WEEK 1
renters – the petitioner and Pugaos.
BANKING LAW DIGEST
CA Agro-Industrial Development Corporation vs CA GR No. 90027. March 3,
1993
Facts:
CA Agro (through its President, Aguirre) and spouses Pugao entered into
an agreement whereby the former purchased two parcels of land for P350, 525 with a
P75, 725 down payment while the balance was covered by three (3) postdated checks.
Among the terms embodied in a Memorandum of True and Actual Agreement of Sale
of Land were that titles to the lots shall be transferred to the petitioner upon full
payment of the purchase price and that the owner’s copies of the certificates of titles
thereto shall be deposited in a safety deposit box of any bank. The same could be
withdrawn only upon the joint signatures of a representative of the petitioner upon full
payment of the purchase price. They then rented Safety Deposit box of private
respondent Security Bank and Trust Company (SBTC). For this purpose, both signed
a contract of lease which contains the following conditions:
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 herein
expressly provided, and it assumes absolutely no liability in connection therewith.
After the execution of the contract, two (2) renter’s key were given to Aguirre, and
Pugaos. A key guard remained with the bank. The safety deposit box has two key holes
and can be opened with the use of both keys. Petitioner claims that the CTC were
placed inside the said box.
Thereafter, a certain Mrs. Ramos offered to buy from the petitioner the two (2) lots at
a price of P225 per sqm. Mrs. Ramose demanded the execution of a deed of sale which
necessarily entailed the production of the CTC. Aguirre and Pugaos then proceeded to
the bank to open the safety deposit box. However, when opened in the presence of
bank’s representative, the box yielded no certificates. Because of the delay in
reconstitution of title, Mrs. Ramos withdrew her earlier offer and as a consequence
petitioner failed to realize the expected profit of P280 , 500. Hence, the latter filed a
complaint for damages.
RTC: Dismissed the complaint
CA: Affirmed
Issue:
Whether or not the contractual relation between a commercial bank and another
party in the contract of rent of a safety deposit box is one of bailor and bailee.
Ruling:
Yes.
The contract in the case at bar is a special kind of deposit. It cannot be
characterized as an ordinary contract of lease under Article 1643 because the full and
absolute possession and control of the safety deposit box was not given to the joint
American Jurisprudence:
The prevailing rule is that the relation between a bank renting out safe-deposit
boxes and its customer with respect to the contents of the box is that of a bail or bailee,
the bailment being for hire and mutual benefit.
Our provisions on safety deposit boxes are governed by Section 72 (a) of the
General Banking Act, and this primary function is still found within the parameters of
a contract of deposit like the receiving in custody of funds, documents and other
valuable objects for safekeeping. The renting out of the safety deposit boxes is not
independent from, but related to or in conjunction with, this principal function. Thus,
depositary’s liability is governed by our civil code rules on obligation and contracts,
and thus the SBTC would be liable if, in performing its obligation, it is found guilty
of fraud, negligence, delay or contravention of the tenor of the agreement.
Sia vs. Court of Appeals G.R. No. 102970, May 13, 1990
Contract of the use of a safety deposit box of a bank is not a deposit but a lease under
Sec 72, A of General Banking Act. Accordingly, 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. The bank’s
negligence aggravated the injury or damage to the stamp collection..
Facts: Plaintiff Luzon Sia rented a safety deposit box of Security Bank and Trust
Co. (Security Bank) at its Binondo Branch 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. 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 damage to his
stamps collection. Security Bank rejected the plaintiff’s claim for compensation for
his damaged stamps collection.
Sia, thereafter, instituted an action for damages against the defendant bank. Security
Bank contended that its contract with the Sia over safety deposit box was one of lease
and not of deposit and, therefore, governed by the lease agreement which should be
the applicable law; the destruction of the plaintiff’s stamps collection was due to a
calamity beyond 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 trial court rendered in favor of plaintiff Sia and
ordered Sia to pay damages.
Issue: Whether or not the Bank is liable for negligence.
Held: Contract of the use of a safety deposit box of a bank is not a deposit but a lease.
Section 72 of the General Banking Act [R.A. 337, as amended] pertinently provides:
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.
