Facts:

This case involves a legal dispute between the petitioner, Bank of the Philippine Islands (BPI), and the respondent, Carlo S. Leobrera, originally in the Regional Trial Court and subsequently brought before the Court of Appeals and eventually the Supreme Court. The events trace back to 1979, when BPI failed to deliver three letters of credit totaling $3,265.05 for Leobrera, who was then in the shell exporting business. Following this failure, Leobrera filed a complaint demanding P500,000.00 in damages from BPI. After initial discussions and a meeting where BPI representatives explained the situation, it was purportedly agreed that BPI would provide letters of apology to the foreign buyers and cover legal expenses amounting to P10,000.00. Leobrera claimed that it was also agreed that BPI would assist him in securing loans throughout the years until he could recover his damages, a claim vehemently denied by BPI.

Subsequent to this, BPI granted various loans to Leobrera, which were

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Facts:

Background of Transaction and Initial Failure

• In 1979, the Bank of the Philippine Islands (BPI) unintententionally failed to deliver on time three letters of credit—amounting to an aggregate of US$3,265.05—to the plaintiff, who was then engaged in the business of exporting shells.
• The letters of credit had been opened by foreign buyers of the plaintiff, triggering concerns when the delivery mishap occurred.

Plaintiff’s Demand and Meeting of the Parties

• The plaintiff demanded damages amounting to P500,000.00 as compensation for the failure in handling the export papers.
• Subsequently, BPI officers met with the plaintiff to explain the delay. In the course of the meeting:
• The plaintiff accepted the explanation given by the bank officers.
• As a settlement, BPI agreed to send letters of apology to the foreign buyers, shoulder legal expenses of P10,000.00 incurred by the plaintiff, and assist him in obtaining additional loans.
• The plaintiff contended that the agreement extended the additional loans for a period slightly over 9 years until his P500,000.00 damages were fully recovered—a claim that BPI vehemently denied.

Series of Loans and Restructurings

• In 1980, BPI granted several facilities to the plaintiff:
• A P200,000.00 revolving promissory note line at 10% interest.
• A P100,000.00 export advance line at 12% interest.
• A P500,000.00 industrial guarantee loan at 12% interest.
• These loans were secured by mortgages executed on November 20, 1976, and February 8, 1980.
• Subsequent modifications and restructurings ensued:
• In 1981, the revolving promissory note’s interest rate was increased to 12%.
• In 1982, loans were restructured into:
• A P200,000.00 revolving note at 16% interest.

ii. A P100,000.00 export advance line at 10% interest. iii. A P163,000.00 industrial guarantee loan at 12% interest. iv. An additional short-term loan of P300,000.00 at 16% interest. ii. A P35,000.00 industrial guarantee loan at 12% interest. iii. A P800,000.00 short-term loan at 18% interest.

Admissions, Disputes, and Lower Court Proceedings

• It was undisputed that BPI admitted the damage caused by the mishandling of export documents and agreed to send letters of apology as well as cover P10,000.00 in legal expenses.
• The central factual dispute revolved around whether BPI had also agreed to an arrangement for further compensation—specifically, that the additional loans would persist until the plaintiff’s damage of P500,000.00 was recovered—a claim denied by BPI.
• After the incident and the ensuing demand, the trial court rendered a decision awarding:
• Actual damages of P1,300,000.00.
• Moral damages of P10,000,000.00.
• Exemplary damages of P100,000.00.
• Attorney’s fees of P200,000.00.
• A declaration that the writ of preliminary injunction be made permanent.
• On July 31, 1998, BPI moved for reconsideration in the Court of Appeals, which was denied on January 13, 1999, prompting this appeal.

Issue:

• Whether the trial court erred in awarding moral damages of P10,000,000.00 to the plaintiff despite the amount not being specified in the complaint.
• Whether the trial court erred in ordering the payment of interest on the actual damages even though the plaintiff did not pray for such an award.
• Whether the Court of Appeals erred in awarding excessive damages in light of the unpleaded claims.
• Whether the Court of Appeals erred in finding BPI negligent in the transactions, considering that the respondent plaintiff was merely a beneficiary and not the real party in interest.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)