Chiong, Ricarr Ann W.

FAR EAST BANK AND TRUST COMPANY VS. COURT OF APPEALS

GR NO 108164 (241 SCRA 671)

FACTS:

In October 1986, Luis A. Lana (herein respondent) applied for a Far East Card issued by Far
East Bank and Trust Company (herein petitioner) at its Pasig branch. The bank has also issued a
supplementary card to Clarita S. Luna.

In August 1988, Clarita informed FEBTC that she had lost her credit card. In order to replace the
lost card, Clarita submitted an affidavit of loss. In cases od this nature, the bank’s internal
security procedures and policy would appear to be to meanwhile so record the lost card, along
with the principal card, as a hot card or cancelled card in their file.

On October 1988, Luis tendered a despidida lunch for a close friend. While he presented his Far
East Card to pay for the lunch, the card was not honored, thereby forcing him to pay the bill in
cash. With this, Luis felt embarrassed by the incident.

Luis Lana, through a counsel, demanded from the FEBTC the payment of damages. Adrian
Festejo, vice-president of the bank, expressed the bank’s apologies, admitting that the bank has
failed to inform him of their security policy once a Far East Card Is reported as missing or stolen.

On December 5, 1988, the private respondents filed a complaint for damages with the RTC,
which rendered a decision of ordering FEBTC to pay them (private respondents) for the damages
(moral damages, exemplary damages, and attorney’s fees) incurred.

The CA affirmed the decision of the trial court.

ISSUE/S:

Whether or not the private respondents are entitled to claim for damages

HELD:

In culpa contractual, moral damages may be recovered where the defendant is shown to have
acted in bad faith or with malice in the breach of the contract. The Civil Code provides:

Article 2220. Willful injury to the property may be a legal ground for awarding moral
damages if the court finds that, under the circumstance, such damages are justly die. Same rule
applies to breaches of contracts acted in bad faith or through fraud.

(Bad faith includes gross, not simple, negligence)

Concededly, the bank was negligent for failing to inform Luis of his own card’s cancellation.
The failure to inform Luis is not considered to be gross that it would amount to malice or bad
faith. Malice or bad faith implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that
malice or bad faith contemplates a state of mind affirmatively operating with furtive design or
ill-will.

Article 21 of the New Civil Code contemplates a conscious act to cause harm. In relation to a
breach of contract, its application can be warranted only when the defendant’s disregard of his
contractual obligation is so deliberate as to approximate a degree of misconduct certainly no less
worse than fraud or bad faith. This article is a mere declaration of a general principle in human
relations that clearly must, in any case, give way to the specific provision of Article 2220 of the
New Civil Code authorizing the grant of moral damages in culpa contractual (quasi-delict) solely
when the breach is due to fraud or bad faith.