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1. WHITE MARKETING DEVELOPMENT CORPORATION, vs. GRANDWOOD FURNITURE &WOODWORK,


INC., G.R. No. 222407, November 23, 2016;
2. GOLDENWAY MERCHANDISING CORPORATION vs. EQUITABLE PCI BANK, G.R. No. 195540,March 13,
2013;
3. PHILIPPINE SAVINGS BANK, vs. CHOWKING FOOD CORPORATION, G.R. No. 177526, July 3,2008;
4. ASSOCIATED BANK (Now WESTMONT BANK), vs. VICENTE HENRY TAN, G.R. No. 156940,December 14,
2004;
5. CENTRAL BANK OF THE PHILIPPINES, vs. CITYTRUST BANKING CORPORATION, G.R. No.141835 February
4, 2009;
6. RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his capacity as majority stockholder in
the Rural Bank of San Miguel, Inc., vs. MONETARY BOARD, BANGKO SENTRALNG PILIPINAS and
PHILIPPINE DEPOSIT INSURANCE CORPORATION, G.R. No. 150886,February 16, 2007;
7. DOÑA ADELA EXPORT INTERNATIONAL, INC., vs. TRADE AND INVESTMENT
DEVELOPMENTCORPORATION (TIDCORP), AND THE BANK OF THE PHILIPPINE ISLANDS (BPI), .R.
No.201931, February 11, 2015;
8. BANCO DE ORO-EPCI, INC. vs. JAPRL DEVELOPMENT CORPORATION, RAPID FORMINGCORPORATION
and JOSE U. AROLLADO, G.R. No. 179901, April 14, 2008;
9. FIRST PLANTERS PAWNSHOP, INC., vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.174134, July
30, 2008;
10. LUZAN SIA, vs. COURT OF APPEALS and SECURITY BANK and TRUST COMPANY, G.R. No.102970 May 13,
1993;
11. SIMEX INTERNATIONAL (MANILA), INCORPORATED, vs. THE HONORABLE COURT OFAPPEALS and
TRADERS ROYAL BANK; G.R. No. 88013 March 19, 1990;
12. BANK OF AMERICA, NT & SA, vs. ASSOCIATED CITIZENS BANK, BA-FINANCE CORPORATION,MILLER
OFFSET PRESS, INC., UY KIAT CHUNG, CHING UY SENG, UY CHUNG GUAN SENG, and COURT OF
APPEALS; G.R. No. 141001, May 21, 2009;
13. EQUITABLE PCI BANK, vs. ARCELITO B. TAN, G.R. No. 165339, August 23, 2010.
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2. GOLDENWAY MERCHANDISING CORPORATION VS EQUITABLE PCI BANK

Nature: Redemption of Mortgage


Ponente: Villarama
Date: March 13, 2013

DOCTRINE: Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but
only modified the time for the exercise of such right by reducing the one-year period originally provided in Act
No. 3135. The new redemption period commences from the date of foreclosure sale, and expires upon
registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is likewise
no retroactive application of the new redemption period because Section 47 exempts from its operation those
properties foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act
No. 3135.

FACTS:
On November 29, 1985, petitioner Goldenway Merchandising Corporation executed a Real Estate Mortgage in
favor of Equitable PCI Bank over three parcels of land as security for a Php2,000,000 loan granted to the
petitioner. Petitioner eventually failed to settles its loan obligation, leading respondent to extrajudicially
foreclose the mortgage on December 13, 2000. Subsequently, a Certificate of Sale was issued to respondent
on January 26, 2001.
In a letter dated March 7, 2001, petitioner offered to redeem the foreclosed properties by tendering a check.
Petitioner and respondent met on March 12, 2001. However, petitioner was told that redemption was no
longer possible since the certificate of sale had already been registered; the title to the foreclosed properties
were consolidated in favor of the respondent on March 9, 2001.
Petitioner filed a complaint for specific performance and damages contending that the 1-year period of
redemption under Act 3135 should apply, and not the shorter redemption period under RA 8791 as applying
RA 8791 would result in the impairment of obligations of contracts and would violate the equal protection
clause under the constitution.
The RTC dismissed the action of the petitioner ruling that redemption was made belatedly and that there was
no redemption made at all.
The Court of Appeals affirmed the RTC.

ISSUE:
Whether or not the redemption period should be the 1-year period provided under Act 3135, and not the
shorter period under RA 8791 as the parties expressly agreed that foreclosure would be in accordance with
Act 3135

RULING: The shorter period under RA 8791 should apply.


