Republic of the Philippines
189 [million] which is the last
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 150886 February 16, 2007
RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his capacity as
majority stockholder in the Rural Bankof San Miguel, Inc., Petitioners,
vs.
MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT
INSURANCE CORPORATION, Respondents.
DECISION
CORONA, J.:
This is a petition for review on certiorari 1 of a decision2 and resolution3 of the Court of Appeals
(CA) dated March 28, 2000 and November 13, 2001, respectively, in CA-G.R. SP No. 57112.
Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic corporation engaged in
banking. It started operations in 1962 and by year 2000 had 15 branches in
Bulacan.4 Petitioner Hilario P. Soriano claims to be the majority stockholder of its outstanding
shares of stock.5
On January 21, 2000, respondent Monetary Board (MB), the governing board of respondent
Bangko Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting RBSM from doing
business in the Philippines, placing it under receivership and designating respondent
Philippine Deposit Insurance Corporation (PDIC) as receiver:
On the basis of the comptrollership/monitoring report as of October 31, 1999 as reported by Mr.
Wilfredo B. Domo-ong, Director, Department of Rural Banks, in his memorandum dated
January 20, 2000, which report showed that [RBSM] (a) is unable to pay its liabilities as they
become due in the ordinary course of business; (b) cannot continue in business without
involving probable losses to its depositors and creditors; that the management of the bank had
been accordingly informed of the need to infuse additional capital to place the bank in a solvent
financial condition and was given adequate time within which to make the required infusion
and that no infusion of adequate fresh capital was made, the Board decided as follows:
1. To prohibit the bank from doing business in the Philippines and to place its assets and
affairs under receivership in accordance with Section 30 of [RA 7653];
2. To designate the [PDIC] as receiver of the bank;
xxx xxx xxx6
On January 31, 2000, petitioners filed a petition for certiorari and prohibition in the Regional
Trial Court (RTC) of Malolos, Branch 22 to nullify and set aside Resolution No. 105. 7 However,
on February 7, 2000, petitioners filed a notice of withdrawal in the RTC and, on the same day,
filed a special civil action for certiorari and prohibition in the CA. On February 8, 2000, the RTC
dismissed the case pursuant to Section 1, Rule 17 of the Rules of Court. 8
The CA’s findings of facts were as follows.
To assist its impaired liquidity and operations, the RBSM was granted emergency loans on
different occasions in the aggregate amount of ₱375 [million].
As early as November 18, 1998, Land Bank of the Philippines (LBP) advised RBSM that it will
terminate the clearing of RBSM’s checks in view of the latter’s frequent clearing losses and
continuing failure to replenish its Special Clearing Demand Deposit with LBP. The BSP
interceded with LBP not to terminate the clearing arrangement of RBSM to protect the interests
of RBSM’s depositors and creditors.
After a year, or on November 29, 1999, the LBP informed the BSP of the termination of the
clearing facility of RBSM to take effect on December 29, 1999, in view of the clearing problems
of RBSM.
On December 28, 1999, the MB approved the release of ₱26.
tranche of the ₱375 million emergency loan for the sole purpose of servicing and meeting the
withdrawals of its depositors. Of the ₱26.180 million, xxx ₱12.6 million xxx was not used to
service withdrawals [and] remains unaccounted for as admitted by [RBSM’s Treasury Officer
and Officer-in-Charge of Treasury]. Instead of servicing withdrawals of depositors, RBSM paid
Forcecollect Professional Solution, Inc. and Surecollect Professional, Inc., entities which are
owned and controlled by Hilario P. Soriano and other RBSM officers.
On January 4, 2000, RBSM declared a bank holiday. RBSM and all of its 15 branches were
closed from doing business.
Alarmed and disturbed by the unilateral declaration of bank holiday, [BSP] wanted to examine
the books and records of RBSM but encountered problems.
Meanwhile, on November 10, 1999, RBSM’s designated comptroller, Ms. Zenaida Cabais of
the BSP, submitted to the Department of Rural Banks, BSP, a Comptrollership Report on her
findings on the financial condition and operations of the bank as of October 31, 1999. Another
set of findings was submitted by said comptroller [and] this second report reflected the financial
status of RBSM as of December 31, 1999.
The findings of the comptroller on the financial state of RBSM as of October 31, 1999 in
comparison with the financial condition as of December 31, 1999 is summed up pertinently as
follows:
FINANCIAL CONDITION OF RBSM
As of Oct. 31, 1999 As of Dec. 31, 1999
Total obligations/
₱1,076,863,000.00 1,009,898,000.00
Liabilities
Realizable Assets 898,588,000.00 796,930,000.00
Deficit 178,275,000.00 212,968,000.00
Cash on Hand 101,441.547.00 8,266,450.00
Required Capital Infusion ₱252,120,000.00
Capital Infusion ₱5,000,000.00
(On Dec. 20, 1999)
Actual Breakdown of Total Obligations:
1) Deposits of 20,000 depositors – ₱578,201,000.00
2) Borrowings from BSP – ₱320,907,000.00
3) Unremitted withholding and gross receipt taxes – ₱57,403,000.00.9
Based on these comptrollership reports, the director of the Department of Rural Banks
Supervision and Examination Sector, Wilfredo B. Domo-ong, made a report to the MB dated
January 20, 2000.10 The MB, after evaluating and deliberating on the findings and
recommendation of the Department of Rural Banks Supervision and Examination Sector,
issued Resolution No. 105 on January 21, 2000. 11 Thereafter, PDIC implemented the closure
order and took over the management of RBSM’s assets and affairs.
In their petition12 before the CA, petitioners claimed that respondents MB and BSP committed
grave abuse of discretion in issuing Resolution No. 105. The petition was dismissed by the CA
on March 28, 2000. It held, among others, that the decision of the MB to issue Resolution No.
105 was based on the findings and recommendations of the Department of Rural Banks
Supervision and Examination Sector, the comptroller reports as of October 31, 1999 and
December 31, 1999 and the declaration of a bank holiday. Such could be considered as
substantial evidence.13
Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC stating that RBSM
could not resume business with sufficient assurance of protecting the interest of its depositors,
creditors and the general public, the MB passed Resolution No. 966 directing PDIC to proceed
with the liquidation of RBSM under Section 30 of RA 7653. 14
Hence this petition.
It is well-settled that the closure of a bank may be considered as an exercise of police
power.15 The action of the MB on this matter is final and executory.16 Such exercise may
nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.17
Petitioners argue that Resolution No. 105 was bereft of any basis considering that no complete
examination had been conducted before it was issued. This case essentially boils down to one
core issue: whether Section 30 of RA 7653 (also known as the New Central Bank Act) and
applicable jurisprudence require a current and completeexamination of the bank before it can
be closed and placed under receivership.
Section 30 of RA 7653 provides:
SECTION 30. Proceedings in Receivership and Liquidation. — Whenever, upon report of the
head of the supervising or examining department, the Monetary Board finds that a bank or
quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands induced
by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the [BSP] to meet its liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or creditors;
or
(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.
xxx xxx xxx
The actions of the Monetary Board taken under this section or under Section 29 of this Act
shall be final and executory, and may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for
certiorari may only be filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of the institution of the
order directing receivership, liquidation or conservatorship. (Emphasis supplied)
xxx xxx xxx
Petitioners contend that there must be a current, thorough and complete examination before a
bank can be closed under Section 30 of RA 7653. They argue that this section should be
harmonized with Sections 25 and 28 of the same law:
SECTION 25. Supervision and Examination. — The [BSP] shall have supervision over,
and conduct periodic or special examinations of, banking institutions and quasi-banks,
including their subsidiaries and affiliates engaged in allied activities.
xxx xxx xxx
SECTION 28. Examination and Fees. — The supervising and examining department head,
personally or by deputy, shall examine the books of every banking institution once in every
twelve (12) months, and at such other time as the Monetary Board by an affirmative vote of five
(5) members may deem expedient and to make a report on the same to the Monetary
Board: Provided that there shall be an interval of at least twelve (12) months between annual
examinations. (Emphasis supplied)
xxx xxx xxx
According to the petitioners, it is clear from these provisions that the "report of the supervising
or examining department" required under Section 30 refers to the report on the examination of
the bank which, under Section 28, must be made to the MB after the supervising or examining
head conducts an examination mandated by Sections 25 and 28. 18 They cite Banco Filipino
Savings & Mortgage Bank v. Monetary Board, Central Bank of the Philippines 19 wherein the
Court ruled:
There is no question that under Section 29 of the Central Bank Act, the following are
the mandatory requirements to be complied with before a bank found to be insolvent is
ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall
be conducted by the head of the appropriate supervising or examining department or
his examiners or agents into the condition of the bank; secondly, it shall be disclosed in
the examination that the condition of the bank is one of insolvency, or that its continuance in
business would involve probable loss to its depositors or creditors; thirdly, the department
head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the
Monetary Board shall find the statements of the department head to be true. 20 (Emphasis
supplied)
Petitioners assert that an examination is necessary and not a mere report, otherwise the
decision to close a bank would be arbitrary.
Respondents counter that RA 7653 merely requires a report of the head of the supervising or
examining department. They maintain that the term "report" under Section 30 and the word
"examination" used in Section 29 of the old law are not synonymous. "Examination" connotes
in-depth analysis, evaluation, inquiry or investigation while "report" connotes a simple
disclosure or narration of facts for informative purposes.21
Petitioners’ contention has no merit. Banco Filipino and other cases petitioners cited22 were
decided using Section 29 of the old law (RA 265):
SECTION 29. Proceedings upon insolvency. — Whenever, upon examination by the head
of the appropriate supervising or examining department or his examiners or agents into
the condition of any bank or non-bank financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or creditors, it shall be
the duty of the department head concerned forthwith, in writing, to inform the Monetary Board
of the facts. The Board may, upon finding the statements of the department head to be true,
forbid the institution to do business in the Philippines and designate an official of the Central
Bank or a person of recognized competence in banking or finance, as receiver to immediately
take charge of its assets and liabilities, as expeditiously as possible collect and gather all the
assets and administer the same for the benefits of its creditors, and represent the bank
personally or through counsel as he may retain in all actions or proceedings for or against the
institution, exercising all the powers necessary for these purposes including, but not limited to,
bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary
performing quasi-banking functions. (Emphasis supplied)
xxx xxx xxx
Thus in Banco Filipino, we ruled that an "examination [conducted] by the head of the
appropriate supervising or examining department or his examiners or agents into the condition
of the bank"23 is necessary before the MB can order its closure.
However, RA 265, including Section 29 thereof, was expressly repealed by RA 7653 which
took effect in 1993. Resolution No. 105 was issued on January 21, 2000. Hence, petitioners’
reliance on Banco Filipino which was decided under RA 265 was misplaced.
In RA 7653, only a "report of the head of the supervising or examining department" is In short, MB and BSP complied with all the requirements of RA 7653. By relying on a report
necessary. It is an established rule in statutory construction that where the words of a statute before placing a bank under receivership, the MB and BSP did not only follow the letter of the
are clear, plain and free from ambiguity, it must be given its literal meaning and applied without law, they were also faithful to its spirit, which was to act expeditiously. Accordingly, the
attempted interpretation:24 issuance of Resolution No. 105 was untainted with arbitrariness.
This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech Having dispensed with the issue decisive of this case, it becomes unnecessary to resolve the
is the index of intention) rests on the valid presumption that the words employed by the other minor issues raised.31
legislature in a statute correctly express its intention or will and preclude the court from WHEREFORE, the petition is hereby DENIED. The March 28, 2000 decision and November
construing it differently. The legislature is presumed to know the meaning of the words, to have 13, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 57112 are AFFIRMED.
used words advisedly, and to have expressed its intent by use of such words as are found in Costs against petitioners.
the statute. Verba legis non est recedendum, or from the words of a statute there should be no SO ORDERED.
departure.25
The word "report" has a definite and unambiguous meaning which is clearly different from
"examination." A report, as a noun, may be defined as "something that gives information" or "a
usually detailed account or statement." 26On the other hand, an examination is "a search,
investigation or scrutiny."27
This Court cannot look for or impose another meaning on the term "report" or to construe it as
synonymous with "examination." From the words used in Section 30, it is clear that RA 7653
no longer requires that an examination be made before the MB can issue a closure order. We
cannot make it a requirement in the absence of legal basis.
Indeed, the court may consider the spirit and reason of the statute, where a literal meaning
would lead to absurdity, contradiction, injustice, or would defeat the clear purpose of the
lawmakers.28 However, these problems are not present here. Using the literal meaning of
"report" does not lead to absurdity, contradiction or injustice. Neither does it defeat the intent of
the legislators. The purpose of the law is to make the closure of a bank summary and
expeditious in order to protect public interest. This is also why prior notice and hearing are no
longer required before a bank can be closed.29
Laying down the requisites for the closure of a bank under the law is the prerogative of the
legislature and what its wisdom dictates. The lawmakers could have easily retained the word
"examination" (and in the process also preserved the jurisprudence attached to it) but they did
not and instead opted to use the word "report." The insistence on an examination is not
sanctioned by RA 7653 and we would be guilty of judicial legislation were we to make it a
requirement when such is not supported by the language of the law.
What is being raised here as grave abuse of discretion on the part of the respondents was the
lack of an examination and not the supposed arbitrariness with which the conclusions of the
director of the Department of Rural Banks Supervision and Examination Sector had been
reached in the report which became the basis of Resolution No. 105.1awphi1.net
The absence of an examination before the closure of RBSM did not mean that there was no
basis for the closure order. Needless to say, the decision of the MB and BSP, like any other
administrative body, must have something to support itself and its findings of fact must be
supported by substantial evidence. But it is clear under RA 7653 that the basis need not arise
from an examination as required in the old law.
We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there were
grounds that would justify RBSM’s closure. It relied on the report of Mr. Domo-ong, the head of
the supervising or examining department, with the findings that: (1) RBSM was unable to pay
its liabilities as they became due in the ordinary course of business and (2) that it could not
continue in business without incurring probable losses to its depositors and creditors.30 The
report was a 50-page memorandum detailing the facts supporting those grounds, an extensive
chronology of events revealing the multitude of problems which faced RBSM and the
recommendations based on those findings.

