Damages: 5.

5 Temperate or Moderate Damages

40 SCRA 144 - Araneta vs. Bank of America
Makalintal

Leopoldo Araneta was a merchant engaged in the import and export business. He issued a check for $500 payable to
cash and drawn against the San Francisco office of the Bank of America .The check was dishonored although he had
sufficient balance to cover the amount of the check and stamped with the notation “Account Closed.” The Bank
apologized and promised that the incident does not happen again. On two subsequent occasions Araneta’s checks were
also dishonored although he had a sufficient deposit to cover their value. Plaintiff sued the defendant. The trial court
awarded a total of P120,000 damages but the CA eliminated the compensatory damages and reduced the moral
damages and the exemplary damages. Plaintiff appealed to the SC. (Jarencio)

DOCTRINE
The financial credit of a businessman is a prized and valuable asset, it being a significant part of the foundation of his
business. Any adverse reflection thereon constitutes some material loss to him. “It can hardly be possible that a
customer’s check can be wrongfully refused payment, without some impeachment of his credit, which must in face be an
actual injury, though he cannot, from the nature of the case, furnish independent, distinct proof.” (Atlanta Nat’l Bank v. Davis)

IMPORTANT PEOPLE
Plaintiff, merchant – Leopoldo Araneta | Defendant, bank – Bank of America (BoA)

FACTS
1. Araneta issued a check for $500 payable to cash and drawn against BoA (in San Francisco; main office)
⮚ Wherein he maintains a dollar current account since 1948. His credit balance: $523.81 as confirmed by the
bank’s assistant cashier in a letter dated September 7, 1961
2. Sept. 8, ’61 – said check was dishonored and stamped with the notation “Account Closed”.
⮚ BoA explained that it was an error—for some reason check had been encoded with the wrong account number

⮚ “We shall make every effort to see that this does not reoccur.” 🡪 But it did. Twice.

⮚ Sent an apology letter to the payee of the check: “the check was returned through an error on our part and should
not reflect adversely upon Mr. Araneta.”
3. May 1962 Araneta issued (2) checks; $500 and $1,500. Both were stamped with “Account Closed”, but for the 2 nd one
BoA pulled a clutch move and honored the check before the letter of notice to the payee (Saldaña) could reply.
4. Araneta sent a letter (through counsel) to the BoA demanding damages: $20,000.
⮚ While admitting responsibility, BoA claimed that the amount was excessive and offered to pay 2,000 pesos.

⮚ Offer was rejected.

5. Araneta filed a complaint against BoA for the recovery of:
⮚ Actual or compensatory: P30k | Moral: P20k | Temperate P50k | Exemplary: P10k | Atty.’s fees: 10k

⮚ Total: P120,000
6. TRIAL COURT: Awarded ALL the items prayed for
7. CA:
● Eliminated the award of compensatory and temperate damages.
Reason: Plaintiff has not proven his claim that the (2) checks for $500 each were in partial payment of (2) orders for
JEWELS worth P50k each. He has likewise not proven the actual damages which he claims he has suffered.

● Reduced the moral damages to P8,000 and the exemplary damages to P1,000 and that atty.’s fees to P1,000
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8. Hence, this appeal before the SC.

ISSUE with HOLDING:

WON Araneta sustained some pecuniary loss although no sufficient proof of the amount thereof has been
adduced. – YES.

ARANETA’S ARGUMENTS: 1) To hold that temperate damages can’t be awarded w/out proof of actual pecuniary loss is
contrary to Art. 22161 and jurisprudence. 2) Invokes Art. 22052 w/c states that moral damages may be recovered as an
item separate and distinct from the damages recoverable for injury to business standing and commercial credit.
Jurisprudence: Atlanta Nat’l Bank vs. Davis3 (See doctrine for relevant quotation) and Other citations – 1) “temperate
damages are allowed in certain classes of cases, w/out proof of actual or special damages, where the wrong done must in
fact have caused actual damage to the plaintiff, though from the nature of the case, he cannot furnish independent,
distinct proof thereof.” 2) “dishonor of a merchant’s or trader’s check is tantamount or analogous, to a slander of his trade
or business, imputing to him insolvency or bad faith.”

BoA’S ARGUMENTS:
1) Since Araneta invokes 2205, w/c speaks of actual or compensatory damages for business standing or commercial
credit, he may not claim them as temperate damages and thereby do away w/ proof of pecuniary loss under
2216.
2) Invokes 2224: “temperate or moderate damages, w/c are more than nominal but less than compensatory
damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved w/ certainty.” It contends that Araneta failed to show any such loss.

SC HELD:
1) CA based its decision on the fact that Araneta wasn’t able to prove the existence of a contract to buy JEWELS at
a profit for w/c he issued the 2 checks. While this may be true, CA also found that actual damages had been
suffered.
⮚ “adverse refection against the credit of Araneta”, “obviously affected the credit of Araneta w/ Ms. Saldaña”4
2) The Code of Commission explained the concept of 2224: “Injury to one’s commercial credit or to the goodwill of a
business firm is often hard to show w/ certainty in terms of money. The judge should be empowered to calculate
moderate damages in such cases, rather that the plaintiff should suffer, w/out redress from the defendant’s
wrongful act.”
3) Araneta is a merchant of long standing and good reputation (gleaned from some of his record cited in the CA
decision)
4) CLAIM FOR TEMPERATE DAMAGES IS LEGALLY SATISFIED in the amount of P5,000, considering the
following circumstances:
● rather small size of Aranet’s account w/ BoA

● amounts of the checks w/c were wrongfully dishonored

● BoA tried to rectify the error soon after it was discovered, although damage was already done
5) Moral damages also proper on account of his wounded feelings and mental anguish, also besmirched reputation;
his blood pressure also rose beyond normal limit. P8,000 is deemed appropriate. Atty.’s fees also awarded
considering the nature and extent of the services. SC increases fees to 4k (from the 1k that CA wanted to give)

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2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The
assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.
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2205. Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to
the plaintiff’s business standing or commercial credit.
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Plaintiff, whose check was wrongfully dishonored by the bank, was not required to prove special damages in order to recover substantial damages
since, the court observed, such damages would naturally follow the dishonor of a check by a bank, although they were probably not susceptible of
independent distinct proof. The plaintiff was awarded $200 as temperate damages.
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These are quotes from the CA’s decision
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DISPOSITIVE PORTION
WHEREFORE, the judgment of the CA is modified by awarding temperate damages to the petitioner in the sum of P5,000
and increasing the attorney’s fees to P4,000; and is affirmed in all other respects. Costs against the respondent.

DIGESTER: Viveka 🍓