The one-year period of redemption is counted from the date of the registration of the certificate of sale. In
this case, the parties provided in their real estate mortgage contract that upon petitioner’s default and the
latter’s entire loan obligation becoming due, respondent may immediately foreclose the mortgage judicially in
accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended.
But under Sec 47 of RA 8791, an exception is thus made in the case of juridical persons which are allowed to
exercise the right of redemption only "until, but not after, the registration of the certificate of foreclosure
sale" and in no case more than three (3) months after foreclosure, whichever comes first.
Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified
the time for the exercise of such right by reducing the one-year period originally provided in Act No. 3135. The
new redemption period commences from the date of foreclosure sale, and expires upon registration of the
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certificate of sale or three months after foreclosure, whichever is earlier. There is likewise no retroactive
application of the new redemption period because Section 47 exempts from its operation those properties
foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act No. 3135.
We agree with the CA that the legislature clearly intended to shorten the period of redemption for juridical
persons whose properties were foreclosed and sold in accordance with the provisions of Act No. 3135.
The difference in the treatment of juridical persons and natural persons was based on the nature of the
properties foreclosed – whether these are used as residence, for which the more liberal one-year redemption
period is retained, or used for industrial or commercial purposes, in which case a shorter term is deemed
necessary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks to
dispose sooner of these acquired assets. It must be underscored that the General Banking Law of 2000,
crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform the General Banking Act
of 1949 by fashioning a legal framework for maintaining a safe and sound banking system. In this context, the
amendment introduced by Section 47 embodied one of such safe and sound practices aimed at ensuring the
solvency and liquidity of our banks. It cannot therefore be disputed that the said provision amending the
redemption period in Act 3135 was based on a reasonable classification and germane to the purpose of the
law.
The right of redemption being statutory, it must be exercised in the manner prescribed by the statute, and
within the prescribed time limit, to make it effective. Furthermore, as with other individual rights to contract
and to property, it has to give way to police power exercised for public welfare. The concept of police power is
well-established in this jurisdiction. It has been defined as the "state authority to enact legislation that may
interfere with personal liberty or property in order to promote the general welfare." Its scope, ever-expanding
to meet the exigencies of the times, even to anticipate the future where it could be done, provides enough
room for an efficient and flexible response to conditions and circumstances thus assuming the greatest
benefits.
The freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State
and not only may regulations which affect them be established by the State, but all such regulations must be
subject to change from time to time, as the general well-being of the community may require, or as the
circumstances may change, or as experience may demonstrate the necessity. Settled is the rule that the non-
impairment clause of the Constitution must yield to the loftier purposes targeted by the Government. The
right granted by this provision must submit to the demands and necessities of the State’s power of regulation.
Such authority to regulate businesses extends to the banking industry which, as this Court has time and again
emphasized, is undeniably imbued with public interest.
Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional, we find no reversible error
committed by the CA in holding that petitioner can no longer exercise the right of redemption over its
foreclosed properties after the certificate of sale in favor of respondent had been registered.

3. PHILIPPINE SAVINGS BANK v. CHOWKING FOOD CORPORATION


G.R. No. 177526 | JULY 4, 2008 | REYES, R.T., J. | THIRD DIVISION

The banking business is impressed with public interest. Of paramount importance is the trust and confidence
of the public in general in the banking industry. Consequently, the diligence required of banks is more than
that of a Roman pater familias or a good father of a family. The highest degree of diligence is expected.

The General banking Law of 2000 requires of banks the highest standards of integrity and performance.
Needless to say, a bank is “under obligation to treat the accounts of its depositors with meticulous care.” The
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fiduciary nature of the relationship between the bank and the depositors must always be of paramount
concern.

Facts
Joe Kuan Food Coporation issued in favor of Chowking five (5) PSBank checks. The total amount of the subject
checks reached P556,981.86.

Chowking’s acting accounting manager, Rino T. Manzano, endorsed and encashed said checks with the Bustos
branch of PSBank. All five checks were honored by Santos, the branch head, even with only the endorsement
of Manzano approving them. The signatures of the other authorized officers of Chowking were absent,
contrary to usual banking practice. Unexpectedly, Manzano absconded with and misappropriated the check
proceeds.

When Chowking found out Manzano scheme, it demanded reimbursement from PSBank. When PSBank
refused to pay, Chowking filed a complaint for a sum of money with damages before RTC.

PSBank denied liability for the encashed checks and maintained that it exercised due diligence in the
supervision of all its employees. It even dismissed Santos after she was found guilty of negligence in the
performance of her duties. It also averred that Chowking is stopped from claiming reimbursement and
damages since it was negligent in allowing Manzano to take hold, endorse, and encash its checks. It pointed
out that the proximate cause of Chowking’s loss was its own negligence.

RTC rendered judgment in favor of Chowking. PSBank then filed a motion for reconsideration and RTC
reversed its earlier ruling and held that it was Chowking’s own negligence that was the proximate cause of the
loss.

The CA set aside the order of RTC and held that both PSBank and Santos should bear the loss.

Issue
WON PSBank observed the due diligence required of banks under the law.

Ruling
NO. PSBank failed to prove that it has observed the due diligence required of banks under the law.

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

In its declaration of policy, the General Banking Law of 2000 requires of banks the highest standards of
integrity and performance. Needless to say, a bank is “under obligation to treat the accounts of its depositors
with meticulous care.” The fiduciary nature of the relationship between the bank and the depositors must
always be of paramount concern.
PSBank, through Santos, was clearly negligent when it honored Chowking’s checks with the lone endorsement
of Manzano. The proximate cause of the loss is not Chowking’s alleged negligence in allowing Manzano to take
hold and encash Chowking’s checks. The proximate cause id PSBank’s own negligence in the supervision of its
employees when it overlooked the irregular practice of encashing checks without the requisite endorsements.
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In BPI v. Casa Montessori Internationale, the Court similarly held:

“pursuant to its prime duty to ascertain well the genuineness of the signatures of its client-depositors on
checks being encashed, BPI is “expected to use reasonable business prudence.” In the performance of that
obligation, it is bound by its internal banking rules and regulation that form part of the contract it enters into
with its depositors.

Unfortunately, it failed in that regard. Without exercising the required prudence on its part, BPI accepted and
encashed the checks presented to it. As a result, it proximately contributed to the fraud and should be held
primarily liable for the negligence of its officers or agents when acting within the course and scope of their
employment. It must bear the loss.”

