BANK OF THE PHILIPPINE ISLANDS v IAC, 206 SCRA 408 (1992) deposit slip for the newly-opened joint
posit slip for the newly-opened joint current account of the Canlas spouses, that
DOCTRINE: The is no merit in the argument that a bank should not be considered
negligent, much less held liable for damages on account of the inadvertence of its bank
employees for Article 1173 of the Civil Code only requires it to exercise the diligence of a
good father of the family. While the bank’s negligence may not have been attended with
malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and
humiliation to the depositors for which they are entitled to reasonable moral damages.
FACTS The spouses Arthur and Vivienne Canlas opened a joint account in CBTC Q.C.
with an initial deposit of P2,250. Before that, Arthur Canlas had an existing separate
personal checking account there. When they opened this account, the "new accounts"
teller of the bank pulled out from the bank's files the old signature card of Arthur Canlas
for use as I D and reference. By mistake, she placed the old personal account number
of Arthur Canlas on the deposit slip for the new joint checking account of the spouses
so that the initial deposit of P2,250 for the joint checking account was miscredited to
Arthur's personal account. The spouses subsequently deposited other amounts in their
joint account.
When Vivienne Canlas issued a check for Pl,639.89 in April 1977 and another check for
P1,160.00 on June 1, 1977, one of the checks was dishonored by the bank for
insufficient funds and a penalty of P20 was deducted from the account in both instances.
Thereafter, the spouses filed a case for damages agaisnt the bank for serious anxiety,
embarrassment and humiliation by reason of the dishonor of the checks. The RTC and
the IAC found that the bank had been seriously negligent and awarded damages to the
spouses Canlas.
ISSUE Whether the mistake of the teller can be considered as serious negligence entitling
the spouses Canlas to an award of damages.
RULING YES. There is no merit in CBTC's argument that it was only required to exercise
the diligence of a good father of family. The fiduciary nature of the relationship between
a bank and its depositors and the extent of diligence expected of it in handling the
accounts entrusted to its care is a great responsibility.
"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 bank is not expected to be infallible but it must bear the blame for not discovering
the mistake of its teller despite the established procedure requiring the papers and bank
books to pass through a battery of bank personnel whose duty it is to check and
countercheck them for possible errors. Apparently, the officials and employees tasked to
do that did not perform their duties with due care, as may be gathered from the
testimony of the bank's lone witness, Antonio Enciso, who casually declared that "the
approving officer does not have to see the account numbers and all those things. Those
are very petty things for the approving manager to look into." Unfortunately, it was a
"petty thing," like the incorrect account number that the bank teller wrote on the initial
sparked this half-a-million-peso damage suit against the bank.
While the bank's negligence may not have been attended with malice and bad faith,
nevertheless, it caused serious anxiety, embarrassment and humiliation to the private
respondents for which they are entitled to recover reasonable moral damages.
BPI V. COURT OF APPEALS (2000)
FACTS: Private respondent Benjamin Napiza “Napiza” deposited in his Foreign
Currency Deposit Unit “FCDU” Savings Account “SA” with BPI a Continental Bank MC,
payable to "cash" in the amount of 2.5k USD. This check belonged to a certain Henry
Chan who requested Napiza to deposit the check in his dollar account by way of
accommodation for the purpose of clearing the same. Napiza acceded, and agreed to
deliver to Chan a signed blank withdrawal slip,with the understanding that as soon as
the check is cleared, both of them would go to the bank to withdraw the amount of the
check upon Napiza’s presentation to the bank of his passbook. Using the blank
withdrawal slip given by private respondent to Chan, one Ruben Gayon, Jr. was able to
withdraw the amount of 2,541.67 USD from Napiza’s FCDU SA. Notably, the withdrawal
slip shows that the amount was payable to Ramon A. de Guzman and Agnes C. de
Guzman and was duly initialed by the branch assistant manager, Teresita Lindo.
