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Banking Laws

1. The New Central Bank Act (RA 7653)


a. State policies
b. Creation of the Bangko Sentral ng Pilipinas (BSP)
c. Responsibility and primary objective
d. Monetary Board
- Powers and functions
e. How the BSP handles banks in distress
(1) Conservatorship also called controllership, pertains to the temporary control
of the state to manage financial affairs of banks in distress; an appointer person is called a
conservator or guardian
(2) Closure act of closing the bank due to fiscal emergency or failure
(3) Receivership also called insolvency; a banking institution that has been
forbidden from doing business in the Phils by the Monetary Board
(4) Liquidation brought about by dissolution
f. How the BSP handles exchange crisis
(1) Legal tender power
(2) Rate of exchange
2. Law on Secrecy of Bank Deposits (RA 1405, as amended)
a. Purpose
b. Prohibited acts
c. Deposits covered
d. Exceptions
e. Garnishment of deposits, including foreign deposits
f. Penalties for violation
3. General Banking Act (RA 8791)
a. Definition and classification of banks
b. Distinction of banks from quasi-banks and trust entities
c. Bank powers and liabilities
(1) Corporate powers
(2) Banking and incidental powers
d. Diligence required of banks
- relevant jurisprudence
e. Nature of bank funds and bank deposits
f. Stipulation on interests
g. Grant of loans and security requirements
(1) Ratio of net worth to total risk assets
(2) Single borrowers limit
(3) Restrictions on bank exposure to DOSRI (directors,
officers, stockholders and their related interests)
h. Penalties for violations
(1) Fine, imprisonment
(2) Suspension or removal of director or officer
(3) Dissolution of bank
4. Philippine Deposit Insurance Corporation Act

a. Basic policy
b. Concept of insured deposits
c. Liability to depositors
(1) Deposit liabilities required to be insured with PDIC
(2) Commencement of liability
(3) Deposit accounts not entitled to payment
(4) Extent of liability
(5) Determination of insured deposits
(6) Calculation of liability
(a) Per depositor, per capacity rule
(b) Joint accounts
(c) Mode of payment
(d) Effect of payment of insured deposit
(e) Payments of insured deposits as preferred credit
under Art. 2244, Civil Code
(f) Failure to settle claim of insured depositor
(g) Failure of depositor to claim insured deposits
i. Examination of banks and deposit accounts
ii. Prohibition against splitting of deposits
iii. Prohibition against issuances of TROs, etc.

Financial Institutions shall refer to business organizations that offer a broad base
of financial services or specialize in specific financial functions, products, or
services, e.g.
banks, investment houses, pension funds, pawnshops, credit unions, investment
companies, insurance companies, securities, brokers and dealers, stock exchanges,
mutual
funds, trust corporations, leasing companies, financing companies, credit card
companies,
companies engaged in foreign exchange dealership/brokerage and others that deal
in money.
Foreign Bank shall refer to a bank or banking corporation formed, organized and
existing under any foreign law
Forex Corporations, whether or not named as such, refer to entities whose
business
include buying and selling of foreign exchange.
Bangko Sentral
Objectives
The BSPs primary objective is to maintain price stability conducive to a balanced and sustainable
economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of
the national currency.
Responsibilities
The BSP provides policy directions in the areas of money, banking and credit. It supervises operations of
banks and exercises regulatory powers over non-bank financial institutions with quasi-banking functions.
Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its
status as the Republics central monetary authority.

Liquidity Management. The BSP formulates and implements monetary policy aimed at
influencing money supply consistent with its primary objective to maintain price stability.

Currency issue. The BSP has the exclusive power to issue the national currency. All notes and
coins issued by the BSP are fully guaranteed by the Government and are considered legal tender
for all private and public debts.

Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for
liquidity purposes.

Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-bank
institutions performing quasi-banking functions.