[G.R. No. 161276. January 31, 2005]
BORLONGAN vs. REYES
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated JAN 31 2005.
G.R. No. 161276 (Teodoro C. Borlongan vs. Alberto V. Reyes, Ma. Dolores B. Yuviengco,
Candon B. Guerrero and Tomas S. Aure, Jr.)
At bar is this petition for review on certiorari filed by petitioner Teodoro C. Borlongan,
assailing thedecision dated 18 September 2003[1] of the Court of Appeals in CA-G.R. SP No.
72234, reversing and setting aside the Orders dated 2 July 2002 and 30 July 2002 of the
Ombudsman in OMB-ADM-0-00-0867 which respectively declared herein respondents guilty
of simple neglect of duty, and denied both parties' separate motions for reconsideration.
In a complaint-affidavit filed with Office of the Ombudsman and thereat docketed as
OMB-ADM-0-00-0867, petitioner Teodoro C. Borlongan, former president and chief executive
officer of Union Bank, Inc. (UBI), administratively charged herein respondent officials of the
Bangko Sentral ng Pilipinas (BSP), for allegedly falsifying statement of facts in the
BSP Supervision and Examination Sector (SES) reports and tendering incorrect and
inaccurate reports and opinions to conjure false grounds for the closure of UBI and Urbancorp
Development Bank and placing them under receivership, to the detriment of their shareholders,
officers and employees.
In an Order dated 2 July 2002,[2]cralaw the Ombudsman found respondents guilty of simple
neglect of duty and imposed upon them the penalty of one (1) month and one (1) day
suspension without pay. In a subsequent Order dated 30 July 2002,[3]cralawthe Ombudsman
denied both parties' motions for reconsideration.
Therefrom, both parties interposed separate appellate recourses to the Court of Appeals.
Respondents were the first to appeal via a petition for review, which was docketed in the Court
of Appeals as CA-G.R. SP No. 72234 and raffled off to its 17th Division.
For his part, petitioner, also thru a petition for review, questioned before the Court of Appeals
the Ombudsman's absolution of the BSP Governor and its General Counsel from his
affidavit-complaint, and sought the imposition of a graver penalty against the herein
respondents. Docketed as CA-G.R. SP No. 72270, petitioner's appeal landed to
the 5th Division of the appellate court.
Initially, petitioner filed a motion to consolidate the two (2) cases. Later, however, he not only
withdrew said motion but even vigorously opposed the consolidation.
Unconsolidated, the two (2) cases proceeded separately. And, as it turned out, the two (2)
divisions of the Court of Appeals rendered conflicting decisions.
Thus, in a decision dated 13 August 2003,[4] the 5th Division modified the questioned orders
of the Ombudsman by finding the herein respondents, including the BSP Governor, guilty of
gross neglect of duty and imposing on each of them the penalty of one (1) year suspension
without pay.
On the other hand, the 17th Division, in a decision dated 18 September
2003,[5]cralawreversed and set aside the same assailed orders of the Ombudsman and
dismissed the administrative complaints against the herein respondents.
Petitioner filed a motion for reconsideration, imploring the 17th Division to set aside
its September 18,2003 decision for being inconsistent with the August 13, 2003 decision of the
5th Division in CA-G.R. SP No. 72270.
In a Resolution dated 17 December 2003,[6]cralaw the 17th Division denied petitioner's motion
for reconsideration, and, in the process, castigated petitioner for his refusal to have the two (2)
cases consolidated:
Without a consolidation, there is no rule of law or jurisprudence that prevents us, the
17th Division, from deciding SP 72234 according to our own independent judgment, any more
than the 5th Division can be prevented from ruling upon SP 72270 according to their own
independent judgment.
The records show that respondent had, indeed, filed with us a motion to consolidate SP 72270
with our SP 72234. But for reasons only known to him, he withdrew the motion for
consolidation. He even said that the 5th Division had eventually denied the consolidation of the
case with us, again for reasons we do not know.
Under these circumstances, without a consolidation, both divisions will have to decide their
own cases, and any resulting conflict in the decisions on similar issues of fact and law will have
to be resolved ultimately by the Supreme Court as the supreme arbiter of all justiciable
controversies in this jurisdiction.
But for the respondent to make it appear as if we are to blame for the conflict between the two
divisions of the Court, after the respondent refused to consolidate the cases before us, is
absurd and comical. Absurd, because he is saying in so many words that we should not
exercise an independent judgment in our case anymore after the 5th Division happened to
decide its case ahead of us and comical, because he has reduced the adjudicative process
into a race between the cases. If we had only known that this was the kind of ballgame he
wanted us to observe, we would have considered our case submitted for decision a long time
ago, immediately after he filed his comment, and bar the parties from filling replies,
memoranda and other pleadings as a waste of our time. This is how things would turn out if we
pursued his line of thinking ad absurdum.
To repeat, the respondent refused to have his case in the 5th Division consolidated before us. If
he is to fault anyone now for the consequence of this non-consolidation, he should point all his
fingers to himself.
Later, or on June 14, 2004, the former 5th Division of the Court of Appeals, this time acting as
aSpecial Division of Five in connection with the motions for reconsideration therein pending,
came out with an Amended Decision,[7]cralawamending the earlier decision of 12 August
2003 in CA-G.R. SP No. 72270 by dismissing the administrative complaint against all the
respondents therein. Petitioner elevated the same Amended Decision to this Court via a
petition for review on certiorari in G.R. No. 163765.
In a Resolution promulgated on July 26, 2004,[8]cralaw the Court, thru its Third Division,
denied the petition in G.R. No. 163765 "for failure of the petitioner to show that a reversible
error had been committed by the appellate court". In a subsequent Resolution promulgated
on October 1, 2004, the Court denied petitioner's motion for reconsideration with finality "as no
substantial arguments were raised to warrant a reconsideration thereof".
Meanwhile, on February 13, 2004, petitioner filed the instant petition for review on certiorari,
this time assailing the 18 September 2003 decision of the 17th Decision of the Court of Appeals
in CA-G.R. SP No. 72234.
Perusal of the present petition reveals that it raises substantially the same issues already
passed upon by the two (2) Divisions of the Court of Appeals and by this Court, no less, in G.R.
No. 163765.
Chanting the same tone, the recourse is unavailing.
In Philippine Retirement Authority vs. Rupa,[9]cralaw we laid down the standard definition of
simple neglect of duty, as a disregard of a duty resulting from carelessness or indifference.
Here, we find that neither gross nor simple neglect of duty characterized the acts of the
respondents. The subject SES reports prepared by respondents and submitted to the
Monetary Board were anything but haphazardly or negligently made. As it were, the reports
were a compendium of long years of monitoring by the BSP of a problem bank, and assembled
over a period of 15 hours after the respondents were instructed to do so. The data contained
therein had been patiently collected and analyzed.
Record reveals that UBI was being monitored by BSP officials for years. Respondent Dolores
Yuvienco had supervised the bank directly since 1999 as Director of DCB II
UBI had since given up its status as an expanded commercial bank and reverted to an ordinary
commercial bank because it could not meet the P3.5 billion minimum capital requirement for a
universal bank. For two (2) months prior to its closure, Urban Bank had been besieged by
liquidity problems, and its declaration of a bank holiday on April 25 only confirmed its
decreasing ability to meet obligations on time.
Section 30(a) of RA 7653, otherwise known as the New Central Bank Act, is relevant. Under
that law, the Monetary Board may execute measures such those taken in this case, summarily
and without need of prior hearing:
Sec. 30. Proceedings in Receivership and Liquidation. -Whenever, upon report of the head of
the supervising and examining department, the Monetary Board finds that the Bank or
quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of
business:Provided, that this shall not include inability to pay caused by extraordinary
demands induced by financial panic in the banking community;
(b) has insufficient realizable asset, as determined by the Bangko Sentral to meet its
liabilities; or
(c) cannot continue in business without involving probable losses to its creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the Banking institution. xxx. Court is not convinced of the existence of "special and important reasons" to warrant review, of
(Emphasis supplied) which none exists in this case.