Subsequently, BPI received communication from the Wells Fargo Bank International of
New York that the said check deposited by private respondent was a counterfeit check
because it was not of the type or style of checks issued by Continental Bank
International. Reyes as bank manager informed Napiza that the check bounced. For
failure of Napiza to return the 2.5k USD, notwithstanding demand, BPI eventually filed
a suit for the return of the said amount. The RTC dismissed the case, arguing that to
so hold Napiza liable "would render inutile the requirement of "clearance" from the
drawee bank before the value of a particular foreign check or draft can be credited to the
account of a depositor making such deposit." The CA affirmed the decision of the lower
court in toto. The appellate court held that petitioner committed "clear gross negligence"
in allowing Ruben Gayon, Jr. to withdraw the money without presenting private
respondent's passbook and, before the check was cleared and in crediting the amount
indicated therein in private respondent's account.Thus this present petition.
ISSUE: WON the dismissal of BPI’s case was proper.
HELD: YES. The proximate cause of the withdrawal and eventual loss of the amount
of $2,500.00 on BPI's part was its personnel's negligence in allowing such withdrawal in
disregard of its own rules and the clearing requirement in the banking system. (1) BPI’s
own rules and regulation provide that neither a deposit nor a withdrawal will be
permitted except upon the presentation of the depositor's savings passbook. Yet in this
case, Napiza's passbook was not presented during the withdrawal. (2) Further, BPI’s
own rules and regulations provide that deposits of checks, etc. will be accented as
subject to collection only and credited to the account only upon receipt of the notice of
final payment. Yet in the case at bar, BPI’s personnel allowed the withdrawal of an
amount bigger than the original deposit of $750.00 and the value of the check.deposited
in the amount of $2,500.00 although they had not yet received notice from the clearing
bank in the United States on whether or not the check was funded.By depositing the
check with petitioner, private respondent was, in a way, merely designating petitioner as
the collecting bank. This is in consonance with the rule that a negotiable instrument,
such as a check, whether a manager's check or ordinary check, is not legal tender. The
check deposited must have been cleared first before its value could be properly
transferred to Napiza’s account
Consolidated Bank and Trust Corporation vs. Court of Appeals G.R. No. 138569,
September 11, 2003
MARCH 16, 2014LEAVE A COMMENT
Solidbank’s tellers must exercise a high degree of diligence in insuring that they
return the passbook only to the depositor or his authorized representative. The
tellers know, or should know, that the rules on savings account provide that any
person in possession of the passbook is presumptively its owner.
Facts: Solidbank is a domestic banking corporation while private respondent L.C. Diaz
and Company, CPA’s (“L.C. Diaz”), is a professional partnership engaged in the practice
of accounting and which opened a savings account with Solidbank. Diaz through its
cashier, Mercedes Macaraya , filled up a savings cash deposit slip and a savings checks
deposit slip. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit
the money with Solidbank and give him the Solidbank passbook. Calapre went to
Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The
teller acknowledged receipt of the deposit by returning to Calapre the duplicate copies
of the two deposit slips. Since the transaction took time and Calapre had to make
another deposit for L.C. Diaz with Allied Bank, he left the passbook with
Solidbank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6
informed him that somebody got the passbook. Calapre went back to L.C. Diaz and
reported the incident to Macaraya. The following day,, L.C. Diaz through its Chief
Executive Officer, Luis C. Diaz, called up Solidbank to stop any transaction using the
same passbook until L.C. Diaz could open a new account followed by a formal written
request later that day. It was also on the same day that L.C. Diaz learned of the
unauthorized withdrawal the day before of P300,000 from its savings account. The
withdrawal slip bore the signatures of the authorized signatories of L.C. Diaz, namely
Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal
slip. A certain Noel Tamayo received the P300,000.
L.C. Diaz demanded from Solidbank the return of its money but to no avail. Hence, L.C.
Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank with the
Regional Trial Court. After trial, the trial court rendered a decision absolving Solidbank
and dismissing the complaint. Court of Appeals reversed the decision of the trial court.
Issue: Whether or not Solidbank must be held liable for the fraudulent withdrawal on
private respondent’s account.
