1. SIMEX INTERNATIONAL (MANILA), INCORPORATED, v.
it is not enough to say that the private respondent rectified its records and
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL
BANK
FACTS: The petitioner is a private corporation engaged in the exportation of food
products. It buys these products from various local suppliers and then sells them
abroad, particularly in the United States, Canada and the Middle East. Most of its
exports are purchased by the petitioner on credit.
The petitioner was a depositor of the respondent bank and maintained a
checking account in its branch at Romulo Avenue, Cubao, Quezon City. On May
25, 1981, the petitioner deposited to its account in the said bank the amount of
P100,000.00, thus increasing its balance as of that date to P190,380.74. 1
Subsequently, the petitioner issued several checks against its deposit but was
suprised to learn later that they had been dishonored for insufficient funds.
As a consequence, the California Manufacturing Corporation sent on June 9,
1981, a letter of demand to the petitioner, threatening prosecution if the
dishonored check issued to it was not made good. It also withheld delivery of the
order made by the petitioner. Similar letters were sent to the petitioner by the
Malabon Long Life Trading, on June 15, 1981, and by the G. and U. Enterprises,
on June 10, 1981. Malabon also canceled the petitioner's credit line and
demanded that future payments be made by it in cash or certified check.
Meantime, action on the pending orders of the petitioner with the other suppliers
whose checks were dishonored was also deferred.
The petitioner complained to the respondent bank on June 10, 1981.
Investigation disclosed that the sum of P100,000.00 deposited by the petitioner
on May 25, 1981, had not been credited to it. The error was rectified on June 17,
1981, and the dishonored checks were paid after they were re-deposited.
In its letter dated June 20, 1981, the petitioner demanded reparation from the
respondent bank for its "gross and wanton negligence." This demand was not
met. The petitioner then filed a complaint in the then Court of First Instance of
Rizal claiming from the private respondent moral damages in the sum of
P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25%
attorney's fees, and costs.
RTC: Rendered judgment holding that moral and exemplary damages were not
called for under the circumstances. However, observing that the plaintiff's right
had been violated, he ordered the defendant to pay nominal damages in the
amount of P20,000.00 plus P5,000.00 attorney's fees and costs.
CA: Affirmed RTC’s decision.
ISSUE: WON the petitioner is entitled to moral damages
RULING: Yes. This Court has carefully examined the facts of this case and finds
that it cannot share some of the conclusions of the lower courts. It seems to us
that the negligence of the private respondent had been brushed off rather lightly
as if it were a minor infraction requiring no more than a slap on the wrist. We feel
1 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
credited the deposit in less than a month as if this were sufficient repentance.
The error should not have been committed in the first place. The respondent
bank has not even explained why it was committed at all. It is true that the
dishonored checks were, as the Court of Appeals put it, "eventually" paid.
However, this took almost a month when, properly, the checks should have been
paid immediately upon presentment.
We also note that while stressing the rectification made by the respondent bank,
the decision practically ignored the prejudice suffered by the petitioner. This was
simply glossed over if not, indeed, disbelieved. The fact is that the petitioner's
credit line was canceled and its orders were not acted upon pending receipt of
actual payment by the suppliers. Its business declined. Its reputation was
tarnished. Its standing was reduced in the business community. All this was due
to the fault of the respondent bank which was undeniably remiss in its duty to the
petitioner.
Article 2205 of the Civil Code provides that actual or compensatory damages
may be received "(2) for injury to the plaintiff s business standing or commercial
credit." There is no question that the petitioner did sustain actual injury as a result
of the dishonored checks and that the existence of the loss having been
established "absolute certainty as to its amount is not required." Such injury
should bolster all the more the demand of the petitioner for moral damages and
justifies the examination by this Court of the validity and reasonableness of the
said claim.
From every viewpoint except that of the petitioner's, its claim of moral damages
in the amount of P1,000,000.00 is nothing short of preposterous. Its business
certainly is not that big, or its name that prestigious, to sustain such an
extravagant pretense. Moreover, a corporation is not as a rule entitled to moral
damages because, not being a natural person, it cannot experience physical
suffering or such sentiments as wounded feelings, serious anxiety, mental
anguish and moral shock. The only exception to this rule is where the corporation
has a good reputation that is debased, resulting in its social humiliation.
In every case, the depositor expects the bank to treat his account with the utmost
fidelity, whether such account consists only of a few hundred pesos or of millions.
The bank must record every single transaction accurately, down to the last
centavo, and as promptly as possible. This has to be done if the account is to
reflect at any given time the amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and to whomever he directs. A
blunder on the part of the bank, such as the dishonor of a check without good
reason, can cause the depositor not a little embarrassment if not also financial
loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the
nature of its functions, the bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of
their relationship. In the case at bar, it is obvious that the respondent bank was
remiss in that duty and violated that relationship. What is especially deplorable is
that, having been informed of its error in not crediting the deposit in question to
the petitioner, the respondent bank did not immediately correct it but did so only
one week later or twenty-three days after the deposit was made. It bears
repeating that the record does not contain any satisfactory explanation of why the
error was made in the first place and why it was not corrected immediately after
its discovery. Such ineptness comes under the concept of the wanton manner
contemplated in the Civil Code that calls for the imposition of exemplary
damages.
After deliberating on this particular matter, the Court, in the exercise of its
discretion, hereby imposes upon the respondent bank exemplary damages in the
amount of P50,000.00, "by way of example or correction for the public good," in
the words of the law. It is expected that this ruling will serve as a warning and
deterrent against the repetition of the ineptness and indifference that has been
displayed here, lest the confidence of the public in the banking system be further
impaired.