Pertinent, too, is Section 53 of Republic Act No. 8791,[10]cralaw since it underscores the All told, we find that no reversible error was committed by the 17th Division of Court of Appeals
summary character of the MB's initiative of placing a bank under receivership. It provides that when it reversed and set aside the July 2, 2002 and July 30, 2002 Orders of the Ombudsman
in case a bank or quasi-banknotifies the BSP or publicly announces a bank holiday, or in any in OMB-ADM-0-00-0867.
manner suspends the payment of its deposit liabilities continuously for more than 30 days, the
MB may summarily and without need of prior hearing close such banking institution and place WHEREFORE, the instant petition is hereby DENIED DUE COURSE.
it under receivership of the PDIC.
SO ORDERED.
This authority is beyond review by the courts except on a petition for certiorari. Here, it is worth
to note even the Ombudsman found significant evidence to rationalize the decision of the
Monetary Board to place UBI under receivership.

Likewise, we agree with the appellate court's 17th Division in its ratiocination that it is illogical to
hold the respondents administratively liable for the preparation of reports that are, in their
nature, merely recommendatory and have to be acted upon by superior officials. The reports
were not the final action that creates right and duties and affects the interest and fortunes of
third parties. Courts do not interfere with any administrative measure prior to its completion or
finality, and when they do, what is actionable is not the recommendation but the decision of the
official with the competence under the law to issue it. [11]cralaw

The subject reports are only between the Monetary Board and the BSP officials who prepared
and endorsed them and may be rejected, modified or accepted by the Monetary Board. As far
as this case is concerned, the legal obligations of diligence and good faith that BSP officials
owe to the public under Section 16 of the New Central Act start with the official acts of the
Monetary Board which, rightly or wrong, are the cause of loss or injury to third parties, not any
preparatory report or recommendation.

As earlier noted, UBI's own top management, specifically Bartolome III, its chairman of the
Board, and the petitioner himself, its president, continually provided the BSP the picture of the
worsening situation of UBI in the four (4) weeks from March 20, 2000 to April 25, 2000, leading
to UBI's unilateral declaration of a bank holiday on April 25, 2000. [12]cralaw Their constant
reporting showed that UBI was "unable to pay its liabilities as they become due in the ordinary
course of business; (or that it) has insufficient realizable assets, as determined by the Bangko
Sentral, to meet its liabilities."[13]cralaw While other factors might have weighed in the analysis
of UBI's financial liquidity and in the preparation of the inevitable Supervisor and Examination
Sector (SES) reports, the MB considered the constant reports of UBI's own top management
as the best proof of its dire liquidity status.

Petitioner would have this Court review and reverse factual findings of the Court of Appeals.
This, of course, the Court cannot and will not do. Review of factual findings of the appellate
court is not a function ordinarily undertaken by this Court, the rule admitting only a few
exceptions recognized in decisional law. The principle is consistent with Rule 45 of the Rules
of Court which categorically provides that a petition for review on certiorari must raise "only
questions of law which must be distinctly set forth" in the petition. Even then, the review sought
will be denied if the questions raised are "too unsubstantial to require consideration" or if the
`

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents.

Don P. Porcuincula for petitioner.

San Juan, Gonzalez, San Agustin & Sinense for private respondent.

CRUZ, J.:
We are concerned in this case with the question of damages, specifically moral and exemplary
damages. The negligence of the private respondent has already been established. All we have
to ascertain is whether the petitioner is entitled to the said damages and, if so, in what
amounts.
The parties agree on the basic facts. The petitioner is a private corporation engaged in the
exportation of food products. It buys these products from various local suppliers and then sells
them abroad, particularly in the United States, Canada and the Middle East. Most of its exports
are purchased by the petitioner on credit.
The petitioner was a depositor of the respondent bank and maintained a checking account in
its branch at Romulo Avenue, Cubao, Quezon City. On May 25, 1981, the petitioner deposited
to its account in the said bank the amount of P100,000.00, thus increasing its balance as of
that date to P190,380.74. 1 Subsequently, the petitioner issued several checks against its
deposit but was suprised to learn later that they had been dishonored for insufficient funds.
The dishonored checks are the following:
1. Check No. 215391 dated May 29, 1981, in favor of California Manufacturing Company, Inc.
for P16,480.00:
2. Check No. 215426 dated May 28, 1981, in favor of the Bureau of Internal Revenue in the
amount of P3,386.73:
3. Check No. 215451 dated June 4, 1981, in favor of Mr. Greg Pedreño in the amount of
P7,080.00;
4. Check No. 215441 dated June 5, 1981, in favor of Malabon Longlife Trading Corporation in
the amount of P42,906.00:
5. Check No. 215474 dated June 10, 1981, in favor of Malabon Longlife Trading Corporation in
the amount of P12,953.00:
6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services, Inc. in the amount of
P27,024.45:
7. Check No. 215412 dated June 10, 1981, in favor of Baguio Country Club Corporation in the
amount of P4,385.02: and
8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in the amount of
P6,275.00. 2
As a consequence, the California Manufacturing Corporation sent on June 9, 1981, a letter of
demand to the petitioner, threatening prosecution if the dishonored check issued to it was not
made good. It also withheld delivery of the order made by the petitioner. Similar letters were
sent to the petitioner by the Malabon Long Life Trading, on June 15, 1981, and by the G. and U.
Enterprises, on June 10, 1981. Malabon also canceled the petitioner's credit line and
demanded that future payments be made by it in cash or certified check. Meantime, action on
the pending orders of the petitioner with the other suppliers whose checks were dishonored
was also deferred.
The petitioner complained to the respondent bank on June 10, 1981. 3 Investigation disclosed
that the sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been
credited to it. The error was rectified on June 17, 1981, and the dishonored checks were paid
after they were re-deposited. 4
In its letter dated June 20, 1981, the petitioner demanded reparation from the respondent bank
for its "gross and wanton negligence." This demand was not met. The petitioner then filed a
complaint in the then Court of First Instance of Rizal claiming from the private respondent
moral damages in the sum of P1,000,000.00 and exemplary damages in the sum of
P500,000.00, plus 25% attorney's fees, and costs.
After trial, Judge Johnico G. Serquinia rendered judgment holding that moral and exemplary
damages were not called for under the circumstances. However, observing that the plaintiff's
right had been violated, he ordered the defendant to pay nominal damages in the amount of
P20,000.00 plus P5,000.00 attorney's fees and costs. 5 This decision was affirmed in toto by
the respondent court. 6
The respondent court found with the trial court that the private respondent was guilty of
negligence but agreed that the petitioner was nevertheless not entitled to moral damages. It
said:
The essential ingredient of moral damages is proof of bad faith (De Aparicio vs. Parogurga,
150 SCRA 280). Indeed, there was the omission by the defendant-appellee bank to credit
appellant's deposit of P100,000.00 on May 25, 1981. But the bank rectified its records. It
credited the said amount in favor of plaintiff-appellant in less than a month. The dishonored
checks were eventually paid. These circumstances negate any imputation or insinuation of
malicious, fraudulent, wanton and gross bad faith and negligence on the part of the
defendant-appellant.
It is this ruling that is faulted in the petition now before us.
This Court has carefully examined the facts of this case and finds that it cannot share some of
the conclusions of the lower courts. It seems to us that the negligence of the private
respondent had been brushed off rather lightly as if it were a minor infraction requiring no more
than a slap on the wrist. We feel it is not enough to say that the private respondent rectified its
records and credited the deposit in less than a month as if this were sufficient repentance. The
error should not have been committed in the first place. The respondent bank has not even
explained why it was committed at all. It is true that the dishonored checks were, as the Court
of Appeals put it, "eventually" paid. However, this took almost a month when, properly, the
checks should have been paid immediately upon presentment.
As the Court sees it, the initial carelessness of the respondent bank, aggravated by the lack of
promptitude in repairing its error, justifies the grant of moral damages. This rather lackadaisical
attitude toward the complaining depositor constituted the gross negligence, if not wanton bad
faith, that the respondent court said had not been established by the petitioner.
We also note that while stressing the rectification made by the respondent bank, the decision
practically ignored the prejudice suffered by the petitioner. This was simply glossed over if not,
indeed, disbelieved. The fact is that the petitioner's credit line was canceled and its orders
were not acted upon pending receipt of actual payment by the suppliers. Its business declined.
Its reputation was tarnished. Its standing was reduced in the business community. All this was
due to the fault of the respondent bank which was undeniably remiss in its duty to the
petitioner.
Article 2205 of the Civil Code provides that actual or compensatory damages may be received
"(2) for injury to the plaintiff s business standing or commercial credit." There is no question
that the petitioner did sustain actual injury as a result of the dishonored checks and that the
existence of the loss having been established "absolute certainty as to its amount is not
required." 7 Such injury should bolster all the more the demand of the petitioner for moral
damages and justifies the examination by this Court of the validity and reasonableness of the
said claim.
We agree that moral damages are not awarded to penalize the defendant but to compensate
the plaintiff for the injuries he may have suffered. 8 In the case at bar, the petitioner is seeking
such damages for the prejudice sustained by it as a result of the private respondent's fault. The
respondent court said that the claimed losses are purely speculative and are not supported by
substantial evidence, but if failed to consider that the amount of such losses need not be
established with exactitude precisely because of their nature. Moral damages are not
susceptible of pecuniary estimation. Article 2216 of the Civil Code specifically provides that "no
proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or
exemplary damages may be adjudicated." That is why the determination of the amount to be
awarded (except liquidated damages) is left to the sound discretion of the court, according to
"the circumstances of each case."
From every viewpoint except that of the petitioner's, its claim of moral damages in the amount
of P1,000,000.00 is nothing short of preposterous. Its business certainly is not that big, or its
name that prestigious, to sustain such an extravagant pretense. Moreover, a corporation is not
as a rule entitled to moral damages because, not being a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish
and moral shock. The only exception to this rule is where the corporation has a good
reputation that is debased, resulting in its social humiliation. 9
We shall recognize that the petitioner did suffer injury because of the private respondent's
negligence that caused the dishonor of the checks issued by it. The immediate consequence
was that its prestige was impaired because of the bouncing checks and confidence in it as a
reliable debtor was diminished. The private respondent makes much of the one instance when
the petitioner was sued in a collection case, but that did not prove that it did not have a good
reputation that could not be marred, more so since that case was ultimately settled. 10 It does
not appear that, as the private respondent would portray it, the petitioner is an unsavory and
disreputable entity that has no good name to protect.
Considering all this, we feel that the award of nominal damages in the sum of P20,000.00 was
not the proper relief to which the petitioner was entitled. Under Article 2221 of the Civil Code,
"nominal damages are adjudicated in order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him." As we have found that the petitioner has
indeed incurred loss through the fault of the private respondent, the proper remedy is the
award to it of moral damages, which we impose, in our discretion, in the same amount of
P20,000.00.
Now for the exemplary damages.
The pertinent provisions of the Civil Code are the following:
Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for
the public good, in addition to the moral, temperate, liquidated or compensatory damages.
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
The banking system is an indispensable institution in the modern world and plays a vital role in
the economic life of every civilized nation. Whether as mere passive entities for the
safekeeping and saving of money or as active instruments of business and commerce, banks
have become an ubiquitous presence among the people, who have come to regard them with
respect and even gratitude and, most of all, confidence. Thus, even the humble wage-earner
has not hesitated to entrust his life's savings to the bank of his choice, knowing that they will be
safe in its custody and will even earn some interest for him. The ordinary person, with equal
faith, usually maintains a modest checking account for security and convenience in the settling
of his monthly bills and the payment of ordinary expenses. As for business entities like the
petitioner, the bank is a trusted and active associate that can help in the running of their affairs,
not only in the form of loans when needed but more often in the conduct of their day-to-day
transactions like the issuance or encashment of checks.
In every case, the depositor expects the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred pesos or of millions. The bank must
record every single transaction accurately, down to the last centavo, and as promptly as
possible. This has to be done if the account is to reflect at any given time the amount of money
the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to
whomever he directs. A blunder on the part of the bank, such as the dishonor of a check
without good reason, can cause the depositor not a little embarrassment if not also financial
loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their relationship. In the case at bar, it is
obvious that the respondent bank was remiss in that duty and violated that relationship. What
is especially deplorable is that, having been informed of its error in not crediting the deposit in
question to the petitioner, the respondent bank did not immediately correct it but did so only
one week later or twenty-three days after the deposit was made. It bears repeating that the
record does not contain any satisfactory explanation of why the error was made in the first
place and why it was not corrected immediately after its discovery. Such ineptness comes
under the concept of the wanton manner contemplated in the Civil Code that calls for the
imposition of exemplary damages.