4. G.R. No. 156940 December 14, 2004ASSOCIATED BANK (Now WESTMONT BANK) vs. TAN
FACTS:
Respondent Tan is a businessman and a regular depositor-creditor of the petitioner, Associated Bank.
Sometime in September 1990, he deposited a postdated check with the petitioner in the amount of P101,000
issued to him by a certain Willy Cheng from Tarlac. The check was duly entered in his bank record. Allegedly,
upon advice and instruction of petitioner that theP101,000 check was already cleared and backed up by
sufficient funds, respondent, on the same date, withdrew the sum of P240,000 from his account leaving a
balance of P57,793.45. A day after, TAN deposited the amount of P50,000 making his existing balance in the
amount of P107,793.45, because he has issued several checks to his business partners. However, his suppliers
and business partners went back to him alleging that the checks he issued bounced for insufficiency of funds.
Thereafter, respondent informed petitioner to take positive steps regarding the matter for he has adequate
and sufficient funds to pay the amount of the subject checks. Nonetheless, petitioner did not bother nor offer
any apology regarding the incident. Respondent Tan filed a Complaint for Damages on December 19, 1990,
with the RTC against petitioner. The trial court rendered a decision in favor of respondent and ordered
petitioner to pay damages and attorney’s fees. Appellate court affirmed the lower court’s decision. CA
ruled that the bank should not have authorized the withdrawal of the value of the deposited check
prior to its clearing. Petitioner filed a Petition for Review before the Supreme Court.

ISSUE:
W/N petitioner has the right to debit the amount of the dishonored check from the account of respondent on
the ground that the check was withdrawn by respondent prior to its clearing

HELD:
The Petition has no merit. The real issue here is not so much the right of petitioner to debit respondent’s
account but, rather, the manner in which it exercised such right. Banks are granted by law the right to debit
the value of a dishonored check from a depositor’s account but they must do so with the highest degree of
care, so as not to prejudice the depositor unduly. 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 this case, petitioner did not treat respondent’s account with the highest degree of care. Respondent
withdrew his money upon the advice of petitioner that his money was already cleared. It is petitioner’s
premature authorization of the withdrawal that caused the respondent’s account balance to fall
to insufficient levels, and the subsequent dishonor of his own checks for lack of funds.
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5. CENTRAL BANK OF THE PHILIPPINES v. CITYTRUST BANKING CORPORATION 578 SCRA 27 (2009)

If the plaintiff’s 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, but the courts shall mitigate the damages to
be awarded.
The Citytrust Banking Corporation (Citytrust) gave Central Bank of the Philippines a list of signatures of five of
its officers authorized to sign checks and serve as drawers and indorsers for its account, and also the list of the
roving tellers authorized to perform other transactions on its behalf, one of whom was Rounceval Flores
(Flores). Flores presented two checks to the Central Bank’s Senior Teller Iluminada dela Cruz (Dela Cruz) and
was subsequently approved. Dela Cruz prepared the cash transfer slip where Flores should sign but instead he
sign as one Rosauro C. Cayabyab. This fact was missed by Dela Cruz. It was given to Cash Department and the
signatures were examined and later on paid Flores for the checks. After one year and nine months, the
Citytrust demanded that the checks be cancelled and the funds taken out be returned because the check was
stolen before. Central Bank did not heed such call. Citytrust filed a complaint to collect the sum of money with
damages against Central Bank to the Regional Trial Court (RTC). RTC found both parties negligent and held
them equally liable for the loss. Court of Appeals affirmed the decision.

ISSUE:
Whether or not Citytrust can collect sum of money as damages from the Central Bank.

HELD:
The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act
No. 8791 (R.A. 8791), which took effect on 13 June 2000, declares that the State recognizes the “fiduciary
nature of banking that requires high standards of integrity and performance.”
This fiduciary relationship means that the bank’s obligation to observe “high standards of integrity and
performance” is deemed written into every deposit agreement between a bank and its depositor. The
fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of
a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that
prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family.
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 their depositors. 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 accordance with Article 2179 of the Civil Code which provides that if the plaintiff’s 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, but the courts shall mitigate the damages to be awarded.

6. Rural Bank of San Miguel v Monetary Board G.R. No. 150886 February 16, 2007
It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the
MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can
be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack
or excess of jurisdiction.

Facts: Monetary Board (MB), the governing board of respondent Bangko Sentral ng Pilipinas (BSP), issued
Resolution No. 105 prohibiting RBSM from doing business in the Philippines, placing it under receivership and
designating respondent Philippine Deposit Insurance Corporation (PDIC) as receiver on the basis of the
comptrollership reports of the banks supervising head. To assist its impaired liquidity and operations, the
RBSM was granted emergency loans on different occasions in the aggregate amount of P375. As early as
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November 18, 1998, Land Bank of the Philippines (LBP) advised RBSM that it will terminate the clearing of
RBSM’s checks in view of the latter’s frequent clearing losses and continuing failure to replenish its Special
Clearing Demand Deposit with LBP. The BSP interceded with LBP not to terminate the clearing arrangement of
RBSM to protect the interests of RBSM’s depositors and creditors. On the basis of reports prepared by PDIC
stating that RBSM could not resume business with sufficient assurance of protecting the interest of its
depositors, creditors and the general public, the MB passed Resolution No. 966 directing PDIC to proceed with
the liquidation of RBSM under Section 30 of RA 7653.

Issue: Whether or not the Monetary Board can unilaterally close a bank without prior hearing

Held: No. It is well-settled that the closure of a bank may be considered as an exercise of police power. The
action of the MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial
inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction.

This case essentially boils down to one core issue: whether Section 30 of RA 7653 (also known as the New
Central Bank Act) and applicable jurisprudence require a current and complete examination of the bank
before it can be closed and placed under receivership. The actions of the Monetary Board taken under this
section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by
the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari
may only be filed by the stockholders of record representing the majority of the capital stock within ten (10)
days from receipt by the board of directors of the institution of the order directing receivership, liquidation or
conservatorship.

