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1. SIMEX INTERNATIONAL (MANILA), INCORPORATED, v.

it is not enough to say that the private respondent rectified its records and
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL credited the deposit in less than a month as if this were sufficient repentance.
BANK The error should not have been committed in the first place. The respondent
bank has not even explained why it was committed at all. It is true that the
FACTS: The petitioner is a private corporation engaged in the exportation of food dishonored checks were, as the Court of Appeals put it, "eventually" paid.
products. It buys these products from various local suppliers and then sells them However, this took almost a month when, properly, the checks should have been
abroad, particularly in the United States, Canada and the Middle East. Most of its paid immediately upon presentment.
exports are purchased by the petitioner on credit. We also note that while stressing the rectification made by the respondent bank,
The petitioner was a depositor of the respondent bank and maintained a the decision practically ignored the prejudice suffered by the petitioner. This was
checking account in its branch at Romulo Avenue, Cubao, Quezon City. On May simply glossed over if not, indeed, disbelieved. The fact is that the petitioner's
25, 1981, the petitioner deposited to its account in the said bank the amount of credit line was canceled and its orders were not acted upon pending receipt of
P100,000.00, thus increasing its balance as of that date to P190,380.74. 1 actual payment by the suppliers. Its business declined. Its reputation was
Subsequently, the petitioner issued several checks against its deposit but was tarnished. Its standing was reduced in the business community. All this was due
suprised to learn later that they had been dishonored for insufficient funds. to the fault of the respondent bank which was undeniably remiss in its duty to the
petitioner.
As a consequence, the California Manufacturing Corporation sent on June 9,
1981, a letter of demand to the petitioner, threatening prosecution if the Article 2205 of the Civil Code provides that actual or compensatory damages
dishonored check issued to it was not made good. It also withheld delivery of the may be received "(2) for injury to the plaintiff s business standing or commercial
order made by the petitioner. Similar letters were sent to the petitioner by the credit." There is no question that the petitioner did sustain actual injury as a result
Malabon Long Life Trading, on June 15, 1981, and by the G. and U. Enterprises, of the dishonored checks and that the existence of the loss having been
on June 10, 1981. Malabon also canceled the petitioner's credit line and established "absolute certainty as to its amount is not required." Such injury
demanded that future payments be made by it in cash or certified check. should bolster all the more the demand of the petitioner for moral damages and
Meantime, action on the pending orders of the petitioner with the other suppliers justifies the examination by this Court of the validity and reasonableness of the
whose checks were dishonored was also deferred. said claim.
The petitioner complained to the respondent bank on June 10, 1981.
Investigation disclosed that the sum of P100,000.00 deposited by the petitioner From every viewpoint except that of the petitioner's, its claim of moral damages
on May 25, 1981, had not been credited to it. The error was rectified on June 17, in the amount of P1,000,000.00 is nothing short of preposterous. Its business
1981, and the dishonored checks were paid after they were re-deposited. certainly is not that big, or its name that prestigious, to sustain such an
In its letter dated June 20, 1981, the petitioner demanded reparation from the extravagant pretense. Moreover, a corporation is not as a rule entitled to moral
respondent bank for its "gross and wanton negligence." This demand was not damages because, not being a natural person, it cannot experience physical
met. The petitioner then filed a complaint in the then Court of First Instance of suffering or such sentiments as wounded feelings, serious anxiety, mental
Rizal claiming from the private respondent moral damages in the sum of anguish and moral shock. The only exception to this rule is where the corporation
P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25% has a good reputation that is debased, resulting in its social humiliation.
attorney's fees, and costs.
In every case, the depositor expects the bank to treat his account with the utmost
RTC: Rendered judgment holding that moral and exemplary damages were not fidelity, whether such account consists only of a few hundred pesos or of millions.
called for under the circumstances. However, observing that the plaintiff's right The bank must record every single transaction accurately, down to the last
had been violated, he ordered the defendant to pay nominal damages in the centavo, and as promptly as possible. This has to be done if the account is to
amount of P20,000.00 plus P5,000.00 attorney's fees and costs. 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
CA: Affirmed RTC’s decision. 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
ISSUE: WON the petitioner is entitled to moral damages loss and perhaps even civil and criminal litigation.
RULING: Yes. This Court has carefully examined the facts of this case and finds The point is that as a business affected with public interest and because of the
that it cannot share some of the conclusions of the lower courts. It seems to us nature of its functions, the bank is under obligation to treat the accounts of its
that the negligence of the private respondent had been brushed off rather lightly depositors with meticulous care, always having in mind the fiduciary nature of
as if it were a minor infraction requiring no more than a slap on the wrist. We feel their relationship. In the case at bar, it is obvious that the respondent bank was