After deliberating on this particular matter, the Court, in the exercise of its discretion, hereby
imposes upon the respondent bank exemplary damages in the amount of P50,000.00, "by way
of example or correction for the public good," in the words of the law. It is expected that this
ruling will serve as a warning and deterrent against the repetition of the ineptness and
indefference that has been displayed here, lest the confidence of the public in the banking
system be further impaired.

ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private respondent is
ordered to pay the petitioner, in lieu of nominal damages, moral damages in the amount of
P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original award of
attorney's fees in the amount of P5,000.00, and costs.

SO ORDERED
 Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 62404 promulgated
on August 27, 2002, which affirmed with modification the Decision of the Regional Trial Court
(RTC) of Pasig City, Branch 158, in Civil Case No. 65146 dated December 18, 1998.

The facts of the case, as summarized by the RTC, are as follows:

It appears from the plaintiffs' [petitioners] evidence that Arturo [respondent]

is the elder brother of Alice [petitioner] and Rosita [petitioner], Benjamin
[petitioner] and Patricia [petitioner] are Arturo's nephew and niece. Arturo
and his wife Evelyn [respondent] are residents of the United States. In
October 1993, Arturo leased from Dr. Borja a condominium unit identified as
Unit 28-C Gilmore Townhomeslocated at Granada St., Quezon City. The
lease was for the benefit of Benjamin who is the occupant of the unit. The
rentals were paid by Ignacio. The term of the lease is for one (1) year and
will expire onOctober 15, 1994. It appears that Arturo was intending to
renew the lease contract. As he had to leave for the U.S., Arturo drew up a
check, UCPB Check No. GRH-560239 and wrote on it the name of the
payee, Dr. Manuel Borja, but left blank the date and amount. He signed the
check. The check was intended as payment for the renewal of the
Republic of the Philippines lease. The date and the amount were left blank because Arturo does not
Supreme Court know when it will be renewed and the new rate of the lease. The check was
Manila left with Arturo's sister-in-law, who was instructed to deliver or give it to
Benjamin.