7. DONA ADELA EXPORT INTERNATIONAL V. TRADE AND INVESTMENT DEVELOPMENT CORP (G.R. NO.
201931)

Facts:
Petitioner Dona Adela filed a Petition for Voluntary Insolvency before the RTC. After finding the petition
sufficient in form and substance, RTC declared petitioner herein as insolvent and stayed all civil proceedings
against it. Thereafter, Atty. Arlene Gonzales was appointed as a receiver and proceeded to make the necessary
report, to engage appraisers and require the creditors to submit proof of their respective claims. Atty.
Gonzales then filed a Motion for Parties to Enter Into Compromise Agreement incorporating therein her
proposed terms of compromise. Then, TIDCORP and BPI also filed a Joint Motion to Approve Agreement which
was approved. Petitioner filed a motion for partial reconsideration claiming that TIDCORP and BPI’s agreement
imposes upon it several obligations such as payment of expenses and taxes and waiver of confidentiality of
bank deposits when it is not a party and signatory to the said agreement. RTC denied the motion.

Issue:
Whether or not petitioner is bound by the provision in the BPI-TIDCORP Joint Motion to Approve Agreement
to waive its rights to confidentiality of its bank deposits under R.A. No. 1405.

Ruling:
NO.
R.A. No. 1405 provides for exceptions when records of deposits may be disclosed. These are under any of the
following instances: (a) upon written permission of the depositor, (b) in cases of impeachment, (c) upon order
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of a competent court in the case of bribery or dereliction of duty of public officials or, (d) when the money
deposited or invested is the subject matter of the litigation, and (e) in cases of violation of the Anti-Money
Laundering Act, the Anti-Money Laundering Council may inquire into a bank account upon order of any
competent court.

In this case, the Joint Motion to Approve Agreement was executed by BPI and TIDCORP only. There was no
written consent given by petitioner or its representative, Epifanio Ramos, Jr., that petitioner is waiving the
confidentiality of its bank deposits. The provision on the waiver of the confidentiality of petitioner’s bank
deposits was merely inserted in the agreement. It is clear therefore that petitioner is not bound by the said
provision since it was without the express consent of petitioner who was not a party and signatory to the said
agreement.

Clearly, the waiver of confidentiality of petitioner’s bank deposits in the BPI-TIDCORP Joint Motion to Approve
Agreement lacks the required written consent of petitioner and conformity of the receiver. We, thus, hold that
petitioner is not bound by the said provision.

8. BANCO DE ORO-EPCI, INC., Petitioner vs. JAPRL DEVELOPMENT CORPORATION, RAPID FORMING
CORPORATION and JOSE U. AROLLADO, Respondents. G.R. No. 179901, April 14, 2008, CORONA, J.

Key Doctrine: Banks have the right to annul any credit accommodation or loan, and demand the immediate
payment thereof, from borrowers proven to be guilty of fraud.

Facts:
Petitioner Banco de Oro-EPCI, Inc. extended credit facilities to JAPRL Development Corporation (JAPRL)
amounting to P230,000,000 after evaluating the latter’s financial statements for fiscal years 1998, 1999 and
2000. Respondents Rapid Forming Corporation (RFC) and Jose Arollado acted as JAPRLs sureties. Despite its
seemingly strong financial position, JAPRL defaulted in the payment of four trust receipts soon after the
approval of its loan. BDO- EPCI later learned from MRM Management, JAPRLs financial adviser, that JAPRL had
altered and falsified its financial statements. It allegedly bloated its sales revenues to post a big income from
operations for the concerned fiscal years to project itself as a viable investment. The information alarmed
petitioner. Citing relevant provisions of the Trust Receipt Agreement, it demanded immediate payment of
JAPRLs outstanding obligations amounting to P194,493,388.98.

JAPRL (and its subsidiary, RFC) filed a petition for rehabilitation in the Regional Trial Court (RTC) of Quezon City
and disclosed that it had been experiencing a decline in sales for the three preceding years and a staggering
loss in 2002. As the petition was sufficient in form and substance, a stay order was issued. However, the
proposed rehabilitation plan for JAPRL and RFC was eventually rejected by the Quezon City RTC.

Petitioner BDO-EPCI filed a complaint for sum of money with an application for the issuance of a writ of
preliminary attachment against respondents in Makati RTC since JAPRL is ignoring its demand for payment.
BDO-EPCI asserted that JAPRL was guilty of fraud because it (JAPRL) altered and falsified its financial
statements. The Makati RTC subsequently denied the application (for the issuance of a writ of preliminary
attachment) for lack of merit as petitioner was unable to substantiate its allegations. Nevertheless, it ordered
the service of summons on respondents. Respondents moved to dismiss the complaint due to an allegedly
invalid service of summons. Because the officers return stated that an administrative assistant had received
the summons, JAPRL and RFC argued that Section 11, Rule 14 of the Rules of Court contained an exclusive list
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of persons on whom summons against a corporation must be served. An administrative assistant was not one
of them. Arollado, on the other hand, cited Section 6, Rule 14 thereof which mandated personal service of
summons on an individual defendant. Makati RTC noted that because corporate officers are often busy,
summonses to corporations are usually received only by administrative assistants or secretaries of corporate
officers in the regular course of business. Hence, it denied the motion for lack of merit.

JAPRL (and its subsidiary, RFC) filed a petition for rehabilitation in the RTC of Calamba, Laguna, Branch 34
(Calamba RTC). Finding JAPRLs petition sufficient in form and in substance, the Calamba RTC issued a stay
order. respondents hastily moved to suspend the proceedings in Civil Case No. 03 -991 pending in the Makati
RTC. Makati RTC granted the motion with regard to JAPRL and RFC but ordered Arollado to file an answer. It
ruled that, because he was jointly and solidarily liable with JAPRL and RFC, the proceedings against him should
continue. Respondents moved for reconsideration but it was denied. CA granted the petition and held that
because the summonses were served on a mere administrative assistant, the Makati RTC never acquired
jurisdiction over respondents. Respondents filed a petition for certiorari in the CA and asserted that the
Makati RTC committed grave abuse of discretion as it did not acquire jurisdiction over their persons due to
defective service of summons. Thus, the Makati RTC could not hear the complaint for sum of money.