Management of foreign currency reserves. The BSP seeks to maintain sufficient international
reserves to meet any foreseeable net demands for foreign currencies in order to preserve the
international stability and convertibility of the Philippine peso.

Determination of exchange rate policy. The BSP determines the exchange rate policy of the
Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such
that the role of Bangko Sentral is principally to ensure orderly conditions in the market.

Other activities. The BSP functions as the banker, financial advisor and official depository of the
Government, its political subdivisions and instrumentalities and government-owned and
-controlled corporations.

GOVERNANCE OF THE BANK


The Monetary Board exercises the powers and functions of the BSP, such as the conduct of monetary
policy and supervision of the financial system. Its chairman is the BSP Governor, with five full-time
members from the private sector and one member from the Cabinet.
The Governor is the chief executive officer of the BSP and is required to direct and supervise the
operations and internal administration of the BSP. A deputy governor heads each of the BSP's operating
sector as follows:

Monetary Stability Sector takes charge of the formulation and implementation of the BSPs
monetary policy, including serving the banking needs of all banks through accepting deposits,
servicing withdrawals and extending credit through the rediscounting facility.

Supervision and Examination Sector enforces and monitors compliance to banking laws to
promote a sound and healthy banking system.

Resource Management Sector serves the human, financial and physical resource needs of the BSP

The Monetary Board


The powers and function of Bangko Sentral are exercised by its Monetary Board, which has seven
members appointed by the President of The Philippines. Under the New Central Bank Act, one of the
government sector members of the Monetary Board must also be a member of the Cabinet designated by
the President.
The New Central Bank Act establishes certain qualifications for the members of the Monetary Board and
also prohibits members from holding certain positions with other governmental agencies and private
institutions that may give rise to conflicts of interest. With the exception of the members of the Cabinet,
the Governor and the other members of the Monetary Board serve terms of six years and may only be
removed for cause.

The Monetary Board meets at least once a week. The Board may be called to a meeting by the Governor
of the Bangko Sentral or by two (2) other members of the Board. Usually, the Board meets every
Thursday but on some occasions, it convenes to discuss urgent issues.
The major functions of the Monetary Board include the power to:
1. Issue rules and regulations it considers necessary for the effective discharge
of the responsibilities and exercise of the powers vested in it;
2. Direct the management, operations, and administration of Bangko Sentral,
organize its personnel and issue such rules and regulations as it may deem
necessary or desirable for this purpose;
3. Establish a human resource management system which governs the
selection, hiring, appointment, transfer, promotion, or dismissal of all
personnel;
4. Adopt an annual budget for and authorize such expenditures by Bangko
Sentral as are in the interest of the effective administration and operations of
Bangko Sentral in accordance with applicable laws and regulations; and
5. Indemnify its members and other officials of Bangko Sentral, including
personnel of the departments performing supervision and examination
functions, against all costs and expenses reasonably incurred by such
persons in connection with any civil or criminal action, suit or proceeding, to
which any of them may be made a party by reason of the performance of his
functions or duties, unless such members or other officials is found to be
liable for negligence or misconduct.
The BSP Monetary Board

Chairman Amando M. Tetangco, Jr.

Members Cesar V. Purisima


Alfredo C. Antonio
Ignacio R. Bunye
Peter B. Favila
Felipe M. Medalla
Armando L. Suratos

