CITIBANK, N.A., Petitioner, Baldwin Park Boulevard, Baldwin Park, California.

ldwin Park Boulevard, Baldwin Park, California. Initially, they On July 1, 1997, the RTC rendered a decision in favor of the
reported that only Carmelita's jewelry box was missing, but later Cabamongan spouses and against Citibank, the dispositive portion
on, they discovered that other items, such as their passports, bank of which reads, thus:
vs.
deposit certificates, including the subject foreign currency deposit,
and identification cards were also missing. 14 It was only then that
WHEREFORE, premises considered, defendant Citibank, N.A., is
SPS. LUIS and CARMELITA CABAMONGAN and their sons LUIS the Cabamongan spouses realized that their passports and bank
hereby ordered to pay the plaintiffs the following:
CABAMONGAN, JR. and LITO CABAMONGAN, Respondents. deposit certificates were lost.15

1) the principal amount of their Foreign Currency Deposit

Through various overseas calls, the Cabamongan spouses informed
(Reference No. 6022214372) amounting to $55,216.69 or its Phil.
Citibank, thru San Pedro, that Carmelita was in the United States
Currency equivalent plus interests from August 16, 1993 until fully
DECISION and did not preterminate their deposit and that the person who did
paid;
so was an impostor who could have also been involved in the break-
in of their California residence. San Pedro told the spouses to
AUSTRIA-MARTINEZ, J.: submit the necessary documents to support their claim but Citibank 2) Moral damages of P50,000.00;
concluded nonetheless that Carmelita indeed preterminated her
Before the Court is a petition for review on certiorari of the deposit. In a letter dated September 16, 1994, the Cabamongan 3) Attorney's fees of P50,000.00; and
Decision1 dated January 26, 2001 and the Resolution2 dated July 30, spouses, through counsel, made a formal demand upon Citibank for
2001 of the Court of Appeals (CA) in CA-G.R. CV No. 59033. payment of their preterminated deposit in the amount of
$55,216.69 with legal interests. 16 In a letter dated November 28, 4) Cost of suit.
1994, Citibank, through counsel, refused the Cabamongan spouses'
The factual background of the case is as follows: demand for payment, asserting that the subject deposit was SO ORDERED.24
released to Carmelita upon proper identification and verification.17
On August 16, 1993, spouses Luis and Carmelita Cabamongan
The RTC reasoned that:
opened a joint "and/or" foreign currency time deposit in trust for On January 27, 1995, the Cabamongan spouses filed a complaint
their sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch, with against Citibank before the Regional Trial Court of Makati for
Reference No. 60-22214372, in the amount of $55,216.69 for a Specific Performance with Damages, docketed as Civil Case No 95- xxx Citibank, N.A., committed negligence resulting to the undue
term of 182 days or until February 14, 1994, at 2.5625 per cent 163 and raffled to Branch 150 (RTC).18 suffering of the plaintiffs. The forgery of the signatures of plaintiff
interest per annum.3 Prior to maturity, or on November 10, 1993, a Carmelita Cabamongan on the questioned documents has been
person claiming to be Carmelita went to the Makati branch and pre- categorically established by the handwriting expert. xxx Defendant
terminated the said foreign currency time deposit by presenting a In its Answer dated April 20, 1995, Citibank insists that it was not bank was clearly remiss in its duty and obligations to treat plaintiff's
passport, a Bank of America Versatele Card, an ATM card and a negligent of its duties since the subject deposit was released to account with the highest degree of care, considering the nature of
Mabuhay Credit Card.4 She filled up the necessary forms for pre- Carmelita only upon proper identification and verification.19 their relationship. Banks are under the obligation to treat the
termination of deposits with the assistance of Account Officer Yeye accounts of their depositors with meticulous care. This is the reason
San Pedro. While the transaction was being processed, she was At the pre-trial conference the parties failed to arrive at an for their established procedure of requiring several specimen
casually interviewed by San Pedro about her personal amicable settlement.20 Thus, trial on the merits ensued. signatures and recent picture from potential depositors. For every
circumstances and investment plans. 5 Since the said person failed transaction, the depositor's signature is passed upon by personnel
to surrender the original Certificate of Deposit, she had to execute a to check and countercheck possible irregularities and therefore
notarized release and waiver document in favor of Citibank, For the plaintiffs, the Cabamongan spouses themselves and must bear the blame when they fail to detect the forgery or
pursuant to Citibank's internal procedure, before the money was Florenda G. Negre, Documents Examiner II of the Philippine discrepancy.25
released to her.6 The release and waiver document 7 was not National Police (PNP) Crime Laboratory in Camp Crame, Quezon