BDO-EPCI asserts that respondents maliciously evaded the service of summonses to prevent the Makati RTC
from acquiring jurisdiction over their persons. Furthermore, they employed bad faith to delay proceedings by
cunningly exploiting procedural technicalities to avoid the payment of their obligations. Petitioner moved for
reconsideration but it was denied. Hence, this petition.

Issue:
Whether or not the bank (BPO-EPCI) may demand the immediate payment of JAPRL’s outstanding obligations.

Ruling:
YES.
When respondents moved for the suspension of proceedings in Civil Case No. 03-991 before the Makati RTC
(on the basis of the March 13, 2006 order of the Calamba RTC), they waived whatever defect there was in the
service of summons and were deemed to have submitted themselves voluntarily to the jurisdiction of the
Makati RTC. Under the Interim Rules of Procedure on Corporate Rehabilitation, a stay order defers all actions
or claims against the corporation seeking rehabilitation from the date of its issuance until the dismissal of the
petition or termination of the rehabilitation proceedings. The Makati RTC may proceed to hear Civil Case No.
03- 991 only against Arollado if there is no ground to go after JAPRL and RFC (as will later be discussed). A
creditor can demand payment from the surety solidarily liable with the corporation seeking rehabilitation.

Respondents abused procedural technicalities (albeit unsuccessfully) for the sole purpose of preventing, or at
least delaying, the collection of their legitimate obligations. Their reprehensible scheme impeded the speedy
dispensation of justice. More importantly, however, considering the amount involved, respondents utterly
disregarded the significance of a stable and efficient banking system to the national economy.

Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow the
public’s excess money (i.e.,deposits) and lend out the same. Banks therefore redistribute wealth in the
economy by channeling idle savings to profitable investments. Banks operate (and earn income) by extending
credit facilities financed primarily by deposits from the public. They plough back the bulk of said deposits into
the economy in the form of loans. Since banks deal with the public’s money, their viability depends largely on
their ability to return those deposits on demand. For this reason, banking is undeniably imbued with public
interest.
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Protecting the integrity of the banking system has become, by large, the responsibility of banks. The role of
the public, particularly individual borrowers, has not been emphasized. Nevertheless, we are not unaware of
the rampant and unscrupulous practice of obtaining loans without intending to pay the same.

In this case, petitioner BDO-EPCI alleged that JAPRL fraudulently altered and falsified its financial statements in
order to obtain its credit facilities. Considering the amount of petitioner’s exposure in JAPRL, justice and
fairness dictate that the Makati RTC hear whether or not respondents indeed committed fraud in securing the
credit accommodation.

The protective remedy of rehabilitation was never intended to be a refuge of a debtor guilty of fraud.
Meanwhile, the Makati RTC should proceed to hear respondents guided by Section 40 of the General Banking
Law

Civil Case No. 03-991 against the three which states:


Section 40. Requirement for Grant of Loans or Other Credit Accommodations. Before granting a loan or other
credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his commitments to the
bank.

Towards this end, a bank may demand from its credit applicants a statement of their assets and liabilities and
of their income and expenditures and such information as may be prescribed by law or by rules and
regulations of the Monetary Board to enable the bank to properly evaluate the credit application which
includes the corresponding financial statements submitted for taxation purposes to the Bureau of Internal
Revenue. Should such statements prove to be false or incorrect in any material detail, the bank may terminate
any loan or credit accommodation granted on the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation.

In formulating the rules and regulations under this Section, the Monetary Board shall recognize the peculiar
characteristics of microfinancing, such as cash flow- based lending to the basic sectors that are not covered by
traditional collateral. (emphasis supplied)

Under this provision, banks have the right to annul any credit accommodation or loan, and demand the
immediate payment thereof, from borrowers proven to be guilty of fraud. Petitioner would then be entitled to
the immediate payment of P194,493,388.98 and other appropriate damages. Finally, considering that
respondents failed to pay the four trust receipts, the Makati City Prosecutor should investigate whether or not
there is probable cause to indict respondents for violation of Section 13 of the Trust Receipts Law.

9. FIRST PLANTERS PAWNSHOP, INC., Petitioner, v. COMMISSIONER OF INETRNAL REVENUE Respondent.


G.R. No. 174134, July 30, 2008, AUSTRIA-MARTINEZ, J.

Key Doctrine: It need not be elaborated that pawnshops are non-banks/banking institutions. Moreover, the
nature of their business activities partakes that of a financial intermediary in that its principal function is lending.

Facts: First Planters Pawnshop, Inc. (petitioner) contests the deficiency value-added tax imposed upon it by the
Bureau of Internal Revenue (BIR) for the year 2000. The core of petitioner's argument is that it is not a lending
investor within the purview of Section 108(A) of the National Internal Revenue Code (NIRC), as amended, and
therefore not subject to value-added tax (VAT).
11

In a Pre-Assessment Notice petitioner was informed by the BIR that it has an existing tax deficiency on its VAT
liabilities for the year 2000. The deficiency assessment was at P541,102.79 for VAT Petitioner protested the
assessment for lack of legal and factual bases. Petitioner subsequently received a Formal Assessment Notice
directing payment.

Petitioner sought reconsideration but this was denied by the CTA En Banc.

Issue: Whether petitioner, engaged in pawnshop business, is liable to pay the deficiency assessment at
P541,102.79 for VAT?

Ruling: No!