1 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
remiss in that duty and violated that relationship. What is especially deplorable is dishonored the check because of insufficiency of funds and because the
that, having been informed of its error in not crediting the deposit in question to signature differed from PBC’s specimen signature.
the petitioner, the respondent bank did not immediately correct it but did so only - Failing to get back the passbook, Macaraya went back to her office and
one week later or twenty-three days after the deposit was made. It bears reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.
repeating that the record does not contain any satisfactory explanation of why the - The following day, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz,
error was made in the first place and why it was not corrected immediately after called up Solidbank to stop any transaction using the same passbook until L.C.
its discovery. Such ineptness comes under the concept of the wanton manner Diaz could open a new account followed by a formal written request later that
contemplated in the Civil Code that calls for the imposition of exemplary day. It was also on the same day that L.C. Diaz learned of the unauthorized
damages. withdrawal the day before, 14 August 1991, of P300, 000 from its savings
After deliberating on this particular matter, the Court, in the exercise of its account. The withdrawal slip bore the signatures of the authorized signatories of
discretion, hereby imposes upon the respondent bank exemplary damages in the L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied
amount of P50,000.00, "by way of example or correction for the public good," in signing the withdrawal slip. A certain Noel Tamayo received the P300, 000.
the words of the law. It is expected that this ruling will serve as a warning and - L.C. Diaz charged its messenger, Ilagan and Vedazola with estafa through
deterrent against the repetition of the ineptness and indifference that has been Falsification of Commercial Document. RTC Manila dismissed the criminal case.
displayed here, lest the confidence of the public in the banking system be further L.C. Diaz then demanded from Solidbank the return of its money but to no avail.
impaired.
RTC: Rendered decision absolving Solidbank and dismissing the complaint.
2. CONSOLIDATED BANK and TRUST CO. v. CA > The rules state that “possession of this book raise the presumption of
ownership and any payment or payments made by the bank upon the production
FACTS: Solidbank is a domestic banking corporation while private respondent of the said book and entry therein of the withdrawal shall have the same effect as
L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership if made to the depositor personally.”
engaged in the practice of accounting. - At the time of the withdrawal, a certain Noel Tamayo was not only in possession
- L.C. Diaz opened a savings account with Solidbank. In 1991, Diaz through its of the passbook, he also presented a withdrawal slip with the signatures of the
cashier, Mercedes Macaraya, filled up a savings cash deposit slip for P900 and a authorized signatories of L.C. Diaz. The teller stamped the withdrawal slip with
savings checks deposit slip for P50. the words “Saving Teller No. 5” then passed on to Genere Manuel for
- Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the authentication. Manuel verified the signatures on the slip and then given to
money with Solidbank and give him the Solidbank passbook. Calapre went to another office who compared the signatures on the withdrawal slip with the
Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. specimen on the signature cards.
- The teller acknowledged receipt of the deposit by returning to Calapre the > The Trial court concluded that the Solidbank acted with care and observed the
duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips rules on savings account when it allowed the withdrawal of P300, 000 from the
with the words “DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD savings account of L.C. Diaz.
OFFICE”. > Another provision of the rules on savings account states that the depositor
- Since the transaction took time and Calapre had to make another deposit for must keep the passbook “under lock and key”. It ruled that the passbook
L.C. Diaz with Allied Bank, he left the passbook with Solidbank. When Calapre presented during the questioned transaction was now out of the lock and key and
returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that presumptively ready for a business transaction. Solidbank did not have any
somebody got the passbook. Calapre went back to L.C. Diaz and reported the participation in the custody and care of the passbook.
incident to Macaraya. - The trial court held that L.C. Diaz’s negligence caused the unauthorized
- Macaraya immediately prepared a deposit slip in duplicate copies with a check withdrawal. Three facts established such negligence:
of P200,000. Macaraya, together with Calapre, went to Solidbank and presented (1) The possession of the passbook by a person other than the depositor, L.C.
Teller No. 6 the deposit slip and check. The teller stamped the words Diaz
“DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD OFFICE” on the (2) The presentation of a signed withdrawal receipt by an unauthorized person
duplicate copy of the deposit slip. When Macaraya asked for the passbook, Teller and,
No. 6 told Macaraya that someone shorter than Calapre got the passbook but (3) The possession by an unauthorized person of a PBC check “long closed” by
she couldn’t remember to whom she gave the passbook. L.C. Diaz
- Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the CA: Ruled that Solidbank’s negligence was the proximate cause of the
deposit of a check for P90, 000 drawn on Philippine Banking Corporation. This unauthorized withdrawal. This is in consonance to Article 2176 of the Civil Code
PBC check of L.C. Diaz was a check that it had “long closed”. PBC subsequently which states: “Whoever by act or omission causes damage to another, there

2 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
being fault or negligence, is obliged to pay for the damage done. Such fault or - However, L.C. Diaz was guilty of contributory negligence in allowing a
negligence, if there is no pre-existing contractual relation between the parties, is withdrawal slip signed by its authorized signatories to fall into the hands of an
called a quasi-delict and is governed by provisions of this Chapter.” impostor. Thus, the liability of Solidbank should be reduced. Hence, the liability
- The CA pointed out that the teller of Solidbank who received the withdrawal slip of Solidbank for actual damages was reduced to only 60%, the remaining 40%
allowed the withdrawal without making necessary inquiry. The teller should have was borne by private respondent.
called up L.C. Diaz because the amount of money withdrawn was of significant
amount. The teller did not even verify the identity of the impostor who made the 3. METROPOLITAN BANK AND TRUST COMPANY v. CABILZO
withdrawal. Thus, Solidbank is liable for negligence in the selection and
supervision of its employees. Facts: Petitioner Metrobank is a banking institution duly organized and existing
> Solidbank could not escape liability because of the doctrine of last clear as such under Philippine laws. Respondent Renato D. Cabilzo (Cabilzo) was one
chance. Solidbank could have averted the injury suffered by L.C. Diaz had it of Metrobank’s clients who maintained a current account with Metrobank Pasong
called up L.C. Diaz to verify the withdrawal. Tamo Branch. Cabilzo issued a Metrobank Check No. 985988, payable to
> The degree of diligence required from Solidbank is more than that of a "CASH" and postdated on 24 November 1994 in the amount of One Thousand
good father of a family. The business and functions of banks are affected with Pesos (P1,000.00). The check was drawn against Cabilzo’s Account with
public interest. Banks are obligated to treat the accounts of their depositors with Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and
meticulous care, always having in mind the fiduciary nature of their relationship was paid by Cabilzo to a certain Mr. Marquez, as his sales commission. The
with their clients. Thus, Solidbank is remiss in its duty, violating its fiduciary check was presented to Westmont Bank for payment. Westmont Bank, in turn,
relationship with L.C. Diaz. indorsed the check to Metrobank for appropriate clearing. After the entries
thereon were examined, including the availability of funds and the authenticity of
ISSUE: Whether or not Solidbank must be held liable for the fraudulent the signature of the drawer, Metrobank cleared the check for encashment in
withdrawal on private respondent’s account. accordance with the Philippine Clearing House Corporation (PCHC) Rules.

