Moran vs. CA

8/8/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 230
VOL. 230, MARCH 7, 1994 799

Moran vs. Court of Appeals
*
G.R. No. 105836. March 7, 1994.
SPOUSES GEORGE MORAN and LIBRADA P. MORAN,

petitioners, vs. THE HON. COURT OF APPEALS and
CITYTRUST BANKING CORPORATION, respondents.
Banks; Negotiable Instruments; Checks; Words and Phrases; A check

is a bill of exchange drawn on a bank payable on demand.—A check is a
bill of exchange drawn on a bank payable on demand. Thus, a check is a
written order addressed to a bank or persons carrying on the business of
banking, by a party having money in their hands, requesting them to pay on
presentment, to a person named therein or to bearer or order, a named sum
of money.
Same; Same; Same; The relationship between the bank and the
depositor is that of a debtor and creditor.—Fixed savings and current
deposits of money in bonks and similar institutions shall be governed by the
provisions concerning simple loan. In other words, the relationship between
the bank and the depositor is that of a debtor and creditor. By virtue of the
contract of deposit between the banker and its depositor, the banker agrees
to pay checks drawn by the depositor provided that said depositor has
money in the hands of the bank.
Same; Same; Same; Failure of a bank to pay the check of a merchant
or a trader, when the deposit is sufficient, entitles the drawer to substantial
damages without any proof of actual damages.—Hence, where the bank
possesses funds of a depositor, it is bound to honor his checks to the extent
of the amount of his deposits. The failure of a bank to pay the check of a
merchant or a trader, when the deposit is sufficient, entitles the drawer to
substantial damages without any proof of actual damages. Conversely, a
bank is not liable for its refusal to pay a check on account of insufficient
funds, notwithstanding the fact that a deposit may be made later in the day.
Before a bank depositor may maintain a suit to recover a specific amount
from his bank, he must first show that he had on deposit sufficient funds to
meet his demand.
Same; Same; Same; Evidence; Presumption of regularity; In the
absence of a contrary showing, it n presumed that the acts in question were
in conformity with the usual conduct of business.—Petitioners
________________
* SECOND DIVISION.
http://central.com.ph/sfsreader/session/0000016516a8ff36c4c9c65d003600fb002c009e/t/?o=False 1/15
800
800 SUPREME COURT REPORTS ANNOTATED
argue that public respondent, by relying heavily on Rionisto’s testimony,

failed to consider the fact that the witness himself admitted that he had no
personal knowledge surrounding the dishonor of the two checks in question.
Thus, although he knew the standard clearing procedure, it does not
necessarily mean that the same procedure was adopted with regard to the
two checks. We do not agree. Section 3(q), Rule 131 of the Rules of Court
provides a disputable presumption in law that the ordinary course of
business has been followed. In the absence of a contrary showing, it is
presumed that the acts in question were in conformity with the usual
conduct of business. In the case at bar, petitioners failed to present
countervailing evidence to rebut the presumption that the checks involved
underwent the same regular process for clearing of checks followed by the
bank since 1983.
Same; Same; Same; A check, as distinguished from an ordinary bill of
exchange, is supposed to be drawn against a previous deposit of funds for it
is ordinarily intended for immediate payment.—Petitioners had no reason to
complain, for they alone were at fault. A drawer must remember his
responsibilities every time he issues a check. He must personally keep track
of his available balance in the bank and not rely on the bank to notify him of
the necessity to fund certain checks he previously issued. A check, as
distinguished from an ordinary bill of exchange, is supposed to be drawn
against a previous deposit of funds for it is ordinarily intended for immediate
payment.
Same; Same; Same; A bank is under no obligation to make part
payment on a check, up to only the amount of the drawer s funds.—A bank
is under no obligation to make part payment on a check, up to only the
amount of the drawer’s funds, where the check is drawn for an amount
larger than what the drawer has on deposit. Such a practice of paying checks
in part has never existed. Upon partial payment, the check holder could not
be called upon to surrender the check, and the bank would be without a
voucher affording a certain means of showing the payment. The rule is
based on commercial convenience, and any rule that would work such
manifest inconvenience should not be recognized A check is intended not
only to transfer a light to the amount named in it, but to serve the further
purpose of affording evidence for the bank of the payment of such amount
when the check is taken up.
Same; Same; Same; Bank’s letter written merely to maintain the
goodwill and continued patronage of a client could not be construed as an
admission of liability.—We agree with respondent Court of Appeals in its
assessment and interpretation of the nature of the letter of
801
VOL. 230, MARCH 7, 1994 801
Citytrust to Petrophil, dated December 16, 1983. As aptly and correctly