notarized on that same day but the money was nonetheless given City, testified. The Cabamongan spouses, in essence, testified that
Carmelita could not have preterminated the deposit account since Despite the favorable decision, the Cabamongan spouses filed on
to the person withdrawing.8 The transaction lasted for about 40
she was in California at the time of the incident. 21 Negre testified October 1, 1997 a motion to partially reconsider the decision by
minutes.9
that an examination of the questioned signature and the samples of praying for an increase of the amount of the damages awarded. 26
the standard signatures of Carmelita submitted in the RTC showed a Citibank opposed the motion.27 On November 19, 1997, the RTC
After said person left, San Pedro realized that she left behind an significant divergence. She concluded that they were not written by granted the motion for partial reconsideration and amended the
identification card.10 Thus, San Pedro called up Carmelita's listed one and the same person.22 dispositive portion of the decision as follows:
address at No. 48 Ranger Street, Moonwalk Village, Las Pinas,
Metro Manila on the same day to have the card picked up. 11
For the respondent, Citibank presented San Pedro and Cris From the foregoing, and considering all the evidence laid down by
Marites, the wife of Lito, received San Pedro's call and was stunned
Cabalatungan, Vice-President and In-Charge of Security and the parties, the dispositive portion of the court's decision dated July
by the news that Carmelita preterminated her foreign currency
Management Division. Both San Pedro and Cabalatungan testified 1, 1997 is hereby amended and/or modified to read as follows:
time deposit because Carmelita was in the United States at that
time.12 The Cabamongan spouses work and reside in California. that proper bank procedure was followed and the deposit was
Marites made an overseas call to Carmelita to inform her about released to Carmelita only upon proper identification and WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the
what happened.13 The Cabamongan spouses were shocked at the verification.23 plaintiffs the following:
news. It seems that sometime between June 10 and 16, 1993, an
unidentified person broke in at the couple's residence at No. 3268
1) the principal amount of their foreign currency deposit (Reference Second, in the internal memorandum of Account Officer Yeye San It held that, insofar as the date from which legal interest of 12% is
No. 6022214372) amounting to $55,216.69 or its Philippine Pedro regarding the incident, she reported that upon comparing to run, it should be counted from September 16, 1994 when
currency equivalent (at the time of its actual payment or execution) the authentic signatures of Carmelita Cabamongan on file with the extrajudicial demand was made. As to moral damages, the CA
plus legal interest from Aug. 16, 1993 until fully paid. bank with the signatures made by the person claiming to be reduced it to P100,000.00 and deleted the awards of exemplary
Cabamongan on the documents required for the termination of the damages and litigation expenses. Thus, the dispositive portion of
deposit, she noticed that one letter in the latter [sic] signatures was the CA decision reads:
2) moral damages in the amount of P200,000.00;
different from that in the standard signatures. She requested said
person to sign again and scrutinized the identification cards
WHEREFORE, the decision of the trial court dated 01 July 1997, and
3) exemplary damages in the amount of P100,000.00; presented. Presumably, San Pedro was satisfied with the second set
its order dated 19 November 1997, are hereby AFFIRMED with the
of signatures made as she eventually authorized the termination of
MODIFICATION that the legal interest for actual damages awarded
4) attorney's fees of P100,000.00; the deposit. However, upon examination of the signatures made
in the amount of $55,216.69 shall run from 16 September 1994;
during the incident by the Philippine National Police (PNP) Crime
exemplary damages amounting to P100,000.00 and litigation
Laboratory, the said signatures turned out to be forgeries. As the
5) litigation expenses of P200,000.00; expenses amounting to P200,000.00 are deleted; and moral
qualifications of Document Examiner Florenda Negre were
damages is reduced to P100,000.00.
established and she satisfactorily testified on her findings during the
6) cost of suit. trial, we have no reason to doubt the validity of her findings. Again,
the bank's negligence is patent. San Pedro was able to detect Costs against defendant.
discrepancies in the signatures but she did not exercise additional
SO ORDERED.28 precautions to ascertain the identity of the person she was dealing SO ORDERED.31
with. In fact, the entire transaction took only 40 minutes to
Dissatisfied, Citibank filed an appeal with the CA, docketed as CA- complete despite the anomalous situation. Undoubtedly, the bank
G.R. CV No. 59033.29 On January 26, 2001, the CA rendered a could have done a better job. The Cabamongan spouses filed a motion for partial reconsideration