RULING: YES. However, the liability of Solidbank is reduced. Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some
> Solidbank is liable for breach of contract due to negligence or culpa transaction when he was asked by a bank personnel if Cabilzo had issued a
contractual. The contract between the bank and its depositor is governed by the check in the amount of P91,000.00 to which the former replied in the negative.
provisions of the Civil Code on Simple Loan. Article 1980 of the Civil Code states On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate
“Fixed, savings, and current deposits of money in banks and similar that he did not issue a check in the amount of P91,000.00 and requested that the
institutions shall be governed by the provisions concerning simple loan.” questioned check be returned to him for verification, to which Metrobank
There is debtor-creditor relationship between the bank (debtor) and depositor complied. Upon receipt of the check, Cabilzo discovered that Metrobank Check
(creditor). No. 985988 which he issued on 12 November 1994 in the amount of P1,000.00
- The law imposes in banks high standards in view of the fiduciary nature of was altered to P91,000.00 and the date 24 November 1994 was changed to 14
banking. This in view of Section of the GBL (RA 8791). November 1994.
> Section 2 of R A 8791 prescribes the statutory diligence required from banks-
that banks must observe high standards of integrity and performance in servicing Cabilzo demanded that Metrobank re-credit the amount of P91, 000, however
their depositors. Metrobank refused and failed to re-credit the amount. The counsel of Cabilzo
> Article 1172 of the Civil Code provides that responsibility arising from sent a demand letter to Metrobank for the payment of P90, 000 after deducting
negligence in the performance of every kind of obligation is demandable. For the original amount of the check, amounting to P1,000. Despite the demand
breach of the savings deposit agreement due to negligence or culpa contractual, letter, Metrobank refused and failed to comply.
the bank is liable to its depositors.
- For failing to return the passbook to Calapre, the authorized representative of Cablizo filed a civil action against Metrobank before the RTC praying for
L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high reimbursement, actual and moral damages to be awarded in his favor.
degree of diligence in safeguarding the passbook and in insuring its return to the Petitioner’s contention: Upon the receipt of the said check through the PCHC
party authorized to receive the same. on 14 November 1994, it examined the genuineness and the authenticity of the
- Doctrine of Last Clear Chance is not applicable in this case. Solidbank is drawer’s signature appearing thereon and the technical entries on the check
liable for breach of contract due to negligence in the performance of its including the amount in figures and in words to determine if there were
contractual obligation to L.C. Diaz. alterations, erasures, superimpositions or intercalations thereon, but none was
noted.

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Metrobank claimed that as a collecting bank and the last indorser, Westmont 4. PNB v. PIKE
Bank should be held liable for the value of the check. Westmont Bank indorsed
the check as the an unqualified indorser, by virtue of which it assumed the liability FACTS: Respondent often travelled to and from Japan as a gay entertainer.
of a general indorser, and thus, among others, warranted that the instrument is Sometime in 1991, he opened a U.S. Dollar Savings Account No. 0265-704591-0
genuine and in all respect what it purports to be. with Petitioner in its Buendia branch for which he was issued a passbook. It was
alleged that before Respondent left for Japan, he placed the passbook inside a
RTC—in favor of Cabilzo cabinet under lock and key; that a few hours after he arrived in Japan, he
Stressing the fiduciary nature of the relationship between the bank and discovered that some of his valuables including the passbook were missing. He
its clients and the negligence of the drawee bank in failing to detect an immediately reported the incident to the police which led to the arrest of Joy
apparent alteration on the check. Manuel Davasol and Respondent also discovered that there were 2 unauthorized
withdrawals from his US Dollar Savings Account both times at the PNB Buendia
CA—affirmed the Decision of the trial court Branch.
Metrobank is liable for the amount of the check, without prejudice, March 31, 1993 – $3,500
however, to the outcome of the case between Metrobank and April 5 1993 - $4,000
Westmont Bank. that on several occasions, complainant Pike went to petitioner PNB’s Buendia
Hence, this petition. branch and verbally protested the unauthorized withdrawals and likewise
demanded the return of the total withdrawn amount of U.S. $7,500.00, on the
Issue: W/N Metrobank should be held liable for damages for its negligence. ground that he never authorized anybody to withdraw from his account as the
Held: YES. The degree of diligence required of a reasonable man in the exercise signatures appearing on the subject withdrawal slips were clearly forgeries; that
of his tasks and the performance of his duties has been faithfully complied with petitioner PNB refused to credit said amount back to Respondent’s U.S. Dollar
by Cabilzo. In fact, he was wary enough that he filled with asterisks the space Savings Account without justifiable reason, and instead, Petitioner bank wrote
between and after the amounts, not only those stated in words but also those in him that it exercised due diligence in the handling of said account; and that on 06
numerical figures in order to prevent any fraudulent insertion. Metrobank cannot May 1993, Respondent Pike wrote defendant PNB simply to request that the
rely on the doctrine of equitable estoppel which states that “when one of the two hold-account be lifted so that he may withdraw the remaining balance left in his
innocent persons, each guiltless of any intentional or moral wrong, must suffer a U.S.$ Savings Account and nothing else.
loss, it must be borne by the one whose erroneous conduct, either by omission or On the other hand, Petitioner bank has a different version of facts as
commission, was the cause of injury.” Metrobank did not prove that Cabilzo was follows: On March 15, 1993 at PNB Buendia Branch, Mr. Norman Y. Pike,
negligent or that this negligence was the proximate cause of the loss. Negligence together with a certain Joy Davasol went to see PNB AVP Mr. Lorenzo T. Val Jr.
is not presumed but it must be proven by the one who alleges it. Banking is a purposely to withdraw the amount of $2,000.00. Mr. Pike also informed AVP Val
business affected with public interest and because of the nature of its functions, that he is leaving for Japan and made verbal instruction to honor all withdrawals
the bank is under obligation to treat the accounts of its depositors with meticulous to be transmitted by his Talent Manager and Choreographer, Joy Davasol who
care, always having in mind the fiduciary nature of their relationship. The shall present pre-signed withdrawal slips bearing his signature. On April 19,
appropriate degree of diligence required of a bank must be a high degree of 1993, a certain Josephine Balmaceda, who claimed to be plaintiff’s sister
diligence, if not the utmost diligence. Here, the alterations on the check are executed an affidavit stating therein tha they discovered today (April 19, 1993)
visible to the naked eye but Metrobank failed to detect the alterations which could the lost (sic) of her brother’s passbook issued by PNB on account of robbery,
not escape the attention of even an ordinary person. This negligence is further committed in the residence/office of her brother, promptly reporting the matter to
exacerbated by the fact that it was the cash custodian who examined the check the police authorities and her brother cannot report the matter to the Bank
when his functions do not involve the examining of checks. Obviously, the because he was currently in Japan and therefore requesting the Bank to issue a
custodian was not versed and competent in handling such duty. Banks are hold-order on her brother’s passbook.
expected to exercise the highest degree of diligence in the selection and  RTC – Petitioner Bank is liable. The court is not impressed
supervision of employees. with the defense put up by the bank. Its contention that the
withdrawals were authorized by the plaintiff because there
was an arrangement between the bank represented by its
Asst. Vice President Lorenzo Bal, Jr. and the depositor
Norman Y. Pike to the effect that pre-signed withdrawal slips,
that is, withdrawal slip signed by the depositor in the presence
of Mr. Bal whereby it would be made to appear that it was the

