Bank Liable for Negligence in Encashment

I. SHORT TITLE: 1 SANDEJAS,ET.AL V. SPS.
IGNACIO
II. FULL TITLE: ALICE A.I. SANDEJAS, ROSITA A.I. CUSI, PATRICIA A.I.
SANDEJAS and BENJAMIN A.I. ESPIRITU, petitioners, vs. SPS. ARTURO IGNACIO,
JR. and EVELYN IGNACIO, respondents.
III. TOPIC: Banking Industry impressed with public interest.
IV. STATEMENT OF THE FACTS:
Arturo drew up a check, UCPB Check No. GRH-560239 and wrote on it the name
of the payee, Dr. Manuel Borja, but left blank the date and amount. He signed the check.
The check was left with Arturo's sister-in-law, who was instructed to deliver or give it to
Benjamin. The check later came to the possession of Alice who felt that Arturo cheated
their sister Rosita in the amount of three million pesos (P3,000,000.00). She believed that
Arturo and Rosita had a joint and/or money market placement in the amount of P3
million with the UCPB branch at Ortigas Ave., SanJuan and that Ignacio preterminated
the placement and ran away with it, which rightfully belonged to Rosita. She together
with Rosita drew up a scheme to recover the P3 million from Arturo. Alice got her driver,
Kudera, to stand as the payee of the check, Dr. Borja. Alice and Rosita came to SBC
Greenhills Branch together with a man (Kudera) who[m] they introduced as Dr. Borja to
the then Assistant Cashier Luis. They opened a Joint Savings Account. As initial deposit
for the Joint Savings Account, Alice, Rosita and Kudera deposited the check. Thereafter,
they successfully withdraw the amount. Arturo Ignacio, Jr. and Evelyn Ignacio
(respondents) filed a verified complaint for recovery of a sum of money and damages.
Judgment is rendered in favor of plaintiffs as against defendants Security Bank and Trust
Co., Rene Colin Gray, Sonia Ortiz Luis,Alice A.I. Sandejas and Rosita A.I. Cusi. The
counterclaims of Patricia A.I. Sandejas are dismissed. Both parties appealed the RTC
Decision to the CA. The defendants-appellants Security Bank and Trust Company, Rene
Colin D. Gray, Sonia Ortiz-Luis, Alice A.I. Sandejas,and Rosita A.I. Cusi, are ordered to
jointly and severally pay the plaintiffs. Petitioners and SBTC, together with Gray and
Ortiz-Luis, filed their respective petitions for review before this Court.
V. STATEMENT OF THE CASE: Before the Court is a Petition for Review on Certiorari
under Rule 45 of the Rules of Court assailing the Decision1of the Court of Appeals (CA)
in CA-G.R. CV No. 62404promulgated on August 27, 2002, which affirmed with
modification the Decision of the Regional Trial Court (RTC) of Pasig City, Branch 158, in
Civil Case No. 65146 dated December 18, 1998.
VI. ISSUE:
1. Whether or not Alice and Rosita are justified in encashing the subject check given the
factual circumstances established in the present case.
2. Whether or not the petitioners can hold respondent liable for moral damages as effect
of his complaint.
VII. RULING:
The Supreme Court ruled that petitioners’ posture is not sanctioned by law. If they truly
believe that Arturo took advantage of and violated the rights of Rosita, petitioners should
have sought redress from the courts and should not have simply taken the law into their own
hands. Our laws are replete with specific remedies designed to provide relief for the violation
of one’s rights. In the instant case, Rosita could have immediately filed an action for the
nullification of the sale of the building she owns in light of petitioners’ claim that the
document bearing her conformity to the sale of the said building was taken by Arturo from
her without her knowledge and consent. Or, in the alternative, as the CA correctly held, she
could have brought a suit for the collection of a sum of money to recover her share in the sale
of her property in Morayta. In a civilized society such as ours, the rule of law should always
prevail. To allow otherwise would be productive of nothing but mischief, chaos and anarchy.
As a lawyer, who has sworn to uphold the rule of law, Rosita should know better. She must
go to court for relief.
As to Patricia’s entitlement to damages, this Court has held that while no proof of
pecuniary loss is necessary in order that moral damages may be awarded, the amount of
indemnity being left to the discretion of the court, it is nevertheless essential that the claimant
should satisfactorily show the existence of the factual basis of damages and its causal connection
to defendant’s acts.This is so because moral damages, though incapable of pecuniary estimation,
are in the category of an award designed to compensate the claimant for actual injury suffered
and not to impose a penalty on the wrongdoer.Moreover, additional facts must be pleaded and
proven to warrant the grant of moral damages under the Civil Code, these being, social
humiliation, wounded feelings, grave anxiety, etc. that resulted from the act being complained
of.In the present case, both the RTC and the CA were not convinced that Patricia is entitled to
damages.
In addition, and with respect to Benjamin, the Court agrees with the CA that in the absence of
a wrongful act or omission, or of fraud or bad faith, moral damages cannot be awarded. The
adverse result of an action does not per se make the action wrongful, or the party liable for
it. One may err, but error alone is not a ground for granting such damages. In the absence of
malice and bad faith, the mental anguish suffered by a person for having been made a party in a
civil case is not the kind of anxiety which would warrant the award of moral damages.
The Court sustains the award of moral and exemplary damages as well as attorney’s fees in
favor of respondents.
As to moral damages, Article 20 of the Civil Code provides that every person who, contrary
to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.
In addition, Article 2219 (10) of the Civil Code provides that moral damages may be recovered
in acts or actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the same Code.
More particularly, Article 21 of the said Code provides that any person who willfully causes loss
or injury to another in a manner that is contrary to morals, good customs, or public policy shall
compensate the latter for the damage. In the present case, the act of Alice and Rosita in
fraudulently encashing the subject check to the prejudice of respondents is certainly a violation
of law as well as of the public policy that no one should put the law into his own hands. As to
SBTC and its officers, their negligence is so gross as to amount to a willfull injury to
respondents. The banking system has become an indispensable institution in the modern world
and plays a vital role in the economic life of every civilized society.Whether as mere passive
entities for the safe-keeping and saving of money or as active instruments of business and
commerce, banks have attained a ubiquitous presence among the people, who have come to
regard them with respect and even gratitude and most of all, confidence. For this reason, banks
should guard against injury attributable to negligence or bad faith on its part.
VII. FALLO: WHEREFORE, the instant petition is DENIED. The Decision of the
Court of Appeals dated August 27, 2002 in CA-G.R. CV No. 62404 is
AFFIRMED.
2. G.R. No. 150228 July 30, 2009
BANK OF AMERICA NT & SA, Petitioner,

vs.
PHILIPPINE RACING CLUB, Respondent.
Topic: Banking industry is impressed with public interest / Last Clear Chance Doctrine
Statement of Facts: Plaintiff PRCI is a domestic corporation which maintains a current account
with petitioner Bank of America. Its authorized signatories are the company President and Vice-
President. By virtue of a travel abroad for these officers, they pre-signed checks to accommodate
any expenses that may come up while they were abroad for a business trip. The said pre-signed
checks were left for safekeeping by PRCs accounting officer. Unfortunately, the two (2) of said
checks came into the hands of one of its employees who managed to encash it with petitioner
bank. The said check was filled in with the use of a check-writer, wherein in the blank for the
'Payee', the amount in words was written, with the word 'Cash' written above it.
Clearly there was an irregularity with the filling up of the blank checks as both showed similar
infirmities and irregularities and yet, the petitioner bank did not try to verify with the corporation
and proceeded to encash the checks.
Statement of the Case: PRC filed an action for damages against the bank. The lower court
awarded actual and exemplary damages. On appeal, the CA affirmed the lower court's decision
and held that the bank was negligent. Hence this appeal. Petitioner contends that it was merely
doing its obligation under the law and contract in encashing the checks, since the signatures in
the checks are genuine.
Issue: Whether or not the petitioner can be held liable for negligence and thus should pay
damages to PRC
Held: Both parties are held to be at fault but the bank has the last clear chance to prevent the
fraudulent encashment hence it is the one foremost liable .
There was no dispute that the signatures in the checks are genuine but the presence of
irregularities on the face of the check should have alerted the bank to exercise caution before
encashing them. Every client should be treated equally by a banking institution regardless of the
amount of his deposits and each client has the right to expect that every centavo he entrusts to a
bank would be handled with the same degree of care as the accounts of other clients. It is well-
settled that banks are in the business impressed with public interest that they are duty bound to
protect their clients and their deposits at all times. They must treat the accounts of these clients
with meticulousness and a highest degree of care considering the fiduciary nature of their
relationship. The diligence required of banks is more than that of a good father of a family.
The PRC officers' practice of pre-signing checks is a seriously negligent and highly risky
behavior which makes them also contributor to the loss. Its own negligence must therefore
mitigate the petitioner's liability. Moreover, the person who stole the checks is also an employee
of the plaintiff, a clerk in its accounting department at that. As the employer, PRC supposedly
should have control and supervision over its own employees.
Dispositive Portion: WHEREFORE, the Decision of the Court of Appeals dated July
16, 2001 and its Resolution dated September 28, 2001 are AFFIRMED with the following
MODIFICATIONS: (a) petitioner Bank of America NT & SA shall pay to respondent Philippine
Racing Club sixty percent (60%) of the sum of Two Hundred Twenty Thousand Pesos
(P220,000.00) with legal interest as awarded by the trial court and (b) the awards of attorneys
fees and litigation expenses in favor of respondent are deleted.
Proportionate costs.
6. Citibank N.A VS Atty. Ernesto S. Dinopol
Statement of Facts: Atty. Dinopol applied for “Ready Credit Account”, which were granted by
Citibank with a credit line limit of 30, 000 pesos. On December 26, 1996, a sum of 1,545 pesos
representing Ready Credit Documentary Stamp and Annual Membership fee reflection his
Statement of Account. On January 26, 1997, he was billed 1, 629.21 (1,545 plus 10 for
documentary stamp and 74.21 as accrued interest) pesos as interest and charges for late payment.
He settled his account on February 26, 1997.
On March 6, 1997 Atty. Dinopol issued a credit using the same in the amount of 30, 000 pesos in
favor of Dr. Marietta Geonzon as investment to her restaurant business. It was deposited on
March 12, 1997, but was dishonored due to DAIF (drawn against insufficient account).
Atty. Dinopol filed for damages alleging that the bank was grossly negligent and acted in bad
faith. Citibank averred that the dishonor was justified as Atty. Dinopol did not have sufficient
funds at the time the check was issued since the credit limit has been reduced by the interest and
penalty charges as a result of late payment.
RTC rendered decision against Citibank since the bank failed to disclose the terms and
conditions of the “Ready Credit Account”. The Standard handbook Guide was never given to
him and only the general provisions thereof were explained to Atty. Dinopol. Further, Atty.
Dinopol was given a “go signal” by the bank when he informed that h was going to issue the
check but failed to inform him that he had an outstanding balance of 58 pesos. RTC granted 100
thousand for moral damages.
Citibank appealed to CA. CA affirmed the RTC decision with modification, increasing the moral
damages to 500 thousand (rationale: Dinopol was a lawyer of good standing abused by the
bank; dishonesty of Citibank; bad faith for using the measly amount of 58 pesos to dishonor due
to DAIF and that Citibank besmirched Atty. Dinopol’s reputation and caused him undue
humiliation) and adding 50 thousand as exemplary damages. Citibank was dishonest for claiming
that Atty. Dinopol was given the customer handbook which was admitted by their witness Mark
Andre Hernando. Instead of exercising good faith, Citibank further argued that Atty. Dinopol
should have been knowledgeable since he is a practicing lawyer. Moreover, Atty. Dinopol was
NOT YET delinquent when he issued the check to justify the 58 pesos deduction from the 30
000 credit line. The due date for the February 26, 1997 Statement of Account was on March 19,
1997. Thus, when Atty. Dinopol issued the check on March 6, 1997, the 30 000 credit should not
have been deducted the penalty.
Citibank filed for petition for review under Rule 45.
Issue: WON the CA was correct in ruling that Citibank was liable to Atty. Dinopol for damages
Ruling: YES. Citibank was at fault for claiming that Atty. Dinopol was given a handbook upon
approval of the Ready Credit Account, thus he was aware of the terms and conditions thereof,
despite non delivery. Further, Atty. Dinopol’s penalty of 58. 33 pesos was not yet due on the date
he issued the check.
The SC is in agreement with CA in awarding the moral and exemplary damages. However, the
view of the RTC would suffice in the awarding of the damages and interest. Moral damages are
meant to compensate for any physical suffering, mental anguish, social humiliation and other
similar injuries unjustly caused. Exemplary damages is allowed by law as example for public
good.
The business of banking is impressed public interest and great reliance is made on the bank’s
sworn profession of diligence and meticulousness in giving irreproachable service. In any event,
banks must be cautious in dealing with clients since it is imbued with public interests. Banks
must always act in good faith and must win the confidence of clients and people in general. It is
irrelevant whether the client was a lawyer of not.
I. SHORT TITLE: 4 BPI VS. CASA MONTESSSORI INTERNATIONALE
II. FULL TITLE: BANK OF THE PHILIPPINE ISLANDS, vs. CASA MONTESSORI

INTERNATIONALE and LEONARDO T. YABUT, – G.R. No. 149454. May 28, 2004,
CASA MONTESSORI INTERNATIONALE, vs. BANK OF THE

PHILIPPINE ISLANDS - G.R. No. 149507. May 28, 2004. PANGANIBAN, J.:
III. TOPIC: GENERAL BANKING LAWS – EXTRAORDINARY DILIGENCE
IV. STATEMENT OF FACTS:
Plaintiff CASA Montessori International maintains an account with defendant BPI with
CASA’s President Ms. Ma. Carina C. Lebron as one of its authorized signatories. Plaintiff
subsequently discovered that nine of its checks had been encashed by a certain Sonny D. Santos.
It turned out that ‘Sonny D. Santos’ with account at BPI’s Greenbelt Branch was a fictitious
name used by Leonardo T. Yabut who worked as external auditor of CASA who voluntarily
admitted that he forged the signature of Ms. Lebron to encash the checks. Plaintiff filed a
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.
V. STATEMENT OF THE CASE:
Regional Trial Court rendered a decision in favor of the plaintiff. Modifying the Decision
of the RTC, the CA apportioned the loss between BPI and CASA. The appellate court took into
account CASA’s contributory negligence that resulted in the undetected forgery. It then ordered
Leonardo T. 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. Hence both parties appealed
the decision of the Court of Appeals by Petitions for review on certiorari.
VI. ISSUE:
1. Whether the bank can be held liable with forged check?
2. Whether there was waiver for failure to report error in the accounts?
3. Whether the depositors can validly claim moral damages?
VII. RULING:
1. We have 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.” BPI contends that it has a signature verification procedure,
in which checks are honored only when the signatures therein are verified to be the same with or
similar to the specimen signatures on the signature cards. Nonetheless, it still failed to detect the
instances of forgery.
Under Sec 23 of negotiable instruments law, 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 bank’s 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.” In both law and equity, when
one of two innocent persons “must suffer by the wrongful act of a third person, the loss must be
borne by the one whose negligence was the proximate cause of the loss or who put it into the
power of the third person to perpetrate the wrong.”
2. The monthly statements issued by BPI to its clients contain a notice worded as follows:
“If no error is reported in ten (10) days, account will be correct.” Such notice cannot be
considered a waiver, even if CASA failed to report the error. Neither is it estopped from
questioning the mistake after the lapse of the ten-day period. The former’s omission, if any, may
only be deemed an innocent mistake oblivious to the procedures and consequences of periodic
audits. Since its conduct was due to such ignorance founded upon an innocent mistake, estoppel
will not arise. This notice is a simple confirmation or “circularization”—in accounting parlance
—that requests client-depositors to affirm the accuracy of items recorded by the banks. Its
purpose is to obtain from the depositors a direct corroboration of the correctness of their account
balances with their respective banks. Besides, the notice was a measly request worded as
follows: “Please examine x x x and report x x x.” CASA had no obligation to respond. It could—
as it did—choose not to respond.
3. Regrettably, in this case CASA was unable to identify the particular instance—
enumerated in the Civil Code—upon which its claim for moral damages is predicated. Neither
bad faith nor negligence so gross that it amounts to malice can be imputed to BPI. Bad faith,
under the law, “does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty
through some motive or interest or ill will that partakes of the nature of fraud.” CASA’s mere
allegation or supposition thereof, without any sufficient evidence on record, is not enough.
VIII. DISPOSITIVE PORTION:

WHEREFORE, the Petition in G.R. No. 149454 is hereby DENIED, and that in G.R. No.
149507 PARTLY GRANTED. The assailed Decision of the Court of Appeals is AFFIRMED
with modification: BPI is held liable for P547,115, the total value of the forged checks less the
amount already recovered by CASA from Leonardo T. Yabut, plus interest at the legal rate of six
percent (6%) per annum—compounded annually, from the filing of the complaint until paid in
full; and attorney’s fees of ten percent (10%) thereof, subject to reimbursement from Respondent
Yabut for the entire amount, excepting attorney’s fees. Let a copy of this Decision be furnished
the Board of Accountancy of the Professional Regulation Commission for such action as it may
deem appropriate against Respondent Yabut. No costs.
I. SHORT TITLE: 5 PHILIPPINE BANKING CORPORATION vs COURT OF

APPEALS
II. FULL TITLE: Philippine Banking Corporation vs Court of Appeals and Leonilo Marcos
–GR No. 127469, January 15, 2004, Carpio, J.
III. TOPIC: Banking law – General Banking Law

Leonilo Marcos filed with the trial court a complaint for sum of money with damages
against petitioner Philippine Banking Corporation. Marcos alleged that he made a time deposit in
two occasions the amount of P664,897.67 and P764,897.67 through the persuasion of his close
friend, Florencio Pagsaligan, one of the officials of the bank. 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 deposits
and its accumulated interests to buy materials for his construction business, 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.
Marcos accused 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.

Before us is a petition for review of the Decision [1] of the Court of Appeals in CA-G.R.
CV No. 34382 dated 10 December 1996 modifying the Decision [2] of the Regional Trial Court,
Fourth Judicial Region, Assisting Court, Bian, Laguna in Civil Case No. B-3148 entitled Leonilo
Marcos v. Philippine Banking Corporation.
The trial court rendered its decision in favor of Marcos. Aggrieved, the Bank appealed to
Court of Appeals.
VI. ISSUE:
1. Whether or not the Bank failed to take a proper account on Marcos’ deposits and
payment of his loans?
VII. RULING:
1. The BANK is liable to Marcos for offsetting his time deposits with a fictitious promissory
note. The existence of Promissory Note No. 20-979-83 could have been easily proven had the
BANK presented the original copies of the promissory note and its supporting evidence. In lieu
of the original copies, the BANK presented the "machine copies of the duplicate" of the
documents.
These substitute documents have no evidentiary value. The BANK’s failure to explain the
absence of the original documents and to maintain a record of the offsetting of this loan with the
time deposits bring to fore the BANK’s dismal failure to fulfill its fiduciary duty to Marcos.
Section 2 of Republic Act No. 8791 (General Banking Law of 2000) expressly imposes this
fiduciary duty on banks when it declares that the State recognizes the "fiduciary nature of
banking that requires high standards of integrity and performance." This statutory declaration
merely echoes the earlier pronouncement of the Supreme Court in Simex International (Manila)
Inc. v. Court of Appeals31 requiring banks to "treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their relationship." 32 The Court reiterated this
fiduciary duty of banks in subsequent cases.33
Assuming Pagsaligan was behind the spurious promissory note, the BANK would still be
accountable to Marcos. We have held that a bank is liable for the wrongful acts of its officers
done in the interest of the bank or in their dealings as bank representatives but not for acts
outside the scope of their authority.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner Philippine Banking Corporation is ordered to return to private
respondent Leonilo Marcos P500,404.11, the remaining principal amount of his time deposits,
with interest at 17% per annum from 30 August 1989 until full payment. Petitioner Philippine
Banking Corporation is also ordered to pay to private respondent Leonilo Marcos P211,622.96,
the accumulated interest as of 30 August 1989, plus 12% legal interest per annum from 30
August 1989 until full payment. Petitioner Philippine Banking Corporation is further ordered to
pay P100,000 by way of moral damages and P20,000 as exemplary damages to private
respondent Leonilo Marcos.
Costs against petitioner.
SO ODERED.
6. G.R. No. 157845, 20 September 2005
PHILIPPINE NATIONAL BANK VS NORMAN Y. PIKE
FACTS
Norman Pike is a depositor of PNB Buendia branch keeping a dollar savings account therein.
On March 5 and April 13, 1993, two unauthorized withdrawals with aggregate amount of
US$7,500 were noted by Pike from his account. Thereafter on April 19, Pike reported that his
Account Passbook was stolen from his house. On several occasions, Pike protested the
unauthorized withdrawals claiming the signatures in the withdrawal slips were forgeries and
demanded that they be returned to his account but the bank merely replied that they have
exercised due diligence in the handling of Pike’s account thus cannot be held liable which
prompted Pike to send a formal demand letter thru counsel which was unheeded. On May 6,
1993, Pike wrote a letter to the bank requesting the replacement of his lost passbook and
withdrawal of the remaining balance on his account which was granted by the bank. In the same
letter, it was alleged that Pike promised not to hold the bank liable for the unauthorized
withdrawals made from his account which was later denied by Pike claiming the portion of his
letter showing such waiver was fraud for having been intercalated. The demand for return of
money being unheeded, Pike filed a complaint with RTC for the return of money plus damages.
Bank, thru its AVP Lorenzo Val, contended that the questioned withdrawals were made by
Davasol and covered by withdrawal slips which were presigned by Pike, in his presence, on
Pike’s previous visit in the bank wherein Pike instructed Val to honor the withdrawals from
Pike’s account by his Talent Manager Davasol. During trial, Val admitted that such an
accommodation of valued client’s verbal request is not a standard bank operating procedure.
Trial Court ruled in favour of Pike holding that PNB was negligent in handling Pike’s account
and that it was not satisfied there was a pre-signing arrangement as claimed by Val. On appeal,
CA affirmed RTC ruling that PNB should have required Pike, as a normal procedure, to
authorize a withdrawal by representative which is an allowed bank practice, and was normally
previously resorted to by Pike, instead of merely accepting pre-signed slips. Hence this appeal
ISSUE
WON PNB is liable for the unauthorized withdrawals for its negligence?
COURT RULING
Yes
It bears emphasizing that negligence of banking institutions should never be countenanced. The
negligence here lies in the lackadaisical attitude exhibited by employees of PNB in their
treatment of respondent Pike’s US Dollar Savings Account that resulted in the unauthorized
withdrawal of US$7,500.
Considering the banking business is imbued with public interest, banks are required to exercise
due diligence higher than that of a good father of a family. The stability of banks largely
depends on the confidence of the people in the honesty and efficiency of banks. Sec. 2 of RA
8791 makes a categorical declaration that the State recognizes the “fiduciary nature of banking
that requires high standards of integrity and performance”.
The Court’s finding of negligence is culled from the testimonies of PNB’s witness, Val. That
despite not knowing or not being familiar with the physical appearance of Pike and his signature,
Val acceded to his mere verbal instructions regarding the withdrawals using pre-signed slips.
Likewise, it was revealed that Val was also not familiar with the appearance of Davasol yet he
did not bother to ask the former to present identification when making the questioned
withdrawals. Val also admitted that the use of the presigned slips which was the basis of
authority in the questioned withdrawals were in breach of the standard operating procedure of
banks in the ordinary and usual course of banking operations. Finally, the bank’s inability to
require Pike to authorize the withdrawal by representative weighed heavily against the bank.
WHEREFORE, the instant petition is DENIED.

Case No. 7 General Banking Laws San Diego, Rachel Mae M.
I. SHORT TITLE: Far East Bank VS. Chante
II. FULL TITLE: FAR EAST BANK & TRUST COMPANY, petitioner, vs. ROBERT
MAR CHANTE, a.k.a. ROBERT MAR G. CHAN, respondents.
III. TOPIC: Banks could not avoid the duty or evade the responsibility for the fraud resulting
from the system bug on account of its exclusive control of its computer system.
Roberto Mar Chante A.K.A. Mar G. Chan (Chan) was a current account depositor of
petitioner Far East Bank & Trust Co. (FEBTC) at its Ongpin Branch. FEBTC issued to him a
“Do-it-all Card” which can handle both credit card and ATM Transactions. And as a security
feature, a personal identification number (PIN) known only to Chan was required in order to gain
access to the account. Thus, with the use of the card and the PIN, he could then deposit and
withdraw funds from his account.
FEBTC filed a civil case against Chan to recover the principal sum of 770,488.33 representing
the unpaid balance of the amount fraudulently withdrawn from Chan’s account. FEBTC alleged
that between 8:52 pm of May 4, 1992 and 4:06am of May 5, 1992 Chan had used his card and
PIN to withdraw funds totalling 967,000 from PNB- Megalink ATM facility at the Manila
Pavilion Hotel; that the withdrawals were done in a series of 242 transactions; that the
transactions were processed and recorded by the respective computer systems of PNB- Megalink
despite the following circumstances: (a) the office status of Ongpin Branch; (b) Chan’s balance
is only 198,11.70 at that time; (c) the maximum withdrawal limit of the ATM facility being
50,000/day; (d) and the transactions did not reflect in his account and no debit or deduction are
made in his account.
FEBTC also alleged that at the time of withdrawal transactions, there was an error of the system
that allowed Chan to successfully withdraw funds in excess of his current balance and Chan had
taken advantage of such.
Chan denied liability and insisted that he had been actually home at the time of withdrawal. And
despite having possession of the card, that there is a possibility of an inside job. Chan denied that
it would be physically impossible for him to stand for hours in front of the ATM facility just to
withdraw funds. The records show that FEBTC detected the bug only after the routine
reconciliation on May 7, 1992.
On May 14, FEBTC debited his current account in amount 192,517.20 leaving the unrecovered
portion of 770,488.30. And the FEBTC sent to Chan a letter demanding recovery of said balance
but he turned a deaf ear to the demands.
RTC ruled in favour of FEBTC, deciding that the actions of the defendant after the
incident gave him away. That merely two days after the heavy withdrawal, Chan returned not to
the exact scene of the incident but at a branch nearby and tried again to withdraw, but this time
the bank already knew what happened so it blocked the card and restrained it by a “hot card”.
But the defendant was not successful this time so what he did was to issue a check almost for the
whole amount of balance in his account.
There is also no available precedents in this case regarding computer errors but the Court finds
that the defendant should be held liable for the violation of the following provisions of law:
Article 19, 21, 22 and 25 of the Civil Code.
Moreover, though the cause of action in this case may be erroneous dispensation of money due
to a computer bug which is not the defendant’s wrongdoing. The Court sees that what was wrong
was the failure to return the amount in excess of what was legally his.
Chan appealed to the Court of Appeals which reversed the RTC’s decision. Basing such reversal
from the fact that the computer and the ATM system are not perfect, as shown by the incident.
Aside from the vulnerability to inside staff members we take judicial notice that no less that our
own Central Bank has publicly warned banks about other nefarious schemes involving ATMs.
Hence, this petition before the Supreme Court.
VI. ISSUE: Whether Chan is liable for the withdrawals made on his account?;
VII. RULING:
No. Although there was no question that Chan had the physical possession of Far East
Card No. 05-01120-5-0 at the time of the withdrawals, the exclusive possession of the card alone
did not suffice to preponderantly establish that he had himself made the withdrawals, or that he
had caused the withdrawals to be made. In his answer, he denied using the card to withdraw
funds from his account on the dates in question, and averred that the withdrawals had been an
“inside job.” His denial effectively traversed FEBTC’s claim of his direct and personal liability
for the withdrawals, that it would lose the case unless it competently and sufficiently established
that he had personally made the withdrawals himself, or that he had caused the withdrawals. In
other words, it carried the burden of proof.
Burden of proof is a term that refers to two separate and quite different concepts, namely: (a) the
risk of non-persuasion, or the burden of persuasion, or simply persuasion burden; and (b) the
duty of producing evidence, or the burden of going forward with the evidence, or simply the
production burden or the burden of evidence. In its first concept, it is the duty to establish the
truth of a given proposition or issue by such a quantum of evidence as the law demands in the
case at which the issue arises. In its other concept, it is the duty of producing evidence at the
beginning or at any subsequent stage of trial in order to make or meet a prima facie case.
Generally speaking, burden of proof in its second concept passes from party to party as the case
progresses, while in its first concept it rests throughout upon the party asserting the affirmative of
the issue.
Being the plaintiff, FEBTC must rely on the strength of its own evidence instead of upon the
weakness of Chan’s evidence. Its burden of proof thus required it to preponderantly demonstrate
that his ATM card had been used to make the withdrawals, and that he had used the ATM card
and PIN by himself or by another person to make the fraudulent withdrawals. Otherwise, it could
not recover from him any funds supposedly improperly withdrawn from the ATM account. We
remind that as a banking institution, FEBTC had the duty and responsibility to ensure the safety
of the funds it held in trust for its depositors. It could not avoid the duty or evade the
responsibility because it alone should bear the price for the fraud resulting from the system bug
on account of its exclusive control of its computer system.
Moreover, the fact that Chan’s account number and ATM card number were the ones used for
the withdrawals, by itself, is not sufficient to support the conclusion that he should be deemed to
have made the withdrawals. But more than this, we are not convinced that the tapes lead us to the
inevitable conclusion that Chan’s card, rather than a replacement card containing Chan’s PIN
and card number or some other equivalent scheme, was used. To our mind, we cannot discount
this possibility given the available technology making computer fraud a possibility, the cited
instances of computer security breaches, the admitted system bug, and — most notably— the
fact that the withdrawals were made under circumstances that took advantage of the system bug.
System errors of this kind, when taken advantage of to the extent that had happened in this case,
are planned for. Indeed, prior preparation must take place to avoid suspicion and attention where
the withdrawal was made for seven (7) long hours in a place frequented by hundreds of guests,
over 242 transactions where the physical volume of the money withdrawn was not insignificant.
To say that this was done by the owner of the account based solely on the records of the
transactions, is a convenient but not a convincing explanation
Significantly, Edgar Munarriz, FEBTC’s very own Systems Analyst, admitted that the bug
infecting the bank’s computer system had facilitated the fraudulent withdrawals.
The RTC’s deductions on the cause of the withdrawals were faulty. It chiefly relied on inferences
drawn from his acts subsequent to the series of withdrawals, specifically his attempt to withdraw
funds from his account at an FEBTC ATM facility in Ermita, Manila barely two days after the
questioned withdrawals; his issuance of a check for P190,000.00 immediately after the capture of
his ATM card by the ATM facility; his failure to immediately report the capture of his ATM card
to FEBTC; and his going to FEBTC only after the dishonor of the check he had issued following
the freezing of his account. The inferences were not warranted, however, because the subsequent
acts would not persuasively establish his actual participation in the withdrawals due to their
being actually susceptible of other interpretations consistent with his innocence.
The RTC also ignored the likelihood that somebody other than Chan familiar with the bug
infection of FEBTC’s computer system at the time of the withdrawals and adept with the
workings of the computer system had committed the fraud. This likelihood was not far-fetched
considering that FEBTC had immediately adopted corrective measures upon its discovery of the
system bug, by which FEBTC admitted its negligence in ensuring an error-free computer system;
and that the system bug had affected only the account of Chan. Truly, the trial court
misapprehended the extent to which the system bug had made the computer system of FEBTC
stumble in serious error.
VII. FALLO: WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals;

and DIRECTS the petitioner to pay the costs of suit.
SO ORDERED.
Case No. 8 General Banking Laws Teodoro, Claudine Mae G.
I. SHORT TITLE: REYES ET.AL. VS. COURT OF APPEALS
II. FULL TITLE: GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,

vs. THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY,
respondents.
III. TOPIC: Diligence required of banks where the fiduciary nature of their relationship is
concerned and in their commercial transactions.
Godofredo, Chief Cashier of the Philippine Racing Club (PCRI), went to

respondent 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.
Upon their arrival in the Philippines they instituted a case against the respondent
bank. However, it was dismissed by the RTC and on appeal the dismissal was affirmed
with modifications.
The Spouses Reyes in their petition for review prays for the Court to re-examine
the facts to cite certain instances of negligence.
Before the Court is a PETITION for review on certiorari of a decision of the Court of
Appeals which affirmed the RTC’s decision with modifications in dismissing the case.
VI. ISSUES:
1. Whether or not there is a reversible error made by the CA.
2. Whether or not the respondent bank is liable for damages?
VII. RULING:
None. Section 1 of Rule 45 of the Revised Rules of Court provides that "(T)he petition
for review shall raise only questions of law which must be distinctly set forth." Thus, the Court
ruled that the factual findings of the CA are conclusive on the parties and not reviewable by the
SC. Moreover, they carry more weight when the CA affirms the findings of the trial court.
No. The circumstances clearly shows that all efforts were made by the Respondent bank
to avoid such mistake. It was found that there were miscommunications of the Bank's SWIFT
message. There exists the erroneous decoding on the part of Westpac-Sydney. Hence, if there
was a mistake in decoding on the part of Westpac-Sydney which lead to the message being sent
to the wrong department, the mistake was Westpac's, not the Bank's.
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 highest degree of
care. But the said ruling only applies ro cases where banks act under ther fiduciary capacity, that
is, the depositary of the deposits if their depositors. Hence, 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 depositors. In this case, the latter is being applied being a
commercial transaction.
FALLO:
WHEREFORE, the petition is hereby DENIED, and the assailed decision of the Court of
Appeals is AFFIRMED. Costs against the petitioners
9. First Planters Pawnshop v. CIR
560 SCRA 606
Statement of the facts:
In a Pre-Assessment Notice in the year 2003, petitioner was informed by the Bureau Internal
Revenue that it has an existing tax deficiency on its Value Added Tax (VAT) and Documentary
Stamp Tax (DST) liabilities for the year 2000. The deficiency assessment was at P541,102.79 for
VAT and P26,646.33 for DST.
Petitioner protested the assessment for lack of legal and factual bases but petitioner subsequently
received a Formal Assessment Notice on December 29,2003, directing to pay deficiency with
surcharge and interest. Petitioner filed a protest which was denied by Acting Regional Director
Adriano per Final Decision dated on 2004.
Petitioner argues that it is not a lending investor within the purview of Sec,108(A) of the NIRC,
as amended, and therefore not subject to VAT. Moreover, petitioner contends that a pawn ticket
is not subject to DST because it is not proof of the pledge transaction, and even assuming that it
is, so, still, it is not subject to tax since a DST is levied on the document issued and not on the
transaction.
Statement of the case:
The petition for review filed by the Petitioner with the Court of Tax Appeals (CTA), where the
Second Division of the CTA upheld the deficiency assessment. Motion for reconsideration also
filed by the latter was denied. Petitioner appealed to CTA En Banc which affirmed the assailed
decision. It was the CTA’s view that the services rendered by pawnshops fall under the general
definition of “sale or exchange of services” under Section 108(A) of the 1987 Tax Code. Hence
this petition.
Issues:
1 Whether or not the petitioner is liable for VAT

2 Whether or not the petitioner is liable for DST
Ruling:
1 No. The determination of petitioner’s tax liability depends on the tax treatment of a pawnshop
business. The Court finds that pawnshops should have been treated as non-bank financial
intermediaries from the very beginning, subject to the appropriate taxes provided by law. At the
time of the disputed assessment, that is, for the year 2000, pawnshops were not subject to 10%
VAT under the general provision on “sale or exchange services” as defined under Section
108(A) of the Tax Code of 1997. Instead, due to the specific nature of its business, pawnshops
were then subject to 10% VAT under the category of non-bank financial intermediaries, as
provided in the same Section 108(A), which reads:
The phrase “sale or exchange of services” means the performance of all kinds or services in the
Philippines for others for a fee, remuneration or consideration, including x x x services of banks,
non-bank financial intermediaries and finance companies; and non-life insurance companies
(except their crop insurances), including surety, fidelity, indemnity and bonding companies..xx
Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the past tax
years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, the petitioner is not liable for VAT
during these tax years. But with the full implementation of the VAT system on non-bank
financial intermediaries starting January 1, 2003, petitioner is liable for 10% VAT for said tax
year. And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no longer
liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case
may be.
2 Yes. Pawnshops are liable for documentary stamp tax. Subject of DST is not limited to the
document alone. Pledge (which is an exercise of a privilege to transfer obligations, rights or
properties incident thereto) is essentially the business of pawnshops which are defined under
Section 3 of Presidential Decree No. 114, or the Pawnshop Regulation Act, as persons or entities
engaged in lending money on personal property delivered as security for loans. The DST is an
excise tax imposed in the exercise of a pledge. Although the law does not consider a pawn ticket
as an evidence of security or indebtedness, for purposes of taxation it is treated as an exercise of
a taxable privilege of concluding a contract of pledge.
Thus, the court partially granted the petition where the decision on the BIR assessment on VAT
deficiency is reversed and set aside while the decision on payment for DST is affirmed.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated June 7, 2006 and
Resolution dated August 14, 2006 of the Court of Tax Appeals En Banc is MODIFIED to the effect that
the Bureau of Internal Revenue assessment for VAT deficiency in the amount of P541,102.79 for the year
2000 is REVERSED and SET ASIDE, while its assessment for DST deficiency in the amount
of P24,747.13, inclusive of surcharge and interest, is UPHELD.
I.SHORT TITLE: 12 PDIC V CITIBANK ET.AL
II. FULL TITLE: Philippine Deposit Insurance Corporation vs Citibank and Bank of
America, S.T. N. A – 669 SCRA 191 April 12, 2012, J. Mendoza
III. TOPIC: Foreign Currency Deposit
Citibank, N.A. (Citibank) and Bank of America, S.T. & N.A. (BA) are duly organized
corporations and existing under the laws of the United States of America and duly licensed to do
business in the Philippines, with offices in Makati City. Petitioner Philippine Deposit Insurance
Corporation (PDIC) conducted an examination of the books of account of Citibank and BA in
1977and 1979 respectively. It discovered that Citibankin the course of its banking business,
received from its head office and other foreign branches a total of P11,923,163,908.00 in dollars
from September 30, 1974 to June 30, 1977 covered by Certificates of Dollar Time Deposit that
were interest-bearing with corresponding maturity dates. And BA a total of P629, 311,869.10 in
dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates and lodged in their books under the account Due to Head
Office/Branches. For failure to report the said amounts as deposit liabilities that were subject to
assessment for insurance, PDIC sought the remittance of deficiency premium assessments for
dollar deposits.
Citibank and BA each filed a petition for declaratory relief before the Court of First
Instance stating that the money placements they received from their head office and other foreign
branches were not deposits and did not give rise to insurable deposit liabilities under Sections 3
and 4 of R.A. No. 3591 (the PDIC Charter) and, as a consequence, the deficiency assessments
made by PDIC were improper and erroneous. RTC ruled in favor of Citibank and BAwhich
reasoned that there was no depositor-depository relationship between the respondents and their
head office or other branches. Also, the placements were deposits made outside the Philippines
which are excluded under Section 3.05(b) of the PDIC Rules and Regulations and Section 3(f) of
the PDIC Charter likewise excludes from the definition of the term deposit any obligation of a
bank payable at the office of the bank located outside the Philippines.
PDIC argues that the head offices of Citibank and BA and their individual foreign
branches are separate and independent entities hence not exempt in Section 3(b) of R.A. No.
3591.
PDIC appealed to the CA which affirmed the ruling of the RTC.
VI. ISSUE:
Whether or not the money placements subject matter of these petitions are
assessable for insurance purposes under the PDIC Act
VII. RULING:
The court ruled that the funds in question are not deposits within the definition of the
PDIC Charter and are, thus, excluded from assessment. Pursuant toSection 3(f) of the PDIC
Charter, the term deposit means unpaid balance of money or its equivalent received by a bank in
the usual course of business and for which it has given or is obliged to give credit to a
commercial, checking, savings, time or thrift account or which is evidenced by its certificate of
deposit, and trust funds held by such bank whether retained or deposited in any department of
said bank or deposit in another bank, together with such other obligations of a bank as the Board
of Directors shall find and shall prescribe by regulations to be deposit liabilities of the
Bank; Provided, that any obligation of a bank which is payable at the office of the bank located
outside of the Philippines shall not be a deposit for any of the purposes of this Act or included as
part of the total deposits or of the insured deposits.As explained by the respondents, the transfer
of funds, which resulted from the inter-branch transactions, took place in the books of account of
the respective branches in their head office located in the United States. Hence, because it is
payable outside of the Philippines, it is not considered a deposit.

WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the Court of
Appeals in CA-G.R. CV No. 61316 is AFFIRMED.
I. SHORT TITLE: 13 PCI Bank vs. Citibank
II. FULL TITLE: G.R. No. 121413 January 29, 2001 PHILIPPINE COMMERCIAL
INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA),
petitioner, vs. COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A.,
respondents.
G.R. No. 121479 January 29, 2001 FORD PHILIPPINES, INC., petitioner-plaintiff,
vs. COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE COMMERCIAL
INTERNATIONAL BANK, respondents.
G.R. No. 128604 January 29, 2001 FORD PHILIPPINES, INC., petitioner,
vs. CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL BANK and COURT
OF APPEALS, respondents.
III. TOPIC: Banking Law

Ford Philippines issued three Citibank checks payable to the Commission on International
Revenue for its quarterly tax percentage, amounting to P4,746,114.41, Php 5, 851,706.37 and
P6,311,591.73. These checks which were "crossed-checks" and contain two diagonal lines on its
upper corner and with written words "payable to the payee/s account only", "were deposited with
the Insular Bank of Asia and America” (now PCI Bank). The checks were cleared but the
proceeds thereof never reached the payee, CIR. It appeared that the funds were embezzled by an
alleged organized syndicate represented by PCI Bank, Ford and CIR employees. for filed an
action to recover an amount with the drawee bank, Citibank, and the collecting bank, PCI Bank.

On December 9, 1988, Regional Trial Court of Makati, Branch 57, held drawee-bank, Citibank,
liable for the value of the two checks while absolving PCI Bank from any liability. Both Ford
and Citibank appealed to the Court of Appeals which affirmed, in toto, the decision of the trial
court. Hence, this petition.
VI. ISSUE:
Whether Ford has the right to recover from the collecting bank (PCI Bank) and the drawee bank
(Citibank) the value of the checks intended as payment to the Commissioner of Internal
Revenue?
VII. RULING:
Yes. It appears that although the employees of Ford initiated the transactions attributable to an
organized syndicate, their actions were not the proximate cause of encashing the checks payable
to the CIR. The collecting bank's (PCI Bank) negligence is the proximate cause of the loss. The
crossing of the check with the phrase - "Payee/s Account only" is a warning that the check
should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank,
PCI bank to ascertain that the check be deposited in payee/s account only. Therefore, it is the
collecting bank, PCI Bank which is bound to scrutinize the check and to know its depositors
before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement
guaranteed". the bank is liable for the fraudulent acts or representations of its officers who
apparently performed their activities using facilities in their official capacity or authority but for
their personal and private gain or benefit.
Citibank as drawee bank was likewise negligent in the performance of its duties. Citibank failed
to establish that its payment of Ford/s checks were made in due course and legally in order.
Section 62 of the Negotiable Instruments Law provides that by accepting the instrument, the
acceptor which is Citibank engages that it will pay according to the tenor of its acceptance, and
that it will pay only to the payee, (the CIR), since here the check was crossed with annotation
"Payees Account only". Thus, invoking the doctrine of comparative negligence" both PCI Bank
and Citibank failed in their respective obligations and both were negligent in the selection and
supervision of their employees resulting in the encashment of the Citibank checks. Thus, they are
equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV
No. 25017 are AFFIRMED. PCI Bank, know formerly as Insular Bank of Asia and America, is
declared solely responsible for the loss of the proceeds of Citibank Check No SN 04867 in the
amount P4,746,114.41, which shall be paid together with six percent (6%) interest thereon to
Ford Philippines Inc. from the date when the original complaint was filed until said amount is
fully paid.
However, the Decision and Resolution of the Court of Appeals in CA-G.R. No. 28430 are
MODIFIED as follows: PCI Bank and Citibank are adjudged liable for and must share the loss,
(concerning the proceeds of Citibank Check Numbers SN 10597 and 16508 totalling
P12,163,298.10) on a fifty-fifty ratio, and each bank is ORDERED to pay Ford Philippines Inc.
P6,081,649.05, with six percent (6%) interest thereon, from the date the complaint was filed until
full payment of said amount.
Costs against Philippine Commercial International Bank and Citibank N.A.
AIDAN M. HORTILANO LLB 3A
14 BPI FAMILY SAVINGS BANK, INC v.

FIRST METRO INVESTMENT CORPORATION
The case:
Petition is for review on certiorari assailing the decision of the Court of Appeals affirming the
decision of the Trial Court. The petition is denied by the Supreme Court.
The facts:
On August 25, 1989, FMIC, through its Executive Vice President Antonio Ong, opened current
account and deposited METROBANK check no. 898679 of P100 million with BPI Family Bank
(BPI FB) San Francisco del Monte Branch (Quezon City). Ong made the deposit upon request of
his friend, Ador de Asis, a close acquaintance of Jaime Sebastian, then Branch Manager of BPI
FB San Francisco del Monte Branch. Sebastian’s aim was to increase the deposit level in his
Branch. BPI FB, through Sebastian, guaranteed the payment of P14,667,687.01 representing
17% per annum interest of P100 million deposited by FMIC. The latter, in turn, assured BPI FB
that it will maintain its deposit of P100 million for a period of one year on condition that the
interest of 17% per annum is paid in advance. This agreement between the parties was reached
through their communications in writing. Subsequently, BPI FB paid FMIC 17% interest
or P14,667,687.01 upon clearance of the latter’s check deposit.
However, on August 29, 1989, on the basis of an Authority to Debit signed by Ong and Ma.
Theresa David, Senior Manager of FMIC, BPI FB transferred P80 million from FMICs current
account to the savings account of Tevesteco Arrastre Stevedoring, Inc. (Tevesteco). FMIC
denied having authorized the transfer of its funds to Tevesteco, claiming that the signatures of
Ong and David were falsified. Thereupon, to recover immediately its deposit, FMIC,
on September 12, 1989, issued BPI FB check no. 129077 for P86,057,646.72 payable to itself
and drawn on its deposit with BPI FB SFDM branch. But upon presentation for payment
on September 13, 1989, BPI FB dishonored the check as it was drawn against insufficient funds
(DAIF). Consequently, FMIC filed with the Regional Trial Court, Branch 146, Makati City
Civil Case No. 89-5280 against BPI FB. FMIC likewise caused the filing by the Office of the
State Prosecutors of an Information for estafa against Ong, de Asis, Sebastian and four
others. However, the Information was dismissed on the basis of a demurrer to evidence filed by
the accused.
The issues:
1. Whether or not the transaction between First Metro Investment Corporation and BPI
Family Bank a time deposit or an interest-bearing current account.
2. Whether or not BPI Family Bank is liable for the unauthorized transfer of FMIC’ funds to
Tevesteco.
The SC decision:
1. We hold that the parties did not intend the deposit to be treated as a demand deposit but
rather as an interest-earning time deposit not withdrawable anytime. When respondent
FMIC invested its money with petitioner BPI FB, they intended the P100 million as a
time deposit, to earn 17% per annum interest and to remain intact until its maturity date
one year thereafter. Ordinarily, a time deposit is defined as one the payment of which
cannot legally be required within such a specified number of days. In contrast, demand
deposits are all those liabilities of the Bangko Sentral and of other banks which are
denominated in Philippine currency and are subject to payment in legal tender upon
demand by the presentation of (depositors) checks. While it may be true that barely one
month and seven days from the date of deposit, respondent FMIC demanded the
withdrawal of P86,057,646.72 through the issuance of a check payable to itself, the same
was made as a result of the fraudulent and unauthorized transfer by petitioner BPI FB of
its P80 million deposit to Tevestecos savings account. Certainly, such was a normal
reaction of respondent as a depositor to petitioner’s failure in its fiduciary duty to treat its
account with the highest degree of care. Under this circumstance, the withdrawal of
deposit by respondent FMIC before the one-year maturity date did not change the nature
of its time deposit to one of demand deposit. We have held that if a corporation
knowingly permits its officer, or any other agent, to perform acts within the scope of an
apparent authority, holding him out to the public as possessing power to do those acts, the
corporation will, as against any person who has dealt in good faith with the corporation
through such agent, be estopped from denying such authority. Petitioner maintains that
respondent should have first inquired whether the deposit of P100 Million and the fixing
of the interest rate were pursuant to its (petitioners) internal procedures. Petitioner’s
stance is a futile attempt to evade an obligation clearly established by the intent of the
parties. What transpires in the corporate board room is entirely an internal matter. Hence,
petitioner may not impute negligence on the part of respondent’s representative in failing
to find out the scope of authority of petitioners Branch Manager. Indeed, the public has
the right to rely on the trustworthiness of bank managers and their acts. Obviously,
confidence in the banking system, which necessarily includes reliance on bank managers,
is vital in the economic life of our society. Significantly, the transaction was actually
acknowledged and ratified by petitioner when it paid respondent in advance the interest
for one year. Thus, petitioner is estopped from denying that it authorized its Branch
Manager to enter into an agreement with respondents Executive Vice President
concerning the deposit with the corresponding 17% interest per annum.
2. Yes. We uphold the finding of both lower courts that petitioner failed to exercise
that degree of diligence required by the nature of its obligations to its depositors. 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 million of pesos. Here,
petitioner cannot claim it exercised such a degree of care required of it and must,
therefore, bear the consequence.
15 ASSOCIATED BANK (Now WESTMONT BANK), petitioner,
vs. VICENTE HENRY TAN, respondent.
G.R. No. 156940, 446 SCRA 282 December 14, 2004
FACTS:
It is a Petition for Review under Rule 45 of the Rules of Court, assailing the decision of
the Court of Appeals ruling that the bank should not have authorized the withdrawal of the value
of the deposited check prior to its clearing.
Respondent Tan is a businessman and a regular depositor-creditor of the petitioner,
Associated Bank. Sometime in September 1990, he deposited a post-dated check with the
petitioner in the amount of P101,000 issued to him by a certain Willy Cheng from Tarlac. The
check was duly entered in his bank record. Allegedly, upon advice and instruction of petitioner
that theP101,000 check was already cleared and backed up by sufficient funds, respondent, on
the same date, withdrew the sum of P240,000 from his account leaving a balance of P57,793.45.
A day after, TAN deposited the amount of P50,000 making his existing balance in the amount of
P107,793.45, because he has issued several checks to his business partners. However, his
suppliers and business partners went back to him alleging that the checks he issued bounced for
insufficiency of funds. Thereafter, respondent informed petitioner to take positive steps
regarding the matter for he has adequate and sufficient funds to pay the amount of the subject
checks. Nonetheless, petitioner did not bother nor offer any apology regarding the incident.
Respondent Tan filed a Complaint for Damages on December 19, 1990, with the RTC
against petitioner. The trial court rendered a decision in favor of respondent and ordered
petitioner to pay damages and attorney’s fees. Appellate court affirmed the lower court’s
decision. Hence, petitioner filed a Petition for Review before the Supreme Court.
ISSUE:
W/N petitioner has the right to debit the amount of the dishonored check from the
account of respondent on the ground that the check was withdrawn by respondent prior to its
clearing.
HELD:
The Petition has no merit. The real issue here is not so much the right of petitioner to
debit respondent’s account but, rather, the manner in which it exercised such right. Banks are
granted by law the right to debit the value of a dishonored check from a depositor’s account but
they must do so with the highest degree of care, so as not to prejudice the depositor unduly. The
degree of diligence required of banks is more than that of a good father of a family where the
fiduciary nature of their relationship with their depositors is concerned. In this case, petitioner
did not treat respondent’s account with the highest degree of care. Respondent withdrew his
money upon the advice of petitioner that his money was already cleared. It is petitioner’s
premature authorization of the withdrawal that caused the respondent’s account balance to fall to
insufficient levels, and the subsequent dishonor of his own checks for lack of funds.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
I. SHORT TITLE: 17 PRUDENTIAL BANK vs LIM
II. FULL TITLE: PRUDENTIAL BANK versus Chairman, AUSTRIA-MARTINEZ

,CALLEJO, SR.,TINGA, and CHICO-NAZARIO, JJ. CHONNEY LIM, G.R. No.
136371, November 11, 2005
III. TOPIC: Negligence of banks; Damages
Chonney Lim, a businessman in Baguio City, maintained two (2) accounts with Prudential Bank
namely: Savings Account No. 11264 and Checking Account No. 1262. He availed of the banks
automatic transfer system wherein the funds from his savings account could be transferred to his
checking account in case the balance of the latter account was insufficient to cover the checks he
issued.

On 14 March 1988, respondent deposited the amount of P34,000.00 with his savings account.
According to respondent, the following day, 15 March 1988, he deposited an equal amount with
the same savings account.
On 24 May 1988, respondent issued a check against his current account in favor of the
Paluwagan ng Bayan Savings Bank in the sum of P2,830.00 in payment of his loan with the said
bank. On 25 May 1988, respondent drew another check against his checking account to the order
of Teodulo Crisologo in the amount of P10,000.00 as payment for a business transaction with the
latter.

Prudential bank, however, dishonored both checks, claiming that respondent did not have
sufficient funds in his account with the bank. Upon learning that the first check paid to
Paluwagan had been dishonored, respondent wrote a letter to the bank on 27 May 1988, asking it
to recheck its records. On 30 May 1988, the bank manager, Opiniano sent a reply letter offering,
as an excuse for the dishonor of said check, the inadvertent earlier posting to respondents
account of a postdated check. While Opiniano apologized for respondents inconvenience, he
made no commitment to honor this first check.

When the second dishonored check came to Lim’s knowledge, he immediately wrote a letter to
the bank, protesting the dishonor of the check. Opiniano sent a reply stating that as per records, a
deposit slip dated 15 March 1988 for P34,000.00 was received for deposit to Savings Account
No. 11264 on 14 March 1988.

Respondent denied having made only one deposit, insisting that he made two deposits
of P34,000.00 each, one on 14 March and the other on 15 March. As proof, respondent presented
the two separate deposit slips covering the transactions, the first bearing the date 14 March 1988
while the second, the date 15 March 1988.

After the bank had conducted a thorough investigation, on 10 June 1988, Opiniano informed Lim
that two deposits were made on 14 March 1988, one for P34,000.00 and the other for P1,000.00;
and that two other deposits were made on 15 March 1988: P4,900.00 and P2,900.00. He
maintained that although the deposit slip bearing the amount of P34,000.00 is dated 15 March
1988, it was actually received the day before or on 14 March 1988. Thus, the bank’s position is
that only one deposit of P34,000.00 was made by respondent on 14 and 15 March 1988.
Lim filed before the RTC, Baguio City for the recovery of P34,000.00 representing his actual
deposit and P300.00 as penalty charge, plus damages.
On 27 August 1991, the RTC rendered its Decision holding that respondent made two
deposits of P34,000.00 apiece. Thus, the RTC ordered the bank to pay the following
amounts: P34,000, representing the unposted deposit, with legal interest; P600.00, representing
the service charges unjustifiably imposed on respondent, with legal interest; P50,000.00 as moral
damages; P25,000.00 as exemplary damages; and P10,000.00 as attorney’s fees, plus costs of
suit.

On appeal, the Court of Appeals affirmed the decision of the trial court with modification as to
the award of moral damages, reducing it to P10,000.00. The testimony of the bank teller, coupled
with the fact that the two deposit slips listed different denominations of money
totaling P34,000.00 per deposit slip, led the appellate court to conclude that there were indeed
two deposits of P34,000.00 each, one made on 14 March and the other on 15 March 1988.
This treats of the petition for review on certiorari of the Decision of the Court of
Appeals, dated 31 July 1998, which affirmed with slight modification the Decision of the
Regional Trial Court, granting the action filed by respondent for recovery of sum of money
and damages.
VI. ISSUE:
WHETHER OR NOT the award of damages by the appellate court is groundless that
consequently, the assailed decision is not in accord with law and jurisprudence.
VII. RULING:
We find no justification to deviate from the factual findings of the trial court and the
appellate court. The bank has utterly failed to convince us that the assailed findings are
devoid of basis or are not supported by substantial evidence. An examination of the deposit
slips dated 14 March and 15 March 1988 reveals that while the slips each cover deposits in
the amount of P34,000.00, they list down different denominations however. Evidently, the
slips were not prepared simultaneously or concurrently. This fact militates against the banks
claim that one deposit slip is simply the duplicate of the other. The bank insists that the court
misappreciated the import of the letter of Opiniano dated 10 June 1988. As we have earlier
intimated, appreciation of evidence is the domain of the lower courts. From another
perspective, the negligence of the bank constitutes a breach of duty to its client. It is worthy
of note that the banking industry is impressed with public interest. As such, it must observe a
high degree of diligence and observe lofty standards of integrity and performance. By the
nature of its functions, a bank is under obligation to treat the accounts of its depositors with
meticulous care and always to have in mind the fiduciary nature of its relationship with them.

With the attending factual milieu, the imposition of damages on the errant bank is in
order.
The concept of moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Although incapable of pecuniary computation, moral damages may be recovered if they
are the proximate result of the defendant's wrongful act or omission.

Needless to say, the banks wrongful act caused injury to respondent. Credit is very
important to businessmen, and its loss or impairment needs to be recognized and compensated.
Furthermore, we sustain the award of exemplary damages. Such damages are imposed by way of
example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages. The business of a bank is affected with public interest; thus, it makes a
sworn profession of diligence and meticulousness in giving irreproachable service. For this
reason, the bank should guard against injury attributable to negligence or bad faith on its part.
The banking sector must at all times maintain a high level of meticulousness. In view of the
banks negligence to record the deposit, the grant of exemplary damages is thus justified.
VIII. FALLO: WHEREFORE, the petition is DENIED. The Decision of the RTC dated 27
August 1991 in Civil Case No. 1467-R is AFFIRMED IN FULL. Costs against
petitioner. SO ORDERED.
MAPALAD JULIANNE MARIE M. #18
I. SHORT TILE: CADIZ VS COURT OF APPEALS
II: FULL TITLE: ROMEO CADIZ, CARLITO. BONGKINGKI, PRISCO GLORIA IV

VS COURT APPEALS, ET. AL G.R. NO. 153784
OCTOBER 25, 2005
III: TOPIC: GENERAL BANKING LAW OF 2000- RE: NEGLIGENCE/ LAXITIES

OF THE BANK WHICH GAVE WAY TO THE FRAUDELNT
ACTS OF ITS EMPLOYEES.
IV: STATEMENT OF FACTS:

Petitioners Cadiz, Bongkingki and Gloria were employed as signature verifier, book
keeper and foreign currency denomination clerk/ book keeper- reliever, respectively in the main
office of the Philippine Commercial National Bank (PCIB for brevity) filed an illegal dismissal
against the latter bank.
The controversy arose from a complaint filed by one Rosalina B. Alqueza with the PCIB
stating among others the non receipt of s six hundred dollar demand draft drawn against it and
which was purchased by her husband from Hongkong and Shanghai Banking Coporation. Upon
verification the demand draft was found to be deposited on 10 June 1988 with FCDU Savings
Account N. 1083-4, an account under the name of one Sonia Alfiscar, together with four (4)
checks. The same was made to appear as only one deposit covered HSBC Check No. 979120 for
US$ 1,232.00).
By virtue of the said findings, bank manager Sandig conducted a series of meeting with
herein petitioners and they verbally admitted their participation in a scheme to divert funds
intended for other accounts under the savings account of Alfiscar. Cadiz also confirmed having
paid Alqueza the peso equivalent of the demand draft, but insisted that receipt be issued in
Alfiscar’s name instead.
A special audit was likewise conducted and was further found out that as early as July
1987, Cadiz had reserved savings account in the name of Sonia Alfiscar. I was opened on 27
November 1987 and was closed on 23 June 1988. Petitioners surreptitiously diverted funds
deposited by depositors to S/A 1083- 4.The same yielded finding of miscoded checks, forged
signature, non validation of deposit slips by teller, wrongful deposit accounts, deposits slips
which do not bear required approval of the officers of the bank and withdrawals made on the day
of deposit or on the following day.
Hence, show cause memoranda were served to the petitioners requiring them to explain
within 72 hours. The petitioners submitted their written explanation thereto but the bank
remained unsatisfied, hence, they were dismissed from employment for Violation of Article III
Section 1 B-2 and Article III Sec- 1C of the Code of Discipline. Thereafter, petitioners an illegal
dismissal case before the labor arbiter.
V: STATE OF THE CASE:
The labor arbiter ruled in favor of the petitioners and adjudged that they were illegally
dismissed. It ordered for their reinstatement and payment of full backwages The said finding of
the LA was based on the notice of dismissals which was found by the labor arbiter to be couched
on general terms without explaining the rules that petitioners violated. The labor arbiter further
concluded that that the fraudulent acts of the petitioners was mere procedural inadequacies with
fault attributable to the bank for its laxity.
On appeal the Decision rendered by the labor arbiter was reversed by the NIRC on the
ground that petitioners were dismissed with just cause. Upon elevation of the case to the Court of
Appeals, the latter affirmed the findings of NIRC.
Hence, this Petition for Review on Certiorari.
VI: ISSUES:
A. Whether or not petitioners were validly dismissed based on just cause and with
sufficient notice?
B. Whether or not the acts of the petitioners were mere procedural in inadequacies
attributable for the bank for its laxity and negligence, hence, depriving them of their right
terminate their employees who acted fraudulently?
HELD:
On the first issue, the Supreme Court held that respondent bank complied with the two
notice rule. Petitioners were given all avenues to present their side and disprove the allegation of
the banks. Meetings with them were conducted and a special audit investigation was made.
Thereafter, a show cause memorandum was given to them to explain their side which constituted
the first notice. The replies submitted by the petitioners relative thereto very well complied with
the requirement for hearing, by which petitioners were given afforded opportunity to defend
themselves. The second notice came in the form of memoranda, informing them of their
dismissal from service. From the foregoing it is clear that the required procedural process for
termination were complied with.
The petitioners were dismissed based on loss of trust and confidence which is one of the
just causes for termination of employment. Utmost trust and confidence are deemed to have been
reposed on petitioners by virtue of the nature of their work.
Petitioners contended that the ground of loss of trust and confidence for dismissal is not
evident from the acts of the respondent bank as they were not placed under preventive
suspension and even promoted them after the order of the labor arbiter of reinstatement. The
court explained that preventive suspension which is never obligatory upon the employer may be
resorted to only when continued employment of employee poses a serious and imminent threat
to the life and property of the employer and his co-workers. The same is absent in the case as the
account of Alfiscar where the anomalous transactions were coursed was no longer active when
the fraud was discovered. The promotion made was by virtue of the decision of the Labor Arbiter
and was not voluntary on the part of the bank.
On the second issue, the Supreme Court explained that even assuming that the observed
the less than ideal controls over the security of its operations, such laxity does not serve as a
carte blanche signal for the bank employees to take advantage of safeguard and control lapses
and perpetuate chicanery on their employers. Employees who abuse their position fiduciary gain
cannot be shielded from the consequences of their wrongdoing even on account of bank
operational laxities. Their misconduct provides the bank with cause for termination of their
employement.
Also it cannot be gainsaid that banks is enshrined its fiduciary nature under the General
Banking law of 2000. Fiduciary nature of banking requires high standard of integrity and
performance. Banks must not only exercise high standards of integrity and performance, it must
also ensure that its employees do likewise because it the only way to ensure that bank will
comply with its fiduciary duties.
DISPOSITIVE:
Wherefore, Petition is hereby denied and assailed decision f the Court of Appeals is
affirmed. Cost against the petitioners.
I. SHORT TITLE: 19 CITYTRUST VS. CARLOS CRUZ
II. FULL TITLE: CITYTRUST BANKING CORPORATION (now Bank of the Philippine
Islands), vs. CARLOS ROMULO N. CRUZ, G G.R. No. 157049. August 11, 2010,
SANDOVAL- BERSAMIN, J.:
III. TOPIC: GENERAL BANKING LAWS – EXTRAORDINARY DILIGENCE

The respondent, an architect and businessman, maintained savings and checking accounts
at the petitioner’s Loyola Heights Branch. The savings account was considered closed due to the
oversight committed by one of the latter’s tellers. The closure resulted in the extreme
embarrassment of the respondent, for checks that he had issued could not be honored although
his savings account was sufficiently funded and that when current accounts were maintained at
zero balance the funds from the savings account were automatically transferred to the current
account to cover checks issued by the depositor.

The respondent sued in the RTC to claim damages from the petitioner. After trial, the
RTC ruled in the respondent’s favor, and ordered the petitioner to pay him P100,000.00 as moral
damages, P20,000.00 as exemplary damage, and P20,0000.00 as attorney’s fees. The petitioner
appealed to the Court of Appeals (CA), arguing that the RTC erred in ordering it to pay moral
and exemplary damages. However, the CA affirmed the RTC, explaining that the erroneous
closure of the respondent’s account would not have been committed in the first place if the
petitioner had not been careless in supervising its employees.
VI. ISSUE:
Whether the client can validly claim moral damages against the bank?
VII. RULING:
The petitioner, being a banking institution, had the direct obligation to supervise very
closely the employees handling its depositors’ accounts, and should always be mindful of the
fiduciary nature of its relationship with the depositors. Such relationship required it and its
employees to record accurately every single transaction, and as promptly as possible, considering
that the depositors’ accounts should always reflect the amounts of money the depositors could
dispose of as they saw fit, confident that, as a bank, it would deliver the amounts to whomever
they directed. If it fell short of that obligation, it should bear the responsibility for the conse-
quences to the depositors, who, like the respondent, suffered particular embarrassment and
disturbed peace of mind from the negligence in the handling of the accounts. It is never
overemphasized that the public always relies on a bank’s profession of diligence and
meticulousness in rendering irreproachable service.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision
rendered on October 8, 2002 by the Court of Appeals. Costs of suit to be paid by the petitioner.
I. SHORT TITLE: 20 METROBANK vs CUSTODIO
II. FULL TITLE: METROPOLITAN BANK AND TRUST

COMPANY, Petitioner, vs. MARINA B. CUSTODIO, Respondent. G.R. No.
173780 March 21, 2011
III. TOPIC: Required degree of diligence of banks.