Held: Solid bank’s tellers must exercise a high degree of diligence in insuring that they
return the passbook only to the depositor or his authorized representative. The tellers
know, or should know, that the rules on savings account provide that any person in
possession of the passbook is presumptively its owner. If the tellers give the passbook
to the wrong person, they would be clothing that person presumptive ownership of the
passbook, facilitating unauthorized withdrawals by that person. For failing to return
the passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller
No. 6 presumptively failed to observe such high degree of diligence in safeguarding the
passbook, and in insuring its return to the party authorized to receive the same.
However, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip
signed by its authorized signatories to fall into the hands of an impostor. Thus, the
liability of Solidbank should be reduced. Hence, the liability of Solidbank for actual
damages was reduced to only 60%, the remaining 40% was borne by private respondent.
The contract between the bank and its depositor is governed by the provisions of the
Civil Code on simple loan. There is a debtor-creditor relationship between the bank and
its depositor. The bank is the debtor and the depositor is the creditor. The law imposes
on banks high standards in view of the fiduciary nature of banking. RA 8791 declares
that the State recognizes the “fiduciary nature of banking that requires high standards
of integrity and performance.” This new provision in the general banking law, introduced
in 2000, is a statutory affirmation of Supreme Court decisions holding that “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.”
Goyanko, Jr. v. United Coconut Planters BankG.R. No. 179096, 6 February
2013Second Division, Brion, J.Nature: Petition for Review on Certiorari
Facts: In 1995, the late Joseph Goyanko, Sr. invested Php2,000,000.00 with Philippine
AsiaLending Investors, Inc. (PALII). Goyanko, Sr.’s legitimate family, represented by
Joseph Goyanko, Jr. (petitioner), the administrator of Goyanko, Sr.’s Estate, and his
illegitimate family presented conflicting claims toPALII for the release of the investment.
Pending the investigation of the conflicting claims, PALIIdeposited the proceeds of the
investment with UCPB on October 29, 1996 under the name “PhilAsia: ITF (In Trust For)
The Heirs of Joseph Goyanko, Sr.” (“ACCOUNT”). On September 27,1997, the deposit
under the ACCOUNT was Php1,509,318.76. On December 11, 1997, UCPB allowed PALII
to withdraw Php1,500,000.00 from the Account, leaving a balance of only Php9,318.76.
When UCPB refused the demand to restore the amount withdrawn plus legal interest
from December 11, 1997, the petitioner filed a complaint before the Regional Trial Court
(RTC).In its answer to the complaint, UCPB admitted, among others, the opening of the
ACCOUNT under the name “ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.,” (ITF
HEIRS) and the withdrawal on December 11, 1997.After trial, the RTC dismissed
petitioner’s complaint. It did not consider the words “ITFHEIRS” sufficient to charge
UCPB with knowledge of any trust relation between PALII and Goyanko’s heirs
(HEIRS). It concluded that UCPB merely performed its duty as a depository bank in
allowing PALII to withdraw from the ACCOUNT, as the contract of deposit was officially
only between PALII, in its own capacity, and UCPB. Aggrieved, the petitioner appealed
his case to the Court of Appeals (CA). Before the CA,the petitioner maintained that by
opening the ACCOUNT, PALII established a trust by which it was the “trustee” and the
HEIRS are the “trustors-beneficiaries;” thus, UCPB should be liable for allowing the
withdrawal.After due consideration, the CA held that no express trust was created
between the HEIRS and PALII. For a trust to be established, the law requires, among
others, a competent trustor and trustee and a clear intention to create a trust, which
were absent in this case.Quoting the RTC with approval, the CA noted that the contract
of deposit was only between PALII in its own capacity and UCPB, and the words “ITF
HEIRS” were insufficient to establish the existence of a trust. The CA concluded that
as no trust existed, expressly or impliedly,UCPB is not liable for the amount withdrawn.
Issue: Whether or not UCPB should be held liable for the amount withdrawn because a
trustagreement existed between PALII and UCPB, in favor of the HEIRS, when PALII
opened the ACCOUNT with UCPB?
Held: No. A trust, either express or implied, is the fiduciary relationship “x x x between
one person having an equitable ownership of property and another person owning the
legal title to such property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the latter.” Express
or direct trusts are created by the direct and positive acts of the trustor or of the parties.
