BPI vs.

Intermediate Appellate Court GR# L-66826, August

19, 1988
CORTES, J:

Facts:

Rizaldy T. Zshornack and his wife maintained in COMTRUST a dollar savings account and a peso current
account. An application for a dollar drat was accomplished by Virgillo Garcia branch manager of
COMTRUST payable to a certain Leovigilda Dizon. In the PPLICtion, Garcia indicated that the amount was
to be charged to the dolar savings account of the Zshornacks. There wasa no indication of the name of the
purchaser of the dollar draft. Comtrust issued a check payable to the order of Dizon. When Zshornack
noticed the withdrawal from his account, he demanded an explainaiton from the bank. In its answer,
Comtrust claimed that the peso value of the withdrawal was given to Atty. Ernesto Zshornack, brother of
Rizaldy. When he encashed with COMTRUST a cashiers check for P8450 issued by the manila banking
corporation payable to Ernesto.

Issue: Whether the contract between petitioner and respondent bank is a deposit?

Held: The document which embodies the contract states that the US$3,000.00 was received by the bank
for safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for
the bank to safely keep the dollars and to return it to Zshornack at a later time. Thus, Zshornack demanded
the return of the money on May 10, 1976, or over five months later.

The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with
the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not
the principal purpose of the contract, there is no deposit but some other contract.
THE CONSOLIDATED BANK and TRUST CORPORATION vs. COURT OF
APPEALS and L.C. DIAZ and COMPANY, CPA’s
G.R. No. 138569, Sep 11, 2003.
FACT:
Petitioner Solidbank is a domestic banking corporation organized and existing
under Philippine laws. Private respondent L.C. Diaz and Company, CPA’s, is a
professional partnership engaged in the practice of accounting.
In March 1976, L.C. Diaz opened a savings account with Solidbank. On 14
August 1991, L.C. Diaz through its cashier, Mercedes Macaraya, filled up a
savings (cash) deposit slip for P990 and a savings (checks) deposit slip for
P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to
deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank
passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips
and the passbook. The teller acknowledged the receipt of the deposit by
returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6
stamped the deposit slips with the words “DUPLICATE” and “SAVING
TELLER 6 SOLIDBANK HEAD OFFICE.” 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. Calapre then went to Allied Bank. 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.

Macaraya immediately prepared a deposit slip in duplicate copies with a check

of P200,000. Macaraya and Calapre went to Solidbank and presented to Teller
No. 6 the deposit slip and check. The teller stamped the words “DUPLICATE”
and “SAVING TELLER 6 SOLIDBANK HEAD OFFICE” on the duplicate copy
of the deposit slip. When Macaraya asked for the passbook, Teller No. 6 told
Macaraya that someone got the passbook but she could not remember to
whom she gave the passbook. When Macaraya asked Teller No. 6 if Calapre
got the passbook, Teller No. 6 answered that someone shorter than Calapre
got the passbook. Calapre was then standing beside Macaraya.

The following day L.C. Diaz learned of the unauthorized withdrawal the day
before (14 August 1991) of P300,000 from its
savings account. The withdrawal slip for the P300,000 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. Solidbank
refused. L.C. Diaz filed a Complaint for Recovery of a Sum of Money against
Solidbank. The trial court absolved Solidbank. L.C. Diaz appealed to the CA.
CA reversed the ecision of the trial court. CA denied the motion for
reconsideration of Solidbank. But it modified its decision by deleting the
award of exemplary damages and attorney’s fees. Hence this petition.

ISSUE:
WON petitioner Solidbank is liable.
RULING:
Yes. Solidbank is liable for breach of contract due to negligence, or culpa
contractual.
The contract between the bank and its depositor is governed by the provisions
of the Civil Code on simple loan. Article 1980 of the Civil Code expressly
provides that “x x x savings x x x deposits of money in banks and similar
institutions shall be governed by the provisions concerning 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 depositor lends
the bank money and the bank agrees to pay the depositor on demand. The
savings deposit agreement between the bank and the depositor is the contract
that determines the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of
banking. 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.

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 RA 8791 prescribes the statutory diligence required from banks – that
banks must observe “high standards of integrity and performance” in servicing
their depositors.

However, the fiduciary nature of a bank-depositor relationship does not

convert the contract between the bank and its depositors from a simple loan to
a trust agreement, whether express or implied. Failure by the bank to pay the
depositor is failure to pay a simple loan, and not a breach of trust. The law
simply imposes on the bank a higher standard of integrity and performance in
complying with its obligations under the contract of simple loan, beyond those
required of non-bank debtors under a similar contract of simple loan.

The fiduciary nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors but to
earn money for themselves.

Solidbank’s Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that “responsibility arising from
negligence in the performance of every kind of obligation is demandable.” For
breach of the savings deposit agreement due to negligence, or culpa
contractual, the bank is liable to its depositor.

Calapre left the passbook with Solidbank because the “transaction took time”
and he had to go to Allied Bank for another transaction. The passbook was still
in the hands of the employees of Solidbank for the processing of the deposit
when Calapre left Solidbank. When the passbook is in the possession of
Solidbank’s tellers during withdrawals, the law imposes on Solidbank and its
tellers an even higher degree of diligence in safeguarding the passbook.

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. 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.

In culpa contractual, once the plaintiff proves a breach of contract, there is a

presumption that the defendant was at fault or negligent. The burden is on the
defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was
negligent. In the present case, L.C. Diaz has established that Solidbank
breached its contractual obligation to return the passbook only to the
authorized representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning the
passbook to Calapre. The burden was on Solidbank to prove that there was no
negligence on its part or its employees. But Solidbank failed to discharge its
burden. Solidbank did not present to the trial court Teller No. 6, the teller with
whom Calapre left the passbook and who was supposed to return the passbook
to him. Solidbank also failed to adduce in evidence its standard procedure in
verifying the identity of the person retrieving the passbook, if there is such a
procedure, and that Teller No. 6 implemented this procedure in the present
case.

Solidbank is bound by the negligence of its employees under the principle of

respondeat superior or command responsibility. The defense of exercising the
required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana. The bank
must not only exercise “high standards of integrity and performance,” it must
also insure that its employees do likewise because this is the only way to
insure that the bank will comply with its fiduciary duty

Proximate Cause of the Unauthorized Withdrawal

Proximate cause is that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred. Proximate cause is determined by
the facts of each case upon mixed considerations of logic, common sense,
policy and precedent.

L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor. Solidbank was in possession of the passbook while it was processing
the deposit. After completion of the transaction, Solidbank had the contractual
obligation to return the passbook only to Calapre, the authorized
representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation
because it gave the passbook to another person.

