4 Things to Prove to Claim Moral Damages

Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered, not to impose a penalty to the wrongdoer. To be entitled to moral damages, a claimant must prove:

[1] That he or she suffered besmirched reputation, or physical, mental or psychological suffering sustained by the claimant;
[2] That the defendant committed a wrongful act or omission;
[3] That the wrongful act or omission was the proximate cause of the damages the claimant sustained;
[4] The case is predicated on any of the instances expressed or envisioned by Article 2219 and 2220. In culpa contractual or breach of contract, moral damages are recoverable only if the defendant acted fraudulently or in bad faith or in wanton disregard of his contractual obligations. The breach must be wanton, reckless, malicious or in bad faith, and oppressive or abusive.

The RTC found that respondents did not pay Equitable the interest due on February 9, 2001 (or any month thereafter prior to the maturity of the loan) or the amount due (principal plus interest) due on July 9, 2001. Consequently, Equitable applied respondents' deposits to their loans upon maturity.

The relationship between a bank and its depositor is that of creditor and debtor. For this reason, a bank has the right to set-off the deposits in its hands for the payment of a depositor's indebtedness.

Respondents indeed defaulted on their obligation. For this reason, Equitable had the option to exercise its legal right to set-off or compensation. However, the RTC mistakenly (or, as it now appears, deliberately) concluded that Equitable acted fraudulently or in bad faith or in wanton disregard of its contractual obligations despite the absence of proof. The undeniable fact was that, whatever damage respondents sustained was purely the consequence of their failure to pay their loans. There was therefore absolutely no basis for the award of moral damages to them.

Neither was there reason to award exemplary damages. Since respondents were not entitled to moral damages, neither should they be awarded exemplary damages. And if respondents were not entitled to moral and exemplary damages, neither could they be awarded attorney's fees and litigation expenses. (G.R. No. 171545; December 19, 2007)