IV. STATEMENT OF FACTS: On 13 June 1995 at 8:18 a.m., respondent
Custodio reported for work in petitioner bank’s branch in Laoag City. At the
start of the banking day, respondent Custodio received loose money (picos) for
the day’s business and was assigned as Teller No. 3. In the course of
performing her duties, respondent Custodio handled several cash transactions
with the customers on behalf of petitioner bank.
At 12:10 p.m., a cash transfer of two hundred thousand pesos (PhP200,000) was made from
Teller No. 1 to respondent Custodio.Petitioner Metrobank explained that, usually, a transfer of
money from one teller to another occurs if the latter "needs money, maybe to pay for the
withdrawal." However, petitioner bank pointed out that it was unnecessary for respondent
Custodio to borrow from another teller at that time, since respondent had sufficient cash on hand
to cover a withdrawal in the same amount as the cash transfer.
At 12:25 p.m., respondent Custodio was reported to have taken her lunch break alone and
returned to work thereafter at 1:12 p.m.
The security guard for the Laoag City branch of petitioner Metrobank, Mr. Hannibal Jara,
testified that respondent Custodio would ordinarily go out for lunch at noon with another teller,
Ms. Mary Paula Castro. However, he explained that the two employees did not go out for lunch
together that day, since another teller was on leave. Mr. Jara also noticed that when respondent
Custodio went out for lunch, she was carrying a shoulder bag and a paper bag. He, however, did
not check the contents of the bags carried by respondent.
At the close of banking hours, respondent Custodio balanced her transactions for the day and
turned over the funds to the bank’s cash custodian, Ms. Marinel Castro, in the amount of two
million one hundred thirteen thousand five hundred pesos (PhP2,113,500). Ms. Marinel Castro
acknowledged receipt of the bundled cash turned over and signed a Cash Transfer Slip.
Around 5:05 p.m., after all tellers had turned over their cash on hand, Ms. Castro discovered that
there was a shortage amounting to PhP600,000. She notified Mr. Adriano Lucas, the branch
manager, of the missing money. The latter then instructed the cashier and the accountant to
review all cash transactions to find out the reason for the cash shortage. However, no errors were
found in the records of the transactions, and the shortage was confirmed.
Thereafter, Mr. Lucas instructed all bank employees to check all desks, drawers and even
personal bags. The guards were likewise instructed to search anybody going out of the office
from that time on. However, the missing money was not found. Thus, the amount "CASH IN
VAULT" was reported to be short of PhP600,000.
Later on, petitioner Metrobank alleged that it was able to recover eight bill wrappers only for
bundles of five-hundred-peso bills (without the bills thereunder) that purportedly corresponded
to the missing four hundred thousand pesos (PhP400,000). These bill wrappers bore a rubber
stamp "PEPT-3" for Teller No. 3. Respondent Custodio countered that the discovery of the bill
wrappers being attributed to her care was never mentioned at the time the cash shortage
occurred, and that these wrappers could have been obtained subsequently by stamping unmarked
ones.
Respondent Custodio was allowed to continue to render services as a teller in petitioner bank’s
Laoag City branch from 14 June 1995 to 23 June 1995.She argued that had she been found
responsible for the cash shortage, then she would not have been allowed to continue working as a
teller on subsequent days.
On 22 June 1995, petitioner Metrobank filed a Complaint for a sum of money with ex-parte
application for a writ of preliminary attachment, praying that respondent Custodio pay the
amount of PhP600,000, including attorney’s fees and costs of suit. The trial court subsequently
granted the application for a writ of preliminary attachment against the properties of respondent
Custodio.
On 27 June 1995, respondent Custodio requested from petitioner Metrobank a copy of the Cash
Transfer Slip that was signed by the cash custodian, Ms. Castro. In reply, Mr. Lucas notified
respondent that her request would be sent to the Head Office of petitioner Metrobank for
approval. This request was, however, not acted upon by petitioner. Despite respondent’s motion
to have the Cash Transfer Slip produced in the trial proceedings and the manifestation of
petitioner Metrobank’s counsel that it would present the slip, the document was not entered into
the records.
On 06 July 1995, respondent Custodio filed an Answer with Compulsory Counterclaim, denying
the allegations of petitioner Metrobank that she was responsible for the cash
shortage. Respondent argued that Ms. Castro, not she, was the one who incurred the cash
shortage, since the loss was discovered only after the cash and other accountabilities were turned
over to her, as cash custodian.
After the case was submitted for decision,the trial court rendered its Decision granting petitioner
Metrobank’s Complaint and ordering respondent Custodio to pay the amount of six hundred
thousand pesos (PhP600,000) plus interest.
On 06 August 2003, respondent teller subsequently filed a Notice of Appeal.
On 16 July 2006, the Court of Appeals found respondent Custodio’s appeal meritorious and
reversed the trial court’s Decision:
WHEREFORE, the appeal being meritorious, the assailed decision dated July 25, 2003 of the
RTC, Branch 11, Laoag City, in Civil Case No. 10814 is REVERSED and SET ASIDE.
Consequently, the plaintiff-appellee’s complaint against defendant-appellant is DISMISSED.
Hence this petition for review by Metrobank.
V. STATEMENT OF THE CASE: This civil case is essentially a demand by a

bank for the recovery of a sum of money from one of its tellers who allegedly
failed to account for funds entrusted to her, amounting to six hundred
thousand pesos (PhP600,000) via petition for review.
VI. ISSUE: WHETHER OR NOT there is a preponderance of evidence to

establish that respondent Custodio incurred a cash shortage of PhP600,000 at
the close of the banking day on 13 June 1995 and is therefore liable to pay
petitioner Metrobank the said amount.
VII. RULING: In civil cases such as in the instant action for a sum of money,
petitioner Metrobank carries the burden of proof and must establish its cause
of action by a preponderance of evidence. The concept of preponderance of
evidence refers to evidence that is of greater weight or more convincing, than
that which is offered in opposition to it; at bottom, it means probability of
truth.
The Court sustains the appellate court’s finding that petitioner Metrobank failed to discharge its
burden of proving that respondent Custodio was responsible for the cash shortage. Petitioner
Metrobank’s evidence on record does not sufficiently establish that respondent Custodio took the
funds that were entrusted to her as a bank teller.
The issue of respondent Custodio’s civil liability for the cash shortage turns on whether she is the
proximate or direct cause of the loss. There is nothing on record that will show that there were
any missing bundles of one-thousand-peso and five-hundred-peso bills when respondent
Custodio turned over the funds to the cash custodian, Ms. Marinel Castro. As the appellate court
correctly found, the Cash Transfer Slip was the best evidence that respondent Custodio had
properly turned over the amounts in her care, and that the cash custodian received them without
any shortage.
As the Court of Appeals correctly surmised, Ms. Castro’s procedural lapse in trusting her co-
employees by automatically signing the cash transfer slip without ensuring its correctness
contributed significantly to the loss of the bank’s money. The proper accounting of funds
through the cash transfer slip was precisely instituted as a safety mechanism to trace the flow of
money from one employee to another. Specifically, the cash transfer slip was meant to ensure
that the tellers had properly counted the money that they turned over to the cash custodian. If Ms.
Castro, as cash custodian, had not been remiss in her responsibilities, petitioner Metrobank
would have been able to identify who among the tellers failed to turn over the proper amount as
reflected in the Cash Transfer Slip. The cash custodian is not to be admonished for reposing her
trust in her co-employees; nonetheless, she was negligent, insofar as ignoring established bank
procedures meant to prevent loss, especially when one of her co-employees had broken that trust.
The Court of Appeals underscored the "highest degree of diligence" from the banking business,
considering that it is impressed with public interest and of paramount importance. However, as
petitioner Metrobank pointed out, the exacting standard of diligence required by the appellate
court pertains to the relationship between a bank and a depositor, and not between a bank and its
employees. In this case, no depositors were affected, as the transactions during that day were
accounted for, and no error was found in the recording thereof. The relevant standard of
diligence that we need to examine here is that of a bank teller who was entrusted monies by the
bank and who may have failed to account for them. In this case, petitioner Metrobank was unable
to prove that respondent Custodio failed to exercise the necessary degree of diligence that would
justify the bank’s action for damages. Respondent Custodio was not remiss in her duties as all
her dealings with the bank’s money were clearly reflected on the records of the bank.
If petitioner bank had to attribute any negligence on the part of its employees, then it should have
set its sights on the acts and/or omissions of Ms. Marinel Castro, the cash Custodian, and Mr.
Hanibal Jara, the security guard. If theft of the money cannot be established, and negligence is
the only legal phenomenon that is evident on the records, then the proximate cause of the loss of
the bank’s PhP600,000 is Ms. Castro, who, as cash custodian, disregarded established procedures
and blindly signed the teller’s cash transfer slips without counting the money turned over to her.
Meanwhile, Mr. Jara failed to inspect respondent Custodio’s belongings as she left the bank on
that day for lunch. Despite his own suspicions of respondent teller’s conduct, he ignored them
and decided not to check the bags. This omission can conceivably be considered as a grave
omission of his duties as a security guard.
Verily, it is highly doubtful that Ms. Castro and Mr. Jara had performed the necessary care and
caution required of bank employees in this instance, which directly contributed to the loss of
PhP600,000 for petitioner Metrobank.
Considering the failure of the cash custodian and the security guard to abide by the procedural
safeguards, petitioner bank is now left to find other evidence to determine the person liable for
the cash shortage. The Court, however, is not sufficiently convinced that petitioner Metrobank
has introduced a preponderance of circumstantial evidence to show that respondent Custodio was
liable for the missing bundles of cash worth PhP600,000.
Regrettably, the evidence offered by petitioner Metrobank is insufficient to convince to the Court
that the probability of respondent Custodio’s having taken the money is greater than its having
been taken by another employee. Verily, weighing the evidence on record, the Court finds that
petitioner Metrobank failed in its burden of proving by a preponderance of evidence that
respondent Custodio took PhP600,000 from petitioner Metrobank and is liable to return the
amount to the latter.
VIII. FALLO: In view of the foregoing, the Court DENIES the instant Petition for
Review filed by Metropolitan Bank and Trust Company. The Court of
Appeals’ 14 July 2006 Decision, which dismissed the complaint against
respondent Marina Custodio, is hereby AFFIRMED. SO ORDERED.
I. SHORT TITLE: 21 BPI EMPLOYEES UNION- DAVAO CITY V. BPI

II. FULL TITLE: BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEUDAVAO
CITY-FUBU), petitioner, vs. BANK OF THE PHILIPPINE ISLANDS (BPI), and
BPI OFFICERS CLARO M. REYES, CECIL CONANAN and GEMMA VELEZ,
respondents.
III. TOPIC: The competence in determining which banking functions may or may not be
outsourced lies with the BSP.
BPI Operations Management Corporation (BOMC), which was created pursuant

to Central Bank Circular No. 1388, Series of 1993 (CBP Circular No. 1388, 1993),
and primarily engaged in providing and/or handling support services for banks and
other financial institutions, is a subsidiary of the Bank of Philippine Islands (BPI)
operating and functioning as an entirely separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPIs
Metro Manila branches. In this agreement, BOMC undertook to provide services such
as check clearing, delivery of bank statements, fund transfers, card production,
operations accounting and control, and cash servicing, conformably with BSP
Circular No. 1388. Not a single BPI employee was displaced and those performing
the functions, which were transferred to BOMC, were given other assignments.
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then

filed a complaint for unfair labor practice (ULP). The Labor Arbiter (LA) decided the
case in favor of the union. The decision was, however, reversed on appeal by the
NLRC. BPIEU-Metro Manila-FUBU filed a petition for certiorari before the CA
which denied it, holding that BPI transferred the employees in the affected
departments in the pursuit of its legitimate business.
The service agreement was likewise implemented in Davao City. Later, a merger
between BPI and Far East Bank and Trust Company (FEBTC) took effect on April
10, 2000 with BPI as the surviving corporation. Thereafter, BPIs cashiering function
and FEBTCs cashiering, distribution and bookkeeping functions were handled by
BOMC. Consequently, twelve (12) former FEBTC employees were transferred to
BOMC to complete the latters service complement.
BPI Davaos rank and file collective bargaining agent, BPI Employees Union-Davao
City-FUBU (Union), objected to the transfer of the functions and the twelve (12)
personnel to BOMC contending that the functions rightfully belonged to the BPI
employees and that the Union was deprived of membership of former FEBTC
personnel who, by virtue of the merger, would have formed part of the bargaining
unit represented by the Union pursuant to its union shop provision in the CBA.
Before the Court is a petition for review on certiorariunder Rule 45 of the 1997 Rules of
Civil Procedure, assailing the April 5, 2006 Decision 1 and August 17, 2006 Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 74595 affirming the December 21, 2001 3 and August
23, 20024 Resolutions of the National Labor Relations Commission (NLRC) in declaring as valid
and legal the action of respondent Bank of the Philippine Islands-Davao City (BPI-Davao) in
contracting out certain functions to BPI Operations Management Corporation (BOMC).
VI. ISSUE:
Whether or not the act of BPI to outsource the cashiering, distribution and
bookkeeping functions to BOMC is in conformity with the law and the existing
Central Bank Act.
VII. RULING:
In the present case, the alleged violation of the union shop agreement in the CBA, even
assuming it was malicious and flagrant, is not a violation of an economic provision in the
agreement. The provisions relied upon by the Union were those articles referring to the
recognition of the union as the sole and exclusive bargaining representative of all rank-and-file
employees, as well as the articles on union security, specifically, the maintenance of membership
in good standing as a condition for continued employment and the union shop clause. It failed to
take into consideration its recognition of the banks exclusive rights and prerogatives, likewise
provided in the CBA, which included the hiring of employees, promotion, transfers, and
dismissals for just cause and the maintenance of order, discipline and efficiency in its operations.
The Union, however, insists that jobs being outsourced to BOMC were included in the existing
bargaining unit, thus, resulting in a reduction of a number of positions in such unit. The
reduction interfered with the employees right to self-organization because the power of a union
primarily depends on its strength in number.
It is incomprehensible how the "reduction of positions in the collective bargaining unit"

interferes with the employees right to self-organization because the employees themselves were
neither transferred nor dismissed from the service. In the case at hand, the union has not
presented even an iota of evidence that petitioner bank has started to terminate certain
employees, members of the union. In fact, what appears is that the Bank has exerted utmost
diligence, care and effort to see to it that no union member has been terminated. In the process of
the consolidation or merger of the two banks which resulted in increased diversification of
functions, some of these non-banking functions were merely transferred to the BOMC without
affecting the union membership.
It is to be emphasized that contracting out of services is not illegal per se. It is an exercise of
business judgment or management prerogative. Absent proof that the management acted in a
malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an
employer. In this case, bad faith cannot be attributed to BPI because its actions were authorized
by CBP Circular No. 1388, Series of 1993 issued by the Monetary Board of the then Central
Bank of the Philippines (now Bangko Sentral ng Pilipinas). The circular covered amendments in
Book I of the Manual of Regulations for Banks and Other Financial Intermediaries, particularly
on the matter of bank service contracts. A finding of ULP necessarily requires the alleging party
to prove it with substantial evidence. Unfortunately, the Union failed to discharge this burden.
Much has been said about the applicability of D.O. No. 10. Both the NLRC and the CA
agreed with BPI that the said order does not apply. With BPI, as a commercial bank, its
transactions are subject to the rules and regulations of the governing agency which is the Bangko
Sentral ng Pilipinas. The Union insists that D.O. No. 10 should prevail.
The Court is of the view, however, that there is no conflict between D.O. No. 10 and CBP
Circular No. 1388. In fact, they complement each other. Consistent with the maxim, interpretare
et concordare leges legibus est optimus interpretandi modus, a statute should be construed not
only to be consistent with itself but also to harmonize with other laws on the same subject matter,
as to form a complete, coherent and intelligible system of jurisprudence. The seemingly
conflicting provisions of a law or of two laws must be harmonized to render each effective. It is
only when harmonization is impossible that resort must be made to choosing which law to apply.
In the case at bench, the Union submits that while the Central Bank regulates banking, the
Labor Code and its implementing rules regulate the employment relationship. To this, the Court
agrees. The fact that banks are of a specialized industry must, however, be taken into account.
The competence in determining which banking functions may or may not be outsourced lies with
the BSP. This does not mean that banks can simply outsource banking functions allowed by the
BSP through its circulars, without giving regard to the guidelines set forth under D.O. No. 10
issued by the DOLE.
While D.O. No. 10, Series of 1997, enumerates the permissible contracting or subcontracting
activities, it is to be observed that, particularly in Sec. 6(d) invoked by the Union, the provision
is general in character — “x x x Works or services not directly related or not integral to the
main business or operation of the principal… x x x.” This does not limit or prohibit the
appropriate government agency, such as the BSP, to issue rules, regulations or circulars to
further and specifically determine the permissible services to be contracted out. CBP Circular
No. 1388 enumerated functions which are ancillary to the business of banks, hence, allowed to
be outsourced. Thus, sanctioned by said circular, BPI outsourced the cashiering (i.e., cash-
delivery and deposit pick-up) and accounting requirements of its Davao City branches.
The Court agrees with BPI that D.O. No. 10 is but a guide to determine what functions may
be contracted out, subject to the rules and established jurisprudence on legitimate job contracting
and prohibited labor-only contracting. Even if the Court considers D.O. No. 10 only, BPI would
still be within the bounds of D.O. No. 10 when it contracted out the subject functions. This is
because the subject functions were not related or not integral to the main business or operation of
the principal which is the lending of funds obtained in the form of deposits. From the very
definition of “banks” as provided under the General Banking Law, it can easily be discerned that
banks perform only two (2) main or basic functions ― deposit and loan functions. Thus,
cashiering, distribution and bookkeeping are but ancillary functions whose outsourcing is
sanctioned under CBP Circular No. 1388 as well as D.O. No. 10.
VIII. FALLO: WHEREFORE, the petition is DENIED.
22 G.R. No. 170574 January 30, 2009

PHILIPPINE BANKING CORPORATION (NOW: GLOBAL BUSINESS BANK, INC.),
Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
Topic: Certificate of deposit
Statement of FACTS:
Petitioner is a domestic corporation duly licensed as a banking institution. For the taxable years
1996 and 1997, petitioner offered its Special/Super Savings Deposit Account (SSDA) to its
depositors. On 10 January 2000, the Commissioner of Internal Revenue (respondent) sent
petitioner a Final Assessment Notice assessing deficiency DST based on the outstanding
balances of its SSDA, including increments, in the total sum of P17,595,488.75 for 1996 and
P47,767,756.24 for 1997.
Petitioner claims that the SSDA is in the nature of a regular savings account. Petitioner maintains
that the tax assessments are erroneous because Section 180 of the 1977 NIRC does not include
deposits evidenced by a passbook among the enumeration of instruments subject to DST.
Petitioner also argues that even on the assumption that a passbook evidencing the SSDA is a
certificate of deposit, no DST will be imposed because only negotiable certificates of deposits
are subject to tax under Section 180 of the 1977 NIRC.
Respondent avers that under Section 180 of the 1977 NIRC, certificates of deposits deriving
interest are subject to the payment of DST. Petitioner’s passbook evidencing its SSDA is
considered a certificate of deposit, and being very similar to a time deposit account, it should be
subject to the payment of DST. Respondent further argues that Section 180 of the 1977 NIRC
categorically states that certificates of deposit deriving interest are subject to DST without
limiting the enumeration to negotiable certificates of deposit.
The CTA enbanc held that a passbook representing an interest-earning deposit account issued by
a bank qualifies as a certificate of deposit drawing interest affirming the Decision and Resolution
of the CTA's Second Division
On 14 December 2005, petitioner appealed to this Court the CTA decision.

ISSUE:
Whether petitioner’s product called Special/Super Savings Account is subject to DST under
Section 180 of the 1977 NIRC.
RULING:
Yes. Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property
incident thereto. A DST is actually an excise tax because it is imposed on the transaction rather
than on the document. A DST is also levied on the exercise by persons of certain privileges
conferred by law for the creation, revision, or termination of specific legal relationships through
the execution of specific instruments. Hence, in imposing the DST, the Court considers not only
the document but also the nature and character of the transaction.
Section 180 of the 1977 NIRC imposes a DST of P0.30 on each P200 of the face value of any
certificate of deposit drawing interest. As correctly observed by the CTA, a certificate of deposit
is a written acknowledgment by a bank of the receipt of a sum of money on deposit which the
bank promises to pay to the depositor, to the order of the depositor, or to some other person or
his order, whereby the relation of debtor or creditor between the bank and the depositor is
created.
Petitioner’s SSDA has the following features:
1. Although the money placed in the SSDA can be withdrawn anytime, the money is subject to a
holding period in order to earn a higher interest rate. Otherwise, in case of premature withdrawal,
the depositor will not earn the preferred interest ranging from 8% or higher but only the normal
interest rate on regular savings deposit.
2. In order to qualify for an SSDA, the depositor must place a substantial amount of money of
not less than P50,000. This amount is even larger than what is needed to open a time deposit
which is P20,000. Aside from the substantial amount of money required, this amount must be
maintained within a certain period just like a time deposit.
3. On the issue of penalty, in an SSDA, if the depositor withdraws the money and the balance
falls below the "minimum balance" of P50,000, the interest is reduced. This condition is identical
to that imposed on a time deposit that is withdrawn before maturity.
Based on these features, it is clear that the SSDA is a certificate of deposit drawing interest
subject to DST even if it is evidenced by a passbook and non-negotiable in character. In
International Exchange Bank v. Commissioner of Internal Revenue, we held that: A document to
be deemed a certificate of deposit requires no specific form as long as there is some written
memorandum that the bank accepted a deposit of a sum of money from a depositor. What is
important and controlling is the nature or meaning conveyed by the passbook and not the
particular label or nomenclature attached to it, inasmuch as substance, not form, is paramount.
TAX AMNESTY:
On 24 May 2007, during the pendency of this case before this Court, RA. 9480 or "An Act
Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid
Internal Revenue Taxes Imposed by the National Government for Taxable Year 2005 and Prior
Years", lapsed into law.
On 21 September 2007, Metrobank, the surviving entity that absorbed petitioner’s banking
business, filed a Tax Amnesty Return, paid the amnesty tax and fully complied with all the
requirements. Petitioner contends that the availment includes all deficiency tax assessments of
the BIR subject of this petition.
The DST is one of the taxes covered by the Tax Amnesty Program under RA 9480. As discussed
above, petitioner is clearly liable to pay the DST on its SSDA for the years 1996 and 1997.
However, petitioner, as the absorbed corporation, can avail of the tax amnesty benefits granted to
Metrobank.
Dispositive Portion: Wherefore, we GRANT the petition, and SET ASIDE the Court of Tax
Appeals’ Decision dated 23 November 2005 in CTA EB No. 63 solely in view of petitioner’s
availment of the Tax Amnesty Program.
23. Manuel Serrano VS Central bank of the Philippines and Overseas Bank of Manila
Statement of Facts: On October 13, 1966 and December 12, 1966 Manuel Serrano made a time
deposit for one year with 6% interest. Concepcion Maneja also made a time deposit of 200
thousand with the same bank with 6 to 12% interest.
On August 31, 1968 Maneja, married to Felixberto Serano, assigned and conveyed her time
deposit of 200 thousand pesos to Manuel Serrano. Manuel tried to encash the same from
December 6, 1967 to March 4, 1968, but not a single time deposit certificate was honored by the
bank.
Serrano filed for mandamus and prohibition with preliminary injunction and seeks solidary
likability of CB and Overseas Bank of Manila for failure of the latter to return the time deposit
assigned to him. Serrano alleged that CB failed to exercise strict supervision over respondent
bank to protect depositors and the general public.
CB admits that it is charged with the duty of administering the banking system and exercises
supervision over all doing business. However it denies that it has to watch every move or activity
of all banks. On March 12, 1965, the bank was only on a limited degree of banking operations
since MB Resolution No. 322 prohibiting the bank from making new loans and investments up to
1968. CB also denied that it is a guarantor of the permanent solvency of any banking institution.
A case was filed by Ramos against the CB for declaring the bank insolvent and liquidating its
assets. Manuel Serrano filed a motion to intervene which was denied by the court as thousands of
other depositors would follow and cause an avalanche of cases in this court.
The Court also held that the MB Resolution prohibiting the bank was annulled and the CB was
directed to comply with obligations under VTA. Serrano filed a motion praying for decision and
the 350 thousand deposit with interest.
Issue: WON the CB has obligation to pay the deposit of a depositor made in an insolvent bank
Ruling: NO. The nature of bank deposits is in the nature of irregular deposits. They are really
loans because they earn interest. The bank was a debtor. Failure of the debtor to honor the time
deposit is failure to pay its obligation as a debtor and not as a breach of trust arising from a
depositary’s failure to return the subject matter of the deposit.
I. SHORT TITLE: 24 SIMEX INTERNATIONAL VS. CA
II. FULL TITLE: SIMEX INTERNATIONAL (MANILA), INCORPORATED, vs. THE

HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, G.R. No. 88013. March
19, 1990, CRUZ, J.:
III. TOPIC: GENERAL BANKING LAWS – MORAL DAMAGES
The petitioner was a depositor of the respondent bank with a checking account in the
amount of P190,380.74. Subsequently, the petitioner issued several checks against its deposit but
was suprised to learn later that they had been dishonored for insufficient funds.
As a consequence, the California Manufacturing Corporation sent a letter of demand to
the petitioner, threatening prosecution if the dishonored check issued to it was not made good. It
also withheld delivery of the order made by the petitioner. Similar letters were sent to the
petitioner by the Malabon Long Life Trading, by the G. and U. Enterprises, also canceling the
petitioner’s credit line and demanded that future payments be made by it in cash or certified
check. Meantime, action on the pending orders of the petitioner with the other suppliers whose
checks were dishonored was also deferred.
The petitioner complained to the respondent bank and the error was rectified but petitioner
demanded reparation for its “gross and wanton negligence.” This demand was not met. The
petitioner then filed a complaint in the then Court of First Instance of Rizal claiming moral
damages in the sum of P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus
25% attorney’s fees, and costs.
After trial, moral and exemplary damages were not called for under the circumstances.
However, observing that the plaintiff’s right had been violated, he ordered the defendant to pay
nominal damages in the amount of P20,000.00 plus P5,000.00 attorney’s fees and costs. This
decision was affirmed in toto by the respondent court holding that proof of bad faith is an
essential ingredient of moral damages.
VI. ISSUE:
Whether the depositors can validly claim nominal damages?
VII. RULING:
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.
In every case, the depositor expects the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred pesos or of millions. The bank must record
every single transaction accurately, down to the last centavo, and as promptly as possible. This
has to be done if the account is to reflect at any given time the amount of money the depositor
can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he
directs. A blunder on the part of the bank, such as the dishonor of a check without good reason,
can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil
and criminal litigation.
Considering all this, we feel that the award of nominal damages in the sum of P20,000.00
was not the proper relief to which the petitioner was entitled. Under Article 2221 of the Civil
Code, “nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.” As we have found that the petitioner
has indeed incurred loss through the fault of the private respondent, the proper remedy is the
award to it of moral damages, which we impose, in our discretion, in the same amount of
P20,000.00
We agree that moral damages are not awarded to penalize the defendant but to
compensate the plaintiff for the injuries he may have suffered. In the case at bar, the petitioner is
seeking such damages for the prejudice sustained by it as a result of the private respondent’s
fault. The respondent court said that the claimed losses are purely speculative and are not
supported by substantial evidence, but it failed to consider that the amount of such losses need
not be established with exactitude, precisely because of their nature. Moral damages are not
susceptible of pecuniary estimation. Article 2216 of the Civil Code specifically provides that “no
proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or
exemplary damages may be adjudicated.” That is why the determination of the amount to be
awarded (except liquidated damages) is left to the sound discretion of the court, according to “the
circumstances of each case.”
ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private

respondent is ordered to pay the petitioner, in lieu of nominal damages, moral damages in the
amount of P20,000.00, and exemplary damages in the amount of P50,000.00 plus the original
award of attorney’s fees in the amount of P5,000.00, and costs.
I. SHORT TITLE: 25 PHILIPPINE BANK OF COMMERCE vs COURT OF APPEALS
II. FULL TITLE: Philippine Bank of Commerce, now absorbed by Philippine Commercial
International Bank, Rogelio Lacson, Digna De Leon, Maria Angelita Pascual, et al., vs ThE
Court of Appeals, Rommel’s Marketing Corp., represented by Romeo Lipana, its President &
General Manager, -GR No. 97626, March 14, 1997, Hermosisima, Jr., J.
III. TOPIC: Banking law– General Banking Law
From May 5, 1975 to July 16, 1976, petitioner Romeo Lipana claims to have entrusted RMC
funds in the form of cash totalling P304,979.74 to his secretary, Irene Yabut, for the purpose of
depositing said funds in the current accounts of RMC with PBC. It turned out, however, that
these deposits, on all occasions, were not credited to RMC's account but were instead deposited
to Account No. 53-01734-7 of Yabut's husband, Bienvenido Cotas who likewise maintains an
account with the same bank. During this period, petitioner bank had, however, been regularly
furnishing private respondent with monthly statements showing its current accounts balances.
Unfortunately, it had never been the practice of Romeo Lipana to check these monthly
statements of account reposing complete trust and confidence on petitioner bank.
Irene Yabut's modus operandi is far from complicated. She would accomplish two (2) copies of
the deposit slip, an original and a duplicate. The original showed the name of her husband as
depositor and his current account number. On the duplicate copy was written the account number
of her husband but the name of the account holder was left blank. PBC's teller, Azucena
Mabayad, would, however, validate and stamp both the original and the duplicate of these
deposit slips retaining only the original copy despite the lack of information on the duplicate slip.
The second copy was kept by Irene Yabut allegedly for record purposes. After validation, Yabut
would then fill up the name of RMC in the space left blank in the duplicate copy and change the
account number written thereon, which is that of her husband's, and make it appear to be RMC's
account number, i.e., C.A. No. 53-01980-3. With the daily remittance records also prepared by
Ms. Yabut and submitted to private respondent RMC together with the validated duplicate slips
with the latter's name and account number, she made her company believe that all the while the
amounts she deposited were being credited to its account when, in truth and in fact, they were
being deposited by her and credited by the petitioner bank in the account of Cotas. This went on
in a span of more than one (1) year without private respondent's knowledge.
Upon discovery of the loss of its funds, RMC demanded from petitioner bank the return of its
money, but as its demand went unheeded, it filed a collection suit before the Regional Trial
Court.
Petitioners submit that the proximate cause of the loss is the negligence of respondent RMC and
Romeo Lipana in entrusting cash to a dishonest employee in the person of Ms. Irene Yabut.5
Private respondent, on the other hand, maintains that the proximate cause of the loss was the
negligent act of the bank, thru its teller Ms. Azucena Mabayad, in validating the deposit slips,
both original and duplicate, presented by Ms. Yabut to Ms. Mabayad, notwithstanding the fact
that one of the deposit slips was not completely accomplished.

Challenged in this petition for review is the Decision dated February 28, 1991 1 rendered
by public respondent Court of Appeals which affirmed the Decision dated November 15, 1985 of
the Regional Trial Court, National Capital Judicial Region, Branch CLX (160), Pasig City, in
Civil Case No. 27288 entitled "Rommel's Marketing Corporation, etc. v. Philippine Bank of
Commerce, now absorbed by Philippine Commercial and Industrial Bank."
The trial court found petitioner bank negligent and ordered the defendant Philippine Bank
of Commerce, now absorbed by defendant Philippine Commercial & Industrial Bank, and
defendant Azucena Mabayad to pay the plaintiff, jointly and severally, and without prejudice to
any criminal action which may be instituted if found warranted.
The Court of Appeals affirmed the decisions of the trial court with modifications.
VI. ISSUE:
1. What is the proximate cause of the loss, to the tune of P304,979.74,
suffered by the private respondent RMC — petitioner bank's negligence or that of private
respondent's?
VII. RULING:
1. Petitioner Bank’s negligence. Under the doctrine of “last clear chance” (also referred to, at
times as “supervening negligence” or as “dis-covered peril”), petitioner bank was indeed the
culpable party. This doctrine, in essence, states that 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. Stated differently, the rule would also mean that an 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 the exercise of due diligence. Here, assuming that private
respondent RMC was negligent in entrusting cash to a dishonest employee, thus providing the
latter with the opportunity to defraud the company, as advanced by the petitioner, yet it cannot be
denied that the petitioner bank, thru its teller, had the last clear opportunity to avert the injury
incurred by its client, simply by faithfully observing their self-imposed validation procedure.
In the case of banks, however, the degree of diligence required is more than that of a good father
of a family. Considering the fiduciary nature of their relationship with their depositors, banks are
duty bound to treat the accounts of their clients with the highest degree of care.
As elucidated in Simex International (Manila), Inc. v. Court of Appeals, in every case, the
depositor expects the bank to treat his account with the utmost fidelity, whether such account
consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done
if the account is to reflect at any given time the amount of money the depositor can dispose as he
sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the
part of the bank, such as the failure to duly credit him his deposits as soon as they are made, can
cause the depositor not a little embarrassment if not financial loss and perhaps even civil and
criminal litigation.
WHEREFORE, the decision of the respondent Court of Appeals is modified by reducing the
amount of actual damages private respondent is entitled to by 40%. Petitioners may recover from
Ms. Azucena Mabayad the amount they would pay the private respondent. Private respondent
shall have recourse against Ms. Irene Yabut. In all other respects, the appellate court's decision is
AFFIRMED.
Proportionate costs.
SO ORDERED.
26 G.R. No. 123498, November 23, 2007
BPI FAMILY BANK VS AMADO FRANCO and COURT OF APPEALS
FACTS
On August 31, 1989, respondent Franco opened 3 accounts with petitioner bank with an
aggregate initial deposit of P2,000,000.00. The amount used to open these accounts came from a
check issued by Tevesteco Arrastre-Stevedoring Co., Inc. In turn, the funding for the
P2,000,000.00 check of Tevesteco was part of the P80,000,000.00 debited by the bank from First
Metro Investment Corp.’s (FMIC) P100Million time deposit and credited to Tevesteco’s account
pursuant to an Authority to Debit FMIC account which was claimed by the latter as having been
forged. Thereafter, several civil and criminal suits were instituted against the bank by FMIC and
by the bank against other individuals and entities which the bank claimed to be part of the multi-
million peso scam one of which is Franco being the recipient of the Tevesteco’s P2Million check.
As a result, the bank garnished the deposits of Franco by the RTC Makati order dated may 1990.
Prior to the knowledge of the garnishment order, Franco issued two checks which were
dishonoured upon presentment for payment as a consequence of the garnishment of his account.
In justifying its dishonour of Franco’s checks, BPI claimed that it had a better right to Franco’s
money as it emanated from Tevesteco’s proceeds of unauthorized credit from FMIC account.
Thus, the bank claims that the legal consequence of FMIC’s forgery claim is that the money
transferred by it to Tevesteco is its own, and considering that it was able to recover possession of
the same when the money was redeposited by Franco, it had the right to set up its ownership
thereon and freeze Franco’s accounts.
ISSUE
Whether or not the bank has a better right to the deposits in Franco’s account.
COURT RULING
No.
Bank’s business is imbued 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. There is no doubt that petitioner bank
owns the deposited money in respondent’s accounts but not as a legal consequence of the
unauthorized transfer of FMIC’s deposits to Tevesteco but by the effects of the provisions on
simple loan or mutuum under the Civil Code. By contract of simple loan, the depositor transfers
to the bank the ownership of the deposited money with corollary obligation on the part of the
bank to pay the depositor an equal amount on demand.
Petitioner bank does not have a unilateral right to freeze the accounts of Franco based on its mere
suspicion that the funds therein were proceeds of the multi million peso scam Franco allegedly
involved in. To grant the bank the right to take whatever action it pleases on deposits which it
supposes are derived from shady transactions, would open the floodgates of public distrust in the
bank industry.
Ineluctably, the bank as the trustee in fiduciary relationship, is duty bound to know the signatures
of its customers. Having failed to detect the forgery in the Authority to Debit and in the process
inadvertently facilitate the FMIC-Tevesteco transfer, petitioner bank cannot now shift the
liability thereon to the respondent and other payees of checks issued by Tevesteco, or prevent
withdrawals from their respective accounts without the appropriate court writ or a favourable
final judgement.
VIII. SHORT TITLE: PSBank VS Chowking
IX. FULL TITLE: PHILIPPINE SAVINGS BANK, petitioner, vs. CHOWKING FOOD

CORPORATION, respondent.
X. TOPIC:
XI. STATEMENT OF THE FACTS:
Between March 15, 1989 and August 10, 1989, Joe Kwan Food Corporation issued in
favour of Chowking five (5) PSBank Checks. The total amount of the subject checks reached
P556,981.86.
On the respective due dates of each check, Chowking’s acting manager, Rino T. Manzano
endorsed and encashed said checks with the Bustos Branch of respondent PSBank
All the five checks were honoured by the Branch Head Erlinda O. Santos even with only the
endorsement of Manzano approving them without the signatures of the other authorized officers
of Chowking, contrary to usual banking practice.
Manzano then misappropriated the funds and fled. When Chowking found out, it demanded from
the bank reimbursement. The bank, however, refused to pay. Chowking filed a complaint for a
sum of money with damages before the RTC. Likewise impleaded were PSBank’s president,
Antonio S. Abacan, and Bustos branch head, Santos.
Both PSBank and Santos filed cross claims and third party complaints against Manzano. Despite
all diligent efforts, summonses were not served upon third party defendant Manzano. Santos did
not take any further action and her third party complaint was archived.
Meanwhile, petitioner caused the service of its summons on the cross-claim and third party
complaints through publication. On its subsequent motion, Manzano was declared in default for
failure to file a responsive pleading. Respondent filed a motion for summary judgment.
Petitioner opposed the motion. On February 1, 1995, the trial court denied the motion via an
order of even date.
In its Answer, petitioner did not controvert the foregoing facts, but denied liability to respondent
for the encashed checks.Petitioner bank maintained it exercised due diligence in the supervision
of all its employees. It even dismissed defendant Santos after she was found guilty of negligence
in the performance of her duties. Defendant Santos, on the other hand, denied that she had been
negligent in her job. She averred that she merely followed the bank’s practice of honoring
respondent’s checks even if accompanied only by Manzano’s endorsement.
Defendant Abacan likewise denied any liability to respondent. He alleged that, as president and
officer of petitioner bank, he played no role in the transactions complained of. Thus, respondent
has no cause of action against him. Petitioner, Santos and Abacan were unanimous in asserting
that respondent is estopped from claiming reimbursement and damages since it was negligent in
allowing Manzano to take hold, endorse, and encash its checks. Petitioner pointed out that the
proximate cause of respondent’s loss was its own negligence.
XII. STATEMENT OF THE CASE:

The RTC ruled in favour of Chowking ordering PSBank and Santos to solidarily
reimburse Chowking the amount of 556,981 plus interest of 12% per annum; 20%of total amount
due plaintiff as attorney’s fees; 100,000 for exemplary damages and 1Million for plaintiff’s
unrealized profits. The complaint with respect to Abacan as well as his counterclaim and
crossclaim are hereby dismissed. Santos and Manzano to solidarity reimburse PSBank whatever
amount the latter shall be costrained to pay Chowking.
Aggrieved, PSBank filed for a reconsideration, the RTC then reversed its earlier ruling and held
that it was respondents own negligence that was the proximate cause of the loss.
Dissatisfied, Chowking appealed to the Court of Appeals who then granted the appeal,
reinstating the first decision of the RTC.
Hence this petition for review on certiorari.
XIII. ISSUES: (1) Whether or not Chowking is estopped from its claim against PSBank?;
(2) Whether Chowking should bear the loss from its negligence?
VII. RULING:
(1)No. The doctrine of equitable estoppel or estoppel in pais finds no application in
the present case. The equitable doctrine of estoppel as explained by this Court:
“Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon. A
party may not go back on his own acts and representations to the prejudice of the other party who
relied upon them. In the law of evidence, whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to believe a particular thing true, to act upon
such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be
permitted to falsify it.”
“In estoppel by pais, as related to the party sought to be estopped, it is necessary that there be a
concurrence of the following requisites: (a) conduct amounting to false representation or
concealment of material facts or at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (b)
intent, or at least expectation that this conduct shall be acted upon, or at least influenced by the
other party; and (c) knowledge, actual or constructive of the actual facts.”
Estoppel may vary somewhat in definition, but all authorities agree that a party invoking the
doctrine must have been misled to one’s prejudice. That is the final and, in reality, most
important of the elements of equitable estoppel. It is this element that is lacking here.
We agree with the CA that Chowking did not make any false representation or concealment of
material facts in relation to the encashments of the previous checks. As adverted to earlier,
respondent may have allowed Manzano to previously encash its checks, but it has always been
accompanied with the endorsements of the other authorized signatories. Respondent did not
allow petitioner to have its checks encashed without the signature of all of its authorized
signatories.
Neither can estoppel be appreciated in relation to petitioner itself. The Court enumerated the
elements of estoppel in this wise:
“x x x As related to the party claiming the estoppel, the essential elements are (1) lack of
knowledge and of the means of knowledge of the truth as the facts in question; (2) reliance, in
good faith, upon the conduct and statements of the party to be estopped; (3) action or inaction
based thereon of such character as to change the position or status of the party claiming the
estoppel, to his injury, detriment or prejudice.”
Here, the first two elements are wanting. Petitioner has knowledge of the truth and the means to
it as to the proper endorsements necessary in encashing respondent’s checks. Respondent has an
account with petitioner bank and, as such, is privy to the proper signatories to endorse
respondent’s checks.
Neither can petitioner claim good faith.
It is elementary that estoppel cannot be sustained in doubtful inference. Absent the conclusive
proof that its essential elements are present, estoppel must fail. Because estoppel, when
misapplied, becomes a most effective weapon to accomplish an injustice, inasmuch as it shuts a
man’s mouth from speaking the truth.
(2) No. Petitioner failed to prove that it has observed the due diligence required of
banks under the law. Contrary to petitioner’s view, its negligence is the proximate cause of
respondent’s loss.It cannot be over emphasized that the banking business is impressed with
public interest. Of paramount importance is the trust and confidence of the public in general in
the banking industry. Consequently, the diligence required of banks is more than that of a
Roman pater familias or a good father of a family. The highest degree of diligence is expected.
In its declaration of policy, the General Banking Law of 2000 requires of banks the highest
standards of integrity and performance. Needless to say, a bank is “under obligation to treat the
accounts of its depositors with meticulous care.” The fiduciary nature of the relationship between
the bank and the depositors must always be of paramount concern.
Petitioner, through Santos, was clearly negligent when it honored respondent’s checks with the
lone endorsement of Manzano.
It was this negligence x x x coupled by the negligence of the petitioner bank in the selection and
supervision of its bank teller, which was the proximate cause of the loss suffered by private
respondent, and not the latter’s act of entrusting cash to a dishonest employee, as insisted by the
petitioners.”
Proximate cause is determined by the facts of the case. It 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.
Measured by the foregoing yardstick, the proximate cause of the loss is not respondent’s alleged
negligence in allowing Manzano to take hold and encash respondent’s checks. The proximate
cause is petitioner’s own negligence in the supervision of its employees when it overlooked the
irregular practice of encashing checks even without the requisite endorsements.
XIV. FALLO: WHEREFORE, the petition is DENIED for lack of merit. SO ORDERED.
I. SHORT TITLE: CENTRAL BANK VS. CITYTRUST BANKING CORP.

