SOLIDBANK CORPORATION/ METROPOLITAN BANK AND TRUST COMPANY,* Petitioner,

vs.
SPOUSES PETER and SUSAN TAN, Respondents.

CORONA, J.:

Assailed in this petition for review by certiorari under Rule 45 of the Rules of Court are the decision1 and
resolution2 of the Court of Appeals (CA) dated November 26, 2004 and March 1, 2005, respectively, in
CA-G.R. CV No. 58618,3 affirming the decision of the Regional Trial Court (RTC) of Manila, Branch 31.4

On December 2, 1991, respondents’ representative, Remigia Frias, deposited with petitioner ten checks
worth ₱455,962. Grace Neri, petitioner’s teller no. 8 in its Juan Luna, Manila Branch, received two
deposit slips for the checks, an original and a duplicate. Neri verified the checks and their amounts in the
deposit slips then returned the duplicate copy to Frias and kept the original copy for petitioner.

In accordance with the usual practice between petitioner and respondents, the latter’s passbook was
left with petitioner for the recording of the deposits on the bank’s ledger. Later, respondents retrieved
the passbook and discovered that one of the checks, Metropolitan Bank and Trust Company
(Metrobank) check no. 403954, payable to cash in the sum of ₱250,000 was not posted therein.

Immediately, respondents notified petitioner of the problem. Petitioner showed respondent Peter Tan a
duplicate

copy of a deposit slip indicating the list of checks deposited by Frias. But it did not include the missing
check. The deposit slip bore the stamp mark "teller no. 7" instead of "teller no. 8" who previously
received the checks.

Still later, respondent Peter Tan learned from Metrobank (where he maintained an account) that
Metrobank check no. 403954 had cleared after it was inexplicably deposited by a certain Dolores Lagsac
in Premier Bank in San Pedro, Laguna. Respondents demanded that petitioner pay the amount of the
check but it refused, hence, they filed a case for collection of a sum of money in the RTC of Manila,
Branch 31.

In its answer, petitioner averred that the deposit slips Frias used when she deposited the checks were
spurious. Petitioner accused respondents of engaging in a scheme to illegally exact money from it. It
added that, contrary to the claim of respondents, it was "teller no. 7" who received the deposit slips
and, although respondents insisted that Frias deposited ten checks, only nine checks were actually
received by said teller. By way of counterclaim, it sought payment of ₱1,000,000 as actual and moral
damages and ₱500,000 as exemplary damages.

After trial, the RTC found petitioner liable to respondents:

Upon examination of the oral, as well as of the documentary evidence which the parties presented at
the trial in support of their respective contentions, and after taking into consideration all the
circumstances of the case, this Court believes that the loss of Metrobank Check No. 403954 in the sum
of ₱250,000.00 was due to the fault of [petitioner]…[It] retained the original copy of the [deposit slip
marked by "Teller No. 7"]. There is a presumption in law that evidence willfully suppressed would be
adverse if produced.

Art. 1173 of the Civil Code states that "the fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and corresponds with the circumstances
of the person of the time and of the place"; and that "if the law or contract does not state the diligence
which is to be observed in the performance, the same as expected of a good father of a family shall be
required."

…For failure to comply with its obligation, [petitioner] is presumed to have been at fault or to have acted
negligently unless they prove that they observe extraordinary diligence as prescribed in Arts. 1733 and
1735 of the Civil Code (Art. 1756)…

xxx xxx xxx

WHEREFORE, premises considered, judgment is hereby rendered in favor of [respondents], ordering

[petitioner] to pay the sum of ₱250,000, with legal interest from the time the complaint [for collection
of a sum of money] was filed until satisfied; ₱25,000.00 moral damages; ₱25,000.00 exemplary damages
plus 20% of the amount due [respondents] as and for attorney’s fees. With costs.

