SIMEX INTL MANILA V.

COURT OF APPEALS, 183 SCRA 360 (1990)

FACTS:

ISSUE:

HELD:













































BPI V. IAC AND SPOUSES CANLAS, 206 SCRA 408 (1992)
FACTS: Spouses Arthur and Vivienne Canlas opened a joint current account with Commercial
Bank and Trust Company of the Philippines (CBTC). By mistake, the "new accounts" teller of
the bank miscredited the initial deposit of P2,250 to Arthur's personal account in the same
branch. The spouses subsequently deposited other amounts in their joint account.
1. Vivienne Canlas issued a check for Pl,639.89 and another check for P1,160.002.One of
the checks was dishonored by the bank for insufficient funds and a penalty of P20 was
deducted from the account in both instances.
2. Respondents then filed a complaint for damages against CBTC in the CFI Pampanga
3. During the pendency of the case, the Bank of the Philippine Islands (BPI) and CBTC
were merged.
4. TC awarded the private respondents P465,000
5. IAC - reduced the damage-award to P105,000

ISSUE: WON the petitioner was guilty of gross negligence in the handling of private
respondents' bank account

HELD: There is no merit in petitioner's argument that it should not be considered negligent,
much less held liable for damages on account of the inadvertence of its bank employee for
Article 1173 of the Civil Code only requires it to exercise the diligence of a good father of family.
In Simex International (Manila), Inc. vs. Court of Appeals (183 SCRA 360, 367), this Court
stressed the fiduciary nature of the relationship between a bank and its depositors and the
extent of diligence expected of it in handling the accounts entrusted to its care.

In every case, the depositor expects the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred pesos or of millions. The bank
must record every single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to reflect at any given
time the amount of money the depositor can dispose of as he sees fit, confident
that the bank will deliver it as and to whomever he directs. A blunder on the part
of the bank, such as the dishonor of a check without good reason, can cause the
depositor not a little embarrassment if not also financial loss and perhaps even
civil and criminal litigation.

The point is that as a business affected with public interest and because of the nature of
its functions, the bank is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their relationship

The bank is not expected to be infallible but, as correctly observed by respondent Appellate
Court, in this instance, 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.








BANK OF THE PHILIPPINE ISLANDS V. COURT OF APPEALS AND NAPIZA, 326 SCRA
641 (2000)
FACTS: Private respondent Napiza deposited in a Foreign Currency Deposit Unit (FCDU)
account with petitioner BPI a managers check from Continental Bank, payable to cash in the
amount of $2,500. It appears the check belonged to a certain Henry and asked Napiza to
deposit the check in his dollar account by way of accommodation and for the purpose of
clearing the same.
1. Napiza agreed to the arrangement and delivered to Chan a signed blank withdrawal slip,
with the understanding that as soon as the check is cleared, both of them will withdraw the
amount of the check upon presenting Napizas passbook to the bank
2. However, a certain Ruben Gayon used the Napizas blank withdrawal slip to withdraw the
amount of $2,541.67 from the latters FCDU. Notably, the withdrawal slip shows that the
amount was payable to de Guzman and was duly initiated by BPIs assistant manager
3. Subsequently, BPI was informed by Wells Fargo bank (Drawee bank) that the check
deposited by Napiza was a counterfeit. As such, BPIs branch manager notified Napiza
that the check was dishonored
4. For failure to return the amount, petitioner BPI filed an action against Napiza praying for
the return of $2,500
5. Napiza, in his answer, alleged that while he did indeed signed a blank withdrawal slip
with the understanding that the amount deposited shall be withdrawn only after the check
has been cleared. However, without his knowledge, Gayon withdrew $2,541.67 Napiza
contended that the bank was grossly negligent for its apparent ignorance of routine bank
rules since it accepted the encashed the check even if the account holders passbook was
not presented
6. The lower court dismissed the complaint and ruled that incumbent upon the petitioner
bank to credit the value of the check to the account of the private respondent only upon
receipt of final payment and should not have authorized the withdrawal from the latters
account of the value of the check.
7. CA affirmed the lower courts decision citing that BPI committed clear gross negligence in
allowing Gayon to withdraw the money without presenting the private respondents
passbook. The mere deposit of a check in private respondents account did not mean the
check was already the private respondents property. The check still had to be cleared and
its proceeds can only be withdrawn upon presentation of a passbook in accordance with
the banks rules and regulations.

ISSUE: WON petitioner bank was grossly negligent in allowing the withdrawal

HELD: Yes. As correctly held by the CA, in depositing the check in his name, private
respondent did not become the outright owner of the amount stated therein. Under the above
rule, by depositing the check with petitioner, private respondent was, in a way, merely
designating petitioner as the collecting bank. This is in consonance with the rule that a
negotiable instrument, such as a check, whether a manager's check or ordinary check, is not
legal tender. As such, after receiving the deposit, under its own rules, petitioner shall credit the
amount in private respondent's account or infuse value thereon only after the drawee bank shall
have paid the amount of the check or the check has been cleared for deposit. Again, this is in
accordance with ordinary banking practices and with this Court's pronouncement that "the
collecting bank or last endorser generally suffers the loss because has the duty to
ascertain the genuineness of all prior endorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making the
presentment has done its duty to ascertain the genuineness of the endorsements." The
rule finds more meaning in this case where the check involved is drawn on a foreign bank and
therefore collection is more difficult than when the drawee bank is a local one even though the
check in question is a manager's check.

By the nature of its functions, a bank is under obligation to treat the accounts of its depositors
"with meticulous care, always having in mind the fiduciary nature of their relationship. As such,
in dealing with its depositors, a bank should exercise its functions not only with the diligence of a
good father of a family but it should do so with the highest degree of care.

CAB: BPI, in allowing the withdrawal of private respondent's deposit, failed to exercise the
diligence of a good father of a family. In total disregard of its own rules, petitioner's personnel
negligently handled private respondent's account to petitioner's detriment.
While it is true that private respondent's having signed a blank withdrawal slip set in motion the
events that resulted in the withdrawal and encashment of the counterfeit check, the negligence
of petitioner's personnel was the proximate cause of the loss that petitioner sustained.
Proximate cause, which is determined by a mixed consideration of logic, common sense, policy
and precedent, is "that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would not have
occurred." The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00
on petitioner's part was its personnel's negligence in allowing such withdrawal in disregard of its
own rules and the clearing requirement in the banking system. In so doing, petitioner assumed
the risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it
should suffer the resulting damage.





























CONSOLIDATED BANK & TRUST CORP V. COURT OF APPEALS AND L.C. DIAZ CO, 410
SCRA 562 (2003)
FACTS: L.C. Diaz opened a savings account with Solidbank. L.C. Diaz through its cashier,
Macaraya, filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip
for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money
with Solidbank. Macaraya also gave Calapre the Solidbank passbook.
1. Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the
passbook. The teller acknowledged receipt of the deposit by returning to Calapre the
duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips with the
words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE. Since the
transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied
Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When
Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook.Calapre went back to L.C. Diaz and reported the incident
to Macaraya.
2. The following day, 15 August 1991, L.C. Diaz, called up Solidbank to stop any
transaction using the same passbook until L.C. Diaz could open a new account. On the
same day, Diaz formally wrote Solidbank to make the same request. It was also on the
same day that L.C. Diaz learned of the unauthorized withdrawal the day before,
of P300,000 from its savings account. The withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C. Diaz. The signatories, however, denied
signing the withdrawal slip. A certain Noel Tamayo received the P300,000.
3. L.C. Diaz through its counsel demanded from Solidbank the return of its
money. Solidbank refused.
4. L.C. Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank. The trial
courts absolved Solidbank and dismissed the complaint. It found LC Diaz to be negligent
in handling its passbook. The loss of the P300k was not the result of Solidbanks
negligence.
5. The Court of Appeals reversed the decision of the trial court.The CA used the rules on
quasi-delict.