4 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
depositor himself who presented the same to the bank despite bank’s employee, Lorenzo T. Bal, an Assistant Vice President at that, was
the fact that it was another person who presented the same exceedingly careless in his treatment of respondent Pike’s savings account.
should be honored by the bank cannot be sanctioned by the
court. Firstly, the court is not satisfied that there was indeed 5. BPI v. LIFETIME MARKETING
such an arrangement. It is Mr. Bal’s contention that such an
arrangement although not ordinarily entered into is still a legal FACTS: Lifetime Marketing Corporation (LMC) opened a current account with the
procedure of the bank and is resorted to accommodate the Bank of the Philippine Islands (BPI) Greenhills-Edsa branch. In this account, the
depositors specially honored and valued depositor at that sales agents of LMC would have to deposit their collections or payments to the
time. The court compared the signatures in the questioned latter.
withdrawal slips with the known signatures of the depositor As a result, LMC and BPI, made a special arrangement that the
and is convinced that the signatures in the unauthorized former’s agents will accomplish three (3) copies of the deposit slips, the third
withdrawal slips do not correspond to the true signatures of copy to be retained and held by the teller until LMC’s authorized representatives
the depositor. shall retrieve them on the following banking day.
 CA – affirmed RTC; PNB was negligent in exercising the LMC availed of the BPI’s inter-branch banking network services
diligence required of a business imbued with public interest wherein BPI’s bank tellers were no longer obliged to retain the extra copy of the
such as that of the banking industry. deposit slips instead, they will rely on the machine-validated deposit slip, to be
Petitioner PNB contends that due to the verbal instructions of submitted by LMC’s agents.
respondent Pike, a valued depositor, it allowed the withdrawal by another person. On various dates, Alice Laurel, one of LMC’s Educational Consultants
Plus, the fact that said respondent withdrew the remaining balance in his US or agents deposited checks to LMC’s subject account at different branches of
Savings Account and executed a waiver releasing petitioner PNB from any BPI. Each check thus deposited were retrieved by Alice Laurel after the deposit
liability due to the loss of the funds should rightly negate a finding of negligence slips were machine-validated, except thirteen (13) checks which bore no machine
on its part. validation.
A verification with BPI by LMC showed that Alice Laurel made check
ISSUE: WON PNB failed to exercise the diligence required in safeguarding the deposits with the named BPI branches and, after the check deposit slips were
Petitioner US Dollar Savings Account? machine-validated, requested the teller to reverse the transactions. This requires
that all copies of the deposit slips must be retrieved or surrendered to the bank.
RULING: Yes, PNB failed to exercise the required diligence in banks. Notwithstanding this, the verbal requests of Alice Laurel and her husband to
withdrawals. The Court held that with banks, the degree of diligence required, reverse the were accommodated by BPI tellers.
contrary to the position of petitioner PNB, is more than that of a good father of a Alice Laurel presented the machine-validated deposit slips to LMC
family considering that the business of banking is imbued with public interest due which, on the strength thereof, considered her account paid. The total amount
to the nature of their functions. The stability of banks largely depends on the covered by Alice’s deposit slips was P2,767,594.00 and, for which, LMC paid
confidence of the people in the honesty and efficiency of banks. Thus, the law Laurel the total of P560,726.00 by way of sales discount and promo prizes.
imposes on banks a high degree of obligation to treat the accounts of its Upon discovery of this fraud in early August 1992, LMC made queries
depositors with meticulous care, always having in mind the fiduciary nature of from the BPI branches involved., BPI branch managers formally admitted that
banking. Section 2 of RA 8791, makes a categorical declaration that the State they cancelled, without the permission of or due notice to LMC, the deposit
recognizes the „fiduciary nature of banking that requires high standards of transactions made by Alice and her husband, and based only upon the latter’s
integrity and performance. Though passed long after the unauthorized verbal request or representation.
withdrawals in this case, the provision is a statutory affirmation of Supreme Court LMC immediately instituted a criminal action for Estafa against Alice
decisions already in esse at the time of such withdrawals. We elucidated in the Laurel and her husband Thomas Limoanco before the RTC. But it was archived
1990 case of Simex International, Inc. v. Court of Appeals, “the bank is under because summons could not be served upon the spouses as they have
obligation to treat the accounts of its depositors with meticulous care, always absconded.
having in mind the fiduciary nature of their relationship. Here, having admitted LMC filed a Complaint for Damages against BPI before the RTC of
that pre-signed withdrawal slips do not constitute the normal procedure with Makati.
respect to withdrawals by representatives should have already put petitioner
PNB’s employees on guard. Rather than readily validating and permitting said RTC: Ordered BPI to pay LMC P1Million pesos plus 100,000.00 attorney’s fees.
withdrawals, they should have proceeded more cautiously. Clearly, petitioner

