FACTS:

Petitioners filed an action for damages against the respondent, alleging that they had experienced emotional shock, mental anguish, public ridicule, humiliation, insults and embarrassment during their trip to Thailand because of the respondent’s release to them of five US$ 100 bills that later on turned out to be counterfeit.

They claimed that they withdrew US$ l ,000.00 in US$ 100 notes from their dollar account at the respondent’s Pateros branch; that while in Bangkok, they went to exchange the US$ 100 bill at Norkthon Bank, but the bank teller told them that it was fake and confiscated the US$ 100 bill and had threatened to report them to the police.

Petitioners also claimed that they had bought jewelry using four of the remaining US$100 bills as payment, however, they were confronted by the shop owner at the hotel lobby because their four US$ 100 bills had turned out to be counterfeit; the shop owner shouted at them: “You Filipinos, you are all cheaters!;”within the hearing distance of fellow travelers and several foreigners.

Upon their return to the Philippines, they had confronted the manager of the respondent’s Pateros branch on the fake dollar bills, who insisted that the dollar bills were genuine inasmuch as the bills had come from the head office. The BSP had certified that the four US$100 bills were near perfect genuine notes.

Petitioners’ counsel explained their unfortunate experience caused by the respondent’s release of the fake US dollar bills to them, and had demanded moral damages of ₱10 Million and exemplary damages.

Respondent offered to reinstate US$500 in their dollar account, and, in addition, to underwrite a round-trip all-expense-paid trip to Hong Kong, but they were adamant and staged a walk-out.

The trial court dismissed the complaint for lack of merit.

On appeal, the CA affirmed the assailed Decision.

Hence, this appeal.

ISSUE:

Whether the respondent should be liable for moral and exemplary damages on account of their suffering the unfortunate experience abroad brought about by their use of the fake US dollar bills withdrawn from the latter.

RULING:

The appeal is partly meritorious.

The General Banking Act of 2000 demands of banks the highest standards of integrity and performance. As such, the banks are under obligation to treat the accounts of their depositors with meticulous care. However, the banks’ compliance with this degree of diligence is to be determined in accordance with the particular circumstances of each case.

The CA and the RTC both found that the respondent had exercised the diligence required by law in observing the standard operating procedure, in taking the necessary precautions for handling the US dollar bills in question, and in selecting and supervising its employees. 

The relationship existing between the petitioners and the respondent that resulted from a contract of loan was that of a creditor-debtor. Even if the law imposed a high standard on the latter as a bank by virtue of the fiduciary nature of its banking business, bad faith or gross negligence amounting to bad faith was absent. 

Hence, there simply was no legal basis for holding the respondent liable for moral and exemplary damages.

In breach of contract, moral damages may be awarded only where the defendant acted fraudulently or in bad faith. 

That was not true herein because the respondent was not shown to have acted fraudulently or in bad faith. This is pursuant to Article 2220 of the Civil Code, to wit:

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where defendant acted fraudulently or in bad faith.

It is true that the petitioners suffered embarrassment and humiliation in Bangkok. Yet, we should distinguish between damage and injury. In The Orchard Golf & Country Club, Inc. v. Yu,  the Court has fittingly pointed out the distinction, viz.:

x x x Injury is the illegal invasion of a legal right, damage is the loss, hurt, or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. These situations are often called dmimum absque injuria. 

In every situation of damnum absque injuria, therefore, the injured person alone bears the consequences because the law affords no remedy for damages resulting from an act that does not amount to a legal injury or wrong. 

Given the situation being one of damnum absque injuria, they could not be compensated for the damage sustained.