THIRD DIVISION The check later came to the possession of Alice who felt that Arturo cheated
their sister in the amount of three million pesos (P3,000,000.00). She
believed that Arturo and Rosita had a joint and/or money market placement
ALICE A.I. SANDEJAS, G.R. No. 155033 in the amount of P3 million with the UCPB branch at Ortigas Ave., San
ROSITA A.I. CUSI, Juan and that Ignacio preterminated the placement and ran away with it,
PATRICIA A.I. SANDEJAS and Present: which rightfully belonged to Rosita. Alicethen inquired from
BENJAMIN A.I. ESPIRITU, UCPB Greenhills branch if Arturo still has an account with them. On getting
Petitioners, YNARES-SANTIAGO, a confirmation, she together with Rosita drew up a scheme to recover the P3
Chairperson, million from Arturo. Alice filled up the date of the check with March 17,
AUSTRIA-MARTINEZ, 1995 and the amount with three million only. Alice got her driver, Kudera, to
- versus - CARPIO MORALES,* stand as the payee of the check, Dr. Borja. Alice and Rosita came to
CHICO-NAZARIO, and SBC[2] GreenhillsBranch together with a man (Kudera) who[m] they
NACHURA, JJ. introduced as Dr. Borja to the then Assistant Cashier Luis. After introducing
SPS. ARTURO IGNACIO, JR. the said man as Dr. Borja, Rosita, Alice and the man who was later identified
and EVELYN IGNACIO, Promulgated: as Kudera opened a Joint Savings Account No. 271-410554-7. As initial
Respondents. December 19, 2007 deposit for the Joint Savings Account, Alice, Rosita and Kudera deposited
x------------------------------------------------x the check. No ID card was required of Mr. Kuderabecause it is an internal
policy of the bank that when a valued client opens an account, an
identification card is no longer required (TSN, April 21, 1997, pp.
DECISION 15-16). SBC also allowed the check to be deposited without the
endorsement of the impostor Kudera. SBC officials stamped on the dorsal
portion of the check endorsement/lack of endorsement guaranteed and sent
AUSTRIA-MARTINEZ, J.: the check for clearing to the Philippine Clearing House Corporation.
 On 21 March 1995, after the check had already been cleared by the drawer
bank UCPB, Rosita withdrew P1 million from Joint Savings Account and
deposited said amount to the current account of Alicewith
SBC Greenhills Branch. On the same date, Alice caused the transfer of P2
million from the Joint Savings Account to two (2) Investment Savings
Account[s] in the names of Alice, Rosita and/or Patricia. ...
On April 4, 1995, a day after Evelyn and Atty. Sanz inquired about the
identity of the persons and the circumstances surrounding the deposit and
withdrawal of the check, the three million pesos in the two investment
savings account[s] and in the current account just opened with SBC were
withdrawn by Alice and Rosita.[3]
On June 18, 1995, Arturo Ignacio, Jr. and Evelyn Ignacio (respondents) filed a verified
complaint for recovery of a sum of money and damages against Security Bank and Trust
Company (SBTC) and its officers, namely: Rene Colin D. Gray, Manager; and Sonia Ortiz-Luis,
Cashier. The complaint also impleaded herein petitioner Benjamin A.I. Espiritu(Benjamin), a
John Doe, representing himself as Manuel N. Borja; and a Jane Doe.
On November 7, 1995, the complaint was amended by additionally impleading herein
petitioners Alice A.I. Sandejas (Alice), Rosita A.I. Cusi (Rosita) and Patricia
A.I. Sandejas(Patricia) as defendants who filed their respective answers and counterclaims.
After trial, the RTC rendered judgment dated December 18, 1998 with the
following dispositive portion:
WHEREFORE, in view of the foregoing, judgment is rendered in favor of
plaintiffs as against defendants Security Bank and Trust Co., Rene Colin
Gray, Sonia Ortiz Luis, Alice A.I. Sandejas and Rosita A.I. Cusi, ordering
them to pay jointly and severally the plaintiffs the following amounts:
(1) P3,000,000.00 plus legal interest on it from March 17, 1995 until the
entire amount is fully paid;
(2) P500,000.00 as moral damages;
(3) P200,000.00 as exemplary damages;
(4) P300,000.00 as attorney's fees; plus
(5) the cost of suit.
In turn, plaintiffs are directed to pay Benjamin A.I. Espiritu the amount
of P100,000.00 as moral damages, P50,000.00 as exemplary damages and
another P50,000.00 as attorney's fees.
The counterclaims of Patricia A.I. Sandejas are dismissed.
SO ORDERED.[4]
Both parties appealed the RTC Decision to the CA.
On August 14, 1999, during the pendency of the appeal with the CA, herein respondent Arturo
Ignacio, Jr. (Arturo) died.[5]
On August 27, 2002, the CA promulgated the presently assailed Decision, disposing as
follows:
WHEREFORE, in view of the foregoing, the assailed decision of the trial
court is hereby AFFIRMED with the MODIFICATION that the judgment
shall read as follows:
The defendants-appellants Security Bank and Trust Company, Rene Colin
D. Gray, Sonia Ortiz-Luis, Alice A.I. Sandejas, and Rosita A.I. Cusi, are
hereby ordered to jointly and severally pay the plaintiffs the following
amounts:
1. P3,000,000.00 plus legal interest computed from March 17, 1995 until the
entire amount is fully paid;
2. P200,000.00 as moral damages;
3. P100,000.00 as exemplary damages;
4. P50,000.00 as attorney's fees; plus
5. the costs of suit.
The award of moral damages, exemplary damages, and attorney's fees in
favor of Benjamin Espiritu is DELETED.
SO ORDERED.[6]
Petitioners and SBTC, together with Gray and Ortiz-Luis, filed their respective petitions for
review before this Court.
However, the petition filed by SBTC, Gray and Ortiz-Luis, docketed as G.R. No. 155038, was
denied in a Resolution[7] issued by this Court on November 20, 2002, for their failure to
properly verify the petition, submit a valid certification of non-forum shopping, and attach to the
petition the duplicate original or certified true copy of the assailed CA Decision. Said
Resolution became final and executory on April 9, 2003.[8]
On the other hand, the instant petition was given due course. Petitioners enumerated the
following grounds in support of their petition:
I. THE COURT OF APPEALS HAD DECIDED A QUESTION OF
SUBSTANCE NOT HERETOFORE DECIDED BY THIS COURT AND/OR
HAD DECIDED IT IN A WAY PROBABLY NOT IN ACCORD WITH EQUITY,
THE LAW AND THE APPLICABLE DECISIONS OF THIS COURT, SUCH
AS:
(a) IN NOT HOLDING THAT AS BETWEEN SIBLINGS, THE AGGRIEVED
SIBLING HAS THE RIGHT TO TAKE MEASURES OR STEPS TO
PROTECT HIS OWN INTEREST OR PROPERTY RIGHTS FROM AN ACT
OF THE GUILTY SIBLING;
(b) IN NOT HOLDING THAT THE ACT OF ROSITA AND ALICE IN FILLING
OUT THE BLANK PORTIONS OF THE CHECK TO RECOVER WHAT
ARTURO, JR. TOOK FROM AND DUE ROSITA, DID NOT GIVE RISE TO
AN ACTIONABLE TORT;
(c) IN NOT HOLDING THAT THE CRIMINAL ACT OF ARTURO, JR. IN
SUBMITTING AN AFFIDAVIT OF LOSS OF THE CERTIFICATE OF TIME
DEPOSIT FOR P3,000,000 THAT RIGHTFULLY BELONGED TO ROSITA
JUST TO BE ABLE TO PRE-TERMINATE THE TIME DEPOSIT AND GET
ITS FACE VALUE, WHEN HE KNEW IT WAS NOT LOST BUT IN FACT
INTACT AND IN THE POSSESSION OF ROSITA, IS A DISHONEST AND
REPREHENSIBLE ACT THAT JUSTIFIED ROSITA AND ALICE IN TAKING
MEANS TO REGAIN THE MONEY AND TO DENY ARTURO, JR. ANY
RIGHT TO RECOVER THE SAID AMOUNT AS WELL AS TO AN AWARD
OF DAMAGES;
(d) IN NOT HOLDING THAT THE CRIMINAL ACT OF ARTURO, JR. IN
SUBMITTING AN AFFIDAVIT OF LOSS OF THE OWNER'S COPY OF THE
TITLE IN MORAYTA AND IN TESTIFYING IN COURT AS TO SUCH,
WHEN THAT IS NOT THE TRUTH AS HE KNEW THAT THE ORIGINAL
OWNER'S COPY OF THE TITLE WAS WITH ROSITA, IS ANOTHER
DISHONEST AND REPREHENSIBLE ACT THAT SHOULD NOT HAVE
ENTITLED HIM TO ANY AWARD OF DAMAGES; AND
(e) IN NOT APPLYING THE RULE ON PARI DELICTO UNDER ART. 1412
OF THE CIVIL CODE.
II. THE COURT OF APPEALS HAD DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS WHEN IT FAILED TO RESOLVE
IN THE APPEAL THE COUNTERCLAIM OF ROSITA AGAINST ARTURO,
JR. FOR THE RECOVERY OF THE AMOUNTS LEGALLY HERS THAT
SHOULD JUSTIFY ALICE'S BEING ABSOLVED FROM ANY LIABILITY
FOR USING THE CHECK IN RECOVERING THE AMOUNT RIGHTFULLY
BELONGING TO ROSITA;
III. THE COURT OF APPEALS HAD DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS WHEN IT REVERSED THE
TRIAL COURT'S FINDING THAT RESPONDENT WAS GUILTY OF BAD
FAITH AND MALICE THAT ENTITLED PETITIONER BENJAMIN A.I.
ESPIRITU TO THE AWARD OF DAMAGES NOTWITHSTANDING THAT
THERE WAS AMPLE EVIDENCE SHOWN THAT SUCH BAD FAITH AND
MALICE WAS MADE AS A LEVERAGE TO COMPEL ARTURO'S
SIBLINGS TO RETURN TO HIM THEP3,000,000 WHICH WAS NOT HIS;
and,
IV. THE COURT OF APPEALS HAD DECIDED THE CASE NOT IN
ACCORD WITH LAW WHEN IT DELETED THE AWARD OF DAMAGES
TO PETITIONER ESPIRITU AND IN NOT HAVING RULED THAT HE WAS
ENTITLED TO A HIGHER AWARD OF DAMAGES CONSIDERING THE
CIRCUMSTANCES OF THE CASE AS WELL AS IN NOT HAVING RULED
THAT PATRICIA WAS ENTITLED TO AN AWARD OF DAMAGES.[9]
Petitioners argue that the CA overlooked and ignored vital pieces of evidence showing that the
encashment of the subject check was not fraudulent and, on the contrary, was justified under
the circumstances; and that such encashment did not amount to an actionable tort and that it
merely called for the application of the civil law rule on pari delicto.
In support of these arguments, petitioners contend that the principal adversaries in the present
case are full blooded siblings; that the law recognizes the solidarity of family which is why it is
made a condition that earnest efforts towards a compromise be exerted before one family
member can institute a suit against the other; that even if Arturo previously defrauded Rosita
and deprived her of her lawful share in the sale of her property, petitioners Rosita and Alice did
not precipitately file suit against him and instead took extra-legal measures to protect Rosita's
property rights and at the same time preserve the solidarity of their family and save it from
public embarrassment. Petitioners also aver that Rosita's and Alice's act of encashing the
subject check is not fraudulent because they did not have any unlawful intent and that they
merely took from Arturo what rightfully belonged to Rosita. Petitioners contend that even
granting that the act of Rosita and Alice amounted to an actionable tort, they could not be
adjudged liable to return the amount to respondents or to pay damages in their favor, because
the civil law rule on pari delicto dictates that, when both parties are at fault, neither of them
could expect positive relief from courts of justice and, instead, are left in the state where they
were at the time of the filing of the case.
Petitioners also contend that the CA erred in failing to award damages to Patricia even if the
appellate court sustained the trial court's finding that she was not a party to the fraudulent acts
committed by Rosita and Alice. Petitioners argue that even if Patricia did not bother to know
the details of the cases against her and left everything to her mother, she did not even know
the nature of the case against her, or her superiors in the bank where she worked did not know
whether she was the plaintiff or defendant, these were not reasons to deny her award of
damages. The fact remains that she had been maliciously dragged into the case, and that the
suit had adversely affected her work and caused her mental worries and anguish, besmirched
reputation, embarrassment and humiliation.
As to Benjamin, petitioners aver that the CA also erred in deleting the award of damages and
attorney's fees in his favor. Petitioners assert that the trial court found that Benjamin suffered
mental anguish, wounded feelings and moral shock as a result of the filing of the present
case. Citing the credentials and social standing of Benjamin, petitioners claim that the award of
damages and attorney's fees in his favor should be increased.
Lastly, petitioners contend that the award of damages and attorney's fees to respondents
should be deleted for their failure to establish malice or bad faith on the part of petitioners Alice
and Rosita in recovering the P3,000,000.00 which Arturo took from Rosita; and that it is Rosita
who is entitled to damages and attorney's fees for Arturo's failure and refusal to give her share
in the sale of her property in Morayta.
In their Memorandum, respondents simply contend that the issues raised by petitioners are
factual in nature and that the settled rule is that questions of fact are not subject to review by
the Supreme Court in a petition for review on certiorari under Rule 45 of the Rules of
Court. While there are exceptions to this rule, respondents assert that petitioners failed to
show that the instant case falls under any of these exceptions.
The Courts Ruling