ISSUE: WON the relations between Solidbank and LC Diaz, the depositor, is governed by
quasi-delict in determining the liability of Solidbank

HELD: Solidbanks Fiduciary Duty under the Law
The rulings of the trial court and the Court of Appeals conflict on the application of the law. The
trial court pinned the liability on L.C. Diaz based on the provisions of the rules on savings
account, a recognition of the contractual relationship between Solidbank and L.C. Diaz, the
latter being a depositor of the former. On the other hand, the Court of Appeals applied the law
on quasi-delict to determine who between the two parties was ultimately negligent. The law on
quasi-delict or culpa aquiliana is generally applicable when there is no pre-existing contractual
relationship between the parties.

We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual.
The contract between the bank and its depositor is governed by the provisions of the Civil Code
on simple loan. There is a debtor-creditor relationship between the bank and its depositor. The
depositor lends the bank money and the bank agrees to pay the depositor on demand. The
savings deposit agreement between the bank and the depositor is the contract that determines
the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2
of RA 8791declares that the State recognizes the fiduciary nature of banking that requires high
standards of integrity and performance.This new provision in the general banking law,
introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting with the 1990
case of Simex International v. Court of Appeals, holding that the bank is under obligation to
treat the accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.

This fiduciary relationship means that the banks obligation to observe high standards
of integrity and performance is deemed written into every deposit agreement between a
bank and its depositor. The fiduciary nature of banking requires banks to assume a
degree of diligence higher than that of a good father of a family. Although RA 8791 took
effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diazs
savings account, jurisprudence at the time of the withdrawal already imposed on banks the
same high standard of diligence required under RA No. 8791
.
However, the fiduciary nature of a bank-depositor relationship does not convert the contract
between the bank and its depositors from a simple loan to a trust agreement, whether express
or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a
breach of trust.T he law simply imposes on the bank a higher standard of integrity and
performance in complying with its obligations under the contract of simple loan, beyond those
required of non-bank debtors under a similar contract of simple loan.

The fiduciary nature of banking does not convert a simple loan into a trust agreement because
banks do not accept deposits to enrich depositors but to earn money for themselves. The law
allows banks to offer the lowest possible interest rate to depositors while charging the highest
possible interest rate on their own borrowers. The interest spread or differential belongs to the
bank and not to the depositors who are not cestuique trust of banks. If depositors are cestuique
trust of banks, then the interest spread or income belongs to the depositors, a situation that
Congress certainly did not intend in enacting Section 2 of RA 8791.

Solidbanks Breach of its Contractual Obligation- For breach of the savings deposit
agreement due to negligence, or culpa contractual, the bank is liable to its depositor.

Calapre left the passbook with Solidbank because the transaction took time and he had to go
to Allied Bank for another transaction. The passbook was still in the hands of the employees of
Solidbank for the processing of the deposit when Calapre left Solidbank. Solidbanks rules on
savings account require that the deposit book should be carefully guarded by the depositor and
kept under lock and key, if possible. When the passbook is in the possession of Solidbanks
tellers during withdrawals, the law imposes on Solidbank and its tellers an even higher degree
of diligence in safeguarding the passbook.

Solidbank is bound by the negligence of its employees under the principle of respondeat
superior or command responsibility. The defense of exercising the required diligence in the
selection and supervision of employees is not a complete defense in culpa contractual, unlike
in culpa aquiliana.

The bank must not only exercise high standards of integrity and performance, it must also
insure that its employees do likewise because this is the only way to insure that the bank will
comply with its fiduciary duty.
Proximate Cause of the Unauthorized Withdrawal- L.C. Diaz was not at fault that the
passbook landed in the hands of the impostor. Solidbank was in possession of the passbook
while it was processing the deposit. After completion of the transaction, Solidbank had the
contractual obligation to return the passbook only to Calapre, the authorized representative of
L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook to
another person.Solidbanks failure to return the passbook to Calapre made possible the
withdrawal of the P300,000 by the impostor who took possession of the passbook.

Doctrine of Last Clear Chance- We do not apply the doctrine of last clear chance to the
present case. Solidbank is liable for breach of contract due to negligence in the performance of
its contractual obligation to L.C. Diaz. This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would
exonerate the defendant from liability.Such contributory negligence or last clear chance by the
plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate
the defendant from his breach of contract.

Mitigated Damages- In this case, L.C. Diaz was guilty of contributory negligence in allowing a
withdrawal slip signed by its authorized signatories to fall into the hands of an impostor. Thus,
the liability of Solidbank should be reduced.

Petitioner Solidbank Corporation shall pay private respondent L.C. Diaz and Company, CPAs
only 60% of the actual damages awarded by the Court of Appeals. The remaining 40% of the
actual damages shall be borne by private respondent L.C. Diaz and Company, CPAs.




























PHIL BANKING CORP V. COURT OF APPEALS, 419 SCRA 487 (2004)
FACTS:

ISSUE:

HELD:













































SAMSUNG CONSTRUCTION COMPANY PHILIPPINES, INC. V. FAR EAST BANK, 436
SCRA 402 (2004)
If a bank pays out on a forged check, is it liable to reimburse the drawer from whose account the
funds were paid out? The CA, in reversing a trial court decision adverse to the bank, invoked
tenuous reasoning to acquit the bank of liability. We reverse, applying time-honored principles of
law.
FACTS: Samsung Construction, while based in Bian, Laguna, maintained a current account
with defendant Far East Bank and Trust Company
1
("FEBTC") at the latters Bel-Air, Makati
branch.
2
The sole signatory to Samsung Constructions account was Jong Kyu Lee ("Jong"), its
Project Manager, while the checks remained in the custody of the companys accountant, Kyu
Yong Lee ("Kyu").
1. A certain Roberto Gonzaga presented for payment FEBTC Check payable to cash and
drawn against Samsung Constructions current account in the amount of
P999,500.00.The bank teller was satisfied as to the authenticity of the signature
appearing on the check.
2. Shirley Syfu, approved the encashment of the check after Jose Sempio III (whom at the
time of the encashment was in the bank with Gonzaga), the assistant accountant of
Samsung Construction who was well-known to Syfu and the other bank officers,
vouched for the genuineness of Jongs signature.
3. Kyu discovered that a checkP999,500.00 had been encashed and found that the last
blank check was missing. He reported the matter to Jong, who then proceeded to the
bank and realized that his signature had been forged.
4. Samsung Construction demanded that FEBTC credit to it the amount encashed with
interest but to no avail. Samsung Construction filed aComplaint for violation of Section
23 of the Negotiable Instruments Law, and prayed for the payment of the amount
debited as a result of the questioned check plus interest, and attorneys fees.

ISSUE: WON FEBTC is liable

HELD: Yes. Even assuming that FEBTC had a standing habit of dealing with Sempio, acting in
behalf of Samsung Construction, the irregular circumstances attending the presentment of the
forged check should have put the bank on the highest degree of alert. The Court recently
emphasized that the highest degree of care and diligence is required of banks.

Banks are engaged in a business impressed with public interest, and it is their duty to
protect in return their many clients and depositors who transact business with them.
They have the obligation to treat their clients account meticulously and with the highest
degree of care, considering the fiduciary nature of their relationship. The diligence
required of banks, therefore, is more than that of a good father of a family.

Given the circumstances (huge amount of money involved), extraordinary diligence dictates that
FEBTC should have ascertained from Jong personally that the signature in the questionable
check was his.








