G.R. No. 173186 - Uy vs. Court of Appeals

Leopoldo Araneta, a well-established local merchant engaged in the import and export business, is the petitioner.
Bank of America, with its main office in San Francisco, is the respondent.
Araneta maintained a dollar current account with the bank since 1948.

On June 30, 1961, Araneta issued a check for $500 payable to cash.
At the time of issuance, his account had a confirmed credit balance of $523.81, as evidenced by a letter from the bank’s assistant cashier dated September 7, 1961.
When the bank received the check on September 8, 1961, it was dishonored and stamped “Account Closed.”
Upon inquiry, the bank admitted an error—specifically, the check had been encoded with the wrong account number—and promised remedial measures.
The bank sent an apology letter to the check’s payee, Mr. Harry Gregory of Hongkong, indicating that the error should not adversely affect Araneta’s credit.

On May 25 and 31, 1962, Araneta issued Check No. 110 for $500 and Check No. 111 for $150, both drawn against his Bank of America account.
Both checks were received and processed on June 3, 1962.

Check No. 110 was deposited by Rufina Saldana into her account at the First National City Bank of New York and cleared via the Federal Reserve Bank.

ii. Check No. 111 cleared through the Wells Fargo Bank.

Despite Araneta’s sufficient deposit balance, both checks were returned with the “Account Closed” stamp.
In the case of Check No. 110, the bank initially paid the amount to the First National City Bank but later claimed that the payment had been inadvertently made, returning the check for a credit reversal.
The bank informed the depositor, Rufina Saldana, of the return with the “Account Closed” annotation and requested consent for deduction from her deposit; prior to her response, the bank recalled and subsequently honored the check.

Araneta, through counsel, demanded damages amounting to $20,000 in a letter to the bank, which was rejected by the respondent’s offer of P2,000—a sum he found inadequate.
On December 11, 1962, Araneta filed a complaint against the Bank of America seeking the recovery of:

Eliminated the compensatory and temperate damages.
Reduced the moral damages to P8,000.00, exemplary damages to P1,000.00, and attorney’s fees to P1,000.00.

The petitioner then filed a petition for review based on five assigned errors, with the second and third errors (relating to temperate and moral damages) forming the basis of his petition.

Araneta argued that temperate damages should be awarded for injury to business standing or commercial credit even without proof of actual pecuniary loss, citing Article 2216 of the New Civil Code and relevant jurisprudence.
He maintained that the wrongful dishonor of his checks had adversely affected his credit despite the lack of independent, distinct proof of pecuniary loss.

The petitioner contended that moral damages for mental anguish, reputational harm, and social humiliation should be recoverable separately from damages for injury to commercial credit.
This argument was anchored on the interpretation of Article 2205(2) of the New Civil Code, a provision not yet authoritatively interpreted by the Supreme Court.

Whether the wrongful dishonor of the petitioner’s checks by the Bank of America—despite the presence of a sufficient deposit balance—constitutes sufficient ground for awarding temperate damages.
Whether the recovery of temperate damages is justified even in the absence of independent, distinct proof of actual pecuniary loss, given the adverse impact on the petitioner’s commercial credit and business standing.

Whether moral damages for mental anguish, wounded feelings, and injury to reputation should be awarded as a separate and distinct head of recovery, apart from any damages recoverable for injury to business standing or commercial credit.
Whether the Court of Appeals erred in reducing the moral damages, despite the evidence of reputational harm and physical effects (e.g., elevated blood pressure leading to medical treatment) reported by the petitioner.

Whether the reduction of attorney’s fees from the trial court award is justifiable, considering the nature and extent of legal services rendered in both trial and appellate proceedings.