II. FULL TITLE: CENTRAL BANK OF THE PHILIPPINES, petitioner, vs.
CITYTRUST BANKING CORPORATION, respondent.
III. TOPIC: Fiduciary Nature of Banking
Rounceval Flores (Flores) was one of the authorized persons to sign checks and
serve as drawers and indorsers in behalf of the Citytrust Banking Corporation
(Citytrust). Flores presented two checks to the Central Bank’s Senior Teller
Iluminada dela Cruz (Dela Cruz) and was subsequently approved. Dela Cruz prepared
the cash transfer slip where Flores should sign but instead he sign as one Rosauro C.
Cayabyab. This fact was missed by Dela Cruz, because the latter relied that Flores
made a number of transactions with her already. It was given to Cash Department and
the signatures were examined and later on paid Flores for the checks. After one year
and nine months, the Citytrust demanded that the checks be cancelled and the funds
taken out be returned because the check was stolen before. Central Bank did not heed
such call. Citytrust filed a complaint to collect the sum of money with damages
against Central Bank to the Regional Trial Court (RTC). RTC found both parties
negligent and held them equally liable for the loss. Court of Appeals affirmed the
decision.

PETITION for review on certiorari of a decision of the Court of Appeals.
By Decision1 of November 13, 1991, Branch 32 of the RTC of Manila found both
Citytrust and petitioner negligent and accordingly held them equally liable for the
loss. Both parties appealed to the Court of Appeals which, by Decision2 dated July
16, 1999, affirmed the trial court’s decision, it holding that both parties contributed
equally to the fraudulent encashment of the checks, hence, they should equally share
the loss in consonance with Article 21793 vis-à-vis Article 11724 of the Civil Code.
VI. ISSUES:
1. Whether or not Citytrust can collect sum of money as damages from the Central Bank.
2. Whether or not Citytrust produced a contributory negligence resulting to diminution of

possible claims, if there is, against the Central Bank.
VII. RULING:
Both yes to the two issues.
Citytrust may collect damages against the Central Bank, however the amount of the
claims is mitigated because of the contributory negligence of the Citytrust.
The law imposes on banks high standards in view of the fiduciary nature of
banking. Section 2 of Republic Act No. 8791 (R.A. 8791), which took effect on 13
June 2000, declares that the State recognizes the “fiduciary nature of banking that
requires high standards of integrity and performance.”
This fiduciary relationship means that the bank’s obligation to observe “high
standards of integrity and performance” is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than that of a good father of a family.
Furthermore, Section 2 of R.A. 8791 prescribes the statutory diligence required from
banks – that banks must observe “high standards of integrity and performance” in
servicing their depositors.
In addition, Citytrust’s failure to timely examine its account, cancel the checks
and notify petitioner of their alleged loss/theft should mitigate petitioner’s liability, in
accordance with Article 2179 of the Civil Code which provides that if the plaintiff’s
negligence was only contributory, the immediate and proximate cause of the injury
being the defendant’s lack of due care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded. Hence the damages should be borne
by Central Bank and Citytrust in a 60/40 percentage, respectively.
VIII. FALLO: WHEREFORE, the assailed Court of Appeals Decision of July 16, 1999 is
hereby AFFIRMED with MODIFICATION, in that petitioner and Citytrust should
bear the loss on a 60-40 ratio.
#29 Samson v. BPI
405 SCRA 607
Petitioner Gerardo Samson (Samson) deposited to his account with respondent Bank of the
Philippine Island (BPI) a Prudential Bank check in the amount of P3500.00. After four days,
Samson instructed his daughter to withdraw P2000.00 but such withdrawal was declined for
insufficient funds. More than two weeks, petitioner, upon depositing P5500.00 to his account
with BPI, he discovered that he has only such remaining balance same as before he deposited the
previous check with P25.00 service charge.
Samson complained to BPI about the discrepancy. BPI confirmed the P3,500.00 check deposit
but could not account the same. Investigation only ensued after Samson informed BPI and the
latter found that the check was encashed by BPI’s security guard Rondina. In such investigation,
it was discovered that one of the deposit envelopes was missing and BPI did nothing to look for
the missing check deposit or to inform Samson about it and it did not even bother to conduct its
own inquiry into said irregularity. Moreover, Manager Nerissa M. Cayanga, displayed arrogance,
indifference and discourtesy towards Samson.
Petitioner contends that because of such eventuality Samson suffered embarrassment as he could
not then and there produce required cash to fulfill his commitment and monetary obligation
towards a creditor who waited at his residence. He then filed action for damages against BPI.
BPI denied all the material allegations in the complaint and alleged that the complaint fails to
state a cause of action; that [petitioner] has violated the provisions of the covering contract of
deposit which provides that representatives are not allowed to contract business on the account
on behalf of the depositor; that petitioner’s claim has been paid, waived and extinguished; that
petitioner by his inaction in reporting the loss of his check deposit, is estopped from claiming
damages from defendant.
The trial court ruled in favor of Samson and awarded P200,000.00 as moral damages. The Court
of Appeals (CA) affirmed the ruling as it held that since the banking business was affected with
public interest, Bank of the Philippine Islands (BPI) was required to exercise a high degree of
care with respect to the accounts of its clients. Thus, the bank was rendered liable by its
negligence resulting in damage to its depositor. However, it reduced the award of moral damages
to P50,000.00. Hence, this petition.
Issue: Whether or not the CA erred in reducing the award moral damages
Ruling:
The petition is partly meritorious.There is no hard-and-fast rule in determining what would be a

fair and reasonable amount of moral damages, since each case must be governed by its own
peculiar facts. Indeed, it must be commensurate to the loss or injury suffered. In the present case,
petitioner bases his claim on the failure of respondent to credit the sum of P3,500 to his account
due to its gross negligence. As a result of such failure, he was unable to fulfill his obligation to a
valued creditor, resulting in the severance of his credit line. He further alleges that he suffered
humiliation and besmirched reputation. According to him, his suffering was exacerbated by his
subjection to indifference, discourtesy and arrogance from respondents’ officers.
Moral damages are awarded to achieve a “spiritual status quo,” thus:
“Moral damages are awarded to enable the injured party to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he/she has undergone, by reason of
the defendant’s culpable action. Its award is aimed at restoration, as much as possible, of the
spiritual status quo ante; thus, it must be proportionate to the suffering inflicted. Since each case
must be governed by its own peculiar circumstances, there is no hard and fast rule in determining
the proper amount. x x x.”
The social standing of the aggrieved party is essential to the determination of the proper amount
of the award. Otherwise, the goal of enabling him to obtain means, diversions, or amusements to
restore him to the status quo ante would not be achieved.
We believe that the award should be increased to P100,000, considering (1) that petitioner
was a businessman and was the highest lay person in the United Methodist Church; (2) that he
was regarded by respondent and its officers with arrogance and a condescending manner; and (3)
that respondent successfully postponed compensating him for more than a decade. This amount
is more than the P50,000 granted by the CA, but not as much as the P200,000 granted by the
RTC.
WHEREFORE, the Petition is partly GRANTED and the assailed Decision MODIFIED. The
award of moral damages is increased to P100,000. No pronouncement as to costs.
SO ORDERED
I.SHORT TITLE: 32 FIRESTONE TIRE V. CA
II. FULL TITLE: FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES,
vs., COURT OF APPEALS and LUZON DEVELOPMENT BANK – 353 SCRA 601
March 5, 2001, J. Quisumbing
III. TOPIC: General Banking Law
In January 1978, plaintiff and Fojas-Arca entered into a Franchised Dealership

Agreement (Exh. B) whereby Fojas-Arca has the privilege to purchase on credit and sell
plaintiffs products.
On January 14, 1978 up to May 15, 1978. Pursuant to the aforesaid Agreement, Fojas-Arca
purchased on credit Firestone products from plaintiff with a total amount of P4,896,000.00. In
payment of these purchases, Fojas-Arca delivered to plaintiff six (6) special withdrawal slips
drawn upon the defendant.In turn, these were deposited by the plaintiff with its current account
with the Citibank. All of them were honored and paid by the defendant. This singular
circumstance made plaintiff believe [sic] and relied [sic] on the fact that the succeeding special
withdrawal slips drawn upon the defendant would be equally sufficiently funded. Relying on
such confidence and belief and as a direct consequence thereof, plaintiff extended to Fojas-Arca
other purchases on credit of its products.
On the following dates Fojas-Arca purchased Firestone products on credit (Exh. M, I, J,

K) and delivered to plaintiff the corresponding special withdrawal slips in payment thereof
drawn upon the defendant, to wit:
DATE WITHDRAWAL AMOUNT
SLIP NO.
June 15, 1978 42127 P1,198,092.80
July 15, 1978 42128 940,190.00
Aug. 15, 1978 42129 880,000.00
Sep. 15, 1978 42130 981,500.00
These were likewise deposited by plaintiff in its current account with Citibank and in turn
the Citibank forwarded it [sic] to the defendant for payment and collection, as it had done in
respect of the previous special withdrawal slips. Out of these four (4) withdrawal slips only
withdrawal slip No. 42130 in the amount of P981,500.00 was honored and paid by the defendant
in October 1978. Because of the absence for a long period coupled with the fact that defendant
honored and paid withdrawal slips No. 42128 dated July 15, 1978, in the amount of P981,500.00
plaintiffs belief was all the more strengthened that the other withdrawal slips were likewise
sufficiently funded, and that it had received full value and payment of Fojas-Arcas credit
purchased then outstanding at the time. On this basis, plaintiff was induced to continue extending
to Fojas-Arca further purchase on credit of its products as per agreement (Exh. B).
However, on December 14, 1978, plaintiff was informed by Citibank that special
withdrawal slips No. 42127 dated June 15, 1978 for P1,198,092.80 and No. 42129 dated August
15, 1978 for P880,000.00 were dishonored and not paid for the reason NO ARRANGEMENT.
As a consequence, the Citibank debited plaintiffs account for the total sum of P2,078,092.80
representing the aggregate amount of the above-two special withdrawal slips. Under such
situation, plaintiff averred that the pecuniary losses it suffered is caused by and directly
attributable to defendants gross negligence.
On September 25, 1979, counsel of plaintiff served a written demand upon the defendant
for the satisfaction of the damages suffered by it. And due to defendants refusal to pay plaintiffs
claim, plaintiff has been constrained to file this complaint, thereby compelling plaintiff to incur
litigation expenses and attorneys fees which amount are recoverable from the defendant.
VI. ISSUE:
Whether or not respondent bank should be held liable for damages suffered by petitioner,
due to its allegedly belated notice of non-payment of the subject withdrawal slips.
VII. RULING:
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.
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
latters 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.
The withdrawal slips deposited with petitioners current account with Citibank were not
checks, as petitioner admits. Citibank was not bound to accept the withdrawal slips as a valid
mode of deposit. But having erroneously accepted them as such, Citibank and petitioner as
account-holder must bear the risks attendant to the acceptance of these instruments. Petitioner
and Citibank could not now shift the risk and hold private respondent liable for their admitted
mistake.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV
No. 29546 is AFFIRMED. Costs against petitioner.
I. SHORT TITLE: 33 PNB vs. Cheah Chee Chong
II. FULL TITLE: Philippine National Bank vs. Cheah Chee Chong, 671 SCRA 49, G.R. No.
170865 April 25, 2012

Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina) were having a conversation in the
latter’s office when Adelinas friend, Filipina Tuazon (Filipina), approached her to ask if she
could have Filipinas check cleared and encashed for a service fee of 2.5%. Ofelia has a joint
dollar savings account with her Malaysian husband Cheah Chee Chong (Chee Chong) under
Account No. 265-705612-2 with PNB Buendia Branch and so Ofelia agreed. Five days later,
PNB received a credit advice from Philadelphia National Bank that the proceeds of the subject
check had been temporarily credited to PNBs account. Ofelia that day personally withdrew
$180,000.00. Adelina could withdraw the remaining amount the next day after having been
authorized by Ofelia.Filipina received all the proceeds. In the meantime, the Cable Division of
PNB Head Office in Escolta, Manila received on November 16, 1992 a SWIFT message from
Philadelphia National Bank dated November 13, 1992 with Transaction Reference Number
(TRN) 46506218, informing PNB of the return of the subject check for insufficient funds.
Informed about the bounced check and upon demand by PNB Buendia Branch to return the
money withdrawn, Ofelia immediately contacted Filipina to get the money back. But the latter
told her that all the money had already been given to several people who asked for the checks
encashment. PNB sent a demand letter to spouses Cheah for the return of the amount of the
check, froze their peso and dollar deposits in the amounts of P275,166.80 and $893.46,[23] and
filed a complaint against them for Sum of Money with Branch 50 of the Regional Trial Court
(RTC) of Manila, docketed as Civil Case No. 94-71022. In said complaint, PNB demanded
payment of around P8,202,220.44, plus interests and attorney’s fees, from the spouses Cheah.
As their main defense, the spouses Cheah claimed that the proximate cause of PNBs injury was
its own negligence of paying a US dollar denominated check.

The RTC ruled in PNBs favor. The RTC held that spouses Cheah were guilty of contributory
negligence. Unwilling to accept the judgment, the spouses Cheah appealed to the CA.
The CA on the other hand, ratiocinated that PNB Buendia Branch’s non-receipt of the SWIFT
message from Philadelphia National Bank within the 15-day clearing period is not an acceptable
excuse. Applying the last clear chance doctrine, the CA held that PNB had the last clear
opportunity to avoid the impending loss of the money and yet, it glaringly exhibited its
negligence in allowing the withdrawal of funds without exhausting the 15-day clearing period
which has always been a standard banking practice. To the CA, PNB cannot claim from spouses
Cheah even if the latter are accommodation parties under the law as the banks own negligence is
the proximate cause of the damage it sustained. Nevertheless, it also found Ofelia guilty of
contributory negligence. Thus, both parties should be made equally responsible for the resulting
loss.
Both parties filed their respective Motions for Reconsideration but same were denied in a
Resolution dated December 21, 2005. Hence, these Petitions for Review on Certiorari.
VI. ISSUE:
Whether PNBs act of releasing the proceeds of the check prior to the lapse of the 15-day clearing
period was the proximate cause of the loss?
VII. RULING:
Yes. The petitions for review lack merit. Hence, we affirm the ruling of the CA. PNBs act of
releasing the proceeds of the check prior to the lapse of the 15-day clearing period was the
proximate cause of the loss. It is worthy of notice that the 15-day clearing period alluded to is
construed as 15 banking days. As declared by Josephine Estella, the Administrative Service
Officer who was the banks Remittance Examiner, what was unusual in the processing of the
check was that the lapse of 15 banking days was not observed. Even PNBs agreement with
Philadelphia National Bank regarding the rules on the collection of the proceeds of US dollar
checks refers to business/ banking days. Ofelia deposited the subject check on November 4,
1992. Hence, the 15th banking day from the date of said deposit should fall on November 25,
1992. However, what happened was that PNB Buendia Branch, upon calling up Ofelia that the
check had been cleared, allowed the proceeds thereof to be withdrawn on November 17 and 18,
1992, a week before the lapse of the standard 15-day clearing period.

WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R. No. 170865
and in G.R. No. 170892 are both DENIED. The assailed August 22, 2005 Decision and
December 21, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 63948 are hereby
AFFIRMED in toto.
SO ORDERED.
AIDAN M. HORTILANO LLB3A
34 ALLIED BANKING CORPORATION

v.
BANK OF THE PHILIPPINE ISLANDS
The case:
Petition is for review on certiorari assailing the decision of the Court of Appeals which set aside
the decision of the Trial Court. The petition is denied by the Supreme Court.
The facts:
On October 10, 2002, a check in the amount of P1,000,000.00 payable to “Mateo Mgt. Group
International” (MMGI) was presented for deposit and accepted at petitioner’s Kawit Branch. The
check, post-dated “Oct. 9, 2003”, was drawn against the account of Marciano Silva, Jr. (Silva)
with respondent Bank of the Philippine Islands (BPI) Bel-Air Branch. Upon receipt, petitioner
sent the check for clearing to respondent through the Philippine Clearing House Corporation
(PCHC). The check was cleared by respondent and petitioner credited the account of MMGI
with P1,000,000.00. On October 22, 2002, MMGI’s account was closed and all the funds therein
were withdrawn. A month later, Silva discovered the debit of P1,000,000.00 from his account. In
response to Silva’s complaint, respondent credited his account with the aforesaid sum. On
March 21, 2003, respondent returned a photocopy of the check to petitioner for the reason:
“Postdated.” Petitioner, however, refused to accept and sent back to respondent a photocopy of
the check. Thereafter, the check, or more accurately, the Charge Slip, was tossed several times
from petitioner to respondent, and back to petitioner, until on May 6, 2003, respondent requested
the PCHC to take custody of the check. Acting on the request, PCHC directed the respondent to
deliver the original check and informed it of PCHC’s authority under Clearing House Operating
Memo (CHOM) No. 279 dated 06 September 1996 to split 50/50 the amount of the check subject
of a “Ping-Pong” controversy which shall be implemented thru the issuance of Debit Adjustment
Tickets against the outward demands of the banks involved. PCHC likewise encouraged
respondent to submit the controversy for resolution thru the PCHC Arbitration Mechanism.
The issues:
1. Whether the doctrine of last clear chance applies in this case.
2. Whether the 60-40 apportionment of loss ordered by the CA was justified.
The SC decision:
1. No. The doctrine of last clear chance, stated broadly, is that the negligence of the
plaintiff does not preclude a recovery for the negligence of the defendant where it appears
that the defendant, by exercising reasonable care and prudence, might have avoided
injurious consequences to the plaintiff notwithstanding the plaintiff’s negligence. The
doctrine necessarily assumes negligence on the part of the defendant and contributory
negligence on the part of the plaintiff, and does not apply except upon that assumption.
Stated differently, 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.
Moreover, in situations where the doctrine has been applied, it was defendant’s failure to
exercise such ordinary care, having the last clear chance to avoid loss or injury, which
was the proximate cause of the occurrence of such loss or injury. In this case, the
evidence clearly shows that the proximate cause of the unwarranted encashment of the
subject check was the negligence of respondent who cleared a post-dated check sent to it
thru the PCHC clearing facility without observing its own verification procedure. As
correctly found by the PCHC and upheld by the RTC, if only respondent exercised
ordinary care in the clearing process, it could have easily noticed the glaring defect upon
seeing the date written on the face of the check “Oct. 9, 2003”. Respondent could have
then promptly returned the check and with the check thus dishonored, petitioner would
have not credited the amount thereof to the payee’s account. Thus, notwithstanding the
antecedent negligence of the petitioner in accepting the post-dated check for deposit, it
can seek reimbursement from respondent the amount credited to the payee’s account
covering the check.
Yes. We believe the allocation of sixty percent (60%) of the actual damages involved in this
case (represented by the amount of the checks with legal interest) to petitioner is proper under
the premises. Respondent should, in light of its contributory negligence, bear forty percent (40%)
of its own loss. Contributory negligence is conduct on the part of the injured party, contributing
as a legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection. Admittedly, petitioner’s acceptance of the subject
check for deposit despite the one year postdate written on its face was a clear violation of
established banking regulations and practices. In such instances, payment should be refused by
the drawee bank and returned through the PCHC within the 24-hour reglementary period. As
aptly observed by the CA, petitioner’s failure to comply with this basic policy regarding post-
dated checks was “a telling sign of its lack of due diligence in handling checks coursed through
it. It bears stressing that “the diligence required of banks is more than that of a Roman pater
familias or a good father of a family. The highest degree of diligence is expected,” considering
the nature of the banking business that is imbued with public interest. While it is true that
respondent’s liability for its negligent clearing of the check is greater, petitioner cannot take
lightly its own violation of the long-standing rule against encashment of post-dated checks and
the injurious consequences of allowing such checks into the clearing system. Petitioner
repeatedly harps on respondent’s transgression of clearing house rules when the latter resorted to
direct presentment way beyond the reglementary period but glosses over its own negligent act
that clearly fell short of the conduct expected of it as a collecting bank. Petitioner must bear the
consequences of its omission to exercise extraordinary diligence in scrutinizing checks presented
by its depositors.
I. SHORT TITLE: 37 METROBANK vs CA
II. FULL TITLE: METROPOLITAN BANK & TRUST

COMPANY, petitioner, vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION,
INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA
CASTILLO, respondents. G.R. No. 88866, February 18, 1991
III. TOPIC: Negligence of banks.
In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and
deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37.
On various dates between June 25 and July 16, 1979, all these warrants were subsequently
indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account
No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the
branch office to the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing.
More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times
to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was
meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over
Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner
says it finally decided to allow Golden Savings to withdraw from the proceeds of the
warrants.
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own
account, eventually collecting the total amount of P1,167,500.00 from the proceeds of the
apparently cleared warrants. The last withdrawal was made on July 16, 1979.
On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to make up the deficit in its account.
The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of
Mindoro. Judgement was rendered directing the plaintiff to reverse its action of debiting Savings
Account No. 2498 of the sum of P1,754,089.00 and to reinstate and credit to such account such
amount existing before the debit was made including the amount of P812,033.37 in favor of
defendant Golden Savings and Loan Association, Inc. and thereafter, to allow defendant Golden
Savings and Loan Association, Inc. to withdraw the amount outstanding thereon before the
debit. On appeal to the respondent court, the decision was affirmed. Hence this petition for
review.
This case, for all its seeming complexity, turns on a simple question of negligence. Metrobank
assails the decision of CA through petition for review in affirming RTC’s decision.
VI. ISSUE:
WHETHER OR NOT respondent Court of Appeals erred in disregarding and failing to apply the
clear contractual terms and conditions on the deposit slips allowing Metrobank to charge back
any amount erroneously credited.
VII. RULING:
The petition has no merit. From the above undisputed facts, it would appear to the Court that
Metrobank was indeed negligent in giving Golden Savings the impression that the treasury
warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the
proceeds thereof from his account with it. Without such assurance, Golden Savings would not
have allowed the withdrawals; with such assurance, there was no reason not to allow the
withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal to return
the money that to all appearances belonged to the depositor, who could therefore withdraw it any
time and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited
them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It
relied on Metrobank to determine the validity of the warrants through its own services. The
proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings
itself to withdraw them from its own deposit. It was only when Metrobank gave the go-signal
that Gomez was finally allowed by Golden Savings to withdraw them from his own account.
Metrobank exhibited extraordinary carelessness. The amount involved was not trifling — more
than one and a half million pesos (and this was 1979). There was no reason why it should not
have waited until the treasury warrants had been cleared; it would not have lost a single centavo
by waiting. Yet, despite the lack of such clearance — and notwithstanding that it had not
received a single centavo from the proceeds of the treasury warrants, as it now repeatedly
stresses — it allowed Golden Savings to withdraw — not once, not twice, but thrice — from
the uncleared treasury warrants in the total amount of P968,000.00
Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo
about the clearance and it also wanted to "accommodate" a valued client. It
"presumed" that the warrants had been cleared simply because of "the lapse of
one week." For a bank with its long experience, this explanation is
unbelievably naive.
VIII. FALLO:
WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3
of the dispositive portion of the judgment of the lower court shall be reworded as follows:
Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing
defendant Golden Savings & Loan Association, Inc. to withdraw the amount outstanding
thereon, if any, after the debit. SO ORDERED.
35 BANK OF THE PHILIPPINE ISLANDS (successor-in- interest of COMMERCIAL
AND TRUST CO.), petitioner,
vs. HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIM,
respondents
G.R. No. 104612, 232 SCRA302 May 10, 1994
FACTS:
It is a petition for review with prayer to set aside the amended Decision of the respondent
Court of Appeals which modified the Decision of Branch 19 of the Regional Trial Court (RTC)
of Manila and had affirmed the dismissal of the complaint but had granted the defendants'
counterclaim for P331,261.44 which represents the outstanding balance of their account with the
plaintiff.
Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the
corporation, had an “AND/OR” joint account with Commercial Bank and Trust Co (CBTC), the
predecessor-in-interest of petitioner Bank of the Philippine Islands. Lim withdraw funds from
such account and used it to open a joint checking account (an “AND” account) with Mariano
Velasco. When Velasco died in 1977, said joint checking account had P662,522.87. By virtue of
an Indemnity Undertaking executed by Lim and as President and General Manager of Eastern
withdrew one half of this amount and deposited it to one of the accounts of Eastern with CBTC.
Eastern obtained a loan of P73,000.00 from CBTC which was not secured. However, Eastern and
CBTC executed a Holdout Agreement providing that the loan was secured by the “Holdout of
the C/A No. 2310-001-42” referring to the joint checking account of Velasco and Lim.
Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal of the balance
of the account of Velasco and Lim. Asserting that the Holdout Agreement provides for the
security of the loan obtained by Eastern and that it is the duty of CBTC to debit the account of
respondents to set off the amount of P73,000 covered by the promissory note, BPI filed the
instant petition for recovery. Private respondents Eastern and Lim, however, assert that the
amount deposited in the joint account of Velasco and Lim came from Eastern and therefore
rightfully belong to Eastern and/or Lim. Since the Holdout Agreement covers the loan of
P73,000, then petitioner can only hold that amount against the joint checking account and must
return the rest.
The trial court in its decision dismissed the complaint because BPI failed to make out its
case. Furthermore, it ruled that "the promissory note in question is subject to the 'hold-out'
agreement," and that based on this agreement, "it was the duty of the BPI to debit the account of
the defendants under the promissory note to set off the loan even though the same has no fixed
maturity." As to the defendants' counterclaim, the trial court, recognizing the fact that the entire
amount in question had been withdrawn by Velasco's heirs pursuant to the order of the intestate
court, denied it because the "said claim cannot be awarded without disturbing the resolution" of
the intestate court. The Court of Appeals rendered a decision affirming the decision of the trial
court. It, however, failed to rule on the defendants' (private respondents') partial appeal from the
trial court's denial of their counterclaim. Upon their motion for reconsideration, the Court of
Appeals in its amended decision ruled that the settlement of Velasco's estate had nothing to do
with the claim of the defendants for the return of the balance of their account with CBTC/BPI as
they were not privy to that case, and that the defendants, as depositors of CBTC/BPI, are the
latter's creditors; hence, CBTC/BPI should have protected the defendants' interest in Sp. Proc.
No. 8959 when the said account was claimed by Velasco's estate. It then ordered BPI "to pay
defendants the amount of P331,261.44 representing the outstanding balance in the bank account
of defendants." Hence, petitioner filed a Petition for Review before the Supreme Court.
ISSUE:
1. W/N BPI can demand the payment of the loan despite the existence of the Holdout
Agreement?
2. W/N BPI is still liable to the private respondents on the account subject of the withdrawal
by the heirs of Velasco?
HELD:
1. Yes, the Holdout Agreement conferred on CBTC the power, not the duty, to set off the loan
from the account subject of the Agreement. When BPI demanded payment of the loan from
Eastern, it exercised its right to collect payment based on the promissory note, and
disregarded its option under the Holdout Agreement. Therefore, its demand was in the
correct order.
2. Yes, the BPI was the debtor and Eastern was the creditor with respect to the joint checking
account. Therefore, BPI was obliged to return the amount of the said account only to the
creditor. When it allowed the withdrawal of the balance of the account by the heirs of
Velasco, it made the payment to the wrong party. The law provides that payment made by
the debtor to the wrong party does not extinguish its obligation to the creditor who is without
fault or negligence. Therefore, BPI was still liable to the true creditor, Eastern.
WHEREFORE, the instant petition is partly GRANTED. The challenged amended decision in
CA-G.R. CV No. 25735 is hereby MODIFIED. As modified:
1. Private respondents are ordered to pay the petitioner the promissory note for P73,000.00
with interest at:
a. 14% per annum on the principal, computed from 18 August 1978 until payment;
b. 12% per annum on the interest which had accrued up to the date of the filing of the
complaint, computed from that date until payment pursuant to Article 2212 of the
Civil Code.
2. The award of P331,264.44 in favor of the private respondents shall bear interest at the
rate of 12%per annum computed from the filing of the counterclaim.
No pronouncement as to costs.
CASE NO. 38 GENRAL BANKING LAW MAPALAD,
JULIANNE MARIE M.
I. SHORT TILE: BPI VS. CA
II: FULL TITLE: BANK OF THE PHILIPPINE ISLAND VS. COURT OF APPEALS
AND BENJAMIN C. NAPIZA G.R. NO. 112392 29 FEBRUARY 2000
III: TOPIC: GENERAL BANKING LAW OF 2000- NEGLIGENCE OF BANK
The complaint arouse when a certain Mr. Henry Chan who owned a Continental Bank
Manager’s Check payable to cash in the amount of two thousand five hundred dollars. Chan
went to the office herein private respondent 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 same upon the presentation of the respondent’s passbook. The latter thus endorsed
the check and deposited the same at his foreign currency account unit savings account
maintained with BPI. However, the amount of $2, 541.67 in the account the respondent was
withdrawn by one Ruben Gayon, Jr., by using the blank withdrawal slip that respondent gave
Mr. Chan. Thereafter, the Continental Bank called BPI and informed the latter the check was
counterfeited. Hence, notice was made to private respondent and demanded the return of the said
amount. The latter explained the circumstances surrounding the said check as stated above but
the bank did not heed to his explanation. BPI claimed that private respondent, having affixed his
signature at the dorsal portion of the check, should be liable for the amount stated therein in
accordance with the provision of the Negotiable Instrument Law on the liability of a general
endorser. By virtue of his failure to pay the same a complaint for collection of sum of money was
filed against him.
V.STATEMENT OF THE CASE:
The lower court ruled dismissing the complaint. It was held that petitioner could not hold
respondent liable based on the check’s face value alone. To hold him liable would render inutile
the requirement of clearance from the drawee bank the value of a particular foreign check before
it can be credited to the account of the depositer making such deposit. BPI should have waited
for the final notice of payment before crediting the said amount to the private respondent’s bank
and should have not authorized withdrawal of the same. Having admitted that it committed as
mistake for not waiting for the clearance of the check before authorizing the withdrawal of its
value or proceeds, hence, petitioner should suffer loss.
On appeal, the Court of Appeals affirmed the ruling of the lower court and held that
petitioner committed gross negligence
Hence, this instant petition for review on certiorari.
VI. ISSUE:
Whether or not petitioner can be hold private respondent liable for the proceeds of the check for
having affixed his signature at the dorsal portion as an indorser?
Whether or not the bank’s negligence was the proximate cause of the loss, thus can be held
liable?
VII: HELD:
On the first issue, it cannot be gainsaid that private respondent can be held liable as an
indorser of the check or even as accommodation party. However, to hold him liable would result
in an injustice thus demand looking into to the events that led into the encashment of the check.
The BPI rules issued to the private respondent clearly stated that to be able to withdraw
from the Philippine Deposit System, two requisites must concur, to wit: (1) a duly filled up
withdrawal slip; and (2) the depositor’s passbook.
The withdrawal slip itself indicates that the amount is payable to Ramon De Guzman
and/or Agnes De Guzman. Such being the case, petitioner’s personnel should have been duly
warned that Gayon was not the proper payee of the proceeds of the check. Morever, the fact that
the private respondent’s passbook was not presented during withdrawl is evidence by the entries
therein showing that the last transaction he made was when he deposited the check.
On the second issue, it was ruled that the bank was under the obligation to treat the
account of its depositors with meticulous care, always having in mind the fudiciary nature of
their relationship. Petitioner failed to exercise the diligence of a good father of a family. In total
disregard of its own ruled, petitioners personnel negligently handled private respondent’s
account to the petitioner’s detriment.
Hence it was the bank’s negligence which the proximate cause. The petitioner in allowing
it to happen, it shall assumed the risk of incurring a loss account of a forged or counterfeit
foreign check, thus, it should suffer the resulting damage.
VIII. FALLO:
WHEREFORE, the Petition for Certiorari is DENIED. The Decision of Court of Appeals
in CA-G.R. C.V. No. 37392 is affirmed.
I. SHORT TITLE: Far East Bank vs. Pacilan
II. FULL TITLE: FAR EAST BANK AND TRUST COMPANY, NOW BANK OF
THE PHILIPPINE ISLANDS, petitioner, vs. THEMISTOCLES PACILAN, JR., respondent.
III. TOPIC: Banks liability to damages resulting from an act which does not
amount to a legal injury or wrong

