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BPI vs CA FACTS: A certain Henry Chan owned a Continental Bank Managers Check payable to "cash" in the amount of Two

Thousand Five Hundred Dollars ($2,500.00). Chan went to the office of Benjamin Napiza and requested him to deposit the check in his dollar account by way of accommodation and for the purpose of clearing the same. Private respondent acceded, and agreed to deliver to Chan a signed blank withdrawal slip, with the understanding that as soon as the check is cleared, both of them would go to the bank to withdraw the amount of the check upon private respondents presentation to the bank of his passbook. Napiza thus endorsed the check and deposited it in a Foreign Currency Deposit Unit (FCDU) Savings Account he maintained with BPI. Using the blank withdrawal slip given by private respondent to Chan, one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67 from Napiza's FCDU account. It turned out that said check deposited by private respondent was a counterfeit check. *When BPI demanded the return of $2,500.00, private respondent claimed that he deposited the check "for clearing purposes" only to accommodate Chan. **Petitioner claims that private respondent, having affixed his signature at the dorsal side of the check, should be liable for the amount stated therein in accordance with the provision of the Negotiable Instruments Law on the liability of a general indorser (Sec. 66). ISSUE:* Whether private respondent is obliged to return the money paid out by BPI on a counterfeit check even if he deposited the check "for clearing purposes" only to accommodate Chan. ISSUE:** Whether or not respondent Napiza is liable under his warranties as a general indorser. RULING: Ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party. However, petitioner BPI, in allowing the withdrawal of private respondents deposit, failed to exercise the diligence of a good father of a family. BPI violated its own rules by

allowing the withdrawal of an amount that is definitely over and above the aggregate amount of private respondents dollar deposits that had yet to be cleared. The proximate cause of the eventual loss of the amount of $2,500.00 on BPI's part was its personnels negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in the banking system. In so doing, BPI assumed the risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage. BPI vs. IAC [G.R. No. 69162 February 21, 1992] Facts: Spouses Arthur & Vivienne Canlas opened a joint account in Commercial Bank & Trust Comp (CBTC) with initial deposit of P2,250. Arthur Canlas had an existing separate personal account in the same branch. Upon opening the joint account, the new accounts teller pulled out form the banks files the old and existing signature card of Arthur Canlas, for ID and reference. By mistake, she placed the old personal account number of Arthur Canlas on the deposit slip for the new joint checking account of the spouses so that the initial deposit of P2,250 for the joint checking account was miscredited to Arthur's personal account. The spouses subsequently deposited other amounts in their joint account. As a consequence, two checks were dishonored which the Canlas had issued against their joint account. The bank was unable to contract the spouses because of a wrong address. Spouses Canlas filed a complaint for damages against CBTC in CFI Pampanga. During the pendency of the case, the Bank of the Philippine Islands (BPI) and CBTC were merged. As the surviving corporation under the merger agreement and under Section 80 (5) of the Corporation Code of the Philippines, BPI took over the prosecution and defense of any pending claims, actions or proceedings by and against CBTC. RTC Pampanga rendered a decision against BPI, ordering them to pay actual damages (P5,000), moral damages (P300,000), and exemplary damages (P150,000). On appeal, the IAC deleted the actual damages and reduced the other awardsactual damages (P50,000), moral damages (P50,000) and exemplary damages (P50,000).

Issue: Whether or not BPI is guilty of gross negligence in the handling of the spouses Canlas bank account. Held: YES.IAC decision modified by deleting the award of exemplary damages. The bank is not expected to be infallible but it must bear the blame for not discovering the mistake of its teller despite the established procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. Apparently, the officials andemployees tasked to do that did not perform their duties with due care, as may be gathered from the testimony of the bank's lone witness, Antonio Enciso, who casually declared that "the approving officer does not have to see the account numbers and all those things. Those are very petty things for the approving manager to look into." Unfortunately, it was a "petty thing," like the incorrect account number that the bank teller wrote on the initial deposit slip for the newly-opened joint current account of the Canlas spouses that sparked this half-a-million-peso damage suit against the bank. While the bank's negligence may not have been attended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and humiliation to the private respondents for which they are entitled to recover reasonable moral damages. However, the absence of malice and bad faith renders the award of exemplary damages improper. FIRESTONE TIRE V. CA 353 SCRA 601

by Luzon Development Bank. As this was the circumstances, Firestone believed in the sufficient funding of the slips until there was a time that Citibank informed it that one of the slips was dishonored. It wrote then a demand letter to Fojas Arca for the payment and damages but the latter refused to pay, prompting Firestone to file an action against it. HELD: The withdrawal slips, at the outset, are nonnegotiable. Hence, the rule on immediate notice of dishonor is non-applicable to the case at hand. Thus, the bank was under no obligation to give immediate notice that it wouldn't make payment on the subject withdrawal slips. Citibank should have known that withdrawal slips are not negotiable instruments. It couldn't expect then the slips be treated like checks by other entities. Payment or notice of dishonor from respondent bank couldn't be expected immediately in contrast to the situation involving checks. In the case at bar, Citibank relied on the fact that LDB honored and paid the withdrawal slips which made it automatically credit the account of Firestone with the amount of the subject withdrawal slips then merely waited for LDB to honor and pay the same. It bears stressing though that Citibank couldn't have missed the non-negotiable character of the slips. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to be a substitute for money. The withdrawal slips in question lacked this character. The withdrawal slips deposited were not checks as Firestone admits and Citibank generally was not bound to accept the withdrawal slips as a valid mode of deposit. Nonetheless, Citibank erroneously accepted the same as such and thus, must bear the risks attendant to the acceptance of the instruments. Firestone and Citibank could not now shift the risk to LDB for their committed mistake.