Simex International Inc. vs. CA [G.R. No. 88013 March 19, 1990]
Facts: Simex International 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.
Simex is a depositor of TRB and maintained a checking account in its Cubao branch.
Simex maintained an account in the amount of P100,000.00, thus increasing its
balance as of that date to P190,380.74. Subsequently, the petitioner issued several
(8) checks against its deposit but was surprised to learn later that they had been
dishonored for insufficient funds.
As a consequence, actions on the pending orders of SIMEX with the other suppliers
(California Manufacturing Comp., Malabon Longlife Trading Corp., etc.) whose
checks were dishonored was deferred. And thus made these companies send
demand letters to SIMEX threatening prosecution if the checks were not made
good.
SIMEX complained to TRB and found out that the sum of P100,000.00 deposited had
not been credited. The error was rectified on June 17, 1981, and the dishonored
checks were paid after they were re-deposited. SIMEX sent demand letter for
reparation against TRB, which was not met, thus a complaint was filed in CFI Rizal
by SIMEX. The court denied the moral & exemplary damages but upheld and
ordered TRB to pay for nominal damages in the amount of P20,000.00 plus attys
fees & costs, which was then affirmed by the CA. The CA 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. It said:
The essential ingredient of moral damages is proof of bad faith (De Aparicio vs.
Parogurga, 150 SCRA 280). Indeed, there was the omission by the defendantappellee bank to credit appellant's deposit of P100,000.00 on May 25, 1981. But the
bank rectified its records. It credited the said amount in favor of plaintiff-appellant in
less than a month. The dishonored checks were eventually paid. These
circumstances negate any imputation or insinuation of malicious, fraudulent,
wanton and gross bad faith and negligence on the part of the defendant-appellant.
It is this ruling that is faulted in the petition now before us.
Issue: Whether or not TRB is guilty of negligence which warrants SIMEX reparation
for damages.
Held: YES. Award SIMEX with moral damages (P20,000) and exemplary damages
(P50,000).
The initial carelessness of the respondent bank, aggravated by the lack of
promptitude in repairing its error, justifies the grant of moral damages. This rather
lackadaisical attitude toward the complaining depositor constituted the gross

negligence, if not wanton bad faith, that the respondent court said had not been
established by the petitioner.
There was also prejudice suffered by SIMEX in the fact that the petitioner's credit
line was canceled and its orders were not acted upon pending receipt of actual
payment by the suppliers. Its business declined. Its reputation was tarnished. Its
standing was reduced in the business community. All this was due to the fault of the
respondent bank which was undeniably remiss in its duty to the petitioner.
We shall recognize that the petitioner did suffer injury because of the private
respondent's negligence that caused the dishonor of the checks issued by it. The
immediate consequence was that its prestige was impaired because of the bouncing
checks and confidence in it as a reliable debtor was diminished.
In the case at bar, it is obvious that the respondent bank was remiss in that duty
and violated that relationship. What is especially deplorable is that, having been
informed of its error in not crediting the deposit in question to the petitioner, the
respondent bank did not immediately correct it but did so only one week later or
twenty-three days after the deposit was made. It bears repeating that the record
does not contain any satisfactory explanation of why the error was made in the first
place and why it was not corrected immediately after its discovery. Such ineptness
comes under the concept of the wanton manner contemplated in the Civil Code that
calls for the imposition of exemplary damages.
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 and
employees 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 newlyopened joint current account of the Canlas spouses that sparked this half-a-millionpeso 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.

SECOND DIVISION
[G.R. No. 125536. March 16, 2000]
PRUDENTIAL BANK, petitioner, vs. COURT OF APPEALS and LETICIA TUPASIVALENZUELA joined by husband Francisco Valenzuela, respondents. Edpm-is
DECISION
QUISUMBING, J.:
This appeal by certiorari under Rule 45 of the Rules of Court seeks to annul and set
aside the Decision dated January 31, 1996, and the Resolution dated July 2, 1997, of
the Court of Appeals in CA G.R. CV No. 35532, which reversed the judgment of the