Had the passbook not fallen into the hands of the impostor, the loss of
P300,000 would not have happened. Thus, the proximate cause of the
unauthorized withdrawal was Solidbank’s negligence in not returning the
passbook to Calapre.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent
but the negligent act of one is appreciably later than that of the other, or where
it is impossible to determine whose fault or negligence caused the loss, the one
who had the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss. The antecedent negligence of the plaintiff does not
preclude him from recovering damages caused by the supervening negligence
of the defendant, who had the last fair chance to prevent the impending harm
by the exercise of due diligence.

We do not apply the doctrine of last clear chance to the present case. This is a
case of culpa contractual, where neither the contributory negligence of the
plaintiff nor his last clear chance to avoid the loss, would exonerate the
defendant from liability. Such contributory negligence or last clear chance by
the plaintiff merely serves to reduce the recovery of damages by the plaintiff
but does not exculpate the defendant from his breach of contract

Mitigated Damages
Under Article 1172, “liability (for culpa contractual) may be regulated by the
courts, according to the circumstances.” This means that if the defendant
exercised the proper diligence in the selection and supervision of its employee,
or if the plaintiff was guilty of contributory negligence, then the courts may
reduce the award of damages. In this case, 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.

In PBC v. CA where the Court held the depositor guilty of contributory

negligence, we allocated the damages between the depositor and the bank on a
40-60 ratio. Applying the same ruling to this case, we hold that L.C. Diaz must
shoulder 40% of the actual damages awarded by the appellate court.
Solidbank must pay the other 60% of the actual damages.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with

MODIFICATION.
 Goyanko, Jr. v. United Coconut Planters Bank
G.R. No. 179096, 6 February 2013
Second Division, Brion, J.

Nature: Petition for Review on Certiorari

Facts: In 1995, the late Joseph Goyanko, Sr. invested ₱2,000,000.00 with Philippine Asia Lending
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 to
PALII for the release of the investment. Pending the investigation of the conflicting claims, PALII
deposited the proceeds of the investment with UCPB on October 29, 1996 under the name “Phil Asia:
ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.” (ACCOUNT). On September 27, 1997, the
deposit under the ACCOUNT was ₱1,509,318.76. On December 11, 1997, UCPB allowed PALII to
withdraw ₱1,500,000.00 from the Account, leaving a balance of only ₱9,318.76. 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 “ITF
HEIRS” 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 trust
agreement 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 the above
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, and one 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 duty to 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, the terms 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 identified for a trust to exist, the intention
to create an express trust must first be firmly established, along with the other elements laid above;
absent these, no express trust exists.
Phil. Banking Corp. vs CA GR. No. 127469
Facts:

Leonilo Marcos filed in court a complaint for sum of money with damages against Phil. Banking
Corporation (PBC). Marcos allegedly made a time deposit in 2 occasions the amt. of P664,897.67
and P764,897.67 through the persuasion of his friend Pagsaligan, one of the bank’s officials. The bank
issued receipt for the first deposit while a letter-certification was issued for his second deposit by
Pagsaligan. Pagsaligan kept the various time deposit certificates. When Marcos wanted to withdraw
his time deposit and its accumulated interest Pagsaligan encouraged him to open a letter of credit to
the bank by executing 3 trust receipts agreement. He signed blank forms for domestic letter of credits,
trust receipts agreements and promissory notes. He was required to deposit 30% of the total amount
of credit and his time deposit will secure the remaining 70% of the letters of credit.

He is now accusing the bank for unjustly collecting payment without deducting the 30% of his down
payment and charging him with accumulating interests since his time deposit serves as collateral for
his remaining obligation. He further denied making a loan of P500,000 with 25% interest per annum
covered by a promissory note produced by the bank. The bank explained that the promissory notes
he executed are distinct from the trust receipt agreement and denied falsifying the promissory note
covering for the loan of P500,000. The evidence presented on the promissory note however is merely
a machine copy of the document. The said loan was already paid by offsetting it from his time deposit.

Issue:
Whether or not the bank failed to take a proper account on Marcos’ deposits and payment of his loans?

Ruling:

The court held that the bank is liable for offsetting the time deposit of Marcos to the
fictitious promissory note for the 500,000 loan. The court upheld the findings of the
lower court on the discrepancies shown by the machine copy of the duplicate of the
promissory note and the suspicious claim of the bank that it could not produce the
original copy thereof. The mere machine copy of the document has no evidentiary value
before the court. The court held that the bank did not forge the promissory note.
Pagsaligan did to cover up his failure to give the proper account of Marcos’ time
deposits. This however does not excuse the bank to return to Marcos the correct
amount of his time deposit with interest. Bank has the fiduciary duty before its clients. Its
duty is to observe the highest standards of integrity and performance. Assuming
Pagsaligan is responsible for the spurious promissory note the court held that a bank is
liable for the wrongful acts of its officers. The court made the proper account of the total
amount due to Marcos ordering the bank to give to him the same plus moral and
exemplary damages.
Samsung Construction v. Far East Bank and
Trust Company (FEBTC) and CA, G.R. No.
129015 Banking, Negotiable Instruments
Law
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.
Edilberto Cruz v Bancom Finance Corp. GR No.
147788, March 19, 2002
Innocent purchaser

Facts:

The petitioners are the registered owners of an agricultural land. Candelaria Sanchez introduced the
petitioner to Norma Sulit who offered to buy the petitioner’s lot. The asking price for the property is
P7000,000 but Norma only has P25,000 which the petitioner accepted as an earnest money with
agreement that the title will be transferred in the name of Norma after she pays the remaining balance.
Norma failed to pay the balance but negotiated to transfer the title in her name which the petitioner
refused. However, through Candelaria Sanchez the title was transferred to Norma upon the execution
of a deed of sale made by the petitioner in favor of Sanchez who obtained a bank loan using the
petitioner’s land as collateral. She then executed on the same day another deed of sale in favor of
Norma. Both deed of sales reflect the amount of only P150,000.00. Using the deed of sale Norma was
able to register the property in her name. Norma obtained a loan from Bancom while mortgaging the
land title. Meanwhile, a special agreement was entered into by petitioner and Norma. When Norma
failed to pay the remaining balance stipulated in their special agreement, the petitioner filed a
complaint for the reconveyance of the land. Bancom claimed priority as mortgagee in good faith.
Norma defaulted payment with the bank and the property was foreclosed and auctioned with Bancom
as the highest bidder.

Trial Court decision: The trial court held that the contract of sale between petitioner and Candelaria
was absolutely simulated thereby producing no legal effect. Bancom was not a mortgagee in good
faith cannot claim priority rights over the property.

Court of Appeals: Reversed the RTC decision holding the deed of sale as valid and binding and not
simulated. The mortgage contract between Norma and Bancom is likewise valid and Bancom has a
priority rights over the property. It also ruled that the petitioner intended to be bound by the sale and
mortgage since they did not seek to annul the same but instead executed a special agreement to
enforce payment of the remaining balance.

