FIRSTDIVISION

[G.R.No.149454.May28,2004]

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI

INTERNATIONALEandLEONARDOT.YABUT,respondents.

[G.R.No.149507.May28,2004]

CASA MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE PHILIPPINE

ISLANDS,respondent.
DECISION
PANGANIBAN,J.:

Bythenatureofitsfunctions,abankisrequiredtotakemeticulouscareofthedepositsofitsclients,
whohavetherighttoexpecthighstandardsofintegrityandperformancefromit.Amongitsobligationsin
furtherancethereofisknowingthesignaturesofitsclients.Depositorsarenotestoppedfromquestioning
wrongfulwithdrawals,eveniftheyhavefailedtoquestionthoseerrorsinthestatementssentbythebank
tothemforverification.
TheCase
[1]

BeforeusaretwoPetitionsforReview underRule45oftheRulesofCourt,assailingtheMarch23,
[2]

[3]

2001 Decision and the August 17, 2001 Resolution of the Court of Appeals (CA) in CAGR CV No.
63561.ThedecretalportionoftheassailedDecisionreadsasfollows:
WHEREFORE,uponthepremises,thedecisionappealedfromisAFFIRMEDwiththemodificationthatdefendant
bank[BankofthePhilippineIslands(BPI)]isheldliableonlyforonehalfofthevalueoftheforgedchecksinthe
amountofP547,115.00afterdeductionssubjecttoREIMBURSEMENTfromthirdpartydefendantYabutwhois
[4]
likewiseORDEREDtopaytheotherhalftoplaintiffcorporation[CasaMontessoriInternationale(CASA)].
TheassailedResolutiondeniedallthepartiesMotionsforReconsideration.
TheFacts
ThefactsofthecasearenarratedbytheCAasfollows:
[5]

OnNovember8,1982,plaintiffCASAMontessoriInternational openedCurrentAccountNo.0291008101with
defendantBPI[,]withCASAsPresidentMs.Ma.CarinaC.Lebronasoneofitsauthorizedsignatories.
In1991,afterconductinganinvestigation,plaintiffdiscoveredthatnine(9)ofitscheckshadbeenencashedbya
certainSonnyD.Santossince1990inthetotalamountofP782,000.00,onthefollowingdatesandamounts:
CheckNo.DateAmount
1.839700April24,1990P43,400.00
2.839459Nov.2,1990110,500.00

3.839609Oct.17,199047,723.00
4.839549April7,199090,700.00
5.839569Sept.23,199052,277.00
6.729149Mar.22,1990148,000.00
7.729129Mar.16,199051,015.00
8.839684Dec.1,1990140,000.00
9.729034Mar.2,199098,985.00
[6]

TotalP782,600.00

ItturnedoutthatSonnyD.SantoswithaccountatBPIsGreenbeltBranch[was]afictitiousnameusedby
thirdpartydefendantLeonardoT.YabutwhoworkedasexternalauditorofCASA.Thirdpartydefendant
voluntarilyadmittedthatheforgedthesignatureofMs.Lebronandencashedthechecks.
ThePNPCrimeLaboratoryconductedanexaminationofthenine(9)checksandconcludedthatthe
handwritingsthereoncomparedtothestandardsignatureofMs.Lebronwerenotwrittenbythelatter.
OnMarch4,1991,plaintifffiledthehereinComplaintforCollectionwithDamagesagainstdefendant
[7]

bankprayingthatthelatterbeorderedtoreinstatetheamountofP782,500.00 inthecurrentandsavings
accountsoftheplaintiffwithinterestat6%perannum.
[8]

OnFebruary16,1999,theRTCrenderedtheappealeddecisioninfavoroftheplaintiff.
RulingoftheCourtofAppeals

Modifying the Decision of the Regional Trial Court (RTC), the CA apportioned the loss between BPI
and CASA. The appellate court took into account CASAs contributory negligence that resulted in the
undetectedforgery.ItthenorderedLeonardoT.YabuttoreimburseBPIhalfthetotalamountclaimedand
CASA,theotherhalf.Italsodisallowedattorneysfeesandmoralandexemplarydamages.
[9]

Hence,thesePetitions.