Respondent opened a current account with petitioner’s Bacolod Branch.
Respondent since then issued several post-dated checks to different payees drawn against
the said account. Sometime in March 1988, the respondent issued a check in the amount
of P680.00 and the same was presented for payment to petitioner bank on April 4, 1988.
Upon presentment, the check was dishonoured. The next day, respondent deposited to his
current account the amount of P800.00. The said amount was accepted by petitioner
bank; hence, increasing the balance of the respondent’s deposit to P1, 051.43.
Subsequently, when the respondent verified with the bank about the dishonoured check,
he discovered that his current account was closed on the ground that it was “improperly
handled.” The records of the bank disclosed that respondent issued four checks, to wit:
Check No. 2480416 for P6, 000.00; Check No. 2480419 for P50.00; Check No. 2434880
for P680.00 and; Check No. 2434886 for P680.00, or a total amount of P7,410.00. At the
time, however, the respondent’s current account with petitioner bank only had a deposit
of P6, 981.43. Thus, the total amount of the checks presented for payment on April 4,
1988 exceeded the balance of the respondent’s deposit in his account. For this reason,
the bank through its branch accountant Villadelgado closed respondent’s current account
on the ground that it was “improperly handled” effective the evening of April 4, 1988 as
it then had an overdraft of P428.57.
Pacilan then wrote the bank complaining that the closure of his account was unjustified
because on the first banking hour of April 5, 1988, he already deposited an amount
sufficient to fund his checks. The respondent pointed out that Check No. 2434886, in
particular, was delivered to petitioner bank at the close of banking hours on April 4, 1988
and, following normal banking procedure, it had until the last clearing hour of the
following day, or on April 5, 1988, to honor the check or return it, if not funded. In
disregard of this banking procedure and practice, however, petitioner bank hastily closed
the respondent’s current account and dishonored his Check No. 2434886. He did not
however receive a reply from the petitioner bank.
The bank’s act of closing his account preempted the deposits he intended to make to fund
the several postdated checks he had issued. It also exposed him to criminal prosecution
for violation ofBP 22 and that the indecent haste to close is account was patently
malicious and intended to embarrass him and the acts of the bank besmirched his
reputation and caused him social humiliation, wounded feelings, insurmountable worries
and sleepless nights entitling him to damages.
In their answer, petitioner bank and Villadelgado maintained that the respondent’s current
account was subject to petitioner bank’s Rules and Regulations Governing the
Establishment and Operation of Regular Demand Deposits which provide that “the Bank
reserves the right to close an account if the depositor frequently draws checks against
insufficient funds and/or uncollected deposits” and that “the Bank reserves the right at
any time to return checks of the depositor which are drawn against insufficient funds or
for any reason.”3
They showed that the respondent had improperly and irregularly handled his current
account. For example, in 1986, the respondent’s account was overdrawn 156 times, in
1987, 117 times and in 1988, 26 times. In all these instances, the account was overdrawn
due to the issuance of checks against insufficient funds. The respondent had also signed
several checks with a different signature from the specimen on file for dubious reasons.
Pacilan filed with RTC of Negros Occidental a complaint for damages against
petitioner bank and Villadelgado. The Trial Court ruled in favour of Pacilan and ordered
the bank and Villadelgado to pay the amount of 100,000 as moral damages, 50,000 for
exemplary damages and cost of suit.
After due proceedings, the court a quo rendered judgment in favor of the
respondent as it ordered the petitioner bank and Villadelgado, jointly and severally, to
pay the respondent the amounts of P100,000.00 as moral damages and P50,000.00 as
exemplary damages and costs of suit. In so ruling, the trial court in deciding the case cited
petitioner bank’s rules and regulations which state that “a charge of P10.00 shall be
levied against the depositor for any check that is taken up as a returned item due to
‘insufficiency of funds’ on the date of receipt from the clearing office even if said check
is honored and/or covered by sufficient deposit the following banking day.” The same
rules and regulations also provide that “a check returned for insufficiency of funds for
any reason of similar import may be subsequently recleared for one more time only,
subject to the same charges.”
According to the court, following these rules and regulations, the respondent, as
depositor, had the right to put up sufficient funds for a check that was taken as a returned
item for insufficient funds the day following the receipt of said check from the clearing
office. In fact, the said check could still be recleared for one more time.
As a result of the closure of his current account, several of the respondent’s
checks were subsequently dishonored and because of this, the respondent was humiliated,
embarrassed and lost his credit standing in the business community. The court further
ratiocinated that even granting arguendo that petitioner bank had the right to close the
respondent’s account, the manner which attended the closure constituted an abuse of the
said right. Citing Article 19 of the Civil Code of the Philippines which states that “[e]very
person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith” and Article 20 thereof
which states that “[e]very person who, contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same,” the court adjudged petitioner
bank of acting in bad faith. It held that, under the foregoing circumstances, the respondent
is entitled to an award of moral and exemplary damages.
Aggrieved, the petitioner bank appealed to the CA which renders a decision affirming
with modification with respect to the amount of damages awarded by the Trial Court.
Hence the recourse to this Court via petition for review on certiorari.
VI. ISSUES: Whether Petitioner bank is liable for damages
VII. RULING:
NO. A perusal of the respective decisions of the court a quo and the appellate
court show that the award of damages in the respondent’s favor was anchored mainly on
Article 19 CC. The elements of abuse of rights are the following: (a) the existence of a
legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of
prejudicing or injuring another. Malice or bad faith is at the core of the said provision.
The law always presumes good faith and any person who seeks to be awarded damages
due to acts of another has the burden of proving that the latter acted in bad faith or with
ill-motive. Good faith refers to the state of the mind which is manifested by the acts of the
individual concerned. It consists of the intention to abstain from taking an
unconscionable and unscrupulous advantage of another. Bad faith does not simply
connote bad judgment or simple negligence, dishonest purpose or some moral obliquity
and conscious doing of a wrong, a breach of known duty due to some motives or interest
or ill-will that partakes of the nature of fraud. Malice connotes ill-will or spite and speaks
not in response to duty. It implies an intention to do ulterior and unjustifiable harm.
Malice is bad faith or bad motive.
Undoubtedly, the bank has the right to close the account of the respondent based on the
following provisions of its Rules and Regulations Governing the Establishment and
Operation of Regular Demand Deposits. The facts, as found by the court a quo and the
appellate court, do not establish that, in the exercise of this right, petitioner bank
committed an abuse thereof. Specifically, the second and third elements for abuse of
rights are not attendant in the present case. The evidence presented by petitioner bank
negates the existence of bad faith or malice on its part in closing the respondent’s account
on April 4, 1988 because on the said date the same was already overdrawn. The
respondent issued four checks, all due on April 4, 1988, amounting to P7,410.00 when
the balance of his current account deposit was only P6,981.43. Thus, he incurred an
overdraft of P428.57 which resulted in the dishonor of his Check No. 2434886.Further,
petitioner bank showed that in 1986, the current account of the respondent was overdrawn
156 times due to his issuance of checks against insufficient funds. In 1987, the said
account was overdrawn 117 times for the same reason. Again, in 1988, 26 times. There
were also several instances when the respondent issued checks deliberately using a
signature different from his specimen signature on file with petitioner bank. All these
circumstances taken together justified the petitioner bank’s closure of the respondent’s
account on April 4, 1988 for “improper handling.”
It is observed that nowhere under its rules and regulations is petitioner bank required to
notify the respondent, or any depositor for that matter, of the closure of the account for
frequently drawing checks against insufficient funds. No malice or bad faith could be
imputed on petitioner bank for so acting since the records bear out that the respondent
had indeed been improperly and irregularly handling his account not just a few times but
hundreds of times. Under the circumstances, petitioner bank could not be faulted for
exercising its right in accordance with the express rules and regulations governing the
current accounts of its depositors. Upon the opening of his account, the respondent had
agreed to be bound by these terms and conditions.
Neither the fact that petitioner bank accepted the deposit made by the respondent the day
following the closure of his account constitutes bad faith or malice on the part of
petitioner bank. The same could be characterized as simple negligence by its personnel.
Said act, by itself, is not constitutive of bad faith. The respondent had thus failed to
discharge his burden of proving bad faith on the part of petitioner bank or that it was
motivated by ill-will or spite in closing his account on April 4, 1988 and in inadvertently
accepting his deposit on April 5, 1988.Further, it has not been shown that these acts were
done by the bank with the sole intention of prejudicing and injuring the respondent. It is
conceded that the respondent may have suffered damages as a result of the closure of his
current account. However, there is a material distinction between damages and injury.
The Court had the occasion to explain the distinction between damages and injury in this
wise:“... Injury is the illegal invasion of a legal right; damage is the loss, hurt or harm
which results from the injury; and damages are the recompense or compensation awarded
for the damage suffered. Thus, there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of a legal duty. In such cases, the
consequences must be borne by the injured person alone, the law affords no remedy for
damages resulting from an act which does not amount to a legal injury or wrong. These
situations are often called damnum absque injuria.”
Whatever damages the respondent may have suffered as a consequence, e.g., dishonor of
his other insufficiently funded checks, would have to be borne by him alone. It was the
respondent’s repeated improper and irregular handling of his account which constrained
petitioner bank to close the same in accordance with the rules and regulations governing
its depositors’ current accounts. The respondent’s case is clearly one of damnum absque
injuria.
VIII. FALLO: WHEREFORE, the petition is GRANTED. The Decision dated
August 30, 2002 and Resolution dated January 17, 2003 of the Court of Appeals in CA-
G.R. CV No. 36627 are REVERSED AND SET ASIDE.
SO ORDERED.
MAPALAD JULIANNE MARIE M. #40
I. SHORT TILE: PBTC VS. ABASOLO
II: FULL TITLE: PRUDENTIAL BANK and TRUST COOMPANY VS. LIWAYWAY
ABASOLO G.R. No. 186738 September 27, 2010
III: TOPIC: GENERAL BANKING LAW OF 2000- Subsidiary Liability of Banks
The case at hand stemmed from a collection of sum of money and annulment of sale with
the mortage with damages against one Corazon Maragisan and herein petitioner Prudential Bank
and Trust Company before RTC of Sta. Cruz, Laguna.
The complainte averred that herein respondent was empowered by virtue of a special
power of attorney by the heirs of one Leonor Valenzuela Rosales to sell the two parcels of land
in Palanan, Sta. Cruz, Laguna which they inherited from the latter.
According to respondent Abasolo, one Corazon Marisigan was interested in buying the
said properties. However, the latter was no cash to pay the said properties, hence, proposed the
idea that the said properties be mortgaged and the proceeds thereof will paid directly to
respondent. Respondent agreed.
Then, respondent and Marasigan made consultation with the PBTC’s head office. One of
its employees Norberto Mediola allegedly advised that the respondent issue a an authorization to
Marasigan for the latter to mortgage the property and to sign as one of the co- makers so that
proceeds of the loan could be released to both of them. It was also further advised by Mendiola
that the property be transferred by way of deed of absolute sale to Marasigan to facilitate the
release of loan. Respondent required Marasigan to issue a promissory before transferring the said
property which the latter did. Hence, the properties were transferred to Marasigan. The latter
executed a real estate mortgage to secure the payment of loan. In the absence of a written request
for bank guarantee, the PBTC released the proceeds of the to Marasigan.
However, despite the release and repeated demands to pay the purchase price of the
properties, Maraisgan failed to pay. Subsequently, one owner type of jeep and four passenger
jeeps plus the amount P665,000 by way of installment was given by Marasigan but the same did
not cover the whole amount thereof.
Marasigan denied that there was an agreement that the proceeds of the loan would paid
directly to respondent and she also claimed that the vehicles represented the full payment of the
properties and had in fact overpaid P 76, 040.00. PBTC denied also as to the said agreement that
proceeds of the loan shall be released to Abasolo immediately.
V.STATEMENT OF THE CASE:
The RTC ruled against Marasigan. PBTC was held subsidiarily liable thereto based on
the ground that it committed a breached of its understanding to release the loan proceeds to
respondent. RTC anchored the said ruling found at the course of the trial that the bank had in fact
such obligation as proven by evidence. The said failed to rebut the testimony of respondent and
the same was further strengthened by the respondent’s witness Miguela delos Santos.
The Court of Appeals affirmed the ruling of RTC. Hence, this petition for review.
VIII. ISSUE:
Whether or not the bank can be held subsidiarily liable?
VII: HELD:
In the absence of a lender borrower relationship between petitioner and Liwayway, there
is no relationship between the petitioner and respondent, there is no inherent obligation of the
petitioner to release the proceeds of the loan to her.
The principle of relativity of contracts is made to support the petitioner’s cause.
In order for the respondent to prove her claim, a clear and deliberate act of conferring
favor upon her must be present. A written document relative thereto can be sufficient but she was
not able to produce one to prove the same. Hence, since it was not established that the petitioner
had an obligation to Liwayway, there is no breach to speak of. Petitioner cannot be thus held
subsidiarily liable. To court, respondent should have not relied on the representation made by
Mendiola.
It was also clearly averred from her testimonies that it was the execution of a promissory
note by Marasigan which prompted her to finally execute a deed of sale. Also evidence is
wanting to show that collusion existed between Marasigan and Mendiola to defraud her. Neither
they were able to prove that Mendiola has an apparent authority to act in behalf of the bank.
Hence, the principle in law that bank can made liable to third persons who was defrauded by one
who acted as an agent of it and one who is clothed with an apparent authority is inapplicable in
the instant case.
DISPOSITIVE:
Wherefore, the Decision of January 14 of the Court of Appeals, in so far as it holds

petitioner, PBTC subsidiarily liable in its co defendant Corazon Marasigan who did appeal
from the trial court’s decision, fails to pay the judgment debt, is hereby REVERSED and SET
ASIDE. The complaint against petitioner is accordingly dismissed.
I. SHORT TITLE: 41 PCI BANK V. CA
II. FULL TITLE: PHILIPPINE COMMERCIAL INTERNATIONAL BANK,

petitioner, vs. COURT OF APPEALS and RORY W. LIM, respondents.
III. TOPIC: Rights and Obligations of Correspondent Banks
On March 13, 1986, private respondent Rory Lim delivered to his cousin Lim Ong Tian PCIB
Check No. JJJ 24212467 in the amount of P200,000.00 for the purpose of obtaining a telegraphic
transfer from petitioner PCIB in the same amount. The money was to be transferred to Equitable
Banking Corporation, Cagayan de Oro Branch, and credited to private respondent’s account at
the said bank. Upon purchase of the telegraphic transfer, petitioner issued the corresponding
receipt dated March 13, 1986 [T/T No. 284] which contained the assailed provision. Subsequent
to the purchase of the telegraphic transfer, petitioner in turn issued and delivered eight (8)
Equitable Bank checks to his suppliers in different amounts as payment for the merchandise that
he obtained from them. When the checks were presented for payment, five of them bounced for
insufficiency of funds, while the remaining three were held overnight for lack of funds upon
presentment. Consequent to the dishonor of these checks, Equitable Bank charged and collected
the total amount of P1,100.00 from private respondent. The dishonor of the checks came to
private respondent’s attention only on April 2, 1986, when Equitable Bank notified him of the
penalty charges and after receiving letters from his suppliers that his credit was being cut-off due
to the dishonor of the checks he issued.
Upon verification by private respondent with the Gingoog Branch Office of petitioner
PCIB, it was confirmed that his telegraphic transfer (T/T No. 284) for the sum of P200,000.00
had not yet been remitted to Equitable Bank, Cagayan de Oro branch. In fact, petitioner PCIB
made the corresponding transfer of funds only on April 3, 1986, twenty one (21) days after the
purchase of the telegraphic transfer on March 13, 1986.
Aggrieved, private respondent demanded from petitioner PCIB that he be compensated

for the resulting damage that he suffered due to petitioner’s failure to make the timely transfer of
funds which led to the dishonor of his checks. In a letter dated April 23, 1986, PCIB’s Branch
Manager Rodolfo Villarmia acknowledged their failure to transmit the telegraphic transfer on
time as a result of their mistake in using the control number twice and the petitioner bank’s
failure to request confirmation and act positively on the disposition of the said telegraphic
transfer.
Nevertheless, petitioner refused to heed private respondent’s demand prompting the latter to
file a complaint for damages with the Regional Trial Court of Gingoog City on January 16, 1987.
Answering the complaint, petitioner denied any liability to private respondent and interposed
as special and affirmative defense the lack of privity between it and private respondent as it was
not private respondent himself who purchased the telegraphic transfer from petitioner.
Additionally, petitioner pointed out that private respondent is nevertheless bound by the
stipulation in the telegraphic transfer application/form receipt which provides:
“x x x. In case of fund transfer, the undersigned hereby agrees that such transfer will be made
without any responsibility on the part of the BANK, or its correspondents, for any loss
occasioned by errors or delays in the transmission of message by telegraph or cable companies or
by correspondents or agencies, necessarily employed by this BANK in the transfer of this
money, all risks for which are assumed by the undersigned.”
The Regional Trial Court of Gingoog City held petitioner liable for breach of contract
and struck down the aforecited provision found in petitioner’s telegraphic transfer application
form/receipt exempting it from any liability and declared the same to be invalid and
unenforceable. As found by the trial court, the provision amounted to a contract of adhesion
wherein the objectionable portion was unilaterally inserted by petitioner in all its application
forms without giving any opportunity to the applicants to question the same and express their
conformity thereto. Upon appeal by petitioner to the Court of Appeals, respondent court affirmed
with modifications the judgment of the trial court. Hence, this present petition.
This is a petition for review on certiorari seeking the reversalof the Decision of the Court of
Appeals in CA-G.R. No. 18843 promulgated on July 30, 1990, and the Resolution dated March
11, 1991, affirming with modification the judgment of the Regional Trial Court of Gingoog City
which held petitioner Philippine Commercial International Bank (PCIB) liable for damages
resulting from its breach of contract with private respondent Rory W. Lim.
VI. ISSUE:
Whether or not the assailed provision found in the application form/receipt exempting it from
any liability in case of loss resulting from errors or delays in the transfer of funds is valid.
VII. RULING:
A contract of adhesion is defined as one in which one of the parties imposes a ready-
made form of contract, which the other party may accept or reject, but which the latter cannot
modify. One party prepares the stipulation in the contract, while the other party merely affixes
his signature or his “adhesion” thereto,giving no room for negotiation and depriving the latter of
the opportunity to bargain on equal footing. Nevertheless, these types of contracts have been
declared as binding as ordinary contracts, the reason being that the party who adheres to the
contract is free to reject it entirely. It is equally important to stress, though, that the Court is not
precluded from ruling out blind adherence to their terms if the attendant facts and circumstances
show that they should be ignored for being obviously too one-sided.
Having established that petitioner acted fraudulently and in bad faith, we find it implausible to
absolve petitioner from its wrongful acts on account of the assailed provision exempting it from
any liability. It was unequivocally declared that notwithstanding the enforceability of a
contractual limitation, responsibility arising from a fraudulent act cannot be exculpated because
the same is contrary to public policy. Undoubtedly, the services being offered by a banking
institution like petitioner are imbued with public interest. The use of telegraphic transfers have
now become commonplace among businessmen because it facilitates commercial transactions.
Any attempt to completely exempt one of the contracting parties from any liability in case of loss
notwithstanding its bad faith, fault or negligence, as in the instant case, cannot be sanctioned for
being inimical to public interest and therefore contrary to public policy. Resultingly, there being
no dispute that petitioner acted fraudulently and in bad faith, the award of moral and exemplary
damages were proper. But notwithstanding petitioner’s liability for the resulting loss and damage
to private respondent, we find the amount of moral damages adjudged by respondent court in the
sum of P400,000.00 exorbitant, therefore P200,000.00 is reasonable.
VIII. FALLO:
WHEREFORE, the instant petition is herewith DENIED for being plainly

unmeritorious, and the assailed Decision is AFFIRMED in toto.
42 July 24, 1996

PHILIPPINE NATIONAL BANK, petitioner, vs. THE COURT OF APPEALS and
RAMON LAPEZ, doing business under the name and style SAPPHIRE SHIPPING,
respondents.
Topic: Rights and obligations of a correspondent bank / Compensation, Art. 1279
Statement of Facts:
PNB appropriated the amounts of $2,627.11 and P34,340.38 from remittances of Ramon Lapez’s
principals abroad.
The first remittance was made by the NCB of Jeddah for the benefit of Lapez, to be credited to
his account at Citibank, Greenhills Branch; the second was from Libya, and was intended to be
deposited at Lapez’s account with PNB. Lapez made a written demand for remittance of the
equivalent of $2,627.11 by means of a letter dated December 4, 1986. This was answered by
PNB on December 22, 1986 inviting Lapez to come for a conference.
There were two instances in the past, one in November 1980 and the other in January 1981 when
Lapez’s account was doubly credited with the equivalents of $5,679.23 and $5,885.38,
respectively, which amounted to an aggregate amount of P87,380.44. PNB claims, however, that
plaintiff’s claim has prescribed.
PNB made a demand upon Lapez for refund of the double or duplicated credits erroneously
made on his account, by means of a letter dated October 23, 1986 or 5 years and 11 months from
November 1980, and 5 years and 9 months from January 1981.
The deduction of P34,340.38 was made by PNB with the knowledge and consent of Lapez, who
was issued a receipt dated February 18, 1987.
There is no question that the two erroneous double payments made to Lapez’s accounts in 1980
and 1981 created an extra-contractual obligation on the part of Lapez in favor of the PNB, under
the principle of solutioindebiti, as follows:
"'If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises."' (Article 2154)
Statement of the Case: RTC and CA ruled in favor of Lapez.

Issue:
WoN PNB was legally justified in making the compensation or set-off against the two
remittances coursed through it in favor of private respondent to recover on the double credits it
erroneously made in 1980 and 1981, based on the principle of solutioindebiti.
Held:
No, they were not. SC affirmed RTC and CA’s decision.
Article 1279 of the Civil Code provides:
"'In order that compensation may prosper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consists in a sum of money, or if the things due are consumable, they be of
the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there by any retention or controversy, commenced by third persons
and communicated in due time to the debtor."'
In the case of the $2,627.11, requisites Nos. 2 through 5 are apparently present, for both debts
consist in a sum of money, are both due, liquidated and demandable, and over neither of them is
there a retention or controversy commenced by third persons and communicated in due time to
the debtor.
(a) With respect to Lapez being a depositor of PNB, they are creditor and debtor respectively
(b) As to the relationship created by the telexed fund transfers from abroad: A contract between
a foreign bank and local bank asking the latter to pay an amount to a beneficiary is a
stipulation pour autrui--a stipulation in favor of a third person.
Thus between PNB (as the local correspondent of the National Commercial Bank of Jeddah) and
Lapez as beneficiary, there is created an implied trust pursuant to Art. 1453 of the Civil Code.
c) By the principle of solutioindebiti, Lapez, who unduly received something by mistake (i.e., the
2 double credits, although he had no right to demand it), became obligated to PNB to return what
he unduly received. Thus, there was created between them a relationship of obligor and obligee,
or of debtor and creditor under a quasi-contract.
In view of the foregoing, the Court is of the opinion that the parties are not both principally
bound with respect to the $2,627.11 from Jeddah neither are they at the same time principal
creditor of the other. Therefore, as matters stand, the parties' obligations are not subject to
compensation or set off under Art. 1279 of the Civil Code, for the reason that PNB is not a
principal debtor nor is Lapez a principal creditor insofar as the amount of $2,627.11 is
concerned. They are debtor and creditor only with respect to the double payments; but are
trustee-beneficiary as to the fund transfer of $2,627.11.
Thus, while it may be concluded that Lapez owes PNB the equivalent of the sums of $5,179.23
and $5,885.38 erroneously doubly credited to his account, the PNB’s actuation in intercepting
the amount of $2,627.11 supposed to be remitted to another bank is not only improper; it will
also erode the trust and confidence of the international banking community in the banking
system of the country, something we can ill afford at this time when we need to attract and invite
deposits of foreign currencies.
The P34,340.38 subject of the supplemental complaint is quite another thing. The receipt issued
to the Lapez by PNB for the amount of P34,340.00 in full settlement of accounts receivables,
seems to uphold PNB’s theory that the said amount was voluntarily delivered by Lapez to PNB.
At any rate, Lapez in his Memorandum, stated that the subsequent fund transfer from Brega
Petroleum Marketing Company of Libya (from where the P34,340.38 was deducted) was
intended for credit and deposit in Lapez’s account at PNB. Such being the case, the Court
believes that insofar as the amount of P34,340.38 is concerned, all the requirements of Art. 1279
of the Civil Code are present, and the said amount may properly be the subject of compensation
or set-off. And since all the requisites of Art. 1279 of the Civil Code are present (insofar as the
amount of P34,392.38 is concerned), compensation takes place by operation of law (Art.
1286),albeit only partial with respect to plaintiff's indebtedness of P7,380.44.
On the question of prescription, the Court believes that Art. 1149 as cited by the plaintiff is not
applicable in this case. Rather, the applicable law is Art. 1145, which fixes the prescriptive
period for actions upon a quasi-contract (such as solutio indebiti) at six years.
But petitioner has adopted a novel theory, contending that since respondent Court found that
private respondent is "an obligor of PNB and the latter, as aforesaid, has become an obligor of
private respondent (resulting in legal compensation), the (h)onorable respondent court should
have ordered private respondent to pay PNB what the latter is bound by the trial court's decision
to return the former.This petition is a clever ploy to use this Court to validate or legalize an
improper act of the petitioner bank, with the not impossible intention of using this case as a
precedent for similar acts of interception in the future. This piratical attitude of the nation's
premier bank deserves a warning that it should not abuse the justice system in its collection
efforts, particularly since we are aware that if the petitioner bank had been in good faith, it could
have easily disposed of this controversy in ten minutes flat by means of an exchange of checks
with private respondent for the same amount. The litigation could have ended there, but it did
not. Instead, this plainly unmeritorious case had to clog our docket and take up the valuable time
of this Court.
Dispositive Portion: WHEREFORE, the instant petition is herewith DENIED for being plainly
unmeritorious, and the assailed Decision is AFFIRMED in toto. Costs against petitioner
43. Metropolitan Bank and Trust VS Centro Development Corporation
Statement of Facts: On 20 March 1990, in a special meeting of the board of directors of

respondent Centro Development Corporation (Centro), its president Go Eng Uy was authorized
to mortgage its properties and assets to secure the medium-term loan of P 84 million. On 21
March 1990, respondent Centro, represented by Go Eng Uy, executed a Mortgage Trust
Indenture (MTI) with the Bank of the Philippines Islands (BPI). Thereafter, respondent alleged
that there was a new mortgage constituted by virtue of stockholders’ Resolution No. 005,
s. 1994.
Metrobank contends that the stockholders’ Resolution No. 005, s. 1994 did not constitute a new
mortgage in favor of petitioner. Instead, the stockholders merely amended the existing MTI by
appointing petitioner as the new trustee for the MTI, which was already existing and held by
BPI. Thus, there was no need to secure a 2/3 vote from the stockholders. Petitioner posits that the
authority to mortgage the properties was granted in 1990, upon the execution of the first MTI
between respondent Centro and BPI.

It also maintains that the CA erred in interpreting the phrase "at which meeting a quorum was
present" contained in the Secretary’s Certificate dated 18 August 1994. The bank points out that
the phrase indicates that at least a quorum was present, rather than that only a quorum was
present. Thus, the Secretary’s Certificate did not in any way limit the number of those actually
present.
Issue: WON MTI constituted a new mortgage
Ruling: NO. The act of appointing a new trustee of the MTI was a regular business transaction.
The appointment necessitated only a decision of at least a majority of the directors present at the
meeting in which there was a quorum, pursuant to Section 25 of the Corporation Code. The
Secretary’s Certificate is clear that the main purpose of the directors’ Resolution was to appoint
petitioner as the new trustee of the previously executed and amended MTI. Going through the
original and the revised MTI, we find no substantial amendments to the provisions of the
contract.
Republic Act No. 8971, or the General Banking Law of 2000, recognizes the vital role of banks
in providing an environment conducive to the sustained development of the national economy
and the fiduciary nature of banking; thus, the law requires banks to have high standards of
integrity and performance. The fiduciary nature of banking requires banks to assume a degree of
diligence higher than that of a good father of a family. In the case at bar, petitioner itself was
negligent in the conduct of its business when it extended unsecured loans to the debtors. Worse,
it was in serious breach of its duty as the trustee of the MTI. It was not able to protect the
interests of the parties and was even instrumental in violating the terms of the MTI, to the
detriment of the parties thereto. Thus, petitioner has only itself to blame for being left with
insufficient recourse against petitioner under the assailed MTI.
I. SHORT TITLE: 44 PHILIPPINE BANKING VS. ARTURO DY
II. FULL TITLE: PHILIPPINE BANKING CORPORATION vs. ARTURO DY,

BERNARDO DY, JOSE DELGADO and CIPRIANA DELGADO, G.R. No. 183774.
November 14, 2012. PERLAS-BERNABE, J.:
III. TOPIC: GENERAL BANKING LAWS – MORTGAGEE IN GOOD FAITH

Spouses Jose and Cipriana was the registered owner of the subject land who in turn sold the
same with a certain Cecilia Tan for a consideration of P10.00/sq.m. It was agreed that the buyer
shall make partial payments from time to time and pay the balance when the deed of sale was
executed the title transferred to her.
At the time of sale, the buyer was already occupying a portion of the property where she
operates a noodle (bihon) factory while the rest was occupied by tenants. Eventually, the buyer
learned of the sale of the property to the Dys and its subsequent mortgage to petitioner Philippine
Banking Corporation (Philbank), prompting the filing of the Complaint for annulment of
certificate of title, specific performance and/or reconveyance with damages against Sps.
Delgado, the Dys and Philbank.

In their Answer, Sps. Delgado, while admitting receipt of the partial payments made by the
buyer, claimed that there was no perfected sale because the latter was not willing to pay their
asking price of P17.00/sq.m. They also interposed a cross-claim against the Dys averring that the
deeds of absolute sale in their favor were fictitious and merely intended to enable them (the Dys)
to use the said properties as collateral for their loan application with Philbank. However, after
receiving the loan proceeds, the Dys reneged on their agreement, prompting Sps. Delgado to
cause the annotation of an adverse claim on the Dys’ titles and to inform Philbank of the
simulation of the sale. Sps. Delgado, thus, prayed for the dismissal of the complaint, with a
counterclaim for damages and a cross-claim against the Dys for the payment of the balance of
the purchase price plus damages.
For their part, the Dys denied knowledge of the alleged transaction between cross-claimants
Sps. Delgado and buyer. They claimed to have validly acquired the subject property from Sps.
Delgado and paid the full consideration therefor as the latter even withdrew their adverse claim
and never demanded for the payment of any unpaid balance.
On the other hand, Philbank filed its Answer asserting that it is an innocent mortgagee for
value without notice of the defect in the title of the Dys. It filed a cross-claim against Sps.
Delgado and the Dys for all the damages that may be adjudged against it in the event they are
declared seller and purchaser in bad faith, respectively.
the RTC dismissed the cross-claims of Sps. Delgado against the Dys and Philbank. It noted
that other than Sps. Delgado’s bare allegation of the Dys’ supposed non-payment of the full they
failed to adduce competent evidence to support their claim. Moreover Sps. Delgado notified
Philbank of the purported simulation of the sale to the Dys only after the execution of the loan
and mortgage documents and the release of the loan proceeds to the latter, negating their claim of
bad faith. Moreover, they subsequently notified the bank of the Dys’ full payment for the two
lots mortgaged to it.
However, on appeal, the CA set aside the RTC’s decision and ordered the cancellation of the
Dys’ certificates of title and the reinstatement of Cipriana’s title. It ruled that there were no
perfected contracts of sale between Sps. Delgado and the Dys in view of the latter’s admission
that the deeds of sale were purposely executed to facilitate the latter’s loan application with
Philbank and that the prices indicated therein were not the true consideration. Being merely
simulated, the contracts of sale were, thus, null and void, rendering the subsequent mortgage of
the lots likewise void.
The CA also declared Philbank not to be a mortgagee in good faith for its failure to ascertain
how the Dys acquired the properties and to exercise greater care when it conducted an ocular
inspection thereof. It thereby canceled the mortgage over the two lots
VI. ISSUE:
Whether the banks are accorded the rights of the mortgagee in good faith?
VII. RULING:
While it is settled that a simulated deed of sale is null and void and therefore, does not
convey any right that could ripen into a valid title, it has been equally ruled that, for reasons of
public policy, the subsequent nullification of title to a property is not a ground to annul the
contractual right which may have been derived by a purchaser, mortgagee or other transferee
who acted in good faith
Primarily, it bears noting that the doctrine of “mortgagee in good faith” is based on the
rule that all persons dealing with property covered by a Torrens Certificate of Title are not
required to go beyond what appears on the face of the title. This is in deference to the public
interest in upholding the indefeasibility of a certificate of title as evidence of lawful ownership of
the land or of any encumbrance thereon. In the case of banks and other financial institutions,
however, greater care and due diligence are required since they are imbued with public interest,
failing which renders the mortgagees in bad faith. Thus, before approving a loan application, it is
a standard operating practice for these institutions to conduct an ocular inspection of the property
offered for mortgage and to verify the genuineness of the title to determine the real owner(s)
thereof. The apparent purpose of an ocular inspection is to protect the “true owner” of the
property as well as innocent third parties with a right, interest or claim thereon from a usurper
who may have acquired a fraudulent certificate of title thereto.
In this case, while Philbank failed to exercise greater care in conducting the ocular
inspection of the properties offered for mortgage, its omission did not prejudice any innocent
third parties. Indeed, a finding of negligence must always be contextualized in line with the
attendant circumstances of a particular case “the diligence with which the law requires of banks
whose business is impressed with public interest is that nothing short of extraordinary diligence,
Philbank’s inconsequential oversight should not and cannot serve as a bastion for fraud and
deceit.
To be sure, fraud comprises “anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of legal duty or equitable duty, trust, or
confidence justly reposed, resulting in damage to another, or by which an undue and
unconscientious advantage is taken of another.”In this light, the Dys’ and Sps. Delgado’s
deliberate simulation of the sale intended to obtain loan proceeds from and to prejudice Philbank
clearly constitutes fraudulent conduct. As such, Sps. Delgado cannot now be allowed to deny the
validity of the mortgage executed by the Dys in favor of Philbank as to hold otherwise would
effectively sanction their blatant bad faith to Philbank’s detriment
WHEREFORE, the assailed January 30, 2008 Decision of the Court of Appeals in CA-
GR. CV No. 51672 is hereby AFFIRMED with MODIFICATION upholding the mortgage rights
of petitioner Philippine Banking Corporation over the subject properties.
I. SHORT TITLE: 45 EUSEBIO GONZALES vs PHILIPPINE COMMERCIAL AND
INERNATIONAL BANK
II. FULL TITLE: Eusebio Gonzales vs Philippine Commercial and International Bank, Edna
Ocampo and Roberto Noceda- GR No. 180257, February 23, 2011, Velasco, Jr., J.
III. TOPIC: Banking Law – General Banking Law

Petitioner Eusebio Gonzales was a client of PCIB for a good 15 years. In October 1992,
PCIB granted a credit line to Gonzales through the execution of a Credit-On-Hand Loan
Agreement[3] (COHLA), in which the aggregate amount of the accounts of Gonzales with PCIB
served as collateral for and his availment limit under the credit line. Gonzales drew from said
credit line through the issuance of check. At the institution of the instant case, Gonzales had a
Foreign Currency Deposit (FCD) of USD 8,715.72 with PCIB.