The Court finds the petition bereft of merit. There is no compelling reason for the Court to
disturb the findings of facts of the lower courts.
The trial court's findings are as follows: (1) Rosita failed to establish that there is an agreement
between her and Arturo that the latter will give her one-third of the proceeds of the sale of
the Morayta property; (2) petitioners were not able to establish by clear and sufficient evidence
that the P3,000,000.00 which they took from Arturo when they encashed the subject check
was part of the proceeds of the sale of the Morayta property; (3) Rosita's counterclaim is
permissive and she failed to pay the full docket and filing fees for her counterclaim. [10]
Petitioners challenge the findings of the RTC and insist that they should not be held liable
for encashing the subject check because Arturo defrauded Rosita and that he committed
deceitful acts which deprived her of her rightful share in the sale of her building in Morayta; that
the amount of P3,000,000.00 represented by the check which they encashedformed part of
the proceeds of the said sale; that Alice and Rosita were merely moved by their desire to
recover from Arturo, Rosita's supposed share in the sale of her property.
However, the Court agrees with respondents that only questions of law are entertained in
petitions for review on certiorari under Rule 45 of the Rules of Court.[11] The trial courts findings
of fact, which the Court of Appeals affirmed, are generally binding and conclusive upon this
court.[12] There are recognized exceptions to this rule, among which are: (1) the conclusion is
grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken,
absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of facts are conflicting; (6) there is no citation of
specific evidence on which the factual findings are based; (7) the finding of absence of facts is
contradicted by the presence of evidence on record; (8) the findings of the CA are contrary to
the findings of the trial court; (9) the CA manifestly overlooked certain relevant and undisputed
facts that, if properly considered, would justify a different conclusion; (10) the findings of the
CA are beyond the issues of the case; and (11) such findings are contrary to the admissions of
both parties.[13] In the instant case, petitioners failed to demonstrate that their petition falls
under any one of the above exceptions.
Petitioners' assignments of errors boil down to the basic issue of whether or not Alice and
Rosita are justified in encashing the subject check given the factual circumstances established
in the present case.
Petitioners' posture is not sanctioned by law. If they truly believe that Arturo took advantage of
and violated the rights of Rosita, petitioners should have sought redress from the courts and
should not have simply taken the law into their own hands. Our laws are replete with specific
remedies designed to provide relief for the violation of one's rights. In the instant case, Rosita
could have immediately filed an action for the nullification of the sale of the building she owns
in light of petitioners' claim that the document bearing her conformity to the sale of the said
building was taken by Arturo from her without her knowledge and consent. Or, in the
alternative, as the CA correctly held, she could have brought a suit for the collection of a sum
of money to recover her share in the sale of her property in Morayta. In a civilized society such
as ours, the rule of law should always prevail. To allow otherwise would be productive of
nothing but mischief, chaos and anarchy. As a lawyer, who has sworn to uphold the rule of law,
Rosita should know better.She must go to court for relief.
It is true that Article 151 of the Family Code requires that earnest efforts towards a compromise
be made before family members can institute suits against each other. However, nothing in the
law sanctions or allows the commission of or resort to any extra-legal or illegal measure or
remedy in order for family members to avoid the filing of suits against another family member
for the enforcement or protection of their respective rights.
Petitioners invoke the rule of pari delicto to support their contention that respondents do not
deserve any relief from the courts.
The principle of pari delicto provides that when two parties are equally at fault, the law leaves
them as they are and denies recovery by either one of them.[14] Indeed, one who seeks equity
and justice must come to court with clean hands. [15] However, in the present case, petitioners
were not able to establish that respondents are also at fault. Thus, the principle
of pari delicto cannot apply.
In any case, the application of the pari delicto principle is not absolute, as there are exceptions
to its application.[16] One of these exceptions is where the application of the paridelicto rule
would violate well-established public policy.[17] The prevention of lawlessness and the
maintenance of peace and order are established public policies. In the instant case, to deny
respondents relief on the ground of pari delicto would put a premium on the illegal act of
petitioners in taking from respondents what the former claim to be rightfully theirs.
Petitioners also question the trial court's ruling that their counterclaim is permissive. This Court
has laid down the following tests to determine whether a counterclaim is compulsory or not, to
wit: (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on defendants claims, absent the compulsory
counterclaim rule? (3) Will substantially the same evidence support or refute plaintiffs claim as
well as the defendants counterclaim? and (4) Is there any logical relation between the claim
and the counterclaim, such that the conduct of separate trials of the respective claims of the
parties would entail a substantial duplication of effort and time by the parties and the court? [18]
Tested against the above-mentioned criteria, this Court agrees with the view of the RTC that
Rosita's counterclaim for the recovery of her alleged share in the sale of the Moraytaproperty
is permissive in nature. The evidence needed to prove respondents' claim to recover the
amount of P3,000,000.00 from petitioners is different from that required to establish Rosita's
demands for the recovery of her alleged share in the sale of the subject Morayta property. The
recovery of respondents' claim is not contingent or dependent upon the establishment of
Rosita's counterclaim such that conducting separate trials will not result in the substantial
duplication of the time and effort of the court and the parties.
In Sun Insurance Office, Ltd., (SIOL) v. Asuncion,[19] this Court laid down the rules on the
payment of filing fees, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory pleading,
but the payment of the prescribed docket fee, that vests a trial court with
jurisdiction over the subject-matter or nature of the action. Where the filing of
the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
 2. The same rule applies to permissive counterclaims, third-party claims and
similar pleadings, which shall not be considered filed until and unless the
filing fee prescribed therefor is paid. The court may allow payment of said
fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading, or
if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It shall be
the responsibility of the Clerk of Court or his duly authorized deputy to
enforce said lien and assess and collect the additional fee.[20]
In order for the trial court to acquire jurisdiction over her permissive counterclaim, Rosita is
bound to pay the prescribed docket fees.[21] Since it is not disputed that Rosita never paid the
docket and filing fees, the RTC did not acquire jurisdiction over her permissive counterclaim.
Nonetheless, the trial court ruled on the merits of Rosita's permissive counterclaim by
dismissing the same on the ground that she failed to establish that there is a sharing
agreement between her and Arturo with respect to the proceeds of the sale of the
subject Morayta property and that the amount of P3,000,000.00 represented by the check
which Rosita and Alice encashed formed part of the proceeds of the said sale.
It is settled that any decision rendered without jurisdiction is a total nullity and may be struck
down at any time, even on appeal before this Court. [22]
In the present case, considering that the trial court did not acquire jurisdiction over the
permissive counterclaim of Rosita, any proceeding taken up by the trial court and any ruling or
judgment rendered in relation to such counterclaim is considered null and void. In effect,
Rosita may file a separate action against Arturo for recovery of a sum of money.
However, Rosita's claims for damages and attorney's fees are compulsory as they necessarily
arise as a result of the filing by respondents of their complaint. Being compulsory in nature,
payment of docket fees is not required.[23] Nonetheless, since petitioners are found to be liable
to return to respondents the amount of P3,000,000.00 as well as to pay moral and exemplary
damages and attorney's fees, it necessarily follows that Rosita's counterclaim for damages
and attorney's fees should be dismissed as correctly done by the RTC and affirmed by the CA.
As to Patricia's entitlement to damages, this Court has held that while no proof of pecuniary
loss is necessary in order that moral damages may be awarded, the amount of indemnity
being left to the discretion of the court, it is nevertheless essential that the claimant should
satisfactorily show the existence of the factual basis of damages and its causal connection to
defendants acts.[24] This is so because moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to compensate the claimant for actual
injury suffered and not to impose a penalty on the wrongdoer. [25] Moreover, additional facts
must be pleaded and proven to warrant the grant of moral damages under the Civil
Code, these being, social humiliation, wounded feelings, grave anxiety, etc. that resulted from
the act being complained of.[26] In the present case, both the RTC and the CA were not
convinced that Patricia is entitled to damages. Quoting the RTC, the CA held thus:
With respect to Patricia, she did not even bother to know the details of the
case against her, she left everything to the hands of her mother Alice. Her
attitude towards the case appears weird, she being a banker who seems so
concerned of her reputation.
Aside from the parties to this case, her immediate superiors in the BPI knew
that she is involved in a case. They did not however know whether she is the
plaintiff or the defendant in the case. Further, they did not know the nature of
the case that she is involved in. It appears that Patricia has not suffered any
of the injuries enumerated in Article 2217 of the Civil Code, thus, she is not
entitled to moral damages and attorney's fees.[27]
This Court finds no cogent reason to depart from the above-quoted findings as Patricia failed
to satisfactorily show the existence of the factual basis for granting her moral damages and the
causal connection of such fact to the act of respondents in filing a complaint against her.
In addition, and with respect to Benjamin, the Court agrees with the CA that in the absence of a
wrongful act or omission, or of fraud or bad faith, moral damages cannot be awarded. [28] The
adverse result of an action does not per se make the action wrongful, or the party liable for
it.[29] One may err, but error alone is not a ground for granting such damages. [30] In the
absence of malice and bad faith, the mental anguish suffered by a person for having been
made a party in a civil case is not the kind of anxiety which would warrant the award of moral
damages.[31]
A resort to judicial processes is not, per se, evidence of ill will upon which a claim for damages
may be based.[32]
In China Banking Corporation v. Court of Appeals,[33] this Court held:
Settled in our jurisprudence is the rule that moral damages cannot be
recovered from a person who has filed a complaint against another in good
faith, or without malice or bad faith (Philippine National Bank v. Court of
Appeals, 159 SCRA 433 [1988]; R & B Surety and Insurance v. Intermediate
Appellate Court, 129 SCRA 736 [1984]). If damage results from the filing of
the complaint, it isdamnum absque injuria (Ilocos Norte Electrical Company
v. Court of Appeals, 179 SCRA 5 [1989]).[34]
In the present case, the Court agrees with the RTC and the CA that petitioners failed to
establish that respondents were moved by bad faith or malice in impleading Patricia and
Benjamin. Hence, Patricia and Benjamin are not entitled to damages.
The Court sustains the award of moral and exemplary damages as well as attorney's fees in
favor of respondents.
As to moral damages, Article 20 of the Civil Code provides that every person who, contrary to
law, willfully or negligently causes damage to another, shall indemnify the latter for the same.
In addition, Article 2219 (10) of the Civil Code provides that moral damages may be recovered
in acts or actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the same
Code. More particularly, Article 21 of the said Code provides that any person who willfully
causes loss or injury to another in a manner that is contrary to morals, good customs, or public
policy shall compensate the latter for the damage. In the present case, the act of Alice and
Rosita in fraudulently encashing the subject check to the prejudice of respondents is certainly
a violation of law as well as of the public policy that no one should put the law into his own
hands. As to SBTC and its officers, their negligence is so gross as to amount to a willfull injury
to respondents. 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. [35] 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. [36] For this
reason, banks should guard against injury attributable to negligence or bad faith on its part.[37]

There is no hard-and-fast rule in the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar facts. [38] The yardstick should
be that it is not palpably and scandalously excessive. [39] Moreover, the social standing of the
aggrieved party is essential to the determination of the proper amount of the
award.[40] Otherwise, the goal of enabling him to obtain means, diversions, or amusements to
restore him to the status quo ante would not be achieved.[41] In the present case, the Court
finds no cogent reason to modify the amount of moral damages granted by the CA.

Likewise, the Court finds no compelling reason to disturb the modifications made by the CA on
the award of exemplary damages and attorney's fees.

Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by way of
example or correction for the public good, in addition to moral, temperate, liquidated, or
compensatory damages. In the instant case, the award of exemplary damages in favor of
respondents is in order for the purpose of deterring those who intend to enforce their rights by
taking measures or remedies which are not in accord with law and public policy. On the part of
respondent bank, the public relies on a bank's sworn profession of diligence and
meticulousness in giving irreproachable service.[42] Hence, the level of meticulousness must
be maintained at all times by the banking sector.[43] In the present case the award of exemplary
damages is justified by the brazen acts of petitioners Rosita and Alice in violating the law
coupled with the gross negligence committed by respondent bank and its officers in allowing
the subject check to be deposited which later paved the way for its encashment.