decision sustaining the finding of the RTC that Citibank was on the matter of the award of damages in the decision. 32 On July 30,
negligent, ratiocinating in this wise: 2001, the
Third, as the bank had on file pictures of its depositors, it is
inconceivable how bank employees could have been duped by an
In the instant case, it is beyond dispute that the subject foreign impostor. San Pedro admitted in her testimony that the woman she CA granted in part said motion and modified its decision as follows:
currency deposit was pre-terminated on 10 November 1993. But dealt with did not resemble the pictures appearing on the
Carmelita Cabamongan, who works as a nursing aid (sic) at the identification cards presented but San Pedro still went on with the 1. The actual damages in amount of $55,216.69, representing the
Sierra View Care Center in Baldwin Park, California, had shown sensitive transaction. She did not mind such disturbing anomaly amount of appellees' foreign currency time deposit shall earn an
through her Certificate of Employment and her Daily Time Record because she was convinced of the validity of the passport. She also interest of 2.5625% for the period 16 August 1993 to 14 February
from the [sic] January to December 1993 that she was in the United considered as decisive the fact that the impostor had a mole on her 1994, as stipulated in the contract;
States at the time of the incident. face in the same way that the person in the pictures on the
identification cards had a mole. These explanations do not account
for the disparity between the pictures and the actual appearance of 2. From 16 September 1994 until full payment, the amount of
Defendant Citibank, N.A., however, insists that Carmelita was the $55,216.69 shall earn interest at the legal rate of 12% per annum,
the impostor. That said person was allowed to withdraw the money
one who pre-terminated the deposit despite claims to the contrary. and;
anyway is beyond belief.
Its basis for saying so is the fact that the person who made the
transaction on the incident mentioned presented a valid passport
The above circumstances point to the bank's clear negligence. Bank 3. The award of moral damages is reduced to P50,000.00.33
and three (3) other identification cards. The attending account
officer examined these documents and even interviewed said transactions pass through a successive [sic] of bank personnel,
person. She was satisfied that the person presenting the documents whose duty is to check and countercheck transactions for possible Dissatisfied, both parties filed separate petitions for review on
was indeed Carmelita Cabamongan. However, such conclusion is errors. While a bank is not expected to be infallible, it must bear the certiorari with this Court. The Cabamongan spouses' petition,
belied by these following circumstances. blame for failing to discover mistakes of its employees despite docketed as G.R. No. 149234, was denied by the Court per its
established bank procedure involving a battery of personnel Resolution dated October 17, 2001.34 On the other hand, Citibank's
designed to minimize if not eliminate errors. In the instant case, petition was given due course by the Court per Resolution dated
First, the said person did not present the certificate of deposit
Yeye San Pedro, the employee who primarily dealt with the December 10, 2001 and the parties were required to submit their
issued to Carmelita Cabamongan. This would not have been an
impostor, did not follow bank procedure when she did not have the respective memoranda.35
insurmountable obstacle as the bank, in the absence of such
waiver document notarized. She also openly courted disaster by
certificate, allows the termination of the deposit for as long as the
ignoring discrepancies between the actual appearance of the
depositor executes a notarized release and waiver document in Citibank poses the following errors for resolution:
impostor and the pictures she presented, as well as the disparities
favor of the bank. However, this simple procedure was not followed
between the signatures made during the transaction and those on
by the bank, as it terminated the deposit and actually delivered the
file with the bank. But even if San Pedro was negligent, why must 1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND
money to the impostor without having the said document notarized
the other employees in the hierarchy of the bank's work flow allow GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THE LOWER
on the flimsy excuse that another department of the bank was in
such thing to pass unnoticed and unrectified?30 COURT'S DECISION WHICH IS NOT BASED ON CLEAR EVIDENCE BUT
charge of notarization. The said procedure was obviously for the
ON GRAVE MISAPPREHENSION OF FACTS.
protection of the bank but it deliberately ignored such precaution.
At the very least, the conduct of the bank amounts to negligence. The CA, however, disagreed with the damages awarded by the RTC.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN immediately assessed their loss and informed Citibank of the account was allowed. Even the waiver document was not notarized,