Issues
InGRNo.149454,PetitionerBPIsubmitsthefollowingissuesforourconsideration:
I.TheHonorableCourtofAppealserredindecidingthiscaseNOTinaccordwiththeapplicabledecisionsofthis
HonorableCourttotheeffectthatforgerycannotbepresumedthatitmustbeprovedbyclear,positiveand
convincingevidenceandthattheburdenofproofliesonthepartyallegingtheforgery.
II.TheHonorableCourtofAppealserredindecidingthiscasenotinaccordwithapplicablelaws,inparticularthe
NegotiableInstrumentsLaw(NIL)whichprecludesCASA,onaccountofitsownnegligence,fromassertingits
[10]
forgeryclaimagainstBPI,speciallytakingintoaccounttheabsenceofanynegligenceonthepartofBPI.
InGRNo.149507,PetitionerCASAsubmitsthefollowingissues:
1.TheHonorableCourtofAppealserredwhenitruledthatthereisnoshowingthat[BPI],althoughnegligent,acted
inbadfaithxxxthusdenyingtheprayerfortheawardofattorneysfees,moraldamagesandexemplarydamagesto
[CASA].TheHonorableCourtalsoerredwhenitdidnotorder[BPI]topayinterestontheamountsdueto[CASA].
2.TheHonorableCourtofAppealserredwhenitdeclaredthat[CASA]waslikewisenegligentinthecaseatbar,thus
warrantingitsconclusionthatthelossintheamountofP547,115.00beapportionedbetween[CASA]and[BPI]xxx.
[11]

These issues can be narrowed down to three. First, was there forgery under the Negotiable
InstrumentsLaw(NIL)?Second,wereanyofthepartiesnegligentandthereforeprecludedfromsettingup
forgery as a defense? Third, should moral and exemplary damages, attorneys fees, and interest be
awarded?
TheCourtsRuling
ThePetitioninGRNo.149454hasnomerit,whilethatinGRNo.149507ispartlymeritorious.
FirstIssue:
ForgedSignatureWhollyInoperative
Section23oftheNILprovides:
Section23.Forgedsignatureeffectof.Whenasignatureisforgedormadewithouttheauthorityoftheperson
whosesignatureitpurportstobe,itiswhollyinoperative,andnorightxxxtoenforcepaymentthereofagainstany
partythereto,canbeacquiredthroughorundersuchsignature,unlessthepartyagainstwhomitissoughttoenforce
[12]

suchrightisprecludedfromsettinguptheforgeryorwantofauthority.
[13]

[14]

Under this provision, a forged signature is a real or absolute defense, and a person whose
signature on a negotiable instrument is forged is deemed to have never become a party thereto and to
[15]

haveneverconsentedtothecontractthatallegedlygaverisetoit.

Thecounterfeitingofanywriting,consistinginthesigningofanothersnamewithintenttodefraud,is
[16]

forgery.

Inthepresentcase,weholdthattherewasforgeryofthedrawerssignatureonthecheck.
First, both the CA

[17]

and the RTC

[18]

found that Respondent Yabut himself had voluntarily admitted,

[19]

through an Affidavit, that he had forged the drawers signature and encashed the checks.
[20]

refutedthesefindings.

He never

Thathehadbeencoercedintoadmissionwasnotcorroboratedbyanyevidence

[21]

onrecord.

Second, the appellate and the trial courts also ruled that the PNP Crime Laboratory, after its
[22]
examination of the said checks, had concluded that the handwritings thereon compared to the
[23]
[24]
standardsignatureofthedrawerwerenothers. ThisconclusionwasthesameasthatintheReport
thatthePNPCrimeLaboratoryhadearlierissuedtoBPIthedraweebankuponthelattersrequest.
Indeed, we respect and affirm the RTCs factual findings, especially when affirmed by the CA, since
[25]
thesearesupportedbysubstantialevidenceonrecord.
VoluntaryAdmissionNot
ViolativeofConstitutionalRights
ThevoluntaryadmissionofYabutdidnotviolatehisconstitutionalrights(1)oncustodialinvestigation,
and(2)againstselfincrimination.
[26]

Inthefirstplace,hewasnotundercustodialinvestigation. HisAffidavitwasexecutedinprivateand
[27]
before private individuals. The mantle of protection under Section 12 of Article III of the 1987
[28]
Constitution coversonlytheperiodfromthetimeapersonistakenintocustodyforinvestigationofhis
possibleparticipationinthecommissionofacrimeorfromthetimeheissingledoutasasuspectinthe
[29]
commissionofacrimealthoughnotyetincustody.
Therefore,tofallwithintheambitofSection12,quotedabove,theremustbeanarrestoradeprivation
of freedom, with questions propounded on him by the police authorities for the purpose of eliciting

[30]

admissions, confessions, or any information.

The said constitutional provision does not apply to

[31]

spontaneousstatementsmadeinavoluntarymanner
[32]

of a crime.

wherebyanindividualorallyadmitstoauthorship

What the Constitution proscribes is the compulsory or coercive disclosure of incriminating

[33]

facts.

[34]

[35]

Moreover, the right against selfincrimination under Section 17 of Article III of the Constitution,
whichisordinarilyavailableonlyincriminalprosecutions,extendstoallothergovernmentproceedings
[36]

includingcivilactions,legislativeinvestigations,
orpenalaspect

[37]

andadministrativeproceedingsthatpossessacriminal

butnottoprivateinvestigationsdonebyprivateindividuals.Eveninsuchgovernment
[38]

proceedings, this right may be waived,

understandinglyandwillinglymade.

provided the waiver is certain unequivocal and intelligently,

[39]

Ifinthesegovernmentproceedingswaiverisallowed,allthemoreisitsoinprivateinvestigations.Itis
ofnomomentthatnocriminalcasehasyetbeenfiledagainstYabut.Thefilingthereofisentirelyuptothe
appropriateauthoritiesortotheprivateindividualsuponwhomdamagehasbeencaused.Asweshallalso
explainlater,itisnotmandatoryforCASAtheplaintiffbelowtoimpleadYabutinthecivilcasebefore
thelowercourt.
[40]

Underthesetwoconstitutionalprovisions,[t]heBillofRights doesnotconcernitselfwiththerelation
betweenaprivateindividualandanotherindividual.Itgovernstherelationshipbetweentheindividualand
[41]

theState.

Moreover,theBillofRightsisacharteroflibertiesfortheindividualandalimitationuponthe
[42]

[43]

powerofthe[S]tate. Theserights areguaranteedtoprecludetheslightestcoercionbytheStatethat

mayleadtheaccusedtoadmitsomethingfalse,notpreventhimfromfreelyandvoluntarilytellingthetruth.
[44]

Yabut is not an accused here. Besides, his mere invocation of the aforesaid rights does not
[45]

[46]

automaticallyentitlehimtotheconstitutionalprotection. Whenhefreelyandvoluntarilyexecuted his

Affidavit, the State was not even involved.Such Affidavit may therefore be admitted without violating his
constitutionalrightswhileundercustodialinvestigationandagainstselfincrimination.
Clear,PositiveandConvincing
ExaminationandEvidence
TheexaminationbythePNP,thoughinconclusive,wasneverthelessclear,positiveandconvincing.
[47]

[48]

Forgerycannotbepresumed. Itmustbeestablishedbyclear,positiveandconvincingevidence.
Under the best evidence rule as applied to documentary evidence like the checks in question, no
secondaryorsubstitutionaryevidencemayinceptivelybeintroduced,astheoriginalwritingitselfmustbe
[49]
producedincourt. Butwhen,withoutbadfaithonthepartoftheofferor,theoriginalcheckshavealready
[50]
been destroyed or cannot be produced in court, secondary evidence may be produced. Without bad
faithonitspart,CASAprovedthelossordestructionoftheoriginalchecksthroughtheAffidavitoftheone
[51]
personwhoknewofthatfact Yabut.Heclearlyadmittedtodiscardingthepaidcheckstocoveruphis
[52]
misdeed. Insuchasituation,secondaryevidencelikemicrofilmcopiesmaybeintroducedincourt.
The drawers signatures on the microfilm copies were compared with the standard signature. PNP
Document Examiner II Josefina de la Cruz testified on crossexamination that two different persons had
[53]
[54]
writtenthem. Althoughnoconclusivereportcouldbeissuedintheabsenceoftheoriginalchecks, she
[55]
affirmed that her findings were 90 percent conclusive. According to her, even if the microfilm copies
[56]
were the only basis of comparison, the differences were evident. Besides, the RTC explained that
althoughtheReportwasinconclusive,noconclusivereportcouldhavebeengivenbythePNP,anyway,in
[57]
the absence of the original checks. This explanation is valid otherwise, no such report can ever be
relieduponincourt.
Evenwithrespecttodocumentaryevidence,thebestevidenceruleappliesonlywhenthecontentsof
[58]
adocumentsuchasthedrawerssignatureonacheckisthesubjectofinquiry. Astowhetherthe
document has been actually executed, this rule does not apply and testimonial as well as any other

[59]

secondary evidence is admissible. Carina Lebron herself, the drawers authorized signatory, testified
manytimesthatshehadneversignedthosechecks.Her testimonial evidence is admissible the checks
have not been actually executed. The genuineness of her handwriting is proved, not only through the
[60]
courtscomparisonofthequestionedhandwritingsandadmittedlygenuinespecimensthereof, butabove
allbyher.
The failure of CASA to produce the original checks neither gives rise to the presumption of
[61]

suppression of evidence

nor creates an unfavorable inference against it.

[62]

Such failure merely

[63]

authorizestheintroductionofsecondaryevidence intheformofmicrofilmcopies.Ofnoconsequenceis
the fact that CASA did not present the signature card containing the signatures with which those on the
[64]
checkswerecompared. Specimensofstandardsignaturesarenotlimitedtosuchacard.Considering
thatitwasnotproducedinevidence,otherdocumentsthatbearthedrawersauthenticsignaturemaybe
[65]

resortedto.

Besides,thatcardwasinthepossessionofBPItheadverseparty.

Wehaveheldthatwithouttheoriginaldocumentcontainingtheallegedlyforgedsignature,onecannot
[66]

make a definitive comparison that would establish forgery

and that a comparison based on a mere

[67]

reproduction of the document under controversy cannot produce reliable results.

[68]

however,thatajudgecannotmerelyrelyonahandwritingexpertstestimony,

We have also said,

butshouldalsoexercise
[69]

independentjudgmentinevaluatingtheauthenticityofasignatureunderscrutiny. Inthepresentcase,
boththeRTCandtheCAconductedindependentexaminationsoftheevidencepresentedandarrivedat
reasonable and similar conclusions. Not only did they admit secondary evidence they also appositely
consideredtestimonialandotherdocumentaryevidenceintheformoftheAffidavit.
Thebestevidenceruleadmitsofexceptionsand,aswehavediscussedearlier,thefirstofthesehas
beenmet.

[70]

Theresultofexaminingaquestionedhandwriting,evenwiththeaidofexpertsandscientific
[71]

instruments,maybeinconclusive

butitisanonsequiturtosaythatsuchresultisnotclear,positiveand
[72]

convincing.Thepreponderanceofevidencerequiredinthiscasehasbeensatisfied.
SecondIssue:
NegligenceAttributabletoBPIAlone

Havingestablishedtheforgeryofthedrawerssignature,BPIthedraweeerredinmakingpaymentsby
virtue thereof. The forged signatures are wholly inoperative, and CASA the drawer whose authorized
signatures do not appear on the negotiable instruments cannot be held liable thereon. Neither is the
latterprecludedfromsettingupforgeryasarealdefense.
ClearNegligence
inAllowingPayment
UnderaForgedSignature
Wehaverepeatedlyemphasizedthat,sincethebankingbusinessisimpressedwithpublicinterest,of
paramount importance thereto is the trust and confidence of the public in general. Consequently, the
[73]
[74]
highest degree of diligence is expected, and high standards of integrity and performance are even
[75]
required, of it. By the nature of its functions, a bank is under obligation to treat the accounts of its
[76]
[77]
depositorswithmeticulouscare, alwayshavinginmindthefiduciarynatureoftheirrelationship.
BPIcontendsthatithasasignatureverificationprocedure,inwhichchecksarehonoredonlywhenthe
signaturesthereinareverifiedtobethesamewithorsimilartothespecimensignaturesonthesignature
cards. Nonetheless, it still failed to detect the eight instances of forgery. Its negligence consisted in the
[78]
omissionofthatdegreeofdiligencerequired ofabank.Itcannotnowfeignignorance,forveryearlyon
wehavealreadyruledthatabankisboundtoknowthesignaturesofitscustomersandifitpaysaforged
check,itmustbeconsideredasmakingthepaymentoutofitsownfunds,andcannotordinarilychargethe
[79]
amountsopaidtotheaccountofthedepositorwhosenamewasforged. Infact,BPIwasthesamebank
involvedwhenweissuedthisrulingseventyyearsago.

NeitherWaivernorEstoppel
ResultsfromFailureto
ReportErrorinBankStatement
ThemonthlystatementsissuedbyBPItoitsclientscontainanoticewordedasfollows:Ifnoerroris
[80]

reported in ten (10) days, account will be correct. Such notice cannot be considered a waiver, even if
CASAfailedtoreporttheerror.Neitherisitestoppedfromquestioningthemistakeafterthelapseofthe
tendayperiod.
Thisnoticeisasimpleconfirmation

[81]

orcircularizationinaccountingparlancethatrequestsclient
[82]

depositors to affirm the accuracy of items recorded by the banks. Its purpose is to obtain from the
depositorsadirectcorroborationofthecorrectnessoftheiraccountbalanceswiththeirrespectivebanks.
[83]

[84]

Internal or external auditors of a bank use it as a basic audit procedure the results of which its
clientdepositorsareneitherinterestedinnorprivytototestthedetailsoftransactionsandbalancesin
[85]

thebanksrecords.

Evidentialmatterobtainedfromindependentsourcesoutsideabankonlyservesto
[86]

providegreaterassuranceofreliability thanthatobtainedsolelywithinitforpurposesofanauditofits
ownfinancialstatements,notthoseofitsclientdepositors.
[87]

Furthermore, there is always the audit risk that errors would not be detected
[88]

One, materiality is a consideration in audit planning

for various reasons.

and two, the information obtained from such a

[89]

substantive test is merely presumptive and cannot be the basis of a valid waiver. BPI has no right to
imposeaconditionunilaterallyandthereafterconsiderfailuretomeetsuchconditionawaiver.Neithermay
[90]

CASArenouncearight

[91]

ithasneverpossessed.

Every right has subjects active and passive. While the active subject is entitled to demand its
[92]

enforcement,thepassiveoneisdutyboundtosuffersuchenforcement.

On the one hand, BPI could not have been an active subject, because it could not have demanded
fromCASAaresponsetoitsnotice.Besides,thenoticewasameaslyrequestwordedasfollows:Please
[93]

examinexxxandreportxxx. CASA,ontheotherhand,couldnothavebeenapassivesubject,either,
becauseithadnoobligationtorespond.Itcouldasitdidchoosenottorespond.
Estoppel precludes individuals from denying or asserting, by their own deed or representation,
[94]

anything contrary to that established as the truth, in legal contemplation.

Our rules on evidence even

[95]

makeajurisetdejurepresumption thatwheneveronehas,byonesownactoromission,intentionally
anddeliberatelyledanothertobelieveaparticularthingtobetrueandtoactuponthatbelief,onecannot
[96]
inanylitigationarisingfromsuchactoromissionbepermittedtofalsifythatsupposedtruth.
In the instant case, CASA never made any deed or representation that misled BPI. The formers
omission,ifany,mayonlybedeemedaninnocentmistakeoblivioustotheproceduresandconsequences
of periodic audits. Since its conduct was due to such ignorance founded upon an innocent mistake,
[97]
estoppel will not arise. A person who has no knowledge of or consent to a transaction may not be
[98]
[99]
estoppedbyit. Estoppelcannotbesustainedbymereargumentordoubtfulinferencexxx. CASAis
notbarredfromquestioningBPIserrorevenafterthelapseoftheperiodgiveninthenotice.
LossBorneby
ProximateSource
ofNegligence
[100]

Forallowingpayment onthecheckstoawrongfulandfictitiouspayee,BPIthedraweebank
[101]
becomesliabletoitsdepositordrawer.Sincetheencashingbankisoneofitsbranches, BPIcaneasily
[102]
[103]
go after it and hold it liable for reimbursement. It may not debit the drawers account and is not
[104]
entitledtoindemnificationfromthedrawer. Inbothlawandequity,whenoneoftwoinnocentpersons
mustsufferbythewrongfulactofathirdperson,thelossmustbebornebytheonewhosenegligencewas
[105]
theproximatecauseofthelossorwhoputitintothepowerofthethirdpersontoperpetratethewrong.

[106]

Proximate cause is determined by the facts of the case. It is that cause which, in natural and
continuoussequence,unbrokenbyanyefficientinterveningcause,producestheinjury,andwithoutwhich
theresultwouldnothaveoccurred.

[107]

Pursuanttoitsprimedutytoascertainwellthegenuinenessofthesignaturesofitsclientdepositorson
[108]

checksbeingencashed,BPIisexpectedtousereasonablebusinessprudence. Intheperformanceof
that obligation, it is bound by its internal banking rules and regulations that form part of the contract it
[109]

entersintowithitsdepositors.

Unfortunately, it failed in that regard. First, Yabut was able to open a bank account in one of its
[110]

branches without privity that is, without the proper verification of his corresponding identification
papers. Second, BPI was unable to discover early on not only this irregularity, but also the marked
differencesinthesignaturesonthechecksandthoseonthesignaturecard.Third,despitetheexamination
[111]

procedures it conducted, the Central Verification Unit of the bank even passed off these evidently
different signatures as genuine. Without exercising the required prudence on its part, BPI accepted and
encashedtheeightcheckspresentedtoit.Asaresult,itproximatelycontributedtothefraudandshouldbe
[112]

heldprimarilyliable

forthenegligenceofitsofficersoragentswhenactingwithinthecourseandscope

[113]

oftheiremployment.

Itmustbeartheloss.

CASANotNegligent
inItsFinancialAffairs
[114]

Inthisjurisdiction,thenegligenceofthepartyinvokingforgeryisrecognizedasanexception

tothe

[115]

generalrulethataforgedsignatureiswhollyinoperative. ContrarytoBPIsclaim,however,wedonot
find CASA negligent in handling its financial affairs. CASA, we stress, is not precluded from setting up
forgeryasarealdefense.
RoleofIndependentAuditor
Themajorpurposeofanindependentauditistoinvestigateanddetermineobjectivelyifthefinancial
statements submitted for audit by a corporation have been prepared in accordance with the appropriate
[116]

financialreportingpractices
ofprivateentities.Therelationshipthatarisestherefromisbothlegaland
[117]
[118]
moral. Itbeginswiththeexecutionoftheengagementletter thatembodiesthetermsandconditions
[119]
oftheauditandendswiththefulfilledexpectationoftheauditorsethical
andcompetentperformancein
[120]
allaspectsoftheaudit.
The financial statements are representations of the client but it is the auditor who has the
responsibility for the accuracy in the recording of data that underlies their preparation, their form of
[121]
[122]
presentation,andtheopinion expressedtherein. Theauditordoesnotassumetheroleofemployee
[123]
[124]
orofmanagementintheclientsconductofoperations
andisneverunderthecontrolorsupervision
oftheclient.
[125]

Yabutwasanindependentauditor hiredbyCASA.Hehandleditsmonthlybankreconciliationsand
[126]
[127]
had access to all relevant documents and checkbooks.
In him was reposed the clients trust and
[128]
confidence that he would perform precisely those functions and apply the appropriate procedures in
[129]
accordance with generally accepted auditing standards. Yet he did not meet these expectations.
Nothingcouldbemorehorribletoaclientthantodiscoverlateronthatthepersontaskedtodetectfraud
wasthesameonewhoperpetratedit.
CashBalances
OpentoManipulation

Itisanonsequiturtosaythatthepersonwhoreceivesthemonthlybankstatements,togetherwiththe
cancelled checks and other debit/credit memoranda, shall examine the contents and give notice of any
discrepancieswithinareasonabletime.Awarenessisnotequipollentwithdiscernment.
[130]

Besides,intheinternalaccountingcontrolsystemprudentlyinstalledbyCASA,
[131]

shouldexaminethose documentsin ordertopreparethebankreconciliations.

itwasYabutwho

Heownedhisworking

[132]

papers, and his output consisted of his opinion as well as the clients financial statements and
accompanyingnotesthereto.CASAhadeveryrighttorelysolelyuponhisoutputbasedonthetermsof
theauditengagementandcouldthusbeunwittinglydupedintobelievingthateverythingwasinorder.
Besides, [g]ood faith is always presumed and it is the burden of the party claiming otherwise to adduce
[133]

clearandconvincingevidencetothecontrary.

Moreover,therewasatimegapbetweentheperiodcoveredbythebankstatementandthedateofits
[134]

actualreceipt.LebronpersonallyreceivedtheDecember1990bankstatementonlyinJanuary1991
whenshewasalsoinformedoftheforgeryforthefirsttime,afterwhichsheimmediatelyrequestedastop
paymentorder.She cannot be faulted for the late detection of the forged December check.After all, the
bankaccountwithBPIwasnotpersonalbutcorporate,andshecouldnotbeexpectedtomonitorclosely
allitsfinances.Apreschoolteacherchargedwithmoldingthemindsoftheyouthcannotbeburdenedwith
theintricaciesorcomplexitiesofcorporateexistence.
There is also a cutoff period such that checks issued during a given month, but not presented for
[135]

paymentwithinthatperiod,willnotbereflectedtherein. Anexperiencedauditorwithintenttodefraud
can easily conceal any devious scheme from a client unwary of the accounting processes involved by
manipulatingthecashbalancesonrecordespeciallywhenbanktransactionsarenumerous,largeand
frequent.CASAcouldonlybeblamed,ifatall,foritsunintelligentchoiceintheselectionandappointment
ofanauditorafaultthatisnottantamounttonegligence.
[136]

Negligenceisnotpresumed,butprovenbywhoeverallegesit.
[137]

Itsmereexistenceisnotsufficient
[138]

withoutproofthatit,andnoothercause, hasgivenrisetodamages. Inaddition,thisfaultiscommon

to, if not prevalent among, small and mediumsized business entities, thus leading the Professional
Regulation Commission (PRC), through the Board of Accountancy (BOA), to require today not only
[139]

accreditation for the practice of public accountancy, but also the registration of firms in the practice
thereof. In fact, among the attachments now required upon registration are the code of good
[140]

governance

[141]

andaswornstatementonadequateandeffectivetraining.

[142]

[143]

The missing checks were certainly reported by the bookkeeper to the accountant her
immediatesupervisorandbythelattertotheauditor.However,boththeaccountantandtheauditor,for
reasonsknownonlytothem,assuredthebookkeeperthattherewerenoirregularities.
[144]

[145]

The bookkeeper who had exclusive custody of the checkbooks

did not have to go directly to
CASAs president or to BPI. Although she rightfully reported the matter, neither an investigation was
conductednoraresolutionofitwasarrivedat,preciselybecausethepersonatthetopofthehelmwasthe
culprit.Thevouchers,invoicesandcheckstubsinsupportofallcheckdisbursementscouldbeconcealed
or fabricated even in collusion and management would still have no way to verify its cash
accountabilities.
Clearlythen,YabutwasabletoperpetratethewrongfulactthroughnofaultofCASA.Ifauditorsmay
[146]
beheldliableforbreachofcontractandnegligence, withallthemorereasonmaytheybechargedwith
theperpetrationoffrauduponanunsuspectingclient.CASAhadthediscretiontopursueBPIaloneunder
the NIL, by reason of expediency or munificence or both.Money paid under a mistake may rightfully be
[147]
recovered,
andundersuchtermsastheinjuredpartymaychoose.
ThirdIssue:
AwardofMonetaryClaims
MoralDamagesDenied
WedenyCASAsclaimformoraldamages.

[148]

Intheabsenceofawrongfulactoromission,
[150]

awarded.

[149]

oroffraudorbadfaith,

moraldamagescannotbe

Theadverseresultofanactiondoesnotpersemaketheactionwrongful,orthepartyliable
[151]

for it. One may err, but error alone is not a ground for granting such damages.

While no proof of

pecuniarylossisnecessarythereforwiththeamounttobeawardedlefttothecourtsdiscretion
[153]

claimantmustnonethelesssatisfactorilyprovetheexistenceofitsfactualbasis

[152]

the
[154]

andcausalrelation

[155]

totheclaimantsactoromission.

Regrettably,inthiscaseCASAwasunabletoidentifytheparticularinstanceenumeratedintheCivil
[156]

Code upon which its claim for moral damages is predicated.

gross that it amounts to malice

[157]

Neither bad faith nor negligence so

can be imputed to BPI. Bad faith, under the law, does not simply
[158]

connote bad judgment or negligence it imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that
[159]

partakesofthenatureoffraud.

Asageneralrule,acorporationbeinganartificialpersonwithoutfeelings,emotionsandsenses,and
[160]

having existence only in legal contemplation is not entitled to moral damages,

because it cannot

[161]

experiencephysicalsufferingandmentalanguish. However,forbreachofthefiduciarydutyrequiredof
a bank, a corporate client may claim such damages when its good reputation is besmirched by such
breach,andsocialhumiliationresultstherefrom.
[163]

goodreputationof,

[162]

CASAwasunabletoprovethatBPIhaddebasedthe

andconsequentlycausedincalculableembarrassmentto,theformer.CASAsmere
[164]

allegationorsuppositionthereof,withoutanysufficientevidenceonrecord,

isnotenough.

ExemplaryDamagesAlsoDenied
WealsodenyCASAsclaimforexemplarydamages.
[165]

Imposedbywayofcorrection

[166]

forthepublicgood,

exemplarydamagescannotberecoveredas

[167]

amatterofright. Aswehavesaidearlier,thereisnobadfaithonthepartofBPIforpayingthechecks
of CASA upon forged signatures. Therefore, the former cannot be said to have acted in a wanton,
[168]

fraudulent,reckless,oppressiveormalevolentmanner.

The latter, having no right to moral damages,

[169]

cannotdemandexemplarydamages.
AttorneysFeesGranted

[170]

Although it is a sound policy not to set a premium on the right to litigate,

we find that CASA is
[171]
entitledtoreasonableattorneysfeesbasedonfactual,legal,andequitablejustification.
Whentheactoromissionofthedefendanthascompelledtheplaintifftoincurexpensestoprotectthe
[172]
[173]
lattersinterest, orwherethecourtdeemsitjustandequitable, attorneysfeesmayberecovered.In
thepresentcase,BPIpersistentlydeniedtheclaimofCASAundertheNILtorecreditthelattersaccount
for the value of the forged checks. This denial constrained CASA to incur expenses and exert effort for
morethantenyearsinordertoprotectitscorporateinterestinitsbankaccount.Besides,wehavealready
cautioned BPI on a similar act of negligence it had committed seventy years ago, but it has remained
[174]
unrelenting. Therefore, the Court deems it just and equitable to grant ten percent (10%) of the total
valueadjudgedtoCASAasattorneysfees.
InterestAllowed
ForthefailureofBPItopayCASAupondemandandforcompellingthelattertoresorttothecourtsto
obtainpayment,legalinterestmaybeadjudicatedatthediscretionoftheCourt,thesametorunfromthe
[175]
[176]
filing
oftheComplaint. Sinceacourtjudgmentisnotaloanoraforbearanceofrecovery,thelegal

[177]

interestshallbeatsixpercent(6%)perannum. If the obligation consists in the payment of a sum of

money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the
[178]

contrary,shallbethepaymentofxxxlegalinterest,whichissixpercentperannum.
[179]

for its computation shall be on the amount finally adjudged,

[181]

thecostofmoney

[180]

compounded

Theactualbase

annually to make up for

alreadylosttoCASA.