SO ORDERED.5

Petitioner appealed to the CA which affirmed in toto the RTC’s assailed decision:

Serious doubt [was] engendered by the fact that [petitioner] did not present the original of the deposit
slip marked with "Teller No. 7" and on which the entry as to Metrobank Check No. 403954 did not
appear. Even the most cursory look at the handwriting thereon reveal[ed] a very marked difference with
that in the other deposit slips filled up [by Frias] on December 2, 1991. Said circumstances spawn[ed]
the belief thus, the said deposit slip was prepared by [petitioner] itself to cover up for the lost check.6

Petitioner filed a motion for reconsideration but the CA dismissed it. Hence, this appeal.1a\^/phi1.net

Before us, petitioner faults the CA for upholding the RTC decision. Petitioner argues that: (1) the findings
of the RTC and the CA were not supported by the evidence and records of the case; (2) the award of
damages in favor of respondents was unwarranted and (3) the application by the RTC, as affirmed by the
CA, of the provisions of the Civil Code on common carriers to the instant case was erroneous.7

The petition must fail.

On the first issue, petitioner contends that the lower courts erred in finding it negligent for the loss of
the subject check. According to petitioner, the fact that the check was deposited in Premier Bank
affirmed its claim that it did not receive the check.

At the outset, the Court stresses that it accords respect to the factual findings of the trial court and,
unless it overlooked substantial matters that would alter the outcome of the case, this Court will not
disturb such findings.8 We meticulously reviewed the records of the case and found no reason to
deviate from the rule. Moreover, since the CA affirmed these findings on appeal, they are final and
conclusive on us.9 We therefore sustain the RTC’s and CA’s findings that petitioner was indeed negligent
and responsible for respondents’ lost check.

On the issue of damages, petitioner argues that the moral and exemplary damages awarded by the
lower courts had no legal basis. For the award of moral damages to stand, petitioner avers that
respondents should have proven the existence of bad faith by clear and convincing evidence. According
to petitioner, simple negligence cannot be a basis for its award. It insists that the award of exemplary
damages is justified only when the act complained of was done in a wanton, fraudulent and oppressive
manner.10

We disagree.

While petitioner may argue that simple negligence does not warrant the award of moral damages, it
nonetheless cannot insist that that was all it was guilty of. It refused to produce the original copy of the
deposit slip which could have proven its claim that it did not receive respondents’ missing check. Thus,
in suppressing the best evidence that could have bolstered its claim and confirmed its innocence, the
presumption now arises that it withheld the same for fraudulent purposes.11

Moreover, in presenting a false deposit slip in its attempt to feign innocence, petitioner’s bad faith was
apparent and unmistakable. Bad faith imports a dishonest purpose or some moral obliquity or conscious
doing of a wrong that partakes of the nature of fraud.12

As to the award of exemplary damages, the law allows it by way of example for the public good. The
business of banking is impressed with public interest and great reliance is made on the bank’s sworn
profession of diligence and meticulousness in giving irreproachable service.13 For petitioner’s failure to
carry out its responsibility and to account for respondents’ lost check, we hold that the lower courts did
not err in awarding exemplary damages to the latter.

On the last issue, we hold that the trial court did not commit any error.1awphi1.nét A cursory reading of
its decision reveals that it anchored its conclusion that petitioner was negligent on Article 1173 of the
Civil Code.14

In citing the different provisions of the Civil Code on common carriers,15 the trial court merely made
reference to the kind of diligence that petitioner should have performed under the circumstances. In
other words, like a common carrier whose business is also imbued with public interest, petitioner should
have exercised extraordinary diligence to negate its liability to respondents.

Assuming arguendo that the trial court indeed used the provisions on common carriers to pin down
liability on petitioner, still we see no reason to strike down the RTC and CA rulings on this ground alone.

In one case,16 the Court did not hesitate to apply the doctrine of last clear chance (commonly used in
transportation laws involving common carriers) to a banking transaction where it adjudged the bank
responsible for the encashment of a forged check. There, we enunciated that the degree of diligence
required of banks is more than that of a good father of a family in keeping with their responsibility to
exercise the necessary care and prudence in handling their clients’ money.