UPHOLDING THE DECISION OF THE TRIAL COURT AWARDING disappearance of the bank certificate, their passports and other a procedure meant to protect the bank. For not observing the
MORAL DAMAGES WHEN IN FACT THERE IS NO BASIS IN LAW AND identification cards, then the fraud would not have been degree of diligence required of banking institutions, whose business
FACT FOR SAID AWARD. perpetuated and the losses avoided. It further argues that since the is impressed with public interest, Citibank is liable for damages.
Cabamongan spouses are guilty of contributory negligence, the
doctrine of last clear chance is inapplicable.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING As to the interest rate, Citibank avers that the claim of the
THAT THE PRINCIPAL AMOUNT OF US$55,216.69 SHOULD EARN Cabamongan spouses does not constitute a loan or forbearance of
INTEREST AT THE RATE OF 12% PER ANNUM FROM 16 SEPTEMBER Citibank's assertion that the Cabamongan spouses are guilty of money and therefore, the interest rate of 6%, not 12%, applies.
1994 UNTIL FULL PAYMENT.36 contributory negligence and non-application of the doctrine of last
clear chance cannot pass muster since these contentions were
The Court does not agree.
raised for the first time only in their Supplemental Memorandum.
Anent the first ground, Citibank contends that the CA erred in
Indeed, the records show that said contention were neither
affirming the RTC's finding that it was negligent since the said courts
pleaded in the petition for review and the memorandum nor in The time deposit subject matter of herein petition is a simple loan.
failed to appreciate the extra diligence of a good father of a family
Citibank's Answer to the complaint or in its appellant's brief filed The provisions of the New Civil Code on simple loan govern the
exercised by Citibank thru San Pedro.
with the CA. To consider the alleged facts and arguments raised contract between a bank and its depositor. Specifically, Article 1980
belatedly in a supplemental pleading to herein petition for review thereof categorically provides that ". . . savings . . . deposits of
As to the second ground, Citibank argues that the Cabamongan at this very late stage in the proceedings would amount to money in banks and similar institutions shall be governed by the
spouses are not entitled to moral damages since moral damages trampling on the basic principles of fair play, justice and due provisions concerning simple loan." Thus, the relationship between
can be awarded only in cases of breach of contract where the bank process.391avvphil.net a bank and its depositor is that of a debtor-creditor, the depositor
has acted willfully, fraudulently or in bad faith. It submits that it has being the creditor as it lends the bank money, and the bank is the
not been shown in this case that Citibank acted willfully, debtor which agrees to pay the depositor on demand.
The Court has repeatedly emphasized that, since the banking
fraudulently or in bad faith and mere negligence, even if the
business is impressed with public interest, of paramount
Cabamongan spouses suffered mental anguish or serious anxiety on
importance thereto is the trust and confidence of the public in The applicable interest rate on the actual damages of $55,216.69,
account thereof, is not a ground for awarding moral damages.
general. Consequently, the highest degree of diligence 40 is should be in accordance with the guidelines set forth in Eastern
expected,41 and high standards of integrity and performance are Shipping Lines, Inc. v. Court of Appeals49 to wit:
On the third ground, Citibank avers that the interest rate should not even required, of it.42 By the nature of its functions, a bank is "under
be 12% but the stipulated rate of 2.5625% per annum. It adds that obligation to treat the accounts of its depositors with meticulous I. When an obligation, regardless of its source, i.e., law, contracts,
there is no basis to pay the interest rate of 12% per annum from care,43 always having in mind the fiduciary nature of their quasi-contracts, delicts or quasi-delicts is breached, the
September 16, 1994 until full payment because as of said date relationship."44 contravenor can be held liable for damages. The provisions under
there was no legal ground yet for the Cabamongan spouses to
Title XVIII on "Damages" of the Civil Code govern in determining the
demand payment of the principal and it is only after a final
In this case, it has been sufficiently shown that the signatures of measure of recoverable damages.
judgment is issued declaring that Citibank is obliged to return the
Carmelita in the forms for pretermination of deposits are forgeries.
principal amount of US$55,216.69 when the right to demand
Citibank, with its signature verification procedure, failed to detect II. With regard particularly to an award of interest, in the concept of
payment starts and legal interest starts to run.
