G.R. No. 158143; September 21, 2011
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, vs. ANTONIO B. BALMACEDA and ROLANDO N. RAMOS, Respondents.

FACTS

Petitioner Philippine Commercial International Bank (PCIB) filed an action for recovery of a sum of money against its Branch Manager, Antonio Balmaceda, who fraudulently obtained and encashed 34 Manager’s Checks totaling ₱11,937,150.00. Balmaceda accomplished this by forging the signature of a corporate client on application forms, having the checks issued, and then forging the payees’ signatures to encash them. PCIB later amended its complaint to implead respondent Rolando Ramos as one of the recipients of a portion (₱895,000.00) of the misappropriated funds, alleging he acted in collusion with Balmaceda. Balmaceda was declared in default. Ramos denied complicity, claiming he was a legitimate businessman engaged in selling fighting cocks and that the money he received from Balmaceda was payment for such sales, with no knowledge of its illicit source. The Regional Trial Court (RTC) found both Balmaceda and Ramos liable, ordering Ramos to pay PCIB ₱895,000.00. The RTC based its finding of collusion on the fact that crossed Manager’s Checks payable to Ramos were encashed by Balmaceda, who then deposited most of the proceeds into Ramos’s savings account. The Court of Appeals (CA) reversed the RTC decision insofar as Ramos was concerned, dismissing the complaint against him for lack of sufficient evidence proving his complicity. The CA also ordered PCIB to release ₱251,910.96 (which PCIB had frozen and debited from Ramos’s account) to Ramos and to pay him moral and exemplary damages and attorney’s fees. PCIB elevated the case via a petition for review on certiorari.

ISSUE

1. Whether the Court of Appeals erred in holding that there was no evidence to prove respondent Rolando Ramos acted in complicity with respondent Antonio Balmaceda in defrauding PCIB.
2. Whether the Court of Appeals erred in ordering PCIB to release the amount of ₱251,910.96 to Ramos and to pay him moral and exemplary damages and attorney’s fees.

RULING

The Supreme Court PARTLY GRANTED the petition.
1. On Ramos’s Liability: The Supreme Court upheld the CA’s finding that PCIB failed to prove by preponderance of evidence that Ramos colluded with Balmaceda. While the RTC and CA had conflicting factual findings, the Court reviewed the evidence and agreed with the CA. The mere fact that Ramos was named as payee on some checks and received deposits from Balmaceda does not, by itself, establish complicity in the fraudulent scheme. Ramos’s defense that he received the money as payment for fighting cocks sold to Balmaceda, a client, remained unrebutted. PCIB’s evidence was circumstantial and insufficient to overcome the presumption of good faith. No evidence showed Ramos participated in or had knowledge of Balmaceda’s forgery and misappropriation. Therefore, Ramos could not be held liable to return the ₱895,000.00 to PCIB.
2. On the Debited Amount and Award of Damages: The Supreme Court MODIFIED the CA’s decision regarding the ₱251,910.96 and the damages.
* On the ₱251,910.96: The Court held that PCIB had the right to freeze Ramos’s account. A bank has a contractual duty of confidentiality, but this is not absolute. It may disclose account information and take protective measures when there is a clear and imminent danger to its interests, such as to prevent fraud or protect against potential liability. Given the circumstances of Balmaceda’s fraud and Ramos’s receipt of the funds, PCIB acted in good faith and within its rights to freeze the account to preserve the status quo. However, since Ramos was ultimately found not liable, the frozen amount must be returned to him. The Court affirmed the CA’s order for PCIB to release ₱251,910.96 to Ramos, plus legal interest from the time of extrajudicial demand (September 30, 1993).
* On Moral and Exemplary Damages and Attorney’s Fees: The Court DELETED the awards for moral damages (₱50,000.00), exemplary damages (₱50,000.00), and attorney’s fees (₱20,000.00). For moral damages to be awarded, there must be clear proof of a wrongful act and resulting physical suffering, mental anguish, or similar injury. PCIB’s act of freezing the account was a legitimate exercise of its right to protect its interests and did not constitute a wrongful, fraudulent, or oppressive act. No bad faith was proven. Consequently, exemplary damages and attorney’s fees, which are predicated on a finding of bad faith or wanton conduct, were also not warranted.
DISPOSITIVE PORTION:
WHEREFORE, premises considered, we PARTLY GRANT the petition. The assailed Court of Appeals Decision dated April 29, 2003 is AFFIRMED with MODIFICATION. The complaint against respondent Rolando N. Ramos is DISMISSED. Petitioner Philippine Commercial International Bank is ORDERED to release to respondent Rolando N. Ramos the amount of ₱251,910.96, with legal interest from September 30, 1993 until fully paid. The awards of moral damages, exemplary damages, and attorney’s fees are DELETED. No costs.