No written words are required to create an express trust. This is clear from Article 1444
of the Civil Code, but, the creation of an express trust must be firmly shown; it cannot
be assumed from loose and vague declarations or circumstances capable of other
interpretations.
In Rizal Surety & Insurance Co. v. CA [329 Phil. 789], we laid down the requirements
before an express trust will be recognized: Basically, these elements include a
competent trustor and trustee, an ascertainable trust res, and sufficiently certain
beneficiaries. xxx each of theabove elements is required to be established, and, if
any one of them is missing,it is fatal to the trusts (sic). Furthermore, there must be a
present and complete disposition of the trust property, notwithstanding that
the enjoyment in the beneficiary will take place in the future. It is essential, too, that
the purpose be an active one to prevent trust from being executed into a legal estate or
interest, andone that is not in contravention of some prohibition of statute or rule of
public policy. There must also be some power of administration other than a mere dutyto
perform a contract although the contract is for a third-party beneficiary. A
declaration of terms is essential, and these must be stated with reasonable
certainty in order that the trustee may administer, and that the court, if called upon so
to do, may enforce, the trust.
Under these standards, we hold that no express trust was created. First,
while an ascertainable trust res and sufficiently certain beneficiaries may exist, a
competent trustor and trustee do not. Second, UCPB, as trustee of the ACCOUNT, was
never under any equitable duty to deal with or given any power of administration over
it. On the contrary, it was PALII that undertook the duty to hold the title to the ACCOUNT
for the benefit of the HEIRS. Third, PALII,as the trustor, did not have the right to the
beneficial enjoyment of the ACCOUNT. Finally, theterms by which UCPB is to administer
the ACCOUNT was not shown with reasonable certainty.While we agree with the
petitioner that a trust’s beneficiaries need not be particularly identifiedfor a trust to exist,
the intention to create an express trust must first be firmly established, alongwith the
other elements laid above; absent these, no express trust exists.
5. PHILIPPINE BANKING CORPORATION v CA, 419 SCRA 487 (2004)
DOCTRINE: Sec. 2 of RA 8791 (GBL) expressly imposes a fiduciary duty on the
banks when it declares that the State recognizes the “fiduciary nature of
banking that requires high standards of integrity and performance.” The
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.
FACTS: Florencio Pagsaligan, a close friend and officer of the bank, persuaded
Leonilo Marcos to deposit money with Philippine Banking Corporation
(BANK). Marcos yielded and made a time deposit with the Bank on two
occasions.
Later, Marcos wanted to withdraw from the Bank to buy material for his
construction business. However, the bank convinced him to keep his time
deposit and instead, open several domestic letters of credit. Trusting the bank
and Pagsaligan, he again yielded. Marcos executed 3 Trust Receipt
Agreements totaling 851k. He deposited 30% of the amount of Trust
Agreement as marginal deposit. He believed that the remaining 70% would
be credited from his time deposit and accumulated interest.
However, the bank did not offset his time deposit due to an alleged
promissory note amount to 500k. The Bank demanded for the balance of the
Trust Agreement from him. Due to failure to pay, several penalties and
interest accumulated against Marcos. Marcos now files a complaint against
the Bank.
In their defense, the bank argues that the complaint was only an attempt to
avoid liability under several trust receipt agreements that were subject of a
criminal complaint. The RTC ruled in favor of Marcos. The CA modified the
decision only by reducing the damages.
ISSUE Whether the Bank is liable for damages
RULING: YES, the bank is liable. The bank is liable on the ground of offsetting
Marcos’s time deposit with a fictitious promissory note. The Bank failed to
present the original copy of the note. They only presented machine copies of
the duplicate. But these copies have no evidentiary value, contradicting the
Best Evidence Rule.
Sec 2 of the General Banking law of 2000 expressly imposes the fiduciary duty
of on banks. The fiduciary nature of banking requires high standards of
integrity and performance. Although the GBL only took effect in 2000,
jurisprudence has already imposed the same high standard of diligence from
banks at the time the Bank transacted with Marcos. This fiduciary relationship
means that the bank’s obligation to observe high standards of integrity is
deemed written into every deposit agreement between a bank and its
depositor.
