BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. THE INTERMEDIATE APPELLATE COURT AND THE SPOUSES ARTHUR CANLAS AND VIVIENE CANLAS, RESPONDENTS.

In a decision dated September 3, 1984, the Intermediate Appellate
Court (now Court of Appeals) in AC-G.R. CV No. 69178 entitled, “Arthur A.
Canlas, et al., Plaintiff-Appellees vs. Commercial Bank and Trust Company of
the Philippines, Defendant-Appellant,” reduced to P105.000 the P465.000
damage-award of the trial court to the private respondents for an error of a
bank teller which resulted in the dishonor of two small checks which the
private respondents had issued against their joint current account. This petition for review of that decision
was filed by the Bank.

The respondent spouses, Arthur and Vivienne Canlas, opened a
joint current account No. 210-520-73 on April 25, 1977 in the Quezon City
branch of the Commercial Bank and Trust Company of the Philippines (CBTC) with
an initial deposit of P2,250. Prior
thereto, Arthur Canlas had an existing separate personal checking account No.
210-442-41 in the same branch.

When the respondent spouses opened their joint current account,
the “new accounts” teller of the bank pulled out from the bank’s
files the old and existing signature card of respondent Arthur Canlas for
Current Account No. 210-442-41 for use as ID and reference. By mistake, she placed the old personal account
number of Arthur Canlas on the deposit slip for the new joint checking account
of the spouses so that the initial deposit of P2, 250 for the joint checking
account was miscredited to Arthur’s personal account (p. 9, Rollo). The spouses subsequently deposited other
amounts in their joint account.

However, when respondent Vivienne Canlas issued a check for P1,
639.89 in April 1977 and another check for P1,160 on June 1, 1977, one of the
checks was dishonored by the bank for insufficient funds and a penalty of P20
was deducted from the account in both instances. In view of the overdrawings, the bank tried to call up the
spouses at the telephone number which they had given in their application form,
but the bank could not contact them because they actually reside in Porac,
Pampanga. The city address and
telephone number which they gave to the bank belonged to Mrs. Canlas’ parents.

On December 15, 1977, the private respondents filed a complaint
for damages against CBTC in the Court of First Instance of Pampanga (p. 113,
Rollo).

On February 27, 1978, the bank filed a motion to dismiss the
complaint for improper venue. The
motion was denied.

During the pendency of the case, the Bank of the Philippine
Islands (BPI) and CBTC were merged. As
the surviving corporation under the merger agreement and under Section 80(5) of
the Corporation Code of the Philippines, BPI took over the prosecution and
defense of any pending claims, actions or proceedings by and against CBTC.

On May 5, 1981, the Regional Trial Court of Pampanga rendered a
decision against BPI, the dispositive portion of which reads:

“WHEREFORE, judgment is hereby rendered sentencing defendant
to pay the plaintiffs the following:

“1. P5,000.00 as actual
damages;

“2. P150,000.00 for
plaintiff Arthur Canlas and P150,000.00 for plaintiff Vivienne S. Canlas
representing moral damages;

“3. P150,000.00 as
exemplary damages;

“4. P10,000.00 as
attorney’s fees; and

“5. Costs.” (p.
36, Rollo.)

On appeal, the Intermediate Appellate Court deleted the actual
damages and reduced the other awards. The dispositive portion of its decision reads:

“WHEREFORE, the judgment appealed from is hereby modified as
follows:

“1. The award of P50,000.00
in actual damages is herewith deleted.

“2. Moral damages of
P50,000.00 is awarded to plaintiffs-appellees Arthur Canlas and Vivienne S.
Canlas, not P50,000.00 each.

“3. Exemplary damages
is likewise reduced to the sum of P50,000.00 and attorney’s fees to
P5,000.00.

“Costs against the defendant-appellant.” (p. 40, Rollo.)

Petitioner filed this petition for review alleging that the
appellate court erred in holding that:

1. The venue of the case had been properly laid
at Pampanga in the light of private respondents’ earlier declaration that
Quezon City is their true residence.

2. The petitioner was
guilty of gross negligence in the handling of private respondents’ bank account.

3. Private respondents are
entitled to the moral and exemplary damages and attorney’s fees adjudged by the
respondent appellate court.

On the question of venue raised by petitioner, it is evident that
personal actions may be instituted in the Court of First Instance (now Regional
Trial Court) of the province where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff (Section 2(b), Rule 4 of the Rules of
Court). In this case, there was ample
proof that the residence of the plaintiffs is B. Sacan, Porac, Pampanga (p.
117, Rollo). The city address of Mrs.
Canlas’ parents was placed by the private respondents in their application for
a joint checking account, at the suggestion of the new accounts teller,
presumably to facilitate mailing of the bank statements and communicating with
the private respondents in case any problems should arise involving the
account. No waiver of their provincial
residence for purposes of determining the venue of an action against the bank
may be inferred from the so-called “misrepresentation” of their true
residence.

The appellate court based its award of moral and exemplary
damages, and attorney’s fees on its finding that the mistake committed by the
new accounts teller of the petitioner constituted “serious”
negligence (p. 38, Rollo). Said court
further stressed that it cannot absolve the petitioner from liability for
damages to the private respondents, even on the assumption of an honest mistake
on its part, because of the embarrassment that even an honest mistake can cause
its depositors (p. 39, Rollo).

There is no merit in petitioner’s argument that it should not be
considered negligent, much less held liable for damages on account of the
inadvertence of its bank employee for Article 1173 of the Civil Code only requires it to
exercise the diligence of a good father of a family.

In Simex International (Manila), Inc. vs. Court of Appeals (183
SCRA 360, 367), this Court stressed the fiduciary nature of the relationship
between a bank and it’s depositors and the extent of diligence expected of it
in handling the accounts entrusted to its care.

“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. x x x.”

The bank is not expected to be infallible but, as correctly
observed by respondent Appellate Court, in this instance, it must hear the
blame for not discovering the mistake of its teller despite the established
procedure requiring the papers and bank books to pass through a battery of bank
personnel whose duty it is to check and countercheck them for possible
errors. Apparently, the officials and
employees tasked to do that did not perform their duties with due care, as may
be gathered from the testimony of the bank’s lone witness. Antonio Enciso, who casually declared that
“the approving officer does not have to see the account numbers and all
those things. Those are very
petty things for the approving
manager to look into” (p. 78, Record on
Appeal). Unfortunately, it was a
“petty thing,” like the incorrect account number that the bank teller
wrote on the initial deposit slip for the newly-opened joint current account of
the Canlas spouses, that sparked this half-a-million-peso damage suit against
the bank.

While the bank’s negligence may not have been attended with malice
and bad faith, nevertheless, it caused serious anxiety, embarrassment and
humiliation to the private respondents for which they are entitled to recover
reasonable moral damages (American Express International, Inc. vs. IAC, 167
SCRA 209). The award of reasonable
attorney’s fees is proper for the private respondents were compelled to
litigate to protect their interest (Art. 2208, Civil Code). However, the absence of malice and bad faith
renders the award of exemplary damages improper (Globe Mackay Cable and Radio
Corp. vs. Court of Appeals, 176 SCRA 778).

WHEREFORE, the petition for review is granted. The appealed decision is MODIFIED by
deleting the award of exemplary damages to the private respondents. In all other respects, the decision of the
Intermediate Appellate Court now Court of Appeals, is AFFIRMED. No costs.

SO ORDERED.

Narvasa, (Chairman), Cruz, and
Medialdea, JJ., concur.