ARMANDO V. ALANO [DECEASED], SUBSTITUTED BY ELENA however, sustained the validity of the real estate mortgage.

[25]
ALANO-TORRES,* PETITIONER, VS. PLANTER'S DEVELOPMENT
BANK, AS SUCCESSOR-IN-INTEREST OF MAUNLAD SAVINGS
AND LOAN ASSOCIATION, INC.,*** RESPONDENT.
"No one can give what he does not have" (Nemo dat quod non habet).
According to the RTC, Maunlad Savings and Loan Association, Inc.
had the right to rely on the Torrens title as there was no reason for it to
doubt the mortgagor's ownership over the subject property. [26]
Accordingly, the fallo of the decision reads:

This Amended Petition for Review on Certiorari [1] under Rule 45 of the WHEREFORE, premises considered, judgment is hereby rendered as
Rules of Court assails the June 9, 2005 Decision [2] and the February follows:
21, 2006 Resolution [3] of the Court of Appeals (CA) in CA G.R. CV
No. 58554. 1. Declaring plaintiff Armando Alano the owner of one-half of the
property in question;
Factual Antecedents
2. Ordering the Register of Deeds of Quezon City to cancel TCT No.
Petitioner Armando V. Alano and his brother, the late Agapito V. Alano, 90388 issued in the name of Lydia J. Alano and the corresponding
Jr., inherited from their father a parcel of land located at Gov. Forbes owner's duplicate certificate and to issue a new one in the names of
St., Sampaloc, Manila. [4] Armando V. Alano, single[,] ½ share pro indiviso and Lydia Alano,
widow, ½ share pro indiviso with the corresponding mortgage lien
On June 30, 1988, petitioner executed a Special Power of Attorney [5] annotation in favor of the Maunlad Savings and Loan [Association,] Inc.
authorizing his brother to sell their property in Manila. From the upon finality of this decision;
proceeds of the sale, the brothers purchased on September 22, 1988
a residential house located at No. 60 Encarnacion St., BF Homes, 3. Ordering the defendant Maunlad Savings and Loan [Association,]
Quezon City. [6] The title of the Quezon City property, however, was Inc. to surrender [the] owner's duplicate copy of TCT No. 90388 to the
not immediately transferred to them because the duplicate and original Register of Deeds of Quezon City for cancellation upon finality of this
copies of the title were destroyed by a fire that gutted the Quezon City decision;
Hall Building. [7]
4. Ordering defendants Lydia J. Alano and Melecio Javier to jointly and
On June 27, 1990, Agapito V. Alano, Jr. died leaving behind his wife, severally pay the plaintiff the sum of P20,000.00 as attorney's fees and
Lydia J. Alano (Lydia), and four legitimate children, who adjudicated to to pay the costs of suit.
themselves the property in Quezon City. [8] Consequently, title to the
said property was reconstituted as Transfer Certificate of Title (TCT) SO ORDERED. [27]
No. 18990 and registered solely in the names of Lydia and her four
children. [9] This prompted petitioner to execute an Affidavit of Adverse Dissatisfied, petitioner moved for partial reconsideration [28] but the
Claim [10] which was annotated on TCT No. 18990. [11] But because RTC denied the same in its Order [29] dated February 24, 1997.
of the assurance of his nieces that they would put things right, petitioner
agreed to delay the filing of a case in court. [12] Ruling of the Court of Appeals

Meanwhile, Lydia filed with the Register of Deeds of Quezon City an Petitioner appealed [30] to the CA but to no avail. The CA found
Affidavit of Cancellation of Adverse Claim, [13] which caused the Maunlad Savings and Loan Association, Inc. to be a mortgagee in good
cancellation of the adverse claim annotated on TCT No. 18990. [14] faith since it took the necessary precautions to ascertain the status of
Thereafter, by virtue of a Deed of Absolute Sale [15] allegedly executed the property sought to be mortgaged as well as the identity of the
by her children in her favor, TCT No. 18990 was cancelled and a new mortgagor by conducting an ocular inspection of the property and
one, TCT No. 90388, was issued solely in her name. [16] requiring the submission of documents, such as the latest tax receipts
and tax clearance. [31] The CA thus disposed of the appeal as follows:
On February 8, 1994, Slumberworld, Inc., represented by its President,
Melecio A. Javier, and Treasurer, Lydia, obtained from Maunlad WHEREFORE, premises considered, the appeal is hereby
Savings and Loan Association, Inc. a loan of P2.3 million, secured by DISMISSED for lack of merit. The September 12, 1996 Decision of the
a Real Estate Mortgage [17] over the property covered by TCT No. Regional Trial Court of Quezon City, Branch 92, is hereby AFFIRMED.
90388. [18]
SO ORDERED. [32]
On April 20, 1994, petitioner filed a Complaint [19] against Lydia,
Melecio A. Javier, Maunlad Savings and Loan Association, Inc. and the Petitioner sought reconsideration [33] but the CA denied the same in
Register of Deeds of Quezon City before the Regional Trial Court its Resolution [34] dated February 21, 2006.
(RTC) of Quezon City, which was raffled to Branch 92. Petitioner
sought the cancellation of TCT No. 90388, the issuance of a new title Issues
in his name for his one-half share of the Quezon City property, and the
nullification of real estate mortgage insofar as his one-half share is Hence, the present recourse, petitioner raising the following issues:
concerned. [20]
WHETHER THE REAL ESTATE MORTGAGE EXECUTED BY
Defendants Maunlad Savings and Loan Association, Inc. and the DEFENDANT LYDIA J. ALANO WAS VALID AND BINDING WITH
Register of Deeds of Quezon City filed their respective Answers. [21] RESPECT TO PETITIONER'S CO-OWNER'S SHARE IN THE
Defendants Lydia and Melecio A. Javier, however, failed to file their SUBJECT PROPERTY.
respective Answers. Thus, the RTC in an Order [22] dated August 29,
1994 declared them in default. WHETHER DEFENDANT MAUNLAD SAVINGS AND LOAN
ASSOCIATION, INC. WAS AN INNOCENT MORTGAGEE IN GOOD
Ruling of the Regional Trial Court FAITH.

