FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, petitioner, vs.

, COURT OF APPEALS and LUZON DEVELOPMENT BANK, respondents. FACTS: 1. Defendant Luzon Development Bank had as one of its client-depositors the Fojas-Arca Enterprises Compan !"Fojas-Arca#$. Fojas-Arca maintainin% a special savin%s account &ith the defendant' the latter authorized and allo&ed &ithdra&als of funds therefrom throu%h the medium of special &ithdra&al slips. (hese are supplied ) the defendant to Fojas-Arca. *. +laintiff Firestone and Fojas-Arca entered into a "Franchised Dealership A%reement# &here) Fojas-Arca has the privile%e to purchase on credit and sell plaintiff,s products -. +ursuant to the A%reement' Fojas-Arca purchased on credit Firestone products from plaintiff &ith a total amount of +.'/01'222.22. a. 3n pa ment of these purchases' Fojas-Arca delivered to plaintiff si4 !1$ special &ithdra&al slips dra&n upon the defendant. 3n turn' these &ere deposited ) the plaintiff &ith its current account &ith the Citi)ank. All of them &ere honored and paid ) the defendant. ). (his sin%ular circumstance made plaintiff )elieve and relied on the fact that the succeedin% special &ithdra&al slips dra&n upon the defendant &ould )e e5uall sufficientl funded. 6el in% on such confidence and )elief and as a direct conse5uence thereof' plaintiff e4tended to Fojas-Arca other purchases on credit of its products. .. 7u)se5uentl ' Fojas-Arca purchased Firestone products on credit and delivered to plaintiff the special &ithdra&al slips in pa ment thereof. a. (hese &ere like&ise deposited ) plaintiff in its current account &ith Citi)ank and in turn the Citi)ank for&arded it to the defendant for pa ment and collection' as it had done in respect of the previous special &ithdra&al slips. ). 8n this )asis' plaintiff &as induced to continue e4tendin% to Fojas-Arca further purchase on credit of its products as per a%reement. 9. :o&ever' on Decem)er 1.' 10;/' plaintiff &as informed ) Citi)ank that special &ithdra&al slips <o. .*1*; dated =une 19' 10;/ for +1'10/'20*./2 and <o. .*1*0 dated Au%ust 19' 10;/ for +//2'222.22 &ere dishonored and not paid for the reason ><8 A66A<?E@E<(., 1. As a conse5uence' the Citi)ank de)ited plaintiff,s account for the total sum of +*'2;/'20*./2 representin% the a%%re%ate amount of the a)ove-t&o special &ithdra&al slips. a. Ander such situation' plaintiff averred that the pecuniar losses it suffered is caused ) and directl attri)uta)le to defendant,s %ross ne%li%ence. ;. Counsel of plaintiff firestone served a &ritten demand upon the defendant for the satisfaction of the dama%es suffered ) it. And due to defendant,s refusal to pa plaintiff,s claim' plaintiff has )een constrained to file this complaint' there) compellin% plaintiff to incur liti%ation e4penses and attorne ,s fees &hich amount are recovera)le from the defendant. /. Controvertin% the fore%oin% asseverations of plaintiff' defendant asserted' inter alia that the transactions mentioned ) plaintiff are that of plaintiff and Fojas-Arca onl ' BinC &hich defendant is not involvedD that defendant is not a priv to an of the transactions )et&een Fojas-Arca and plaintiff for &hich reason defendant is not dut )ound to notif nor %ive notice of an thin% to plaintiff. 3f at first defendant had %iven notice to plaintiff it is merel an e4tension of usual )ank courtes to a prospective clientD that defendant is onl dealin% &ith its depositor Fojas-Arca and not the plaintiff. 3n summation' defendant cate%oricall stated that plaintiff has no cause of action a%ainst it. 0. RTC: +etitioner,s complaint for a sum of mone and dama%es &as dismissed to%ether &ith the counterclaim of defendant. 12. +etitioner appealed the decision to the Court of Appeals. a. 3t averred that respondent Luzon Development Bank &as lia)le for dama%es under Article *1;1 in relation to Articles 10 and *2 of the Civil Code. ). As noted ) the CA' petitioner alle%ed the follo&in% tortious acts on the part of private respondentE 1$ the acceptance and pa ment of the special &ithdra&al slips &ithout the presentation of the depositor,s pass)ook there) %ivin% the impression that the &ithdra&al slips are instruments pa a)le upon presentmentD *$ %ivin% the special

&ithdra&al slips the %eneral appearance of checksD and -$ the failure of respondent )ank to seasona)l &arn petitioner that it &ould not honor t&o of the four special &ithdra&al slips. 11. CA: 3t denied the appeal and affirmed the jud%ment of the trial court. a. Accordin% to the appellate court' respondent )ank notified the depositor to present the pass)ook &henever it received a collection note from another )ank' )el in% petitioner,s claim that respondent )ank &as ne%li%ent in not re5uirin% a pass)ook under the su)ject transaction. (he appellate court also found that the special &ithdra&al slips in 5uestion &ere not purposel %iven the appearance of checks' contrar to petitioner,s assertions' and thus should not have )een mistaken for checks. Lastl ' the appellate court ruled that the respondent )ank &as under no o)li%ation to inform petitioner of the dishonor of the special &ithdra&al slips' for to do so &ould have )een a violation of the la& on the secrec of )ank deposits. ISSUE: Fhether or not respondent )ank should )e held lia)le for dama%es suffered ) petitioner' due to its alle%edl )elated notice of non-pa ment of the su)ject &ithdra&al slips. HELD: <8 At the outset' &e note that petitioner admits that the !thd"a a# $#!%$ !n &'e$t!(n e"e n(n) ne*(t!a+#e. :ence' the rules %overnin% the %ivin% of immediate notice of dishonor of ne%otia)le instruments do not appl in this case. +etitioner itself concedes this point. (hus' respondent )ank &as under no o)li%ation to %ive immediate notice that it &ould not make pa ment on the su)ject &ithdra&al slips. Citi)ank should have kno&n that &ithdra&al slips &ere not ne%otia)le instruments. 3t could not e4pect these slips to )e treated as checks ) other entities. +a ment or notice of dishonor from respondent )ank could not )e e4pected immediatel ' in contrast to the situation involvin% checks. 3n the case at )ar' it appears that Citi)ank' &ith the kno&led%e that respondent Luzon Development Bank' had honored and paid the previous &ithdra&al slips' automaticall credited petitioner,s current account &ith the amount of the su)ject &ithdra&al slips' then merel &aited for the same to )e honored and paid ) respondent )ank. 3t presumed that the &ithdra&al slips &ere "%ood.# 3t )ears stressin% that Citi)ank could not have missed the non-ne%otia)le nature of the &ithdra&al slips. (he essence of ne%otia)ilit &hich characterizes a ne%otia)le paper as a credit instrument lies in its freedom to circulate freel as a su)stitute for mone .(he &ithdra&al slips in 5uestion lacked this character. A )ank is under o)li%ation to treat the accounts of its depositors &ith meticulous care' &hether such account consists onl of a fe& hundred pesos or of millions of pesos. (he fact that the other &ithdra&al slips &ere honored and paid ) respondent )ank &as no license for Citi)ank to presume that su)se5uent slips &ould )e honored and paid immediatel . B doin% so' it failed in its fiduciar dut to treat the accounts of its clients &ith the hi%hest de%ree of care. 3n the ordinar and usual course of )ankin% operations' current account deposits are accepted ) the )ank on the )asis of deposit slips prepared and si%ned ) the depositor' or the latter,s a%ent or representative' &ho indicates therein the current account num)er to &hich the deposit is to )e credited' the name of the depositor or current account holder' the date of the deposit' and the amount of the deposit either in cash or in check. (he &ithdra&al slips deposited &ith petitioner,s current account &ith Citi)ank &ere not checks' as petitioner admits. Citi)ank &as not )ound to accept the &ithdra&al slips as a valid mode of deposit. But havin% erroneousl accepted them as such' Citi)ank G and petitioner as account-holder G must )ear the risks attendant to the acceptance of these instruments. +etitioner and Citi)ank could not no& shift the risk and hold private respondent lia)le for their admitted mistake. ,HEREFORE' the petition is DE<3ED and the decision of the Court of Appeals in CA-?.6. CH <o. *09.1 is AFF36@ED. Costs a%ainst petitioner.