Case Summary (G.R. No. L-57493)
Prejudice to Petitioner’s Business and Reputation
Dishonored checks prompted California Manufacturing Co., Malabon Longlife Trading, G. & U. Enterprises, and others to defer or withhold shipments, cancel credit lines, and demand cash payments. Pending orders were suspended. Simex’s business declined, its standing in the export market suffered, and its credit reputation was tarnished.
Procedural History and Trial Court Ruling
Simex filed suit in the Court of First Instance of Rizal, claiming moral damages (₱1,000,000), exemplary damages (₱500,000), 25% attorney’s fees, and costs. The trial court found negligence but awarded only nominal damages of ₱20,000, attorney’s fees of ₱5,000, and costs, denying moral and exemplary damages.
Appellate Court’s Decision on Bad Faith Requirement
The Court of Appeals affirmed, holding that moral damages require proof of bad faith or malice. It found the bank’s correction within a month negated wanton or gross negligence, and that petitioner failed to establish malice, fraud, or intentional wrongdoing.
Supreme Court’s Reappraisal of Negligence and Prejudice
The Supreme Court agreed negligence was established and criticized the lower courts for minimizing the bank’s lapse. It emphasized that the bank offered no explanation for the error or delay. The delay in crediting and dishonoring of checks inflicted real prejudice on Simex’s commercial reputation and operations.
Legal Basis for Moral Damages Award
Under Civil Code Articles 2205(2) and 2216, moral damages compensate injury to business standing without need for precise valuation. Although corporations seldom claim moral damages, Simex’s established good reputation was impaired, constituting social humiliation and loss of commercial credit.
Award of Moral Damages
Exercising its discretion, the Supreme Court modified the award of nominal damages to moral damages of ₱20,000, recognizing the actual non-pecuniary injury sustained by Simex due to public embarrassment and commercial prejudice.
Legal Basis for Exemplary Damages Award
Civil Code Articles 2229 and 2232 authorize exemplary damages in quasi-contractu
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Facts of the Case
- The petitioner, Simex International (Manila), Inc., is a private corporation exporting food products to the United States, Canada, and the Middle East.
- It maintained a checking account at Traders Royal Bank’s Cubao, Quezon City branch.
- On May 25, 1981, the petitioner deposited ₱100,000.00, raising its balance to ₱190,380.74.
- Subsequently, several checks drawn on this account were dishonored for “insufficient funds”:
- Check No. 215391 (May 29, 1981) – ₱16,480.00, to California Manufacturing Co., Inc.
- Check No. 215426 (May 28, 1981) – ₱3,386.73, to the Bureau of Internal Revenue
- Check No. 215451 (June 4, 1981) – ₱7,080.00, to Mr. Greg Pedreno
- Check No. 215441 (June 5, 1981) – ₱42,906.00, to Malabon Longlife Trading Corporation
- Check No. 215474 (June 10, 1981) – ₱12,953.00, to Malabon Longlife Trading Corporation
- Check No. 215477 (June 9, 1981) – ₱27,024.45, to Sea-Land Services, Inc.
- Check No. 215412 (June 10, 1981) – ₱4,386.02, to Baguio Country Club Corporation
- Check No. 215480 (June 9, 1981) – ₱6,275.00, to Enriqueta Bayla
- A bank investigation revealed that the ₱100,000.00 deposit had not been credited; the error was corrected on June 17, 1981, and the checks were paid upon re-deposit.
- As a result of the dishonors, suppliers threatened prosecution, withheld deliveries, cancelled credit lines, and deferred action on pending orders.
Procedural History
- June 20, 1981: Petitioner demanded reparation from Traders Royal Bank for “gross and wanton negligence.”
- June 1981: Bank failed to satisfy the demand.
- Petitioner filed a complaint in the Court of First Instance of Rizal seeking:
- Moral damages – ₱1,000,000.00
- Exemplary damages – ₱500,000.00
- Attorney’s fees – 25% of award
- Costs
- Trial Court (Judge Serquina) found negligence but denied moral and exemplary damage