Issues:

Whether or not the sale and mortgage are valid?

Whether or not the respondent is an innocent mortgagee in good faith?

Ruling:

As a general rule, if the terms of the contract are clear and unambiguous its stipulations shall control
but when its words contravene with the intention of the parties, the intention shall prevail over the
words of the contract. Simulation of contract takes place when the parties do not want the express
words of the contract to have its legal effect. It may be absolute or relative. When parties do not intend
to be bound at all it is absolute simulated contract and considered void. When the parties conceal their
true agreement, it is a relative simulated contract and binds the parties when it does not prejudice third
persons and is not contrary to law, morals, good custom, public order, and public policy. It was shown
that although a deed of absolute sale was executed in the amount of P150,000 no consideration was
involved as no exchange of money took place between them. Norma and Candelaria also did not
assert their right to ownership over the property. It was clear that the deed of sale was simulated in
order to facilitate the bank loan to be secured by Candelaria using the property as collateral. The fact
that Norma obtained registration of the property in her name does not entitle her to ownership since
the simulated deed of sale produced no legal effect. A simulated contract is not a recognized mode of
transferring ownership.

With the contention of Bancom that it is a mortgagee in good faith, the court ruled otherwise pointing
out that it is a mortgagee-bank thus is expected to exercise greater care and prudence when dealing
with registered lands. Failure to observe due diligence was shown with judicial notice that the bank
did not conduct an ocular inspection on the property and did not send a representative to investigate
the ownership of the land, these being a standard procedure before approving loans. It is also aware
of the adverse claim because of the notice of lis pendens annotated to the title. Because it was
established that the two deeds of sale were simulated thus null and void, it does not convey any right
that may ripen into a valid title. The mortgage was also null and void because Norma was not the
owner of the property. The property cannot be validly foreclosed by the respondent. The court declares
the petitioner to remain as the valid owner of the property.
ROMEO C. CADIZ, CARLITO BONGKINGKI and PRISCO GLORIA IV, Petitioners, vs. COURT OF APPEALS, and PHILIPPINE COMMERCIAL INTERNATIONAL
BANK (Now EQUITABLE PCIBANK),Respondents.
DECISION
Tinga, J.:

Employees who abuse their position for fiduciary gain cannot be shielded from the consequences of their wrongdoing even on account of the
bank’s operational laxities that may have provided the gateway for their shenanigans. Their misconduct provides the bank with cause for the
termination of their employment.

FACTS

Petitioners Romeo Cadiz, Carlito Bongkingki and Prisco Gloria IV were employed as signature verifier, bookkeeper, and foreign currency
denomination clerk/bookkeeper-reliever, respectively, in the main office branch (MOB) of Philippine Commercial International Bank.

The anomalies in question arose when Rosalina B. Alqueza filed a complaint with PCIB for the alleged non-receipt of a ($600.00) demand draft
drawn against it which was purchased by her husband from Hongkong and Shanghai Banking Corporation. Upon verification, it was uncovered that
the demand draft was deposited on 10 June 1988 with FCDU Savings Account (S/A) No. 1083-4, an account under the name of Sonia Alfiscar .
Further investigation revealed that the demand draft, together with (4) other checks, was made to appear as only one deposit covered by HSBC
Check No. 979120 for (US$1,232.00).

The Branch Manager (Sandig), presided meetings, wherein Cadiz, Bongkingki and Gloria allegedly verbally admitted their participation in a scheme
to divert funds intended for other accounts using the Savings Account of Alfiscar. Subsequently, Cadiz allegedly paid Alqueza P12,690.00, the peso
equivalent of US$600, but insisted that the corresponding receipt be issued in Alfiscar’s name instead.

On account of these allegations, a special audit examination was conducted by the bank. The internal auditors of the bank, submitted their findings
in an official report. The auditors determined that as early as July 1987, petitioner Cadiz had reserved the savings account in the name of Sonia
Alfiscar. The account was opened on 27 November 1987 and closed on 23 June 1988. (25) deposit slips involving the account were posted by
Bongkingki while (16) deposit slips were posted by Gloria. A verification of the deposit slips yielded findings of miscoded checks, forged signatures,
non-validation of deposit slips by the tellers, wrongful deposit of second-endorsed checks into foreign currency deposit accounts, the deposit slips
which do not bear the required approval of bank officers, and withdrawals made either on the day of deposit or the following banking day.

In view of such findings, show-cause memoranda were served on petitioners, requiring them to explain within (72) hours why no disciplinary action
should be taken against them in connection with the results of the special audit examination. Petitioners submitted their written explanations. Not
satisfied with their explanations, respondent bank in memoranda dismissed petitioners from employment for violation of Article III Section 1 B-2
and Article III Section 1-C of the Code of Discipline.

Petitioners lodged a complaint before the labor arbiter for illegal dismissal.

Labor Arbiter adjudged that petitioners were illegally dismissed and ordered their reinstatement and payment of backwages. A perusal of the labor
arbiter’s Decision reveals a different perspective from which the case was approached. While the labor arbiter conceded that petitioners Bongkingki
and Gloria had miscoded several deposit slips, rendering them immediately withdrawable, he characterized the errors as "mere procedural
inadequacies" which were preventable had management exercised greater control over its employees.

The labor arbiter’s Decision was reversed on appeal before the (NLRC), which, in a Decision ordered the dismissal of the petition. Dismissed With
Just Cause. The general thesis as laid down by the NLRC and Court of Appeals is that petitioners had surreptitiously diverted funds deposited by
depositors to S/A No. 1083-4 which was under their control and disposition.

ISSUE:

Whether or not the Court of Appeals erred in dismissing the petition

HELD: NO

Far from petitioners’ thrust, the miscoding of deposit slips cannot be downplayed as "mere procedural inadequacies." After all, it is such miscoding
that precipitated the fraudulent withdrawals in the first place. The act operated as the first indispensable step towards the commission of fraud on
the bank.

More disturbing though is the labor arbiter’s willingness to acquit petitioners of culpability on account of the purported negligence of the bank. It
is similar to concluding that the bank guards, and not the burglars, bear primary culpability for a bank robbery. Whatever liability or responsibility
was expected of the bank stands as an issue separate from the liability of the recreant bank employees. Even assuming that the bank observed
less-than-ideal controls over the security of its operations, such laxity does not serve as the carte blanche signal for the bank employees to take
advantage of safeguard control lapses and perpetrate chicanery on their employer.

First, petitioners insist that the show-cause memoranda served on them did not impute any fraudulent behavior, but merely lapses. We disagree.

The show-cause memoranda were occasioned by the confidential report prepared by Sandig, as well as the findings of the special audit examination.
The confidential report pertains to the discovery of fraudulent transactions on S/A No.1083-4 involving three employees of respondent bank. The
report detailed how the events transpired, including the admissions of petitioners. From there, a special audit examination was conducted to make
a thorough investigation of the questioned account. The examination yielded conspicuous findings that anomalous transactions had taken place
involving petitioners.