Prior to the EVAT Law, pawnshops were treated as lending investors subject to lending investor's tax. Pawnshops
were then treated as VAT-able enterprises under the general classification of sale or exchange of services under
Section 108(A) of the Tax Code of 1997, as amended. On February 16, 2004 R.A. No. 9238 took effect. R.A. No.
9238 finally classified pawnshops as Other Non-bank Financial Intermediaries.

The tax treatment of pawnshops as non-bank financial intermediaries is not without basis.

R.A. No. 8791 or the General Banking Law of 2000 provided that banks shall refer to entities engaged in the
lending of funds obtained in the form of deposits. R.A. No. 8791 also included cooperative banks, Islamic banks
and other banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas in the classification
of banks.

It need not be elaborated that pawnshops are non-banks/banking institutions. Moreover, the nature of their
business activities partakes that of a financial intermediary in that its principal function is lending.

That pawnshops are to be treated as non-bank financial intermediaries is further bolstered by the fact that
pawnshops are

under the regulatory supervision of the Bangko Sentral ng Pilipinas and covered by its Manual of Regulations
for Non-Bank

Financial Institutions. The Manual includes pawnshops in the list of non-bank financial intermediaries, viz.:

4101Q.1 Financial Intermediaries


xxx
Non-bank financial intermediaries shall include the following:

(1) A person or entity licensed and/or registered with any government regulatory body as a non-
bank financial intermediary, such as investment house, investment company, financing company,
securities dealer/broker, lending investor, pawnshop, money broker x x x. (Emphasis supplied)

Coming now to the issue at hand - Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT
for the tax years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT during these
12

tax years. And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no longer liable for
VAT but it is subject to percentage tax on gross receipts from 0% to 5 %, as the case may be.

10. Sia vs. Court of Appeals G.R. No. 102970, May 13, 1993, DAVIDE, JR., J.
Contract for the use of safety deposit box is a special kind of deposit and the relationship between the parties
thereto, with respect to the contents of the box, is that of a bailor and bailee, the bailment being for hire and
mutual benefit.
Conditions in a “Lease Agreement” covering a safety deposit box which exempt the bank from any liability for
damage, loss or destruction of the contents thereof arising from its own or its agent’s fraud, negligence or
delay are considered null and void, for being contrary to law and public policy.
Although flooding could be considered a fortuitous event, failure of the bank to give notice to the renter of
such fact makes it liable for damages, its negligence caused to aggravate injury or damage to the renter

Facts:
This is an action for damages arising out of the destruction or loss of the stamp collection of the plaintiff
LUZAN SIA (petitioner herein) contained in Safety Deposit Box No. 54 which had been rented from the
defendant SECURITY BANK AND TRUST COMPANY (SBTC) pursuant to a contract denominated as a Lease
Agreement.

The plaintiff rented the Safety Deposit Box No. 54 of the defendant bank at its Binondo Branch located at the
wherein he placed his collection of stamps. The said safety deposit box leased by the plaintiff was at the
bottom or at the lowest level of the safety deposit boxes of the defendant bank at its aforesaid Binondo
Branch.

During the floods that took place in 1985 and 1986, floodwater entered into the defendant bank’s premises,
seeped into the safety deposit box leased by the plaintiff and caused, according to the plaintiff, damage to his
stamps collection. The defendant bank rejected the plaintiff’s claim for compensation for his damaged stamps
collection, so, the plaintiff instituted an action for damages against the defendant bank.

The defendant bank also contended

1. that its contract with the plaintiff over safety deposit box No. 54 was one of lease and not of deposit
and, therefore, governed by the lease agreement which should be the applicable law;
2. that the destruction of the plaintiff’s stamps collection was due to a calamity beyond its control; and
3. that there was no obligation on its part to notify the plaintiff about the floodwaters that inundated its
premises at Binondo branch which allegedly seeped into the safety deposit box leased to the plaintiff.

The defendant also invokes the following provisions in the Lease Agreement of the safety box:

13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of
the same.

14. The bank has no interest whatsoever in said contents, except as herein expressly provided, and it
assumes absolutely no liability in connection therewith.

The trial court ruled in favour of SIA but this was reversed on appeal to CA.
13

Issue:
Whether or not the contract between SIA and SBTC is one of lease which would exculpate SBTC from liability
on account of damage to stamps collection deposited in its safety deposit box.

Ruling:
In the case of CA Agro-Industrial Development Corp. vs. Court of Appeals, this Court explicitly rejected the
contention that a contract for the use of a safety deposit box is a contract of lease governed by Title VII, Book
IV of the Civil Code. Nor did we fully subscribe to the view that it is a contract of deposit to be strictly
governed by the Civil Code provision on deposit; it is, as we declared, a special kind of deposit.

Furthermore, Section 72 of the General Banking Act [R.A. 337, as amended] pertinently provides:
SEC. 72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other
than building and loan associations may perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the
safeguarding of such effects.
xxx

The banks shall perform the services permitted under subsections (a), (b), and (c) of this section as
depositories or as agents.

Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of fraud,
negligence, delay or contravention of the tenor of the agreement [Art. 1170, id.]. In the absence of any
stipulation prescribing the degree of diligence required, that of a good father of a family is to be observed [Art.
1173, id.]. Hence, any stipulation exempting the depositary from any liability, arising from the loss of the thing
deposited on account of fraud, negligence or delay would be void for being contrary to law and public policy
and as such, provisions #13 and 14 in the lease agreement of safety deposit box being invoked by SBTC are
void. Furthermore, said provisions are inconsis tent with the respondent Bank’s responsibility as a depositary
under Section 72(a) of the General Banking Act.