As correctly held by the trial court, Security Bank was guilty of negligence. The bank’s
negligence aggravated the injury or damage to the stamp collection. SBTC was aware
of the floods of 1985 and 1986; it also knew that the floodwaters inundated the room
where the safe deposit box 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. Accordingly,
the aforementioned fourth characteristic of a fortuitous event is absent. Article 1170
of the Civil Code, which reads “Those who in the performance of their obligation are
guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages” is applicable. Hence, the petition was granted.
The provisions contended by Security Bank in the lease agreement which are meant to
exempt SBTC from any liability for damage, loss or destruction of the contents of the
safety deposit box which may arise from its own agents’ fraud, negligence or delay
must be stricken down for being contrary to law and public policy.
Simex International v. CA (G.R. No. 88013)
Facts:
Petitioner, a private corporation engaged in the exportation of food products, was a
depositor maintaining a checking account with respondent Traders Royal Bank.
Petitioner deposited to its account increasing its balance and subsequently, issued
several checks but was surprised to learn that it had been dishonored for insufficient
funds. As a consequence, petitioner received demand letters from its suppliers for the
dishonored checks. Investigation disclosed that the deposit was not credited to it. The
error was rectified and the dishonored checks were consequently paid. Petitioner
demanded reparation from respondent bank for its gross and wanton negligence but
the later did not heed. Petitioner then filed before the RTC which later held that
respondent bank was guilty of negligence but petitioner nonetheless was not entitled
to moral damages. CA affirmed.
Issue:
Whether or not petitioner is entitled to damages due to respondent bank’s negligence.
Ruling: YES.
As the Court sees it, the initial carelessness of the respondent bank, aggravated by the
lack of promptitude in repairing its error, justifies the grant of moral damages. This
rather lackadaisical attitude toward the complaining depositor constituted the gross
negligence, if not wanton bad faith, that the respondent court said had not been
established by the petitioner. We shall recognize that the petitioner did suffer injury
because of the private respondent’s negligence that caused the dishonor of the checks
issued by it. The immediate consequence was that its prestige was impaired because
of the bouncing checks and confidence in it as a reliable debtor was diminished.
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.
Consolidated Bank and Trust Corporation vs. Court of Appeals G.R. No. 138569,
September 11, 2003
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: 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. 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.”
Metropolitan Bank and Trust Company vs Cabilzo
510 SCRA 259 [G.R. No. 154469 December 6, 2006]
Facts: Petitioner Metrobank is a banking institution duly organized and existing as
such under Philippine laws. Respondent Renato D. Cabilzo (Cabilzo) was one of
Metrobank’s clients who maintained a current account with Metrobank Pasong Tamo
Branch. On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988,
payable to “CASH” and postdated on 24 November 1994 in the amount of One
Thousand Pesos (P 1,000.00). The check was drawn against Cabilzo’s Account with
Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and was
paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the
check was presented to Westmont Bank for payment. Westmont Bank, in turn,
indorsed the check to Metrobank for appropriate clearing. After the entries thereon
were examined, including the availability of funds and the authenticity of the signature
of the drawer, Metrobank cleared the check for encashment in accordance with the
Philippine Clearing House Corporation (PCHC) Rules. On 16 November 1994,
Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some
transaction when he was asked by a bank personnel if Cabilzo had issued a check in
the amount of P 91,000.00 to which the former replied in the negative. On the
afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did
not issue a check in the amount of P 91,000.00 and requested that the questioned check
be returned to him for verification, to which Metrobank complied. 1,000.00 was
altered to P Upon receipt of the check, Cabilzo discovered that Metrobank Check No.
985988 which he issued on 12 November 1994 in the amount of P 91,000.00 and the
date 24 November 1994 was changed to 14 November 1994.
Issue: Whether or not the alteration made in the subject check is a material alteration.
Held: Yes. An alteration is said to be material if it changes the effect of the instrument.
It means that an unauthorized change in an instrument that purports to modify in any
respect the obligation of a party or an unauthorized addition of words or numbers or
other change to an incomplete instrument relating to the obligation of a party.In other
words, a material alteration is one which changes the items which are required to be
stated under Section 1 of the Negotiable Instruments Law.