The business of banking is imbued with public interest. The stability of banks
largely depends on the confidence of the people in the honesty and efficiency
of banks. As its depositor, Marcos had the right to expect the bank was
accurately recording his transactions. He also had a right to withdraw the
amount in his time deposit upon maturity. Due to the bank’s failure to
produce the original copies of the promissory note and ledges, it failed to
treat Marcos’s account with meticulous care. Whether it was Pagsaligan who
caused such fictitious loan agreement, it will not excuse the bank from its
obligation to return the correct amount to Marcos. As stated before, a bank
is liable for the wrongful acts of its officers done in the interest of the bank or
in their dealings as bank representatives but not for acts outside the scope of
their authority.
6. Samsung Construction v. Far East Bank and Trust Company (FEBTC) and CA,
G.R. No. 129015 Banking, MARCH 27, 2019
FACTS:
A certain Roberto Gonzaga presented for payment FEBTC Check No. 432100 to the
bank’s branch in Bel-Air, Makati. The check, payable to cash and drawn against
Samsung Construction’s current account, was in the amount of P999,500.00. The bank
teller, Cleofe Justiani, checked the balance of the account. After ascertaining there were
enough funds, and after comparing the signature in the check and that of the specimen
on record, Justiani was satisfied as to the authenticity of the signature on the check.
Gonzaga presented 3 identification cards to the bank officers.
Justiani forwarded the check to the branch Senior Assistant Cashier Gemma Velez for
approval. Velez too concluded that the check was indeed signed by the
company’s Project Manager Jong Kyu Lee.
The check was also forwarded to Shirley Syfu, another bank officer for approval. Syfu
then noticed that Jose Sempio III (Sempio), the assistant accountant of Samsung
Construction, was also in the bank. Syfu showed the check to Sempio, who vouched for
the genuineness of Jong’s signature.
Satisfied with the genuineness of the signature of Jong, Syfu authorized the banks
encashment of the check to Gonzaga.
The following day, the company’s accountant, Kyu Yong Lee discovered that a check had
been encashed. Aware that he had not prepared such a check for Jong’s signature, Kyu
found that the last blank check was missing.
Jong learned of the encashment of the check, and realized that his signature had been
forged. Samsung Construction filed a Complaint for violation of Section 23 of the NIL,
and prayed for the payment of the amount debited as a result of the questioned check
plus interest, and attorneys fees.
The RTC held that Jong’s signature on the check was forged and accordingly directed
the bank to pay or credit back to Samsung Constructions account the said amount.
On appeal, the CA reversed the RTC Decision and absolved FEBTC from any liability.
ISSUE: Whether or not FEBTC is liable to Samsung Construction in paying the forged
check.
RULING: Section 23 of the Negotiable Instruments Law states:
When a signature is forged or made without the authority of the person whose signature
it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give
a discharge therefore, or to enforce payment thereof against any party thereto, can be
acquired through or under such signature, unless the party against whom it is sought
to enforce such right is precluded from setting up the forgery or want of authority.
The general rule is to the effect that a forged signature is wholly inoperative, and payment
made through or under such signature is ineffectual or does not discharge the
instrument. If payment is made, the drawee cannot charge it to the drawers account.
The traditional justification for the result is that the drawee is in a superior position to
detect a forgery because he has the makers signature and is expected to know and
compare it. The rule has a healthy cautionary effect on banks by encouraging care in
the comparison of the signatures against those on the signature cards they have on file.
Quite palpably, the general rule remains that the drawee who has paid upon the forged
signature bears the loss. The exception to this rule arises only when negligence can be
traced on the part of the drawer whose signature was forged, and the need arises to
weigh the comparative negligence between the drawer and the drawee to determine who
should bear the burden of loss.
We recognize that Section 23 of the Negotiable Instruments Law bars a party from setting
up the defense of forgery if it is guilty of negligence. Yet, we are unable to conclude that
Samsung Construction was guilty of negligence in this case.
Given the circumstances, extraordinary diligence dictates that FEBTC should have
ascertained from Jong personally that the signature in the questionable check was his.