2. CONSOLIDATED BANK and TRUST CO. v. CA
FACTS: Solidbank is a domestic banking corporation while private respondent
L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership
engaged in the practice of accounting.
- L.C. Diaz opened a savings account with Solidbank. In 1991, Diaz through its
cashier, Mercedes Macaraya, filled up a savings cash deposit slip for P900 and a
savings checks deposit slip for P50.
- Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the
money with Solidbank and give him the Solidbank passbook. Calapre went to
Solidbank and presented to Teller No. 6 the two deposit slips and the passbook.
- The teller acknowledged receipt of the deposit by returning to Calapre the
duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips
with the words “DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD
OFFICE”.
- Since the transaction took time and Calapre had to make another deposit for
L.C. Diaz with Allied Bank, he left the passbook with Solidbank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook. Calapre went back to L.C. Diaz and reported the
incident to Macaraya.
- Macaraya immediately prepared a deposit slip in duplicate copies with a check
of P200,000. Macaraya, together with Calapre, went to Solidbank and presented
Teller No. 6 the deposit slip and check. The teller stamped the words
“DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD OFFICE” on the
duplicate copy of the deposit slip. When Macaraya asked for the passbook, Teller
No. 6 told Macaraya that someone shorter than Calapre got the passbook but
she couldn’t remember to whom she gave the passbook.
- Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the
deposit of a check for P90, 000 drawn on Philippine Banking Corporation. This
PBC check of L.C. Diaz was a check that it had “long closed”. PBC subsequently
2 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
dishonored the check because of insufficiency of funds and because the
signature differed from PBC’s specimen signature.
- Failing to get back the passbook, Macaraya went back to her office and
reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.
- The following day, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz,
called up Solidbank to stop any transaction using the same passbook until L.C.
Diaz could open a new account followed by a formal written request later that
day. It was also on the same day that L.C. Diaz learned of the unauthorized
withdrawal the day before, 14 August 1991, of P300, 000 from its savings
account. The withdrawal slip bore the signatures of the authorized signatories of
L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied
signing the withdrawal slip. A certain Noel Tamayo received the P300, 000.
- L.C. Diaz charged its messenger, Ilagan and Vedazola with estafa through
Falsification of Commercial Document. RTC Manila dismissed the criminal case.
L.C. Diaz then demanded from Solidbank the return of its money but to no avail.
RTC: Rendered decision absolving Solidbank and dismissing the complaint.
> The rules state that “possession of this book raise the presumption of
ownership and any payment or payments made by the bank upon the production
of the said book and entry therein of the withdrawal shall have the same effect as
if made to the depositor personally.”
- At the time of the withdrawal, a certain Noel Tamayo was not only in possession
of the passbook, he also presented a withdrawal slip with the signatures of the
authorized signatories of L.C. Diaz. The teller stamped the withdrawal slip with
the words “Saving Teller No. 5” then passed on to Genere Manuel for
authentication. Manuel verified the signatures on the slip and then given to
another office who compared the signatures on the withdrawal slip with the
specimen on the signature cards.
> The Trial court concluded that the Solidbank acted with care and observed the
rules on savings account when it allowed the withdrawal of P300, 000 from the
savings account of L.C. Diaz.
> Another provision of the rules on savings account states that the depositor
must keep the passbook “under lock and key”. It ruled that the passbook
presented during the questioned transaction was now out of the lock and key and
presumptively ready for a business transaction. Solidbank did not have any
participation in the custody and care of the passbook.
- The trial court held that L.C. Diaz’s negligence caused the unauthorized
withdrawal. Three facts established such negligence:
(1) The possession of the passbook by a person other than the depositor, L.C.
Diaz
(2) The presentation of a signed withdrawal receipt by an unauthorized person
and,
(3) The possession by an unauthorized person of a PBC check “long closed” by
L.C. Diaz
CA: Ruled that Solidbank’s negligence was the proximate cause of the
unauthorized withdrawal. This is in consonance to Article 2176 of the Civil Code
which states: “Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by provisions of this Chapter.”
- The CA pointed out that the teller of Solidbank who received the withdrawal slip
allowed the withdrawal without making necessary inquiry. The teller should have
called up L.C. Diaz because the amount of money withdrawn was of significant
amount. The teller did not even verify the identity of the impostor who made the
withdrawal. Thus, Solidbank is liable for negligence in the selection and
supervision of its employees.
> Solidbank could not escape liability because of the doctrine of last clear
chance. Solidbank could have averted the injury suffered by L.C. Diaz had it
called up L.C. Diaz to verify the withdrawal.
> The degree of diligence required from Solidbank is more than that of a
good father of a family. The business and functions of banks are affected with
public interest. Banks are obligated to treat the accounts of their depositors with
meticulous care, always having in mind the fiduciary nature of their relationship
with their clients. Thus, Solidbank is remiss in its duty, violating its fiduciary
relationship with L.C. Diaz.
ISSUE: Whether or not Solidbank must be held liable for the fraudulent
withdrawal on private respondent’s account.
RULING: YES. However, the liability of Solidbank is reduced.
> Solidbank is liable for breach of contract due to negligence or culpa
contractual. The contract between the bank and its depositor is governed by the
provisions of the Civil Code on Simple Loan. Article 1980 of the Civil Code states
“Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.”
There is debtor-creditor relationship between the bank (debtor) and depositor
(creditor).
- The law imposes in banks high standards in view of the fiduciary nature of
banking. This in view of Section of the GBL (RA 8791).
> Section 2 of R A 8791 prescribes the statutory diligence required from banks-
that banks must observe high standards of integrity and performance in servicing
their depositors.
> Article 1172 of the Civil Code provides that responsibility arising from
negligence in the performance of every kind of obligation is demandable. For
breach of the savings deposit agreement due to negligence or culpa contractual,
the bank is liable to its depositors.