stated by said court, “x x x the letter is not an admission of liability as it was
written merely to maintain the goodwill and continued patronage of
plaintiff-appellants. (This) cannot be characterized as baseless, considering
the totality of the circumstances surrounding its writing.” In the present
case, the actions taken by the bank after the incident clearly show that there
was neither malice nor bad faith, but rather a clear intent to mollify an
obviously agitated client. Raul Diaz, the branch manager, even went for this
purpose to the Moran residence to facilitate their application for a manager’s
check. Later, he went to the Petrophil Corporation to personally redeem the
checks. Still later, the letter was sent by respondent bank to Petrophil
explaining that the dishonor of the checks was due to “operational error.”
However, we reiterate, it would be a mistake to construe that letter as an
admission of guilt on the part of the bank. It knew that it was confronted
with a client who obviously was not willing to admit any fault on his part,
although the facts show otherwise. Thus, respondent bank ran the risk of
losing the business of an important and influential member of the financial
community if it did not do anything to assuage the feelings of petitioners.
PETITION for review of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.

Gonzales, Batiller, Bilog & Associates for petitioners.
Agcaoili & Associates for private respondent.
REGALADO, J.:
Petitioner spouses George and Librada Moran are the owners of the
Wack-Wack Petron gasoline station located at Shaw Boulevard,
corner Old Wack-Wack Road, Mandaluyong, Metro Manila. They
regularly purchased bulk fuel and other related products from
Petrophil Corporation on cash on delivery (COD) basis. Orders for
bulk fuel and other related products were made by telephone
1
and
payments were effected by personal checks upon delivery.
Petitioners maintained three joint accounts, namely one current
account (No. 37-00066-7) and two savings accounts, (Nos.
__________________
1 TSN, May 3, 1985, 6-8.
802

1037002387 and 1037001372) with the Shaw Boulevard branch of

Citytrust Banking Corporation. As a special privilege to the Morans,
whom it considered as valued clients, the bank allowed them to
maintain a zero balance in their current account. Transfers from
Savings Account No. 1037002387 to their current account could be

made only with their prior authorization, but they gave written
authority to Citytrust to automatically transfer funds from their
Savings Account No. 1037001372 to their Current Account No. 37-
00066-7 at any time whenever the funds in their current account
were insufficient to meet withdrawals from said current account.
Such arrangement for automatic transfer of funds was called a pre-
2
authorized transfer (PAT) agreement.
The PAT letter-agreement entered into by the parties on March
19, 1982 contained the following provisions:
x x x
1. The transfer may be effected on the day following the overdrawing

of the current account, but the check/s would be honored if the
Ravings account has sufficient balance to cover the overdraft.
2. The regular charges on overdraft, and activity fees will be imposed
by the Bank.
3. This is merely an accommodation on our part and we have the
right, at all times and for any reason whatsoever, to refuse to effect
transfer of funds at our sole and absolute option and discretion,
reserving our right to terminate this arrangement at any time
without written notice to you.
4. You hold CITYTRUST free and harmless for any and all omissions
3
or oversight in executing this automatic transfer of funds; x x x
x x x
On December 12, 1983, petitioners, through Librada Moran, drew a

check (Citytrust No. 041960) for P50,576.00 payable to Petrophil
4
Corporation. The next day, December 13, 1983, petitioners, again
through Librada Moran, issued another check (Citytrust No. 041962)
in the amount of P56,090.00 in favor of the
________________
2 Ibid., id., 18-24.