Second, petitioners contend that they should be relieved of any liability considering that respondent bank did not suffer a pecuniary loss. This claim
must obviously fail.

There is jurisprudential support, as noted by the Court of Appeals in citing University of the East v. NLRC that lack of material or pecuniary damages
would not in any way mitigate a person’s liability nor obliterate the loss of trust and confidence. In the case of Etcuban v. Sulpicio Lines,19 this Court
definitively ruled that:

. . . Whether or not the respondent bank was financially prejudiced is immaterial. Also, what matters is not the amount involved, be it paltry or
gargantuan; rather the fraudulent scheme in which the petitioner was involved, which constitutes a clear betrayal of trust and confidence. . . .

Moreover, it cannot be discounted that as bank employees, the responsibilities of petitioners are impressed with a high degree of public interest.
Private persons entrust their fortunes to banks, and it would cause a breakdown of the financial order if the judicial system were to leave unsanctioned
bank employees who treat depositor’s accounts as their own private kitty.

Still, petitioners insist that respondent bank never lost trust and confidence in them as it did not place them under preventive suspension, and
more tellingly, it even promoted them after the labor arbiter had ordered their reinstatement. Preventive suspension, which is never obligatory on
the part of the employer, may be resorted to only when the continued employment of the employee poses "a serious and imminent threat to the
life or property of the employer or of his co-workers." The bank points out that the Alfiscar account, through which the anomalous transactions
were coursed, was no longer active at the time the fraud was discovered. Clearly, the bank had reason to conclude that the imminence of the
threat posed by the employees was not as vital as it would have been had the dubious account still been open.

Moreover, it would simply be temerarious for the Court to sanction the reinstatement of bank employees who have clearly engaged in anomalous
banking practices. The particular fiduciary responsibilities reposed on banks and its employees cannot be emphasized enough. The fiduciary nature
of banking is enshrined in Republic Act No. 8791 or the General Banking Law of 2000. Section 2 of the law specifically says that the State recognizes
the "fiduciary nature of banking that requires high standards of integrity and performance." The bank must not only exercise "high standards of
integrity and performance," it must also ensure that its employees do likewise because this is the only way to ensure that the bank will comply with
its fiduciary duty.

All given, we affirm the conclusion that petitioners were dismissed for just cause. Loss of trust and confidence is one of the just causes for
termination by employer under Article 282 of the Labor Code. The breach of trust must be willful, meaning it must be done intentionally, knowingly,
and purposely, without justifiable excuse. Ideally, loss of confidence applies only to cases involving employees occupying positions of trust and
confidence or to those situations where the employee is routinely charged with the care and custody of the employer’s money or property. Utmost
trust and confidence are deemed to have been reposed on petitioners by virtue of the nature of their work.

The facts as established, as well as the need to assert the public interest in safeguarding against bank fraud, militate against the present petition.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.
Labor matter (baka lang itanong)

Procedural Due Process for their termination

In the instant case, records show that respondent bank complied with the two-notice rule prescribed in Article 277(b) of the Labor Code. A special
audit investigation was conducted to determine the extent of the fraudulent transactions. Based on the results of the investigation, respondent bank
sent show-cause memoranda to petitioners, asking them to explain their lapses, under pain of disciplinary action. The memoranda, which constitute
the first notice, specified the various questionable acts committed by petitioners.

Afterwards, petitioners submitted their respective replies to the memoranda. This very well complies with the requirement for hearing, by which
petitioners were afforded the opportunity to defend themselves. The second notice came in the form of the termination memoranda, informing
petitioners of their dismissal from service. From the foregoing, it is clear that the required procedural due process for their termination was strictly
complied with.
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.
Citibank v. Sps. Cabamongan
(G.R. No. 146918)
Date: October 16, 2016Author: jaicdn0 Comments

Facts:

Respondent spouses opened a joint foreign currency time deposit in trust for their sons at
petitioner’s Makati branch. Prior to maturity, a person claiming to be Carmelita
Cabamongan pre-terminated the said account upon presenting identification cards. Though
not being able to surrender the Original Certificate of Deposit, the money was released to
her despite the release and waiver documents not being notarized. Respondent spouses
learned of the incident and informed petitioner bank that Carmelita could not have pre-
terminated the account since she was in the US at that time. The spouses made a formal
demand of payment of the deposit and consequently, filed a complaint when petitioner
refused to pay. Petitioner bank insists that it was not negligent of its duties since the deposit
was released upon proper identification and verification. RTC ruled in favor of the spouses.
CA affirmed.

Issue:

Whether or not petitioner bank was negligent in its duties as to be liable for damages

Ruling: YES.

The Court has repeatedly emphasized that, since the 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. By the nature of its functions, a 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 this case, it has been sufficiently shown that the signatures of Carmelita in the forms for
pretermination of deposits are forgeries. Citibank, with its signature verification procedure,
failed to detect the forgery. Its negligence consisted in the omission of that degree of
diligence required of banks. The Court has held 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.” Such principle equally applies here.

The Court agrees with the observation of the CA that Citibank, thru Account Officer San
Pedro, openly courted disaster when despite noticing discrepancies in the signature and
photograph of the person claiming to be Carmelita and the failure to surrender the original
certificate of time deposit, the pretermination of the account was allowed. Even the waiver
document was not notarized, a procedure meant to protect the bank. For not observing the
degree of diligence required of banking institutions, whose business is impressed with
public interest, Citibank is liable for damages
Tan vs. CA – GR 108555, 20 December 1994
Facts:

Ramon Tan, a businessman from Puerto Princesa, secured a Cashier’s Check from PhilippineCommercial Industrial
Bank (PCIBank) to P30,000 payable to his order to avoid carrying cash while enrouteto Manila. He deposited the
check in his account in Rizal Commercial Banking Corporation (RCBC) in itsBinondo Branch. RCBC sent the check
for clearing to the Central Bank which was returned for having been“missent” or “misrouted.” RCBC debited Tan’s
account without informing him. Relying on commonknowledge that a cashier’s check was as good as cash, and a
month after depositing the check, he issued twopersonal checks in the name of Go Lak and MS Development
Trading Corporation. Both checks bounced dueto “insufficiency of funds.” Tan filed a suit for damages against RCBC.

Issue: Whether a cashier’s check is as good as cash, so as to have funded the two checks subsequently drawn.