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CA: Affirmed the decision of the trial court but increased the award of actual
damages to P2,075,695.50 and deleted the award of P100,000.00 as attorney’s 6. BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI
fees. INTERNATIONALE and LEONARDO T. YABUT, respondents

Hence, this petition for review. FACTS: On November 8, 1982, plaintiff CASA Montessori International opened
Current Account No. 0291-0081-01 with defendant BPI, with CASAs President
Ms. Ma. Carina C. Lebron as one of its authorized signatories.
BPI: In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its
1. LMC should have presented evidence to prove not only the amount of the checks had been encashed by a certain Sonny D. Santos since 1990 in the total
checks that were deposited and subsequently reversed, but also the actual amount of P782, 000.00. It turned out that Sonny D. Santos with account at BPIs
delivery of the books and the payment of „sales and promo prizes to Alice Greenbelt Branch was a fictitious name used by third party defendant Leonardo
Laurel. T. Yabut who worked as external auditor of CASA. Third party defendant
voluntarily admitted that he forged the signature of Ms. Lebron and encashed the
2. LMC’s negligence in considering the machine-validated check deposit slips as checks.
evidence of Alice Laurel’s payment was the proximate cause of its own loss. The PNP Crime Laboratory conducted an examination of the nine (9) checks and
concluded that the handwritings thereon compared to the standard signature of
LMC allegedly ignored the express notice indicated in its monthly bank Ms. Lebron were not written by the latter.
statements and consequently failed to check the accuracy of the transactions On March 4, 1991, plaintiff filed the herein Complaint for Collection with
reflected therein. Damages against defendant bank praying that the latter be ordered to reinstate
the amount of P782,500.00 in the current and savings accounts of the plaintiff
ISSUE: Whether BPI was negligent in reversing the transactions subject of with interest at 6% per annum.
this case RTC: Favored the Plaintiff.
CA: Modifying the Decision of the Regional Trial Court (RTC), the CA
RULING: YES. Negligence is the omission to do something which a reasonable apportioned the loss between BPI and CASA. The appellate court took into
man, guided by those considerations which ordinarily regulate the conduct of account CASAs contributory negligence that resulted in the undetected forgery. It
human affairs, would do, or the doing of something which a prudent and then ordered Leonardo T. Yabut to reimburse BPI half the total amount claimed;
reasonable man would not do. and CASA, the other half. It also disallowed attorney’s fees and moral and
Negligence in this case lies in the tellers’ disregard of the validation exemplary damages.
procedures in place and BPI’s utter failure to supervise its employees. Notably,
BPI’s managers admitted in several correspondences with LMC that the deposit ISSUE: WON BPI is negligent and is liable for damages.
transactions were cancelled without LMC’s knowledge and consent and based
only upon the request of Alice Laurel and her husband. RULING: We have repeatedly emphasized that, since the banking business is
It is well to reiterate that the degree of diligence required of banks is impressed with public interest, of paramount importance thereto is the trust and
more than that of a reasonable man or a good father of a family. In view of the confidence of the public in general. Consequently, the highest degree of diligence
fiduciary nature of their relationship with their depositors, banks are duty-bound is expected, and high standards of integrity and performance are even required,
to treat the accounts of their clients with the highest degree of care. of it. By the nature of its functions, a bank is under obligation to treat the
BPI cannot escape liability because of LMC’s failure to scrutinize the accounts of its depositors with meticulous care, always having in mind the
monthly statements sent to it by the bank. This omission does not change the fiduciary nature of their relationship.
fact that were it not for the wanton and reckless negligence of BPI’s tellers in BPI contends that it has a signature verification procedure, in which checks are
failing to require the surrender of the machine-validated deposit slips before honored only when the signatures therein are verified to be the same with or
reversing the deposit transactions, the loss would not have occurred. BPIÊs similar to the specimen signatures on the signature cards. Nonetheless, it still
negligence is undoubtedly the proximate cause of the loss. failed to detect the eight instances of forgery. Its negligence consisted in the
omission of that degree of diligence required of a bank. It cannot now feign
ignorance, for very early on we have already ruled that a bank is bound to know
the signatures 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
charge the amount so paid to the account of the depositor whose name was