As to attorney's fees, Article 2208 of the same Code provides, among others, that attorney's
fees may be recovered when exemplary damages are awarded or when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals
dated August 27, 2002 in CA-G.R. CV No. 62404 is AFFIRMED.

Costs against the petitioners.

SO ORDERED.
 SECOND DIVISION

SECURITY BANK AND TRUST COMPANY, G.R. No. 170984

Petitioner,
Present:

- versus - QUISUMBING, Acting C.J.,

Chairperson,
CORONA,*
RIZAL COMMERCIAL BANKING CORPORATION, CARPIO MORALES,
Respondent. TINGA, and
LEONARDO-DE CASTRO,** JJ.
x-------------------------x

RIZAL COMMERCIAL BANKING CORPORATION, G.R. No. 170987

Petitioner,

- versus -

SECURITY BANK AND TRUST COMPANY, Promulgated:

Respondent.
January 30, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x SO ORDERED.[8]

DECISION
On appeal, the Court of Appeals affirmed with modification the above Decision, to wit:
QUISUMBING, Acting C.J.: WHEREFORE, the appealed Decision
is AFFIRMED with MODIFICATION. Appellant Security Bank and Trust Co.
Before us are opposing parties petitions for review of the Decision[1] dated March 29, shall pay appellee Rizal Commercial Banking Corporation not only the principal
2005 and Resolution[2] dated December 12, 2005 of the Court of Appeals in CA-G.R. CV No. amount of P4,000,000.00 but also interest thereon at (6%) per annum covering
appellees unearned income on interest computed from the time of filing of the
67387. The two petitions are herein consolidated as they stem from the same set of factual
complaint on February 13, 1981 to the date of finality of this Decision. For lack of
circumstances.
factual and legal basis, the award of attorneys fees is DELETED.

The facts, as found by the trial and appellate courts, are as follows: SO ORDERED.[9]

On January 9, 1981, Security Bank and Trust Company (SBTC) issued a managers
check for P8 million, payable to CASH, as proceeds of the loan granted to Guidon Construction and Now for our resolution are the opposing parties petitions for review on certiorari of the
Development Corporation (GCDC). On the same day, the P8-million check, along with other abovecited decision. On its part, SBTC alleges the following to support its petition:
checks, was deposited by Continental Manufacturing Corporation (CMC) in its Current Account No.
0109-022888 with Rizal Commercial Banking Corporation (RCBC). Immediately, RCBC honored I.
the P8-million check and allowed CMC to withdraw the same.[3]
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN
REFUSING TO APPLY THE LAW BECAUSE, IN ITS OPINION, TO DO SO
On the next banking day, January 12, 1981, GCDC issued a Stop Payment Order to WOULD RESULT IN AN INJUSTICE.
SBTC, claiming that the P8-million check was released to a third party by
mistake.Consequently, SBTC dishonored and returned the managers check to II.
RCBC. Thereafter, the check was returned back and forth between the two banks, resulting in
automatic debits and credits in each banks clearing balance. [4] THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN HOLDING
THAT TO DETERMINE WHETHER OR NOT A BANK IS A HOLDER IN
DUE COURSE, ONLY THE NEGOTIABLE INSTRUMENTS LAW NEED BE
On February 13, 1981, RCBC filed a complaint[5] for damages against SBTC with the APPLIED TO THE EXCLUSION OF CENTRAL BANK RULES AND
then Court of First Instance of Rizal, Branch XXII. Said case was docketed as Civil Case No. REGULATIONS.
1081 and later transferred to the Regional Trial Court (RTC) of Makati City, Branch 143.
III.
Meanwhile, following the rules of the Philippine Clearing House, RCBC and SBTC THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN FAILING
stopped returning the checks to each other. By way of a temporary arrangement pending TO NOTE THAT THE MANAGERS CHECK IN QUESTION WAS
resolution of the case, the P8-million check was equally divided between, and credited to, ACCEPTED FOR DEPOSIT BY THE RCBC AND WAS NOT ENCASHED
RCBC and SBTC.[6]
BY THE PAYEE.

On May 9, 2000, the RTC of Makati City, Branch 143, rendered a Decision[7] in favor IV.
of RCBC. The dispositive portion of the decision reads:
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN FAILING
TO CONSIDER THAT PRIOR TO THE DEPOSIT OF THE CHECKS
PREMISES CONSIDERED, the Court renders judgment in favor of plaintiff WORTH PhP53 MILLION, RCBC WAS HOLDING 43 CHECKS
[RCBC] and finds defendant SBTC justly liable to [RCBC] and sentences TOTALING P49,017,669.66 DRAWN BY CONTINENTAL
[SBTC] to pay [RCBC] the amount of: MANUFACTURING CORPORATION AGAINST ITS CURRENT ACCOUNT
1. PhP4,000,000.00 as and for actual damages; WHEN THE BALANCE OF THAT ACCOUNT WAS A MERE P573.62.

2. PhP100,000.00 as and for attorneys fees; and, V.

3. the costs.
 THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN FAILING
TO CONSIDER THAT THE CHECKS DEPOSITED WITH RCBC THE
PROCEEDS OF WHICH WERE IMMEDIATELY WITHDRAWN TO HONOR
THE 43 CHECKS TOTALING P49,017,669.66 DRAWN BY CONTINENTAL
MANUFACTURING CORPORATION ON ITS CURRENT ACCOUNT
WERE NOT ALL MANAGERS CHECK[S] BUT INCLUDED ORDINARY
CHECKS IN THE TOTAL AMOUNT OF PhP15,436,140.81.
VI.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN FAILING
TO CONSIDER THAT EACH OF THE 43 CHECKS DRAWN BY THE
CONTINENTAL MANUFACTURING CORPORATION WERE ALL
HONORED BY RCBC ON THE BASIS OF A MIXTURE OF ALL THE
MANAGERS AND ORDINARY CHECKS DEPOSITED ON THAT DAY OF 9
JANUARY 1981.
VII.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN HOLDING
THAT THE RCBC IS A HOLDER IN DUE COURSE.
VIII.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN HOLDING
THAT SBTC WAITED FOR THREE (3) DAYS TO NOTIFY THE RCBC OF
THE STOP PAYMENT ORDER.
IX.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN HOLDING
THAT SBTC SHOULD HAVE FIRST ACQUIRED PERSONAL
KNOWLEDGE OF THE FACTS WHICH GAVE RISE TO THE REQUEST
FOR THE STOP PAYMENT ORDER BEFORE HONORING SUCH
REQUEST.
X.
THE HONORABLE COURT OF APPEALS RULED CORRECTLY IN
REFUSING TO HOLD SBTC LIABLE FOR DAMAGE CLAIMS BASED
SOLELY ON SPECULATION, CONJECTURE AND GUESSWORK.
XI.
THE HONORABLE COURT OF APPEALS RULED CORRECTLY IN HOLDING
THAT RCBC IS NOT ENTITLED TO EXEMPLARY DAMAGES.
XII.
THE HONORABLE COURT OF APPEALS ERRED GRAVELY IN HOLDING
SBTC LIABLE FOR THE ATTORNEYS FEES OF RCBC [SIC].[10]
On RCBCs part, the following issues are submitted for resolution:
I.
WHETHER OR NOT SBTC IS LIABLE FOR THE MANAGERS CHECK IT
ISSUED.
II.
WHETHER OR NOT RCBC IS ENTITLED TO COMPENSATORY
DAMAGES EQUIVALENT TO THE INTEREST INCOME LOST AS A
RESULT OF THE ILLEGAL REFUSAL OF SBTC TO HONOR ITS OWN
MANAGERS CHECK, AS WELL AS FOR EXEMPLARY DAMAGES AND
ATTORNEYS FEES.[11]
Simply stated, we find that in these consolidated petitions, the legal issues for our resolution
are: (1) Is SBTC liable to RCBC for the remaining P4 million? and (2) Is SBTC liable to pay for
lost interest income on the remaining P4 million, exemplary damages and attorneys fees?
RCBC avers that the managers check issued by SBTC is substantially as good as the
money it represents because by its peculiar character, its issuance has the effect of an
advance acceptance. RCBC claims that it is a holder in due course when it credited
the P8-million managers check to CMCs account. Accordingly, RCBC asserts that SBTCs
refusal to honor its obligation justifies RCBC claim for lost interest income, exemplary
damages and attorneys fees.
On the other hand, SBTC contends that RCBC violated Monetary Board Resolution
No. 2202 of the Central Bank of the Philippines mandating all banks to verify the genuineness
and validity of all checks before allowing drawings of the same. SBTC insists that RCBC
should bear the consequences of allowing CMC to withdraw the amount of the check before it
was cleared.[12]
We shall rule on the issues seriatim.
At the outset, it must be noted that the questioned check issued by SBTC is not just an
ordinary check but a managers check. A managers check is one drawn by a banks manager upon
the bank itself. It stands on the same footing as a certified check,[13] which is deemed to have been
accepted by the bank that certified it.[14] As the banks own check, a managers check becomes the
primary obligation of the bank and is accepted in advance by the act of its issuance.[15]
In this case, RCBC, in immediately crediting the amount of P8 million to CMCs account,
relied on the integrity and honor of the check as it is regarded in commercial transactions. Where
the questioned check, which was payable to Cash, appeared regular on its face, and the bank
found nothing unusual in the transaction, as the drawer usually issued checks in big amounts made
payable to cash, RCBC cannot be faulted in paying the value of the questioned check.[16]
 In our considered view, SBTC cannot escape liability by invoking Monetary Board
Resolution No. 2202 dated December 21, 1979, prohibiting drawings against uncollected
deposits. For we must point out that the Central Bank at that time issued a Memorandum
dated July 9, 1980, which interpreted said Monetary Board Resolution No. 2202. In its
pertinent portion, said Memorandum reads:
MEMORANDUM TO ALL BANKS
July 9, 1980
For the guidance of all concerned, Monetary Board Resolution No. 2202
dated December 31, 1979 prohibiting, as a matter of policy, drawing against
uncollected deposit effective July 1, 1980, uncollected deposits
representing managers cashiers/ treasurers checks, treasury warrants,
postal money orders and duly funded on us checks which may be permitted
at the discretion of each bank, covers drawings against demand deposits as
well as withdrawals from savings deposits.[17]
Pursuant to current jurisprudence, with the finding of liability for exemplary damages,
attorneys fees in the amount of P25,000.00[22] must also be awarded against SBTC and in
favor of RCBC.
WHEREFORE, the assailed Decision dated March 29, 2005 and Resolution
dated December 12, 2005 of the Court of Appeals in CA-G.R. CV No. 67387 is
herebyAFFIRMED with MODIFICATION. Security Bank and Trust Company is ordered to pay
Rizal Commercial Banking Corporation: (1) the remaining P4,000,000.00, with legal interest
thereon at six percent (6%) per annum from the time of filing of the complaint on February 13,
1981 to the date of finality of this Decision; (2) exemplary damages ofP50,000.00; and (3)
attorneys fees of P25,000.00.
No pronouncement as to costs.
SO ORDERED.