PHILIPPINE NATIONAL BANK V. PIKE, 470 SCRA 328 (2005)
FACTS: Respondent Pike, who worked in Japan, opened a US Dollar savings account with
petitioner bank PNB, for which he was issued a corresponding passbook.
1. Pike filed an action for damages against the bank alleging that:
a. Sometime in 1993, he discovered that some of his valuables were missing
including his PNB passbook, which led to the arrest of a Joy Manuel Davasol.
Pike also learned that Davasol made 2 unauthorized withdrawals from his US
Dollar Savings account
b. Pike then went to PNB and demanded the return of the amount withdrawn from
his account on the ground that he never authorized the withdrawal. The bank
refused to credit said amount and instead argued that it exercised due diligence
in the handling of said account
2. On the other hand, PNB alleged the different set of facts:
a. Sometime in 1993, Pike and Davasol went to see PNB AVP Lorenzo Val to
withdraw $2,000. Pike also instructed PNB to honor all withdrawals to be
transmitted by Davasol, who shall present pre-signed withdrawal slips bearing
Pikes signature
b. Subsequently, Pikes sister notified the bank that Pikes PNB passbook was lost
on account of robbery and requested for a hold-order on hers brothers
passbook
c. Pike then executed an affidavit of loss and requested PNB to replace the same
and allow him to make withdrawals therein. He also stated that he was holding
the bank free from any liability
3. The lower court held in favor of Pike and ruled that the bank was negligent in the
exercise of its duties for allowing such a bizarre arrangement. The bank also compared
the signatures on the questioned withdrawal slips with the known signature of Pike and
found that said signatures do not match
4. CA affirmed the same, citing that the bank did not follow its usual procedure of requiring
a depositor who is withdrawing the money through a representative to fill out the back
portion of the withdrawal slips.
5. PNB argument: It cannot be liable for the loss since Pike gave verbal instructions to
allow the withdrawal from his account through another person. Moreover, the fact that
Pike withdrew the remaining balance from his account and executed a waiver releasing
PNB from any liability due to the loss of founds negates a finding of negligence on its
part

ISSUE: WON PNB should be held liable

HELD: Yes. PNBs liability arose from the negligence exhibited by employees of PNB in
the treatment of Pikes dollar account. A banks liability as an obligor is not merely vicarious
but primary, as banks are expected to exercise the highest degree of diligence in the selection
and supervision of its employees. Ordinarily, banks allow withdrawal by someone who is not the
account holder so long as the account holder authorizes his representative to withdraw and
receive from his account by signing on the space provided particularly for such transactions,
usually found at the back of the withdrawal slips.

With banks, the degree of diligence required, contrary to the position of PNB, is more
than that of a good father of a family considering that the business of banking is imbued
with public interest due to the nature of their functions. The stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks. Thus,
the law imposes on banks a high degree of obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of banking. Sec 2 General Banking
Law makes a categorical declaration that the State recognizes the fiduciary nature of banking
that requires high standards of integrity and performance. Art 1172 NCC provides that the
degree of diligence required of an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a father of a family. In every case, the depositor expects the
bank to treat his account with utmost fidelity, whether such accounts consist only of a few
hundred pesos or millions of pesos.












































FAR EAST BANK AND TRUST COMPANY V. PACILAN JR, 486 SCRA 372 (2005)
FACTS: Respondent Pacilan opened a current account with FEBTC Bacolod branch in 1980.
Since then, he has issued postdated checks to different payees drawn against the said against
the said account. Sometime in 1988, respondent issued a check for P680.
1. Upon presentment, the check in question was dishonored by petitioner bank. The
following day, Pacilan deposited P800 to his current account, thus increasing the
balance of his account to P1,051.43
2. When Pacilan inquired with the bank about the dishonor of his check, he found out that
his current account was closed on the ground that it was improperly handled.
3. As such, respondent wrote to petitioner bank complaining that the closure of his account
was unjustified. When he did not receive a reply, he filed an action for damages against
FEBTC
4. Pacilan alleged that prior to the closure of his current account, he had issue several
other postdated checks. FEBTCs act of closing his current account allegedly preempted
the deposits that he intended to make to fund those checks, and exposed him to criminal
prosecution for violation of BP 22. He further alleged that the closure of his account was
done in malice since he was a cashier of a competitor bank
5. In its answer, FEBTC contended that under the banks rules and regulations, the bank
reserves the right to close an account if the depositor frequently draws checks against
insufficient funds and/or uncollected deposits and that the bank reserves the right at
any time to return checks of the depositor which are drawn against insufficient funds or
for any reason
6. As evidence, the bank showed that Pacilans account was overdrawn 156 times in 1986,
117 in 1987 and in 1988, 26 times. The respondent also signed several checks with a
different signature from the specimen on file for dubious reasons
7. When Pacilan deposited P800, it was obviously to cover the issuances made the
previous day against an insufficiently funded account. When he presented the check in
question, he had already incurred an overdraft. Hence, the bank rightfully dishonored the
same for insufficiency of funds
8. The lower court held in favor of Pacilan ruling that the respondent as depositor, had the
right to put up sufficient finds for a check that was returned due to insufficient funds the
day after the check had been received from the clearing office. In previous instances, it
was shown that the bank notified Pacilan when he incurred an overdraft and he would
then deposit sufficient funds to cover the overdraft. Thus, the bank acted unjustifiably
when it immediately closed Pacilans account and deprived him of an opportunity to
reclear his check or deposit sufficient funds the next day. CA affirmed the lower courts
decision

ISSUE: WON the bank had acted with malice in closing the respondents account

HELD: No. Under Art 19 NCC, there is abuse of rights when the following concur: (a) the
existence of a legal right or duty; (b) which is exercised in bad faith; (c) for the sole intent of
prejudicing or injuring another.

It is clear that FEBTC has the right to close the account of respondent based on its Rules
and Regulations Governing the Establishment and Operation of Regular Demand
Deposits. The same rules also provide that the depositor is not entitled, as a matter of
right to overdraw on this deposit and the bank reserves the right to return the checks of
the depositor drawn against insufficient funds.

The facts do not establish that, in the exercise of this right, FEBTC committed an abuse thereof.
Specifically, the second and third elements of abuse of rights are not present in this case. Given
that the respondent had a history of overdrawing his current account, the bank was justified in
closing the same for improper handling.

Nowhere under its rules and regulations is petitioner bank required to notify the
respondent or any depositor of the closure of the account for frequently drawing checks
against insufficient funds. No malice or bad faith can be imputed on petitioner bank for
acting as such since the records clearly show that respondent had been improperly and
irregularly handling his account not just a few times but hundreds of times. Under the
circumstances, FEBTC could not be faulted for exercising its right in accordance with
the express rules and regulations of the bank. Upon the opening of his account, Pacilan
had agreed to be bound by these terms and conditions.

Moreover, it has not been shown that the bank had closed Pacilans current account with the
sole intention of prejudicing and injuring the respondent. While Pacilan may have suffered injury
as a result thereof, but this falls within the concept of damnum absque injuria.


































