contract
other"ise reCuires0
8 8 8
H7olderH -eans the pa2ee or indorsee of a bill or note "ho is in
possession of it, or the bearer thereofB
8 8 8
':
Records, pp. '9+.'9*.
''
!( Rollo, pp. ':6.':9.
',
Id. at ':9.
')
#adri$a% v. CA, /.R. No. '#,*##, (pril '$, ,::$, #$6 S!R( ,#9B Bernardo v.
CA, /.R. No. ':'6+:, Dece-ber 9, '**,, ,'6 S!R( ,,#B Rema%ante v. Ti&e,
/.R. No. D.$*$'#, Februar2 ,$,'*++, '$+ S!R( ')+.
'#
Borromeo v. Sun, /.R. No. 9$*:+, October ,,, '***, )'9 S!R( '96.
'$
'aterno v. 'aterno, /.R. No. 6)6+:, March ,), '**:, '+) S!R( 6):.
'6
Arca&a v. Ta&ancura, #,' Phil. ':*6 4,::'5B #artine( v. CA, /.R. No. ',)$#9,
Ma2 ,', ,::', )$+ S!R( )+.
'9
(ct No. ,:)' 4'*''5.
'+
'' (- <ur ,d, L *++, citin& Doubleda2 v. Mress, $: NN #':, 7off-aster v.
3lac%, +# N #,), and First Nat. 3an% v. /or-an, ,' P,d $#*.
'*
Records, pp. ,+6.,*).
,:
/.R. No. 9,96#, <ul2 '), '*+*, '9$ S!R( )':.
,'
Supra note '+.
,,
Ne&otiable Instru-ents Da", Section ):.
,)
!a-pos <r. and Dope1 !a-pos, HNotes and Selected !ases on Ne&otiable
Instru-ents Da",H p. ':+, 4'**#5.
,#
/.R. No. '$6*#:, Dece-ber '#, ,::#, ##6 S!R( ,+,.
,$
Id.
,6
'rudentia% Bank v. CA, /.R. No. ',$$)6, March '6, ,:::, ),+ S!R( ,6#B
Sime) Internationa% *#ani%a+, Inc. v. CA, /.R. No.++:'), March '*, '**:, '+)
S!R( )6:B B'I v. IAC, /.R. No. 6*'6,, Februar2 ,', '**,, ,:6 S!R( #:+.
,9
Banco de ,ro Savin$s and #ort$a$e Bank v. -.uita&%e Bankin$ Corp., /.R.
No. D.9#*'9, <anuar2 ,:,'*++, '$9 S!R( '++.
,+
Associated Bank v. CA, /.R. No. +*+:,, Ma2 9, '**,, ,:+ S!R( #6$B Cit/
Trust Bankin$ Corp. v. IAC, /.R. No. +#,+', Ma2 ,9, '**#, ,), S!R( $$*.
,*
!( rollo, p. '',B Transcript of Steno&raphic Notes dated Nove-ber *, '**,, pp.
+.*.
):
!( rollo, pp. '''.
)'
!ivil !ode, (rticle ,,'9.
),
'rudentia% Bank v. CA, supra note ,6.