6 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
forged. In fact, BPI was the same bank involved when we issued this ruling - Citytrust then, filed before the Regional Trial Court (RTC) of Manila a complaint
seventy years ago. for recovery of sum of money with damages against petitioner who allegedly
The monthly statements issued by BPI to its clients contain a notice worded as erred in encashing the checks and in charging the proceeds thereof to its
follows: If no error is reported in ten (10) days, account will be correct. Such account, despite the lack of authority of Rosauro C. Cayabyab.
notice cannot be considered a waiver, even if CASA failed to report the error. RTC: Found both Citytrust and petitioner negligent and accordingly held them
Neither is it estopped from questioning the mistake after the lapse of the ten-day equally liable for the loss.
period. CA: Affirmed the trial court’s decision holding that both parties contributed
This notice is a simple confirmation or circularization -- in accounting parlance -- equally to the fraudulent encashment of the checks, hence, they should equally
that requests client-depositors to affirm the accuracy of items recorded by the share the loss in consonance with Article 21791[3] and Article 11722[4] of the
banks. Its purpose is to obtain from the depositors a direct corroboration of the Civil Code.
correctness of their account balances with their respective banks. Internal or - While Citytrust failed to take adequate precautionary measures to prevent the
external auditors of a bank use it as a basic audit procedure - the results of which fraudulent encashment of its checks, petitioner was not entirely blame-free in
its client-depositors are neither interested in nor privy to -- to test the details of light of its failure to verify the signature of Citytrusts agent authorized to receive
transactions and balances in the banks records. Evidential matter obtained from payment.
independent sources outside a bank only serves to provide greater assurance of Petitioner’s contention: Flores having been an authorized roving teller, Citytrust
reliability than that obtained solely within it for purposes of an audit of its own is bound by his acts. Also maintaining that it was not negligent in releasing the
financial statements, not those of its client-depositors. proceeds of the checks to Flores, the failure of its teller to properly verify his
signature notwithstanding, petitioner contends that verification could be
7. CENTRAL BANK v. CITYTRUST BANK dispensed with, Flores having been known to be an authorized roving teller of
Citytrust who had had numerous transactions with it (petitioner) on its (Citytrusts)
FACTS: Respondent Citytrust Banking Corporation maintained a demand behalf for five years prior to the questioned transaction.
deposit account with petitioner Central Bank of the Philippines, now BSP. - Petitioner contends that Cotytrust’s allowing Flores to steal the checks and
- As required, Citytrust furnished petitioner with the names and corresponding failing to timely cancel them, allowing Flores to wear the issued ID by the
signatures of 5 of its officers authorized to sign checks and serve as drawers and petitioner, failing to report absence from work  failure to explain the
indorsers for its account. circumstances surrounding the supposed theft was the proximate cause of the
- Flores presented for payment to petitioner’s Senior Teller Illuminada dela Cruz loss or fraud.
2 Citytrust checks of even date, payable to Citytrust, one in the amount of
P850, 000 and the other P900, 000, both of which were signed and indorsed by ISSUE: Whether or not Citytrust can collect sum of money as damages from the
Citytrust’s authorized signatory-drawers. Central Bank.
- After the checks were certified by petitioners Accounting Department, Iluminada
verified them, prepared the cash transfer slip on which she affixed her signature, HELD: YES, but the liability is mitigated.
stamped the checks with the notation Received Payment and asked Flores to, as The law imposes on banks high standards in view of the fiduciary nature of
he did, sign on the space above such notation. Instead of signing his name, banking. Section 2 of Republic Act No. 8791 (R.A. 8791), which took effect on 13
however, Flores signed as Rosauro C. Cayabyab a fact Iluminada failed to June 2000, declares that the State recognizes the “fiduciary nature of banking
notice. that requires high standards of integrity and performance.”
- Iluminada thereupon sent the cash transfer slip and checks to petitioner’s Cash
Department where an officer verified and compared the drawer’s 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.
- More than a year and nine months later, Citytrust, by letter alleged that the
checks were already cancelled because they were stolen and demanded
petitioner to restore the amounts covered thereby to its demand deposit account
but the demand was refused.
- Citytrust later filed a complaint for estafa against Flores. Flores was convicted.

7 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
- This fiduciary relationship means that the bank’s obligation to observe “high while the amounts she deposited were being credited to its account when, in truth
standards of integrity and performance” is deemed written into every deposit and in fact, they were being deposited by her and credited by the petitioner bank
agreement between a bank and its depositor. The fiduciary nature of banking in the account of Cotas. This went on in a span of more than one (1) year without
requires banks to assume a degree of diligence higher than that of a good father private respondent's knowledge.
of a family. Article 1172 of the Civil Code states that the degree of diligence Upon discovery of the loss of its funds, RMC demanded from petitioner bank the
required of an obligor is that prescribed by law or contract, and absent such return of its money, but as its demand went unheeded, it filed a collection suit
stipulation then the diligence of a good father of a family. Section 2 of R.A. 8791 before the Regional Trial Court.
prescribes the statutory diligence required from banks – that banks must observe
“high standards of integrity and performance” in servicing their depositors. RTC—in favor of Private Respondent
- Citytrust’s failure to timely examine its account, cancel the checks and notify
petitioner of their alleged loss/theft should mitigate petitioner’s liability, in CA—affirmed the Decision of the Trial Court
accordance with Article 2179 of the Civil Code which provides that if the plaintiff’s Hence, this petition.
negligence was only contributory, the immediate and proximate cause of the
injury being the defendant’s lack of due care, the plaintiff may recover damages, ISSUE: WON the proximate cause of the loss, suffered by the private respondent
but the courts shall mitigate the damages to be awarded. RMC is petitioner bank's negligence or that of private respondent's?