3 Exhibit P, Original Record, 260.
4 Exhibit D, ibid., 223.
803
VOL. 230, MARCH 7, 1994 803

5
same corporation. The total sum of the two checks was
P106,666.00.
On December 14, 1983, Petrophil Corporation deposited the two
aforementioned checks to its account with the Pandacan branch of
the Philippine National Bank (PNB), the collecting bank. In turn,
PNB, Pandacan branch presented them for clearing with the
Philippine Clearing House Corporation in the afternoon of the same
day. The records show that on December 14, 1983, Current Account
No. 37-00066-7 had a zero balance, while Savings Account No.
1037001372 (covered by the PAT) had an available balance of

6
P26,104.30 and Savings Account No. 1037002387 had an available
7
balance of P43,268.39.
At about ten o’clock in the morning of the following day,
December 15, 1983, petitioner George Moran went to the bank, as
was his regular practice, to personally oversee their daily
transactions with the bank. He deposited in their Savings Account
8
No. 1037002387 the amounts of P10,874.58 and P6,754.25, and he
likewise deposited in their Savings Account No.9 1037001372 the
amounts of P5,900.00, P35,100.00 and P30.00. The amount of
P40,000.00 was then transferred by him from Savings Account No.
1037002387 to their current account by means of a pro forma
withdrawal form (a debit memorandum), which was provided by the
bank, authorizing the latter to make the necessary transfer. At the
same time, the amount of P66,666.00 was transferred from Savings
Account No. 1037001372 to the same current account through the
10
pre-authorized transfer (PAT) agreement.
Sometime on December 15 or 16, 1983, George Moran was
informed by his wife, Librada, that Petrophil refused to deliver their
orders on a credit basis because the two checks they had previously
issued were dishonored upon presentment for payment. Apparently,11
the bank dishonored the checks due to “insufficiency of funds.”
The non-delivery of gasoline forced petition-
________________
5 Exhibit E, ibid., 224.

6 Supra., Fn. 5.
7 Exhibit N, ibid., 254.
8 Exhibit B-1, ibid., 220.
9 Exhibit C-1, ibid., 222.
10 Supra., Fn. 5; TSN, June 7, 1985, 13-16.
11 TSN, June 7, 1986, 22-23.
804

ers to temporarily stop business operations, allegedly causing them

to suffer loss of earnings. In addition, Petrophil cancelled their credit
12
accommodation, forcing them to pay for their purchases in cash.
George Moran, furious and upset, demanded an explanation from
Raul Diaz, the branch manager. Failing to get a sufficient
explanation, he talked to a certain Villareal, a bank officer, who
allegedly told him that Amy Belen Ragodo, the customer service
13
officer, had committed a “grave error.”
On December 16 or 17, 1983, Diaz went to the Moran residence
to get the signatures of petitioners on an application for a manager’s
check so that the dishonored checks could be redeemed. Diaz then
went to Petrophil to personally present the checks in payment for the
14
two dishonored checks.
In a chance meeting around May or June, 1984, George Moran

learned from one Constancio Magno, credit manager of Petrophil,
that the latter received from Citytrust, through Diaz, a letter dated
December 16, 1983, notifying them that the two aforementioned
checks were “inadvertently dishonored x x x due to operational
15
error.” Said letter was received by Petrophil on January 4, 1984.
On July 24, 1984, or a little over six months after the incident,
petitioners, through counsel, wrote Citytrust claiming that the bank’s
dishonor of the checks caused them besmirched business and
personal reputation, shame and anxiety, hence they were
contemplating the filing of the necessary legal actions unless the
bank issued a certification clearing16
their name and paid them
P1,000,000.00 as moral damages.
The bank did not act favorably on their demands, hence
petitioners filed a complaint for damages on September 8, 1984,
with the Regional Trial Court, Branch 159 at Pasig, Metro Manila,
which was docketed therein as Civil Case No. 51549. In turn,
Citytrust filed a counterclaim for damages, alleging that the case
filed against it was unfounded and unjust.
_______________
12 Ibid., id., 38-40.

