SC: Banks must pay for moral damages suffered by depositors

The Supreme Court (SC) has maintained that banks may be held liable for moral damages suffered by depositors due to negligence, even if there was no proof of bad faith or malice.

In a 22-page decision written by Associate Justice Samuel Gaerlan, the SC third division ordered a bank company to pay two US green card holders living abroad the proceeds of their time deposit, including P100,000 in moral damages.

According to the SC, the two made deposit placements thrice worth over USD150,000 at the bank’s branch in Makati City. 

They told the branch manager that if the deposits were not withdrawn at maturity, they would automatically roll them over into interest-bearing savings accounts.

The time deposit certificates (TDCs), however, were not redeemed on time and were left stored in a safety deposit box at another bank’s Makati branch for safekeeping. 

But the bank later on went bankrupt and was taken over by the Philippine Deposit Insurance Corporation (PDIC), and the operations of its Makati branch was placed on hold in 2011. 

It took the two some time to retrieve their TDCs from the PDIC.

The bank where they originally made deposits, meanwhile, ceased operations eventually and closed down supposedly without notifying them. They only found out about such when they tried to withdraw their investments.

They sent several demand letters to the bank, but it claimed that the deposits had already been withdrawn through a demand draft allegedly signed by one of them, which they denied. 

The two then filed a complaint against the bank with a regional trial court (RTC), countering that one of them could not have withdrawn their investments or signed the demand draft for not being in the Philippines on May 28, 2001. 

She presented immigration records and her passport to prove she was abroad on the said date the demand draft was supposedly signed. A Philippine National Police (PNP) handwriting expert also testified that the signature on the demand draft did not match her’s.

Both the RTC and the Court of Appeals ruled in favor of the two, noting that they still had the original TDCs, which is proof that the deposits had not been withdrawn.

The SC thus upheld that banks are required by law “to observe prudence and diligence higher than that of a good father of a family owing to the fiduciary nature of their business.” 

“Furthermore, even in the absence of malice or bad faith, a depositor still has the right to recover reasonable moral damages, if the depositor suffered mental anguish, serious anxiety, embarrassment, and humiliation," the high court added. 

The SC also pointed out that the PNP expert said the signature on the demand draft was probably made by a different person, and that immigration and passport records showed that it was “physically impossible” for one of the two to go to the branch to sign the draft. 

“Taken together, these pieces of evidence demonstrate the bank’s failure to exercise the required degree of diligence in verifying the identity and authority of the individual who signed the demand draft. This oversight becomes even more glaring given the substantial value of the time deposits in question,” the SC noted. — Giselle Ombay/RSJ, GMA Integrated News