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Credit Transactions Midterm

I. Sasha Bank is liable for the amount of the check.

CASE: Bank of America vs. Philippine Racing Club (G.R. 150228 July
30, 2009)

1. Bank is liable. There was no dispute that the signatures in the checks are genuine but
the presence of irregularities on the face of the check should have alerted the
bank to exercise caution before encashing them. It is well-settled that banks are in
the business impressed with public interest that they are duty bound to protect their
clients and their deposits at all times. They must treat the accounts of these clients with
meticulousness and a highest degree of care considering the fiduciary nature of their
relationship. The diligence required of banks are more than that of a good father of a

It had the last clear chance to stop the fraudulent encashment of the subject checks had
it exercised due diligence and followed the proper and regular banking procedures in
clearing checks. As we had earlier ruled, the one who had a last clear opportunity
to avoid the impending harm but failed to do so is chargeable with the
consequences thereof. In the case at bar, petitioner cannot evade
responsibility for the loss by attributing negligence on the part of respondent
because, even if we concur that the latter was indeed negligent in pre-signing
blank checks, the former had the last clear chance to avoid the loss.

2. PRC is also liable. The PRC officers' practice of pre-signing checks is a seriously
negligent and highly risky behavior which makes them also contributor to the loss.
It's own negligence must therefore mitigate the petitioner's liability. Moreover, the
person who stole the checks is also an employee of the plaintiff, a clerk in its accounting
department at that. As the employer, PRC supposedly should have control and
supervision over its own employees.

3. The court held that the petitioner is liable for 60% of the total amount of damages while
PRC should shoulder 40% of the said amount.

II. Dean Ambrose and Chad Gable are not liable for estafa; their obligation with
Seth Rollins is purely civil in nature.

CASE: Guingona vs. City Fiscal (GR 60033 April 4, 1984)

“When private respondent David invested his money the contract that was perfected
was a contract of simple loan or mutuum and not a contract of deposit. Thus,
Article 1980 of the New Civil Code applies.

Hence, the relationship between the private respondent and the Nation Savings
and Loan Association is that of creditor and debtor; consequently, the ownership of

Credit Transactions Midterm

the amount deposited was transmitted to the Bank upon the perfection of the contract and it
can make use of the amount deposited for its banking operations. And, the failure of the
Bank to return the amount deposited will not constitute estafa through misappropriation
punishable but it will only give rise to civil liability.

But even granting that the failure of the bank to pay private respondent David would
constitute a violation, nevertheless any incipient criminal liability was deemed
avoided, because when the bank was placed under receivership by the Central
Bank, petitioners Guingona and Martin assumed the obligation of the bank to
private respondent David, thereby resulting in the novation and converting the
original trust relation into an ordinary debtor-creditor relation. Failure of the bank
or petitioners Guingona and Martin to pay the deposits of private respondent
would not constitute a breach of trust but would merely be a failure to pay the
obligation as a debtor.”

III. The bank is not negligent.

CASE: Reyes vs. CA (GR. 118492 Aug. 15, 2001)

“Considering the foregoing, the 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.”

IV. A. Yes. The Bank has the right to encash the deposit certificate for the
payment of the loan. This does not constitute pactum commissorium.
Art. 1980 Fixed, savings, and current deposits of money in banks
and similar institutions shall be governed by the provisions
concerning simple loan.

B. Pactum Commissorium. Automatic appropriation by the creditor of the

thing pledged or mortgaged upon the failure of the debtor to pay the
principal obligation.

The prohibition on pactum commissorium stipulations is provided for by

Article 2088 of the Civil Code: Art. 2088. The creditor cannot appropriate the
things given by way of pledge or mortgagee, or dispose of the same. Any
stipulation to the contrary is null and void.

Credit Transactions Midterm

V. Bar Question: Deposit; Exchange (1992)

X and Y staged a daring bank robbery in Manila at 10:30 AM and escaped
with their loot of 2 bags, each bag containing 50, 000.
During their flight, X and Y entered the nearby locked house of A. From A’s
house, X and Y stole a box containing cash 50, 000 which box A had been
keeping in deposit for his friend B.

In their hurry, X and Y left in A’s bedroom 1 of the bags which they took from
the bank.

With X and Y now at large, the bag containing 50, 000 is now claimed by B,
by the Manila Mayor, and by the bank.

B claims that the depository, A by force majeure had obtained the bag of
money in place of the box of money deposited by B.

The Mayor, claims that the bag of money should be deposited with the
office of the Mayor as required of the finder by the provisions of the Civil

The Bank resists the foregoing claims.

To whom should A deliver the bag of money? B would have no right to claim
the money. Art. 1990 of the Civil Code is NOT applicable. The law refers to
another thing received in substitution of the object deposited and is
predicated upon something exchanged.

The mayor cannot invoke Art. 719 of the Civil Code which requires the finder
to deposit the thing with the Mayor only when the previous possessor is

In this case, A must return the bag of money to the bank as the previous
possessor and known owner (Art. 719 and 1990, Civil Code)

Art. 719. Whoever finds a movable, which is not treasure, must return it to its previous possessor. If
the latter is unknown, the finder shall immediately deposit it with the mayor of the city or municipality
where the finding has taken place.

Credit Transactions Midterm

The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems

If the movable cannot be kept without deterioration, or without expenses which considerably diminish
its value, it shall be sold at public auction eight days after the publication.

Six months from the publication having elapsed without the owner having appeared, the thing found, or
its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may
be, to reimburse the expenses.

Art. 1990. If the depositary by force majeure or government order loses the thing and receives money
or another thing in its place, he shall deliver the sum or other thing to the depositor.

VI. Art. 1996. A deposit is necessary:

(1) When it is made in compliance with a legal obligation;
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Art. 1997. The deposit referred to in No. 1 of the preceding article shall be
(a) by the provisions of the law establishing it, and
(b) in case of its deficiency, by the rules on voluntary deposit.

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