13 Ibid., id., 32-35.
14 Ibid., id., 36-37.
15 Ibid., id., 49-51.
16 Rollo, 70.
805
VOL. 230, MARCH 7, 1994 805

After trial, a decision dated October 9, 1989 was rendered by17 the
trial court dismissing both the complaint and the counterclaim. On
appeal, the Court of Appeals rendered judgment in CA-G.R. CV No. 18
25009 on October 9, 1989 affirming the decision of the trial court.
We start with some basic and accepted rules, statutory and
doctrinal.19 A check is a bill of exchange drawn on a bank payable on
demand. Thus, a check is a written order addressed to a bank or
persons carrying on the business of banking, by a party having
money in their hands, requesting them to pay on presentment, to 20a
person named therein or to bearer or order, a named sum of money.
Fixed savings and current deposits of money in banks and similar
institutions
21
shall be governed by the provisions concerning simple
loan. In other words, the relationship between the bank and the
22
depositor is that of a debtor and creditor. By virtue of the contract
of deposit between the banker and its depositor, the banker agrees to
pay checks drawn by the depositor provided that said depositor has
23
money in the hands of the bank.
Hence, where the bank possesses funds of a depositor, it is bound
to honor his checks to the extent of the amount of his deposits. The
failure of a bank to pay the check of a merchant or a trader, when the
deposit is sufficient, entitles the drawer

24
to substantial damages
without any proof of actual damages.
Conversely, a bank is not liable for its refusal to pay a check on
account of insufficient funds, notwithstanding the fact that a
_________________
17 Original Record, 423-429; per Judge Maria Alicia M. Austria.

18 Rollo, 60; Justice Reynato S. Puno, ponente; Justices Emeterio C. Cui and
Salome A. Montoya, concurring.
19 Section 185, Negotiable Instruments Law.
20 Martin, Philippine Commercial Laws, Vol. I, 1985 Ed., 375.
21 Article 1980, Civil Code.
22 Republic vs. Court of Appeals, et al., L-25012, July 22, 1975, 65 SCRA 186
reiterated in Siao Tiao Hong vs. Commissioner of Internal Revenue, et al., G.R. No.
32075, September 1, 1992, 213 SCRA 164.
23 Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the
Philippines, Vol. I, 1987 Ed., 464.
24 Browning vs. Bank of Vernal, 60 Utah 197, 207 Pac. 462.
806

25
deposit may be made later in the day. Before a bank depositor may
maintain a suit to recover a specific amount from his bank, he must
first show26
that he had on deposit sufficient funds to meet his
demand.
The present action for damages accordingly hinges on the
resolution of the inquiry as to whether or not petitioners had
sufficient funds in their accounts when the bank dishonored the
checks in question. In view of the factual findings of the two lower
courts the correctness of which are challenged by what appear to be
plausible arguments, we feel that the same should properly be
resolved by us. This would necessarily require us to inquire into
both the savings and current accounts of petitioners in relation to the
PAT arrangement.
On December 14, 1983, when PNB, Pandacan branch, presented
the checks for collection, the available balance for Savings Account
No. 1037001372 was P26,104.30 while Current Account No. 37-
00066-7 expectedly had a zero balance. On December 15, 1983, at
approximately ten o’clock in the morning, petitioners, through
George Moran, learned that P26,666.00 from Savings Account No.
1037001372 was transferred to their current account. Another
P40,000.00 was transferred from Savings Account No. 1037002387
to the current account. Considering that the transfers were by then
sufficient to cover the two checks, it is asserted by petitioners that
such fact should have prevented the dishonor of the checks. It
appears, however, that it was not so.
As explained by respondent court in its decision, Gerard E.
Rionisto, head of the centralized clearing unit of Citytrust, detailed
on the witness stand the standard clearing procedure adopted by
respondent bank and the Philippine Clearing House Corporation, to

wit:
Q Let me again re-phrase the question. Most of (sic) these two

checks issued by Mrs. Librada Moran under the accounts of the
plaintiffs with Citytrust Banking Corporation were drawn dated
December 12, 1983 and December 13, 1983
________________
25 Goldstein vs. Jefferson Title and Trust Co., 95 Pa. Super Ct., 167.
26 O.E. Eads vs. Commercial National Bank of Phoenix, 62 Am. Law Reports,
183.
807
VOL. 230, MARCH 7, 1994 807