Thus, it is clear from the July 9, 1980 Memorandum that banks were given the
discretion to allow immediate drawings on uncollected deposits of managers checks, among
others. Consequently, RCBC, in allowing the immediate withdrawal against the subject
managers check, only exercised a prerogative expressly granted to it by the Monetary Board.

Moreover, neither Monetary Board Resolution No. 2202 nor the July 9,
1980 Memorandum alters the extraordinary nature of the managers check and the relative
rights of the parties thereto. SBTCs liability as drawer remains the same − by drawing the
instrument, it admits the existence of the payee and his then capacity to indorse; and engages
that on due presentment, the instrument will be accepted, or paid, or both, according to its
tenor.[18]

Concerning RCBCs claim for lost interest income on the remaining P4 million, this is
already covered by the amount of damages in the form of legal interest of 6%, based on Article
2200[19] and 2209[20] of the Civil Code of the Philippines, as awarded by the Court of Appeals
in its decision.
G.R. No. 105364* June 28, 2001
In addition to the above-mentioned award of compensatory damages, we also find
merit in the need to award exemplary damages in order to set an example for the public PHILIPPINE VETERANS BANK EMPLOYEES UNION-N.U.B.E. and PERFECTO V.
good. The banking system has become an indispensable institution in the modern world and FERNANDEZ, petitioners,
plays a vital role in the economic life of every civilized society. Whether as mere passive vs.
entities for the safe-keeping and saving of money or as active instruments of business and HONORABLE BENJAMIN VEGA, Presiding Judge of Branch 39 of the REGIONAL TRIAL
commerce, banks have attained an ubiquitous presence among the people, who have come COURT of Manila, the CENTRAL BANK OF THE PHILIPPINES and THE LIQUIDATOR OF
to regard them with respect and even gratitude and, above all, trust and confidence. In this THE PHILIPPINE VETERANS BANK, respondents
connection, it is important that banks should guard against injury attributable to negligence
or bad faith on its part. As repeatedly emphasized, since the banking business is impressed
with public interest, the trust and confidence of the public in it is of paramount importance. KAPUNAN, J.:
Consequently, the highest degree of diligence is expected, and high standards of integrity and
performance are required of it. SBTC having failed in this respect, the award of exemplary May a liquidation court continue with liquidation proceedings of the Philippine Veterans Bank
damages to RCBC in the amount of P50,000.00 is warranted.[21] (PVB) when Congress had mandated its rehabilitation and reopening?
This is the sole issue raised in the instant Petition for Prohibition with Petition for Preliminary
Injunction and application for Ex Parte Temporary Restraining Order.
The antecedent facts of the case are as follows:
Sometime in 1985, the Central Bank of the Philippines (Central Bank, for brevity) filed with
Branch 39 of the Regional Trial Court of Manila a Petition for Assistance in the Liquidation of
the Philippine Veterans Bank, the same docketed as Case No. SP-32311. Thereafter, the
Philipppine Veterans Bank Employees Union-N.U.B.E., herein petitioner, represented by
petitioner Perfecto V. Fernandez, filed claims for accrued and unpaid employee wages and
benefits with said court in SP-32311.1
After lengthy proceedings, partial payment of the sums due to the employees were made.
However, due to the piecemeal hearings on the benefits, many remain unpaid. 2
On March 8, 1991, petitioners moved to disqualify the respondent judge from hearing the
above case on grounds of bias and hostility towards petitioners.3
On January 2, 1992, the Congress enacted Republic Act No. 7169 providing for the
rehabilitation of the Philippine Veterans Bank.4
Thereafter, petitioners filed with the labor tribunals their residual claims for benefits and for
reinstatement upon reopening of the bank.5
Sometime in May 1992, the Central Bank issued a certificate of authority allowing the PVB to
reopen.6
Despite the legislative mandate for rehabilitation and reopening of PVB, respondent judge
continued with the liquidation proceedings of the bank. Moreover, petitioners learned that
respondents were set to order the payment and release of employee benefits upon motion of
another lawyer, while petitioners’ claims have been frozen to their prejudice.
Hence, the instant petition.
Petitioners argue that with the passage of R.A. 7169, the liquidation court became functus
officio, and no longer had the authority to continue with liquidation proceedings.
In a Resolution, dated June 8, 1992, the Supreme Court resolved to issue a Temporary
Restraining Order enjoining the trial court from further proceeding with the case.
On June 22, 1992, VOP Security & Detective Agency (VOPSDA) and its 162 security guards
filed a Motion for Intervention with prayer that they be excluded from the operation of the
Temporary Restraining Order issued by the Court. They alleged that they had filed a motion
before Branch 39 of the RTC of Manila, in SP-No. 32311, praying that said court order PVB to
pay their backwages and salary differentials by authority of R.A. No 6727, Wage Orders No.
NCR-01 and NCR-01-Ad and Wage Orders No. NCR-02 and NCR-02-A; and, that said court,
in an Order dated June 5, 1992, approved therein movants’ case and directed the bank
liquidator or PVB itself to pay the backwages and differentials in accordance with the
computation incorporated in the order. Said intervenors likewise manifested that there was an
error in the computation of the monetary benefits due them.
On August 18, 1992, petitioners, pursuant to the Resolution of this Court, dated July 6, 1992,
filed their Comment opposing the Motion for Leave to File Intervention and for exclusion from
the operation of the T.R.O. on the grounds that the movants have no legal interest in the
subject matter of the pending action; that allowing intervention would only cause delay in the
proceedings; and that the motion to exclude the movants from the T.R.O. is without legal basis
and would render moot the relief sought in the petition.
On September 3, 1992, the PVB filed a Petition-In-Intervention praying for the issuance of the
writs of certiorari and prohibition under Rule 65 of the Rules of Court in connection with the
issuance by respondent judge of several orders involving acts of liquidation of PVB even after
the effectivity of R.A. No. 7169. PVB further alleges that respondent judge clearly acted in
excess of or without jurisdiction when he issued the questioned orders.
We find for the petitioners.
Republic Act No. 7169 entitled "An Act To Rehabilitate The Philippine Veterans Bank Created
Under Republic Act No. 3518, Providing The Mechanisms Therefor, And For Other Purposes",
which was signed into law by President Corazon C. Aquino on January 2, 1992 and which was
published in the Official Gazette on February 24, 1992, provides in part for the reopening of the
Philippine Veterans Bank together with all its branches within the period of three (3) years from
the date of the reopening of the head office. 7 The law likewise provides for the creation of a
rehabilitation committee in order to facilitate the implementation of the provisions of the same. 8
Pursuant to said R.A. No. 7169, the Rehabilitation Committee submitted the proposed
Rehabilitation Plan of the PVB to the Monetary Board for its approval. Meanwhile, PVB filed a
Motion to Terminate Liquidation of Philippine Veterans Bank dated March 13, 1992 with the
respondent judge praying that the liquidation proceedings be immediately terminated in view of
the passage of R.A. No. 7169.
On April 10, 1992, the Monetary Board issued Monetary Board Resolution No. 348 which
approved the Rehabilitation Plan submitted by the Rehabilitaion Committee.
Thereafter, the Monetary Board issued a Certificate of Authority allowing PVB to reopen.
On June 3, 1992, the liquidator filed A Motion for the Termination of the Liquidation
Proceedings of the Philippine Veterans Bank with the respondent judge.
As stated above, the Court, in a Resolution dated June 8, 1992, issued a temporary restraining
order in the instant case restraining respondent judge from further proceeding with the
liquidation of PVB.
On August 3, 1992, the Philippine Veterans Bank opened its doors to the public and started
regular banking operations.
Clearly, the enactment of Republic Act No. 7169, as well as the subsequent developments has
rendered the liquidation court functus officio. Consequently, respondent judge has been
stripped of the authority to issue orders involving acts of liquidation.
WHEREFORE, in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE
and GRANTED. Respondent Judge is hereby PERMANENTLY ENJOINED from further
proceeding with Civil Case No. SP- 32311.
SO ORDERED.

Liquidation, in corporation law, connotes a winding up or settling with creditors and debtors.9 It
is the winding up of a corporation so that assets are distributed to those entitled to receive
them. It is the process of reducing assets to cash, discharging liabilities and dividing surplus or
loss.

On the opposite end of the spectrum is rehabilitation which connotes a reopening or

reorganization. Rehabilitation contemplates a continuance of corporate life and activities in an
effort to restore and reinstate the corporation to its former position of successful operation and
solvency.10

It is crystal clear that the concept of liquidation is diametrically opposed or contrary to the
concept of rehabilitation, such that both cannot be undertaken at the same time. To allow the
liquidation proceedings to continue would seriously hinder the rehabilitation of the subject
bank.

Anent the claim of respondents Central Bank and Liquidator of PVB that R.A. No. 7169
became effective only on March 10, 1992 or fifteen (15) days after its publication in the Official
Gazette; and, the contention of intervenors VOP Security, et. al. that the effectivity of said law
is conditioned on the approval of a rehabilitation plan by the Monetary Board, among others,
the Court is of the view that both contentions are bereft of merit.

While as a rule, laws take effect after fifteen (15) days following the completion of their
publication in the Official Gazette or in a newspaper of general circulation in the Philippines,
the legislature has the authority to provide for exceptions, as indicated in the clause "unless
otherwise provided."

In the case at bar, Section 10 of R.A. No. 7169 provides:

Sec. 10. Effectivity. - This Act shall take effect upon its approval.

Hence, it is clear that the legislature intended to make the law effective immediately upon its
approval. It is undisputed that R.A. No. 7169 was signed into law by President Corazon C.
Aquino on January 2, 1992. Therefore, said law became effective on said date.

Assuming for the sake of argument that publication is necessary for the effectivity of R.A. No.
7169, then it became legally effective on February 24, 1992, the date when the same was
published in the Official Gazette, and not on March 10, 1992, as erroneously claimed by
respondents Central Bank and Liquidator.