On October 30, 1995, Gonzales and his wife obtained a loan for PhP 500,000. Subsequently, on
December 26, 1995 and January 3, 1999, the spouses Panlilio and Gonzales obtained two
additional loans from PCIB in the amounts of PhP 1,000,000 and PhP 300,000,
respectively. These three loans amounting to PhP 1,800,000 were covered by three promissory
notes.[4] To secure the loans, a real estate mortgage (REM) over a parcel of land covered by
Transfer Certificate of Title (TCT) No. 38012 was executed by Gonzales and the spouses
Panlilio. Notably, the promissory notes specified, among others, the solidary liability of
Gonzales and the spouses Panlilio for the payment of the loans. However, it was the spouses
Panlilio who received the loan proceeds of PhP 1,800,000.

The monthly interest dues of the loans were paid by the spouses Panlilio through the automatic
debiting of their account with PCIB. But the spouses Panlilio, from the month of July 1998,
defaulted in the payment of the periodic interest dues from their PCIB account which apparently
was not maintained with enough deposits. PCIB allegedly called the attention of Gonzales
regarding the July 1998 defaults and the subsequent accumulating periodic interest dues which
were left still left unpaid.

In the meantime, Gonzales issued a check dated September 30, 1998 in favor of Rene Unson
(Unson) for PhP 250,000 drawn against the credit line (COHLA). However, on October 13,
1998, upon presentment for payment by Unson of said check, it was dishonored by PCIB due to
the termination by PCIB of the credit line under COHLA on October 7, 1998 for the unpaid
periodic interest dues from the loans of Gonzales and the spouses Panlilio. PCIB likewise froze
the FCD account of Gonzales.

Gonzales, through counsel, wrote PCIB insisting that the check he issued had been fully funded,
and demanded the return of the proceeds of his FCD as well as damages for the unjust dishonor
of the check.[7] PCIB replied on March 22, 1999 and stood its ground in freezing Gonzales
accounts due to the outstanding dues of the loans.[8]
PCIBs refusal to heed his demands compelled Gonzales to file the instant case for damages with
the RTC, on account of the alleged unjust dishonor of the check issued in favor of Unson.
This is an appeal via a Petition for Review on Certiorari under Rule 45 from the Decision [1] dated
October 22, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 74466, which denied
petitioners appeal from the December 10, 2001 Decision[2] in Civil Case No. 99-1324 of the
Regional Trial Court (RTC), Branch 138 in Makati City. The RTC found justification for
respondents dishonor of petitioners check and found petitioner solidarily liable with the
spouses Jose and Jocelyn Panlilio (spouses Panlilio) for the three promissory notes they executed
in favor of respondent Philippine Commercial and International Bank (PCIB).
VI. ISSUE:
1. Whether Gonzales is liable for the three promissory notes covering the
PhP 1,800,000 loan he made with the spouses Panlilio
2. Whether PCIB properly dishonored the check of Gonzales drawn
against the COHLA he had with the bank.
VII. RULING:
1. As an accommodation party, Gonzales is solidarily liable with the spouses Panlilio for the
loans. In Ang v. Associated Bank, 532 SCRA 244 (2007), quoting the definition of an
accommodation party under Section 29 of the Negotiable Instruments Law, the Court cited that
an accommodation party is 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.”
2. No. Because there was no proper notice to Gonzales of the default and delinquency of the PhP
1,800,000 loan. It must be borne in mind that while solidarily liable with the spouses Panlilio on
the PhP 1,800,000 loan covered by the three promissory notes, Gonzales is only an
accommodation party and as such only lent his name and credit to the spouses Panlilio. While
not exonerating his solidary liability, Gonzales has a right to be properly apprised of the default
or delinquency of the loan precisely because he is a co-signatory of the promissory notes and of
his solidary liability.
In business, more so for banks, the amounts demanded from the debtor or borrower have to be
definite, clear, and without ambiguity. It is not sufficient simply to be informed that one must
pay over a hundred thousand aggregate outstanding interest dues without clear and certain
figures. Thus, We find PCIB negligent in not properly informing Gonzales, who is an
accommodation party, about the default and the exact outstanding periodic interest dues. Without
being properly apprised, Gonzales was not given the opportunity to properly act on them.
The business of banking is impressed with public interest and great reliance is made on the
bank’s sworn profession of diligence and meticulousness in giving irreproachable service. Like a
common carrier whose business is imbued with public interest, a bank should exercise
extraordinary diligence to negate its liability to the depositors. In this instance, PCIB is sorely
remiss in the diligence required in treating with its client, Gonzales. It may not wantonly exercise
its rights without respecting and honoring the rights of its clients.
With banks, the degree of diligence required is more than that of a good father of the family
considering that the business of banking is imbued with public interest due to the nature of their
function. 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. Had
Gonzales been properly notified of the delinquencies of the PhP 1,800,000 loan and the process
of terminating his credit line under the COHLA, he could have acted accordingly and the
dishonor of the check would have been avoided.

WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the CA Decision
dated October 22, 2007 in CA-G.R. CV No. 74466 is hereby REVERSED and SET
ASIDE. The Philippine Commercial and International Bank (now Banco De Oro)
is ORDERED to pay Eusebio Gonzales PhP 50,000 as nominal damages, PhP 50,000 as moral
damages, PhP 10,000 as exemplary damages, and PhP 50,000 as attorneys fees.

No pronouncement as to costs.

SO ORDERED.
46 Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano
G.R. No. 170942, August 28, 2013
A banking institution is obliged to exercise the highest degree of diligence as well as high
standards ofintegrity and performance in all its transactions because its business is imbued with
public interest.
Facts
Respondent spouses own a 200-sqm lot and applied for a P303,450 loan to construct their house
under government’s Unified Home Lending Program (UHLP) through the petitioner as an
originating bank of the program. Under the scheme, petitioner shall advance the cost of the
construction to the building contractor and shall be reimbursed by the National Home Mortgage
Finance Corp. (NHMFC) upon submission of the certificate of completion of the construction
and its acceptance by the owner, original copy of the Occupancy Permit, and pictures of the
finished construction signed at the back by the homeowner.
To undertake the construction, respondents signed a contract with GCB Builders for a price of
P265,000 to be completed in 75 days. It was GCB who facilitated the application of the
respondent’s loan with Comsavings who misrepresented to the respondents that they should pre-
sign sets of documents including certificate of completion and acceptance in order for the fast
release of the loan to which respondents acceded to. The loan was eventually released in
tranches to GCB as assignee of respondent despite the unfinished construction. Despite the
incomplete construction and substandard workmanship and materials, Comsavings was able to
obtain reimbursement from NHMFC through the submission of the pre-signed documents by the
respondents as well as pictures of completed construction of another GCB project purportedly
signed by the respondents. Despite non-completion, NHMFC sent a letter to respondent
requiring them to start payment of the amortization as their loan had been released to
Comsavings bank to which respondent replied by letter protesting such demand arguing that they
have not signed any certificate of completion and acceptance or that if there be any, they have
been forged.
The house not being finished and not having been accepted by respondent more than 1 year after
GCB obtained complete payment and nearly 7 months after Comsavings obtained reimbursement
from NHMFC, respondents sued GCB, Comsavings and NHMFC for breach of contract and
damages praying that defendants be ordered to jointly and severally be liable to finish
construction and payment of other damages. Defendants asserted that the complaint stated no
cause of action while GCB claimed the project had been completed and that respondent failed to
occupy and pay balance of P46,849 while Comsavings argued that respondent is estopped from
assailing their pre-signing of the completion and acceptance report because they are given the
option not to pre-sign and that such pre-signing was not prohibited but a common practice. RTC
ruled in favour of the respondents and declared all defendants jointly and severally liable. On
appeal by defendants (except respondent), CA affirmed RTC but modified the award of damages
and absolved NHMFC of the liability. Thus this further appeal by Comsavings bank raising the
issue of error on CA in declaring it jointly and severally liable with GCB.
ISSUE
Whether or not petitioner should be held jointly and severally liable with GCB?
COURT RULING
YES.
Comsavings bank is solidarily liable with GCB Builders for damages to respondent on the basis
of Tortious acts as provided by Arts. 20 and 1170 of the CCP. A banking institution like
petitioner bank is obliged to exercise the highest degree of diligence as well as high standards of
integrity and performance in all its transactions because its business is imbued with public
interest.
There is no doubt that petitioner was grossly negligent in its dealings with respondents because it
did not comply with its legal obligation to exercise due diligence and integrity. As an originating
bank of the UHLP and being the maker of the certificate of completion and acceptance, it was
fully aware that the purpose of the signed certificate was to affirm that the house had been
completely constructed according to the approved plans and specification and respondents had
thereby accepted the delivery of the complete house. Knowing such purpose, it should have
desisted from presenting the certificate to respondents for their signature without such conditions
having been fulfilled. Had Comsavings bank been fair to the respondents as its clients, it should
have not made them pre-sign the certificate until it had confirmed that the construction had been
completed and indeed accepted. The court also belied petitioner’s assertion that the certificate
was submitted to NHMFC only after the project has been completed which was contradicted by
the evidence presented by NHMFC. Additionally, the Court declared petitioner grossly
negligent when it submitted to NHMFC fake pictures of purportedly completed project with
spurious signature of the respondents which could be easily avoided by conducting a simple
ocular inspection of the project itself.
WHEREFORE, the CA decision is AFFIRMED with modification on the amount of temperate
damages and attorney’s fees.
I. SHORT TITLE: Consolidated Rural Bank vs CA
II. FULL TITLE: CONSOLIDATED RURAL BANK (CAGAYAN

VALLEY), INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and HEIRS
OF TEODORO DELA CRUZ, respondents
III. TOPIC: Diligence required to be exercised by banks before entering a contract of
mortgage
The Madrid brothers were the registered owners of Lot A situated in Isabela.
Said lot was subdivided into several lots. Rizal Madrid sold part of his share identified lot
A-7 to Gamiao and Dayag by virtue of a Deed of Sale, to which his brothers offered no
objection as evidenced by their Joint Affidavit .The deed of sale was not registered with
the ORD of Isabela. However, Gamiao and Dayag declared the property in their names
on a Tax Declaration. Gamiao and Dayag sold the subject southern half of lot to Teodoro
dela Cruz, and the northern half to Restituto Hernandez.
Thereupon, Teodoro dela Cruz and Hernandez took possession of and cultivated the
portions of the property respectively sold to them (Later Restituto Hernandez donated the
northern half to his daughter. The children of Teodoro dela Cruz continued possession of
the southern half after their father’s death)
However, in another Deed of Sale, the Madrid brothers conveyed all their rights and
interests over lot A-7 to Pacifico Marquez which the former confirmed. The deed of sale
was registered with the ORD of Isabela. Subsequently, Marquez subdivided lot A-7 into
eight (8) lots namely: Lot Nos. 7036-A-7-A to 7036-A-7-H, for which TCT Nos. T-
149375 to T-149382 were issued to him.
Marquez and his spouse, Mercedita Mariana, mortgaged four (4) lots (Lots Nos. 7036-A-
7-A to 7036-A-7-D) to the Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter,
CRB) to secure a loan. These deeds of real estate mortgage were registered with the
ORD.
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the
mortgages in its favor and the lots were sold to it as the highest bidder.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural
Bank of Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00).
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto)
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382;
the foreclosure sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and
the sale to Calixto, the Heirs now respondents herein represented by Edronel dela Cruz,
filed a case for reconveyance and damages with the Regional Trial Court, Branch 19 of
Cauayan, Isabela, the southern portion of Lot No. 7036-A (hereafter, the subject
property) against Marquez, Calixto, RBC and CRB in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave
of court a Complaint in Intervention wherein she claimed the northern portion of Lot No.
7036-A-7.
In the Answer to the Amended Complaint, Marquez, as defendant, alleged that apart from
being the first registrant, he was a buyer in good faith and for value. He also argued that
the sale executed by Rizal Madrid to Gamiao and Dayag was not binding upon him, it
being unregistered. For his part, Calixto manifested that he had no interest in the subject
property as he ceased to be the owner thereof, the same having been reacquired by
defendant Marquez.
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good
faith and that they had the right to rely on the titles of Marquez which were free from any
lien or encumbrance.
The RTC handed down a decision in favor of Marquez. The Heirs interposed an appeal
with the CA, which upheld the claim of the Heirs. Dissatisfied, CRB filed a Motion for
Reconsideration pointing out, among others, that the Decision failed to establish good
faith on the part of the Heirs. Absent proof of possession in good faith, CRB avers, the
Heirs cannot claim ownership over the subject property.
In a Resolution the Court of Appeals stressed its disbelief in CRB’s allegation that it did
not merely rely on the certificates of title of the properties and that it conducted credit
investigation and standard ocular inspection.
Hence, Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant
Petition for Certiorari under Rule 45 of the Revised Rules of Court, seeking the review of
the Decision of the Court of Appeals which reversed the judgment of the lower court in
favor of petitioner. However, both Marquez and RBC elected not to challenge
the Decision of the appellate court.
VI. ISSUES: (1)Whether or not there is a double sale that requires the
application of Article 1544?
(2) Whether or not the Bank is a mortgagee in good faith?
VII. RULING: (1)NO. Like the lower court, the appellate court resolved the present
controversy by applying the rule on double sale provided in Article 1544 of the Civil
Code. They, however, arrived at different conclusions. The RTC made CRB and the other
defendants win, while the Court of Appeals decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property. Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith first recorded it in the Registry
of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. The provision is not applicable in the present
case. It contemplates a case of double or multiple sales by a single vendor. It cannot be
invoked where the two different contracts of sale are made by two different persons, one
of them not being the owner of the property sold. And even if the sale was made by the
same person, if the second sale was made when such person was no longer the owner of
the property, because it had been acquired by the first purchaser in full dominion, the
second purchaser cannot acquire any right. In the case at bar, the subject property was not
transferred to several purchasers by a single vendor. In the first deed of sale, the vendors
were Gamiao and Dayag whose right to the subject property originated from their
acquisition thereof from Rizal Madrid with the conformity of all the other Madrid
brothers. On the other hand, the vendors in the other or later deed were the Madrid
brothers but at that time they were no longer the owners since they had long before
disposed of the property in favor of Gamiao and Dayag.
In a situation where not all the requisites are present which would warrant the application
of Art. 1544, the principle of prior tempore, potior jure or simply “he who is first in time
is preferred in right, should apply.” The only essential requisite of this rule is priority in
time; in other words, the only one who can invoke this is the first vendee. Undisputedly,
he is a purchaser in good faith because at the time he bought the real property, there was
still no sale to a second vendee. In the instant case, the sale to the Heirs by Gamiao and
Dayag, who first bought it from Rizal Madrid, was anterior to the sale by the Madrid
brothers to Marquez. The Heirs also had possessed the subject property first in time.
Thus, applying the principle, the Heirs, without a scintilla of doubt, have a superior right
to the subject property. Moreover, it is an established principle that no one can give what
one does not have¾nemo dat quod non habet. Accordingly, one can sell only what one
owns or is authorized to sell, and the buyer can acquire no more than what the seller can
transfer legally.53 In this case, since the Madrid brothers were no longer the owners of
the subject property at the time of the sale to Marquez, the latter did not acquire any right
to it.
(2) NO. Although it is a recognized principle that a person dealing on a registered

land need not go beyond its certificate of title, it is also a firmly settled rule that where
there are circumstances which would put a party on guard and prompt him to investigate
or inspect the property being sold to him, such as the presence of occupants/tenants
thereon, it is, of course, expected from the purchaser of a valued piece of land to inquire
first into the status or nature of possession of the occupants, i.e., whether or not the
occupants possess the land en concepto de dueño, in concept of owner. As is the common
practice in the real estate industry, an ocular inspection of the premises involved is a
safeguard a cautious and prudent purchaser usually takes. Should he find out that the land
he intends to buy is occupied by anybody else other than the seller who, as in this case, is
not in actual possession, it would then be incumbent upon the purchaser to verify the
extent of the occupant’s possessory rights. The failure of a prospective buyer to take such
precautionary steps would mean negligence on his part and would thereby preclude him
from claiming or invoking the rights of a “purchaser in good faith.”
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor or mortgagor. His mere
refusal to believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendor’s or mortgagor’s title, will not make
him an innocent purchaser or mortgagee for value, if it afterwards develops that the title
was in fact defective, and it appears that he had such notice of the defects as would have
led to its discovery had he acted with the measure of a prudent man in a like situation.
Especially Banks, Banks’ business being impressed with public interest, are expected to
exercise more care and prudence than private individuals in their dealings, even those
involving registered lands. Hence, for merely relying on the certificates of title and for its
failure to ascertain the status of the mortgaged properties as is the standard procedure in
its operations, we agree with the Court of Appeals that CRB is a mortgagee in bad faith.
VIII. FALLO: WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of
Appeals’ Decision, as modified by its Resolution dated 5 January 1998, is AFFIRMED.
Costs against petitioner

I. SHORT TITLE: URSAL VS. CA
II. FULL TITLE: WINIFREDA URSAL, petitioner, vs. COURT OF APPEALS,
THE RURAL BANK OF LARENA (SIQUIJOR), INC. and SPOUSES JESUS
MONESET and CRISTITA MONESET, respondents.
III. TOPIC: Banks cannot merely rely on certificates of title in ascertaining the status of
mortgaged properties; as their business is impressed with public interest, they are
expected to exercise more care and prudence in their dealings than private
individuals.
Spouses Moneset are registered owners of a parcel of land and they executed on it
a Contract to Sell in favor of petitioner Ursal. Petitioner paid the monthly
installments but stopped due to the spouses’ failure to deliver the TCT. The land
was subject of an absolute deed of sale in favor of Dr. Canora, Jr. and was sold
again with pacto de retro with one Restituto Bundalo. Furthermore, the land was
mortgaged with respondent Rural Bank of Larena and corresponding annotations
to the title were made. The spouses failed to pay the loan, therefore, the bank
served a notice of extra-judicial foreclosure. Petitioner moved for the declaration
of the non-effectivity of the mortgage and the payment of damages alleging that
there was fraud/bad faith in the part of the spouses and with the bank for granting
the real estate mortgage in spite knowing that the property was in possession of
petitioner.

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
RTC ruled in favor of petitioner but maintained that the property be foreclosed.
CA affirmed in toto.
VI. ISSUES:
1. Whether or not respondent bank was able to make a thorough investigation as
prescribed by the laws.
2. Whether or not Ursal is the owner of the disputed land.
VII. RULING:
NO, in both issues.
Banks cannot merely rely on certificates of title in ascertaining the status
of mortgaged properties; as their business is impressed with public interest, they
are expected to exercise more care and prudence in their dealings than private
individuals. Indeed, the rule that persons dealing with registered lands can rely
solely on the certificate of title does not apply to banks.
In this case, the respondent is not an ordinary mortgagee; it is a mortgagee-bank.
As such, unlike private individuals, it is expected to exercise greater care and
prudence in its dealings, including those involving registered lands. A banking
institution is expected to exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of its operations.
Even so, it must be clearly noted that what Ursal and Moneset entered into
was a contract to sell wherein ownership is reserved to the vendor until full
payment of the purchase price. Moreover, under their conditions a separate
contract upon full payment will be further issued and that is the Deed of Sale
which presumes that the ownership is now vested to the vendee upon execution
thereof.
VIII. FALLO: WHEREFORE, the petition is DENIED. The decision of the Regional Trial
Court of Cebu City, Branch 24, promulgated on February 5, 1993 and the decision of
the Court of Appeals dated June 28, 1999 are hereby AFFIRMED. However, in the
higher interest of substantial justice, the Court MODIFIES the same to the effect that
the portion ordering the Rural Bank of Larena (Siquijor), Inc. to give petitioner the
preferential right to redeem the house and lot covered by Transfer Certificate of Title
No. 78374 is DELETED for lack of legal basis.
#49 Philippine National Bank (PNB) v. Corpuz
612 SCRA 493
Statement of Facts:
Respondent Mercedes Corpuz delivered her owner’s duplicate copy of Transfer Certificate of
Title (TCT) 32815 to Dagupan City Rural Bank as security against any liability she might incur
as its cashier. She later left her job and went to the United States.The rural bank where she
worked cancelled its lien on Corpuz’s title, having incurred no liability to her employer. Without
Corpuz’s knowledge and consent, however, Natividad Alano, the rural bank’s manager, turned
over Corpuz’s title to Julita Camacho and Amparo Callejo.
Conniving with someone from the assessor’s office, Alano, Camacho, and Callejo prepared a
falsified deed of sale, making it appear that Corpuz sold her land to one “Mary Bondoc” for
P50,000.00. They caused the registration of the deed of sale, resulting in the cancellation of
Corpuz’ title and the issuance of a TCT in Bondoc’s. A month after the trio executed another
fictitious deed of sale with “Mary Bondoc” selling the property to the spouses Rufo and Teresa
Palaganas for only P15,000.00 which sale resulted in the issuance of TCT in favor of the
Palaganases. The Palaganases executed a deed of sale in favor of spouses Virgilio and Elena
Songcuan for P50,000.00, resulting in the issuance of TCT. Finally, four months later, the
Songcuans took out a loan of P1.1 million from petitioner PNB and, to secure payment, they
executed a real estate mortgage on their title. Before granting the loan, the PNB had the title
verified and the property inspected.
On November 20, 1995 respondent Corpuz filed, through an attorney-in-fact, a complaint before
the Dagupan Regional Trial Court (RTC) against Mary Bondoc, the Palaganases, the Songcuans,
and petitioner PNB, asking for the annulment of the layers of deeds of sale covering the land, the
cancellation of TCTs and the reinstatement of TCT 32815 in her name.
Petitioner PNB points out that, since it did a credit investigation, inspected the property, and
verified the clean status of the title before giving out the loan to the Songcuans, it should be
regarded as a mortgagee in good faith. PNB claims that the precautions it took constitute
sufficient compliance with the due diligence required of banks when dealing with registered
lands.
The RTC rendered a decision granting respondent Corpuz’s prayers. On appeal to the Court of
Appeals (CA), the CA affirmed the decision of the RTC and denied the motion for its
reconsideration, prompting PNB to take recourse to the Supreme Court.
Issue:
Whether or not petitioner PNB is a mortgagee in good faith, entitling it to its lien on the title to
the property in dispute
Ruling:
As a rule, the Court would not expect a mortgagee to conduct an exhaustive investigation of the
history of the mortgagor’s title before he extends a loan. But petitioner PNB is not an ordinary
mortgagee; it is a bank.2 Banks are expected to be more cautious than ordinary individuals in
dealing with lands, even registered ones, since the business of banks is imbued with public
interest.3 It is of judicial notice that the standard practice for banks before approving a loan is to
send a staff to the property offered as collateral and verify the genuineness of the title to
determine the real owner or owners.
One of the CA’s findings in this case is that in the course of its verification, petitioner PNB was
informed of the previous TCTs covering the subject property. And the PNB has not categorically
contested this finding. It is evident from the faces of those titles that the ownership of the land
changed from Corpuz to Bondoc, from Bondoc to the Palaganases, and from the Palaganases to
the Songcuans in less than three months and mortgaged to PNB within four months of the last
transfer.
The above information in turn should have driven the PNB to look at the deeds of sale involved.
It would have then discovered that the property was sold for ridiculously low prices: Corpuz
supposedly sold it to Bondoc for just P50,000.00; Bondoc to the Palaganases for just P15,000.00;
and the Palaganases to the Songcuans also for just P50,000.00. Yet the PNB gave the property an
appraised value of P781,760.00. Anyone who deliberately ignores a significant fact that would
create suspicion in an otherwise reasonable person cannot be considered as an innocent
mortgagee for value.
The Court finds no reason to reverse the CA decision.WHEREFORE, the Court DENIES the
petition and AFFIRMS the decision of the Court of Appeals dated July 31, 2007 and its
resolution dated December 17, 2007 in CA-G.R. CV 60616.
SO ORDERED
I.SHORT TITLE: 52 CANLAS V. CA
II. FULL TITLE: OSMUNDO S. CANLAS and ANGELINA CANLAS, vs. COURT OF
APPEALS, ASIAN SAVINGS BANK, MAXIMO C. CONTRERAS and VICENTE
MAOSCA- 326 SCRA 415
February 28, 2001, J. Purisima
Sometime in August, 1982, the petitioner, Osmundo S. Canlas, and private respondent,
Vicente Maosca, decided to venture in business and to raise the capital needed therefor. The
former then executed a Special Power of Attorney authorizing the latter to mortgage two parcels
of land situated in San Dionisio, (BF Homes) Paranaque, Metro Manila, each lot with semi-
concrete residential house existing thereon, and respectively covered by Transfer Certificate of
Title No. 54366 in his (Osmundo's) name and Transfer Certificate of Title No. S-78498 in the
name of his wife Angelina Canlas.
Subsequently, Osmundo Canlas agreed to sell the said parcels of land to Vicente
Manosca, for and in consideration of P850,000.00,P500,000.00 of which payable within one
week, and the balance of P350,000.00 to serve as his (Osmundo's) investment in the business.
Thus, Osmundo Canlas delivered to Vicente Maosca the transfer certificates of title of the
parcels of land involved. Vicente Maosca, as his part of the transaction, issued two postdated
checks in favor of Osmundo Canlas in the amounts of P40,000.00 and P460,000.00, respectively,
but it turned out that the check covering the bigger amount was not sufficiently funded Ne-xold
On September 3, 1982, Vicente Maosca was able to mortgage the same parcels of land
for P100,000.00 to a certain Attorney Manuel Magno, with the help of impostors who
misrepresented themselves as the spouses, Osmundo Canlas and Angelina Canlas.
On September 29, 1982, private respondent Vicente Maosca was granted a loan by the
respondent Asian Savings Bank (ASB) in the amount of P500,000.00, with the use of subject
parcels of land as security, and with the involvement of the same impostors who again
introduced themselves as the Canlas spouses. When the loan it extended was not paid, respondent
bank extrajudicially foreclosed the mortgaged.
On January 15, 1983, Osmundo Canlas wrote a letter informing the respondent bank that
the execution of subject mortgage over the two parcels of land in question was without
their (Canlas spouses) authority, and request that steps be taken to annul and/or revoke the
questioned mortgage. On January 18, 1983, petitioner Osmundo Canlas also wrote the office of
Sheriff Maximo C. Contreras, asking that the auction sale scheduled on February 3, 1983 be
cancelled or held in abeyance. But respondents Maximo C. Contreras and Asian Savings Bank
refused to heed petitioner Canlas' stance and proceeded with the scheduled auction sal
Consequently, on February 3, 1983 the herein petitioners instituted the present case for
annulment of deed of real estate mortgage with prayer for the issuance of a writ of preliminary
injunction; and on May 23, 1983, the trial court issued an Order restraining the respondent
sheriff from issuing the corresponding Certificate of Sheriffs Sale.
VI. ISSUE:
Whether or not respondent bank exercise due diligence in granting the loan
VII. RULING:
Evidently, the efforts exerted by the bank to verify the identity of the couple posing as
Osmundo Canlas and Angelina Canlas fell short of the responsibility of the bank to observe more
than the diligence of a good father of a family. The negligence of respondent bank was
magnified by the fact that the previous deed of mortgage (which was used as the basis for
checking the genuineness of the signatures of the suppose Canlas spouses) did not bear the tax
account number of the spouses, as well as the Community Tax Certificate of Angelina Canlas.
But such fact notwithstanding, the bank did not require the impostors to submit additional proof
of their true identity.
Under the doctrine of last clear chance, which is applicable here, the respondent bank
must suffer the resulting loss. In essence, the doctrine of last clear chance is to the effect that
where both parties are negligent but the negligent act of one is appreciably later in point of time
than that of the other, or where it is impossible to determine whose fault or negligence brought
about the occurrence of the incident, the one who had the last clear opportunity to avoid the
impending harm but failed to do so, is chargeable with the consequences arising therefrom.
Stated differently, the rule is that the antecedent negligence of a person does not preclude
recovery of damages caused by the supervening negligence of the latter, who had the last fair
chance to prevent the impending harm by the exercise of due diligence.
Assuming that Osmundo Canlas was negligent in giving Vicente Maosca the opportunity
to perpetrate the fraud, by entrusting to latter the owner's copy of the transfer certificates of title
of subject parcels of land, it cannot be denied that the bank had the last clear chance to prevent
the fraud, by the simple expedient of faithfully complying with the requirements for banks to
ascertain the identity of the persons transacting with them.
For not observing the degree of diligence required of banking institutions, whose business is
impressed with public interest, respondent Asian Savings Bank has to bear the loss sued upon.
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and a new
one is hereby entered DISMISSING the complaint of the spouses Osmundo and Angelina
Canlas. On the counterclaim of defendant Asian Savings Bank, the plaintiffs Canlas spouses are
hereby ordered to pay the defendant Asian Savings Bank the amount of P50,000.00 as moral
and exemplary damages plus P15,000.00 as and for attorney's fees.
I. SHORT TITLE: UCPB vs. Ramos
II. FULL TITLE: 53 G.R. No. 147800. November 11, 2003. UNITED COCONUT
PLANTERS BANK, petitioner, vs. TEOFILO C. RAMOS, respondent
Teofilo C. Ramos, the respondent (as plaintiff) alleged that he was the owner of a parcel of land
covered by TCT No. 275167; that Teofilo Ramos, Sr., one of the judgment debtors of UCPB in
Civil Case No. 16453, was only his namesake; that without any legal basis, the petitioner and
Sheriff Villapaa caused the annotation of a notice to levy on the TCT of his aforesaid property
which caused the disapproval of his loan from UCPB and, thus made him lose an opportunity to
participate in the bidding of a considerable project; that by reason of such wrongful annotation of
notice of levy, he suffered sleepless nights, moral shock, mental anguish and almost a heart
attack due to high blood pressure.
The RTC rendered a decision in favor of the respondent. The complaint against Sheriff Villapaa
was dismissed on the ground that he was merely performing his duties. Dissatisfied, the
petitioner interposed an appeal to the Court of Appeals (CA). On March 30, 2001, the CA
rendered a decision affirming, in toto the decision of the trial court.
The CA ruled that the petitioner was negligent in causing the annotation of notice of levy on the
title of the petitioner for its failure to determine with certainty whether the defendant Teofilo
Ramos, Sr. in Civil Case No. 16453 was the registered owner of the property covered by TCT
No. 275167, and to inform the sheriff that the registered owners of the property were the
respondent and his wife Rebecca Ramos, and thereafter request for the cancellation of the motion
of levy on the property.
Disappointed, the petitioner filed this instant petition.
VI. ISSUE:
Whether or not the petitioner acted negligently in causing the annotation of levy on the title of
the respondent; (b) if so, whether or not the respondent was the real party-in-interest as plaintiff
to file an action for damages against the petitioner considering that the loan applicant with UCPB
and PDB was RAMDUSTRIAL CORPORATION; (c) if so, whether or not the respondent is
entitled to moral damages, exemplary damages and attorney’s fees.
VII RULING:
Yes. In this case, the name of the judgment debtor in Civil Case No. 16453 was Teofilo Ramos,
Sr., as appearing in the judgment of the court and in the writ of execution issued by the trial
court. The name of the owner of the property covered by TCT No. 275167 was Teofilo C.
Ramos. It behooved the petitioner to ascertain whether the defendant Teofilo Ramos, Sr. in Civil
Case No. 16453 was the same person who appeared as the owner of the property covered by the
said title. If the petitioner had done so, it would have surely discovered that the respondent was
not the surety and the judgment debtor in Civil Case No. 16453. The petitioner failed to do so,
and merely assumed that the respondent and the judgment debtor Teofilo Ramos, Sr. were one
and the same person.
In sum, we find that the petitioner acted negligently in causing the annotation of notice of levy in
the title of the herein respondent, and that its negligence was the proximate cause of the damages
sustained by the respondent.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56737 is AFFIRMED
WITH MODIFICATION. The award for exemplary damages is deleted. No costs.
SO ORDERED.
54 HEIRS OF EDUARDO MANLAPAT

v. COURT OF APPEALS
The case:
Petition is for review on certiorari assailing the decision of the Court of Appeals reversing the decision of
the Trial Court. The petition is denied by the Supreme Court.
The facts:

The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters,
located at Panghulo, Obando, Bulacan. The property had been originally in the possession of
Jose Alvarez, Eduardo’s grandfather, until his demise in 1916. It remained unregistered until 8
October 1976 when OCT No. P-153(M) was issued in the name of Eduardo pursuant to a free
patent issued in Eduardo’s name that was entered in the Registry of Deeds of Meycauayan,
Bulacan. The subject lot is adjacent to a fishpond owned by one Ricardo Cruz (Ricardo),
predecessor-in-interest of respondents Consuelo Cruz and Rosalina Cruz-Bautista (Cruzes). On
19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an area
of 553 square meters to Ricardo. The sale is evidenced by a deed of sale entitled Kasulatan ng
Bilihang Tuluyan ng Lupang Walang Titulo (Kasulatan) which was signed by Eduardo himself
as vendor and his wife Engracia Aniceto with a certain Santiago Enriquez signing as witness.
The deed was notarized by Notary Public Manolo Cruz. On 4 April 1963, the Kasulatan was
registered with the Register of Deeds of Bulacan. On 18 March 1981, another Deed of
Sale conveying another portion of the subject lot consisting of 50 square meters as right of way
was executed by Eduardo in favor of Ricardo in order to reach the portion covered by the first
sale executed in 1954 and to have access to his fishpond from the provincial road. The deed was
signed by Eduardo himself and his wife Engracia Aniceto, together with Eduardo Manlapat, Jr.
and Patricio Manlapat. The same was also duly notarized on 18 July 1981 by Notary Public
Arsenio Guevarra.