- For failing to return the passbook to Calapre, the authorized representative of
L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high
degree of diligence in safeguarding the passbook and in insuring its return to the
party authorized to receive the same.
- Doctrine of Last Clear Chance is not applicable in this case. Solidbank is
liable for breach of contract due to negligence in the performance of its
contractual obligation to L.C. Diaz.
3 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
- However, L.C. Diaz was guilty of contributory negligence in allowing a
withdrawal slip signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced. Hence, the liability
of Solidbank for actual damages was reduced to only 60%, the remaining 40%
was borne by private respondent.
3. METROPOLITAN BANK AND TRUST COMPANY v. CABILZO
Facts: Petitioner Metrobank is a banking institution duly organized and existing
as such under Philippine laws. Respondent Renato D. Cabilzo (Cabilzo) was one
of Metrobank’s clients who maintained a current account with Metrobank Pasong
Tamo Branch. Cabilzo issued a Metrobank Check No. 985988, payable to
"CASH" and postdated on 24 November 1994 in the amount of One Thousand
Pesos (P1,000.00). The check was drawn against Cabilzo’s Account with
Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and
was paid by Cabilzo to a certain Mr. Marquez, as his sales commission. The
check was presented to Westmont Bank for payment. Westmont Bank, in turn,
indorsed the check to Metrobank for appropriate clearing. After the entries
thereon were examined, including the availability of funds and the authenticity of
the signature of the drawer, Metrobank cleared the check for encashment in
accordance with the Philippine Clearing House Corporation (PCHC) Rules.
Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some
transaction when he was asked by a bank personnel if Cabilzo had issued a
check in the amount of P91,000.00 to which the former replied in the negative.
On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate
that he did not issue a check in the amount of P91,000.00 and requested that the
questioned check be returned to him for verification, to which Metrobank
complied. Upon receipt of the check, Cabilzo discovered that Metrobank Check
No. 985988 which he issued on 12 November 1994 in the amount of P1,000.00
was altered to P91,000.00 and the date 24 November 1994 was changed to 14
November 1994.
Cabilzo demanded that Metrobank re-credit the amount of P91, 000, however
Metrobank refused and failed to re-credit the amount. The counsel of Cabilzo
sent a demand letter to Metrobank for the payment of P90, 000 after deducting
the original amount of the check, amounting to P1,000. Despite the demand
letter, Metrobank refused and failed to comply.
Cablizo filed a civil action against Metrobank before the RTC praying for
reimbursement, actual and moral damages to be awarded in his favor.
Petitioner’s contention: Upon the receipt of the said check through the PCHC
on 14 November 1994, it examined the genuineness and the authenticity of the
drawer’s signature appearing thereon and the technical entries on the check
including the amount in figures and in words to determine if there were
alterations, erasures, superimpositions or intercalations thereon, but none was
noted.
Metrobank claimed that as a collecting bank and the last indorser, Westmont
Bank should be held liable for the value of the check. Westmont Bank indorsed
the check as the an unqualified indorser, by virtue of which it assumed the liability
of a general indorser, and thus, among others, warranted that the instrument is
genuine and in all respect what it purports to be.
RTC—in favor of Cabilzo
Stressing the fiduciary nature of the relationship between the bank and
its clients and the negligence of the drawee bank in failing to detect an
apparent alteration on the check.
CA—affirmed the Decision of the trial court
Metrobank is liable for the amount of the check, without prejudice,
however, to the outcome of the case between Metrobank and
Westmont Bank.
Hence, this petition.
Issue: W/N Metrobank should be held liable for damages for its negligence.
Held: YES. The degree of diligence required of a reasonable man in the exercise
of his tasks and the performance of his duties has been faithfully complied with
by Cabilzo. In fact, he was wary enough that he filled with asterisks the space
between and after the amounts, not only those stated in words but also those in
numerical figures in order to prevent any fraudulent insertion. Metrobank cannot
rely on the doctrine of equitable estoppel which states that “when one of the two
innocent persons, each guiltless of any intentional or moral wrong, must suffer a
loss, it must be borne by the one whose erroneous conduct, either by omission or
commission, was the cause of injury.” Metrobank did not prove that Cabilzo was
negligent or that this negligence was the proximate cause of the loss. Negligence
is not presumed but it must be proven by the one who alleges it. Banking is a
business affected with public interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their relationship. The
appropriate degree of diligence required of a bank must be a high degree of
diligence, if not the utmost diligence. Here, the alterations on the check are
visible to the naked eye but Metrobank failed to detect the alterations which could
not escape the attention of even an ordinary person. This negligence is further
exacerbated by the fact that it was the cash custodian who examined the check
when his functions do not involve the examining of checks. Obviously, the
custodian was not versed and competent in handling such duty. Banks are
expected to exercise the highest degree of diligence in the selection and
supervision of employees.
4 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
4. PNB v. PIKE
FACTS: Respondent often travelled to and from Japan as a gay entertainer.
Sometime in 1991, he opened a U.S. Dollar Savings Account No. 0265-704591-0
with Petitioner in its Buendia branch for which he was issued a passbook. It was
alleged that before Respondent left for Japan, he placed the passbook inside a
cabinet under lock and key; that a few hours after he arrived in Japan, he
discovered that some of his valuables including the passbook were missing. He
immediately reported the incident to the police which led to the arrest of Joy
Manuel Davasol and Respondent also discovered that there were 2 unauthorized
withdrawals from his US Dollar Savings Account both times at the PNB Buendia
Branch.