We find no compelling reason to disallow the application of the provisions on common carriers to this
case if only to emphasize the fact that banking institutions (like petitioner) have the duty to exercise the
highest degree of diligence when transacting with the public. By the nature of their business, they are
required to observe the highest standards of integrity and performance, and utmost assiduousness as
well.17

WHEREFORE, the assailed decision and resolution of the Court of Appeals dated November 26, 2004 and
March 1, 2005, respectively, in CA-G.R. CV No. 58618 are hereby AFFIRMED. Accordingly, the petition is
DENIED.

FEDERICO SERRA, petitioner,

vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING CORPORATION,
respondents.

Andres R. Amante, Jr. for petitioner.

R.C. Domingo, Jr. & Associates for private respondent.

NOCON, J.:

A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An
accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration distinct from the price. (Article 1479, New Civil
Code) The first is the mutual promise and each has the right to demand from the other the fulfillment of
the obligation. While the second is merely an offer of one to another, which if accepted, would create an
obligation to the offeror to make good his promise, provided the acceptance is supported by a
consideration distinct from the price.

Disputed in the present case is the efficacy of a "Contract of Lease with Option to Buy", entered into
between petitioner Federico Serra and private respondent Rizal Commercial Banking Corporation.
(RCBC).

Petitioner is the owner of a 374 square meter parcel of land located at Quezon St., Masbate, Masbate.
Sometime in 1975, respondent bank, in its desire to put up a branch in Masbate, Masbate, negotiated
with petitioner for the purchase of the then unregistered property. On May 20, 1975, a contract of
LEASE WITH OPTION TO BUY was instead forged by the parties, the pertinent portion of which reads:

1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in lease, the parcel of land
described in the first WHEREAS clause, to have and to hold the same for a period of twenty-five (25)
years commencing from June 1, 1975 to June 1, 2000. The LESSEE, however, shall have the option to
purchase said parcel of land within a period of ten (10) years from the date of the signing of this
Contract at a price not greater than TWO HUNDRED TEN PESOS (P210.00) per square meter. For this
purpose, the LESSOR undertakes, within such ten-year period, to register said parcel of land under the
TORRENS SYSTEM and all expenses appurtenant thereto shall be for his sole account.

If, for any reason, said parcel of land is not registered under the TORRENS SYSTEM within the
aforementioned ten-year period, the LESSEE shall have the right, upon termination of the lease to be
paid by the LESSOR the market value of the building and improvements constructed on said parcel of
land.

The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register said parcel of land under the
TORRENS SYSTEM in case the LESSOR, for any reason, fails to comply with his obligation to effect said
registration within reasonable time after the signing of this Agreement, and all expenses appurtenant to
such registration shall be charged by the LESSEE against the rentals due to the LESSOR.

2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at the latter's residence, a
monthly rental of SEVEN HUNDRED PESOS (P700.00), Philippine Currency, payable in advance on or
before the fifth (5th) day of every calendar month, provided that the rentals for the first four (4) months
shall be paid by the LESSEE in advance upon the signing of this Contract.

3. The LESSEE is hereby authorized to construct as its sole expense a building and such other
improvements on said parcel of land, which it may need in pursuance of its business and/or operations;
provided, that if for any reason the LESSEE shall fail to exercise its option mentioned in paragraph (1)
above in case the parcel of land is registered under the TORRENS SYSTEM within the ten-year period
mentioned therein, said building and/or improvements, shall become the property of the LESSOR after
the expiration of the 25-year lease period without the right of reimbursement on the part of the LESSEE.
The authority herein granted does not, however, extend to the making or allowing any unlawful,
improper or offensive used of the leased premises, or any use thereof, other than banking and office
purposes. The maintenance and upkeep of such building, structure and improvements shall likewise be
for the sole account of the LESSEE. 1

The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.

