Citibank v.

Spouses Cabamongan
Facts:
Spouses Cabamongan are both based in California. They opened a foreign currency
time deposit account for their children with Citibank. An impostor who claimed to
be Carmelita (wife) preterminated the time deposit after presenting passport, credit
card and other identification.
The bank personnel who attended to the transaction ignored several red flags which
could have alerted the bank as to the real identity of the person claiming to be
Carmelita: (1) she failed to present the certificate of time deposit, (2) there was a
discrepancy in her signature with that in the signature cards of the bank, and (3) the
photo in the bank's file did not look like this person claiming to be Carmelita.
Despite all these irregularities, the bank went through with the transaction, which
only took 40 minutes. The document waiver which the impostor signed was also not
notarized, as required under bank's procedures. When the spouses demanded
payment, the bank refused claiming that the account was already preterminated.
Issue:
W/N the bank is negligent and therefor should be held liable when it allowed the
pretermination of the time deposit in favor of the impostor.
Ruling:
YES. The bank is bound to know the signatures of its customers; and if it pays a
forged check, it must be considered as making payment out of its own funds, and
cannot ordinarily charge the amount so paid to the account of the depositor whose
name was forged. The bank was indeed negligent as it failed to exercise the highest
degree of care and diligence required of it. The banking business is impressed with
public interest and of paramount importance thereto is the trust and confidence of
the public in general.
In this case, it has been sufficiently shown that the signatures of Carmelita in the
forms forpretermination of deposits are forgeries.Citibank, with its signature
verification procedure, failed to detect the forgery. Its negligence consisted in the
omission of that degree of diligence required of banks.