Held: An ordinary check is not a mere undertaking to pay an amount of money. There is an element ofcertainty or
assurance that it will be paid upon presentation; that is why it is perceived as a convenientsubstitute for currency in
commercial and financial transactions. Herein, what is involved is more than anordinary check, but a cashier’s check.
A cashier’s check is a primary obligation of the issuing bank andaccepted in advance by its mere issuance. By its
very nature, a cashier’s check is a bank’s order to pay what isdrawn upon itself, committing in effect its total
resources, integrity and honor beyond the check. Herein,PCIB by issuing the check created an unconditional credit in
favor any collecting bank. Reliance on thelayman’s perception that a cashier’s check is as good as cash is not
entirely misplaced, as it is rooted inpractice, tradition and principle.
METROPOLITAN BANK AND TRUST COMPANY v. COURT OF APPEALS
GR. No. 112576, October 26, 1994

ROMERO, J.: (Bank’s Negligence as Source of Liability) Isabel Katigbak, president and owner of 65%
shares of Rural Bank of Padre Garcia, Inc., maintains a current accounts with Metropolitan Bank and
Trust Company. MBTC received from Central Bank a credit memo that its demand deposit account was
credited with P304k for the account of RBPG, representing loans granted by the CB. On the basis of credit
memo, Katigbak issued several checks against its account with MBTC, two of which were payable to Dr.
and Mrs. Roque. The checks were deposited with Philippine Banking Corp. however the same bounced
when they were forwarded to MBTC. It was twice dishonored. Dr. Roque went to RBPG for the bounced
checks. RBPG paid Dr. Roque an amount of P50k representing the checks. Katigbak, who was on vacation
in Hongkong with her family, received overseas call from Mrs. Maris Katigbak-San Juan at her residence
in Makati that Mr. Dungo, Asst. Cashier of MBTC, berating her about the bounced checks and saying
“Nag-issue kayo ng tseke, wala naming pondo”. Mrs. San Juan was instructed by Katigbak to check and
verify regarding the credit memo of CB for P304K in favor of RBPG as she was certain that the checks
were covered by the credit memo. Mrs. San Juan another insulting phone call from Mr. Dungo (“Bakit
kayo nag-iisue ng tseke na wala namang pondo, P300K na”). He also brushed aside the request to check
and verify the credit memo, telling her sarcastically that he was very sure that no such credit memo
existed. Katigbak had to cut short her vacation and went back home. She then called MBTC and she was
able to talk to Mr. Dungo who arrogantly said “Bakit kayo magagalit, wala naman kayog pondo?” This
shocked Katigbak which caused her blood pressure to rise to a dangerous level and she had to undergo
medical treatment at the Makati Medical Center for two days. MBTC did not only dishonored the check, it
also issued four debit memos representing service and penalty charges for the returned checks. Katigbak
filed the civil case in RTC Lipa against MBTC for damages. RTC rendered decision in favor of petitioner.
The same was affirmed by CA with deletion as to temperate damages, and deduction as to amount of
moral damages.

ISSUE: Is there a basis as to negligent act of MBTC as the ground for the awarding of damages in the civil
suit of Katigbak?

HELD: YES. The presence of malice and the evidence of besmirched reputation or loss of credit and
business standing, as well as a reappraisal of its probative value, involves factual matters which have been
determined by the lower court. There is no merit in petitioner’s argument that it should not be considered
negligent, much less be held liable for damages on account of inadvertence of its bank employee as Art.
1173 of the Civil Code only requires it to exercise the diligence of a good pater familias. The dishonoring of
the respondent’s checks committed through negligence by the petitioner was rectified nine days after
receipt of the credit memo. MBTC was remiss in its duty and obligation to treat private respondent
account with the highest degree of care, considering the fiduciary nature of their relationship. The bank is
under the obligation to treat the accounts of its depositors with meticulous care. Responsibility arising
from negligence in the performance of every kind of obligation is demandable. While the bank’s
negligence may not have been attended with malice and bad faith, nevertheless, it caused serious anxiety,
embarrassment and humiliation to private respondents for which they are entitled to recover reasonable
moral damages. Insult was added to injury by petitioner bank’s issuance of debit memoranda
representing service and penalty charges for the returned checks, not to mention the insulting remarks
from its Asst. Cashier. Moral and temperate damages which are not susceptible of pecuniary estimation
are not awarded to penalize the petitioner but to compensate the respondents from injuries suffered as a
result of the former’s fault and negligence. AFFIRMED.
BANK OF THE PHILIPPINE ISLANDS, Petitioner, vs. COURT OF
APPEALS and BENJAMIN C. NAPIZA, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the Decision1 of the

Court of Appeals in CA-G.R. CV No. 37392 affirming in toto that of
the Regional Trial Court of Makati, Branch 139,2 which dismissed the
complaint filed by petitioner Bank of the Philippine Islands against
private respondent Benjamin C. Napiza for sum of money.d

On September 3, 1987, private respondent deposited in Foreign

Currency Deposit Unit (FCDU) Savings Account No. 028-1873 which
he maintained in petitioner banks Buendia Avenue Extension
Branch, Continental Bank Managers Check No. 000147574 dated
August 17, 1984, payable to "cash" in the amount of Two Thousand
Five Hundred Dollars ($2,500.00) and duly endorsed by private
respondent on its dorsal side.5 It appears that the check belonged
to a certain Henry Chan who went to the office of private
respondent and requested him to deposit the check in his dollar
account by way of accommodation and for the purpose of clearing
the same. Private respondent 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 private respondents
presentation to the bank of his passbook.

Using the blank withdrawal slip given by private respondent to

Chan, on October 23, 1984, one Ruben Gayon, Jr. was able to
withdraw the amount of $2,541.67 from FCDU Savings Account No.
028-187. 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.6
cräläwvirtual ibrä ry

On November 20, 1984, petitioner received communication from the

Wells Fargo Bank International of New York that the said check
deposited by private respondent was a counterfeit check7 because it
was "not of the type or style of checks issued by Continental Bank
International."8 Consequently, Mr. Ariel Reyes, the manager of
petitioners Buendia Avenue Extension Branch, instructed one of its
employees, Benjamin D. Napiza IV, who is private respondents son,
to inform his father that the check bounced.9 Reyes himself sent a
telegram to private respondent regarding the dishonor of the check.
In turn, private respondents son wrote to Reyes stating that the
check had been assigned "for encashment" to Ramon A. de Guzman
and/or Agnes C. de Guzman after it shall have been cleared upon
instruction of Chan. He also said that upon learning of the dishonor
of the check, his father immediately tried to contact Chan but the
latter was out of town.10 cräläwvirtual ib räry

Private respondents son undertook to return the amount of

$2,500.00 to petitioner bank. On December 18, 1984, Reyes
reminded private respondent of his sons promise and warned that
should he fail to return that amount within seven (7) days, the
matter would be referred to the banks lawyers for appropriate
action to protect the banks interest.11 This was followed by a letter
of the banks lawyer dated April 8, 1985 demanding the return of the
$2,500.00.12 cräläwvirtual ib räry

In reply, private respondent wrote petitioners counsel on April 20,

198513 stating that he deposited the check "for clearing purposes"
only to accommodate Chan. He added:

"Further, please take notice that said check was deposited on

September 3, 1984 and withdrawn on October 23, 1984, or a total
period of fifty (50) days had elapsed at the time of withdrawal. Also,
it may not be amiss to mention here that I merely signed an
authority to withdraw said deposit subject to its clearing, the reason
why the transaction is not reflected in the passbook of the account.
Besides, I did not receive its proceeds as may be gleaned from the
withdrawal slip under the captioned signature of recipient.