Section 125. What constitutes material alteration. – Any alteration which changes:
(a) The date; (b) The sum payable, either for principal or interest; (c) The time or
place of payment; (d) The number or the relation of the parties; (e) The medium or
currency in which payment is to be made; Or which adds a place of payment where no
place of payment is specified, or any other change or addition which alters the effect
of the instrument in any respect is a material alteration.
In the case at bar, the check was altered so that the amount was increased from P
1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14
November 1994. Apparently, since the entries altered were among those enumerated
under Section 1 and 125, namely, the sum of money payable and the date of the check,
the instant controversy therefore squarely falls within the purview of material
alteration.
Now, having laid the premise that the present petition is a case of material alteration,
it is now necessary for us to determine the effect of a materially altered instrument, as
well as the rights and obligations of the parties thereunder. The following provision of
the Negotiable Instrument Law will shed us some light in threshing out this issue:
Section 124. Alteration of instrument; effect of. – Where a negotiable instrument is
materially altered without the assent of all parties liable thereon, it is avoided, except
as against a party who has himself made, authorized, assented to the alteration and
subsequent indorsers . and But when the instrument has been materially altered and is
in the hands of a holder in due course not a party to the alteration, he may enforce the
payment thereof according to its original tenor.
Indubitably, Cabilzo was not the one who made nor authorized the alteration. Neither
did he assent to the alteration by his express or implied acts. There is no showing that
he failed to exercise such reasonable degree of diligence required of a prudent man
which could have otherwise prevented the loss. As correctly ruled by the appellate
court, Cabilzo was never remiss in the preparation and issuance of the check, and there
were no indicia of evidence that would prove otherwise. Indeed, Cabilzo placed
asterisks before and after the amount in words and figures in order to forewarn the
subsequent holders that nothing follows before and after the amount indicated other
than the one specified between the asterisks.
The degree of diligence required of a reasonable man in the exercise of his tasks and
the performance of his duties has been faithfully complied with by Cabilzo. In fact, he
was wary enough that he filled with asterisks the spaces between and after the amounts,
not only those stated in words, but also those in numerical figures, in order to prevent
any fraudulent insertion, but unfortunately, the check was still successfully altered,
indorsed by the collecting bank, and cleared by the drawee bank, and encashed by the
perpetrator of the fraud, to the damage and prejudice of Cabilzo.
Verily, Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel when the
facts on record are bare of evidence to support such conclusion. The doctrine of
equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
erroneous conduct, either by omission or commission, was the cause of injury.
Metrobank’s reliance on this dictum, is misplaced. For one, Metrobank’s
representation that it is an innocent party is flimsy and evidently, misleading. At the
same time, Metrobank cannot asseverate that Cabilzo was negligent and this
negligence was the proximate cause of the loss in the absence of even a scintilla proof
to buttress such claim. Negligence is not presumed but must be proven by the one who
alleges it.
When the drawee bank pays a materially altered check, it violates the terms of the
check, as well as its duty to charge its client’s account only for bona fide disbursements
he had made. Since the drawee bank, in the instant case, did not pay according to the
original tenor of the instrument, as directed by the drawer, then it has no right to claim
reimbursement from the drawer, much less, the right to deduct the erroneous payment
it made from the drawer’s account which it was expected to treat with utmost fidelity.
PNB v. PIKE
SUMMARY. Pike opened a U.S Dollar Savings Account with PNB. After coming
home from a trip to Japan, he found out that his passbook was missing & that there
was an unauthorized withdrawal was made amounting to $7,500. Pike demanded
PNB to return the money, but PNB refused stating that it exercised due diligence in
handling the account. RTC ruled in favor of Pike. PNB appealed– MR was denied.
Hence, this petition.
DOCTRINE. With banks, the degree of diligence required is more than that of a
good father of a family considering that the business of banking is imbued with
public interest due to the nature of their functions. The stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks.
Thus, the law imposes on banks a high degree of obligation to treat the accounts of
its depositors with meticulous care, always having in mind the fiduciary nature of
banking. Section 2 of Republic Act No. 8791, which took effect on 13 June 2000,
makes a categorical declaration that the State recognizes the “fiduciary nature of
banking that requires high standards of integrity and performance.
FACTS.
 Complainant Pike opened a U.S Dollar Savings Account with petitioner PNB
Buendia Branch for which he was issued a passbook.
 Pike alleged that he left his passbook inside a locked cabinet before leaving for
Japan. However, when he came back, some of his valuables + passbook went
missing. He reported this which lead to the arrest of Mr. Joy Manuel Davasol.
 Davasol was found to have made 2 unauthorized withdrawals from Pike’s Savings
Account. ( 31 March ’93 – $3,500 + 5 April ’93 - $4,000)
 Pike demanded PNB Buendia the return of the $7,500 on the ground that he never
authorized anybody to withdraw from his signatures as the signatures appearing on
the subject withdrawal slips were clearly forgeries. Defendant PNB refused on
stating that it exercised due diligence in handling the account.
 Pike requested that the hold-account be lifted in order to withdraw remaining
balanace.
 PNB alleged in its Motion to Dismiss a counterstatement of facts : “1993, Pike &
Davasol wetn to see PNB AVP Lorenzo Bal to withdraw $2k + verbal instructions
to honor all withdrawals transmitted by his Talent Manager and Choreographer Joy
Davasol who shall present pre-signed withdrawal slips bearing Pike’s signature. “
 TC : Bank responsible for unauthorized withdrawals. Signatures in the unauthorized
withdrawals slips did not correspond to the true signature of Pike. From this, court
was convinced that the bank was negligent in the performance of its duties.
 CA : Affirmed findings of RTC. PNB was negligent in exercising the diligence
required of a business imbued with public interest. CA modified rate of interest from
6% to 12% per annum from time the judgment becomes final and executory.
 PNB filed Motion for Reconsideration : CA denied. Hence, this petition.
ISSUES & RATIO.
1. WON PNB exercised the degree of diligence that it ought to have exercised in
dealing with their clients? – NO.
Evidence clearly showed that the petitioner bank did not exercise the degree of
diligence that it ought to have exercised in dealing with their clients.
Having admitted that pre-signed withdrawal slips do not constitute the normal
procedure with respect to withdrawals by representatives should have already put
petitioner PNB’s employees on guard. Rather than readily validating and permitting
said withdrawals, they should have proceeded more cautiously. Clearly, petitioner
bank’s employee, Lorenzo T. Bal, an Assistant Vice President at that, was exceedingly
careless in his treatment of respondent Pike’s savings account.
With banks, the degree of diligence required, contrary to the position of petitioner
PNB, is more than that of a good father of a family considering that the business of
banking is imbued with public interest due to the nature of their functions. The stability
of banks largely depends on the confidence of the people in the honesty and efficiency
of banks. Thus, the law imposes on banks a high degree of obligation to treat the
accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of banking. Section 2 of Republic Act No. 8791, which took effect on 13 June
2000, makes a categorical declaration that the State recognizes the “fiduciary nature
of banking that requires high standards of integrity and performance.
2. WON moral and exemplary damages can be awarded against a party in
good faith? - YES.
The award of moral and exemplary damages is left to the sound discretion of the
court, and if such discretion is well exercised, as in this case, it will not be
disturbed on appeal.
An award of moral damages would require, firstly, evidence of besmirched reputation,
or physical, mental or psychological suffering sustained by the claimant; secondly, a
culpable act or omission factually established; thirdly, proof that the wrongful act or
omission of the defendant is the proximate cause of the damages sustained by the
claimant; and fourthly, that the case is predicated on any of the instances expressed or
envisioned by Articles 2219 and 2220 of the Civil Code.
Specifically, in culpa contractual or breach of contract, as here, moral damages are
recoverable only if the defendant has acted fraudulently or in bad faith, or is found
guilty of gross negligence amounting to bad faith, or in wanton disregard of his
contractual obligations. Verily, the breach must be wanton, reckless, malicious, or in
bad faith, oppressive or abusive.
The award of exemplary damages is also proper as a warning to petitioner PNB and
all concerned not to recklessly disregard their obligation to exercise the highest and
strictest diligence in serving their depositors.
DECISION.
WHEREFORE, the instant petition is DENIED.
NOTES.
 By his own testimony, the witness ( Lorenzo Bal – Assistant Vice President of PNB
Buendia Branch) negated the very reason for the bank’s bizarre “accommodation”
of the alleged verbal request of respondent Pike—that he was a “valued client.” From
the aforequoted, it appears that the witness, Lorenzo Bal, was not even reasonably
familiar with respondent Pike, yet, he was ready, willing and able to accommodate
the verbal request of said depositor.
 It was also shown that, Lorenzo Bal approved the withdrawal transaction without
asking for any proof of identification for the reason that: 1) Davasol was in
possession of a pre-signed withdrawal slip; and 2) the witness “recognized” the
signature of respondent Pike— even after admitting that he did not bother to counter
check the signature on the slip with the specimen signature card of respondent Pike
and that he met respondent Pike just once so that he cannot seem to recall what the
latter looks like.
BPI vs. Casa Montessori Internationale, et. al., G.R. No. 149454. May 28, 2004
Facts: Plaintiff CASA Montessori International opened a current account with BPI. In
1991, plaintiff discovered that nine (9) of its checks had been encashed by a certain
Sonny D. Santos since 1990 in the total amount of P782,000.00. It turned out that
Sonny D. Santos with account at BPIs Greenbelt Branch was a fictitious name used by
third party defendant Leonardo T. Yabut who worked as external auditor of CASA. A
Third party defendant voluntarily admitted that he forged the signature of Ms. Lebron
and encashed the checks.
On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages
against defendant bank praying that the latter be ordered to reinstate the amount
of P782,500.00 in the current and savings accounts of the plaintiff with interest at 6%
per annum.
RTC rendered decision in favor of CASA. CA modified decision holding CASA as
contributory negligent hence ordered Yabut to reimburse BPI half the total amount
claimed and CASA, the other half. It also disallowed attorney’s fees and moral and
exemplary damages.
Issues: WON there was forgery under the Negotiable Instruments Law (NIL)?
Ruling:
The Court first discussed that forgery is a defense.
“Section 23 of the NIL Section 23. Forged signature; effect of. — 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 x x x 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. “
Under this provision, a forged signature is a real or absolute defense, and a
person whose signature on a negotiable instrument is forged is deemed to have
never become a party thereto and to have never consented to the contract that
allegedly gave rise to it. The counterfeiting of any writing, consisting in the
signing of anothers name with intent to defraud, is forgery. In the present case, we
hold that there was forgery of the drawers signature on the check.
Negligence is attributable to BPI alone. A banking business is impressed with public
interest, of paramount importance thereto is the trust and confidence of the public in
general. Consequently, the highest degree of diligence is expected, and high standards
of integrity and performance are even required, of it. BPI, despite claims of following
its signature verification procedure, still failed to detect the eight instances of
forgery. Its negligence consisted in the omission of that degree of diligence required of
a bank. It cannot now feign ignorance, for very early on we have already ruled that a
bank is bound to know the signatures of its customers. and if it pays a forged check, it
must be considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was forged.
Phil. Bank of Commerce v. CA
G.R. No. 97626, March 14, 1997
o The negligence must be the proximate cause of the loss
FACTS:
Rommel’s Marketing Corporation (RMC) maintained two separate current accounts
with PBC in connection with its business of selling appliances. The RMC General
Manager Lipana entrusted to his secretary, Irene Yabut, RMC funds amounting to
P300,000+ for the purpose of depositing the same to RMC’s account with PBC.
However, it turned out that Yabut deposited the amounts in her husband’s account
instead of RMC. Lipana never checked his monthly statement of accounts regularly
furnished by PBC so that Yabut’s modus operandi went on for the span of more than
one year.
ISSUE:
o What is the proximate cause of the loss – Lipana’s negligence in not checking his
monthly statements or the bank’s negligence through its teller in validating the
deposit slips?
HELD:
The bank teller was negligent in validating, officially stamping and signing all the
deposit slips prepared and presented by Yabut, despite the glaring fact that the
duplicate copy was not completely accomplished contrary to the self-imposed
procedure of the bank with respect to the proper validation of deposit slips, original or
duplicate.
The bank teller’s negligence, as well as the negligence of the bank in the selection and
supervision of its bank teller, is the proximate cause of the loss suffered by the private
respondent, not the latter’s entrusting cash to a dishonest employee. Xxx Even if Yabut
had the fraudulent intention to misappropriate the funds, she would not have been able
to deposit those funds in her husband’s current account, and then make plaintiff believe
that it was in the latter’s accounts wherein she had deposited them, had it not been for
the bank teller’s aforesaid gross and reckless negligence.
Doctrine of Last Clear Chance – where both parties are negligent, but the negligent
act of one is appreciably later in time than that of the other, or when it is impossible
to determine whose fault or negligence should be attributed to the incident, the one
who had the last clear opportunity to avoid the impending harm and failed to do so is
chargeable with the consequences thereof. It means that the antecedent negligence of
a person does not preclude the recovery of damages for the supervening negligence
of, or bar a defense against liability sought by another, if the latter, who had the last
fair chance, could have avoided the impending harm by exercise of due diligence. Held: Yes. The evidence also shows that the respondent bank exercised that degree
(Phil. Bank of Commerce v. CA, supra) of diligence expected of an ordinary prudent person under the circumstances obtaining;
the respondent bank advised Westpac-New York to honor the reimbursement claim of
Westpac-Sydney and to debit the dollar account of respondent bank with the former.
Reyes vs. Court of Appeals G.R. No. 118492, August 15, 2001 The degree of diligence required of banks, is more than that of a good father of a family
where the fiduciary nature of their relationship with their depositors is concerned. In
other words banks are duty bound to treat the deposit accounts of their depositors with
The degree of extraordinary diligence applies only to cases where banks act under the highest degree of care. But the said ruling applies only to cases where banks act
their fiduciary capacity, that is, as depositary of the deposits of their depositors. But under their fiduciary capacity, that is, as depositary of the deposits of their depositors.
the same higher degree of diligence is not expected to be exerted by banks in But the same higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with their commercial transactions that do not involve their fiduciary relationship with their
depositors. depositors. The case at bar does not involve the handling of petitioners’ deposit, if any,
with the respondent bank. Instead, the relationship involved was that of a buyer and
Facts: Godofredo, Casheir of the Philippine Racing Club (PCRI), went to respondent seller.
bank to apply for a demand draft in the amount AU$1,610.00 payable to the order of
the 20th Asian Racing Conference Secretariat of Sydney, Australia. He was attended
to by respondent bank’s assistant cashier, Mr. Yasis, who at first denied the application
for the reason that respondent bank did not have an Australian dollar account in any
bank in Sydney. Godofredo asked if there could be a way for respondent bank to
accommodate PRCI’s urgent need to remit Australian dollars to Sydney. Yasis of
respondent bank then informed Godofredo of a roundabout way of effecting the
requested remittance to Sydney thus: the respondent bank would draw a demand draft
against Westpac Bank in Sydney, Australia (Westpac-Sydney) and have the latter
reimburse itself from the U.S. dollar account of the respondent in Westpac Bank in
New York, U.S.A. (Westpac-New York).

However, upon due presentment of the foreign exchange demand draft, the same was
dishonored, with the notice of dishonor stating that there is “No account held with
Westpac.” Meanwhile, Wespac-New York sent a cable to respondent bank informing
the latter that its dollar account in the sum of AU$ 1,610.00 was debited. In response
to PRCI’s complaint about the dishonor of the said foreign exchange demand draft,
respondent bank informed Westpac-Sydney of the issuance of the said demand draft,
drawn against the Wespac-Sydney and informing the latter to be reimbursed from the
respondent bank’s dollar account in Westpac-New York. The respondent bank on the
same day likewise informed Wespac-New York requesting the latter to honor the
reimbursement claim of Wespac-Sydney. Upon its second presentment for payment,
the demand draft was again dishonored by Westpac-Sydney for the same reason, that
is, that the respondent bank has no deposit dollar account with the drawee Wespac-
Sydney. Gregorio Reyes and Consuelo Puyat-Reyes arrived in Sydney on a separate
date and both were humiliated and embarrassed in the presence of international
audience after being denied registration of the conference secretariat since the foreign
exchange draft was dishonored. Petitioners were only able to attend the conference
after promising to pay in cash instead which they fulfilled

Issue: Whether or not respondent bank is liable for damages due to the dishonor of
the foreign exchange demand drafts.