CITIBANK, N.A. V. CABAMONGAN, 488 SCRA 517 (2006)


















































CITIBANK NA V. SABENIANO, 504 SCRA 378 (2006)
FACTS: Respondent claimed to have substantial deposits and money market placements with
the petitioners, as well as money market placements with the Ayala Investment and
Development Corporation (AIDC), the proceeds of which were supposedly deposited
automatically and directly to respondent's accounts with petitioner Citibank.
1. Respondent alleged that petitioners refused to return her deposits and the proceeds of
her money market placements despite her repeated demands, thus, compelling
respondent to file a case against petitioners for "Accounting, Sum of Money and
Damages."
2. On the other hand, petitioners admitted that respondent had deposits and money market
placements with them, including dollar accounts in the Citibank branch in Geneva,
Switzerland (Citibank-Geneva). Petitioners further alleged that the respondent later
obtained several loans from petitioner Citibank, for which she executed Promissory
Notes (PNs), and secured by (a) a Declaration of Pledge of her dollar accounts in
Citibank-Geneva, and (b) Deeds of Assignment of her money market placements with
petitioner FNCB Finance.
3. When respondent failed to pay her loans despite repeated demands by petitioner
Citibank, the latter exercised its right to off-set or compensate respondent's outstanding
loans with her deposits and money market placements, pursuant to the Declaration of
Pledge and the Deeds of Assignment executed by respondent in its favor.
4. RTC set-off was illegal, null and void butruled that Sabeniano is indebted to Citibank
5. CA ruled entirely in favor of Sabenianosaying that Citibank failed to establish by
competent evidence the alleged indebtedness of Sabeniano

ISSUE: WON Petitioner Citibank shall be liable for damages to respondent

HELD: Yes. Citibank did commit wrong when it failed to pay and properly account for the
proceeds of respondent's money market placements and when it sought the remittance of
respondent's dollar accounts from Citibank-Geneva by virtue of a highly-suspect Declaration of
Pledge to be applied to the remaining balance of respondent's outstanding loans. It bears to
emphasize that banking is impressed with public interest and its fiduciary character
requires high standards of integrity and performance. A bank is under the obligation to
treat the accounts of its depositors with meticulous care whether such accounts consist
only of a few hundred pesos or of millions of pesos. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible.Petitioner
Citibank evidently failed to exercise the required degree of care and transparency in its
transactions with respondent, thus, resulting in the wrongful deprivation of her property.

SC affirmed CA with additional payment of damages BUT Sabeniano was ordered to pay for the
outstanding balance of her loan.











CHINA BANKING CORP V. COURT OF APPEALS AND GOTIANUY, 511 SCRA 110 (2006)
FACTS: Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other
properties, US dollar deposits with Citibank NA amounting to P35 million and $864,000.
1. Dee received these amounts from Citibank through checks which she allegedly
deposited at China Bank.
2. Gotianuy also accused his son-in-law, George Dee, of transferring his real properties
and shares of stock in Georges name without any consideration.
3. During the pendency of the case, Gotianuy died and was substituted by his daughter,
Elizabeth Gotianuy Lo.
4. Dee admitted during the trial that she withdrew funds of Citibank upon instruction of her
father and the funds belonged exclusively to the latter.
5. The checks were presented as evidence during the trial. Upon motion of Gotianuy Lo,
the trial court subpoenaed 2 employees of China Bank to testify on the case.
6. China Bank opposed and moved for reconsideration. The trial court held that the
disclosure only as to the name or in whose name the said fund is deposited is not
violative of the law. On appeal, CA affirmed the trial court. It held that what the law
covers is only deposit but not the name of the depositor.
7. China Bank contended that since Jose Gotianuy is not the owner of the subject foreign
currency deposit, thus he cannot invoke the aid of the court in compelling the disclosure
of someone elses foreign currency deposit.

ISSUE: WON China Banks contention is correct

HELD: No. Sec 8 RA 6426 (Foreign Currency Deposit Act) provides that all foreign currency
deposits are considered absolutely confidential in nature and may not be inquired into,
except when the disclosure is permitted by the depositor.

Based on the facts of the case, it is clear that the source of the funds deposited by Dee is Jose
Gotianuy. As the owner of the funds unlawfully taken and which are undisputably deposited with
China Bank, Jose Gotianuy has the right to inquire into the said deposits.

As found by the CA: it is indubitable that the Citibank checks were drawn against the foreign
currency account with Citibank. The monies subject of said checks originally came from the late
Jose Gotianuy, the owner of the account. Thus, he also has legal rights and interests in the
CBC account where said monies were deposited. More importantly, the Citibank checks
readily demonstrate that the late J ose Gotianuy is one of the payees of said checks.
Being a co-payee thereof, then he or his estate can be considered as a co-depositor of
said checks. Ergo, since the late Jose Gotianuy is a co-depositor of the CBC account,
then his request for the assailed subpoena is tantamount to an express permission of a
depositor for the disclosure of the name of the account holder.











BPI V. CASA MONTESORRI INTERNATIONALE, 430 SCRA 261 (2004)
FACTS: CASA Montessori Internationale (CASA) opened a current account with BPI, with
CASAs president Lebron as one of its authorized signatories
1. After conducting an investigation, CASA found that 9 of its checks had been encashed
by a Sonny Santos amounting to a total of P782,000.
2. It turned out the Sonny Santos was a fictitious name used by Yabut, who worked as an
external auditor of CASA. Yabut admitted that he forged the signature of Lebron and
encashed the checks.
3. CASA, then, filed an action for damages against BPI, praying that the latter be ordered
to reinstate the amount of P782,500 in the current and savings account of CASA.
4. RTC held in favor of CASA. On appeal, CA apportioned the loss between BPI and
CASA. CA took into account CASAs contributory negligence that resulted in the
undetected forgery.

ISSUE: WON BPI is liable in this case

HELD: Yes. Under Sec 23 NIL, a forged signature is a real or absolute defense, and a person
whose signature on a negotiable instrument is forged is deemed to have never become a party
thereto and to have never consented to the contract that allegedly gave rise to it. Yabut
voluntarily admitted that he forged the drawers signature and encashed the checks.

Having established the forgery in the drawers signature, BPI (drawee bank) erred in making
payments by virtue thereof. The forged signatures are wholly inoperative and CASA (drawer)
whose authorized signatures do not appear on the checks, cannot be held liable thereon.

Since the banking business is impressed with public interest, of paramount importance thereto
is the trust and confidence of the public in general. Consequently, the highest degree of
diligence is expected, and high standards of integrity and performance are required.

BPIs contention that it has a signature verification procedure, in which checks are honored only
when the signatures therein are verified to be the same or with similar to the specimen
signatures on the signature cards. However, it still failed to detect the 8 instances of forgery.
Its negligence consisted in the omission of that degree of diligence required of a bank. It
cannot now feign ignorance, since it is very clear that the bank is bound to know the
signature of its customers; and if it pays a forged check, it must be considered as
making the payment out of its own funds, and cannot ordinarily charged the amount so
paid to the account of the depositor whose name was forged.

For allowing payment on the checks to a wrongful and fictitious payee, BPI is liable to its
depositor-drawer. Since the encashing bank is one of its branches, BPI could have easily held
it liable for reimbursement. It may not debit the drawers account and is not entitled to
indemnification from the drawer.

It is well-settled that when one of two innocent persons must suffer the wrongful act of a third
person, the loss must be borne by the one whose negligence is the proximate cause or who put
it into the power of the third person to perpetrate the wrong.





PHIL. BANK OF COMMERCE V. COURT OF APPEALS, 269 SCRA 695 (1997)


















































PHIL. SAVINGS BANK V. CHOWKING FOOD CORP, 557 SCRA 318 (2008)

It is the peculiar quality of a fool to perceive the fault of others and to forget his own. Ang isang
kakatuwang katangian ng isang hangal ay punahin ang kamalian ng iba at kalimutan
naman ang sa kanya.