Pursuant to said contract, a building and other improvements were constructed on the land which
housed the branch office of RCBC in Masbate, Masbate. Within three years from the signing of the
contract, petitioner complied with his part of the agreement by having the property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232 was issued by the
Register of Deeds of the Province of Masbate.

Petitioner alleges that as soon as he had the property registered, he kept on pursuing the manager of
the branch to effect the sale of the lot as per their agreement. It was not until September 4, 1984,
however, when the respondent bank decided to exercise its option and informed petitioner, through a
letter, 2 of its intention to buy the property at the agreed price of not greater than P210.00 per square
meter or a total of P78,430.00. But much to the surprise of the respondent, petitioner replied that he is
no longer selling the property.3

Hence, on March 14, 1985, a complaint for specific performance and damages were filed by respondent
against petitioner. In the complaint, respondent alleged that during the negotiations it made clear to
petitioner that it intends to stay permanently on property once its branch office is opened unless the
exigencies of the business requires otherwise. Aside from its prayer for specific performance, it likewise
asked for an award of P50,000.00 for attorney's fees P100,000.00 as exemplary damages and the cost of
the suit.4

A special and affirmative defenses, petitioner contended:

1. That the contract having been prepared and drawn by RCBC, it took undue advantage on him when it
set in lopsided terms.

2. That the option was not supported by any consideration distinct from the price and hence not binding
upon him.

3. That as a condition for the validity and/or efficacy of the option, it should have been exercised within
the reasonable time after the registration of the land under the Torrens System; that its delayed action
on the option have forfeited whatever its claim to the same.

4. That extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of
the currency that could not reasonably be forseen or was manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation, thus, rendering the terms of the contract
unenforceable, inequitable and to the undue enrichment of RCBC. 5

and as counterclaim petitioner alleged that:

1. The rental of P700.00 has become unrealistic and unreasonable, that justice and equity will require its
adjustment.

2. By the institution of the complaint he suffered moral damages which may be assessed at P100,000.00
and award of attorney's fee of P25,000.00 and exemplary damages at P100,000.00.6

Initially, after trial on the merits, the court dismissed the complaint. Although it found the contract to be
valid, the court nonetheless ruled that the option to buy in unenforceable because it lacked a
consideration distinct from the price and RCBC did not exercise its option within reasonable time. The
prayer for readjustment of rental was denied, as well as that for moral and exemplary damages.7

Nevertheless, upon motion for reconsideration of respondent, the court in the order of January 9, 1989,
reversed itself, the dispositive portion reads:

WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and hereby renders judgment as
follows:

1. The defendant is hereby ordered to execute and deliver the proper deed of sale in favor of plaintiff
selling, transferring and
conveying the property covered by and described in the Original Certificate of Title 0-232 of the Registry
of Deeds of Masbate for the sum of Seventy Eight Thousand Five Hundred Forty Pesos (P78,540,00),
Philippine Currency;

2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00) Pesos as attorney's fees;

3. The counter claim of defendant is hereby dismissed; and

4. Defendants shall pay the costs of suit.8

In a decision promulgated on September 19, 1991,9 the Court of Appeals affirmed the findings of the
trial court that:
1. The contract is valid and that the parties perfectly understood the contents thereof;

2. The option is supported by a distinct and separate consideration as embodied in the agreement;

3. There is no basis in granting an adjustment in rental.

Assailing the judgment of the appellate court, petitioner would like us to consider mainly the following:

1. The disputed contract is a contract of adhesion.

2. There was no consideration to support the option, distinct from the price, hence the option cannot be
exercised.

3. Respondent court gravely abused its discretion in not granting currency adjustment on the already
eroded value of the stipulated rentals for twenty-five years.

The petition is devoid of merit.

There is no dispute that the contract is valid and existing between the parties, as found by both the trial
court and the appellate court. Neither do we find the terms of the contract unfairly lopsided to have it
ignored.