Still, even if the bank performed with utmost diligence, the drawer whose signature was
forged may still recover from the bank as long as he or she is not precluded from setting
up the defense of forgery. After all, Section 23 of the Negotiable Instruments Law plainly
states that no right to enforce the payment of a check can arise out of a forged signature.
Since the drawer, Samsung Construction, is not precluded by negligence from setting
up the forgery, the general rule should apply. Consequently, if a bank pays a forged
check, it must be considered as paying out of its funds and cannot charge the amount
so paid to the account of the depositor. A bank is liable, irrespective of its good faith, in
paying a forged check.
7. HEIRS OF EDUARDO MANLAPAT v CA, 459 SCRA412 (2005)
DOCTRINE: A mortgagee-bank has no right to deliver to any stranger any
property entrusted to it other than those contractually and legally entitled to
its possession. The act of a bank of allowing complete strangers to take
possession of the owner’s duplicate certificate even if the purpose is merely
for photocopying constitutes manifest negligence which would hold it liable
for damages under Article 1170 and other relevant provisions of the Civil
Code.
FACTS: Lot 2204 was originally in possession of Jose Alvarez (Eduardo’s
grandfather). Eduardo Manalapat, Alvarez’s successor-in-interest, sold a
portion of it to Ricardo Cruz executing a Kasulatan and Sinumpaang Salaysay
to document it. In 1976, the lot became registered only under the name of
Eduardo Manalapat pursuant to a free patent. The sale of Manalapat and Cruz
was forgotten, as Cruz did not even know an OCT was already issued to
Manalapat. Leon Banaag, as atty-in-fact of Eduardo, executed a mortgage
with Rural Bank of San Pascual for 100k with Lot 2204 as collateral. Banaag
deposited the owner’s duplicate OCT with the bank.
However, when the Cruz’s heirs learned of such sale, they wanted to secure
the OCT for presentation to the Register of Deeds and for issuance of a
separate OCT. They urged to obtain the OCT from Manalapat’s heirs but were
denied. Then, they went to the Rural Bank to photocopy the owner’s
duplicate OCT deposited with the bank. The Rural bank’s Manager, Jose
Salazar, allowed them to borrow the OCT for photocopying. Ultimately, the
heirs secured a TCT for a portion of the Lot.
When Banaag went to the Rural bank to tender payment of the mortgage, he
learned of the actions of the Cruz’s heirs that led to the subdivision of the lot
and the issuance of two separate titles.
3 cases were filed with the trial court, all involving the issuance of the TCT.
RTC ruled in favor of Manalapat. CA reversed and ruled in favor of Cruz and
Rural Bank.
ISSUE 1. Whether the cancellation of the OCT and the splitting into two
separate titles may be accorded legal recognition.
2. Whether the bank is liable for letting the mortgaged document be
borrowed by 3rd persons.
RULING: YES, the two separate titles are valid. The heirs of Cruz have
sufficiently proven their claim of ownership over a portion of Lot 2204. The
fact that the Oct was not registered with their name is immaterial.
Registration is not a requirement for validity of contract between parties. The
principal purpose of registration is merely to notify other persons that a
transaction involving the property has been entered into. The issuance of the
OCT in favor of Manalapat does not disregard the fact that the Cruz owned a
portion of the land. The principle of indefeasibility of a Torrens title does not
apply where fraud attended the issuance of the title.
The issuance of the two TCT was valid. The Cruz’s heirs presented to the RD
the original owners duplicate of the OCT. aside from that, they presented the
Kasulatan and Sinumpaang Salaysay where Manalapat acknowledge the sale
in favor of Cruz. The manner of obtaining the OCT did not invalidate the TCT.
The bank is liable for damages. A mortgagee-bank has no right to deliver to
any stranger any property entrusted to it other than to those contractually
and legally entitled to its possession. Though they rightfully acknowledged
the ownership of Cruz’s heirs, the bank lent the original OCT w/o prior
investigation and did not even notified Manalapat’s heirs of the transaction.
The bank should not have lent the certificate even only for the purpose of
photocopying it. Such act constitutes manifest negligence on the part of the
bank, which would necessarily hold it liable for damages under Art 1170 and
other relevant provisions of the Civil Code. Thus, the bank is liable for 50k as
nominal damages to Manalapat’s heirs.
8. CRUZ v BANCOM FINANCE CORPORATION, 379 SCRA 490 (2002)
DOCTRINE: Mortgagee-banks, unlike private individuals, are expected to
exercise greater care and prudence in their dealings, including those involving
registered lands. A banking institution is expected to exercise due diligence
before entering into a mortgage contract. The ascertainment of the status or
condition of a property offered to it as security for a loan must be a standard
and indispensable part of its operations.
FACTS: Edilberto Cruz and Simplicio Cruz offered to sell their parcel of land to
Norma Sulit. In order to facilitate the sale, the Cruz’s executed a deed of sale
in favor of Candelaria Sanchez, but no consideration was paid. On the same
day Candelaria Sanchez conveyed the land to Norma Sulit. Unknown to the
plaintiffs, Norma managed to obtain a loan from Bancom secured by a
mortgage over the land now titled in her name. Norma defaulted on her
obligations to the plaintiffs and later on also defaulted on her payments with
Bancom. The land was foreclosed and auctioned, Bancom was the highest
bidder. Cruz then filed for reconveyance of the land. While Bancom claimed
priority right over Cruz, alleging it was a mortgagee in good faith.
ISSUE Whether Bancom is a mortgagee in good faith
HELD NO. As a general rule, every person dealing with registered land may
safely rely on the correctness of the certificate of title and is no longer
required to look behind the certificate in order to determine the actual
owner. Respondent, however, is not an ordinary mortgagee; it is a mortgagee
bank. As such, unlike private individuals, it is expected to exercise greater care
and prudence in its dealings, including those involving registered lands. A
banking institution is expected to exercise due diligence before entering into
a mortgage contract. The ascertainment of the status or condition of a
property offered to it as security for a loan must be a standard and
indispensable part of its operations.
The evidence before us indicates that respondent bank was not a mortgagee
in good faith. First, at the time the property was mortgaged to it, it failed to
conduct an ocular inspection. Judicial notice is taken of the standard practice
for banks before they approve a loan: to send representatives to the premises
of the land offered as collateral and to investigate the ownership thereof.
Respondent was clearly wanting in the observance of the necessary
precautions to ascertain the flaws in the title of Sulit and to examine the
condition of the property she sought to mortgage.[44] It should not have
simply relied on the face of the Certificate of Title to the property, as its
ancillary function of investing funds required a greater degree of
diligence.[45] Considering the substantial loan involved at the time, it should
have exercised more caution.
9. PNB vs Pike
Facts: The petitioner PNB allowed a representative of Defendant (his talent
manager) to withdraw from his dollar account with the use of a pre-signed
withrdawal slip.
Issue: Whether or not the bank is liable
HELD: Yes. PNB was held liable due to the negligence of its employees in
allowing the unauthorized withdrawal. This was shown by the lackadaisical
attitude of its employees in treating Pike's US dollar account, an act which
resulted to the loss of $7,500. Such warrants for the award of damages.
The slips used were in breach of the standard operating procedure of the
bank in the ordinary and usual course of business.
Even if it is the employees who are negligent, the bank's liability as the
obligor is not merely vicarious but primary since banks are expected to
exercise the degree of diligence in the selection and supervision of their
employees.
10.Cadiz vs CA – Nasa phone
11. FEBTC v. Pacilan Digest
Far East Bank vs. Pacilan
G.R. 157314 July 29, 2005
Callejo Sr, J.:
Facts:
1. Pacilan maintains a current account with petitioner bank (now BPI). He issued
several postdated checks, the last one being check no. 2434886 amounting to
P680. The said check was presented to petitioner bank for payment on April 4,
1988 but was dishonored. It appeared that the account of Pacilan has been
closed on the evening of April 4 on the ground that it was 'improperly handled'.
2. It appeared that the plaintiff issued four checks from March 30 - April 4, 1988
amounting in total to P7,410, on one hand, his funds in the bank only amounted
to P6,981.43, thus an overdraft of P 428.57 resulted therefrom. Consequently,
the last check was dishonored despite the fact that plaintiff deposited the
amount the following day.
3. Pacilan wrote a complaint to the bank but after the bank did not reply, he filed
an action for damages against it and the employee (Villadelgado) who closed the
account. The plaintiff alleged that the immediate closure of his account was
malicious and intended to embarrass him.
4. The lower court ruled in favor of the plaintiff and awarded actual damages
(P100,000) and exemplary damages (P50,000). The bank appealed, but the CA
affirmed the lower court's decision with modifications and held that the closure
of the bank of plaintiff's account despite its rules and regulation allowing a re-
clearing of a check returned for insufficiency of funds, is patently malicious and
unjustifiable. Hence, this appeal.

5. The petitioner contended that in closing the account, it acted in good faith and
in accordance with the pertinent banking rules and regulations governing the
operations of a regular demand deposit, allowing it to close an account if the
depositor frequently draws checks against insufficient funds or uncollected
deposits.
Issue: Whether or not the petitioner is liable for damages
NO. The award of damages under Art. 19 of the Civil Code is unjustifiable. The
petitioner has the right to close the account of plaintiff based on the rules and
regulations on regular demand deposits. The facts do not show that the
petitioner abused its rights in the exercise of its duties. The evidence negates the
existence of bad faith and malice on the part of the petitioner bank, which are
the second and third elements necessary to prove an abuse of right in violation
of Art. 19.
The records also showed that indeed plaintiff has mishandled his account by
issuing checks previously against insufficient funds not just once, but more than
a hundred times.
Moreover, the acceptance by the bank of the deposit the day after the closure of
the account cannot be considered as bad faith nor done with malice but a mere
simple negligence of its personnel.
As a result, whatever damage the plaintiff has suffered (by virtue of the
subsequent dishonor of the other checks he issued) should be borne by him alone
as these was the result of his own act in irregularly handling his account.
12. Citibank, NA v Cabamongan
DOCTRINE: In a loan or forbearance of money, the interest due should be that
stipulated in writing and in the absence thereof, the rate shall be 12% per
annum counted from the time of demand.
FACTS On August 16, 1993, spouses Cabamongan opened a joint foreign
currency time deposit for their sons Lito and Luis Jr. in the amount of
$55,216.69 for a term of 182 days at 2.5625% (from August 16, 1993 to
February 14,1994). On November 10, 1993, a person claiming to be Carmelita
Cabamongan (the wife) pre-terminated the foreign currency account, for
which she presented a Bank of America card, passport, an ATM, and Mabuhay
card. Yeye San Pedro processed the pre-termination. The person executed a
notarize release and waiver document for failure to surrender the original
Certificate of Deposit. The release and waiver document was not notarized,
but the money was released. The person left an ID card, for which San Pedro
called the spouses residence. Upon calling, she was told that the spouses was
in the US, and that she couldn't have pre-terminated the account. On
September 16, 1994, the spouses demanded that the amount withdrawn be
returned, plus interest, which the bank refused. The spouses filed a
complaint, where the RTC ruled in favor of them. The CA affirmed but ruled
that the interest of 12% should run only at the time of demand.
ISSUE Whether interest should be 2.5625%, 6%, or 12%
RULING 12%. The bank argues that the interest should be 2.5625%, or the
interest which was agreed upon. In arguendo that they were negligent, it
should be 6% since the funds did not constitute a loan. The facts show that
the bank employees were negligent when they released the funds upon
showing that (1) failure to produce the original certificate of deposit, and in
lieu of it, a notarized release and waiver document; (2) there was discrepancy
with the signature; (3) the picture of the depositors did not match the person
withdrawing the funds. However, the Court ruled that under Article 1980 of
the Civil Code, bank deposits are considered as simple loan. The relationship
between a bank and a depositor are really a debtor-creditor relationship,
where deposits are treated as loan by the bank from its depositors. As ruled
in Eastern Shipping Lines v CA, a loan should have an interest that is
stipulated, and in absence, should be 12% per annum from the time of
demand.
***Therefore, the interest would be 2.5625% per annum from August 16,
1993 to February 14, 1994, the same rate from February 14, 1994 to
September 16, 1994, and 12% per annum from September 16, 1994 up to the
present date of the case.