(and) these two (2) checks were made payable to Petrophil

Corporation. On record, Petrophil Corporation presented these
two (2) checks for clearing with PNB Pandacan Branch on
December 14, 1983. Now in accordance with the bank, what
would happen with these checks drawn with (sic) PNB on
December 14, 1983?
A So these checks will now be presented by PNB with the
Philippine Clearing House on December 14, and then the
Philippine Clearing House will process it until midnight of
December 14. Citytrust will send a clearing representative to the
Philippine Clearing House at around 2:00 o’clock in the
morning of December 15 and then get the checks. The checks
will now be processed at the Citytrust Computer at around 3:00
o’clock in the morning of December 14 (sic) but it will be
processed for balance of Citytrust as of December 14 because
for one, we have not opened on December 15 at 3:00 o’clock.
Under the clearing house rules, we are supposed to process it on
the date it was presented for clearing. (tsn, September 9, 1988,
27
pp. 9-10).
Considering the clearing process adopted, as explained in the

aforequoted testimony, it is clear that the available balance on
December 14, 1983 was used by the bank in determining whether or
not there was sufficient cash deposited to fund the two checks,
although what was stamped on the dorsal side of the two checks in
question was “DAIF/12-15-83,” since December 15, 1983 was the
actual date when the checks were processed. As earlier stated, when
petitioners’ checks were dishonored due to insufficiency of funds,
the available balance of Savings Account No. 1037001372, which
was the subject of the PAT agreement, was not enough to cover
either of the two checks. On December 14, 1983, when PNB,
Pandacan branch presented the checks for collection, the available
balance for Savings Account No. 1037001372, to repeat, was only
P26,104.30 while Current Account No. 37-0006-7 had no available
balance. It was only on December 15, 1983 at around ten o’clock in
the morning that the necessary funds were deposited, which

unfortunately was too late to prevent the dishonor of the checks.
Petitioners argue that public respondent, by relying heavily
_________________
27 Annex A, Petition; Rollo, 55.
808

on Rionisto’s testimony, failed to consider the fact that the witness

himself admitted that he had no personal knowledge surrounding the
dishonor of the two checks in question. Thus, although he knew the
standard clearing procedure, it does not necessarily mean that the
same procedure was adopted with regard to the two checks.
We do not agree. Section 3(q), Rule 131 of the Rules of Court
provides a disputable presumption in law that the ordinary course of
business has been followed. In the absence of a contrary showing, it
is presumed that the acts in question were in conformity with the
usual conduct of business. In the case at bar, petitioners failed to
present countervailing evidence to rebut the presumption that the
checks involved underwent the same regular process for clearing of
checks followed by the bank since 1983.
Petitioners had no reason to complain, for they alone were at
fault. A drawer must remember his responsibilities every time he
issues a check. He must personally keep track of his available
balance in the bank and not rely on the bank to notify him of the
necessity to fund certain checks he previously issued. A check, as
distinguished from an ordinary bill of exchange, is supposed to be
drawn against a previous28 deposit of funds for it is ordinarily intended
for immediate payment.
Moreover, between the time of the issuance of said checks on
December 12 and 13 and the time of their presentment on December
14, petitioners had, at the very least, twenty-four hours to replenish
their balances in the bank.
As previously noted, it was only during business hours in the
morning of December 15, 1983, that P66,666.00 was automatically
transferred from Savings Account No. 1037001372 to Current
Account No. 37-00066-7, and another P40,000.00 was transferred
from Savings Account No. 1037002387 to the same current account
by a debit memorandum. Petitioners argue that if indeed the checks
were dishonored in the early morning of December 15, 1983, the
bank would not have automatically transferred P66,666.00 to said
current account. They theorize that the checks having already been
dishonored, there was no necessity to put
_________________
28 De Leon, The Law on Negotiable Instruments, 1989 Ed., 230-231.
809
VOL. 230, MARCH 7, 1994 809
into effect the pre-authorized transfer agreement.