FACTS: Joe Kuan Food Corporation issued in favor of Chowking five (5) PSBank checks
amounting to P556,981.86.On the respective due dates of each check, Chowking's acting
accounting manager, Rino T. Manzano, endorsed and encashed said checks with the Bustos
branch of respondent PSBank.
1. All the five checks were honored by defendant Santos, even with only the endorsement
of Manzano approving them. The signatures of the other authorized officers of
respondent corporation were absent in the five (5) checks, contrary to usual banking
practice. Unexpectedly, Manzano absconded with and misappropriated the check
proceeds.
2. When Chowking demanded reimbursement from PSBank but to no avail. Chowking filed
a complaint for a sum of money with damages before the RTC. Likewise impleaded were
PS Bank's president, Antonio S. Abacan, and Bustos branch head, Santos.
3. Petitioner, Santos and Abacan were unanimous in asserting that respondent is estopped
from claiming reimbursement and damages since it was negligent in allowing Manzano
to take hold, endorse, and encash its checks. Petitioner pointed out that the proximate
cause of respondent's loss was its own negligence.

ISSUE: WON the respondent's negligence was the proximate cause of its own loss absolving
petitioner from liability

HELD: No. Petitioner failed to prove that it has observed the due diligence required of
banks under the law. Contrary to petitioner's view, its negligence is the proximate cause of
respondent's loss.

It cannot be over emphasized that the banking business is impressed with public interest. Of
paramount importance is the trust and confidence of the public in general in the banking
industry. Consequently, the diligence required of banks is more than that of a Roman pater
familias or a good father of a family. The highest degree of diligence is expected.

In its declaration of policy, the General Banking Law of 2000 requires of banks the highest
standards of integrity and performance. Needless to say, a bank is "under obligation to treat the
accounts of its depositors with meticulous care." The fiduciary nature of the relationship
between the bank and the depositors must always be of paramount concern.Petitioner, through
Santos, was clearly negligent when it honored respondent's checks with the lone endorsement
of Manzano.

Measured by the foregoing yardstick, the proximate cause of the loss is not respondent's
alleged negligence in allowing Manzano to take hold and encash respondent's checks.
The proximate cause is petitioner's own negligence in the supervision of its employees
when it overlooked the irregular practice of encashing checks even without the requisite
endorsements.




GONZALES V. PCIB, 644 SCRA 180 (2011)
FACTS: PCIB granted a credit line to Gonzales through the execution of a Credit-On-Hand
Loan Agreement (COHLA), in which the aggregate amount of the accounts of Gonzales with
PCIB served as collateral for and his availment limit under the credit line. Gonzales drew from
said credit line through the issuance of check. At the institution of the instant case, Gonzales
had a Foreign Currency Deposit (FCD) of USD 8,715.72 with PCIB.
1. Gonzales and his wife obtained a loan for PhP 500,000. Subsequently, on December 26,
1995 and January 3, 1999, the spouses Panlilio and Gonzales obtained two additional
loans from PCIB in the amounts of PhP 1,000,000 and PhP 300,000, respectively.
These three loans amounting to PhP 1,800,000 were covered by three promissory
notes.
2. To secure the loans, a real estate mortgage was executed by Gonzales and the spouses
Panlilio. Notably, the promissory notes specified, the solidary liability of Gonzales and
the Panlilio for the payment of the loans. However, it was the spouses Panlilio who
received the loan proceeds of PhP 1,800,000.
3. The monthly interest dues were paid by the spouses Panlilio through the automatic
debiting of their account with PCIB. But the spouses Panlilio, defaulted.
4. PCIB allegedly called the attention of Gonzales regarding the defaults and the
subsequent accumulating periodic interest dues which were left still left unpaid.
5. In the meantime, Gonzales issued a check in favor of Unsonfor PhP 250,000 drawn
against the credit line. However, upon presentment for payment, it was dishonored by
due to the termination of the credit line for the unpaid periodic interest dues from the
loans. PCIB likewise froze the FCD account of Gonzales.
6. Gonzales had a falling out with Unson due to the dishonor of the check. They had a
heated argument, which caused great embarrassment and humiliation to Gonzales.
Thereafter, Unson sent a demand letter with the threat of legal action.
7. Gonzales, wrote PCIB insisting that the check he issued had been fully funded, and
demanded the return of the proceeds of his FCD as well as damages for the unjust
dishonor of the check.
8. PCIB stood its ground in freezing the accounts. Gonzales reiterated his demand,
reminding PCIB that it knew well that the actual borrowers were the spouses Panlilio and
he never benefited from the proceeds of the loans, which were serviced by the PCIB
account of the spouses Panlilio.
9. PCIBs refusal to heed his demands compelled Gonzales to file the instant case for
damages with the RTC, on account of the alleged unjust dishonor of the check issued in
favor of Unson.
10. 11.The RTC found Gonzales solidarily liable with the spouses Panlilio on the three
promissory notes relative to the outstanding REM loan. The trial court found no fault in
the termination by PCIB of the COHLA with Gonzales and in freezing the latters
accounts to answer for the past due loan. The trial court ruled that the dishonor of the
checkwas proper considering that the credit line had already been terminated or revoked
before the presentment of the check. The CA affirmed the decision.

ISSUES:
1. 1.Whether Gonzales is liable for the three promissory notes he made with the spouses
Panlilio where a REM was constituted as security- yes
2. 2.Whether PCIB properly dishonored the check of Gonzales drawn against the COHLA
he had with the bank.- no

HELD: First Issue: Solidarily Liability on Promissory Notes
Gonzales is liable for the loans covered by the above promissory notes. 1
st
, Gonzales admitted
that he is an accommodation party which PCIB did not dispute. 2
nd
, the records of PCIB bear
out that the proceeds of the loan went to the spouses Panlilio. 3
rd
, as an accommodation party,
Gonzales is solidarily liable with the spouses Panlilio for the loans.

An accommodation party is one who meets all the three requisites, viz: (1) he must be a party to
the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not receive value
therefor; and (3) he must sign for the purpose of lending his name or credit to some other
person. The accommodation party is liable on the instrument to a holder for value even though
the holder, at the time of taking the instrument, knew him or her to be merely an accommodation
party, as if the contract was not for accommodation.

As petitioner acknowledged it to be, the relation between an accommodation party and the
accommodated party is one of principal and suretythe accommodation party being the surety.
As such, he is deemed an original promisor and debtor from the beginning; he is considered in
law as the same party as the debtor in relation to whatever is adjudged touching the obligation
of the latter since their liabilities are interwoven as to be inseparable. Although a contract of
suretyship is in essence accessory or collateral to a valid principal obligation, the suretys
liability to the creditor is immediate, primary and absolute; he is directly and equally bound with
the principal. As an equivalent of a regular party to the undertaking, a surety becomes liable to
the debt and duty of the principal obligor even without possessing a direct or personal interest in
the obligations nor does he receive any benefit therefrom.

Thus, the knowledge, acquiescence, or even demand by Ocampo for an accommodation by
Gonzales in order to extend the credit or loan of PhP 1,800,000 to the spouses Panlilio does not
exonerate Gonzales from liability on the three promissory notes.

4
th
, the solidary liability of Gonzales is clearly stipulated in the promissory notes.

Second Issue: Improper Dishonor of Check
A careful scrutiny of the records shows that the courts a quo committed reversible error in not
finding negligence by PCIB in the dishonor of the PhP 250,000 check.

1
st
- There was no proper notice to Gonzales of the default and delinquency. While not
exonerating his solidary liability, Gonzales has a right to be properly apprised of the default or
delinquency of the loan precisely because he is a co-signatory of the promissory notes and of
his solidary liability.

Thus, PCIB ought to have notified Gonzales about the status of the default or delinquency of the
interest dues that were not paid. And such notification must be formal or in written form
considering that the outstanding periodic interests became due at various dates.

2
nd
-PCIB was grossly negligent in not giving prior notice to Gonzales about its course of action
to suspend, terminate, or revoke the credit line, thereby violating stipulation in the COHLA.