As to liability of SBTC, although flooding could be considered a fortuitous event, failure of the bank to give
notice to the renter of such fact makes it liable for damages, its negligence caused to aggravate injury or
damage to the renter. SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwaters
inundated the room where Safe Deposit Box No. 54 was located. In view thereof, it should have lost no time in
notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus saving the
same from further deterioration and loss. In this respect, it failed to exercise the reasonable care and
prudence expected of a good father of a family, thereby becoming a party to the aggravation of the injury or
loss.

11. SIMEX INTERNATIONAL (MANILA), INCORPORATED v. THE HONORABLE COURT OF APPEALS and
TRADERS ROYAL BANK G.R. No. 88013, March 19, 1990, CRUZ J.

KEY DOCTRINE: 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 point is that as a business
affected with public interest and because of the nature of its functions, the bank is under obligation to treat
the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their
14

relationship. In the case at bar, it is obvious that the respondent bank was remiss in that duty and violated
that relationship.

The petitioner SIMEX was a depositor of the respondent bank TRADERS ROYAL BANK and maintained a
checking account in its branch at Romulo Avenue, Cubao, Quezon City. SIMEX deposited to its account in the
said bank the amount of P100,000.00. Subsequently, SIMEX issued several checks against its deposit but was
suprised to learn later that they had been dishonored for insufficient funds.

As a consequence, the California Manufacturing Corporation sent, a letter of demand to SIMEX, threatening
prosecution if the dishonored check issued to it was not made good. It also withheld delivery of the order
made by SIMEX. Similar letters were sent to SIMEX by the Malabon Long Life Trading and by the G. and U.
Enterprises.

SIMEX complained to TRADERS ROYAL BANK on June 10, 1981. Investigation disclosed that the sum of
P100,000.00 deposited by SIMEX on May 25, 1981, had not been credited to it. The error was rectified on June
17, 1981, and the dishonored checks were paid after they were re-deposited.

SIMEX demanded reparation from TRADERS ROYAL BANK for its "gross and wanton negligence." This demand
was not met. SIMEX then filed a complaint in the then Court of First Instance of Rizal claiming from TRADERS
ROYAL BANK moral damages in the sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00,
plus 25% attorney's fees, and costs.

ISSUE: Whether or not TRADERS ROYAL BANK is liable for damages

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

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

After deliberating on this particular matter, the Court, in the exercise of its discretion, hereby imposes upon
the respondent bank exemplary damages in the amount of P50,000.00, "by way of example or correction for
the public good," in the words of the law. It is expected that this ruling will serve as a warning and deterrent
against the repetition of the ineptness and indefference that has been displayed here, lest the confidence of
the public in the banking system be further impaired.
15

TRADERS ROYAL BANK is ordered to pay SIMEX, in lieu of nominal damages, moral damages in the amount of
P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original award of attorney's fees in
the amount of P5,000.00, and costs.
12. BANK OF AMERICA, NT & SA VS. ASSOCIATED CITIZENS BANK
G.R. Nos. 141001 & 141018, May 21, 2009, Carpio, J.

The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract
between the bank and its customer (drawer), to pay the check only to the payee or the payee’s order. The
drawer’s instructions are reflected on the face and by the terms of the check. When the drawee bank pays a
person other than the payee named on the check, it does not comply with the terms of the check and violates
its duty to charge the drawer’s account only for properly payable items.

FACTS: BA-Finance Corporation (BA-Finance) entered into a transaction with Miller Offset Press, Inc. (Miller),
through the latter’s authorized representatives, i.e., Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng.

BA-Finance granted Miller a credit line facility through which the latter could assign or discount its trade
receivables with the former.

Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng executed a Continuing Suretyship Agreement with BA-
Finance whereby they jointly and severally guaranteed the full and prompt payment of any and all
indebtedness which Miller may incur with BA-Finance.

Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of Assignment in
favor of the latter. In consideration of the assignment, BA-Finance issued four checks (amounting to P
741,227.78) payable to the "Order of Miller Offset Press, Inc." with the notation "For Payee’s Account Only."

The four checks were deposited by Ching Uy Seng (a.k.a. Robert Ching), then the corporate secretary of Miller,
in Account No. 989 in Associated Citizens Bank (Associated Bank). Account No. 989 is a joint bank account
under the names of Ching Uy Seng and Uy Chung Guan Seng.

Associated Bank stamped the checks with the notation "all prior endorsements and/or lack of endorsements
guaranteed," and sent them through clearing. Later, the drawee bank, Bank of America, honored the checks
and paid the proceeds to Associated Bank as the collecting bank.

Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables. Consequently, BA-
Finance filed a Complaint against Miller for collection of the amount of P731,329.63 which BA-Finance
allegedly paid in consideration of the assignment, plus interest at the rate of 16% per annum and penalty
charges.

Uy Kiat Chung and Uy Chung Guan Seng denied having signed the Continuing Suretyship Agreement with BA-
Finance. In view thereof, BA-Finance filed an Amended Complaint impleading Bank of America as additional
defendant for allegedly allowing encashment and collection of the checks by person or persons other than the
payee named thereon.

The RTC and CA ruled against Associated Bank.


16

ISSUE: Whether or not Associated Bank is liable to reimburse Bank of America for the amount of the four
checks for being negligent.

RULING: Yes. Associated Bank is liable to reimburse Bank of America for the amount of the four checks for
being negligent.

A collecting bank where a check is deposited, and which endorses the check upon presentment with the
drawee bank, is an endorser. This Court has repeatedly held that in check transactions, the collecting bank or
last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting the check for payment to the drawee is an assertion that
the party making the presentment has done its duty to ascertain the genuineness of the endorsements.

When Associated Bank stamped the back of the four checks with the phrase "all prior endorsements and/or
lack of endorsement guaranteed," that bank had for all intents and purposes treated the checks as negotiable
instruments and, accordingly, assumed the warranty of an endorser. Being so, Associated Bank cannot deny
liability on the checks

In Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corporation, it was held that, the law
imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the purpose of
determining their genuineness and regularity. The collecting bank being primarily engaged in banking holds
itself out to the public as the expert and the law holds it to a high standard of conduct.

In presenting the checks for clearing and for payment, Associated Bank made an express guarantee on the
validity of "all prior endorsements". Thus, stamped at the back of the checks are Associated Bank’s clear
warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such
warranty, Bank of America would not have paid on the checks.

As the warranty has proven to be false and inaccurate, Associated Bank is liable for any damage arising out of
the falsity of its representation.

13. EQUITABLE PCI BANK VS. TAN


G.R. No. 165339. August 23, 2010, J. Peralta, Second Division

As a business affected with public interest and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a
family.

FACTS: Arcelito B.Tan maintained a current and savings account with Philippine Commercial International
Bank (PCIB), now Equitable PCI Bank.

On May 13, 1992, Tan issued PCIB Check No. 275100 postdated May 30, 1992 in the amount of P34,588.72 in
favor of Sulpicio Lines, Inc. As of May 14, 1992, respondent's balance with Equitable PCI Bank was P35,147.59.
On May 14, 1992, Sulpicio Lines, Inc. deposited the aforesaid check to its account with Solid Bank, Carbon
Branch, Cebu City. After clearing, the amount of the check was immediately debited by Equitable PCI Bank
from Tan's account thereby leaving him with a balance of only P558.87.
17

Meanwhile, Tan issued three checks from May 9 to May 16, 1992, payable to Agusan del Sur Electric
Cooperative Inc. (ASELCO), to Agusan del Norte Electric Cooperative Inc., (ANECO) and payable in cash for the
amount of P10,000.00. When presented for payment, the three checks were dishonored for being drawn
against insufficient funds.

As a result of the dishonor of Check which were payable to ASELCO and ANECO, respectively, the electric
power supply for the two mini-sawmills owned and operated by Tan, located in Talacogon, Agusan del Sur;
and in Golden Ribbon, Butuan City, was cut off on June 1, 1992 and May 28, 1992, respectively, and it was
restored only on July 20 and August 24, 1992, respectively.

Due to the foregoing, Tan filed with RTC of Cebu City a complaint against Equitable PCI Bank, praying for
payment of losses consisting of unrealized income in the amount of P1,864,500.00. He also prayed for
payment of moral damages, exemplary damages, attorney's fees and litigation expenses.

Tan claimed that Check No. 275100 was a postdated check in payment of Bills of Lading Nos. 15, 16 and 17,
and that his account with Equitable PCI Bank would have had sufficient funds to cover payment of the three
other checks were it not for the negligence of Equitable PCI Bank in immediately debiting from his account
Check No. 275100, in the amount of P34,588.72, even as the said check was postdated to May 30, 1992. As a
consequence of Equitable PCI Bank 's error, which brought about the dishonor of the two checks paid to
ASELCO and ANECO, the electric supply to his two mini-sawmills was cut off, the business operations thereof
were stopped, and purchase orders were not duly served causing tremendous losses to him.

In its defense, Equitable PCI Bank denied that the questioned check was postdated May 30, 1992 and claimed
that it was a current check dated May 3, 1992. It alleged further that the disconnection of the electric supply
to Tan's sawmills was not due to the dishonor of the checks, but for other reasons not attributable to the
bank.

RTC ruled in favor of Equitable PCI Bank but the RTC ruling was reversed by the CA. Hence this petition.

ISSUE: Whether or not Equitable PCI Bank exercised the required degree of diligence for banks.

RULING: No. The law imposes on banks high standards in view of the fiduciary nature of banking. Although
R.A. 8791 took effect only in the year 2000, the Court had already imposed on banks the same high standard
of diligence required under R.A. 8791 at the time of the untimely debiting of respondent's account by
petitioner in May 1992. In Simex International (Manila), Inc. v. Court of Appeals, the Court held that as a
business affected with public interest and because of the nature of its functions, the bank is under obligation
to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship.

The proximate cause of the loss is not Tan's manner of writing the date of the check, as it was very clear that
he intended Check No. 275100 to be dated May 30, 1992 and not May 3, 1992. The proximate cause is
Equitable PCI Bank’s own negligence in debiting the account of the Tan prior to the date as appearing in the
check, which resulted in the subsequent dishonor of several checks issued by Tan and the disconnection by
ASELCO and ANECO of his electric supply.

The bank on which the check is drawn, known as the drawee bank, is under strict liability to pay to the order
of the payee in accordance with the drawers instructions as reflected on the face and by the terms of the
18

check. Thus, payment made before the date specified by the drawer is clearly against the drawee bank's duty
to its client.

Equitable PCI Bank submits that Tan caused confusion on the true date of the check by writing the date of the
check as 5/3/0/92. If, indeed, Equitable PCI Bank was confused on whether the check was dated May 3 or May
30 because of the / which allegedly separated the number 3 from the 0, Equitable PCI Bank should have
required Tan to countersign the said / in order to ascertain the true intent of the drawer before honoring the
check.

As a matter of practice, bank tellers would not receive nor honor such checks which they believe to be
unclear, without the counter-signature of its drawer. Equitable PCI Bank should have exercised the highest
degree of diligence required of it by ascertaining from the respondent the accuracy of the entries therein, in
order to settle the confusion, instead of proceeding to honor and receive the check.

The diligence required of banks, therefore, is more than that of a good father of a family. 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. From the foregoing, it is clear that Equitable PCI Bank did not exercise the degree of
diligence that it ought to have exercised in dealing with its client.