That theory is incorrect. When the transfers from both savings
accounts to the current account were made, they were done in the
hope that the checks may be retrieved, thus preventing their
dishonor. Unfortunately, respondent bank did not succeed in
effectuating its good intentions. The transfers were made to preserve
its relations with petitioners whom it knew were valued clients,
hence it wanted to prevent the dishonor of their checks, if the same
was at all possible. Although not admitting fault, it tried its best to
make sure that the checks would not bounce.
Under similar29
circumstances, it was held in Whitman vs. First
National Bank that a bank performs its full duty where, upon the
receipt of a check drawn against an account in which there are
insufficient funds to pay it in full, it endeavors to induce the drawer
to make good his account so that the check can be paid, and failing
in this, it protests the check on the following morning and notifies its
correspondent bank by telegraph of the protest. It cannot, therefore,
be held liable to the payee and holder of the check for not protesting
it upon the day when it was received. In fact, the court added that the
bank did more than it was required to do by making an effort to
induce the drawer to deposit sufficient money to make the check
good, and by notifying its correspondent of the dishonor of the
check by telegram.
Petitioners maintain that at the time the checks were dishonored,
they had already deposited sufficient funds to cover said checks. To
prove their point, petitioners quoted in their petition the following
testimony of said witness Rionisto, to wit:
Q Now according to you, you would receive the checks from

(being deposited to) the collecting bank which in this particular
example was the Pandacan Branch of PNB which in turn will
deliver it to the Philippine Clearing House and the Philippine
Clearing House will deliver it to your office around 12:00
o’clock in the evening of December . . .?
A Around 2:00 o’clock of December 15. We sent a clearing
representative.
Q And the checks will be processed in accordance with the balance
available as of December 14?
_________________
29 35 Pa. Super Ct., 125 (1907).
810

A Yes, sir.
Q And naturally you will place there “drawn against insufficient
funds, December 14, 1983”?
A Yes, sir.
Q Are you sure about that?
30
A Yes, sir. x x x (tsn, September 9, 1988, p. 14).
Obviously, witness Rionisto was merely confused as to the dates

(December 14 and 15) because it did not jibe with his previous
testimony, wherein he categorically stated that “the checks will now
be processed at the Citytrust Computer at around 3:00 in the
morning of December 14 (sic) but it will be processed for balance of
Citytrust as of December 14 because for one, we have not opened on
December 15 at 3:00 o’clock. Under the clearing house rules, we are 31
supposed to process it on the date it was presented for clearing.”
Analyzing the procedure he had previously explained, and analyzing
his testimony in its entirety and not in truncated portions, it would
logically and ineluctably appear that he actually meant December
15, and not December 14.
In the early morning of every business day, prior to banking
hours, the various branches of Citytrust would receive a computer
printout called the “rejected transactions” report from the head
office. The report contains, among others, a listing of “checks to be
funded.” When Citytrust, Shaw Boulevard branch, received said
report in the early morning of December 15, 1983, the two checks
involved were included in the “checks to be funded.” That report
was used by the bank as its basis in dishonoring the two checks in
question. Petitioner contends that the bank erred when it did so
because on previous occasions, the report was merely used by the
bank as a basis for determining whether or not it was necessary to
notify them of the need to deposit certain amounts in their accounts.
Amy Belen Rogado, a bank employee, testified that she would
normally copy the details stated in the report and transfer it on a
“pink slip.” These pink slips were then given to George Moran. In
turn, George Moran testified that he would deposit the necessary
_________________
30 Rollo, 17.
31 Supra., Fn. 23.
811
VOL. 230, MARCH 7, 1994 811

funds stated in the pink slips. As a matter of fact, so petitioner

asseverated, not a single check written on the notices was ever
dishonored after he had funded said checks with the bank. Thus,
petitioner argues, the checks were not yet dishonored after the bank
received the report in the early morning of December 15, 1983.
Said argument does not persuade. If ever petitioners on previous
occasions were given notices every time a check was presented for
clearing and payment and there were no adequate funds in their

accounts, these were, at most, mere accommodations on the part of
respondent bank. It was not a requirement or a general banking
practice, hence non-compliance therewith could not lay the bank
open to blame or rebuke. Legally, the bank had all the right to
dishonor the checks because there were no sufficient funds to speak
of in the first place. If the demand is by check, a drawer musts have
to his credit enough to cover the demand. If his credit with the bank
is less than the amount on the face of the check, the bank may
32
lawfully refuse payment.
Pursuing this matter further, the bank could also not be faulted
for not accepting either of the two checks. The first check issued was
in the amount of P50,576.00, while the second one was for
P56,090.00. Savings Account No. 1037001372 then had a balance of
only P26,104.30. This being the case, Citytrust could not be
expected to accept for payment either one of the two checks nor
partially honor one check.
A bank is under no obligation to make part payment on a check,
up to only the amount of the drawer’s funds, where the check is
drawn for an amount larger than what the drawer has on deposit.
Such a practice of paying checks in part has never existed. Upon
partial payment, the check holder could not be called upon to
surrender the check, and the bank would be without a voucher
affording a certain means of showing the payment. The rule is based
on commercial convenience, and any rule that would work such
manifest inconvenience should not be recognized. A check is
intended not only to transfer a right to the amount named in it, but to
serve the further purpose of affording
_________________
32 O.E. Eads vs. Commercial National Bank of Phoenix, 62 A.L.R. 183.
812