Regional Trial Court of Valenzuela, Metro Manila, Branch 171, in Civil Case No. 2913V-88, dismissing the private respondent's complaint for damages.
In setting aside the trial court's decision, the Court of Appeals disposed as follows:
"WHEREFORE, the appealed decision is hereby REVERSED and SET
ASIDE and, another rendered ordering the appellee bank to pay
appellant the sum of P100,000.00 by way of moral damages;
P50,000.00 by way of exemplary damages, P50,000.00 for and as
attorney's fees; and to pay the costs. Jjs-c
SO ORDERED."
The facts of the case on record are as follows:
Private respondent Leticia Tupasi-Valenzuela opened Savings Account No. 5744 and
Current Account No. 01016-3 in the Valenzuela Branch of petitioner Prudential Bank,
with automatic transfer of funds from the savings account to the current account.
On June 1, 1988, herein private respondent deposited in her savings account Check
No. 666B (104561 of even date) the amount of P35,271.60, drawn against the
Philippine Commercial International Bank (PCIB). Taking into account that deposit
and a series of withdrawals, private respondent as of June 21, 1988 had a balance
of P35,993.48 in her savings account and P776.93 in her current account, or total
deposits of P36,770.41, with petitioner. Sc-jj
Thereafter, private respondent issued Prudential Bank Check No. 983395 in the
amount of P11,500.00 post-dated June 20, 1988, in favor of one Belen Legaspi. It
was issued to Legaspi as payment for jewelry which private respondent had
purchased. Legaspi, who was in jewelry trade, endorsed the check to one Philip
Lhuillier, a businessman also in the jewelry business. When Lhuillier deposited the
check in his account with the PCIB, Pasay Branch, it was dishonored for being drawn
against insufficient funds. Lhuillier's secretary informed the secretary of Legaspi of
the dishonor. The latter told the former to redeposit the check. Legaspi's secretary
tried to contact private respondent but to no avail.
Upon her return from the province, private respondent was surprised to learn of the
dishonor of the check. She went to the Valenzuela Branch of Prudential Bank on July
4, 1988, to inquire why her check was dishonored. She approached one Albert
Angeles Reyes, the officer in charge of current account, and requested him for the
ledger of her current account. Private respondent discovered a debit of P300.00
penalty for the dishonor of her Prudential Check No. 983395. She asked why her
check was dishonored when there were sufficient funds in her account as reflected
in her passbook. Reyes told her that there was no need to review the passbook

because the bank ledger was the best proof that she did not have sufficient funds.
Then, he abruptly faced his typewriter and started typing. S-jcj
Later, it was found out that the check in the amount of P35,271.60 deposited by
private respondent on June 1, 1988, was credited in her savings account only on
June 24, 1988, or after a period of 23 days. Thus the P11,500.00 check was
redeposited by Lhuillier on June 24, 1988, and properly cleared on June 27, 1988.
Because of this incident, the bank tried to mollify private respondent by explaining
to Legaspi and Lhuillier that the bank was at fault. Since this was not the first
incident private respondent had experienced with the bank, private respondent was
unmoved by the bank's apologies and she commenced the present suit for damages
before the RTC of Valenzuela.
After trial, the court rendered a decision on August 30, 1991, dismissing the
complaint of private respondent, as well as the counterclaim filed by the defendant,
now petitioner.
Undeterred, private respondent appealed to the Court of Appeals. On January 31,
1996, respondent appellate court rendered a decision in her favor, setting aside the
trial court's decision and ordering herein petitioner to pay private respondent the
sum of P100,000.00 by way of moral damages; P50,000.00 exemplary damages;
P50,000.00 for and as attorney's fees; and to pay the costs.
Petitioner filed a timely motion for reconsideration but it was denied. Hence, this
petition, raising the following issues:
I. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DEVIATING FROM ESTABLISHED JURISPRUDENCE IN
REVERSING THE DISMISSAL JUDGMENT OF THE TRIAL COURT AND
INSTEAD AWARDED MORAL DAMAGES, EXEMPLARY DAMAGES AND
ATTORNEY'S FEES. Supr-eme
II. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED IN
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHERE, EVEN IN THE ABSENCE OF EVIDENCE AS FOUND BY THE TRIAL
COURT, AWARDED MORAL DAMAGES IN THE AMOUNT OF P100,000.00.
III. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED IN
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION,
WHERE, EVEN IN THE ABSENCE OF EVIDENCE AS FOUND BY THE TRIAL
COURT, AWARDED P50,000.00 BY WAY OF EXEMPLARY DAMAGES. Court