If at all, my obligation on the transaction is moral in nature, which

(sic) I have been and is (sic) still exerting utmost and maximum
efforts to collect from Mr. Henry Chan who is directly liable under
the circumstances.

xxx......xxx......xxx."
On August 12, 1986, petitioner filed a complaint against private
respondent, praying for the return of the amount of $2,500.00 or
the prevailing peso equivalent plus legal interest from date of
demand to date of full payment, a sum equivalent to 20% of the
total amount due as attorney's fees, and litigation and/or costs of
suit.

Private respondent filed his answer, admitting that he indeed signed

a "blank" withdrawal slip with the understanding that the amount
deposited would be withdrawn only after the check in question has
been cleared. He likewise alleged that he instructed the party to
whom he issued the signed blank withdrawal slip to return it to him
after the bank drafts clearance so that he could lend that party his
passbook for the purpose of withdrawing the amount of $2,500.00.
However, without his knowledge, said party was able to withdraw
the amount of $2,541.67 from his dollar savings account through
collusion with one of petitioners employees. Private respondent
added that he had "given the Plaintiff fifty one (51) days with which
to clear the bank draft in question." Petitioner should have
disallowed the withdrawal because his passbook was not presented.
He claimed that petitioner had no one to blame except itself "for
being grossly negligent;" in fact, it had allegedly admitted having
paid the amount in the check "by mistake" x x x "if not altogether
due to collusion and/or bad faith on the part of (its) employees."
Charging petitioner with "apparent ignorance of routine bank
procedures," by way of counterclaim, private respondent prayed for
moral damages of P100,000.00, exemplary damages of P50,000.00
and attorneys fees of 30% of whatever amount that would be
awarded to him plus an honorarium of P500.00 per appearance in
court.

Private respondent also filed a motion for admission of a third party

complaint against Chan. He alleged that "thru strategem and/or
manipulation," Chan was able to withdraw the amount of $2,500.00
even without private respondents passbook. Thus, private
respondent prayed that third party defendant Chan be made to
refund to him the amount withdrawn and to pay attorneys fees of
P5,000.00 plus P300.00 honorarium per appearance.
Petitioner filed a comment on the motion for leave of court to admit
the third party complaint, wherein it asserted that per paragraph 2
of the Rules and Regulations governing BPI savings accounts,
private respondent alone was liable "for the value of the credit given
on account of the draft or check deposited." It contended that
private respondent was estopped from disclaiming liability because
he himself authorized the withdrawal of the amount by signing the
withdrawal slip. Petitioner prayed for the denial of the said motion
so as not to unduly delay the disposition of the main case asserting
that private respondents claim could be ventilated in another case.

Private respondent replied that for the parties to obtain complete

relief and to avoid multiplicity of suits, the motion to admit third
party complaint should be granted. Meanwhile, the trial court issued
orders on August 25, 1987 and October 28, 1987 directing private
respondent to actively participate in locating Chan. After private
respondent failed to comply, the trial court, on May 18, 1988,
dismissed the third party complaint without prejudice.

On November 4, 1991, a decision was rendered dismissing the

complaint. The lower court held that petitioner could not hold
private respondent liable based on the checks face value alone. To
so hold him 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 lower court further held that "it was incumbent upon
the petitioner to credit the value of the check in question to the
account of the private respondent only upon receipt of the notice of
final payment and should not have authorized the withdrawal from
the latters account of the value or proceeds of the check." Having
admitted that it committed a "mistake" in not waiting for the
clearance of the check before authorizing the withdrawal of its value
or proceeds, petitioner should suffer the resultant loss. Supremax

On appeal, the Court of Appeals affirmed the lower courts decision.

The appellate court held that petitioner committed "clear gross
negligence" in allowing Ruben Gayon, Jr. to withdraw the money
without presenting private respondents passbook and, before the
check was cleared and in crediting the amount indicated therein in
private respondents account. It stressed that the mere deposit of a
check in private respondents account did not mean that the check
was already private respondents property. The check still had to be
cleared and its proceeds can only be withdrawn upon presentation
of a passbook in accordance with the banks rules and regulations.
Furthermore, petitioners contention that private respondent
warranted the checks genuineness by endorsing it is untenable for it
would render useless the clearance requirement. Likewise, the
requirement of presentation of a passbook to ascertain the propriety
of the accounting reflected would be a meaningless exercise. After
all, these requirements are designed to protect the bank from
deception or fraud.

The Court of Appeals cited the case of Roman Catholic Bishop of

Malolos, Inc. v. IAC,14 where this Court stated that a personal check
is not legal tender or money, and held that the check deposited in
this case must be cleared before its value could be properly
transferred to private respondent's account.

Without filing a motion for the reconsideration of the Court of

Appeals Decision, petitioner filed this petition for review on
certiorari, raising the following issues:

1.......WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER

HIS WARRANTIES AS A GENERAL INDORSER.

2.......WHETHER OR NOT A CONTRACT OF AGENCY WAS CREATED

BETWEEN RESPONDENT NAPIZA AND RUBEN GAYON.

3.......WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT

IN ALLOWING THE WITHDRAWAL.

Petitioner claims that private respondent, having affixed his

signature at the dorsal side of the check, should be liable for the
amount stated therein in accordance with the following provision of
the Negotiable Instruments Law (Act No. 2031):

"SEC. 66. Liability of general indorser. Every indorser who indorses

without qualification, warrants to all subsequent holders in due
course
(a)......The matters and things mentioned in subdivisions (a), (b),
and (c) of the next preceding section; and

(b)......That the instrument is at the time of his indorsement, valid

and subsisting.

And, in addition, he engages that on due presentment, it shall be

accepted or paid, or both, as the case may be, according to its
tenor, and that if it be dishonored, and the necessary proceedings
on dishonor be duly taken, he will pay the amount thereof to the
holder, or to any subsequent indorser who may be compelled to pay
it."