the forgery. Its negligence consisted in the omission of that degree actual and compensatory damages, the rate of interest, as well as
of diligence required of banks. The Court has held that a bank is the accrual thereof, is imposed, as follows:
On the other hand, the Cabamongan spouses contend that "bound to know the signatures of its customers; and if it pays a
Citibank's negligence has been established by evidence. As to the forged check, it must be considered as making the payment out of
interest rate, they submit that the stipulated interest of 2.5635% its own funds, and cannot ordinarily charge the amount so paid to 1. When the obligation is breached, and it consists in the payment
should apply for the 182-day contract period from August 16, 1993 the account of the depositor whose name was forged."45 Such of a sum of money, i.e., a loan or forbearance of money, the
to February 14, 1993; thereafter, 12% should apply. They further principle equally applies here. interest due should be that which may have been stipulated in
contend that the RTC's award of exemplary damages of writing. Furthermore, the interest due shall itself earn legal interest
P100,000.00 should be maintained. They submit that the CA erred from the time it is judicially demanded. In the absence of
Citibank cannot label its negligence as mere mistake or human stipulation, the rate of interest shall be 12% per annum to be
in treating the award of litigation expenses as lawyer's fees since
error. Banks handle daily transactions involving millions of pesos. 46 computed from default, i.e., from judicial or extrajudicial demand
they have shown that they incurred actual expenses in litigating
By the very nature of their works the degree of responsibility, care under and subject to the provisions of Article 1169 of the Civil Code.
their claim against Citibank. They also contend that the CA erred in
and trustworthiness expected of their employees and officials is far
reducing the award of moral damages in view of the degree of
greater than those of ordinary clerks and employees. 47 Banks are
mental anguish and emotional fears, anxieties and nervousness 2. When an obligation, not constituting a loan or forbearance of
expected to exercise the highest degree of diligence in the selection
suffered by them.37 money, is breached, an interest on the amount of damages
and supervision of their employees.48
awarded may be imposed at the discretion of the court at the rate
Subsequently, Citibank, thru a new counsel, submitted a of 6% per annum. No interest, however, shall be adjudged on
The Court agrees with the observation of the CA that Citibank, thru unliquidated claims or damages except when or until the demand
Supplemental Memorandum,38 wherein it posits that, assuming that
Account Officer San Pedro, openly courted disaster when despite can be established with reasonable certainty. Accordingly, where
it was negligent, the Cabamongan spouses were guilty of
noticing discrepancies in the signature and photograph of the the demand is established with reasonable certainty, the interest
contributory negligence since they failed to notify Citibank that they
person claiming to be Carmelita and the failure to surrender the shall begin to run from the time the claim is made judicially or
had migrated to the United States and were residents thereat and
original certificate of time deposit, the pretermination of the extrajudicially (Art. 1169, Civil Code) but when such certainty
after having been victims of a burglary, they should have
cannot be so reasonably established at the time the demand is such may be awarded and, in all cases, it must be reasonable, just
made, the interest shall begin to run only from the date the and equitable if the same were to be granted. Attorney's fees as
judgment of the court is made (at which time the quantification of part of damages are not meant to enrich the winning party at the
damages may be deemed to have been reasonably ascertained). expense of the losing litigant. They are not awarded every time a
The actual base for the computation of legal interest shall, in any party prevails in a suit because of the policy that no premium
case, be on the amount finally adjudged. should be placed on the right to litigate. 55 The award of attorney's
fees is the exception rather than the general rule. As such, it is
necessary for the court to make findings of facts and law that would
3. When the judgment of the court awarding a sum of money
bring the case within the exception and justify the grant of such
becomes final and executory, the rate of legal interest whether the
award. The matter of attorney's fees cannot be mentioned only in
case falls under paragraph 1 or paragraph 2, above, shall be 12%
the dispositive portion of the decision. 56 They must be clearly
per annum from such finality until its satisfaction, this interim
explained and justified by the trial court in the body of its decision.
period being deemed to be by then an equivalent to a forbearance
Consequently, the award of attorney's fees should be deleted.
of credit.50

