[20] Firestone Tiles v.
CA “special withdrawal slips” to Fojas-Arca to allow them to withdraw
G.R. No. 113236 | March 5, 2001 | General Banking Law of 2000
Petitioner: FIRESTONE TIRE & RUBBER COMPANY OF THE
PHILIPPINES
Respondents: COURT OF APPEALS and LUZON DEVELOPMENT BANK
Recit-Ready Facts:
1. Firestone and Fojas-Arca entered into a Franchised Dealership
Agreement whereby Fojas-Arca is given the privilege to purchase on
credit and sell Firestone products. Fojas-Arca entered into multiple
purchases on credit with Firestone using Luzon Bank’s special
withdrawal slips, which Firestone deposited with Citibank, and were
subsequently honored.
2. Citibank however informed Firestone that two withdrawal slips were
dishonored by Luzon for insufficiency of funding, and debited the
amount from Firestone’s account.
3. Firestone filed a complaint for sum of money and damages against
Luzon but the court found no liability on the part of Luzon. The special
withdrawal slips clearly indicated that they were non-negotiable and
thus Luzon had no obligation to notify Firestone of dishonor.
4. The court held that banks are under obligation to treat the accounts of
its depositors with meticulous care. Citibank in this case was not
bound to accept the withdrawal slips as a valid mode of deposit but did
so anyways under the presumption that subsequent slips would be
honored and paid. By doing so, it failed in its fiduciary duty to treat the
accounts of its clients with the highest degree of care.
5. Thus Firestone and Citibank must bear the risks attendant to the
acceptance of these instruments
ISSUES:
Doctrine:
1. A bank is under obligation to treat the accounts of its depositors with
meticulous care.
RATIO:
FACTS:
1. Fojas-Arca Enterprises (Fojas-Arca) maintains a special savings
account with Luzon Development Bank (Luzon). Luzon supplied
funds from their account.
2. In January 1978, Firestone Tire & Rubber, Co. (Firestone) and
Fojas-Arca entered into a "Franchised Dealership Agreement" where
Fojas-Arca has the privilege to purchase on credit and sell Firestone
products.
3. From January to May 1978, Fojas-Arca purchased on credit
Firestone products with a total amount of P4,896,000.00 paid
through 6 special withdrawal slips drawn upon Luzon. In turn, these
were deposited by Firestone with its current account with the
Citibank. All of them were honored and paid by the Luzon – leading
Firestone to believe that the succeeding special withdrawal slips
would be sufficiently funded. Thus Firestone extended to Fojas-Arca
other purchases on credit of its products.
4. Subsequent withdrawal slips were issued by Fojas-Arca to Firestone
who similarly deposited them with its Citibank, and Citibank likewise
forwarded them to Luzon for payment. However this time, Citibank
informed Firestone that two of the four withdrawal slips deposited
were dishonored for insufficiency of funds, and as consequence
thereof – Citibank debited from Firestone’s account the value of the
two withdrawal slips.
5. Thus after having their demand unheeded, Firestone filed a
complaint against Luzon for a sum of money and for damages.
6. Luzon averred that it was not privy to the transactions between
Firestone and Fojas-Arca – thus it has no duty to give notice to
Firestone, and that Firestone was grossly negligent in treating the
withdrawal slips as negotiable when it is clearly stated therein that it
is non-negotiable.
1. WON Luzon should be held liable for damages suffered by
Firestone, due to its allegedly belated notice of non-payment of the
withdrawal slips. – NO, Luzon cannot be held liable for damages.
1. At the outset, it is uncontroverted that the withdrawal slips were non-
negotiable, and thus the rules governing the giving of immediate
notice of dishonor of negotiable instruments do not apply in this
 case. Luzon was under no obligation to give immediate notice that it
would not make payment on the subject withdrawal slips. WHEREFORE, the petition is DENIED and the decision of the Court of
2. Citibank should have known that withdrawal slips were not Appeals in CA-G.R. CV No. 29546 is AFFIRMED. Costs against petitioner.
negotiable instruments. It could not expect these slips to be treated
as checks by other entities. Payment or notice of dishonor from SO ORDERED.
respondent bank could not be expected immediately, in contrast to
the situation involving checks.
3. In the case at bar, it appears that Citibank, with the knowledge that
respondent Luzon Development Bank, had honored and paid the
previous withdrawal slips, automatically credited petitioner's current
account with the amount of the subject withdrawal slips, then merely
waited for the same to be honored and paid by respondent bank. It
presumed that the withdrawal slips were "good."
4. It bears stressing that Citibank could not have missed the non-
negotiable nature of the withdrawal slips. The essence of
negotiability which characterizes a negotiable paper as a credit
instrument lies in its freedom to circulate freely as a substitute for
money. The withdrawal slips in question lacked this character.
5. A bank is under obligation to treat the accounts of its depositors with
meticulous care, whether such account consists only of a few
hundred pesos or of millions of pesos. The fact that the other
withdrawal slips were honored and paid by respondent bank was no
license for Citibank to presume that subsequent slips would be
honored and paid immediately. By doing so, it failed in its fiduciary
duty to treat the accounts of its clients with the highest degree of
care.
6. In the ordinary and usual course of banking operations, current
account deposits are accepted by the bank on the basis of deposit
slips prepared and signed by the depositor, or the latter's agent or
representative, who indicates therein the current account number to
which the deposit is to be credited, the name of the depositor or
current account holder, the date of the deposit, and the amount of
the deposit either in cash or in check.
7. The withdrawal slips were not checks. Citibank was not bound to
accept the withdrawal slips as a valid mode of deposit. But having
erroneously accepted them as such, Citibank — and Firestone as
account-holder — must bear the risks attendant to the acceptance of
these instruments. Firestone and Citibank could not now shift the risk
and hold Luzon liable for their admitted mistake.

Disposition of the Court