IV. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED


WITH GRAVE ABUSE OF DISCRETION WHERE EVEN IN THE ABSENCE OF
EVIDENCE, AWARDED ATTORNEY'S FEES.
Simply stated, the issue is whether the respondent court erred and gravely abused
its discretion in awarding moral and exemplary damages and attorney's fees to be
paid by petitioner to private respondent.
Petitioner claims that generally the factual findings of the lower courts are final and
binding upon this Court. However, there are exceptions to this rule. One is where
the trial court and the Court of Appeals had arrived at diverse factual findings.
Petitioner faults the respondent court from deviating from the basic rule that finding
of facts by the trial court is entitled to great weight, because the trial court had the
opportunity to observe the deportment of witness and the evaluation of evidence
presented during the trial. Petitioner contends that the appellate court gravely
abused its discretion when it awarded damages to the plaintiff, even in the face of
lack of evidence to prove such damages, as found by the trial court.
Firstly, petitioner questions the award of moral damages. It claims that private
respondent did not suffer any damage upon the dishonor of the check. Petitioner
avers it acted in good faith. It was an honest mistake on its part, according to
petitioner, when misposting of private respondent's deposit on June 1, 1988,
happened. Further, petitioner contends that private respondent may not "claim"
damages because the petitioner's manager and other employee had profusely
apologized to private respondent for the error. They offered to make restitution and
apology to the payee of the check, Legaspi, as well as the alleged endorsee,
Lhuillier. Regrettably, it was private respondent who declined the offer and allegedly
said, that there was nothing more to it, and that the matter had been put to rest.Jlexj
Admittedly, as found by both the respondent appellate court and the trial court,
petitioner bank had committed a mistake. It misposted private respondent's check
deposit to another account and delayed the posting of the same to the proper
account of the private respondent. The mistake resulted to the dishonor of the
private respondent's check. The trial court found "that the misposting of plaintiffs
check deposit to another account and the delayed posting of the same to the
account of the plaintiff is a clear proof of lack of supervision on the part of the
defendant bank." Similarly, the appellate court also found that "while it may be true
that the bank's negligence in dishonoring the properly funded check of appellant
might not have been attended with malice and bad faith, as appellee [bank]
submits, nevertheless, it is the result of lack of due care and caution expected of an
employee of a firm engaged in so sensitive and accurately demanding task as
banking."

In Simex International (Manila), Inc, vs. Court of Appeals, 183 SCRA 360, 367
(1990), and Bank of Philippine Islands vs. IAC, et al., 206 SCRA 408, 412-413 (1992),
this Court had occasion to stress the fiduciary nature of the relationship between a
bank and its depositors and the extent of diligence expected of the former in
handling the accounts entrusted to its care, thus: Lex-juris
"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 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 account of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. x x x"
In the recent case of Philippine National Bank vs. Court of Appeals, we held that "a
bank is under obligation to treat the accounts of its depositors with meticulous care
whether such account consists only of a few hundred pesos or of millions of pesos.
Responsibility arising from negligence in the performance of every kind of obligation
is demandable. While petitioner's negligence in this case may not have been
attended with malice and bad faith, nevertheless, it caused serious anxiety,
embarrassment and humiliation". Hence we ruled that the offended party in said
case was entitled to recover reasonable moral damages.
Even if malice or bad faith was not sufficiently proved in the instant case, the fact
remains that petitioner has committed a serious mistake. It dishonored the check
issued by the private respondent who turned out to have sufficient funds with
petitioner. The bank's negligence was the result of lack of due care and caution
required of managers and employees of a firm engaged in so sensitive and
demanding business as banking. Accordingly, the award of moral damages by the
respondent Court of Appeals could not be said to be in error nor in grave abuse of
its discretion. Juri-smis
There is no hard-and-fast rule in the determination of what would be a fair amount
of moral damages since each case must be governed by its own peculiar facts. The
yardstick should be that it is not palpably and scandalously excessive. In our view,