8. PHILIPPINE BANK OF COMMERCE, ET AL. vs COURT OF APPEALS RULING: It was this negligence of Ms. Azucena Mabayad, coupled by the
negligence of the petitioner bank in the selection and supervision of its bank
FACTS: RMC (Private Respondent’s Corporation) maintained two (2) separate teller, which was the proximate cause of the loss suffered by the private
current accounts, Current Account Nos. 53-01980-3 and 53-01748-7, with the respondent, and not the latter's act of entrusting cash to a dishonest employee,
Pasig Branch of PBC in connection with its business of selling appliances. as insisted by the petitioners. But since RMC is also negligent, damages are
Romeo Lipana claims to have entrusted RMC funds in the form of cash totalling mitigated.
P304,979.74 to his secretary, Irene Yabut, for the purpose of depositing said
funds in the current accounts of RMC with PBC. It turned out, however, that Mabayad, was negligent in validating, officially stamping and signing all the
these deposits, on all occasions, were not credited to RMC's account but were deposit slips prepared and presented by Ms. Yabut, despite the glaring fact that
instead deposited to Account No. 53-01734-7 of Yabut's husband, Bienvenido the duplicate copy was not completely accomplished contrary to the self-imposed
Cotas who likewise maintains an account with the same bank. Petitioner bank procedure of the bank with respect to the proper validation of deposit slips,
had, however, been regularly furnishing private respondent with monthly original or duplicate, as testified to by Ms. Mabayad herself.
statements showing its current accounts balances. Unfortunately, it had never
been the practice of Romeo Lipana to check these monthly statements of The fact that the duplicate slip was not compulsorily required by the bank in
account reposing complete trust and confidence on petitioner bank. accepting deposits should not relieve the petitioner bank of responsibility.

Yabut would accomplish two copies of the deposit slip, an original and a The odd circumstance alone that such duplicate copy lacked one vital information
duplicate. The original showed the name of her husband as depositor and his — that of the name of the account holder — should have already put Ms.
current account number. On the duplicate copy was written the account number Mabayad on guard. Rather than readily validating the incomplete duplicate copy,
of her husband but the name of the account holder was left blank. PBC's teller, she should have proceeded more cautiously by being more probing as to the true
Azucena Mabayad, would, however, validate and stamp both the original and the reason why the name of the account holder in the duplicate slip was left blank
duplicate of these deposit slips retaining only the original copy despite the lack of while that in the original was filled up. Even if Yabut had the fraudulent intention
information on the duplicate slip. The second copy was kept by Irene Yabut to misappropriate the funds entrusted to her by plaintiff, she would not have been
allegedly for record purposes. After validation, Yabut would then fill up the name able to deposit those funds in her husband's current account, and then make
of RMC in the space left blank in the duplicate copy and change the account plaintiff believe that it was in the latter's accounts wherein she had deposited
number written thereon, which is that of her husband's, and make it appear to be them, had it not been for bank teller Mabayad's aforesaid gross and reckless
RMC's account number. negligence. The latter's negligence was thus the proximate, immediate and
efficient cause that brought about the loss claimed by plaintiff in this case, and
With the daily remittance records also prepared by Ms. Yabut and submitted to the failure of plaintiff to discover the same soon enough by failing to scrutinize the
private respondent RMC together with the validated duplicate slips with the monthly statements of account being sent to it by appellant bank could not have
latter's name and account number, she made her company believe that all the prevented the fraud and misappropriation which Irene Yabut had already

8 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
completed when she deposited plaintiff's money to the account of her husband for Respondent bank to accommodate PRCI’s urgent need to remit Australian
instead of to the latter's accounts. dollars to Sydney. Yasis of Respondent bank informed Godofredo of a
roundabout way of effecting the requested remittance to Sydney thus: the
respondent bank would draw a demand draft against Westpac-Sydney and have
Bank is also negligent the latter reimburse itself from the U.S. dollar account of the respondent in
Negligence here lies not only on the part of Ms. Mabayad but also on the part of Westpac-New York. This arrangement has been customarily resorted to since the
the bank itself in its lackadaisical selection and supervision of Ms. Mabayad. This 1960’s and the procedure has proven to be problem­free. PRCI and the
was exemplified in the testimony of Mr. Romeo Bonifacio, then Manager of the Petitioner acting through Godofredo, agreed to this arrangement or approach in
Pasig Branch of the petitioner bank and now its Vice-President, to the effect that, order to effect the urgent transfer of Australian dollars payable to the Secretariat
while he ordered the investigation of the incident, he never came to know that of the 20th Asian Racing Conference.
blank deposit slips were validated in total disregard of the bank's validation Respondent bank approved the said application of PRCI and issued
procedures. Foreign Exchange Demand Draft (FXDD) No. 209968. But upon presentment, of
the foreign exchange demand draft, denominated as FXDD No. 209968, the
Under doctrine of last clear chance, bank is liable same was dishonored, with the notice of dishonor stating the following: “No
Assuming that private respondent RMC was negligent in entrusting cash to a account held with Westpac.” Meanwhile, on August 16, 1988, Westpac-New York
dishonest employee, thus providing the latter with the opportunity to defraud the sent a cable to Respondent bank informing the latter that its dollar account in the
company, as advanced by the petitioner, yet it cannot be denied that the sum 1, 610 Australian Dollars was debited.
petitioner bank, thru its teller, had the last clear opportunity to avert the injury On August 19, 1988, in response to PRCI’s complaint about the
incurred by its client, simply by faithfully observing their self-imposed validation dishonor of the said foreign exchange demand draft, respondent bank informed
procedure. Westpac-Sydney of the issuance of the said demand draft FXDD No. 209968,
drawn against the Westpac-Sydney and informing the latter to be reimbursed
RMC also negligent; damages mitigated to 60-40 ratio from the respondent bank’s dollar account in Westpac-New York. The
respondent bank on the same day likewise informed Westpac-New York
The foregoing notwithstanding, it cannot be denied that, indeed, private requesting the latter to honor the reimbursement claim of Westpac-Sydney. On
respondent was likewise negligent in not checking its monthly statements of September 14, 1988, upon its second presentment for payment, FXDD No.
account. Had it done so, the company would have been alerted to the series of 209968 was again dishonored by Westpac-Sydney for the same reason, that is,
frauds being committed against RMC by its secretary. The damage would that the respondent bank has no deposit dollar account with the drawee
definitely not have ballooned to such an amount if only RMC, particularly Romeo Westpac-Sydney.
Lipana, had exercised even a little vigilance in their financial affairs. This Petitioner Gregorio H. Reyes arrived in Sydney in the morning of
omission by RMC amounts to contributory negligence which shall mitigate the September 18, 1988, he went directly to the lobby of Hotel Regent Sydney to
damages that may be awarded to the private respondent under Article 2179 of register as a conference delegate. He was told by a lady member of the
the New Civil Code. conference secretariat that he could not register because the foreign exchange
demand draft for his registration fee had been dishonored for the second time.
9. REYES et. al. v. CA et.al. Also, petitioner Consuelo Puyat-Reyes arrived in Sydney. She too was
embarrassed and humiliated at the registration desk of the conference secretariat
FACTS: In view of the 20th Asian Racing Conference held in Sydney Australia, when she was toldin the presence and within the hearing of other delegates that
Philippine Racing Club Inc. (PRCI) sent 4 delegates to the conference. she could not be registered due to the dishonor of the subject foreign exchange
Petitioner, as vice president for finance, racing manager, treasurer and director of demand draft.
PRCI, sent Godofredo Reyes, the club’s chief cashier, to the Respondent Far Petitioners filed with the RTC a complaint for damages against the
East Bank and Trust Co. to apply for a foreign exchange demand draft in respondent bank due to the dishonor of the said foreign exchange demand draft
Australian dollars. issued by the respondent bank. The petitioners claim that as a result of the
Godofredo went to respondent bank’s Buendia Branch in MakatiCity to dishonor of the said demand draft, they were exposed to unnecessary shock,
apply for a demand draft in the amount 1, 610 Australian Dollars. payable to the social humiliation, and deep mental anguish in a foreign country, and in the
order of the 20th Asian Racing Conference Secretariat of Sydney, Australia. He presence of an international audience.
was attended to by Respondent bank’s assistant cashier,Mr. Yasis, who at first  RTC – in favour of bank
denied the application because Respondent bank did not have an Australian
dollar account in any bank in Sydney. Godofredo asked if there could be a way

9 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS
 CA – affirmed RTC; no basis to hold the respondent bank that its employee erroneously read the said cable message, Westpac-Sydney
liable for damages for the reason that it exertedevery effort for merely stated that the respondent bank has no deposit account with it to cover for
the subject foreign exchange demand draft to be honored. the amount of One Thousand Six Hundred Ten Australian Dollar (AU $1610.00)
Petitioners contend that due to the fiduciary nature of the relationship indicated in the foreign exchange demand draft. Thus, the respondent bank had
between the respondent bank and its clients, the respondent bank should have the impression that Westpac-New York had not yet made available the amount
exercised a higher degree of diligence than that expected of an ordinary prudent for reimbursement to Westpac-Sydney despite the fact that respondent bank has
person in the handling of its affairs as in the case at bar. a sufficient deposit dollar account with Westpac-New York. That was the reason
why the respondent bank had to re-confirm and repeatedly notify Westpac-New
ISSUE: WON Respondent bank failed to exercise the required diligence in York to debit its (respondent bank's) deposit dollar account with it and to transfer
banks? or credit the corresponding amount to Westpac-Sydney to cover the amount of
the said demand draft.
RULING: No, Respondent bank respondent bank exercised that degree of
diligence expected of an ordinary prudent person under the circumstances
obtaining. Prior to the first dishonor of the subject foreign exchange demand
draft, the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac- Sydney and to debit the dollar account of
respondent bank with the former. As soon as the demand draft was dishonored,
the respondent bank, thinking that the problem was with the reimbursement and
without any idea that it was due to miscommunication, re-confirmed the authority
of Westpac-New York to debit its dollar account for the purpose of reimbursing
Westpac-Sydney. Respondent bank also sent two (2) more cable messages to
Westpac-New York inquiring why the demand draft was not honored.
In Philippine Bank of Commerce v. Court of Appeals 1 upholding a long
standing doctrine, we ruled that the degree of diligence required of banks, is
more than that of a good father of a family where the fiduciary nature of their
relationship with their depositors is concerned. In other words banks are duty
bound to treat the deposit accounts of their depositors with the highest degree of
care. But the said ruling applies only to cases where banks act under their
fiduciary capacity, that is, as depositary of the deposits of their depositors. But
the same higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with their
depositors.
Thus, Respondent bank was not required to exert more than the
diligence of a good father of a family in regard to the sale and issuance of the
subject foreign exchange demand draft. The case at bar does not involve the
handling of petitioners' deposit, if any, with the respondent bank. Instead, the
relationship involved was that of a buyer and seller, that is, between the
respondent bank as the seller of the subject foreign exchange demand draft, and
PRCI as the buyer of the same, with the 20th Asian Racing conference
Secretariat in Sydney, Australia as the payee thereof. As earlier mentioned, the
said foreign exchange demand draft was intended for the payment of the
registration fees of the petitioners as delegates of the PRCI to the 20 th Asian
Racing Conference in Sydney.
The evidence shows that the respondent bank did everything within its
power to prevent the dishonor of the subject foreign exchange demand draft. The
erroneous reading of its cable message to Westpac-Sydney by an employee of
the latter could not have been foreseen by the respondent bank. Being unaware

10 AGUINALDO, MANGUERA, MORALES C., MORALES I. and UMANGAY – BANKING LAW CASE DIGESTS