WHEREFORE, the instant petition is PARTIALLY GRANTED. The

Thus, in a loan or forbearance of money, the interest due should be
assailed Decision and Resolution are AFFIRMED with
that stipulated in writing, and in the absence thereof, the rate shall
MODIFICATIONS, as follows:
be 12% per annum counted from the time of demand. Accordingly,
the stipulated interest rate of 2.562% per annum shall apply for the
182-day contract period from August 16, 1993 to February 14, 1. The interest shall be computed as follows:
1994. For the period from the date of extra-judicial demand,
September 16, 1994, until full payment, the rate of 12% shall apply.
a. The actual damages in principal amount of $55,216.69,
As for the intervening period between February 15, 1994 to
representing the amount of foreign currency time deposit shall earn
September 15, 1994, the rate of interest then prevailing granted by
interest at the stipulated rate of 2.5625% for the period August 16,
Citibank shall apply since the time deposit provided for roll over
1993 to February 14, 1994;
upon maturity of the principal and interest.51

b. From February 15, 1994 to September 15, 1994, the principal

As to moral damages, in culpa contractual or breach of contract, as
amount of $55,216.69 and the interest earned as of February 14,
in the case before the Court, moral damages are recoverable only if
1994 shall earn interest at the rate then prevailing granted by
the defendant has acted fraudulently or in bad faith, 52 or is found
Citibank;
guilty of gross negligence amounting to bad faith, or in wanton
disregard of his contractual obligations. 53 The act of Citibank's
employee in allowing the pretermination of Cabamongan spouses' c. From September 16, 1994 until full payment, the principal
account despite the noted discrepancies in Carmelita's signature amount of $55,216.69 and the interest earned as of September 15,
and photograph, the absence of the original certificate of time 1994, shall earn interest at the legal rate of 12% per annum;
deposit and the lack of notarized waiver dormant, constitutes gross
negligence amounting to bad faith under Article 2220 of the Civil 2. The award of attorney's fees is DELETED.
Code.

No pronouncement as to costs.
There is no hard-and-fast rule in the determination of what would
be a fair amount of moral damages since each case must be
governed by its own peculiar facts. The yardstick should be that it is SO ORDERED.
not palpably and scandalously excessive. 54 The amount of
P50,000.00 awarded by the CA is reasonable and just. Moreover,
said award is deemed final and executory insofar as respondents
are concerned considering that their petition for review had been
denied by the Court in its final and executory Resolution dated
October 17, 2001 in G.R. No. 149234.

Finally, Citibank contends that the award of attorney's fees should

be deleted since such award appears only in the dispositive portion
of the decision of the RTC and the latter failed to elaborate, explain
and justify the same.

Article 2208 of the New Civil Code enumerates the instances where