evidence for the 33bank of the payment of such amount when the
check is taken up.
On the other hand, assuming arguendo that Savings Account No.
1037002387, which is not covered by a pre-arranged automatic
transfer agreement, had enough amount deposited to cover both
checks (which is not so in this case), the bank still had no obligation
to honor said checks as there was then no authority given to it to
make the transfer of funds. Where a depositor has two accounts with
a bank, an open account and a savings account, and draws a check
upon the open account for more money than the account contains,
the bank may rightfully refuse to pay the check, and is under no duty
34
to make up the deficiency from the savings account.
We agree with respondent Court of Appeals in its assessment and
interpretation of the nature of the letter of Citytrust to Petrophil,
dated December 16, 1983. As aptly and correctly stated by said
court, “x x x the letter is not an admission of liability as it was

written merely to maintain the goodwill and continued patronage of
plaintiff-appellants. (This) cannot be characterized as baseless,
considering
35
the totality of the circumstances surrounding its
writing.”
In the present case, the actions taken by the bank after the
incident clearly show that there was neither malice nor bad faith, but
rather a clear intent to mollify an obviously agitated client. Raul
Diaz, the branch manager, even went for this purpose to the Moran
residence to facilitate their application for a manager’s check. Later,
he went to the Petrophil Corporation to personally redeem the
checks. Still later, the letter was sent by respondent bank to Petrophil
explaining that the dishonor of the checks was due to “operational
error.” However, we reiterate, it would be a mistake to construe that
letter as an admission of guilt on the part of the bank. It knew that it
was confronted with a client who obviously was not willing to admit
any fault on his part, although the facts show otherwise. Thus,
respondent bank ran the risk of
_________________
33 Id., loc. cit.

34 Nauful vs. National Loan and Exchange Bank of Columbia, 97 S.E. Reporter,
843.
35 Annex A, Petition; Rollo, 59.
813
VOL. 230, MARCH 7, 1994 813

losing the business of an important and influential member of the

financial community if it did not do anything to assuage the feelings
of petitioners.
It will be recalled that the credit standing of the Morans with
Petrophil Corporation was involved, which fact, more than anything,
displeased them, to say the least. On demand of petitioners that their
names be cleared, the bank considered it more prudent to send the
letter. It never realized that it would thereafter be used by petitioners
as one of the bases of their legal action. It will be noted that there
was no reason for the bank to send the letter to Petrophil
Corporation since the latter was not a client nor was it demanding
any explanation. Clearly, therefore, the letter was merely intended to
accommodate the request of the Morans and was part of the series of
damage-control measures taken by the bank to placate petitioners.
Respondent Court of Appeals perceptively observed that “all
these somehow pacified plaintiffs-appellants (herein petitioners) for
they did not thereafter take immediate punitive action against the
defendant-appellee (herein private respondent). As pointed out by
the court a quo, it took plaintiffs-appellants about six (6) months
after the dishonor of the checks to demand that defendant-appellee
pay them P1,000,000.00 as damages. At that time, plaintiffs-
appellants had discovered the letter of Mr. Diaz attributing the
dishonor of their checks to ‘operational error.’ The

36
attempt to unduly
ride on the letter of Mr. Diaz speaks for itself.”
On the above premises which irresistibly commend themselves to
our acceptance, we find no cogent and sufficient reason to award
actual, moral, or exemplary damages to petitioners. Although we
take judicial notice of the fact that there is a fiduciary relationship
between a bank and its depositors, as well as the extent of diligence
37
expected of it in handling the accounts entrusted to its care, the
bank may not be held responsible for such damages in the absence
of fraud, bad faith, malice, or
__________________
36 Ibid.; id., 60.