FACTS: FojasArca and Firestone Tire entered into a franchising agreement wherein the former had the privilege to purchase on credit the latters products. In paying for these products, the former could pay through special withdrawal slips. In turn, Firestone would deposit these slips with Citibank. Citibank would then honor and pay the slips. Citibank automatically credits the account of Firestone then merely waited for the same to be honored and paid

PEOPLE VS. DICK ONG 204 SCRA 942 (1991) Facts:

Ruling: 1. The Supreme Court held that bank deposits are in the nature of irregular deposits. Bank deposits are really loans because they earn interest. Whether fixed, savings, or current, all bank Adeposits are to be treated as loans and are to be covered by the law on loans. The elements of this kind of estafa are the following: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack or insufficiency of funds to cover the check; and (3) damage to the payee thereof. In this case, the fact was established that Ong either issued or indorsed the subject checks. However, it must be remembered that the reason for the conviction of an accused of the crime of estafa is his guilty knowledge of the fact that he had no funds in the bank when he negotiated the spurious check. In the present case, however, the prosecution failed to prove that Ong had knowledge with respect to the checks he indorsed. Moreover, it has also been proven that it was the Bank which granted him a drawn against uncollected deposit (DAUD) privilege without need of any pretensions on his part. The privilege this privilege was not only for the subject checks, but for other past transactions. If ever, he, indeed acted fr audulently, he could not have done so without the active cooperation of the Banks employees. Since Talabis and Villaran were declared innocent of the crimes charged against them, the same should be said for the Ong. Thus, Ong cannot be held criminally liable against the Bank. He can only be held civilly liable as the Bank incurred damages.

Accused Dick Ong, one of the depositors of the Home Savings Bank and Trust Company (HSBTC) opened a savings account with HSBTC with an initial deposit of P22.14 in cash and P10,000.00 in check. Ong was allowed to withdraw from his savings account with the Bank the sum of P5,000.00, without his check undergoing the usual and reglementary clearance. The withdrawal slip was signed and approved by Lino Morfe, then the Branch Manager, and accused Lucila Talabis, the Branch Cashier. Subsequently, Ong deposited eleven checks in his savings account with the Bank and against which he made withdrawals against its amount. Again, the withdrawal of the amount by Ong was made before said checks were cleared and the Bank had collected their amounts and with the approval of Talabis. However, when the Bank presented the eleven checks issued, deposited and against which Ong made withdrawals against its amounts, to their respective drawee banks for payment, they were all dishonored for lack or insufficiency of funds. Because of this, the Bank filed a criminal action for Estafa against Ong, and the Banks officer in charge Villaran and Talabis. Talabis testified that the approval of the withdrawals of Ong against his uncleared checks was in accordance with the instruction of their then bank manager and that it is a kind of accommodation given to Ong and also a common practice of the Bank. RTC ruled Ong as guilty for the crime of estafa but acquitted Villarin and Talabis as their guilt were not proven beyond reasonable doubt. CA affirmed RTCs decisions. Issue: 1. 2.


What is the nature of bank deposits? WON Ong is guilty of Estafa. No.

G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner, vs. THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents. BOTTOMLINE: You got preexisting 90K and you deposited 100K, but it was not updated by the bank, 8 checks bounced and you lost business partners. (burn down the bank? hahaha) Can you demand moral and exemplary damages? FACTS: We are concerned in this case with the question of damages, specifically moral and exemplary damages 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, account in the said bank the amount of P100,000.00, thus increasing its balance as of that date to P190,380.74. , the petitioner issued several checks against its deposit but was surprised to learn later that they had been dishonored for insufficient funds. There were 8 dishonored checks. 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. . Malabon also canceled the petitioner's credit line and demanded that future payments be made by it in cash or certified check The petitioner complained to the respondent bank on June 10, 3 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 redeposited , the petitioner demanded reparation from the respondent bank for its "gross and wanton negligence." This demand was not met. 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.

Judge Johnico G. Serquinia 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. The respondent court found with the trial court that the private respondent was guilty of negligence but agreed that the petitioner was nevertheless not entitled to moral damages 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. ISSUE: After all that you went through, the judge only awarded you 20k and 5k, can you demand for 1,000,000 damage? RULING: We also note that while stressing the rectification made by the respondent bank, the decision practically ignored the prejudice suffered by 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." We agree that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered 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 Considering all this, we feel that the award of nominal damages in the sum of P20,000.00 was not the proper relief to which the petitioner was entitled. Under Article 2221 of the Civil Code, "nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him." the proper remedy is the award to it of moral damages, which we impose, in our discretion, in the same amount of P20,000.00.