In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo,
executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP),
for P100,000.00 with the subject lot as collateral. Banaag deposited the owners duplicate
certificate of OCT No. P-153(M) with the bank. On 31 August 1986, Ricardo died without
learning of the prior issuance of OCT No. P-153(M) in the name of Eduardo. His heirs, the
Cruzes, were not immediately aware of the consummated sale between Eduardo and Ricardo.
Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his
spouse; and children, Patricio, Bonifacio, Eduardo, Corazon, Anselmo, Teresita and Gloria, all
surnamed Manlapat. Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the prior
sale in favor of their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to learn
about the sale and the issuance of the OCT in the name of Eduardo. Upon learning of their right
to the subject lot, the Cruzes immediately tried to confront petitioners on the mortgage and
obtain the surrender of the OCT. The Cruzes, however, were thwarted in their bid to see the
heirs. On the advice of the Bureau of Lands, NCR Office, they brought the matter to
the barangay captain of Barangay Panghulo, Obando, Bulacan. During the hearing, petitioners
were informed that the Cruzes had a legal right to the property covered by OCT and needed the
OCT for the purpose of securing a separate title to cover the interest of Ricardo. Petitioners,
however, were unwilling to surrender the OCT. Having failed to physically obtain the title from
petitioners, in July 1989, the Cruzes instead went to RBSP which had custody of the owners
duplicate certificate of the OCT, earlier surrendered as a consequence of the mortgage.
Transacting with RBSPs manager, Jose Salazar (Salazar), the Cruzes sought to borrow the
owners duplicate certificate for the purpose of photocopying the same and thereafter showing a
copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the owners duplicate
certificate outside the bank premises when the latter showed the Kasulatan. The Cruzes returned
the owners duplicate certificate on the same day after having copied the same. They then brought
the copy of the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and showed the
same to him to secure his legal opinion as to how the Cruzes could legally protect their interest in
the property and register the same. Flores suggested the preparation of a subdivision plan to be
able to segregate the area purchased by Ricardo from Eduardo and have the same covered by a
separate title. Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land
Registration Officer, Director III, Legal Affairs Department, Land Registration Authority at
Quezon City, who agreed with the advice given by Flores. Relying on the suggestions of Flores
and Arandilla, the Cruzes hired two geodetic engineers to prepare the corresponding subdivision
plan. The subdivision plan was presented to the Land Management Bureau, Region III, and there
it was approved by a certain Mr. Pambid of said office on 21 July 1989. After securing the
approval of the subdivision plan, the Cruzes went back to RBSP and again asked for the owners
duplicate certificate from Salazar. The Cruzes informed him that the presentation of the owners
duplicate certificate was necessary, per advice of the Register of Deeds, for the cancellation of
the OCT and the issuance in lieu thereof of two separate titles in the names of Ricardo and
Eduardo in accordance with the approved subdivision plan. Before giving the owners duplicate
certificate, Salazar required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal
counsel of RBSP, to secure from the latter a clearance to borrow the title. Atty. Santiago would
give the clearance on the condition that only Cruzes put up a substitute collateral, which they
did. As a result, the Cruzes got hold again of the owners duplicate certificate. After the Cruzes
presented the owners duplicate certificate, along with the deeds of sale and the subdivision plan,
the Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M)
covering 603 square meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M)
covering the remaining 455 square meters in the name of Eduardo. On 9 August 1989, the
Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M) in the name of
Eduardo and retrieved the title they had earlier given as substitute collateral. After securing the
new separate titles, the Cruzes furnished petitioners with a copy of TCT No. 9327-P(M) through
the barangay captain and paid the real property tax for 1989. The Cruzes also sent a formal
letter to Guillermo Reyes, Jr., Director, Supervision Sector, Department III of the Central Bank
of the Philippines, inquiring whether they committed any violation of existing bank laws under
the circumstances. A certain Zosimo Topacio, Jr. of the Supervision Sector sent a reply letter
advising the Cruzes, since the matter is between them and the bank, to get in touch with the bank
for the final settlement of the case. In October of 1989, Banaag went to RBSP, intending to
tender full payment of the mortgage obligation. It was only then that he learned of the dealings of
the Cruzes with the bank which eventually led to the subdivision of the subject lot and the
issuance of two separate titles thereon. In exchange for the full payment of the loan, RBSP tried
to persuade petitioners to accept TCT No. T-9327-P(M) in the name of Eduardo. As a result,
three (3) cases were lodged, later consolidated, with the trial court, all involving the issuance of
the TCTs, to wit: (1) Civil Case No. 650-M-89, for reconveyance with damages filed by the
heirs of Eduardo Manlapat against Consuelo Cruz, Rosalina Cruz-Bautista, Rural Bank of San
Pascual, Jose Salazar and Jose Flores, in his capacity as Deputy Registrar, Meycauayan Branch
of the Registry of Deeds of Bulacan; (2) Civil Case No. 141-M-90 for damages filed by Jose
Salazar against Consuelo Cruz, et. [sic] al.; and (3) Civil Case No. 644-M-89, for declaration of
nullity of title with damages filed by Rural Bank of San Pascual, Inc. against the spouses Ricardo
Cruz and Consuelo Cruz, et al.
The issues:
1. Whether or not the mortgagee bank (Rural Bank of San Pascual, Inc.) can rely on what
appears on the certificate of title presented by the mortgagor and is not expected to
conduct an exhaustive investigation on the history of the mortgagor’s title.
2. Whether or not the mortgagee bank (Rural Bank of San Pascual, Inc.) is liable for
damages.
The SC decision:
1. No. A mortgagee-bank must exercise due diligence before entering into a mortgage
contract. Judicial notice is taken of the standard practice for banks, before approving a
loan, to send representatives to the premises of the land offered as collateral and to
investigate who the real owners thereof are. Banks, indeed, should exercise more care
and prudence in dealing even with registered lands, than private individuals, as their
business is one affected with public interest. Banks keep in trust money belonging to
their depositors, which they should guard against loss by not committing any act of
negligence that amounts to lack of good faith.
2. Yes. The bank should not have allowed complete strangers to take possession of the
owners duplicate certificate even if the purpose is merely for photocopying for a danger
of losing the same is more than imminent. Such act constitutes manifest negligence on
the part of the bank which would necessarily hold it liable for damages under Article
1170 and other relevant provisions of the Civil Code.

55 DAVID SIA TIO and ROBERT SIA TIO, petitioners,
vs LORENZO ABAYATA, et al. respondents.
G.R. No. 160898, 556 SCRA 175 June 27, 2008
FACTS:
It is a petition for Review on Certiorari under Rule 45 of the Rules of Court in the
Decision rendered by the Court of Appeals (CA) dismissing the appeal of David Sia Tioand
Robert Sia Tio (petitioners) and affirming the Decision of Regional Trial Court (RTC) of Lapu-
Lapu City, Branch 54.
The successors-in-interest of Celedonio Abayata (respondents) filed an action for the

annulment of mortgage, mortgage sale, a subsequent sale and certificates of title. The
respondents' contention is that they are the absolute owners of the property in dispute, a 1,868-
square meter parcel of land located in Lapu-Lapu City, Cebu and alleged that through
machinations, defendant Benjamin Lasola (Lasola) was able to register the property in his name
and mortgage it to secure a loan from the Commercial Rural Bank of Tabogon (Cebu), Inc.
(Rural Bank). In turn, the Rural Bank foreclosed the mortgage and sold the property to
petitioners who registered the property. Petitioners and the Rural Bank filed their respective
Answers claiming that they were innocent purchasers for value and in good faith. Defendant
Lasola and his wife were declared in default.
The RTC rendered its decision in favor of respondents’ claims. The petitioners and the
Rural Bank appealed to the CA but the CA just affirmed the decision of the RTC and dismissed
the present appeal. Petitioners filed a motion for reconsideration but it was denied by the CA.
Hence, petitioner filed a Petition for Review before the Supreme Court
ISSUE:
W/N Defendant Rural Bank was a mortgagee in good faith?
HELD:
No. As a banking institution, it is expected to exercise due diligence before entering into
a mortgage contract. The ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of its operations. Defendant Rural
Bank was not a mortgagee in good faith because of its failure to examine more closely the title of
the mortgagors despite the first-hand knowledge that other persons, and not the would-be
mortgagors, were in possession of the property. The very fact that the lot was not in the
possession of the Lasolas should have put the defendant bank on guard and prompted it to make
a more thorough inquiry into the ownership of the lot. The defendant Rural Bank relied on the
representation of Banjamin Lasola that the residents on the lot were squatters. There is no
showing that it inquired from the residents themselves as to who the real owners were, something
it would have done if it were reasonably diligent and prudent in verifying the true ownership of
the lot. Instead, as testified to by Mrs. Lechido, the bank relied merely on the declarations of
Benjamin Lasola and one resident on the lot that the houses were built and occupied by squatters.
Thus, since petitioners were without actual notice of respondents' claim of ownership
over the property, and which claim was not discoverable by them after examining the title, the
annotations on the title, and an observation of the property, then they are entitled to a good faith
status.
WHEREFORE, the petition is GRANTED. The Decision dated May 6, 2003 and
Resolution dated October 8, 2003, rendered by the Court of Appeals in CA-G.R. CV No. 56665
are REVERSED and SET ASIDE and Civil Case No. 2230-L is DISMISSED.
Petitioners' counterclaim against respondents and cross-claim against the Commercial

Rural Bank of Tabogon (Cebu), Inc. are DENIED for lack of merit.
I. SHORT TITLE: SECURITY BANK vs CUENCA
II. FULL TITLE: SECURITY BANK AND TRUST COMPANY versus

RODOLFO M. CUENCA
GR No. 138544; OCTOBER 3, 2000.
III. TOPIC: Liability of a surety.
IV. STATEMENT OF FACTS: On 10 November 1980, [Petitioner] Security

Bank and Trust Co. granted appellant Sta. Ines Melale Corporation [SIMC] a
credit line in the amount of (P8,000,000.00) to assist the latter in meeting the
additional capitalization requirements of its logging operations. The Credit
Approval Memorandum expressly stated that the P8M Credit Loan Facility
shall be effective until 30 November 1981.
And as an additional security, its President and Chairman of the Board of Directors Rodolfo
Cuenca, executed an Indemnity agreement in favor of Security Bank whereby he bound himself
jointly and severally with Sta. Ines.
Specific stipulations:
 The bank reserves the right to amend any of the aforementioned terms and conditions
upon written notice to the Borrower,
 As additional security for the payment of the loan, Rodolfo M. Cuenca executed an
Indemnity Agreement dated 17 December 1980 solidary binding himself:
Rodolfo M. Cuenca x x x hereby binds himself x x x jointly and severally with the client
(SIMC) in favor of the bank for the payment, upon demand and without the benefit of
excussion of whatever amount x x x the client maybe indebted to the bank x x x by virtue
of aforesaid credit accommodation(s) including the substitutions, renewals, extensions,
increases, amendments, conversions and revivals of the aforesaid credit
accommodation(s) x x x .
Sometime in 1985 Cuenca resigned as President and Chairman of the Board of Directors of
defendant-appellant Sta. Ines. Subsequently, the shareholdings of Cuenca in Sta. Ines were sold
at a public auction to Adolfo Angala. Before and after this, Sta Ines availed of its credit line. Sta
Ines encountered difficulty in making the amortization payments on its loans and requested
SBTC for a complete restructuring of its indebtedness. SBTC accommodated SIMC’s request
and signified its approval in a letter dated 18 February 1988 wherein SBTC and Sta. Ines,
without notice to or the prior consent of Cuenca, agreed to restructure the past due obligations
of Sta. Ines. To formalize their agreement to restructure the loan obligations of Sta. Ines,
Security Bank and Sta. Ines executed a Loan Agreement dated 31 October 1989.
Sta Ines made payments up to P1,757,000.00. They defaulted in the payment of its restructured
loan obligations to SBTC despite demands made upon appellant SIMC and Cuenca, SBTC filed
a complaint for collection of sum of resulting after trial on the merits in a decision by the court a
quo, from which Cuenca appealed.
Court of Appeals released Cuenca from liability because 1989 Loan Agreement novated the
1980 credit accommodation which extinguished the Indemnity Agreement for which Cuenca was
liable solidarily. No notice/consent to restructure. Since with expiration date, liability is only up
to that date and up to that amount (P8M).
It further held that the restructuring of Sta. Ines obligation under the 1989 Loan Agreement
was tantamount to a grant of an extension of time to the debtor without the consent of the
surety. Under Article 2079 of the Civil Code, such extension extinguished the surety.
The CA also opined that the surety was entitled to notice, in case the bank and Sta. Ines
decided to materially alter or modify the principal obligation after the expiry date of the credit
accommodation.
V. STATEMENT OF THE CASE: Being an onerous undertaking, a surety

agreement is strictly construed against the creditor, and every doubt is
resolved in favor of the solidary debtor. The fundamental rules of fair play
require the creditor to obtain the consent of the surety to any material
alteration in the principal loan agreement, or at least to notify it
thereof. Hence, petitioner bank cannot hold herein respondent liable for loans
obtained in excess of the amount or beyond the period stipulated in the
original agreement, absent any clear stipulation showing that the latter waived
his right to be notified thereof, or to give consent thereto. This is especially
true where, as in this case, respondent was no longer the principal officer or
major stockholder of the corporate debtor at the time the later obligations were
incurred. He was thus no longer in a position to compel the debtor to pay the
creditor and had no more reason to bind himself anew to the subsequent
obligations. This is the main principle used in denying the present Petition for
Review under Rule 45 of the Rules of Court. Petitioner assails the December
22, 1998 Decision of the Court of Appeals (CA) in CA-GR CV No. 56203.
VI. ISSUE: Whether or not the Honorable Court of Appeals erred in ruling that
the restructuring of SIMCs indebtedness under the P8 million credit
accommodation was tantamount to an extension granted to SIMC without
respondent Cuenca’s consent, thus extinguishing his liability under the
Indemnity Agreement pursuant to Article 2079 of the Civil Code.
VII. RULING: An obligation may be extinguished by novation, pursuant to

Article 1292 of the Civil Code, which reads as follows:
ART. 1292. In order that an obligation may be extinguished by another which substitute the
same, it is imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
Novation of a contract is never presumed. It has been held that in the absence of an express
agreement, novation takes place only when the old and the new obligations are incompatible on
every point. Indeed, the following requisites must be established: (1) there is a previous valid
obligation; (2) the parties concerned agree to a new contract; (3) the old contract is extinguished;
and (4) there is a valid new contract.
Petitioner contends that there was no absolute incompatibility between the old and the new
obligations, and that the latter did not extinguish the earlier one. It further argues that the 1989
Agreement did not change the original loan in respect to the parties involved or the obligations
incurred. It adds that the terms of the 1989 Contract were not more onerous. Since the original
credit accommodation was not extinguished, it concludes that Cuenca is still liable under the
Indemnity Agreement.
We reject these contentions. Clearly, the requisites of novation are present in this case. The
1989 Loan Agreement extinguished the obligation obtained under the 1980 credit
accommodation. This is evident from its explicit provision to liquidate the principal and the
interest of the earlier indebtedness, as the following shows:
1.02. Purpose. The First Loan shall be applied to liquidate the principal portion of the Borrowers
present total outstanding Indebtedness to the Lender (the Indebtedness) while the Second Loan
shall be applied to liquidate the past due interest and penalty portion of the Indebtedness.
Furthermore, several incompatibilities between the 1989 Agreement and the 1980 original
obligation demonstrate that the two cannot coexist. While the 1980 credit accommodation had
stipulated that the amount of loan was not to exceed P8 million, the 1989 Agreement provided
that the loan was P12.2 million. The periods for payment were also different.
Likewise, the later contract contained conditions, positive covenants and negative covenants
not found in the earlier obligation. As an example of a positive covenant, Sta. Ines undertook
from time to time and upon request by the Lender, to perform such further acts and/or execute
and deliver such additional documents and writings as may be necessary or proper to effectively
carry out the provisions and purposes of this Loan Agreement. Likewise, SIMC agreed that it
would not create any mortgage or encumbrance on any asset owned or hereafter acquired, nor
would it participate in any merger or consolidation.
Since the 1989 Loan Agreement had extinguished the original credit accommodation, the
Indemnity Agreement, an accessory obligation, was necessarily extinguished also, pursuant to
Article 1296 of the Civil Code, which provides:
ART. 1296. When the principal obligation is extinguished in consequence of a novation,

accessory obligations may subsist only insofar as they may benefit third persons who did not
give their consent.
VIII. FALLO: WHEREFORE, the Petition is DENIED and the assailed

Decision AFFIRMED. Costs against petitioner. SO ORDERED
CASE NO. 58 GENRAL BANKING LAW MAPALAD,
JULIANNE MARIE M.
I. SHORT TILE: STATE INVESTMENT HOUSE INC., VS. CA
II: FULL TITLE: STATE UNVESTMENT HOUSE INC VS COURT APPEALS,

LOMUYOIN TIMBER INDUSTRIES INC, AMANDA MALONJAO
AND RUFINO MALONJAO G.R. NO 112590 JULY 12 2001
III: TOPIC: GENERAL BANKING LAW OF 2000- INIQUITOUS INTEREST

RATES
Lomuyon Timber Industries, Inc., (Lomuyon for brevity) agreed to sell to plaintiff its
receivables at a discount on a with recourse basis. It was agreed upon that if should the
receivable will remain unpaid, the plaintiff at its discrimination, may impose penalty of 3% per
month. To secure the payment of the receivables, Malonjaos also executed in favor of plaintiff, a
real estate maortgage over certain real properties. The tital consideration by Lomuyon to herein
plaintiff is P 2,558,073.75 consisting various checks. The same were all drawn by Amanda
Malonjao and Anotnietta Malonjao Roque to the order of payee Lomuyon which in turn,
indorsed the checks to plaintiff. However, when plaintiff presented the checks for payment to the
drawee bank, the same were dishonored for having been drawn against insufficient funds except
for one check TCBTC 6118821.
Plaintiff made repeated demands on defendants to make good the checks they indorsed
and to pay the penalty charges it has imposed thereon. Defendants failed to pay the value of the
checks. Plaintiff, thus, institute a foreclosure proceedings. After due proceedings, the mortgaged
property was sold in public auction in the amount P 4,233, 874.12. The plaintiff complained that
after deducting the proceeds of the sale, the same was not able to cover the whole amount of
indebtedness. There remains a defienciency of 2, 239, 237.10. The plaintiff filed action for sum
money to collect the said defiency plus attorneys fees, damages and litigation expenses.
The defendants in their answer admitted that they indeed incurred liability from here
plaintiff. However, plaintiffs contended that plaintiffs computation of their outstanding balance
is erroneous and the interest were unconscionable.
V: STATE OF THE CASE:
The lower court ruled in favor of defendants and held that they were no longer entitled to
the deficiency.
On appeal, the Court of Appeals rendered its decision stating among others that herein
petitioner is no longer entitled to the deficiency considering that penalty charges imposed by the
petitioner on the principal obligation were highly iniquitous and unconscionable.
Hence, this Petition for Review on Certiorari.
VI: ISSUES:
A. Whether or not petitioner is entitled to the deficiency amount computed taking into
consideration the penalty charges it imposed upon defendants were highly iniquitous and
unconscionable as ruled by the Court Appeals?
VII.HELD:
The Supreme Court does find any reversible error committed by the respondent court in
ruling that the petitioner was no longer entitled to recover any deficiency amount after the
foreclosure sale on February 14, 1983. At the time of the auction sale on February 14, 1983, the
properties were sold in the amount of P4,223,874.00 with the petitioner as the highest
bidder. Deducting this amount from the outstanding obligation of P4,809,187.12 as stipulated in
the Statement of Account, there would therefore be a balance of only about P575,313.12.
Whether or not the alleged deficiency from the foreclosure sale was P575,313.12 or
P2,601,147.62 as claimed by petitioner was of no moment. The respondent court disallowed the
payment of the deficiency altogether because it found that the principal obligation of the private
respondent would not have ballooned to such a horrendous amount of P4.8M as of September
21, 1991 if not for the penalty charge of 3% per month or 36% per annum.
Article 2227 of the New Civil Code which states that Liquidated damages, whether
intended as an indemnity or penalty, shall be equitably reduced if they are iniquitous and
unconscionable and Article 1229 which states that judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if there
has been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable supported the said ruling
In exercising this vested power to determine what is iniquitous and unconscionable, the Court
must consider the circumstances of each case. It should be stressed that the Court will not make
any sweeping ruling that surcharges and penalties imposed by banks for non-payment of the
loans extended by them are generally iniquitous and unconscionable. What may be iniquitous
and unconscionable in one case, may be totally just and equitable in another. This provision of
law will have to be applied to the established facts of any given case.
VII FALLO:
ACCORDINGLY, the judgment appealed from is hereby AFFIRMED

#59 Consolidated Bank v. CA
356 SCRA 671
On July 13, 1982, respondents Continental Cement Corporation (respondent Corporation) and
Gregory T. Lim (respondent Lim) obtained from petitioner Consolidated Bank and Trust
Corporation a Letter of Credit No. DOM-23277 in the amount of P1,068,150.00. On the same
date, respondent Corporation paid a marginal deposit of P320,445.00 to petitioner. The letter of
credit was used to purchase around five hundred thousand liters of bunker fuel oil from Petrophil
Corporation, which the latter delivered directly to respondent Corporation in its Bulacan plant. A
trust receipt for the amount of P1,001,520.93 was then executed by respondent Corporation, with
respondent Lim as signatory.
Claiming that respondents failed to turn over the goods covered by the trust receipt or the
proceeds thereof, petitioner filed a complaint for sum of money with application for preliminary
attachmen3 before the Regional Trial Court of Manila.
Respondents averred that the transaction between them was a simple loan and not a trust receipt
transaction, and that the amount claimed by petitioner did not take into account payments already
made by them. Respondent Lim also denied any personal liability in the subject transactions.
The trial court dismissed the Complaint and ordered petitioner to pay respondents P490,228.90
representing overpayment of respondent Corporation, with interest thereon at the legal rate and
P10,000.00 as attorney’s fees; and costs.
Both parties appealed to the Court of Appeals, which partially modified the Decision by deleting
the award of attorney’s fees in favor of respondents and, instead, ordering respondent
Corporation to pay petitioner P37,469.22 as and for attorney’s fees and litigation expenses.
Issues:
1. Whether the respondent court erred in holding that there was overpayment by respondent
corporation in the absence of any computation
2. Whether the manner of computation of the marginal deposit by the respondent court is in
accordance with banking practice
3. Whether the agreement among the parties as to the floating interest rates is valid under
jurisprudence and rules and regulations of the Central
4. Whether the transaction is a trust receipt transaction
5. Whether the private respondent spouses Lim are liable
Ruling:
1. The Supreme Court stress the time-honored rule that findings of fact by the Court of
Appeals,
especially if they affirm factual findings of the trial court will not be disturbed by this Court,
unless these findings are not supported by evidence. Petitioner decries the lack of computation
by the lower court as basis for its ruling that there was an overpayment made. While such a
computation may not have appeared in the Decision itself, we note that the trial court’s finding
of overpayment is supported by evidence presented before it. At any rate, we painstakingly
reviewed and computed the payments together with the interest and penalty charges due thereon
and found that the amount of overpayment made by respondent Bank to
petitioner, i.e., P563,070.13, was more than what was ordered reimbursed by the lower court.
However, since respondents did not file an appeal in this case, the amount ordered reimbursed by
the lower court should stand.
2. Petitioner argues that the marginal deposit should be considered only after computing the
principal plus accrued interests and other charges. However, to sustain petitioner on this score
would be to countenance a clear case of unjust enrichment, for while a marginal deposit earns no
interest in favor of the debtor-depositor, the bank is not only able to use the same for its own
purposes, interest-free, but is also able to earn interest on the money loaned to respondent
Corporation. Indeed, it would be onerous to compute interest and other charges on the face value
of the letter of credit which the petitioner issued, without first crediting or setting off the
marginal deposit which the respondent Corporation paid to it. Compensation is proper and
should take effect by operation of law because the requisites in Article 1279 of the Civil Code
are present and should extinguish both debts to the concurrent amount.
3. The pertinent provision in the trust receipt agreement of the parties fixing the interest rate
states:
I, WE jointly and severally agree to any increase or decrease in the interest rate which may occur
after July 1, 1981, when the Central Bank floated the interest rate, and to pay additionally the
penalty of 1% per month until the amount/s or installment/s due and unpaid under the trust
receipt on the reverse side hereof is/are fully paid.
We agree with respondent Court of Appeals that the foregoing stipulation is invalid, there being
no reference rate set either by it or by the Central Bank, leaving the determination thereof at the
sole will and control of petitioner.
While it may be acceptable, for practical reasons given the fluctuating economic conditions, for
banks to stipulate that interest rates on a loan not be fixed and instead be made dependent upon
prevailing market conditions, there should always be a reference rate upon which to peg such
variable interest rates. An example of such a valid variable interest rate was found in Polotan, Sr.
v. Court of Appeals. In that case, the contractual provision stating that “if there occurs any
change in the prevailing market rates, the new interest rate shall be the guiding rate in
computing the interest due on the outstanding obligation without need of serving notice to the
Cardholder other than the required posting on the monthly statement served to the Cardholder”
was considered valid. On the other hand, a stipulation ostensibly signifying an agreement to “any
increase or decrease in the interest rate,” without more, cannot be accepted by this Court as valid
for it leaves solely to the creditor the determination of what interest rate to charge against an
outstanding loan.
4. Petitioner has also failed to convince us that its transaction with respondent Corporation
is really a trust
receipt transaction instead of merely a simple loan, as found by the lower court and the Court of
Appeals.
The recent case of Colinares v. Court of Appeals appears to be foursquare with the facts
obtaining in the case at bar. There, we found that inasmuch as the debtor received the goods
subject of the trust receipt before the trust receipt itself was entered into, the transaction in
question was a simple loan and not a trust receipt agreement. Prior to the date of execution of the
trust receipt, ownership over the goods was already transferred to the debtor. This situation is
inconsistent with what normally obtains in a pure trust receipt transaction, wherein the goods
belong in ownership to the bank and are only released to the importer in trust after the loan is
granted. In the case at bar, as in Colinares, the delivery to respondent Corporation of the goods
subject of the trust receipt occurred long before the trust receipt itself was executed. More
specifically, delivery of the bunker fuel oil to respondent Corporation’s Bulacan plant
commenced on July 7, 1982 and was completed by July 19, 1982. Further, the oil was used up by
respondent Corporation in its normal operations by August, 1982. On the other hand, the subject
trust receipt was only executed nearly two months after full delivery of the oil was made to
respondent Corporation, or on September 2, 1982.
5. Respondents Gregory T. Lim and his spouse cannot be made personally liable since
respondent Lim entered
into and signed the contract clearly in his official capacity as Executive Vice President. The
personality of the corporation is separate and distinct from the persons composing it.
WHEREFORE, in view of all the foregoing, the instant Petition for Review is DENIED. The
Decision of the Court of Appeals dated July 26, 1993 in CA-G.R. CV No. 29950 is AFFIRMED.
SO ORDERED.
60. Florendo vs CA and Landbank of the Philippines
Facts: Florendo was an employee of Landbank of the Philippines (LBP) from May 17,1976 until
August 16, 1984 when she voluntarily resigned. Before her resignation, she applied for a housing
loan payable in 25 years from LBP’s Provident Fund. Both parties executed a Housing Loan
Agreement and constituted a Real Estate Mortgage and Promissory Note. After almost a year
from her resignation, LBP increased the interest rate on the loan from 95 per annum to 17%.
LBP informed Florendo and the latter protested the increase. LBP kept on demanding Florendo
to pay the increased interest or the new monthly installments based on the increased interest rate.
Florendo maintained that such increase is unjustified and unlawful. Nevertheless, Florendo just
disregarded the increased rate and continued topay the obligation under the original contract.
Issue: WON the LBP have a valid and legal basis to impose an increased interest rate on the
housing loan.
Ruling: NO. The disallowed the bank from increasing the interest rate on the subject loan from
12% to 17% despite an escalation clause in the loan agreement authorizing the bank to
“correspondingly increase the interest rate stipulated in this contract without advance notice to
me/us in the event the law should be enacted increasing the lawful rates of interest that maybe
charged on this particular kind of loan.”
I. SHORT TITLE: 61 SECURITY BANK V. RTC OF MAKATI
II. FULL TITLE: SECURITY BANK AND TRUST COMPANY,

petitioner, vs.REGIONAL TRIAL COURT OF MAKATI, BRANCH 61,
MAGTANGGOL EUSEBIO and LEILA VENTURA, respondents.
III. TOPIC: Courts Without Authority to Not Apply Stipulated Interest.
On April 27, 1983, private respondent Magtanggol Eusebio executed Promissory Note No.
TL/74/178/83 in favor of petitioner Security Bank and Trust Co. (SBTC) in the total amount of
One Hundred Thousand Pesos (P100,000.00) payable in six monthly installments with a
stipulated interest of 23% per annum up to the fifth installment.
On July 28, 1983, respondent Eusebio again executed Promissory Note No. TL/74/1296/83 in
favor of petitioner SBTC. Respondent bound himself to pay the sum of One Hundred Thousand
Pesos (P100,000.00) in six (6) monthly installments plus 23% interest per annum. Finally,
another Promissory Note No. TL/74/1491/83 was executed on August 31, 1983 in the amount of
Sixty Five Thousand Pesos (P65,000.00). Respondent agreed to pay this note in six (6) monthly
installments plus interest at the rate of 23% per annum. On all the abovementioned promissory
notes, private respondent Leila Ventura had signed as co-maker.Upon maturity which fell on the
different dates , the principal balance remaining on the notes stood Upon the failure and refusal
of respondent Eusebio to pay the aforestated balance payable, a collection case was filed in court
by petitioner SBTC. The trial court rendered decision in favour of the petitioner and ordering the
respondents to pay the petitioner with the remaining balance in each every notes with 12%
interest only per annum. Petitioner filed a motion for reconsideration praying that interest to be
applied is 23% per annum as stipulated in the Promissory Note and praying Leila Ventura should
be held joint and severally liable together with the respondent. The trial court grant the MR
partially ordering Leila Ventura to pay petitioner joint and severally together with the
respondent. Hence, this present pettion.

This is a petition for review on certiorari for the purpose of assailing the decision of
Honorable Judge Fernando V. Gorospe of the Regional Trial Court of Makati, Branch 61,
dated March 30, 1993, which found private respondent Eusebio liable to petitioner for a sum
of money. Interest was lowered by the court a quo from 23% per annum as agreed upon by
the parties to 12% per annum
VI. ISSUE:
Whether or not the 23% rate of interest per annum agreed upon by petitioner bank and
respondents is allowable and not against the Usury Law.
Whether or not the Courts have the discretion to arbitrarily override stipulated interest rates of
promissory notes and stipulated interest rates of promissory notes and thereby impose a 12%
interest on the loans, in the absence of evidence justifying the imposition of a higher rate.
VII. RULING:
The Supreme Court grant the petition. From the examination of the records, it appears that
indeed the agreed rate of interest as stipulated on the three (3) promissory notes is 23% per
annum. The applicable provision of law is the Central Bank Circular No. 905 which took effect
on December 22, 1982, particularly Sections 1 and 2 which state:
“Sec. 1. The rate of interest, including commissions, premiums, fees and other charges, on
a loan or forbearance of any money, goods or credits, regardless of maturity and whether secured
or unsecured, that may be charged or collected by any person, whether natural or juridical, shall
not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended.
Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and
the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall
continue to be twelve per cent (12%) per annum.”
CB Circular 905 was issued by the Central Bank’s Monetary Board pursuant to P.D. 1684
empowering them to prescribe the maximum rates of interest for loans and certain
forbearances.“P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties
to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a
loan or forbearance of money, goods or credits. In fine, they can agree to adjust, upward or
downward, the interest previously stipulated.” The SC find no valid reason for the respondent
court a quo to impose a 12% rate of interest on the principal balance owing to petitioner by
respondent in the presence of a valid stipulation. In a loan or forbearance of money, the interest
due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per
annum. Hence, only in the absence of a stipulation can the court impose the 12% rate of interest.
The promissory notes were signed by both parties voluntarily. Therefore, stipulations therein are
binding between them. Respondent Eusebio, likewise, did not question any of the stipulations
therein. In fact, in the Comment filed by respondent Eusebio to this court, he chose not to
question the decision and instead expressed his desire to negotiate with the petitioner bank for
“terms within which to settle his obligation.”
VIII. FALLO:
IN VIEW OF THE FOREGOING, the decision of the respondent court a quo, is hereby
AFFIRMED with the MODIFICATION that the rate of interest that should be imposed be 23%
per annum.
62. CAPITAL CREDIT DIMENSION, INC., petitioner, vs. ALLAN VITA CHUA,
ALFREDO VITA, JR., NELSON P. VITA, MANUEL P. VITA, [1] and LORNA P.
VITA, respondents.
Topic: Writ of Possession in Extra Judicial Foreclosure
Statement of Facts:
Respondents Allan Vita Chua, Alfredo Vita, Jr., Nelson P. Vita, Manuel P. Vita, and Loran P.
Vita appear to be the registered co-owners of the residential property located at No. 25 Yale St.,
Cubao, Quezon City under TCT No. 91086 (348965). Through a purported Deed of Sale dated
October 25, 1993 executed by them in favor of Jesus Cunanan, married to Melodina Cunanan,
TCT No. 91086 (348965) was cancelled and TCT No. 98208 issued in the name of Jesus
Cunanan.
On May 13, 1998, Jesus Cunanan mortgaged the property to petitioner Capital Credit Dimension,
Inc. (CCDI) for a loan of P2,350,000.00. When he failed to pay the loan, the mortgage was
extrajudicially foreclosed. It was sold at public auction to CCDI as the highest bidder. The one-
year period of redemption expired and petitioner CCDI consolidated its ownership. TCT No. N-
211793 was issued in its name.
Statement of the Case:
CCDI filed a petition for the issuance of a writ of possession over the subject property before the
Regional Trial Court of Quezon City. Respondent Allan Vita Chua filed a motion to intervene in
the proceeding. He alleged that the Deed of Sale executed in favor of Jesus Cunanan was void as
his father, Juanito Chua, stole the owner’s copy of TCT from his residence, and forged his
signature and those of his co-owners as sellers.
He further alleged that they have filed a case for annulment of deed of sale, transfer certificates
of title and public auction sale (annulment case) before Branch 100 of the Regional Trial Court
of Quezon City against Jesus and Melodina Cunanan, Juanito Chua, CCDI, and the Register of
Deeds of Quezon City. He prayed that the possessory petition be consolidated with the
annulment case. His motion was denied. He challenged the denial in the Court of Appeals but
again lost the case.[3] We, in turn, denied the petition to review the Court of Appeals decision on
technical grounds.
RTC of Quezon City, Branch 100, decided the annulment case in favor of the respondents Allan
Chua and the Vitas. However, on May 31, 2002, the possessory petition was resolved by the
RTC of Quezon City, Branch 97, in favor of petitioner CCDI. Respondents Allan Vita Chua and
the Vitas filed a petition for prohibition before the Court of Appeals to enjoin the implementation
of the Order which granted said petition.
Issue:
W/N implementation of the writ of possession against respondents is ministerial and cannot be
affected by a pending suit to annul the mortgage or its foreclosure.
Held:
An ex-parte writ of possession issued pursuant to Act No. 3135, as amended, cannot be enforced
against a third person who is in actual possession of the foreclosed property and who is not in
privity with the debtor/mortgagor. To do so would be to sanction his summary ejectment in
violation of the basic tenets of due process. This is because properties brought within the ambit
of Act No. 3135, unlike those subject to judicial foreclosure, are foreclosed by the mere filing of
a petition with the office of the sheriff of the province where the sale is to be made. A third
person in possession of the extrajudicially foreclosed property, who claims a right superior to
that of the original mortgagor, is thus given no opportunity to be heard in his claim. Considering
the lack of opportunity, such third person may therefore not be dispossessed on the strength of a
mere ex-parte possessory writ issued in foreclosure proceedings to which he was not a party.
The cases cited by petitioner to support his claim that the issuance of a writ of possession in
favor of the mortgagee of a foreclosed property after the period of redemption has expired is
ministerial upon the trial court do not apply since the parties who filed the cases questioning the
mortgage and its foreclosure were the debtors/mortgagors themselves, not third parties, as in the
instant case.
Dispositive Portion: IN VIEW WHEREOF, the petition is DENIED. The questioned Decision
dated February 13, 2003 of the Court of Appeals in CA-G.R. SP No. 71703 is AFFIRMED. No
costs.
I. SHORT TITLE: 63 Samson vs. Rivera
II. FULL TITLE: G.R. No. 154355. May 20, 2004. Spouses REMPSON SAMSON and
MILAGROS SAMSON; and REMPSON REALTY & DEVELOPMENT CORPORATION,
petitioners, vs. Judge MAURICIO M. RIVERA, in His Capacity as Presiding Judge of the
Regional Trial Court of Antipolo City, Branch 73; Atty. JOSELITA MALIBAGO-SANTOS, in
Her Capacity as Ex Officio Sheriff, RTC of Antipolo City; and LENJUL REALTY
CORPORATION, respondents.