37 Bank of the Philippine Islands vs. Intermediate Appellate Court, et al., G.R. No.
69162, February 21, 1992, 206 SCRA 408.
814

38
wanton attitude.
WHEREFORE, finding no reversible error in the judgment
appealed from, the same is hereby AFFIRMED, with costs against
petitioners.
SO ORDERED.
Narvasa (C.J., Chairman), Padilla and Nocon, JJ., concur.

Puno, J., No part.
Appealed judgment affirmed.
Note.—An insolvent banking institution which has been ordered

closed by the Central Bank cannot be held liable to pay interest on
bank deposits (Fidelity Savings and Mortgage Bank vs. Cenzon, 184
SCRA 141 [1990]).
——o0o——
__________________
38 Fidelity Savings and Mortgage Bank vs. Cenzon, G.R. No. L-46208, April 5,
1990, 184 SCRA 141.
815
© Copyright 2018 Central Book Supply, Inc. All rights reserved.

Moran vs. CA

Uploaded by

Copyright:

Available Formats

Moran vs. CA

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Moran vs. CA

Uploaded by

Copyright:

Available Formats

8/8/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 230

VOL. 230, MARCH 7, 1994 799

SPOUSES GEORGE MORAN and LIBRADA P. MORAN,

Banks; Negotiable Instruments; Checks; Words and Phrases; A check

800 SUPREME COURT REPORTS ANNOTATED

Moran vs. Court of Appeals

argue that public respondent, by relying heavily on Rionisto’s testimony,

Moran vs. Court of Appeals

Citytrust to Petrophil, dated December 16, 1983. As aptly and correctly

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

1 TSN, May 3, 1985, 6-8.

802 SUPREME COURT REPORTS ANNOTATED

1037002387 and 1037001372) with the Shaw Boulevard branch of

Savings Account No. 1037002387 to their current account could be

1. The transfer may be effected on the day following the overdrawing

On December 12, 1983, petitioners, through Librada Moran, drew a

2 Ibid., id., 18-24.

VOL. 230, MARCH 7, 1994 803

1037001372 (covered by the PAT) had an available balance of

5 Exhibit E, ibid., 224.

804 SUPREME COURT REPORTS ANNOTATED

ers to temporarily stop business operations, allegedly causing them

In a chance meeting around May or June, 1984, George Moran

12 Ibid., id., 38-40.

VOL. 230, MARCH 7, 1994 805

deposit is sufﬁcient, entitles the drawer

17 Original Record, 423-429; per Judge Maria Alicia M. Austria.

806 SUPREME COURT REPORTS ANNOTATED

respondent bank and the Philippine Clearing House Corporation, to

Q Let me again re-phrase the question. Most of (sic) these two

VOL. 230, MARCH 7, 1994 807

(and) these two (2) checks were made payable to Petrophil

Considering the clearing process adopted, as explained in the

the morning that the necessary funds were deposited, which

27 Annex A, Petition; Rollo, 55.

808 SUPREME COURT REPORTS ANNOTATED

on Rionisto’s testimony, failed to consider the fact that the witness

28 De Leon, The Law on Negotiable Instruments, 1989 Ed., 230-231.

into effect the pre-authorized transfer agreement.

Q Now according to you, you would receive the checks from

29 35 Pa. Super Ct., 125 (1907).

810 SUPREME COURT REPORTS ANNOTATED

Obviously, witness Rionisto was merely confused as to the dates

VOL. 230, MARCH 7, 1994 811

funds stated in the pink slips. As a matter of fact, so petitioner

clearing and payment and there were no adequate funds in their

32 O.E. Eads vs. Commercial National Bank of Phoenix, 62 A.L.R. 183.

812 SUPREME COURT REPORTS ANNOTATED

court, “x x x the letter is not an admission of liability as it was

33 Id., loc. cit.

VOL. 230, MARCH 7, 1994 813

losing the business of an important and inﬂuential member of the

dishonor of their checks to ‘operational error.’ The

36 Ibid.; id., 60.

814 SUPREME COURT REPORTS ANNOTATED

Narvasa (C.J., Chairman), Padilla and Nocon, JJ., concur.

Appealed judgment afﬁrmed.

Note.—An insolvent banking institution which has been ordered