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, ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private respondent is ordered to pay the petitioner, in lieu of nominal damages, moral damages in the amount of P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original award of attorney's fees in the amount of P5,000.00, and costs.

preliminary injunction be issued ex parte, enjoining the corporation and itsbranches, as well as its officers and agents, from performing the banking operationscomplained of, and that a receiver be appointed pendente lite. Superintendent of Banks of the Central Bank was then appointed by the Supreme Court as receiverpendente lite of defendant corporation. Issue: Whether or not defendant corporation was engaged in banking operations. Held: Yes. An investment company which loans out the money of its customers,collects the interest and charges a commission to both lender and borrower, is abank. It is conceded that a total of 59,463 savings account deposits have beenmade by the public with the corporation and its 74 branches, with an aggregatedeposit of P1,689,136.74, which has been lent out to such persons as thecorporation deemed suitable therefore. It is clear that these transactions partake of the nature of banking, as the term is used in Section 2 of the General Banking Act.Hence, defendant corporation has violated the law by engaging in banking withoutsecuring the administrative authority required in Republic Act No. 337. Accordingly,the defendant corporation was ordered dissolved and appointment of receiver wasmade permanent.

Republic of the Philippines vs. Security Credit and Acceptance Corporation Facts: Articles of Incorporation of defendant corporation were registered with theSecurities and Exchange Commission. When they applied with SEC for theregistration and licensing of their securities under the Securities Act, the latterreferred it to the Central Bank which in turn rendered an opinion classifyingdefendant corporation as engaged in banking. SEC then advised the corporation tocomply with the requirements under the General Banking Act.Pursuant to a search warrant issued by MTC Manila, members of Central Bankintelligence division and Manila police seized documents and records relative to thebusiness operations of the corporation. After examination of the same, theintelligence division of the Central Bank submitted a memorandum to the thenActing Deputy Governor of Central Bank finding that the corporation is engaged inbanking operations. In lieu of the memorandum, the Monetary Board issued a resolution declaring that the corporation is performing banking operations withoutfirst complying with the provisions of Republic Act No. 337.Notwithstanding such resolution, the corporation, have been and still areperforming the functions and activities which had been declared to constitute illegalbanking operations; the corporation had established 74 branches in principal citiesand towns throughout the Philippines; that through a systematic and vigorouscampaign undertaken by the corporation, the same had managed to induce thepublic to open 59,463 savings deposit accounts with an aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced this quo warrantoproceedings for the dissolution of the corporation, with a prayer that, meanwhile, awrit of

Consolidated Bank vs. CA Facts: LC Diaz and Co. CPAs opened a saving account with SolidBank and in one incident, messenger Calapre was instructed todeposit money on the said bank. Calapre left the passbook inSolid bank because he had transaction to do in Allied Bank butwhen Calapre returned, the passbook was said to be claimed byother person. Personel of LC Diaz inquired with the Solod Bankand gave the same answer. LC Diaz then after called and wrotea formal latter to Solid bank to stop any transaction using thelost passbook and on the same day, an unauthorizedwithdrawal of 300,000 pesos was discovered. LC Diaz orderedthe bank to return the money. Issue: Whether or not the bank is liable for the 300K. Held: Yes. Solidbank is bound by the negligence of its employees under the principle of command responsibility. The bank must not only exercise high

standards of integrity and performance, but also, it must insure that its employees do likewise because this is the only way to ensure that the bank will comply with its fiduciary duty. However, the liability is mitigated due to the contributory negligence of the depositor.

has a sufficient deposit dollar account with Westpac New York. Nevertheless, the demand draft was not served. Can the Respondent Bank be held liable? Held: No, when the circumstances show that all efforts were made by the respondent bank to avoid such mistakes. In Phil. Bank of Commerce v. CA, upholding a long standing doctrine, it was ruled that the degree of diligence required of bank is more than that of 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 test the deposit accounts of their depositors. But the same higher degree of diligence is not expected to be executed by banks in commercial instruction that do not involve their fiduciary relationship with their depositors.

PCI Bank VS. CA (350 scra 446 2011) Time again we have stressed that the banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance, such that appropriate standard of diligence must be very high, if not the highest degree of diligence banks liability as obligor is not merely vicious but primary; the defense of extraordinary diligence in the selection and supervision of its employees is of no merit. Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is for greater than those ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in the selection and supervision of the employee.

Reyes VS. CA Facts: By virtue of the erroneous reading of the cable message by its employee, WestpacSydney asserted that the respondent Bank had no deposit account with it to cover for the amount of AU$1610.00 indicated in the foreign exchange demand draft. Consequently, the respondent Bank had the impression that Westpac- New York had not yet made available the amount for reimbursement to Westpac Sidney despite the fact that Respondent Bank