Petitioner Spouses Rempson and Milagros Samson incurred from Far East Bank and Trust
Company (FEBTC) loan obligations, the principal of which amounted to fifty-five million pesos
(P55,000,000).On October 10, 1994 and February 22, 1996, in order to secure the payment of the
loan obligations, Spouses Samson executed in favor of FEBTC two real estate mortgages
covering five parcels of commercial property located at Antipolo City, Rizal.
Petitioner spouses failed to settle their loan obligations. The auction sale proceeded with two
bidders participating -- FEBTC and Lenjul Realty and Development Corporation, with the latter
declared as the highest bidder in the amount of P80,000,000. Respondent Lenjul Realty filed a
Petition for the Issuance of a Writ of Possession, which sought an ex parte issuance of a writ of
possession over the foreclosed properties.
While the Petition was pending, Spouses Samson and Rempson Corporation filed with the
Antipolo City RTC, an action for Annulment of Extra-Judicial Foreclosure and/or Nullification
of Sale and the Certificates of Title, plus Reconveyance and Damages with Prayer for a
Temporary Restraining Order and/or Writ of Preliminary Injunction. Petitioners filed it against
Lenjul Realty Corporation, FEBTC, Bank of the Philippine Islands, Joselita Malibao-Santos in
her capacity as the clerk of court and ex officio sheriff of the Antipolo City RTC, and the
Register of Deeds of Antipolo City.

On February 26, 2002, a Writ of Possession was issued directing the sheriff of the Antipolo City
RTC to place Lenjul Realty Corporation in physical possession of the foreclosed properties. On
the same date, the sheriff issued a Notice to Vacate addressed to Rempson Corporation, ordering
it to leave the properties on or before March 2, 2002.
On February 22, 2002, petitioners filed with the Court of Appeals the aforesaid Special Civil
Action for Certiorari with Prohibition/Mandamus under Rule 65 with an Application for Issuance
of a Writ of Preliminary Injunction and/or Temporary Restraining Order to annul the November
5, 2001 and the February 11, 2002 Orders of Judge Rivera. The Court of Appeals ruled that
certiorari was improper, because there was an adequate remedy in the ordinary course of law.
Citing Section 8 of Act No. 3135, it opined that petitioners remedy was to file a petition to set
aside the foreclosure sale and to cancel the writ of possession in LR Case No. 01-2698. The CA
further noted that certiorari was premature inasmuch as petitioners had failed to file a motion for
reconsideration of the Order directing the issuance of the writ of possession.
In denying the Motion for Reconsideration, the Court of Appeals held that the issuance of a writ
of possession was a ministerial function that was done upon the filing of the proper motion and
the approval of the corresponding bond. It further ruled that prohibition did not lie to enjoin the
implementation of the writ.
Hence this Petition.
VI. ISSUE:
(1) Whether the trial court committed grave abuse of discretion in granting the Petition for the
Issuance of a Writ of Possession; and
(2) Whether the filing of a Petition for Certiorari with the Court of Appeals was the proper
remedy
VII. RULING:
The petition has no merit.
(1) The purchaser in a foreclosure sale may apply for a writ of possession during the redemption
period by filing for that purpose an ex parte motion under oath, in the corresponding registration
or cadastral proceeding in the case of a property with torrens title. Upon the filing of such motion
and the approval of the corresponding bond, the court is expressly directed to issue the writ.
(2) The Court of Appeals correctly declared that petitioners pursued the wrong remedy. A special
civil action for certiorari could be availed of only if the lower tribunal has acted without or in
excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction; and if there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law.

WHEREFORE, the Petition is DENIED, and the assailed Resolutions of the Court of Appeals
AFFIRMED. Costs against petitioners. SO ORDERED.
64 PROVIDENT SAVINGS BANK

v. COURT OF APPEALS
The case:
Petition is for review on certiorari assailing the decision of the Court of Appeals reversing the
decision of the Trial Court. The petition is denied by the Supreme Court.
The facts:
On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway J. Guarin (Guarins)
obtained a loan from defendant-appellant in the amount of P62,500.00 payable on or before 20
June 1967. As security for the loan, they executed a real estate mortgage in favor of defendant-
appellant over a parcel of land covered by TCT No. 177014. In September, 1972, defendant-
appellant was placed under receivership by the Central Bank of the Philippines until 27 July
1981 when the receivership was set aside by the Honorable Supreme Court. On 11 December
1984, Lorenzo K. Guarin, in reply to the letter of latter's counsel informing that the mortgaged
property would be sold at public auction on 27 December 1984, assured he and his wife had
every intention of paying their obligation and requesting for a recomputation of their account and
a postponement of the foreclosure sale. On 10 February 1986, the Guarins received a Statement
of Account from defendant-appellant showing two outstanding accounts as of 15 February 1986.
One was account of Lorenzo K. Guarin in the amount of P591,088.80, and the other was the
account of L.K. Guarin Manufacturing Co., Inc. in the amount of P6,287,380.27. On 26
February 1986, Lorenzo K. Guarin wrote defendant-appellant stating that he was ready and
willing to pay his obligation in the total amount of P591,088.80 as recomputed by defendant-
appellant whenever defendant-appellant was already to receive the payment and inquiring as to
when his mortgaged title would be available for him to pick up. Defendant-appellant replied on
27 February 1986 that Lorenzo K. Guarin may make payment at its office in Makati, Metro
Manila, but that the mortgaged title could not be released to him even after the payment of the
obligation of P591,088.80 as it also served as security for the indebtedness of L.Y. Guarin
Manufacturing Co., Inc., to defendant-appellant which was undertaken by Lorenzo K. Guarin in
his personal capacity and as president of the corporation. On 20 May 1986, Wilson Chua wrote
defendant-appellant saying that the mortgaged property of the Guarins had been offered to him
as payment of the judgment he obtained against the Guarins in Civil Case No. Q-47465 entitled,
"Wilson Chua vs. Lorenzo K. Guarin", and requesting for defendant-appellant's conformity to
the assignment and expressing his willingness to pay for the obligation of Mr. Guarin so that the
title could be released by defendant-appellant. On 10 July 1986, the Guarins and Wilson Chua
executed a Deed of Absolute Sale With Assumption of Mortgaged whereby the Guarins sold the
mortgaged property to Wilson Chua for the sum of P250,000.00 and Wilson Chua undertook to
assume the mortgaged obligation of the Guarins with defendant-appellant which as of 15
February 1985 amounted to P591,088.80. On 5 August 1986, Wilson Chua informed defendant-
appellant that as a result of the judgment in Civil Case No. Q-47645, the mortgaged property had
been sold to him by the Guarins, as evidenced by the Deed of Sale enclosed for guidance and
information of defendant-appellant. He requested that he be allowed to pay the loan secured by
the mortgaged, otherwise, he would be constrained to bring the matter to court. In reply,
defendant-appellant, on 11 August 1986, informed Wilson Chua that his request could be granted
if he would settle the obligation of L.K. Guarin Manufacturing Co., Inc., as well and defendant-
appellant's letter to Mr. Guarin dated 27 February 1986. On 3 August 1987, counsel for Wilson
Chua addressed a letter to defendant-appellant informing that Wilson Chua had purchased the
mortgaged property from the Guarin's and requesting that the owner's copy of TCT No. 177014
in the possession of defendant-appellant be released to him so that he can register the sale and
have the title to the property transferred in his name. He likewise, informed defendant-appellant
that it had lost whatever right or action had against the Guarins because of prescription.
Defendant-appellant replied on 10 August 1987 stating the reasons why they could not comply
with Wilson Chua’s demands.
The issue:
Whether or not prescription bars Provident Savings Bank from foreclosing Guarins mortgaged
property.
The SC decision:
No. When a bank is prohibited to do business by the Central Bank and a receiver is appointed
for such bank, that bank would not be able to do new business, i.e., to grant new loans or to
accept new deposits. However, the receiver of the bank is obliged to collect debts owing to the
bank, which debts forms part of the assets of the bank. The receiver must assemble the assets and
pay the obligation of the bank under receivership, and take steps to prevent dissipation of such
assets.
However, when a bank is prevented from transacting any business by the Central Bank, this is
force majeure and prescriptive period was legally interrupted insofar as the banks causes of
actions or rights are concerned and the prescriptive period would begin run anew, and not merely
suspension being lifted upon the lifting of the prohibition. Hence, the petition is granted and the
decision of the Court of Appeals is hereby set aside.
I. SHORT TITLE: 65 REGISTRY OF DEEDS vs CHINA BANK
II. FULL TITLE: Registry of Deeds of Manila vs China Banking Corporation, -GR
No.11964,April 28, 1962, Dizon, J.
III. TOPIC: Banking Law – General Banking Law
Alfonso Pangilinan and one Guillermo Chua were charged with qualified theft of money worth
P275,000. Pangilinan and his wife, Belen Sta. Ana, executed a public instrument entitled Deed of
Transfer whereby, after admitting his civil liability in favor of his employer, China Banking
Corporation, he ceded and transferred to the latter a parcel of land located in Manila. The deed
was presented for registration to the Register of Deeds of the City of Manila, but because China
Banking Corporation was alien-owned and, as such, barred from acquiring lands in the
Philippines, the officer submitted the matter of its registration to the Land Registration
Commission for resolution. The Land Registration Commission ruled that the land is
unregistrable.
Appellant argues that: (a) the temporary holding of land by an alien-owned commercial bank
under a public instrument such as the deed of transfer in question "bears no reasonable
connection with the constitutional purpose" underlying the provisions of Section 5, Article XIII
of the Constitution of the Philippines; hence, such holding or acquisition "was not within the
contemplation of the framers of the Constitution";
(b) by judicial as well as by executive-administrative and legislative construction, the
constitutional prohibition against alien landholding does not preclude enjoyment by aliens of
temporary rights and land; (c) under the provisions of Section 25 of Republic Act No. 337
(General Banking Act) an alien or an alien-owned commercial bank may acquire land in the
Philippines subject to the obligation of disposing of it within 4 years from the date of acquisition.

Appeal from a resolution of the Land Registration Commission holding "that the deed of transfer
in favor of an alien bank, subject of the present Consulta, is unregisterable for being in
contravention of the Constitution of the Philippines".
VI. ISSUE:
Whether or not China Banking Corporation can acquire ownership of the lot by
virtue of the deed of transfer
VII. RULING:
No. Assuming,, that under Section 25, RA 337 any commercial bank, whether alien-owned or
controlled or not, may purchase and hold real estate for the specific purposes and in the
particular cases enumerated in Section 25 thereof, we find that the case before Us does not fall
under anyone of them.
Par (c), Section 25 of RA 337 allows a commercial bank to purchase and hold such real estate as
shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings.
We deem it quite clear and free from doubt that the "debts" referred to in this provision are only
those resulting from previous loans and other similar transactions made or entered into by a
commercial bank in the ordinary course of its business as such. Obviously, whatever "civil
liability" — arising from the criminal offense of qualified theft — was admitted in favor of
appellant bank by its former employee, Alfonso Pangilinan, was not a debt resulting from a
loan or a similar transaction had between the two parties in the ordinary course of banking
business.
Neither do the provisions of paragraph (d) of the same section apply to the case because the deed
of transfer in question can in no sense be considered as a sale made by virtue of a judgment,
decree, mortgage, or trust deed held by appellant bank. In the same manner it can not be said that
the real property in question was purchased by appellant "to secure debts due to it", considering
that, as stated heretofore, the term debt employed in the pertinent legal provision can logically
refer only to such debts as may become payable to appellant bank as a result of a banking
transaction.
That the constitutional prohibition under consideration has for its purpose the preservation of the
patrimony of the nation can not be denied, but appellant and the amici curiae claim that it should
be liberally construed so that the prohibition be limited to the permanent acquisition of real estate
by aliens — whether natural or juridical persons. This, of course, would make legal the
ownership acquired by appellant bank by virtue of the deed of transfer mentioned heretofore,
subject to its obligation to dispose of it in accordance with law, within 5 years from the date of
its acquisition. We can not give assent to this contention, in view of the fact that the
constitutional prohibition in question is absolute in terms. We have so held in Ong Sui Si Temple
vs. The Register of Deeds of Manila where we said, inter alia, the following: "We are of the
opinion that the Court below has correctly held that in view of the absolute terms of section 5,
Title XIII, of the Constitution, the provisions of Act 271 of the old Philippine Commission must
be deemed repealed since the Constitution was enacted, in so far as incompatible therewith. In
providing that. 'Save in cases of hereditary succession, no private agricultural land shall be
transferred or assigned except to individuals, corporations or associations qualified to acquire or
hold lands of the public domain in the Philippines', the Constitution makes no exception in favor
of religious associations. Neither is there any such saving found in Sections 1 and 2 of Article
XIII, restricting the acquisition of public agricultural lands and other natural resources to
'corporations or associations at least sixty per centum of the capital of which is owned by such
citizens' (of the Philippines)."
Even in the case of Smith Bell & Co. vs. Register of Deeds of Davao where a lease of a parcel of
land for a total period of 50 years in favor of an alien corporation was held to be registerable, the
reason we gave for such ruling was that a lease — unlike a sale — does not involve the transfer
of dominion over the land, the clear implication from this being that transfer of ownership over
land, even for a limited period of time, is not permissible in view of the constitutional
prohibition. The reason for this is manifestly the desire and purpose of the Constitution to place
and keep in the hands of the people the ownership over private lands in order not to endanger the
integrity of the nation. Inasmuch as when an alien buys land he acquires and will naturally
exercise ownership over the same, either permanently or temporarily, to that extent his
acquisition jeopardizes the purpose of the Constitution.

WHEREFORE, the resolution appealed from is hereby affirmed, with costs
66 G.R. No. 90027 March 3, 1993

CA AGRO-INDL DEVT CORP. VS COURT OF APPEALS and SECURITY BANK AND
TRUST CO.
FACTS
On July 3, 1979, Sergio Aguirre, as President of Petitioner Company, and the Spouses Ramon
and Paula Pugao jointly rented a safety deposit box with the private respondent bank. The box
was to contain 2 TCTs covering lands purchased by the petitioner and will be kept therein
pending full payment of the land and which was agreed to be opened only upon the joint
signatures of both parties. Two sets of renter’s keys were issued each to the parties while a
guard key is kept by the bank. The contract of lease provides stipulations that: 1) The bank is
not a depositary of the contents of the safe and it has neither the possession or control of the
same, and 2) The bank has no interest whatsoever in said contents and assumes absolutely no
liability in connection therewith.
Upon the need to open the safety box to withdraw its contents, the parties, in the presence of the
bank’s representative, opened the same but the certificates were not found therein. Petitioner
thus filed a complaint for damages against the bank with RTC Pasig. Respondent bank answered
that petitioner has no cause of action given the stipulations in the lease agreement. RTC
dismissed petitioner’s complaint declaring stipulations in the lease agreement binding to the
parties. On appeal, CA affirmed RTC decision declaring that the agreement covering the lease
of the safety boxes is a contract of lease and that the stipulations absolving the bank of liability is
valid and does not contravene the law, public order or public policy. On the other hand,
petitioner argued that the agreement, notwithstanding nomenclature, is one of deposit which
makes respondent bank a depositary liable for the loss of the certificates pursuant to Art. 1972 of
the Civil Code.
ISSUE
Whether or not the contract of lease of safety deposit boxes from a bank is a contract of deposit?
COURT RULING
Yes. The Court declared that the contract of rent of safety deposit boxes is a special kind of
deposit. The petitioner is correct in making the contention that the contract for the rent of the
deposit box is not a ordinary contract of lease as defined in Article 1643 of the Civil Code.
However, the Court do not really subscribe to its view that the same is a contract of deposit that
is to be strictly governed by the provisions in Civil Code on Deposit; the contract in the case at
bar is a special kind of deposit.
The Court further agreed that the petitioner is correct in applying American Jurisprudence
wherein the prevailing view is that the relation between the bank renting out safe deposits boxes
and its customer with respect to the contents of the box is that of a bailor and bailee, the bailment
being for hire and mutual benefits. Furthermore, that rule has been adopted in Section 72 of the
General Banking Act which allows the banks to rent out safety deposit boxes as depositaries who
shall be liable as such to the depositor notwithstanding the stipulations absolving it of liability
for the loss of the box’s contents which the court declared as void stipulations for being contrary
to law, public order and public policy.
Notwithstanding the above, the court affirmed CA dismissal of the petition raising the absence of
competent proof of knowledge on the part of the bank-depositary of the agreement between the
joint renters requiring joint signatures to open the safety box and the further lack of evidence to
show that that loss of the certificates was due to the fraud or negligence of the respondent bank.
Without such knowledge, the bank could not be faulted from allowing any of the renters, who
both have the required key, to access the safety box without the other renter being present.
I. SHORT TITLE: ALLIED BANKING CORP VS CA
II. FULL TITLE: ALLIED BANKING CORPORATION, petitioner, vs.COURT OF

APPEALS and BANK OF THE PHILIPPINE ISLANDS, INC., respondents.
III. TOPIC: Philippine Clearing House Corporation; Jurisdiction

Two crossed checks drawn against Allied in favour of Meszellen were
deposited with the ComTrust. The checks were cleared through the Philippine
Clearing House Corporation (PCHC) and then the proceeds thereof were paid by
Allied to ComTrust. Allied was later sued by Meszellen who alleged that payment
had been made by somebody else. Almost ten years later, Allied filed a third party
complaint against BPI, successor-in-interest of ComTrust, for reimbursement in
the event that it would be judged liable in the main case to pay Mezellen.

Before us is a petition for review on certiorari under Rule 45, assailing the
Decision dated February 12, 1996 promulgated by the Court of Appeals 1 in CA-GR
CV No. 44804; which affirmed the trial court’s Order dated September 16, 1991,
dismissing petitioner’s third-party complaint against private respondent.
VI. ISSUES:
Whether or not the trial court had authority to admit a third party complaint filed
by one bank against another involving a check cleared through PCHC.
VII. RULING:
Trial court had no such authority. PCHC rules and regulations hold that “disputes
between two or more clearing participants involving items cleared through PCHC
should be submitted to the Arbitration Committee” without prejudice to recourse to
the courts in case of an adverse decision. A bank’s participation in the clearing
operations of PCHC is deemed its written and subscribed consent to the binding
effect of the arbitration agreement.
The doctrine that a trial court that has jurisdiction over the main action also had
jurisdiction over the third party complaint, even if said court would have none of that
jurisdiction had the third party complaint been filed as an independent actions admits
of an exception in the case of banks that have given written and subscribed consent to
arbitration under PCHC. Third party complaint is merely a procedural device allowed
when the court so permits.
VIII. FALLO: WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.
69 METROPOLITAN BANK & TRUST COMPANY, petitioner,
vs. THE HONORABLE COURT OF APPEALS and UNITED OVERSEAS BANK

(formerly known as WESTMONT BANK), Respondents.
G.R. NO. 166260, 579 SCRA 580 February 18, 2009
FACTS:
It is a Petition for Review under Rule 45 of the Rules of Court, assailing the decision, the
appellate court which affirmed the dismissal by the trial court in the petition for the review of
Philippine Clearing House Corporation (PCHC) Board Resolution No. 08-2000.
A check dated January 13, 1997, payable to cash was drawn against the account of
Bienvenido C. Tan with petitioner Metropolitan Bank & Trust Company (Metrobank) was
deposited with respondent United Overseas Bank (UOB). The check was then forwarded for
clearing on January 14, 1997 through the PCHC, and, on the same date, Metrobank cleared the
check. In its January 27, 1997 Letter, however, Metrobank informed UOB that it was returning
the check on account of material alteration the date was changed from "January 23, 1997" to
"January 13, 1997," and the amount was altered from "P1,000.00" to "P91,000.00." Because
UOB refused to accept the return and to reimburse Metrobank the amount it paid on the check,
the latter filed a Complaint before the PCHC Arbitration Committee, contending in the main that
UOB had the duty to examine the deposited check for any material alteration; but since UOB
failed to exercise due diligence in determining that the check had been altered, UOB should bear
the loss. The UOB interposed the defenses that it exercised due diligence, and that Metrobank
failed to comply with the 24-hour clearing house rule, and, with gross negligence, cleared the
check. The Arbitration Committee directed Metrobank to submit the check to the Philippine
National Police (PNP) Crime Laboratory for examination. on the ground that the PNP Crime
Laboratory document examination results were not yet available, Metrobank moved for the
postponement of the October 12 and 19, 1998 hearings and their resetting to November 16, 1998,
However, on the same ground, Metrobank again moved for the cancellation of the November 16,
1998 hearing and its resetting on December 10, 1998. In the scheduled December 10, 1998
hearing, Metrobank's counsel failed to appear. UOB thus moved for the dismissal of the case,
which the Arbitration Committee granted. On March 9, 1999, following its receipt of the
Transcript of Stenographic Notes of the December 10, 1998 hearing, Metrobank filed a Motion
for Reconsideration of the dismissal order, attaching thereto a copy of the Medical Certificate
declaring that its counsel had been afflicted with influenza during the December 10, 1998
hearing, and a copy of PNP Crime Laboratory Document Examination Report stating that the
subject check had been altered. As expected, UOB opposed the motion and argued that
Metrobank was not serious in prosecuting the case considering the numerous postponements of
hearings made by its counsel; and that the said counsel was trifling with the processes of the
Arbitration Committee because, upon verification with his secretary, he was not really sick on
December 10, 1998. Further, the examination by the PNP Crime Laboratory of the check had
already been completed on July 6, 1998. The Arbitration Committee denied Metrobank's motion.
Unrelenting, Metrobank filed its Second Motion for Reconsideration. The PCHC Board of
Directors issued Resolution No. 08-2000, denying the second motion for reconsideration.
Metrobank again moved for the reconsideration of this resolution. However, it received
communication from the PCHC Executive Secretary informing it that the proper remedy
following Section 13 of the PCHC Rules of Procedure for Arbitration (PCHC Rules) was for it to
file a notice of appeal with the PCHC and a Petition for Review with the Regional Trial Court
(RTC) within a non-extendible period of fifteen (15) days counted from the receipt of the PCHC
board resolution.
Hence, Metrobank filed its Petition for Review with the RTC of Makati City. The trial
court rendered its decision dismissing the petition. It ruled that it had no jurisdiction over the
petition, the same having been filed out of time. The trial court further ruled that the Arbitration
Committee correctly dismissed the original case on account of Metrobank's failure to prosecute,
and that Metrobank's claim could not be sustained considering that under prevailing
jurisprudence the drawee-bank should bear the loss if it had mistakenly cleared a forged or an
altered check. Dissatisfied, Metrobank appealed the case to the CA but the appellate court
affirmed the ruling of the trial court. The CA ratiocinated, however, that the Petition for Review
before the trial court was filed on time its filing was in accordance with the PCHC Rules. The
CA nevertheless ruled that the case was correctly dismissed on account of Metrobank's lack of
interest to prosecute and of its violation of the 24-hour clearing house rule.
Undaunted, petitioner instituted the instant Petition for Review on Certiorari before SC.
ISSUE:
W/N the advice of the PCHC Executive Secretary in the case at bar is correct, that the
proper remedy under Section 13 of the PCHC Rules was to file a notice of appeal with the PCHC
and a Petition for Review with the RTC?
HELD:
No. The Court has already explained in Insular Savings Bank v. Far East Bank and Trust
Company, that the PCHC Rules cannot confer jurisdiction on the RTC to review arbitral awards.
Furthermore, petitioner had several judicial remedies available at its disposal after the
Arbitration Committee denied its Motion for Reconsideration. It may petition the proper RTC to
issue an order vacating the award on the grounds provided for under Section 24 of the
Arbitration Law. Petitioner likewise has the option to file a Petition for Review under Rule 43 of
the Rules of Court with the Court of Appeals on questions of fact, of law, or mixed questions of
fact and law. Lastly, petitioner may file a petition for certiorari under Rule 65 of the Rules of
Court on the ground that the Arbitrator Committee acted without or in excess of its jurisdiction
or with grave abuse of discretion amounting to lack or excess of jurisdiction. Since this case
involves acts or omissions of a quasi-judicial agency, the petition should be filed in and
cognizable only by the Court of Appeals. Hence, in the case at bar, petitioner did not avail of any
of the abovementioned remedies available to it. Instead it filed a Petition for Review with the
RTC where Civil Case No. 92-145 is pending pursuant to Section 13 of the PCHC Rules to
sustain its action. Clearly, it erred in the procedure it chose for judicial review of the arbitral
award. Furthermore, petitioner and respondent have agreed that the PCHC Rules would govern
in case of controversy. However, since the PCHC Rules came about only as a result of an
agreement between and among member banks of PCHC and not by law, it cannot confer
jurisdiction to the RTC. Thus, the portion of the PCHC Rules granting jurisdiction to the RTC to
review arbitral awards, only on questions of law, cannot be given effect.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED.
I.SHORT TITLE: 72 CANLAS V. CA
II. FULL TITLE: SPOUSES RAUL and AMALIA PANLILIO, vs. CITIBANK, N.A- 539
SCRA 69
November 28, 2007, J. Austria-Martinez
On October 10, 1997, petitioner Amalia Panlilio (Amalia) visited

respondent's Makati City office and deposited one million pesos (PhP1 million) in the
bank's Citihi account, a fixed-term savings account with a higher-than-average interest. On the
same day, Amalia also opened a current or checking account with respondent, to which interest
earnings of the Citihi account were to be credited. Respondent assigned one of its
employees, Jinky Suzara Lee (Lee), to personally transact with Amalia and to handle the
accounts.

Amalia opened the accounts as ITF or in trust for accounts, as they were intended to
benefit her minor children, Alejandro King Aguilar and Fe Emanuelle C. Panlilio, in case she
would meet an untimely death. To open these accounts, Amalia signed two documents: a
Relationship Opening Form (ROF) and an Investor Profiling and Suitability Questionnaire
(Questionnaire).

Amalia's initial intention was to invest the money in a Citibank product called the
Peso Repriceable Promissory Note (PRPN), a product which had a higher interest. However, as
the PRPN was not available that day, Amalia put her money in the Citihi savings account.

More than a month later, or on November 28, 1997, Amalia phoned Citibank saying she
wanted to place an investment, this time in the amount of three million pesos (PhP3
million). Again, she spoke with Lee, the bank employee, who introduced her to Citibank's
various investment offerings. After the phone conversation, apparently decided on where to
invest the money, Amaliawent to Citibank bringing a PCIBank check in the amount of three
million pesos (PhP3 million). During the visit, Amalia instructed Lee on what to do with the
PhP3 million. Later, she learned that out of the said amount, PhP2,134,635.87 was placed by
Citibank in a Long-Term Commercial Paper (LTCP), a debt instrument that paid a high interest,
issued by the corporation Camella and PalmeraHomes (C&P Homes). The rest of the money was
placed in two PRPN accounts, in trust for each of Amalia's two children.

Allegations differ between petitioners and respondent as to whether Amalia instructed
Lee to place the money in the LTCP of C&P Homes.

An LTCP is an evidence of indebtedness, with a maturity period of more than 365 days,
issued by a corporation to any person or entity. It is in effect a loan obtained by a corporation (as
borrower) from the investing public (as lender) and is one of many instruments that investment
banks can legally buy on behalf of their clients, upon the latter's express instructions, for
investment purposes. LTCPs' attraction is that they usually have higher yields than most
investment instruments. In the case of the LTCP issued by C&P Homes, the gross interest rate
was 16.25% per annum at the time Amalia made her investment

On November 28, 1997, the day she made the PhP3million investment, Amalia signed the
following documents: a Directional Investment Management Agreement (DIMA), Term
Investment Application (TIA), and Directional Letter/Specific Instructions. Key features of the
DIMA and the Directional Letter are provisions that essentially clear Citibank of any obligation
to guarantee the principal and interest of the investment, absent fraud or negligence on the latter's
part. The provisions likewise state that all risks are to be assumed by the investor (petitioner).

As to the amount invested, only PhP2,134,635.87 out of the PhP3 million brought
by Amalia was placed in the LTCP since, according to Lee, this was the only amount of LTCP
then available.] According to Lee, the balance of the PhP3 million was placed in two PRPN
accounts, each one in trust for Amalia's two children, per her instructions.]

Following this investment, respondent claims to have regularly sent confirmations of
investment (COIs) to petitioners. A COI is a one-page, computer generated document informing
the customer of the investment earlier made with the bank. The first of these COIs was received
by petitioners on or about December 9, 1997, as admitted by Amalia, which is around a week
after the investment was made. Respondent claims that other succeeding COIs were sent to and
received by petitioners.

Amalia claims to have called Lee as soon as she received the first COI in December
1997, and demanded that the investment in LTCP be withdrawn and placed in a
PRPN Respondent, however, denies this, claiming that Amalia merely called to clarify
provisions in the COI and did not demand a withdrawal

On August 6, 1998, petitioners met with respondent's other employee, Lizza Colet,
to preterminate the LTCP and their other investments. Petitioners were told that as to the LTCP,
liquidation could be made only if there is a willing buyer, a prospect which could be difficult at
that time because of the economic crisis. Still, petitioners signed three sets of Sales Order Slip to
sell the LTCP and left these with Colet

On August 18, 1998, Amalia, through counsel, sent her first formal, written demand to
respondent for a withdrawal of her investment as soon as possibleThe same was followed by
another letter dated September 7, 1998, which reiterated the same demands In answer to the
letters, respondent noted that the investment had a 2003 maturity, was not a deposit, and thus, its
return to the investor was not guaranteed by respondent; however, it added that the LTCP may be
sold prior to maturity and had in fact been put up for sale, but such sale was subject to the
availability of buyers in the secondary market. At that time, respondent was not able to find a
buyer for the LTCP. As this response did not satisfy petitioners, Amalia again wrote respondent,
this time a final demand letter dated September 21, 1998, asking for a reconsideration and a
return of the money she invested. In reply, respondent wrote a letter dated October 12,
1998 stating that despite efforts to sell the LTCP, no willing buyers were found and that even if a
buyer would come later, the price would be lower than Amalia's original investment.
The Complaint essentially demanded a return of the investment, alleging

that Amalia never instructed respondent's employee Lee to invest the money in an LTCP; and
that far from what Lee executed, Amalia's instructions were to invest the money in a trust
account with an interest of around 16.25% with a term of 91 days.
VI. ISSUE:
Whether or not petitioners are entitled to recover from respondent the amount of
PhP2,134,635.87 invested under the LTCP
VII. RULING:
Petitioners may not seek a return of their investment directly from respondent at or prior
to maturity. As earlier explained, the investment is not a deposit and is not guaranteed by
respondent. Absent any fraud or bad faith, the recourse of petitioners in the LTCP is solely
against the issuer, C&P Homes, and only upon maturity. The DIMA states, thus:

11. Withdrawal of Income/Principal Subject to availability of funds and taking into
consideration the commitment of this account to third parties, the PRINCIPAL may
withdraw the income/principal of the Portfolio or portion thereof upon request or
application thereof from the Bank. The INVESTMENT MANAGER shall not be required to
inquire as to the income/principal so withdrawn from the Portfolio. Any income of the Portfolio
not withdrawn shall be accumulated and added to the principal of the Portfolio for further
investment and reinvestment.

It is clear that since the money is committed to C&P Homes via LTCP for five years, or
until 2003, petitioners may not seek its recovery from respondent prior to the lapse of this
period. Petitioners must wait and meanwhile just be content with receiving their interest
regularly. If petitioners want the immediate return of their investment before the maturity date,
their only way is to find a willing buyer to purchase the LTCP at an agreed price, or to go
directly against the issuer C&P Homes, not against the respondent.
WHEREFORE, the Petition is DENIED. For lack of evidence, the Decision of the Court of
Appeals dated dated May 28, 2002 and its Resolution of December 11, 2002, are AFFIRMED.

Bank Liable for Negligence in Encashment

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I. SHORT TITLE: 1 SANDEJAS,ET.AL V. SPS.

III. TOPIC: Banking Industry impressed with public interest.

IV. STATEMENT OF THE FACTS:

BANK OF AMERICA NT & SA, Petitioner,

Citibank filed for petition for review under Rule 45.

II. FULL TITLE: BANK OF THE PHILIPPINE ISLANDS, vs. CASA MONTESSORI

CASA MONTESSORI INTERNATIONALE, vs. BANK OF THE

III. TOPIC: GENERAL BANKING LAWS – EXTRAORDINARY DILIGENCE

IV. STATEMENT OF FACTS:

V. STATEMENT OF THE CASE:

VIII. DISPOSITIVE PORTION:

I. SHORT TITLE: 5 PHILIPPINE BANKING CORPORATION vs COURT OF

III. TOPIC: Banking law – General Banking Law

IV. STATEMENT OF FACTS:

V. STATEMENT OF THE CASE:

VIII. DISPOSITIVE PORTION:

WON PNB is liable for the unauthorized withdrawals for its negligence?

WHEREFORE, the instant petition is DENIED.

I. SHORT TITLE: Far East Bank VS. Chante

IV. STATEMENT OF THE FACTS:

V. STATEMENT OF THE CASE:

Hence, this petition before the Supreme Court.

VII. FALLO: WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals;

I. SHORT TITLE: REYES ET.AL. VS. COURT OF APPEALS

II. FULL TITLE: GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,

IV. STATEMENT OF THE FACTS:

Godofredo, Chief Cashier of the Philippine Racing Club (PCRI), went to

V. STATEMENT OF THE CASE:

1. Whether or not there is a reversible error made by the CA.

2. Whether or not the respondent bank is liable for damages?

560 SCRA 606

Statement of the facts:

Statement of the case:

1 Whether or not the petitioner is liable for VAT

III. TOPIC: Foreign Currency Deposit

IV. STATEMENT OF FACTS:

VIII. DISPOSITIVE PORTION:

I. SHORT TITLE: 13 PCI Bank vs. Citibank

III. TOPIC: Banking Law

IV. STATEMENT OF FACTS:

V. STATEMENT OF THE CASE:

VIII. DISPOSITIVE PORTION:

Costs against Philippine Commercial International Bank and Citibank N.A.

AIDAN M. HORTILANO LLB 3A

14 BPI FAMILY SAVINGS BANK, INC v.

15 ASSOCIATED BANK (Now WESTMONT BANK), petitioner,

vs. VICENTE HENRY TAN, respondent.

G.R. No. 156940, 446 SCRA 282 December 14, 2004

I. SHORT TITLE: 17 PRUDENTIAL BANK vs LIM

II. FULL TITLE: PRUDENTIAL BANK versus Chairman, AUSTRIA-MARTINEZ

III. TOPIC: Negligence of banks; Damages

IV. STATEMENT OF FACTS:

V. STATEMENT OF THE CASE:

I. SHORT TILE: CADIZ VS COURT OF APPEALS

II: FULL TITLE: ROMEO CADIZ, CARLITO. BONGKINGKI, PRISCO GLORIA IV

III: TOPIC: GENERAL BANKING LAW OF 2000- RE: NEGLIGENCE/ LAXITIES

IV: STATEMENT OF FACTS:

V: STATE OF THE CASE:

Hence, this Petition for Review on Certiorari.

I. SHORT TITLE: 19 CITYTRUST VS. CARLOS CRUZ

III. TOPIC: GENERAL BANKING LAWS – EXTRAORDINARY DILIGENCE

IV. STATEMENT OF FACTS:

V. STATEMENT OF THE CASE: