Simex International (Manila), Inc. v. Court of Appeals

Simex, a food exporter that bought most of its products on credit, kept a checking account with Traders Royal Bank's Cubao branch. On May 25, 1981 it deposited P100,000, raising its balance to P190,380.74, but eight checks it later issued were dishonored for insufficient funds. Suppliers sent demand letters, one threatening prosecution and withholding delivery of an order; another cancelled Simex's credit line and demanded cash or certified-check payment, and other suppliers deferred action on pending orders. Simex complained on June 10, 1981; the bank found the deposit had not been credited, rectified the error on June 17, 1981, and the checks were paid on re-deposit. Simex sued for P1,000,000 moral damages, P500,000 exemplary damages and attorney's fees. The trial court found that Simex's right had been violated but denied moral and exemplary damages, awarding P20,000 nominal damages and P5,000 attorney's fees. The Court of Appeals affirmed, holding that moral damages require bad faith and that the bank's rectification negated it.

1. 1Whether Simex, a corporation, was entitled to moral damages for the bank's negligence in failing to credit its deposit.
2. 2Whether exemplary damages should be imposed on the bank.

Yes to both. The Court held that the lower courts brushed off the bank's negligence too lightly: the error should not have been committed, was never explained, and took almost a month to correct, during which Simex's credit line was cancelled, its orders held up and its business standing reduced. Citing Article 2205 (injury to business standing or commercial credit) and Article 2216 (no proof of pecuniary loss needed for moral or exemplary damages) of the Civil Code, it ruled that the amount of such losses need not be established with exactitude. Although a corporation is as a rule not entitled to moral damages, the exception applies where its good reputation is debased; Simex's prestige and credit standing were impaired, so nominal damages under Article 2221 were not the proper relief. The Court awarded P20,000 as moral damages instead, calling the P1,000,000 claim preposterous. On exemplary damages under Articles 2229 and 2232, the Court held 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." The bank's unexplained error and its delay in correcting it after being informed amounted to the wanton manner contemplated by the Civil Code. The judgment was modified: the bank was ordered to pay P20,000 moral damages in lieu of nominal damages, P50,000 exemplary damages, P5,000 attorney's fees, and costs.