Moreover,thefailureoftheCAtoawardinterestdoesnotpreventusfromgrantingitupondamages
[182]

awardedforbreachofcontract. BecauseBPIevidentlybreacheditscontractofdepositwithCASA,we
award interest in addition to the total amount adjudged. Under Section 196 of the NIL, any case not
providedforshallbegovernedbytheprovisionsofexistinglegislationor,indefaultthereof,bytherulesof
[183]

thelawmerchant.
DamagesarenotprovidedforintheNIL.Thus,weresorttotheCodeofCommerce
andtheCivilCode.UnderArticle2oftheCodeofCommerce,actsofcommerceshallbegovernedbyits
provisionsand,intheirabsence,bytheusagesofcommercegenerallyobservedineachplaceandinthe
[184]

absenceofbothrules,bythoseofthecivillaw. Thislawbeingsilent,welookatArticle18oftheCivil
Code, which states: In matters which are governed by the Code of Commerce and special laws, their
deficiencyshallbesuppliedbyitsprovisions.Aperusalofthesethreestatutesunmistakablyshowsthatthe
awardofinterestunderourcivillawisjustified.
WHEREFORE,thePetitioninGRNo.149454isherebyDENIED,andthatinGRNo.149507PARTLY
GRANTED. The assailed Decision of the Court of Appeals is AFFIRMED with modification: BPI is held
liableforP547,115,thetotalvalueoftheforgedcheckslesstheamountalreadyrecoveredbyCASAfrom
LeonardoT.Yabut,plusinterestatthelegalrateofsixpercent(6%)perannumcompoundedannually,
fromthefilingofthecomplaintuntilpaidinfullandattorneysfeesoftenpercent(10%)thereof,subjectto
reimbursementfromRespondentYabutfortheentireamount,exceptingattorneysfees.Letacopyofthis
Decision be furnished the Board of Accountancy of the Professional Regulation Commission for such
actionasitmaydeemappropriateagainstRespondentYabut.Nocosts.
SOORDERED.
YnaresSantiago,Carpio,andAzcuna,JJ.,concur.
Davide,Jr.,C.J.,(Chairman),onofficialleave.
[1]
[2]

[3]

[4]
[5]
[6]
[7]
[8]
[9]

GRNo.149454rollo,pp.2040GRNo.149507rollo,pp.320.
Id., pp. 4452 & 2230.Penned by Justice Portia AlioHormachuelos, with the concurrence of Justices Fermin A. Martin Jr.
(SecondDivisionchairman)andMercedesGozoDadole(member).
Id.,pp.54&32.PennedbyJusticePortiaAlioHormachuelos,withtheconcurrenceofJusticesRamonA.Barcelona(Special
FormerSecondDivisionchairman)andMercedesGozoDadole(member).
AssailedCADecision,pp.89GRNo.149454rollo,pp.5152GRNo.149507rollo,pp.2930.
ThisisalsoreferredtointherecordsasCasaMontessoriInternationaleorCasaMontessoriInternational,Inc.
TheamountwasearlierstatedintheCADecisionasP782,000.
ThetotalamountoftheencashedcheckswasearliercomputedintheCADecisiontobeP782,600.
AssailedCADecision,pp.24GRNo.149454rollo,pp.4547GRNo.149507rollo,pp.2325.Citationsomitted.
These two cases were consolidated and deemed submitted for decision on July 25, 2002, upon the Courts receipt of BPIs
Memorandum in GR No. 149454, which was signed by Atty. Justino M. Marquez III.CASAs Memorandum, signed by
Atty. Oscar F. Martinez, was filed on July4,2002 while Yabuts Memorandum, signed by Atty. Leny L. Mauricio, was
filedonJune25,2002.

InGRNo.149507,aManifestation(re:Memorandum)byYabut,alsosignedbyAtty.Mauricio,wasfiledonJune25,2002.BPIs
Memorandum,alsosignedbyAtty.Marquez,wasfiledonJune3,2002whileCASAsMemorandum,alsosignedbyAtty.
Martinez,wasfiledonApril19,2002.
[10]
[11]
[12]

BPIsMemorandum,p.7GRNo.149454rollo,p.140.Boldfaceanduppercasecharacterscopiedverbatim.
CASAsMemorandum,p.6GRNo.149507rollo,p.83.
Act No. 2031 took effect on June 2, 1911. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the
Philippines,VolI(1989ed.),p.191.