On September 12, 1996, the RTC rendered its Decision [23] declaring WHETHER PETITIONER MAY RIGHTFULLY BE MADE TO SUFFER
petitioner the owner of one-half of the subject property since an implied THE CONSEQUENCES OF DEFENDANT LYDIA J. ALANO'S
trust exists between him and the heirs of his brother. [24] The RTC,
WRONGFUL ACT OF MORTGAGING THE SUBJECT PROPERTY. ocular inspection, the credit investigator failed to ascertain the actual
[35] occupants of the subject property and to discover petitioner's
apartment at the back portion of the subject property. [51]
Petitioner's Arguments
Indeed, the existence of petitioner's apartment at the back portion of
Petitioner insists that Maunlad Savings and Loan Association, Inc. is the subject property was never brought up before the trial court and the
not a mortgagee in good faith as it failed to exercise due diligence in appellate court. Nevertheless, we find petitioner's allegation of
inspecting and ascertaining the status of the mortgaged property. negligence substantiated by the testimony of the credit investigator, to
Petitioner calls attention to the testimony of Credit Investigator Carlos wit:
S. Mañosca, who admitted that when he inspected the mortgaged Q-You said also that you inspected the property that was offered as
property, he only checked the finishing of the house and the number of collateral which is a house and lot located at Encarnacion Street, BF
rooms. [36] Hence, he failed to see petitioner's apartment at the back Homes. Did you enter the property?
portion of the property. [37] Moreover, the fact that there was an A-Yes, ma'am.
adverse claim annotated on the previous title of the property should Q-And then you found out that the property was the home of Mrs. Lydia
have alerted Maunlad Savings and Loan Association, Inc. to conduct Alano and her children?
further investigation to verify the ownership of the mortgaged property. A-Yes, ma'am.
[38] All these prove that Maunlad Savings and Loan Association, Inc. ATTY. JAVELLANA
was not a mortgagee in good faith. Corollarily, pursuant to Articles Q-And you also saw that her brother-in-law Armando Alano was also
2085 [39] and 493 [40] of the Civil Code, the real estate mortgage residing there?
executed by Lydia is void insofar as petitioner's share in the mortgaged A-I do not recall if he was there, ma'am.
property is concerned. [41] Q-You did not see him there?
A-When we went there ma'am, we only checked on the finishing of the
Respondent's Arguments house and also checked as to the number of bedrooms and number of
CR, ma'am.
Respondent contends that the issue of whether Maunlad Savings and Q-You did not verify who were actually residing there?
Loan Association, Inc. is a mortgagee in good faith is a question of fact, A-No, ma'am.
which is beyond the jurisdiction of this Court. [42] As to petitioner's Q-You said that you also conducted a neighborhood checking, did you
allegation that there was a separate apartment at the back portion of ask the neighbor who were residing in that property?
the property, respondent claims that this was never raised during the A-Yes, and we were told that Lydia Alano was the one residing there,
trial or on appeal. [43] Hence, it is barred by estoppel. [44] ma'am.
Q-You did not verify from them as to whether anybody else was
Respondent further claims that Maunlad Savings and Loan residing there?
Association, Inc. has no obligation to look beyond the title considering A-No, ma'am. [52] (Emphasis supplied).
that there was no adverse claim annotated on TCT No. 90388 covering
the mortgaged property. [45] And since the mortgaged property was Clearly, while the credit investigator conducted an ocular inspection of
occupied by the mortgagor Lydia, there was also no need for Maunlad the property as well as a "neighborhood checking" and found the
Savings and Loan Association, Inc. to verify the extent of her subject property occupied by the mortgagor Lydia and her children, [53]
possessory rights. [46] he, however, failed to ascertain whether the property was occupied by
persons other than the mortgagor. Had he done so, he would have
Our Ruling discovered that the subject property is co-owned by petitioner and the
heirs of his brother. Since Maunlad Savings and Loan Association, Inc.
The petition has merit. was remiss in its duty in ascertaining the status of the property to be
mortgaged and verifying the ownership thereof, it is deemed a
The instant case is an exception to the mortgagee in bad faith. Consequently, the real estate mortgage
rule that factual issues may not be raised in a executed in its favor is valid only insofar as the share of the mortgagor
petition under Rule 45 of the Rules of Court. Lydia in the subject property. We need not belabor that under Article
493 [54] of the Civil Code, a co-owner can alienate only his pro indiviso
The rule that only questions of law may be raised in a petition for review share in the co-owned property, and not the share of his co-owners.
on certiorari under Rule 45 of the Rules of Court is not without
exception. A review of factual issues is allowed when there is a WHEREFORE, the petition is hereby GRANTED. The assailed June 9,
misapprehension of facts or when the inference drawn from the facts is 2005 Decision and the February 21, 2006 Resolution of the Court of
manifestly mistaken. [47] This case falls under exception. Appeals in CA G.R. CV No. 58554 are SET ASIDE. The September 12,
1996 Decision of the Regional Trial Court of Quezon City, Branch 92,
Maunlad Savings and Loan Association, is hereby MODIFIED by declaring the mortgage in favor of respondent
Inc. is not a mortgagee in good faith. Maunlad Savings and Loan Association, Inc. NULL and VOID insofar
as the ½ share of petitioner in the subject property is concerned, and
The general rule that a mortgagee need not look beyond the title does ordering the annotation of the mortgage lien in favor of respondent only
not apply to banks and other financial institutions as greater care and on the ½ share of Lydia J. Alano in the subject property.
due diligence is required of them. [48] Imbued with public interest, they
"are expected to be more cautious than ordinary individuals." [49] Thus, SO ORDERED.
before approving a loan, the standard practice for banks and other
financial institutions is to conduct an ocular inspection of the property [G.R. No. 132390. May 21, 2004]
offered to be mortgaged and verify the genuineness of the title to BPI FAMILY SAVINGS BANK, INC., petitioner, vs. FIRST METRO
determine the real owner or owners thereof. [50] Failure to do so makes INVESTMENT CORPORATION, respondent.
them mortgagees in bad faith. For our resolution is the instant petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing
In this case, petitioner contends that Maunlad Savings and Loan the Decision[1] dated July 4, 1997 and Resolution[2] dated January 28,
Association, Inc. failed to exercise due diligence in inspecting and 1998 of the Court of Appeals in CA-G.R. CV No. 44986, First Metro
ascertaining the status of the mortgaged property because during the Investment Corporation vs. BPI Family Bank.
 until fully restored. Further, this 17% interest shall itself earn interest at
The facts as found by the trial court and affirmed by the Court of 12% from October 4, 1989 until fully paid.
Appeals are as follows:
SO ORDERED.
First Metro Investment Corporation (FMIC), respondent, is an
investment house organized under Philippine laws. Petitioner, Bank of BPI FB then filed a motion for reconsideration but was denied by the
Philippine Islands Family Savings Bank, Inc. is a banking corporation Court of Appeals.
also organized under Philippine laws.
In the instant petition, BPI FB ascribes to the Appellate Court the
On August 25, 1989, FMIC, through its Executive Vice President following assignments of error:
Antonio Ong, opened current account no. 8401-07473-0 and deposited
METROBANK check no. 898679 of P100 million with BPI Family Bank* A. IN VALIDATING A CLEARLY ILLEGAL AND VOID AGREEMENT
(BPI FB) San Francisco del Monte Branch (Quezon City). Ong made BETWEEN FMIC AND AN OVERSTEPPING BRANCH MANAGER OF
the deposit upon request of his friend, Ador de Asis, a close BPI FB, THE COURT OF APPEALS DECIDED THE APPEALED
acquaintance of Jaime Sebastian, then Branch Manager of BPI FB San CASE IN A MANNER NOT IN ACCORDANCE WITH LAW OR THE
Francisco del Monte Branch. Sebastians aim was to increase the APPLICAPLE DECISIONS OF THE HONORABLE COURT.
deposit level in his Branch.
B. THE COURT OF APPEALS TOTALLY IGNORED THE JUDICIAL
BPI FB, through Sebastian, guaranteed the payment of ADMISSIONS MADE BY FMIC WHEN IT CHARACTERIZED THE
P14,667,687.01 representing 17% per annum interest of P100 million TRANSACTION BETWEEN FMIC AND BPI FB AS A TIME DEPOSIT
deposited by FMIC. The latter, in turn, assured BPI FB that it will WHEN IN FACT IT WAS AN INTEREST-BEARING CURRENT
maintain its deposit of P100 million for a period of one year on condition ACCOUNT WHICH, UNDER THE EXISTING BANK REGULATIONS,
that the interest of 17% per annum is paid in advance. WAS AN ILLEGAL TRANSACTION.

This agreement between the parties was reached through their C. THE COURT OF APPEALS COMMITTED AN EGREGIOUS
communications in writing. ERROR IN RULING THAT BPI FB CLOTHED ITS BRANCH
MANAGER WITH APPARENT AUTHORITY TO ENTER INTO SUCH
Subsequently, BPI FB paid FMIC 17% interest or P14,667,687.01 upon A PATENTLY ILLEGAL ARRANGEMENT.
clearance of the latters check deposit.
D. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
However, on August 29, 1989, on the basis of an Authority to Debit WHEN IT REFUSED TO CONSIDER THE NEGLIGENT ACTS
signed by Ong and Ma. Theresa David, Senior Manager of FMIC, BPI COMMITTED BY FMIC ITSELF WHICH LED TO THE TRANSFER OF
FB transferred P80 million from FMICs current account to the savings THE P80 MILLION FROM THE FMIC ACCOUNT TO THE
account of Tevesteco Arrastre Stevedoring, Inc. (Tevesteco). TEVESTECO ACCOUNT.

FMIC denied having authorized the transfer of its funds to Tevesteco, E. THE COURT OF APPEALS DID NOT ADHERE TO SETTLED
claiming that the signatures of Ong and David were falsified. JURISPRUDENCE WHEN IT ADJUDGED BPI FB LIABLE TO FMIC
Thereupon, to recover immediately its deposit, FMIC, on September FOR AN AMOUNT WHICH WAS MORE THAN WHAT WAS
12, 1989, issued BPI FB check no. 129077 for P86,057,646.72 payable CONTEMPLATED OR PRAYED FOR IN FMICS COMPLAINT,
to itself and drawn on its deposit with BPI FB SFDM branch. But upon MOTION FOR RECONSIDERATION OF THE TRIAL COURTS
presentation for payment on September 13, 1989, BPI FB dishonored DECISION AND APPEAL BRIEF.
the check as it was drawn against insufficient funds (DAIF).
F. IN SUPPORT OF ITS ALTERNATIVE PRAYER, PETITIONER
Consequently, FMIC filed with the Regional Trial Court, Branch 146, SUBMITS THAT THE COURT OF APPEALS COMMITTED
Makati City Civil Case No. 89-5280 against BPI FB. FMIC likewise REVERSIBLE ERROR IN NOT ORDERING THE CONSOLIDATION
caused the filing by the Office of the State Prosecutors of an OF THE INSTANT CASE WITH THE TEVESTECO CASE WHICH IS
Information for estafa against Ong, de Asis, Sebastian and four others. STILL PENDING BEFORE THE MAKATI REGIONAL TRIAL COURT.
However, the Information was dismissed on the basis of a demurrer to
evidence filed by the accused. Petitioner BPI FB contends that the Court of Appeals erred in awarding
the 17% per annum interest corresponding to the amount deposited by
On October 1, 1993, the trial court rendered its Decision in Civil Case respondent FMIC. Petitioner insists that respondents deposit is not a
No. 89-5280, the dispositive portion of which reads: special savings account similar to a time deposit, but actually a demand
deposit, withdrawable upon demand, proscribed from earning interest
Premises considered, judgment is rendered in favor of plaintiff, ordering under Central Bank Circular 777. Petitioner further contends that the
defendant to pay: transaction is not valid as its Branch Manager, Jaime Sebastian, clearly
overstepped his authority in entering into such an agreement with
a. the amount of P80 million with interest at the legal rate from the time respondents Executive Vice President.
this complaint was filed less P14,667,678.01;
b. the amount of P100,000.00 as reasonable attorneys fees; and We hold that the parties did not intend the deposit to be treated as a
c. the cost. demand deposit but rather as an interest-earning time deposit not
SO ORDERED. withdrawable any time. This is quite obvious from the communications
between Jaime Sebastian, petitioners Branch Manager, and Antonio
On appeal by both parties, the Court of Appeals rendered a Decision Ong, respondents Executive Vice President. Both agreed that the
affirming the assailed Decision with modification, thus: deposit of P100 million was non-withdrawable for one year upon
payment in advance of the 17% per annum interest. Respondents time
WHEREFORE, considering all the foregoing, this Court hereby deposit of P100 million was accepted by petitioner as shown by a
modifies the decision of the trial court and adjudges BPI Family Bank deposit slip prepared and signed by Ong himself who indicated therein
liable to First Metro Investment Corporation for the amount of the account number to which the deposit is to be credited, the name of
P65,332,321.99 plus interest at 17% per annum from August 29, 1989 FMIC as depositor or account holder, the date of deposit, and the
amount of P100 million as deposit in check. Clearly, when respondent general scope of his authority even though the agent is secretly
FMIC invested its money with petitioner BPI FB, they intended the P100 abusing his authority and attempting to perpetrate a fraud upon his
million as a time deposit, to earn 17% per annum interest and to remain principal or some other person for his own ultimate benefit.
intact until its maturity date one year thereafter.
In Francisco vs. Government Service Insurance System,[7] we ruled:
Ordinarily, a time deposit is defined as one the payment of which
cannot legally be required within such a specified number of days.[3] Corporate transactions would speedily come to a standstill were every
person dealing with a corporation held duty-bound to disbelieve every
In contrast, demand deposits are all those liabilities of the Bangko act of its responsible officers, no matter how regular they should appear
Sentral and of other banks which are denominated in Philippine on their face. This Court has observed in Ramirez vs. Orientalist Co.,
currency and are subject to payment in legal tender upon demand by 38 Phil. 634, 654-655, that
the presentation of (depositors) checks.[4]
In passing upon the liability of a corporation in cases of this kind it is
While it may be true that barely one month and seven days from the always well to keep in mind the situation as it presents itself to the third
date of deposit, respondent FMIC demanded the withdrawal of party with whom the contract is made. Naturally he can have little or no
P86,057,646.72 through the issuance of a check payable to itself, the information as to what occurs in corporate meetings; and he must
same was made as a result of the fraudulent and unauthorized transfer necessarily rely upon the external manifestations of corporate consent.
by petitioner BPI FB of its P80 million deposit to Tevestecos savings The integrity of commercial transactions can only be maintained by
account. Certainly, such was a normal reaction of respondent as a holding the corporation strictly to the liability fixed upon it by its agents
depositor to petitioners failure in its fiduciary duty to treat its account in accordance with law; and we would be sorry to announce a doctrine
with the highest degree of care. which would permit the property of a man in the city of Paris to be
whisked out of his hands and carried into a remote quarter of the earth
Under this circumstance, the withdrawal of deposit by respondent FMIC without recourse against the corporation whose name and authority
before the one-year maturity date did not change the nature of its time had been used in the manner disclosed in this case. As already
deposit to one of demand deposit. observed, it is familiar doctrine that if a corporation knowingly permits
one of its officers, or any other agent, to do acts within the scope of an
On another tack, petitioners argument that Central Bank regulations apparent authority, and thus holds him out to the public as possessing
prohibit demand deposit from earning interest is bereft of merit. power to do those acts, the corporation will, as against any one who
has in good faith dealt with the corporation through such agent, be
Under Central Bank Circular No. 22, Series of 1994, demand deposits estopped from denying his authority; and where it is said if the
shall not be subject to any interest rate ceiling. This, in effect, is an corporation permits, this means the same as if the thing is permitted by
open authority to pay interest on demand deposits, such interest not the directing power of the corporation.
being subject to any rate ceiling.
Petitioner maintains that respondent should have first inquired whether
Likewise, time deposits are not subject to interest rate ceiling. In fact, the deposit of P100 Million and the fixing of the interest rate were
the rate ceiling was abolished and even allowed to float depending on pursuant to its (petitioners) internal procedures. Petitioners stance is a
the market conditions. Sections 1244 and 1244.1 of the Manual of futile attempt to evade an obligation clearly established by the intent of
Regulations of the Central Bank of the Philippines provide: the parties. What transpires in the corporate board room is entirely an
internal matter. Hence, petitioner may not impute negligence on the
Sec. 1244. Interest on time deposit. Time deposits shall not be subject part of respondents representative in failing to find out the scope of
to any interest rate ceiling. authority of petitioners Branch Manager. Indeed, the public has the
right to rely on the trustworthiness of bank managers and their acts.
Sec. 1244.1. Time of payment. Interest on time deposit may be paid at Obviously, confidence in the banking system, which necessarily
maturity or upon withdrawal or in advance. Provided, however, That includes reliance on bank managers, is vital in the economic life of our
interest paid in advance shall not exceed the interest for one year. society.

Thus, even assuming that respondents account with petitioner is a Significantly, the transaction was actually acknowledged and ratified by
demand deposit, still it would earn interest. petitioner when it paid respondent in advance the interest for one year.
Thus, petitioner is estopped from denying that it authorized its Branch
Going back to the unauthorized transfer of respondents funds to Manager to enter into an agreement with respondents Executive Vice
Tevesteco, in its attempt to evade any liability therefor, petitioner now President concerning the deposit with the corresponding 17% interest
impugns the validity of the subject agreement on the ground that its per annum.
Branch Manager, Jaime Sebastian, overstepped the limits of his
authority in accepting respondents deposit with 17% interest per Anent the award of interest, petitioner contends that such award is not
annum. We have held that if a corporation knowingly permits its officer, in order as it had not been prayed for by respondent in its complaint
or any other agent, to perform acts within the scope of an apparent nor was it an issue agreed upon by the parties during the pre-trial of
authority, holding him out to the public as possessing power to do those the case. Nonetheless, the rule is well settled that when the obligation
acts, the corporation will, as against any person who has dealt in good is breached, and it consists in the payment of a sum of money, i.e., a
faith with the corporation through such agent, be estopped from loan or forbearance of money, the interest due should be that which
denying such authority.[5] We reiterated this doctrine in Prudential may have been stipulated in writing, as in this case. Furthermore, the
Bank vs. Court of Appeals,[6] thus: interest due shall itself earn legal interest from the time it is judicially
demanded.[8] Besides, the matter of how much interest respondent is
A bank holding out its officers and agent as worthy of confidence will entitled to falls squarely within the issues framed by the parties in their
not be permitted to profit by the frauds they may thus be enabled to respective pleadings filed with the court a quo. At any rate, courts may
perpetrate in the apparent scope of their employment; nor will it be indeed grant the relief warranted by the allegations and proof even if
permitted to shirk its responsibility for such frauds, even though no no such specific relief is prayed for if only to conclude a complete and
benefit may accrue to the bank therefrom. Accordingly, a banking thorough resolution of the issues involved.[9]
corporation is liable to innocent third persons where the representation
is made in the course of its business by an agent acting within the
Finally, petitioner faults the Court of Appeals in not ordering the
consolidation of Civil Case No. 89-4996 (filed by petitioner against DATE June 15, 1978
Tevesteco) with Civil Case No. 89-5280 (the instant case). According WITHDRAWAL SLIP NO. 42127
to petitioner, had there been consolidation of these two cases, it would AMOUNT P1,198,092.80
have been shown that the P80 Million transferred to Tevestecos
account were proceeds of a loan extended by respondent FMIC to July 15, 1978
Tevesteco. Suffice it to state that as found by both the trial court and 42128
the Appellate Court, petitioners transfer of respondents P80M to 940,190.00
Tevesteco was unauthorized and tainted with fraud.
Aug. 15, 1978
At this point, we must emphasize that this Court is not a trier of facts. 42129
Thus, we uphold the finding of both lower courts that petitioner failed to 880,000.00
exercise that degree of diligence required by the nature of its
obligations to its depositors. A bank is under obligation to treat the Sep. 15, 1978
accounts of its depositors with meticulous care, whether such account 42130
consists only of a few hundred pesos or of million of pesos.[10] Here, 981,500.00
petitioner cannot claim it exercised such a degree of care required of it
and must, therefore, bear the consequence. These were likewise deposited by plaintiff in its current account with
Citibank and in turn the Citibank forwarded it [sic] to the defendant for
WHEREFORE, the petition is DENIED. The assailed Decision dated payment and collection, as it had done in respect of the previous
July 4, 1997 and the Resolution dated January 28, 1998 of the Court of special withdrawal slips. Out of these four (4) withdrawal slips only
Appeals in CA-G.R. CV No. 44986 are hereby AFFIRMED. Costs withdrawal slip No. 42130 in the amount of P981,500.00 was honored
against petitioner. and paid by the defendant in October 1978. Because of the absence
for a long period coupled with the fact that defendant honored and paid
SO ORDERED. withdrawal slips No. 42128 dated July 15, 1978, in the amount of
P981,500.00 plaintiff's belief was all the more strengthened that the
G.R. No. 113236 March 5, 2001FIRESTONE TIRE & RUBBER other withdrawal slips were likewise sufficiently funded, and that it had
COMPANY OF THE PHILIPPINES, petitioner, vs. received full value and payment of Fojas-Arca's credit purchased then
COURT OF APPEALS and LUZON DEVELOPMENT BANK, outstanding at the time. On this basis, plaintiff was induced to continue
respondents. extending to Fojas-Arca further purchase on credit of its products as
This petition assails the decision 1 dated December 29, 1993 of the per agreement (Exh. "B").
Court of Appeals in CA-G.R. CV No. 29546, which affirmed the
judgment 2 of the Regional Trial Court of Pasay City, Branch 113 in However, on December 14, 1978, plaintiff was informed by Citibank
Civil Case No. PQ-7854-P, dismissing Firestone's complaint for that special withdrawal slips No. 42127 dated June 15, 1978 for
damages. P1,198,092.80 and No. 42129 dated August 15, 1978 for P880,000.00
were dishonored and not paid for the reason 'NO ARRANGEMENT.'
The facts of this case, adopted by the CA and based on findings by the As a consequence, the Citibank debited plaintiff's account for the total
trial court, are as follows: sum of P2,078,092.80 representing the aggregate amount of the
above-two special withdrawal slips. Under such situation, plaintiff
. . . [D]efendant is a banking corporation. It operates under a certificate averred that the pecuniary losses it suffered is caused by and directly
of authority issued by the Central Bank of the Philippines, and among attributable to defendant's gross negligence.
its activities, accepts savings and time deposits. Said defendant had as
one of its client-depositors the Fojas-Arca Enterprises Company On September 25, 1979, counsel of plaintiff served a written demand
("Fojas-Arca" for brevity). Fojas-Arca maintaining a special savings upon the defendant for the satisfaction of the damages suffered by it.
account with the defendant, the latter authorized and allowed And due to defendant's refusal to pay plaintiff's claim, plaintiff has been
withdrawals of funds therefrom through the medium of special constrained to file this complaint, thereby compelling plaintiff to incur
withdrawal slips. These are supplied by the defendant to Fojas-Arca. litigation expenses and attorney's fees which amount are recoverable
from the defendant.
In January 1978, plaintiff and Fojas-Arca entered into a "Franchised
Dealership Agreement" (Exh. B) whereby Fojas-Arca has the privilege Controverting the foregoing asseverations of plaintiff, defendant
to purchase on credit and sell plaintiff's products. asserted, inter alia that the transactions mentioned by plaintiff are that
of plaintiff and Fojas-Arca only, [in] which defendant is not involved;
On January 14, 1978 up to May 15, 1978. Pursuant to the aforesaid Vehemently, it was denied by defendant that the special withdrawal
Agreement, Fojas-Arca purchased on credit Firestone products from slips were honored and treated as if it were checks, the truth being that
plaintiff with a total amount of P4,896,000.00. In payment of these when the special withdrawal slips were received by defendant, it only
purchases, Fojas-Arca delivered to plaintiff six (6) special withdrawal verified whether or not the signatures therein were authentic, and
slips drawn upon the defendant. In turn, these were deposited by the whether or not the deposit level in the passbook concurred with the
plaintiff with its current account with the Citibank. All of them were savings ledger, and whether or not the deposit is sufficient to cover the
honored and paid by the defendant. This singular circumstance made withdrawal; if plaintiff treated the special withdrawal slips paid by Fojas-
plaintiff believe [sic] and relied [sic] on the fact that the succeeding Arca as checks then plaintiff has to blame itself for being grossly
special withdrawal slips drawn upon the defendant would be equally negligent in treating the withdrawal slips as check when it is clearly
sufficiently funded. Relying on such confidence and belief and as a stated therein that the withdrawal slips are non-negotiable; that
direct consequence thereof, plaintiff extended to Fojas-Arca other defendant is not a privy to any of the transactions between Fojas-Arca
purchases on credit of its products. and plaintiff for which reason defendant is not duty bound to notify nor
give notice of anything to plaintiff. If at first defendant had given notice
On the following dates Fojas-Arca purchased Firestone products on to plaintiff it is merely an extension of usual bank courtesy to a
credit (Exh. M, I, J, K) and delivered to plaintiff the corresponding prospective client; that defendant is only dealing with its depositor
special withdrawal slips in payment thereof drawn upon the defendant, Fojas-Arca and not the plaintiff. In summation, defendant categorically
to wit:
stated that plaintiff has no cause of action against it (pp. 1-3, Dec.; pp. known that withdrawal slips were not negotiable instruments. It could
368-370, id).3 not expect these slips to be treated as checks by other entities.
Payment or notice of dishonor from respondent bank could not be
Petitioner's complaint4 for a sum of money and damages with the expected immediately, in contrast to the situation involving checks.
Regional Trial Court of Pasay City, Branch 113, docketed as Civil Case
No. 29546, was dismissed together with the counterclaim of defendant. In the case at bar, it appears that Citibank, with the knowledge that
respondent Luzon Development Bank, had honored and paid the
Petitioner appealed the decision to the Court of Appeals. It averred that previous withdrawal slips, automatically credited petitioner's current
respondent Luzon Development Bank was liable for damages under account with the amount of the subject withdrawal slips, then merely
Article 21765 in relation to Articles 196 and 207 of the Civil Code. As waited for the same to be honored and paid by respondent bank. It
noted by the CA, petitioner alleged the following tortious acts on the presumed that the withdrawal slips were "good."
part of private respondent: 1) the acceptance and payment of the
special withdrawal slips without the presentation of the depositor's It bears stressing that Citibank could not have missed the non-
passbook thereby giving the impression that the withdrawal slips are negotiable nature of the withdrawal slips. The essence of negotiability
instruments payable upon presentment; 2) giving the special which characterizes a negotiable paper as a credit instrument lies in its
withdrawal slips the general appearance of checks; and 3) the failure freedom to circulate freely as a substitute for money.12 The withdrawal
of respondent bank to seasonably warn petitioner that it would not slips in question lacked this character.
honor two of the four special withdrawal slips.
A bank is under obligation to treat the accounts of its depositors with
On December 29, 1993, the Court of Appeals promulgated its assailed meticulous care, whether such account consists only of a few hundred
decision. It denied the appeal and affirmed the judgment of the trial pesos or of millions of pesos.13 The fact that the other withdrawal slips
court. According to the appellate court, respondent bank notified the were honored and paid by respondent bank was no license for Citibank
depositor to present the passbook whenever it received a collection to presume that subsequent slips would be honored and paid
note from another bank, belying petitioner's claim that respondent bank immediately. By doing so, it failed in its fiduciary duty to treat the
was negligent in not requiring a passbook under the subject accounts of its clients with the highest degree of care.14
transaction. The appellate court also found that the special withdrawal
slips in question were not purposely given the appearance of checks, In the ordinary and usual course of banking operations, current account
contrary to petitioner's assertions, and thus should not have been deposits are accepted by the bank on the basis of deposit slips
mistaken for checks. Lastly, the appellate court ruled that the prepared and signed by the depositor, or the latter's agent or
respondent bank was under no obligation to inform petitioner of the representative, who indicates therein the current account number to
dishonor of the special withdrawal slips, for to do so would have been which the deposit is to be credited, the name of the depositor or current
a violation of the law on the secrecy of bank deposits. account holder, the date of the deposit, and the amount of the deposit
either in cash or in check.15
Hence, the instant petition, alleging the following assignment of error:
The withdrawal slips deposited with petitioner's current account with
25. The CA grievously erred in holding that the [Luzon Citibank were not checks, as petitioner admits. Citibank was not bound
Development] Bank was free from any fault or negligence regarding the to accept the withdrawal slips as a valid mode of deposit. But having
dishonor, or in failing to give fair and timely advice of the dishonor, of erroneously accepted them as such, Citibank — and petitioner as
the two intermediate LDB Slips and in failing to award damages to account-holder — must bear the risks attendant to the acceptance of
Firestone pursuant to Article 2176 of the New Civil Code.8 these instruments. Petitioner and Citibank could not now shift the risk
and hold private respondent liable for their admitted mistake.
The issue for our consideration is whether or not respondent bank
should be held liable for damages suffered by petitioner, due to its WHEREFORE, the petition is DENIED and the decision of the Court of
allegedly belated notice of non-payment of the subject withdrawal slips. Appeals in CA-G.R. CV No. 29546 is AFFIRMED. Costs against
petitioner.
The initial transaction in this case was between petitioner and Fojas-
Arca, whereby the latter purchased tires from the former with special SO ORDERED.
withdrawal slips drawn upon Fojas-Arca's special savings account with
respondent bank. Petitioner in turn deposited these withdrawal slips G.R. No. 146918 May 2, 2006
with Citibank. The latter credited the same to petitioner's current CITIBANK, N.A., Petitioner, vs.SPS. LUIS and CARMELITA
account, then presented the slips for payment to respondent bank. It CABAMONGAN and their sons LUISCABAMONGAN, JR. and LITO
was at this point that the bone of contention arose. CABAMONGAN, Respondents.
Before the Court is a petition for review on certiorari of the Decision1
On December 14, 1978, Citibank informed petitioner that special dated January 26, 2001 and the Resolution2 dated July 30, 2001 of the
withdrawal slips Nos. 42127 and 42129 dated June 15, 1978 and Court of Appeals (CA) in CA-G.R. CV No. 59033.
August 15, 1978, respectively, were refused payment by respondent
bank due to insufficiency of Fojas-Arca's funds on deposit. That The factual background of the case is as follows:
information came about six months from the time Fojas-Arca
purchased tires from petitioner using the subject withdrawal slips. On August 16, 1993, spouses Luis and Carmelita Cabamongan
Citibank then debited the amount of these withdrawal slips from opened a joint "and/or" foreign currency time deposit in trust for their
petitioner's account, causing the alleged pecuniary damage subject of sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch, with
petitioner's cause of action. Reference No. 60-22214372, in the amount of $55,216.69 for a term of
182 days or until February 14, 1994, at 2.5625 per cent interest per
At the outset, we note that petitioner admits that the withdrawal slips in annum.3 Prior to maturity, or on November 10, 1993, a person claiming
question were non-negotiable.9 Hence, the rules governing the giving to be Carmelita went to the Makati branch and pre-terminated the said
of immediate notice of dishonor of negotiable instruments do not apply foreign currency time deposit by presenting a passport, a Bank of
in this case.10 Petitioner itself concedes this point.11 Thus, respondent America Versatele Card, an ATM card and a Mabuhay Credit Card.4
bank was under no obligation to give immediate notice that it would not She filled up the necessary forms for pre-termination of deposits with
make payment on the subject withdrawal slips. Citibank should have the assistance of Account Officer Yeye San Pedro. While the
transaction was being processed, she was casually interviewed by San proper bank procedure was followed and the deposit was released to
Pedro about her personal circumstances and investment plans.5 Since Carmelita only upon proper identification and verification.23
the said person failed to surrender the original Certificate of Deposit,
she had to execute a notarized release and waiver document in favor On July 1, 1997, the RTC rendered a decision in favor of the
of Citibank, pursuant to Citibank's internal procedure, before the money Cabamongan spouses and against Citibank, the dispositive portion of
was released to her.6 The release and waiver document7 was not which reads, thus:
notarized on that same day but the money was nonetheless given to
the person withdrawing.8 The transaction lasted for about 40 minutes.9 WHEREFORE, premises considered, defendant Citibank, N.A., is
hereby ordered to pay the plaintiffs the following:
After said person left, San Pedro realized that she left behind an
identification card.10 Thus, San Pedro called up Carmelita's listed 1) the principal amount of their Foreign Currency Deposit (Reference
address at No. 48 Ranger Street, Moonwalk Village, Las Pinas, Metro No. 6022214372) amounting to $55,216.69 or its Phil. Currency
Manila on the same day to have the card picked up.11 Marites, the wife equivalent plus interests from August 16, 1993 until fully paid;
of Lito, received San Pedro's call and was stunned by the news that 2) Moral damages of P50,000.00;
Carmelita preterminated her foreign currency time deposit because 3) Attorney's fees of P50,000.00; and
Carmelita was in the United States at that time.12 The Cabamongan 4) Cost of suit.
spouses work and reside in California. Marites made an overseas call SO ORDERED.24
to Carmelita to inform her about what happened.13 The Cabamongan The RTC reasoned that:
spouses were shocked at the news. It seems that sometime between
June 10 and 16, 1993, an unidentified person broke in at the couple's xxx Citibank, N.A., committed negligence resulting to the undue
residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, suffering of the plaintiffs. The forgery of the signatures of plaintiff
California. Initially, they reported that only Carmelita's jewelry box was Carmelita Cabamongan on the questioned documents has been
missing, but later on, they discovered that other items, such as their categorically established by the handwriting expert. xxx Defendant
passports, bank deposit certificates, including the subject foreign bank was clearly remiss in its duty and obligations to treat plaintiff's
currency deposit, and identification cards were also missing.14 It was account with the highest degree of care, considering the nature of their
only then that the Cabamongan spouses realized that their passports relationship. Banks are under the obligation to treat the accounts of
and bank deposit certificates were lost.15 their depositors with meticulous care. This is the reason for their
established procedure of requiring several specimen signatures and
Through various overseas calls, the Cabamongan spouses informed recent picture from potential depositors. For every transaction, the
Citibank, thru San Pedro, that Carmelita was in the United States and depositor's signature is passed upon by personnel to check and
did not preterminate their deposit and that the person who did so was countercheck possible irregularities and therefore must bear the blame
an impostor who could have also been involved in the break-in of their when they fail to detect the forgery or discrepancy.25
California residence. San Pedro told the spouses to submit the
necessary documents to support their claim but Citibank concluded Despite the favorable decision, the Cabamongan spouses filed on
nonetheless that Carmelita indeed preterminated her deposit. In a letter October 1, 1997 a motion to partially reconsider the decision by praying
dated September 16, 1994, the Cabamongan spouses, through for an increase of the amount of the damages awarded.26 Citibank
counsel, made a formal demand upon Citibank for payment of their opposed the motion.27 On November 19, 1997, the RTC granted the
preterminated deposit in the amount of $55,216.69 with legal motion for partial reconsideration and amended the dispositive portion
interests.16 In a letter dated November 28, 1994, Citibank, through of the decision as follows:
counsel, refused the Cabamongan spouses' demand for payment,
asserting that the subject deposit was released to Carmelita upon From the foregoing, and considering all the evidence laid down by the
proper identification and verification.17 parties, the dispositive portion of the court's decision dated July 1, 1997
is hereby amended and/or modified to read as follows:
On January 27, 1995, the Cabamongan spouses filed a complaint
against Citibank before the Regional Trial Court of Makati for Specific WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the
Performance with Damages, docketed as Civil Case No 95-163 and plaintiffs the following:
raffled to Branch 150 (RTC).18
1) the principal amount of their foreign currency deposit (Reference No.
In its Answer dated April 20, 1995, Citibank insists that it was not 6022214372) amounting to $55,216.69 or its Philippine currency
negligent of its duties since the subject deposit was released to equivalent (at the time of its actual payment or execution) plus legal
Carmelita only upon proper identification and verification.19 interest from Aug. 16, 1993 until fully paid.
2) moral damages in the amount of P200,000.00;
At the pre-trial conference the parties failed to arrive at an amicable 3) exemplary damages in the amount of P100,000.00;
settlement.20 Thus, trial on the merits ensued. 4) attorney's fees of P100,000.00;
5) litigation expenses of P200,000.00;
For the plaintiffs, the Cabamongan spouses themselves and Florenda 6) cost of suit.
G. Negre, Documents Examiner II of the Philippine National Police
(PNP) Crime Laboratory in Camp Crame, Quezon City, testified. The SO ORDERED.28
Cabamongan spouses, in essence, testified that Carmelita could not
have preterminated the deposit account since she was in California at Dissatisfied, Citibank filed an appeal with the CA, docketed as CA-G.R.
the time of the incident.21 Negre testified that an examination of the CV No. 59033.29 On January 26, 2001, the CA rendered a decision
questioned signature and the samples of the standard signatures of sustaining the finding of the RTC that Citibank was negligent,
Carmelita submitted in the RTC showed a significant divergence. She ratiocinating in this wise:
concluded that they were not written by one and the same person.22
In the instant case, it is beyond dispute that the subject foreign currency
For the respondent, Citibank presented San Pedro and Cris deposit was pre-terminated on 10 November 1993. But Carmelita
Cabalatungan, Vice-President and In-Charge of Security and Cabamongan, who works as a nursing aid (sic) at the Sierra View Care
Management Division. Both San Pedro and Cabalatungan testified that Center in Baldwin Park, California, had shown through her Certificate
of Employment and her Daily Time Record from the [sic] January to
December 1993 that she was in the United States at the time of the when she did not have the waiver document notarized. She also openly
incident. courted disaster by ignoring discrepancies between the actual
appearance of the impostor and the pictures she presented, as well as
Defendant Citibank, N.A., however, insists that Carmelita was the one the disparities between the signatures made during the transaction and
who pre-terminated the deposit despite claims to the contrary. Its basis those on file with the bank. But even if San Pedro was negligent, why
for saying so is the fact that the person who made the transaction on must the other employees in the hierarchy of the bank's work flow allow
the incident mentioned presented a valid passport and three (3) other such thing to pass unnoticed and unrectified?30
identification cards. The attending account officer examined these
documents and even interviewed said person. She was satisfied that The CA, however, disagreed with the damages awarded by the RTC.
the person presenting the documents was indeed Carmelita It held that, insofar as the date from which legal interest of 12% is to
Cabamongan. However, such conclusion is belied by these following run, it should be counted from September 16, 1994 when extrajudicial
circumstances. demand was made. As to moral damages, the CA reduced it to
P100,000.00 and deleted the awards of exemplary damages and
First, the said person did not present the certificate of deposit issued to litigation expenses. Thus, the dispositive portion of the CA decision
Carmelita Cabamongan. This would not have been an insurmountable reads:
obstacle as the bank, in the absence of such certificate, allows the
termination of the deposit for as long as the depositor executes a WHEREFORE, the decision of the trial court dated 01 July 1997, and
notarized release and waiver document in favor of the bank. However, its order dated 19 November 1997, are hereby AFFIRMED with the
this simple procedure was not followed by the bank, as it terminated MODIFICATION that the legal interest for actual damages awarded in
the deposit and actually delivered the money to the impostor without the amount of $55,216.69 shall run from 16 September 1994;
having the said document notarized on the flimsy excuse that another exemplary damages amounting to P100,000.00 and litigation expenses
department of the bank was in charge of notarization. The said amounting to P200,000.00 are deleted; and moral damages is reduced
procedure was obviously for the protection of the bank but it to P100,000.00.
deliberately ignored such precaution. At the very least, the conduct of
the bank amounts to negligence. Costs against defendant.

Second, in the internal memorandum of Account Officer Yeye San SO ORDERED.31

Pedro regarding the incident, she reported that upon comparing the
authentic signatures of Carmelita Cabamongan on file with the bank The Cabamongan spouses filed a motion for partial reconsideration on
with the signatures made by the person claiming to be Cabamongan the matter of the award of damages in the decision.32 On July 30,
on the documents required for the termination of the deposit, she 2001, the
noticed that one letter in the latter [sic] signatures was different from
that in the standard signatures. She requested said person to sign CA granted in part said motion and modified its decision as follows:
again and scrutinized the identification cards presented. Presumably,
San Pedro was satisfied with the second set of signatures made as she 1. The actual damages in amount of $55,216.69, representing the
eventually authorized the termination of the deposit. However, upon amount of appellees' foreign currency time deposit shall earn an
examination of the signatures made during the incident by the interest of 2.5625% for the period 16 August 1993 to 14 February 1994,
Philippine National Police (PNP) Crime Laboratory, the said signatures as stipulated in the contract;
turned out to be forgeries. As the qualifications of Document Examiner 2. From 16 September 1994 until full payment, the amount of
Florenda Negre were established and she satisfactorily testified on her $55,216.69 shall earn interest at the legal rate of 12% per annum, and;
findings during the trial, we have no reason to doubt the validity of her 3. The award of moral damages is reduced to P50,000.00.33
findings. Again, the bank's negligence is patent. San Pedro was able
to detect discrepancies in the signatures but she did not exercise Dissatisfied, both parties filed separate petitions for review on certiorari
additional precautions to ascertain the identity of the person she was with this Court. The Cabamongan spouses' petition, docketed as G.R.
dealing with. In fact, the entire transaction took only 40 minutes to No. 149234, was denied by the Court per its Resolution dated October
complete despite the anomalous situation. Undoubtedly, the bank 17, 2001.34 On the other hand, Citibank's petition was given due
could have done a better job. course by the Court per Resolution dated December 10, 2001 and the
parties were required to submit their respective memoranda.35
Third, as the bank had on file pictures of its depositors, it is
inconceivable how bank employees could have been duped by an Citibank poses the following errors for resolution:
impostor. San Pedro admitted in her testimony that the woman she
dealt with did not resemble the pictures appearing on the identification 1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND
cards presented but San Pedro still went on with the sensitive GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THE LOWER
transaction. She did not mind such disturbing anomaly because she COURT'S DECISION WHICH IS NOT BASED ON CLEAR EVIDENCE
was convinced of the validity of the passport. She also considered as BUT ON GRAVE MISAPPREHENSION OF FACTS.
decisive the fact that the impostor had a mole on her face in the same 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
way that the person in the pictures on the identification cards had a UPHOLDING THE DECISION OF THE TRIAL COURT AWARDING
mole. These explanations do not account for the disparity between the MORAL DAMAGES WHEN IN FACT THERE IS NO BASIS IN LAW
pictures and the actual appearance of the impostor. That said person AND FACT FOR SAID AWARD.
was allowed to withdraw the money anyway is beyond belief. 3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
RULING THAT THE PRINCIPAL AMOUNT OF US$55,216.69
The above circumstances point to the bank's clear negligence. Bank SHOULD EARN INTEREST AT THE RATE OF 12% PER ANNUM
transactions pass through a successive [sic] of bank personnel, whose FROM 16 SEPTEMBER 1994 UNTIL FULL PAYMENT.36
duty is to check and countercheck transactions for possible errors.
While a bank is not expected to be infallible, it must bear the blame for Anent the first ground, Citibank contends that the CA erred in affirming
failing to discover mistakes of its employees despite established bank the RTC's finding that it was negligent since the said courts failed to
procedure involving a battery of personnel designed to minimize if not appreciate the extra diligence of a good father of a family exercised by
eliminate errors. In the instant case, Yeye San Pedro, the employee Citibank thru San Pedro.
who primarily dealt with the impostor, did not follow bank procedure
As to the second ground, Citibank argues that the Cabamongan diligence required of banks. The Court has held that a bank is "bound
spouses are not entitled to moral damages since moral damages can to know the signatures of its customers; and if it pays a forged check,
be awarded only in cases of breach of contract where the bank has it must be considered as making the payment out of its own funds, and
acted willfully, fraudulently or in bad faith. It submits that it has not been cannot ordinarily charge the amount so paid to the account of the
shown in this case that Citibank acted willfully, fraudulently or in bad depositor whose name was forged."45 Such principle equally applies
faith and mere negligence, even if the Cabamongan spouses suffered here.
mental anguish or serious anxiety on account thereof, is not a ground
for awarding moral damages. Citibank cannot label its negligence as mere mistake or human error.
Banks handle daily transactions involving millions of pesos.46 By the
On the third ground, Citibank avers that the interest rate should not be very nature of their works the degree of responsibility, care and
12% but the stipulated rate of 2.5625% per annum. It adds that there is trustworthiness expected of their employees and officials is far greater
no basis to pay the interest rate of 12% per annum from September 16, than those of ordinary clerks and employees.47 Banks are expected to
1994 until full payment because as of said date there was no legal exercise the highest degree of diligence in the selection and
ground yet for the Cabamongan spouses to demand payment of the supervision of their employees.48
principal and it is only after a final judgment is issued declaring that
Citibank is obliged to return the principal amount of US$55,216.69 The Court agrees with the observation of the CA that Citibank, thru
when the right to demand payment starts and legal interest starts to Account Officer San Pedro, openly courted disaster when despite
run. noticing discrepancies in the signature and photograph of the person
claiming to be Carmelita and the failure to surrender the original
On the other hand, the Cabamongan spouses contend that Citibank's certificate of time deposit, the pretermination of the account was
negligence has been established by evidence. As to the interest rate, allowed. Even the waiver document was not notarized, a procedure
they submit that the stipulated interest of 2.5635% should apply for the meant to protect the bank. For not observing the degree of diligence
182-day contract period from August 16, 1993 to February 14, 1993; required of banking institutions, whose business is impressed with
thereafter, 12% should apply. They further contend that the RTC's public interest, Citibank is liable for damages.
award of exemplary damages of P100,000.00 should be maintained.
They submit that the CA erred in treating the award of litigation As to the interest rate, Citibank avers that the claim of the Cabamongan
expenses as lawyer's fees since they have shown that they incurred spouses does not constitute a loan or forbearance of money and
actual expenses in litigating their claim against Citibank. They also therefore, the interest rate of 6%, not 12%, applies.
contend that the CA erred in reducing the award of moral damages in
view of the degree of mental anguish and emotional fears, anxieties The Court does not agree.
and nervousness suffered by them.37
The time deposit subject matter of herein petition is a simple loan. The
Subsequently, Citibank, thru a new counsel, submitted a Supplemental provisions of the New Civil Code on simple loan govern the contract
Memorandum,38 wherein it posits that, assuming that it was negligent, between a bank and its depositor. Specifically, Article 1980 thereof
the Cabamongan spouses were guilty of contributory negligence since categorically provides that ". . . savings . . . deposits of money in banks
they failed to notify Citibank that they had migrated to the United States and similar institutions shall be governed by the provisions concerning
and were residents thereat and after having been victims of a burglary, simple loan." Thus, the relationship between a bank and its depositor
they should have immediately assessed their loss and informed is that of a debtor-creditor, the depositor being the creditor as it lends
Citibank of the disappearance of the bank certificate, their passports the bank money, and the bank is the debtor which agrees to pay the
and other identification cards, then the fraud would not have been depositor on demand.
perpetuated and the losses avoided. It further argues that since the
Cabamongan spouses are guilty of contributory negligence, the The applicable interest rate on the actual damages of $55,216.69,
doctrine of last clear chance is inapplicable. should be in accordance with the guidelines set forth in Eastern
Shipping Lines, Inc. v. Court of Appeals49 to wit:
Citibank's assertion that the Cabamongan spouses are guilty of
contributory negligence and non-application of the doctrine of last clear I. When an obligation, regardless of its source, i.e., law, contracts,
chance cannot pass muster since these contentions were raised for the quasi-contracts, delicts or quasi-delicts is breached, the contravenor
first time only in their Supplemental Memorandum. Indeed, the records can be held liable for damages. The provisions under Title XVIII on
show that said contention were neither pleaded in the petition for review "Damages" of the Civil Code govern in determining the measure of
and the memorandum nor in Citibank's Answer to the complaint or in recoverable damages.
its appellant's brief filed with the CA. To consider the alleged facts and
arguments raised belatedly in a supplemental pleading to herein II. With regard particularly to an award of interest, in the concept of
petition for review at this very late stage in the proceedings would actual and compensatory damages, the rate of interest, as well as the
amount to trampling on the basic principles of fair play, justice and due accrual thereof, is imposed, as follows:
process.391avvphil.net
1. When the obligation is breached, and it consists in the payment of a
The Court has repeatedly emphasized that, since the banking business sum of money, i.e., a loan or forbearance of money, the interest due
is impressed with public interest, of paramount importance thereto is should be that which may have been stipulated in writing. Furthermore,
the trust and confidence of the public in general. Consequently, the the interest due shall itself earn legal interest from the time it is judicially
highest degree of diligence40 is expected,41 and high standards of demanded. In the absence of stipulation, the rate of interest shall be
integrity and performance are even required, of it.42 By the nature of 12% per annum to be computed from default, i.e., from judicial or
its functions, a bank is "under obligation to treat the accounts of its extrajudicial demand under and subject to the provisions of Article 1169
depositors with meticulous care,43 always having in mind the fiduciary of the Civil Code.
nature of their relationship."44
2. When an obligation, not constituting a loan or forbearance of money,
In this case, it has been sufficiently shown that the signatures of is breached, an interest on the amount of damages awarded may be
Carmelita in the forms for pretermination of deposits are forgeries. imposed at the discretion of the court at the rate of 6% per annum. No
Citibank, with its signature verification procedure, failed to detect the interest, however, shall be adjudged on unliquidated claims or
forgery. Its negligence consisted in the omission of that degree of damages except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established WHEREFORE, the instant petition is PARTIALLY GRANTED. The
with reasonable certainty, the interest shall begin to run from the time assailed Decision and Resolution are AFFIRMED with
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but MODIFICATIONS, as follows:
when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date 1. The interest shall be computed as follows:
the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The a. The actual damages in principal amount of $55,216.69, representing
actual base for the computation of legal interest shall, in any case, be the amount of foreign currency time deposit shall earn interest at the
on the amount finally adjudged. stipulated rate of 2.5625% for the period August 16, 1993 to February
14, 1994;
3. When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest whether the case falls b. From February 15, 1994 to September 15, 1994, the principal
under paragraph 1 or paragraph 2, above, shall be 12% per annum amount of $55,216.69 and the interest earned as of February 14, 1994
from such finality until its satisfaction, this interim period being deemed shall earn interest at the rate then prevailing granted by Citibank;
to be by then an equivalent to a forbearance of credit.50
c. From September 16, 1994 until full payment, the principal amount of
Thus, in a loan or forbearance of money, the interest due should be $55,216.69 and the interest earned as of September 15, 1994, shall
that stipulated in writing, and in the absence thereof, the rate shall be earn interest at the legal rate of 12% per annum;
12% per annum counted from the time of demand. Accordingly, the
stipulated interest rate of 2.562% per annum shall apply for the 182- 2. The award of attorney's fees is DELETED.
day contract period from August 16, 1993 to February 14, 1994. For
the period from the date of extra-judicial demand, September 16, 1994, No pronouncement as to costs.
until full payment, the rate of 12% shall apply. As for the intervening
period between February 15, 1994 to September 15, 1994, the rate of SO ORDERED.
interest then prevailing granted by Citibank shall apply since the time
deposit provided for roll over upon maturity of the principal and
interest.51

As to moral damages, in culpa contractual or breach of contract, as in

the case before the Court, moral damages are recoverable only if the
defendant has acted fraudulently or in bad faith,52 or is found guilty of
gross negligence amounting to bad faith, or in wanton disregard of his
contractual obligations.53 The act of Citibank's employee in allowing
the pretermination of Cabamongan spouses' account despite the noted
discrepancies in Carmelita's signature and photograph, the absence of
the original certificate of time deposit and the lack of notarized waiver
dormant, constitutes gross negligence amounting to bad faith under
Article 2220 of the Civil Code.

There is no hard-and-fast rule in the determination of what would be a

fair amount of moral damages since each case must be governed by
its own peculiar facts. The yardstick should be that it is not palpably
and scandalously excessive.54 The amount of P50,000.00 awarded by
the CA is reasonable and just. Moreover, said award is deemed final
and executory insofar as respondents are concerned considering that
their petition for review had been denied by the Court in its final and
executory Resolution dated October 17, 2001 in G.R. No. 149234.

Finally, Citibank contends that the award of attorney's fees should be

deleted since such award appears only in the dispositive portion of the
decision of the RTC and the latter failed to elaborate, explain and justify
the same.

Article 2208 of the New Civil Code enumerates the instances where
such may be awarded and, in all cases, it must be reasonable, just and
equitable if the same were to be granted. Attorney's fees as part of
damages are not meant to enrich the winning party at the expense of
the losing litigant. They are not awarded every time a party prevails in
a suit because of the policy that no premium should be placed on the
right to litigate.55 The award of attorney's fees is the exception rather
than the general rule. As such, it is necessary for the court to make
findings of facts and law that would bring the case within the exception
and justify the grant of such award. The matter of attorney's fees cannot
be mentioned only in the dispositive portion of the decision.56 They
must be clearly explained and justified by the trial court in the body of
its decision. Consequently, the award of attorney's fees should be
deleted.