Indeed, the business of banking is impressed with public interest and great reliance is made on
the banks sworn profession of diligence and meticulousness in giving irreproachable service.
Like a common carrier whose business is imbued with public interest, a bank should exercise
extraordinary diligence to negate its liability to the depositors. In this instance, PCIB is sorely
remiss in the diligence required in treating with its client, Gonzales. It may not wantonly exercise
its rights without respecting and honoring the rights of its clients.
The effectivity clause of the COHLA is crystal clear that termination of the COH should be done
only upon prior notice served on the CLIENT. This is the legal duty of PCIBto inform
Gonzales of the termination.

In the instant case, PCIB was able to send a letter advising Gonzales of the unpaid interest on
the loans but failed to mention anything about the termination of the COHLA. More significantly,
no letter was ever sent to him about the termination of the COHLA. The failure to give prior
notice on the part of PCIB is already prima facie evidence of bad faith. Therefore, it is
abundantly clear that this case falls squarely within the purview of the principle of abuse of
rights as embodied in Art. 19.

3
rd
- There is no dispute on the right of PCIB to suspend, terminate, or revoke the COHLA under
the "cross default provisions" of both the promissory notes and the COHLA. However, these
cross default provisions do not confer absolute unilateral right to PCIB, as they are qualified by
the other stipulations in the contracts or specific circumstances, like in the instant case of an
accommodation party.
Thus, due to PCIBs negligence in not giving Gonzales proper notice relative to the
delinquencies, the unjust termination, revocation, or suspension of the credit line from PCIBs
gross negligence in not honoring its obligation to give prior notice to Gonzales about such
termination and in not informing Gonzales of the fact of such termination, treating Gonzales
account as closed and dishonoring his PhP 250,000 check, was certainly a reckless act by
PCIB. This resulted in the actual injury of PhP 250,000 to Gonzales whose FCD account was
frozen and had to look elsewhere for money to pay Unson.

With banks, the degree of diligence required is more than that of a good father of the family
considering that the business of banking is imbued with public interest due to the nature of their
function. The law imposes on banks a high degree of obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of banking.

Third Issue: Award of Damages
The banking system has become an indispensable institution in the modern world and plays a
vital role in the economic life of every civilized societybanks have attained a ubiquitous
presence among the people, who have come to regard them with respect and even gratitude
and most of all, confidence, and it is for this reason, banks should guard against injury
attributable to negligence or bad faith on its part.

In the present case, Gonzales had the right to be informed of the accrued interest and most
especially, for the suspension of his COHLA. For failure to do so, the bank is liable to pay
nominal damages. The amount of such damages is addressed to the sound discretion of the
court, taking into account the relevant circumstances.

Even in the absence of malice or bad faith, a depositor still has the right to recover reasonable
moral damages, if the depositor suffered mental anguish, serious anxiety, embarrassment, and
humiliation. Although incapable of pecuniary estimation, moral damages are certainly
recoverable if they are the proximate result of the defendants wrongful act or omission.

Thus, an award of PhP 50,000 is reasonable moral damages for the unjust dishonor of the
check which was the proximate cause of the consequent humiliation, embarrassment, anxiety,
and mental anguish suffered by Gonzales from his loss of credibility among his friends,
colleagues and peers.
Furthermore, the initial carelessness of the banks omission in not properly informing Gonzales
of the outstanding interest duesaggravated by its gross neglect in omitting to give prior notice
as stipulated under the COHLA and in not giving actual notice of the termination of the credit
linejustifies the grant of exemplary damages of PhP 10,000. Such an award is imposed by
way of example or correction for the public good.

Finally, an award for attorneys fees is likewise called for from PCIBs negligence which
compelled Gonzales to litigate to protect his interest. In accordance with Art. 2208(1) of the
Code, attorneys fees may be recovered when exemplary damages are awarded. We find that
the amount of PhP 50,000 as attorneys fees is reasonable.









































CENTRAL BANK OF THE PHILS V. CITYTRUST BANKING CORP, 578 SCRA 27 (2009)
FACTS: Respondent Citytrust Banking, maintained a demand deposit account with petitioner
Central Bank of the Philippines, now BangkoSentralngPilipinas.
3. As required, Citytrust furnished CB with the names and corresponding signatures of 5 of
its officers authorized to sign checks and serve as drawers and indorsers for its account.
It also provided it with the list and corresponding signatures of its roving tellers
authorized to withdraw, sign receipts and perform other transactions on its behalf.
Petitioner later issued security identification cards to the roving tellers one of whom was
"Rounceval Flores" (Flores).
4. Flores presented for payment to petitioners Senior Teller Iluminada 2 Citytrust checks,
payable to Citytrust, one for P850,000 and the other for P900,000, both of which were
signed and indorsed by Citytrusts authorized signatory-drawers.
5. After the checks were certified by petitioners Accounting Department, Iluminada verified
them, prepared the cash transfer slip on which she affixed her signature, stamped the
checks with the notation "Received Payment" and asked Flores to, as he did, sign on the
space above such notation. Instead of signing his name, however, Flores signed as
"Rosauro C. Cayabyab" a fact Iluminada failed to notice.
6. Iluminada thereupon sent the cash transfer slip and checks to petitioners Cash
Department where an officer verified and compared the drawers signatures on the
checks against their specimen signatures provided by Citytrust, and finding the same in
order, approved the cash transfer slip and paid the corresponding amounts to Flores.
Petitioner then debited the amount of the checks totaling P1,750,000 from Citytrusts
demand deposit account.
7. More than a year and nine months later, Citytrust, by letter, alleging that the checks were
already cancelled because they were stolen, demanded petitioner to restore the
amounts covered thereby to its demand deposit account. Petitioner did not heed the
demand, however.
8. Citytrust later filed a complaint for estafa, with reservation on the filing of a separate civil
action, against Flores. Flores was convicted.
9. Citytrust thereafter filed before the RTC a complaint for recovery of sum of money with
damages against petitioner which it alleged erred in encashing the checks and in
charging the proceeds thereof to its account, despite the lack of authority of "Rosauro C.
Cayabyab."
10. The RTC found both Citytrust and petitioner negligent and held them equally liable for
the loss. The Court of Appeals affirmed the decision, it holding that both parties
contributed equally to the fraudulent encashment of the checks, hence, they should
equally share the loss in consonance with Article 2179/ Article 1172 of the Civil Code.

ISSUE: WON both Citytrust and the Central bank should be equally liable.

HELD: The petition is bereft of merit. Petitioners teller Iluminada did not verify Flores signature
on the flimsy excuse that Flores had had previous transactions with it for a number of years.
That circumstance did not excuse the teller from focusing attention to or at least glancing at
Flores as he was signing, and to satisfy herself that the signature he had just affixed matched
that of his specimen signature. Had she done that, she would have readily been put on notice
that Flores was affixing, not his but a fictitious signature.

Given that petitioner is the government body mandated to supervise and regulate banking and
other financial institutions, the law imposes on banks high standards in view of the fiduciary
nature of banking. Section 2 of RA 8791, which took effect on 13 June 2000, declares that the
State recognizes the "fiduciary nature of banking that requires high standards of integrity and
performance."

This fiduciary relationship means that the banks obligation to observe "high standards of
integrity and performance" is deemed written into every deposit agreement between a bank and
its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence
higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree
of diligence required of an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a good father of a family.

Citytrusts failure to timely examine its account, cancel the checks and notify petitioner of their
alleged loss/theft should mitigate petitioners liability, in accordance with Article 2179 of the Civil
Code which provides that if the plaintiffs negligence was only contributory, the immediate and
proximate cause of the injury being the defendants lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded. For had Citytrust timely
discovered the loss/theft and/or subsequent encashment, their proceeds or part thereof could
have been recovered.

In line with the ruling in Consolidated Bank, the Court deems it proper to allocate the loss
between petitioner and Citytrust on a 60-40 ratio.