the award of P100,000.00 is reasonable, considering the reputation and social


standing of private respondent Leticia T. Valenzuela.
The law allows the grant of exemplary damages by way of example for the public
good. The public relies on the banks' sworn profession of diligence and
meticulousness in giving irreproachable service. The level of meticulousness must
be maintained at all times by the banking sector. Hence, the Court of Appeals did
not err in awarding exemplary damages. In our view, however, the reduced amount
of P20,000.00 is more appropriate. Jj-juris
The award of attorney's fees is also proper when exemplary damages are awarded
and since private respondent was compelled to engage the services of a lawyer and
incurred expenses to protect her interest. The standards in fixing attorney's fees
are: (1) the amount and the character of the services rendered; (2) labor, time and
trouble involved; (3) the nature and importance of the litigation and business in
which the services were rendered; (4) the responsibility imposed; (5) the amount of
money and the value of the property affected by the controversy or involved in the
employment; (6) the skill and the experience called for in the performance of the
services; (7) the professional character and the social standing of the attorney; (8)
the results secured, it being a recognized rule that an attorney may properly charge
a much larger fee when it is contingent than when it is not. In this case, all the
aforementioned weighed, and considering that the amount involved in the
controversy is only P36,770.41, the total deposit of private respondent which was
misposted by the bank, we find the award of respondent court of P50,000.00 for
attorney's fees, excessive and reduce the same to P30,000.00.
WHEREFORE, the assailed DECISION of the Court of Appeals is hereby AFFIRMED,
with MODIFICATION. The petitioner is ordered to pay P100,000.00 by way of moral
damages in favor of private respondent Leticia T. Valenzuela. It is further ordered to
pay her exemplary damages in the amount of P20,000.00 and P30,000.00,
attorney's fees. Jksm
Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
BPI vs. CA 326 SCRA 641 (2000)
Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a dollar
check owned by Henry Chan in which he affixed his signature at the dorsal side thereof. For this purpose,
Napiza gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold of the withdrawal slip and

used it to withdraw the proceeds of the dollar check, even before the check was cleared and without the
presentation of the bank passbook.
Issues:
(1) Whether or not petitioner can hold private respondent liable for the proceeds of the check for having
affixed his signature at the dorsal side as indorser; and
(2) Whether or not the bank was negligent as the proximate cause of the loss and should be held liable.
Held:
(1) No. Ordinarily, private respondent may be held liable as an indorser of the check or even as an
accommodation party. However, to hold him liable would result in an injustice. The interest of justice thus
demands looking into the events that led to the encashment of the check.
Under the rules appearing in the passbook that BPI issued to private respondent, to be able to withdraw
under the Philippine foreign currency deposit system, two requisites must be presented to petitioner BPI
by the person withdrawing an amount:
1) A duly filled-up withdrawal slip; and
2) The depositors passbook.
Petitioner bank alleged that had private respondent indicated therein the person authorized to receive the
money, then Gayon could not have withdrawn any amount. However, the withdrawal slip itself indicates a
special instruction that the amount is payable to Ramon de Guzman and/or Agnes de Guzman. Such
being the case, petitioners personnel should have been duly warned that Gayon was not the proper payee
of the proceeds of the check. Moreover, the fact that private respondents passbook was not presented
during the withdrawal is evidenced by the entries therein showing that the last transaction that he made
was when he deposited the subject check.
(2) Yes. 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. Petitioner failed to exercise the diligence of a
good father of a family. In total disregard of its own rules, petitioners personnel negligently handled
private respondents account to petitioners detriment.
The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on petitioners 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, 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.