March 31, 1993 – $3,500
April 5 1993 - $4,000
that on several occasions, complainant Pike went to petitioner PNB’s Buendia
branch and verbally protested the unauthorized withdrawals and likewise
demanded the return of the total withdrawn amount of U.S. $7,500.00, on the
ground that he never authorized anybody to withdraw from his account as the
signatures appearing on the subject withdrawal slips were clearly forgeries; that
petitioner PNB refused to credit said amount back to Respondent’s U.S. Dollar
Savings Account without justifiable reason, and instead, Petitioner bank wrote
him that it exercised due diligence in the handling of said account; and that on 06
May 1993, Respondent Pike wrote defendant PNB simply to request that the
hold-account be lifted so that he may withdraw the remaining balance left in his
U.S.$ Savings Account and nothing else.
On the other hand, Petitioner bank has a different version of facts as
follows: On March 15, 1993 at PNB Buendia Branch, Mr. Norman Y. Pike,
together with a certain Joy Davasol went to see PNB AVP Mr. Lorenzo T. Val Jr.
purposely to withdraw the amount of $2,000.00. Mr. Pike also informed AVP Val
that he is leaving for Japan and made verbal instruction to honor all withdrawals
to be transmitted by his Talent Manager and Choreographer, Joy Davasol who
shall present pre-signed withdrawal slips bearing his signature. On April 19,
1993, a certain Josephine Balmaceda, who claimed to be plaintiff’s sister
executed an affidavit stating therein tha they discovered today (April 19, 1993)
the lost (sic) of her brother’s passbook issued by PNB on account of robbery,
committed in the residence/office of her brother, promptly reporting the matter to
the police authorities and her brother cannot report the matter to the Bank
because he was currently in Japan and therefore requesting the Bank to issue a
hold-order on her brother’s passbook.
 RTC – Petitioner Bank is liable. The court is not impressed
with the defense put up by the bank. Its contention that the
withdrawals were authorized by the plaintiff because there
was an arrangement between the bank represented by its
Asst. Vice President Lorenzo Bal, Jr. and the depositor
Norman Y. Pike to the effect that pre-signed withdrawal slips,
that is, withdrawal slip signed by the depositor in the presence
of Mr. Bal whereby it would be made to appear that it was the
 depositor himself who presented the same to the bank despite
the fact that it was another person who presented the same
should be honored by the bank cannot be sanctioned by the
court. Firstly, the court is not satisfied that there was indeed
such an arrangement. It is Mr. Bal’s contention that such an
arrangement although not ordinarily entered into is still a legal
procedure of the bank and is resorted to accommodate the
depositors specially honored and valued depositor at that
time. The court compared the signatures in the questioned
withdrawal slips with the known signatures of the depositor
and is convinced that the signatures in the unauthorized
withdrawal slips do not correspond to the true signatures of
the depositor.
 CA – affirmed RTC; PNB was negligent in exercising the
diligence required of a business imbued with public interest
such as that of the banking industry.
Petitioner PNB contends that due to the verbal instructions of
respondent Pike, a valued depositor, it allowed the withdrawal by another person.
Plus, the fact that said respondent withdrew the remaining balance in his US
Savings Account and executed a waiver releasing petitioner PNB from any
liability due to the loss of the funds should rightly negate a finding of negligence
on its part.
ISSUE: WON PNB failed to exercise the diligence required in safeguarding the
Petitioner US Dollar Savings Account?
RULING: Yes, PNB failed to exercise the required diligence in banks.
withdrawals. The Court held that with banks, the degree of diligence required,
contrary to the position of petitioner PNB, is more than that of a good father of a
family considering that the business of banking is imbued with public interest due
to the nature of their functions. The stability of banks largely depends on the
confidence of the people in the honesty and efficiency of banks. Thus, the law
imposes on banks a high degree of obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of
banking. Section 2 of RA 8791, makes a categorical declaration that the State
recognizes the „fiduciary nature of banking that requires high standards of
integrity and performance. Though passed long after the unauthorized
withdrawals in this case, the provision is a statutory affirmation of Supreme Court
decisions already in esse at the time of such withdrawals. We elucidated in the
1990 case of Simex International, Inc. v. Court of Appeals, “the bank is under
obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship. Here, having admitted
that pre-signed withdrawal slips do not constitute the normal procedure with
respect to withdrawals by representatives should have already put petitioner
PNB’s employees on guard. Rather than readily validating and permitting said
withdrawals, they should have proceeded more cautiously. Clearly, petitioner
5 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
bank’s employee, Lorenzo T. Bal, an Assistant Vice President at that, was
exceedingly careless in his treatment of respondent Pike’s savings account.
5. BPI v. LIFETIME MARKETING
FACTS: Lifetime Marketing Corporation (LMC) opened a current account with the
Bank of the Philippine Islands (BPI) Greenhills-Edsa branch. In this account, the
sales agents of LMC would have to deposit their collections or payments to the
latter.
As a result, LMC and BPI, made a special arrangement that the
former’s agents will accomplish three (3) copies of the deposit slips, the third
copy to be retained and held by the teller until LMC’s authorized representatives
shall retrieve them on the following banking day.
LMC availed of the BPI’s inter-branch banking network services
wherein BPI’s bank tellers were no longer obliged to retain the extra copy of the
deposit slips instead, they will rely on the machine-validated deposit slip, to be
submitted by LMC’s agents.
On various dates, Alice Laurel, one of LMC’s Educational Consultants
or agents deposited checks to LMC’s subject account at different branches of
BPI. Each check thus deposited were retrieved by Alice Laurel after the deposit
slips were machine-validated, except thirteen (13) checks which bore no machine
validation.
A verification with BPI by LMC showed that Alice Laurel made check
deposits with the named BPI branches and, after the check deposit slips were
machine-validated, requested the teller to reverse the transactions. This requires
that all copies of the deposit slips must be retrieved or surrendered to the bank.
Notwithstanding this, the verbal requests of Alice Laurel and her husband to
reverse the were accommodated by BPI tellers.
Alice Laurel presented the machine-validated deposit slips to LMC
which, on the strength thereof, considered her account paid. The total amount
covered by Alice’s deposit slips was P2,767,594.00 and, for which, LMC paid
Laurel the total of P560,726.00 by way of sales discount and promo prizes.
Upon discovery of this fraud in early August 1992, LMC made queries
from the BPI branches involved., BPI branch managers formally admitted that
they cancelled, without the permission of or due notice to LMC, the deposit
transactions made by Alice and her husband, and based only upon the latter’s
verbal request or representation.
LMC immediately instituted a criminal action for Estafa against Alice
Laurel and her husband Thomas Limoanco before the RTC. But it was archived
because summons could not be served upon the spouses as they have
absconded.
LMC filed a Complaint for Damages against BPI before the RTC of
Makati.
RTC: Ordered BPI to pay LMC P1Million pesos plus 100,000.00 attorney’s fees.
CA: Affirmed the decision of the trial court but increased the award of actual
damages to P2,075,695.50 and deleted the award of P100,000.00 as attorney’s
fees.
Hence, this petition for review.
BPI:
1. LMC should have presented evidence to prove not only the amount of the
checks that were deposited and subsequently reversed, but also the actual
delivery of the books and the payment of „sales and promo prizes to Alice
Laurel.
2. LMC’s negligence in considering the machine-validated check deposit slips as
evidence of Alice Laurel’s payment was the proximate cause of its own loss.
LMC allegedly ignored the express notice indicated in its monthly bank
statements and consequently failed to check the accuracy of the transactions
reflected therein.
ISSUE: Whether BPI was negligent in reversing the transactions subject of
this case
RULING: YES. Negligence is the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a prudent and
reasonable man would not do.
Negligence in this case lies in the tellers’ disregard of the validation
procedures in place and BPI’s utter failure to supervise its employees. Notably,
BPI’s managers admitted in several correspondences with LMC that the deposit
transactions were cancelled without LMC’s knowledge and consent and based
only upon the request of Alice Laurel and her husband.
It is well to reiterate that the degree of diligence required of banks is
more than that of a reasonable man or a good father of a family. In view of the
fiduciary nature of their relationship with their depositors, banks are duty-bound
to treat the accounts of their clients with the highest degree of care.
BPI cannot escape liability because of LMC’s failure to scrutinize the
monthly statements sent to it by the bank. This omission does not change the
fact that were it not for the wanton and reckless negligence of BPI’s tellers in
failing to require the surrender of the machine-validated deposit slips before
reversing the deposit transactions, the loss would not have occurred. BPIÊs
negligence is undoubtedly the proximate cause of the loss.
6 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
6. BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI
INTERNATIONALE and LEONARDO T. YABUT, respondents
FACTS: On November 8, 1982, plaintiff CASA Montessori International opened
Current Account No. 0291-0081-01 with defendant BPI, with CASAs President
Ms. Ma. Carina C. Lebron as one of its authorized signatories.
In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its
checks had been encashed by a certain Sonny D. Santos since 1990 in the total
amount of P782, 000.00. It turned out that Sonny D. Santos with account at BPIs
Greenbelt Branch was a fictitious name used by third party defendant Leonardo
T. Yabut who worked as external auditor of CASA. Third party defendant
voluntarily admitted that he forged the signature of Ms. Lebron and encashed the
checks.
The PNP Crime Laboratory conducted an examination of the nine (9) checks and
concluded that the handwritings thereon compared to the standard signature of
Ms. Lebron were not written by the latter.
On March 4, 1991, plaintiff filed the herein Complaint for Collection with
Damages against defendant bank praying that the latter be ordered to reinstate
the amount of P782,500.00 in the current and savings accounts of the plaintiff
with interest at 6% per annum.
RTC: Favored the Plaintiff.
CA: Modifying the Decision of the Regional Trial Court (RTC), the CA
apportioned the loss between BPI and CASA. The appellate court took into
account CASAs contributory negligence that resulted in the undetected forgery. It
then ordered Leonardo T. Yabut to reimburse BPI half the total amount claimed;
and CASA, the other half. It also disallowed attorney’s fees and moral and
exemplary damages.
ISSUE: WON BPI is negligent and is liable for damages.
RULING: We have repeatedly emphasized that, since the banking business is
impressed with public interest, of paramount importance thereto is the trust and
confidence of the public in general. Consequently, the highest degree of diligence
is expected, and high standards of integrity and performance are even required,
of it. By the nature of its functions, a bank is under obligation to treat the
accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.
BPI contends that it has a signature verification procedure, in which checks are
honored only when the signatures therein are verified to be the same with or
similar to the specimen signatures on the signature cards. Nonetheless, it still
failed to detect the eight instances of forgery. Its negligence consisted in the
omission of that degree of diligence required of a bank. It cannot now feign
ignorance, for very early on we have already ruled that a bank is bound to know
the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was
forged. In fact, BPI was the same bank involved when we issued this ruling
seventy years ago.
The monthly statements issued by BPI to its clients contain a notice worded as
follows: If no error is reported in ten (10) days, account will be correct. Such
notice cannot be considered a waiver, even if CASA failed to report the error.
Neither is it estopped from questioning the mistake after the lapse of the ten-day
period.
This notice is a simple confirmation or circularization -- in accounting parlance --
that requests client-depositors to affirm the accuracy of items recorded by the
banks. Its purpose is to obtain from the depositors a direct corroboration of the
correctness of their account balances with their respective banks. Internal or
external auditors of a bank use it as a basic audit procedure - the results of which
its client-depositors are neither interested in nor privy to -- to test the details of
transactions and balances in the banks records. Evidential matter obtained from
independent sources outside a bank only serves to provide greater assurance of
reliability than that obtained solely within it for purposes of an audit of its own
financial statements, not those of its client-depositors.
7. CENTRAL BANK v. CITYTRUST BANK
FACTS: Respondent Citytrust Banking Corporation maintained a demand
deposit account with petitioner Central Bank of the Philippines, now BSP.
- As required, Citytrust furnished petitioner with the names and corresponding
signatures of 5 of its officers authorized to sign checks and serve as drawers and
indorsers for its account.
- Flores presented for payment to petitioner’s Senior Teller Illuminada dela Cruz
2 Citytrust checks of even date, payable to Citytrust, one in the amount of
P850, 000 and the other P900, 000, both of which were signed and indorsed by
Citytrust’s authorized signatory-drawers.
- After the checks were certified by petitioners Accounting Department, Iluminada
verified them, prepared the cash transfer slip on which she affixed her signature,
stamped the checks with the notation Received Payment and asked Flores to, as
he did, sign on the space above such notation. Instead of signing his name,
however, Flores signed as Rosauro C. Cayabyab a fact Iluminada failed to
notice.
- Iluminada thereupon sent the cash transfer slip and checks to petitioner’s Cash
Department where an officer verified and compared the drawer’s signatures on
the checks against their specimen signatures provided by Citytrust, and finding
the same in order, approved the cash transfer slip and paid the corresponding
amounts to Flores. Petitioner then debited the amount of the checks totaling
P1,750,000 from Citytrusts demand deposit account.
- More than a year and nine months later, Citytrust, by letter alleged that the
checks were already cancelled because they were stolen and demanded
petitioner to restore the amounts covered thereby to its demand deposit account
but the demand was refused.
- Citytrust later filed a complaint for estafa against Flores. Flores was convicted.
7 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
- Citytrust then, filed before the Regional Trial Court (RTC) of Manila a complaint
for recovery of sum of money with damages against petitioner who allegedly
erred in encashing the checks and in charging the proceeds thereof to its
account, despite the lack of authority of Rosauro C. Cayabyab.
RTC: Found both Citytrust and petitioner negligent and accordingly held them
equally liable for the loss.
CA: Affirmed the trial court’s decision holding that both parties contributed
equally to the fraudulent encashment of the checks, hence, they should equally
share the loss in consonance with Article 21791[3] and Article 11722[4] of the
Civil Code.
- While Citytrust failed to take adequate precautionary measures to prevent the
fraudulent encashment of its checks, petitioner was not entirely blame-free in
light of its failure to verify the signature of Citytrusts agent authorized to receive
payment.
Petitioner’s contention: Flores having been an authorized roving teller, Citytrust
is bound by his acts. Also maintaining that it was not negligent in releasing the
proceeds of the checks to Flores, the failure of its teller to properly verify his
signature notwithstanding, petitioner contends that verification could be
dispensed with, Flores having been known to be an authorized roving teller of
Citytrust who had had numerous transactions with it (petitioner) on its (Citytrusts)
behalf for five years prior to the questioned transaction.
- Petitioner contends that Cotytrust’s allowing Flores to steal the checks and
failing to timely cancel them, allowing Flores to wear the issued ID by the
petitioner, failing to report absence from work  failure to explain the
circumstances surrounding the supposed theft was the proximate cause of the
loss or fraud.
ISSUE: Whether or not Citytrust can collect sum of money as damages from the
Central Bank.
HELD: YES, but the liability is mitigated.
The law imposes on banks high standards in view of the fiduciary nature of
banking. Section 2 of Republic Act No. 8791 (R.A. 8791), which took effect on 13
June 2000, declares that the State recognizes the “fiduciary nature of banking
that requires high standards of integrity and performance.”
- This fiduciary relationship means that the bank’s obligation to observe “high
standards of integrity and performance” is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father
of a family. Article 1172 of the Civil Code states that the degree of diligence
required of an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a good father of a family. Section 2 of R.A. 8791
prescribes the statutory diligence required from banks – that banks must observe
“high standards of integrity and performance” in servicing their depositors.
- Citytrust’s failure to timely examine its account, cancel the checks and notify
petitioner of their alleged loss/theft should mitigate petitioner’s liability, in
accordance with Article 2179 of the Civil Code which provides that if the plaintiff’s
negligence was only contributory, the immediate and proximate cause of the
injury being the defendant’s lack of due care, the plaintiff may recover damages,
but the courts shall mitigate the damages to be awarded.
8. PHILIPPINE BANK OF COMMERCE, ET AL. vs COURT OF APPEALS
FACTS: RMC (Private Respondent’s Corporation) maintained two (2) separate
current accounts, Current Account Nos. 53-01980-3 and 53-01748-7, with the
Pasig Branch of PBC in connection with its business of selling appliances.
Romeo Lipana claims to have entrusted RMC funds in the form of cash totalling
P304,979.74 to his secretary, Irene Yabut, for the purpose of depositing said
funds in the current accounts of RMC with PBC. It turned out, however, that
these deposits, on all occasions, were not credited to RMC's account but were
instead deposited to Account No. 53-01734-7 of Yabut's husband, Bienvenido
Cotas who likewise maintains an account with the same bank. Petitioner bank
had, however, been regularly furnishing private respondent with monthly
statements showing its current accounts balances. Unfortunately, it had never
been the practice of Romeo Lipana to check these monthly statements of
account reposing complete trust and confidence on petitioner bank.