G. REYES V. COURT OF APPEALS, 363 SCRA 52 (2001)


















































FAR EAST BANK & TRUST CO. (NOW BPI) VS TENTMAKERS GROUP, INC., 675 SCRA
546 (2012)
FACTS: The signatures of respondents, Gregoria Pilares Santos and Rhoel P. Santos,
President and Treasurer of respondent Tentmakers Group, Inc. (TGI) respectively, appeared on
the 3 promissory notes for loans contracted with petitioner Far East Bank and Trust
Company (FEBTC), now known as Bank of the Philippine Islands (BPI).
1. Gregoria and Rhoel alleged that they did sign on "blank" promissory notes intended for
future use. After a futile demand, FEBTC filed a Complaint before the RTC for the
payment of the principal of the promissory notes.
2. Respondents alleged that FEBTC had no right at all to demand from them the amount
being claimed; it was FEBTCs branch manager, a certain Liza Liwanag, who
represented to Gregoria and Rhoel that they could avail of additional working capital for
TGI by having them sign the promissory notes in advance, which were blank at the time,
so they would be ready for future use
3. RTC - ruled in favor of FEBTC.CA- reversed RTC

ISSUE: WON respondents are liable to FEBTC

HELD: No FEBTC miserably failed to present any document that would serve as basis for its
claim that the proceeds of the 3 promissory notes were indeed credited to the account of the
respondents. Indeed, the Court finds no evidentiary basis to sustain the RTCs finding of actual
receipt by TGI of the amounts stated in the promissory notes. Accordingly, the Court affirms the
CA decision for being more in accord with the facts and evidence on record.

On a final note, FEBTC should have been more circumspect in dealing with its clients. It cannot
be over emphasized that the banking business is impressed with public interest. Of paramount
importance is the trust and confidence of the public in general in the banking industry.
Consequently, the diligence required of banks is more than that of a Roman pater familias or a
good father of a family. The highest degree of diligence is expected. In handling loan
transactions, banks are under obligation to ensure compliance by the clients with all the
documentary requirements pertaining to the approval and release of the loan applications. For
failure of its branch manager to exercise the requisite diligence in abiding by the MORB and the
banking rules and practices, FEBTC was negligent in the selection and supervision of its
employees. In Equitable PCI Bank v. Tan, the Court ruled:

xxx. Banks handle daily transactions involving millions of pesos. By the very nature of their
works the degree of responsibility, care and trustworthiness expected of their employees and
officials is far greater than those of ordinary clerks and employees. Banks are expected to
exercise the highest degree of diligence in the selection and supervision of their employees.
29

For the loss suffered by FEBTC due to its laxity and carelessness to police its own personnel,
the bank has no one to blame but itself. As correctly concluded by the CA, this situation
partakes of the nature of damnum absque injuria.









PNB V. CHEAH CHEE CHONG, 671 SCRA 49 (2012)
FACTS: On November 4, 1992, Ofelia Cheah and her friend AdelinaGuarin were having a
conversation in the latters office when Adelinasfriend, Filipina Tuazon, approached her to ask if
she could have Filipinas check cleared and encashed for a service fee of 2.5%.
1. The check was Bank of America Check No. 190drawn by Atty. Rosales against Bank of
America California, USA, with a face amount of $300,000.00, payable to cash.
2. Because Adelina does not have a dollar account, she asked Ofelia if she could
accommodate Filipinas request since she has a joint dollar savings account with her
husband CheahChee Chongwith PNB Buendia Branch.
3. Ofelia agreed.They met with the Loans Department who referred them to PNB Division
Chief Garin. Garin discussed with them the process of clearing the check and they were
told that it normally takes 15 days. Assured that the deposit and subsequent clearance
of the check is a normal transaction, Ofelia deposited Filipinas check.
4. PNB then sent it for clearing through its correspondent bank, Philadelphia National
Bank. 5 days later, PNB received a credit advice from Philadelphia that the proceeds of
the subject check had been temporarily credited to PNBs account as of November 6,
1992.
5. On November 16, 1992, Garin called up Ofelia to inform her that the check had already
been cleared. The following day, PNB Buendia, after deducting the bank charges,
credited $299,248.37 to the account of the spouses Cheah.
6. Acting on Adelinas instruction to withdraw the credited amount. Filipina received all the
proceeds.
7. In the meantime, the Cable Division of PNB Head Office received on November 16,
1992 a SWIFT message from Philadelphia, informing PNB of the return of the check for
insufficient funds. However, the PNB Head Office could not ascertain to which
branch/office it should forward the same for proper action.
8. After a few days, PNB Head Office ascertained that the SWIFT message was intended
for PNB Buendia Branch.
9. Informed about the bounced check and upon demand by PNB Buendia to return the
money withdrawn, Ofelia immediately contacted Filipina to get the money back. But the
latter told her that all the money had already been given to several people who asked for
the checks encashment. Criminal charges were then filed against these suspect
beneficiaries.
10. Subsequently, PNB sent a demand letter to spouses Cheah for the return of the amount
of the check, froze their peso and dollar deposits, and filed a complaint against them for
Sum of Money with the RTC. In said complaint, PNB demanded payment of
around P8,202,220.44, plus interests and attorneys fees.
11. The RTC ruled in PNBs favor. It held that spouses Cheah were guilty of contributory
negligence.While the CA recognized the spouses Cheah as victims of a scam who
nevertheless have to suffer the consequences of Ofelias lack of care and prudence in
immediately trusting a stranger, the appellate court did not hold PNB scot-free. It
declared both parties equally negligent and should suffer and shoulder the loss.

ISSUE: WON PNB should be held liable.

HELD: PNBs act of releasing the proceeds of the check prior to the lapse of the 15-day clearing
period was the proximate cause of the loss.

Ofelia deposited the subject check on November 4, 1992. Hence, the 15th banking day from the
date of said deposit should fall on November 25, 1992. However, what happened was that PNB
Buendia, upon calling up Ofelia that the check had been cleared, allowed the proceeds thereof
to be withdrawn on November 17 and 18, 1992, a week before the lapse of the standard 15-day
clearing period.

This Court already held that the payment of the amounts of checks without previously clearing
them with the drawee bank especially so where the drawee bank is a foreign bank and the
amounts involved were large is contrary to normal or ordinary banking practice. Also, in
Associated Bank v. Tan, wherein the bank allowed the withdrawal of the value of a check prior
to its clearing, we said that "[b]efore the check shall have been cleared for deposit, the
collecting bank can only assume at its own risk x xx that the check would be cleared and paid
out."

The delay in the receipt by PNB Buendia of the SWIFT message notifying it of the dishonor is of
no moment, because had PNB Buendia waited for the expiration of the clearing period and had
never released during that time the proceeds of the check, it would have already been duly
notified of its dishonor. Clearly, PNBs disregard of its preventive and protective measure
against the possibility of being victimized by bad checks had brought upon itself the injury of
losing a significant amount of money.

It bears stressing that "the diligence required of banks is more than that of a Roman pater
familias or a good father of a family. The highest degree of diligence is expected." PNB
miserably failed to do its duty of exercising extraordinary diligence and reasonable business
prudence. The disregard of its own banking policy amounts to gross negligence, which the law
defines as "negligence characterized by the want of even slight care, acting or omitting to act in
a situation where there is duty to act, not inadvertently but wilfully and intentionally with a
conscious indifference to consequences in so far as other persons may be affected." With
regard to collection or encashment of checks, suffice it to say that the law imposes on the
collecting bank the duty to scrutinize diligently the checks deposited with it for the purpose of
determining their genuineness and regularity. "The collecting bank, being primarily engaged in
banking, holds itself out to the public as the expert on this field, and the law thus holds it to a
high standard of conduct." A bank is expected to be an expert in banking procedures and it has
the necessary means to ascertain whether a check, local or foreign, is sufficiently funded.

Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle
of solution indebiti.

In the case at bench, PNB cannot recover the proceeds of the check under the principle it
invokes. 1
st
, the gross negligence of PNB, can never be equated with a mere mistake of fact,
which must be something excusable and which requires the exercise of prudence. No recovery
is due if the mistake done is one of gross negligence.

The spouses Cheah are guilty of contributory negligence and are bound to share the loss with
the bank. "Contributory negligence is conduct on the part of the injured party,contributing as a
legal cause to the harm he has suffered, which falls below the standard to which he is required
to conform for his own protection."

The fact that the check was cleared after only eight banking days from the time it was deposited
or contrary to what Garin told her that clearing takes 15 days should have already put Ofelia on
guard. She should have first verified the regularity of such hasty clearance considering that if
something goes wrong with the transaction, it is she and her husband who would be put at risk
and not the accommodated party. Thus, we are one with the CA in ruling that Ofelias prior
consultation with PNB officers is not enough to totally absolve her of any liability
In any case, the complaint against the spouses Cheah could not be dismissed. As PNBs client,
Ofelia was the one who dealt with PNB and negotiated the check such that its value was
credited in her and her husbands account. Being the ones in privity with PNB, the spouses
Cheah are therefore the persons who should return to PNB the money released to them.

All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are
equally negligent and should therefore equally suffer the loss. The two must both bear the
consequences of their mistakes.











































EQUITABLE BANKING CORP V, SPECIAL STEEL PRODUCTS INC & A. PARDO, G.R. NO
175350 (JUNE 13, 2012)
A crossed check with the notation "account payee only" can only be deposited in the named
payees account. It is gross negligence for a bank to ignore this rule solely on the basis of a third
partys oral representations of having a good title thereto.

FACTS: Respondent Special Steel Products is a corporation selling steel products. Its co-
respondent Augusto L. Pardo is SSPIs President and majority stockholder.
1. 2. Interco is its regular customer.
2. Jose Isidoro Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the purchasing
department, and the son-in-law of its majority stockholder.
3. Petitioner Equitable is engaged in banking and is the depository bank of Interco and of
Uy.
4. SSPI sold welding electrodes to Interco. The invoices provided that Interco would pay
interest at the rate of 36% per annum in case of delay.
5. In payment for the welding electrodes, Interco issued three checks payable to the order
of SSPI. Each check was crossed with the notation "account payee only" and was drawn
against Equitable.
6. The records disclose that Uy presented each crossed check to Equitable on the day of
its issuance and claimed that he had good title thereto.
7. Equitable acceded to Uys demands on the assumption that Uy, as the son-in-law of
Intercos majority stockholder, was acting pursuant to Intercos orders. The bank also
relied on Uys status as a valued client. Thus, Equitable accepted the checks for deposit
in Uys personal accounts and stamped "ALL PRIOR ENDORSEMENT AND/OR LACK
OF ENDORSEMENT GUARANTEED" on their dorsal portion. Uy promptly withdrew the
proceeds of the checks.
8. SSPI reminded Interco of the unpaid welding electrodes. Interco replied that it had
already issued three checks payable to SSPI and drawn against Equitable. SSPI denied
receipt of these checks.
9. It was determined that Uy, not SSPI, received the proceeds of the three checks that
were payable to SSPI. Thus, 23 months after the issuance of the three checks, Interco
finally paid the value of the three checks, plus a portion of the accrued interests. Interco
refused to pay the entire accrued interest of P767,345.64 on the ground that it was not
responsible for the delay. Thus, SSPI was unable to collect P437,040.35 (at the
contracted rate of 36% per annum) in interest income.
10. SSPI and its president, Pardo, filed a complaint for damages with application for a writ of
preliminary attachment against Uy and Equitable Bank.
11. In his personal capacity, Pardo claimed an award of P3 million as moral damages from
the defendants. He allegedly suffered hypertension, anxiety, and sleepless nights for
fear that the government would charge him for tax evasion or money laundering.
12. The RTC rendered judgment in favor of plaintiffs Special Steel, and Pardo and against
defendants Equitable and Uy," ordering defendants to jointly and severally pay plaintiffs.
The CA affirmed the trial courts ruling that SSPI had a cause of action for quasi-delict
against Equitable.

ISSUE: WON SSPI has a cause of action against Equitable for quasi-delict .

HELD: This case involves a complaint for damages based on quasi-delict. SSPIs cause of
action is not based on the three checks. SSPI does not ask Equitable or Uy to deliver to it the
proceeds of the checks as the rightful payee. SSPI does not assert a right based on the
undelivered checks or for breach of contract. Instead, it asserts a cause of action based on
quasi-delict. Quasi-delicts exist even without a contractual relation between the parties. The
courts below correctly ruled that SSPI has a cause of action for quasi-delict against Equitable.

The checks that Interco issued in favor of SSPI were all crossed, made payable to SSPIs order,
and contained the notation "account payee only." This creates a reasonable expectation that the
payee alone would receive the proceeds of the checks and that diversion of the checks would
be averted. This expectation arises from the accepted banking practice that crossed checks are
intended for deposit in the named payees account only and no other. At the very least, the
nature of crossed checks should place a bank on notice that it should exercise more caution or
expend more than a cursory inquiry, to ascertain whether the payee on the check has
authorized the holder to deposit the same in a different account. In this connection, it is
important that banks should guard against injury attributable to negligence or bad faith on its
part. As repeatedly emphasized, since the banking business is impressed with public interest,
the trust and confidence of the public in it is of paramount importance. Consequently, the
highest degree of diligence is expected, and high standards of integrity and performance are
required of it."

Equitable did not observe the required degree of diligence expected of a banking institution
under the existing factual circumstances.

The fact that a person, other than the named payee of the crossed check, was presenting it for
deposit should have put the bank on guard. It should have verified if the payee (SSPI)
authorized the holder (Uy) to present the same in its behalf, or indorsed it to him. Considering
however, that the named payee does not have an account with Equitable (hence, the latter has
no specimen signature of SSPI by which to judge the genuineness of its indorsement to Uy), the
bank knowingly assumed the risk of relying solely on Uys word that he had a good title to the
three checks. Such misplaced reliance on empty words is tantamount to gross negligence,
which is the "absence of or failure to exercise even slight care or diligence, or the entire
absence of care, evincing a thoughtless disregard of consequences without exerting any effort
to avoid them."

Equitable contends that its knowledge that Uy is the son-in-law of the majority stockholder of the
drawer, Interco, made it safe to assume that the drawer authorized Uy to countermand the order
appearing on the check. It is troubling that Equitable proceeded with the transaction based only
on its knowledge that Uy had close relations with Interco. The bank did not even make inquiries
with the drawer, Interco (whom the bank considered a "valued client"), to verify Uys
representation. The banking system is placed in peril when bankers act out of blind faith and
empty promises, without requiring proof of the assertions and without making the appropriate
inquiries. Had it only exercised due diligence, Equitable could have saved both Interco and the
named payee, SSPI, from the trouble that the banks mislaid trust wrought for them.











Sps. Serfinovs FEBTC, 683 SCRA 380 (Oct. 2012) banks have no duty to freeze an account
when there is an unverified adverse claim -- MON
22. Citytrust Banking Corp (now BPI) vs. I. Villanueva 361 SCRA 446 (2001) -- MON
23. PCI Bank vs. CA and Ford Phils., 350 SCRA 446 (2001) -- MON
24. Bank of America vs. PRC, 594 SCRA 301 (2009) -- MON
25. Westmont Bank vs. M. Dela Rosa-Ramos, 684 SCRA 429 (2012) -- MON