G.R. No. 157314. July 29, 2005.
FAR EAST BANK AND TRUST COMPANY (NOW BANK OF THE PHILIPPINE ISLANDS), Petitioner, vs. THEMISTOCLES PACILAN, JR., Respondent.

FACTS

Respondent Themistocles Pacilan, Jr. maintained a current account with petitioner bank. On April 4, 1988, his Check No. 2434886 for ₱680.00 was dishonored due to insufficiency of funds, as the total amount of checks presented that day exceeded his account balance, creating an overdraft. The bank, through its branch accountant, closed his account effective that evening. The following day, April 5, Pacilan deposited ₱800.00, but the account remained closed. Pacilan filed a complaint for damages, alleging the bank’s closure of his account was malicious and done with indecent haste, as banking practice allowed until the last clearing hour of the next day to honor or return a check. He claimed this act exposed him to potential criminal liability under B.P. Blg. 22 and caused him social humiliation.
The bank defended its action by presenting its rules governing demand deposits, which reserved its right to close an account if the depositor frequently drew checks against insufficient funds. Records showed Pacilan’s account was overdrawn numerous times: 156 times in 1986, 117 times in 1987, and 26 times in 1988. The bank argued the closure was justified due to Pacilan’s repeated irregular handling of his account.

ISSUE

Whether the bank acted in bad faith or with malice in closing Pacilan’s current account, thereby making it liable for moral and exemplary damages.

RULING

No. The Supreme Court reversed the Court of Appeals and held the bank not liable for damages. The legal logic centers on the absence of bad faith. A bank has the right to close a current account based on contractually stipulated rules, especially when a depositor has a history of issuing checks against insufficient funds. The evidence conclusively established Pacilan’s habitual practice of creating overdrafts. His deposit the day after the dishonor was merely curative and did not negate the prior breach that justified the closure.
The Court found no proof of malice or wanton conduct by the bank. Its act was a legitimate exercise of a contractual right to protect itself from financial risk posed by an irregular account. The principle of damnum absque injuria applies: a loss or damage without a violation of a legal right. While Pacilan may have suffered inconvenience, the bank’s lawful action caused no legal injury. For moral damages to be awarded, a wrongful act or omission constituting a breach of a legal duty must be shown; here, the bank breached no such duty. The proximate cause of Pacilan’s alleged damages was his own repeated issuance of unfunded checks, not the bank’s valid enforcement of its rules.