A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the
contract, while the other party merely affixes his signature or his "adhesion" thereto. These types of
contracts are as binding as ordinary contracts. Because in reality, the party who adheres to the contract
is free to reject it entirely. Although, this Court will not hesitate to rule out blind adherence to terms
where facts and circumstances will show that it is basically one-sided. 10

We do not find the situation in the present case to be inequitable. Petitioner is a highly educated man,
who, at the time of the trial was already a CPA-Lawyer, and when he entered into the contract, was
already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident
that a man of his stature should have been more cautious in transactions he enters into, particularly
where it concerns valuable properties. He is amply equipped to drive a hard bargain if he would be so
minded to.

Petitioner contends that the doctrines laid down in the cases of

Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were misapplied in
the present case, because 1) the option given to the respondent bank was not supported by a
consideration distinct from the price; and 2) that the stipulated price of "not greater than P210.00 per
square meter" is not certain or definite.

Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain period to
accept, the offer maybe withdrawn at anytime before acceptance by communicating such withdrawal,
except when the option is founded upon consideration, as something paid or promised. On the other
hand, Article 1479 of the Code provides that an accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by
the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance
by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as
to the thing which is determinate and the price which is certain. 14 In which case, the parties may then
reciprocally demand performance.

Jurisprudence has taught us that an optional contract is a privilege existing only in one party — the
buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain
merchandise or property, at any time within the agreed period, at a fixed price. This being his
prerogative, he may not be compelled to exercise the option to buy before the time
expires. 15

On the other hand, what may be regarded as a consideration separate from the price is discussed in the
case of Vda. de Quirino v. Palarca 16 wherein the facts are almost on all fours with the case at bar. The
said case also involved a lease contract with option to buy where we had occasion to say that "the
consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to
exercise his option to purchase the same, is the obligation of the lessee to sell to the lessor the building
and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy
leased premises." 17

In the present case, the consideration is even more onerous on the part of the lessee since it entails
transferring of the building and/or improvements on the property to petitioner, should respondent bank
fail to exercise its option within the period stipulated. 18

The bugging question then is whether the price "not greater than TWO HUNDRED PESOS" is certain or
definite. A price is considered certain if it is so with reference to another thing certain or when the
determination thereof is left to the judgment of a specified person or persons. 19 And generally, gross
inadequacy of price does not affect a contract of sale. 20

Contracts are to be construed according to the sense and meaning of the terms which the parties
themselves have used. In the present dispute, there is evidence to show that the intention of the parties
is to peg the price at P210 per square meter. This was confirmed by petitioner himself in his testimony,
as follows:

Q. Will you please tell this Court what was the offer?

A. It was an offer to buy the property that I have in Quezon City (sic).

Q. And did they give you a specific amount?

xxx xxx xxx

A. Well, there was an offer to buy the property at P210 per square meters (sic).

Q. And that was in what year?

A . 1975, sir.
Q. And did you accept the offer?

A. Yes, sir. 21

Moreover, by his subsequent acts of having the land titled under the Torrens System, and in pursuing
the bank manager to effect the sale immediately, means that he understood perfectly the terms of the
contract. He even had the same property mortgaged to the respondent bank sometime in 1979, without
the slightest hint of wanting to abandon his offer to sell the property at the agreed price of P210 per
square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual, in adjusting the amount of
the rent. The contract is the law between the parties and if there is indeed reason to adjust the rent, the
parties could by themselves negotiate for the amendment of the contract. Neither could we consider
the decline of the purchasing power of the Philippine peso from 1983 to the time of the commencement
of the present case in 1985, to be so great as to result in an extraordinary inflation. Extraordinary
inflation exists when there in an unimaginable increase or decrease of the purchasing power of the
Philippine currency, or fluctuation in the value of pesos manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation. 23

Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY" between petitioner
and respondent bank is valid, effective and enforceable, the price being certain and that there was
consideration distinct from the price to support the option given to the lessee.

WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate court is hereby
AFFIRMED.

SO ORDERED.