Yabut would accomplish two copies of the deposit slip, an original and a
duplicate. The original showed the name of her husband as depositor and his
current account number. On the duplicate copy was written the account number
of her husband but the name of the account holder was left blank. PBC's teller,
Azucena Mabayad, would, however, validate and stamp both the original and the
duplicate of these deposit slips retaining only the original copy despite the lack of
information on the duplicate slip. The second copy was kept by Irene Yabut
allegedly for record purposes. After validation, Yabut would then fill up the name
of RMC in the space left blank in the duplicate copy and change the account
number written thereon, which is that of her husband's, and make it appear to be
RMC's account number.
With the daily remittance records also prepared by Ms. Yabut and submitted to
private respondent RMC together with the validated duplicate slips with the
latter's name and account number, she made her company believe that all the
8 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
while the amounts she deposited were being credited to its account when, in truth
and in fact, they were being deposited by her and credited by the petitioner bank
in the account of Cotas. This went on in a span of more than one (1) year without
private respondent's knowledge.
Upon discovery of the loss of its funds, RMC demanded from petitioner bank the
return of its money, but as its demand went unheeded, it filed a collection suit
before the Regional Trial Court.
RTC—in favor of Private Respondent
CA—affirmed the Decision of the Trial Court
Hence, this petition.
ISSUE: WON the proximate cause of the loss, suffered by the private respondent
RMC is petitioner bank's negligence or that of private respondent's?
RULING: It was this negligence of Ms. Azucena Mabayad, coupled by the
negligence of the petitioner bank in the selection and supervision of its bank
teller, which was the proximate cause of the loss suffered by the private
respondent, and not the latter's act of entrusting cash to a dishonest employee,
as insisted by the petitioners. But since RMC is also negligent, damages are
mitigated.
Mabayad, was negligent in validating, officially stamping and signing all the
deposit slips prepared and presented by Ms. Yabut, despite the glaring fact that
the duplicate copy was not completely accomplished contrary to the self-imposed
procedure of the bank with respect to the proper validation of deposit slips,
original or duplicate, as testified to by Ms. Mabayad herself.
The fact that the duplicate slip was not compulsorily required by the bank in
accepting deposits should not relieve the petitioner bank of responsibility.
The odd circumstance alone that such duplicate copy lacked one vital information
— that of the name of the account holder — should have already put Ms.
Mabayad on guard. Rather than readily validating the incomplete duplicate copy,
she should have proceeded more cautiously by being more probing as to the true
reason why the name of the account holder in the duplicate slip was left blank
while that in the original was filled up. Even if Yabut had the fraudulent intention
to misappropriate the funds entrusted to her by plaintiff, she would not have been
able to deposit those funds in her husband's current account, and then make
plaintiff believe that it was in the latter's accounts wherein she had deposited
them, had it not been for bank teller Mabayad's aforesaid gross and reckless
negligence. The latter's negligence was thus the proximate, immediate and
efficient cause that brought about the loss claimed by plaintiff in this case, and
the failure of plaintiff to discover the same soon enough by failing to scrutinize the
monthly statements of account being sent to it by appellant bank could not have
prevented the fraud and misappropriation which Irene Yabut had already
completed when she deposited plaintiff's money to the account of her husband
instead of to the latter's accounts.
Bank is also negligent
Negligence here lies not only on the part of Ms. Mabayad but also on the part of
the bank itself in its lackadaisical selection and supervision of Ms. Mabayad. This
was exemplified in the testimony of Mr. Romeo Bonifacio, then Manager of the
Pasig Branch of the petitioner bank and now its Vice-President, to the effect that,
while he ordered the investigation of the incident, he never came to know that
blank deposit slips were validated in total disregard of the bank's validation
procedures.
Under doctrine of last clear chance, bank is liable
Assuming that private respondent RMC was negligent in entrusting cash to a
dishonest employee, thus providing the latter with the opportunity to defraud the
company, as advanced by the petitioner, yet it cannot be denied that the
petitioner bank, thru its teller, had the last clear opportunity to avert the injury
incurred by its client, simply by faithfully observing their self-imposed validation
procedure.
RMC also negligent; damages mitigated to 60-40 ratio
The foregoing notwithstanding, it cannot be denied that, indeed, private
respondent was likewise negligent in not checking its monthly statements of
account. Had it done so, the company would have been alerted to the series of
frauds being committed against RMC by its secretary. The damage would
definitely not have ballooned to such an amount if only RMC, particularly Romeo
Lipana, had exercised even a little vigilance in their financial affairs. This
omission by RMC amounts to contributory negligence which shall mitigate the
damages that may be awarded to the private respondent under Article 2179 of
the New Civil Code.
9. REYES et. al. v. CA et.al.
FACTS: In view of the 20th Asian Racing Conference held in Sydney Australia,
Philippine Racing Club Inc. (PRCI) sent 4 delegates to the conference.
Petitioner, as vice president for finance, racing manager, treasurer and director of
PRCI, sent Godofredo Reyes, the club’s chief cashier, to the Respondent Far
East Bank and Trust Co. to apply for a foreign exchange demand draft in
Australian dollars.
Godofredo went to respondent bank’s Buendia Branch in MakatiCity to
apply for a demand draft in the amount 1, 610 Australian Dollars. payable to the
order of the 20th Asian Racing Conference Secretariat of Sydney, Australia. He
was attended to by Respondent bank’s assistant cashier,Mr. Yasis, who at first
denied the application because Respondent bank did not have an Australian
dollar account in any bank in Sydney. Godofredo asked if there could be a way
9 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
for Respondent bank to accommodate PRCI’s urgent need to remit Australian
dollars to Sydney. Yasis of Respondent bank informed Godofredo of a
roundabout way of effecting the requested remittance to Sydney thus: the
respondent bank would draw a demand draft against Westpac-Sydney and have
the latter reimburse itself from the U.S. dollar account of the respondent in
Westpac-New York. This arrangement has been customarily resorted to since the
1960’s and the procedure has proven to be problem­free. PRCI and the
Petitioner acting through Godofredo, agreed to this arrangement or approach in
order to effect the urgent transfer of Australian dollars payable to the Secretariat
of the 20th Asian Racing Conference.