Section 65, on the other hand, provides for the following warranties
of a person negotiating an instrument by delivery or by qualified
indorsement: (a) that the instrument is genuine and in all respects
what it purports to be; (b) that he has a good title to it, and (c) that
all prior parties had capacity to contract.15 In People v.
Maniego,16 this Court described the liabilities of an indorser as
follows:

"Appellants contention that as mere indorser, she may not be liable

on account of the dishonor of the checks indorsed by her, is likewise
untenable. Under the law, the holder or last indorsee of a negotiable
instrument has the right to enforce payment of the instrument for
the full amount thereof against all parties liable thereon. Among the
parties liable thereon is an indorser of the instrument, i.e., a person
placing his signature upon an instrument otherwise than as a
maker, drawer or acceptor * * unless he clearly indicated by
appropriate words his intention to be bound in some other capacity.
Such an indorser who indorses without qualification, inter
alia engages that on due presentment, * * (the instrument) shall be
accepted or paid, or both, as the case may be, according to its
tenor, and that if it be dishonored, and the necessary proceedings
on dishonor be duly taken, he will pay the amount thereof to the
holder, or any subsequent indorser who may be compelled to pay it.
Maniego may also be deemed an accommodation party in the light
of the facts, i.e., a person who has signed the instrument as maker,
drawer, acceptor, or indorser, without receiving value therefor, and
for the purpose of lending his name to some other person. As such,
she is under the law liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the instrument
knew * * (her) to be only an accommodation party, although she
has the right, after paying the holder, to obtain reimbursement from
the party accommodated, since the relation between them is in
effect that of principal and surety, the accommodation party being
the surety."

It is thus clear that ordinarily private respondent may be held liable

as an indorser of the check or even as an accommodation
party.17 However, to hold private respondent liable for the amount
of the check he deposited by the strict application of the law and
without considering the attending circumstances in the case would
result in an injustice and in the erosion of the public trust in the
banking system. The interest of justice thus demands looking into
the events that led to the encashment of the check.

Petitioner asserts that by signing the withdrawal slip, private

respondent "presented the opportunity for the withdrawal of the
amount in question." Petitioner relied "on the genuine signature on
the withdrawal slip, the personality of private respondents son and
the lapse of more than fifty (50) days from date of deposit of the
Continental Bank draft, without the same being returned yet."18 We
hold, however, that the propriety of the withdrawal should be
gauged by compliance with the rules thereon that both petitioner
bank and its depositors are duty-bound to observe.

In the passbook that petitioner issued to private respondent, the

following rules on withdrawal of deposits appear:

"4.......Withdrawals must be made by the depositor personally but

in some exceptional circumstances, the Bank may allow withdrawal
by another upon the depositors written authority duly
authenticated; and neither a deposit nor a withdrawal will be
permitted except upon the presentation of the depositors savings
passbook, in which the amount deposited withdrawn shall be
entered only by the Bank.

5.......Withdrawals may be made by draft, mail or telegraphic

transfer in currency of the account at the request of the depositor in
writing on the withdrawal slip or by authenticated cable. Such
request must indicate the name of the payee/s, amount and the
place where the funds are to be paid. Any stamp, transmission and
other charges related to such withdrawals shall be for the account of
the depositor and shall be paid by him/her upon demand.
Withdrawals may also be made in the form of travellers checks and
in pesos. Withdrawals in the form of notes/bills are allowed subject
however, to their (availability).

6.......Deposits shall not be subject to withdrawal by check, and

may be withdrawn only in the manner above provided, upon
presentation of the depositors savings passbook and with the
withdrawal form supplied by the Bank at the counter."19 cräläwvirtua lib räry

Under these rules, to be able to withdraw from the savings account

deposit under the Philippine foreign currency deposit system, two
requisites must be presented to petitioner bank by the person
withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b)
the depositors passbook. Private respondent admits that he signed
a blank withdrawal slip ostensibly in violation of Rule No. 6 requiring
that the request for withdrawal must name the payee, the amount
to be withdrawn and the place where such withdrawal should be
made. That the withdrawal slip was in fact a blank one with only
private respondents two signatures affixed on the proper spaces is
buttressed by petitioners allegation in the instant petition that had
private respondent indicated therein the person authorized to
receive the money, then Ruben Gayon, Jr. could not have
withdrawn any amount. Petitioner contends that "(i)n failing to do
so (i.e., naming his authorized agent), he practically authorized any
possessor thereof to write any amount and to collect the same."20 cräläwvirt ualib räry

Such contention would have been valid if not for the fact that the
withdrawal slip itself indicates a special instruction that the amount
is payable to "Ramon A. de Guzman &/or Agnes C. de Guzman."
Such being the case, petitioners personnel should have been duly
warned that Gayon, who was also employed in petitioners Buendia
Ave. Extension branch,21 was not the proper payee of the proceeds
of the check. Otherwise, either Ramon or Agnes de Guzman should
have issued another authority to Gayon for such withdrawal. Of
course, at the dorsal side of the withdrawal slip is an "authority to
withdraw" naming Gayon the person who can withdraw the amount
indicated in the check. Private respondent does not deny having
signed such authority. However, considering petitioners clear
admission that the withdrawal slip was a blank one except for
private respondents signature, the unavoidable conclusion is that
the typewritten name of "Ruben C. Gayon, Jr." was intercalated and
thereafter it was signed by Gayon or whoever was allowed by
petitioner to withdraw the amount. Under these facts, there could
not have been a principal-agent relationship between private
respondent and Gayon so as to render the former liable for the
amount withdrawn.

Moreover, the withdrawal slip contains a boxed warning that states:

"This receipt must be signed and presented with the corresponding
foreign currency savings passbook by the depositor in person. For
withdrawals thru a representative, depositor should accomplish the
authority at the back." The requirement of presentation of the
passbook when withdrawing an amount cannot be given mere lip
service even though the person making the withdrawal is authorized
by the depositor to do so. This is clear from Rule No. 6 set out by
petitioner so that, for the protection of the banks interest and as a
reminder to the depositor, the withdrawal shall be entered in the
depositors passbook. The fact that private respondents passbook
was not presented during the withdrawal is evidenced by the entries
therein showing that the last transaction that he made with the
bank was on September 3, 1984, the date he deposited the
controversial check in the amount of $2,500.00.22 cräläwvirtua lib räry

In allowing the withdrawal, petitioner likewise overlooked another

rule that is printed in the passbook. Thus:

"2.......All deposits will be received as current funds and will be

repaid in the same manner; provided, however, that deposits
of drafts, checks, money orders, etc. will be accepted as subject to
collection only and credited to the account only upon receipt of the
notice of final payment. Collection charges by the Banks foreign
correspondent in effecting such collection shall be for the account of
the depositor. If the account has sufficient balance, the collection
shall be debited by the Bank against the account. If, for any reason,
the proceeds of the deposited checks, drafts, money orders, etc.,
cannot be collected or if the Bank is required to return such
proceeds, the provisional entry therefor made by the Bank in the
savings passbook and its records shall be deemed automatically
cancelled regardless of the time that has elapsed, and whether or
not the defective items can be returned to the depositor; and the
Bank is hereby authorized to execute immediately the necessary
corrections, amendments or changes in its record, as well as on the
savings passbook at the first opportunity to reflect such
cancellation." (Italics and underlining supplied.)

As correctly held by the Court of Appeals, in depositing the check in

his name, private respondent did not become the outright owner of
the amount stated therein. Under the above rule, 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 managers check or ordinary check, is not legal tender.23 As such,
after receiving the deposit, under its own rules, petitioner shall
credit the amount in private respondents account or infuse value
thereon only after the drawee bank shall have paid the amount of
the check or the check has been cleared for deposit. Again, this is in
accordance with ordinary banking practices and with this Courts
pronouncement that "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."24 The rule finds more meaning
in this case where the check involved is drawn on a foreign bank
and therefore collection is more difficult than when the drawee bank
is a local one even though the check in question is a managers
check.25cräläwvirt ualib rä ry

In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a

commercial bank in Madrid, Spain, paid the amounts represented in
three (3) checks to Virginia Boncan, the finance officer of the
Philippine Embassy in Madrid. The bank did so without previously
clearing the checks with the drawee bank, the Philippine National
Bank in New York, on account of the "special treatment" that
Boncan received from the personnel of Banco Atlanticos foreign
department. The Court held that the encashment of the checks
without prior clearance is "contrary to normal or ordinary banking
practice specially so where the drawee bank is a foreign bank and
the amounts involved were large." Accordingly, the Court approved
the Auditor Generals denial of Banco Atlanticos claim for payment of
the value of the checks that was withdrawn by Boncan.

Said ruling brings to light the fact that the banking business is
affected with public interest. By the nature of its functions, a bank is
under obligation to treat the accounts of its depositors "with
meticulous care, always having in mind the fiduciary nature of their
relationship."27 As such, in dealing with its depositors, a bank should
exercise its functions not only with the diligence of a good father of
a family but it should do so with the highest degree of care.[28]

In the case at bar, Petitioner, in allowing the withdrawal of private

respondents deposit, failed to exercise the diligence of a good father
of a family. In total disregard of its own rules, petitioners personnel
negligently handled private respondents account to petitioners
detriment. As this Court once said on this matter:

"Negligence is the omission to do something which a reasonable

man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would do. The seventy-eight
(78)-year-old, yet still relevant, case of Picart v. Smith, provides the
test by which to determine the existence of negligence in a
particular case which may be stated as follows: Did the defendant in
doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in
effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet pater-familias of the Roman law.
The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that."29
cräläwvirtuali brä ry

Petitioner violated its own rules by allowing the withdrawal of an

amount that is definitely over and above the aggregate amount of
private respondents dollar deposits that had yet to be cleared. The
banks ledger on private respondents account shows that before he
deposited $2,500.00, private respondent had a balance of only
$750.00.30 Upon private respondents deposit of $2,500.00 on
September 3, 1984, that amount was credited in his ledger as a
deposit resulting in the corresponding total balance of
$3,250.00.31 On September 10, 1984, the amount of $600.00 and
the additional charges of $10.00 were indicated therein as
withdrawn thereby leaving a balance of $2,640.00. On September
30, 1984, an interest of $11.59 was reflected in the ledger and on
October 23, 1984, the amount of $2,541.67 was entered as
withdrawn with a balance of $109.92.32 On November 19, 1984 the
word "hold" was written beside the balance of $109.92.33 That must
have been the time when Reyes, petitioners branch manager, was
informed unofficially of the fact that the check deposited was a
counterfeit, but petitioners Buendia Ave. Extension Branch received
a copy of the communication thereon from Wells Fargo Bank
International in New York the following day, November 20,
1984.34 According to Reyes, Wells Fargo Bank International handled
the clearing of checks drawn against U.S. banks that were deposited
with petitioner.35
cräläwvirt uali bräry

From these facts on record, it is at once apparent that petitioners

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. Reyes contention that after the lapse of the 35-
day period the amount of a deposited check could be withdrawn
even in the absence of a clearance thereon, otherwise it could take
a long time before a depositor could make a withdrawal,36 is
untenable. Said practice amounts to a disregard of the clearance
requirement of the banking system.
While it is true that private respondents having signed a blank
withdrawal slip set in motion the events that resulted in the
withdrawal and encashment of the counterfeit check, the negligence
of petitioners personnel was the proximate cause of the loss that
petitioner sustained. Proximate cause, which is determined by a
mixed consideration of logic, common sense, policy and precedent,
is "that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without
which the result would not have occurred."37 The proximate cause of
the withdrawal and eventual loss of the amount of $2,500.00 on
petitioners part was its personnels negligence in allowing such
withdrawal in disregard of its own rules and the clearing
requirement in the banking system. In so doing, petitioner assumed
the risk of incurring a loss on account of a forged or counterfeit
foreign check and hence, it should suffer the resulting damage.

WHEREFORE , the petition for review on certiorari is DENIED. The

Decision of the Court of Appeals in CA-G.R. CV No. 37392 is
AFFIRMED.

BPI vs CA
BPI vs. Court of Appeals and Napiza
G.R. No. 112392. February 29, 2000, 326 scra 641
*accommodation party
**liability of general indorser

FACTS:
A certain Henry Chan owned a Continental Bank Manager’s Check payable to "cash" in
the amount of Two Thousand Five Hundred Dollars ($2,500.00). Chan went to the office
of Benjamin Napiza and requested him to deposit the check in his dollar account by way
of accommodation and for the purpose of clearing the same. Private respondent 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 private respondent’s presentation to the bank of his passbook. Napiza
thus endorsed the check and deposited it in a Foreign Currency Deposit Unit (FCDU)
Savings Account he maintained with BPI. 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
from Napiza's FCDU account. It turned out that said check deposited by private
respondent was a counterfeit check.

*When BPI demanded the return of $2,500.00, private respondent claimed that he
deposited the check "for clearing purposes" only to accommodate Chan.
**Petitioner claims that private respondent, having affixed his signature at the dorsal side
of the check, should be liable for the amount stated therein in accordance with the
provision of the Negotiable Instruments Law on the liability of a general indorser (Sec.
66).

ISSUE:*
Whether private respondent is obliged to return the money paid out by BPI on a counterfeit
check even if he deposited the check "for clearing purposes" only to accommodate Chan.

ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a general indorser.

RULING:
Ordinarily private respondent may be held liable as an indorser of the check or even as
an accommodation party. However, petitioner BPI, in allowing the withdrawal of private
respondent’s deposit, failed to exercise the diligence of a good father of a family. BPI
violated its own rules by allowing the withdrawal of an amount that is definitely over and
above the aggregate amount of private respondent’s dollar deposits that had yet to be
cleared. The proximate cause of the 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. In so doing, BPI assumed the
risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it
should suffer the resulting damage.