Respondent bank approved the said application of PRCI and issued
Foreign Exchange Demand Draft (FXDD) No. 209968. But upon presentment, of
the foreign exchange demand draft, denominated as FXDD No. 209968, the
same was dishonored, with the notice of dishonor stating the following: “No
account held with Westpac.” Meanwhile, on August 16, 1988, Westpac-New York
sent a cable to Respondent bank informing the latter that its dollar account in the
sum 1, 610 Australian Dollars was debited.
On August 19, 1988, in response to PRCI’s complaint about the
dishonor of the said foreign exchange demand draft, respondent bank informed
Westpac-Sydney of the issuance of the said demand draft FXDD No. 209968,
drawn against the Westpac-Sydney and informing the latter to be reimbursed
from the respondent bank’s dollar account in Westpac-New York. The
respondent bank on the same day likewise informed Westpac-New York
requesting the latter to honor the reimbursement claim of Westpac-Sydney. On
September 14, 1988, upon its second presentment for payment, FXDD No.
209968 was again dishonored by Westpac-Sydney for the same reason, that is,
that the respondent bank has no deposit dollar account with the drawee
Westpac-Sydney.
Petitioner Gregorio H. Reyes arrived in Sydney in the morning of
September 18, 1988, he went directly to the lobby of Hotel Regent Sydney to
register as a conference delegate. He was told by a lady member of the
conference secretariat that he could not register because the foreign exchange
demand draft for his registration fee had been dishonored for the second time.
Also, petitioner Consuelo Puyat-Reyes arrived in Sydney. She too was
embarrassed and humiliated at the registration desk of the conference secretariat
when she was toldin the presence and within the hearing of other delegates that
she could not be registered due to the dishonor of the subject foreign exchange
demand draft.
Petitioners filed with the RTC a complaint for damages against the
respondent bank due to the dishonor of the said foreign exchange demand draft
issued by the respondent bank. The petitioners claim that as a result of the
dishonor of the said demand draft, they were exposed to unnecessary shock,
social humiliation, and deep mental anguish in a foreign country, and in the
presence of an international audience.
 RTC – in favour of bank
  CA – affirmed RTC; no basis to hold the respondent bank that its employee erroneously read the said cable message, Westpac-Sydney
liable for damages for the reason that it exertedevery effort for merely stated that the respondent bank has no deposit account with it to cover for
the subject foreign exchange demand draft to be honored. the amount of One Thousand Six Hundred Ten Australian Dollar (AU $1610.00)
Petitioners contend that due to the fiduciary nature of the relationship indicated in the foreign exchange demand draft. Thus, the respondent bank had
between the respondent bank and its clients, the respondent bank should have the impression that Westpac-New York had not yet made available the amount
exercised a higher degree of diligence than that expected of an ordinary prudent for reimbursement to Westpac-Sydney despite the fact that respondent bank has
person in the handling of its affairs as in the case at bar. a sufficient deposit dollar account with Westpac-New York. That was the reason
why the respondent bank had to re-confirm and repeatedly notify Westpac-New
ISSUE: WON Respondent bank failed to exercise the required diligence in York to debit its (respondent bank's) deposit dollar account with it and to transfer
banks? or credit the corresponding amount to Westpac-Sydney to cover the amount of
the said demand draft.
RULING: No, Respondent bank respondent bank exercised that degree of
diligence expected of an ordinary prudent person under the circumstances
obtaining. Prior to the first dishonor of the subject foreign exchange demand
draft, the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac- Sydney and to debit the dollar account of
respondent bank with the former. As soon as the demand draft was dishonored,
the respondent bank, thinking that the problem was with the reimbursement and
without any idea that it was due to miscommunication, re-confirmed the authority
of Westpac-New York to debit its dollar account for the purpose of reimbursing
Westpac-Sydney. Respondent bank also sent two (2) more cable messages to
Westpac-New York inquiring why the demand draft was not honored.
In Philippine Bank of Commerce v. Court of Appeals 1 upholding a long
standing doctrine, we ruled that the degree of diligence required of banks, is
more than that of a good father of a family where the fiduciary nature of their
relationship with their depositors is concerned. In other words banks are duty
bound to treat the deposit accounts of their depositors with the highest degree of
care. But the said ruling applies only to cases where banks act under their
fiduciary capacity, that is, as depositary of the deposits of their depositors. But
the same higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with their
depositors.
Thus, Respondent bank was not required to exert more than the
diligence of a good father of a family in regard to the sale and issuance of the
subject foreign exchange demand draft. The case at bar does not involve the
handling of petitioners' deposit, if any, with the respondent bank. Instead, the
relationship involved was that of a buyer and seller, that is, between the
respondent bank as the seller of the subject foreign exchange demand draft, and
PRCI as the buyer of the same, with the 20th Asian Racing conference
Secretariat in Sydney, Australia as the payee thereof. As earlier mentioned, the
said foreign exchange demand draft was intended for the payment of the
registration fees of the petitioners as delegates of the PRCI to the 20 th Asian
Racing Conference in Sydney.
The evidence shows that the respondent bank did everything within its
power to prevent the dishonor of the subject foreign exchange demand draft. The
erroneous reading of its cable message to Westpac-Sydney by an employee of
the latter could not have been foreseen by the respondent bank. Being unaware

10 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS