SIMEX INTERNATIONAL V. CA (G.R. NO.

88013)

Facts:

Petitioner, a private corporation engaged in the exportation of food products, was a depositor
maintaining a checking account with respondent Traders Royal Bank. Petitioner deposited to its
account increasing its balance and subsequently, issued several checks but was surprised to learn
that it had been dishonored for insufficient funds. As a consequence, petitioner received demand
letters from its suppliers for the dishonored checks. Investigation disclosed that the deposit was not
credited to it. The error was rectified and the dishonored checks were consequently paid. Petitioner
demanded reparation from respondent bank for its gross and wanton negligence but the later did
not heed. Petitioner then filed before the RTC which later held that respondent bank was guilty of
negligence but petitioner nonetheless was not entitled to moral damages. CA affirmed.

Issue: Whether or not petitioner is entitled to damages due to respondent bank’s negligence.

Ruling: YES.

As the Court sees it, the initial carelessness of the respondent bank, aggravated by the lack of
promptitude in repairing its error, justifies the grant of moral damages. This rather lackadaisical
attitude toward the complaining depositor constituted the gross negligence, if not wanton bad faith,
that the respondent court said had not been established by the petitioner. We shall recognize that
the petitioner did suffer injury because of the private respondent’s negligence that caused the
dishonor of the checks issued by it. The immediate consequence was that its prestige was impaired
because of the bouncing checks and confidence in it as a reliable debtor was diminished.

The point is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship. In the case at bar, it is obvious that
the respondent bank was remiss in that duty and violated that relationship. What is especially
deplorable is that, having been informed of its error in not crediting the deposit in question to the
petitioner, the respondent bank did not immediately correct it but did so only one week later or
twenty-three days after the deposit was made. It bears repeating that the record does not contain
any satisfactory explanation of why the error was made in the first place and why it was not
corrected immediately after its discovery. Such ineptness comes under the concept of the wanton
manner contemplated in the Civil Code that calls for the imposition of exemplary damages.

REYES, ET AL V. CA (G.R. NO. 118492)

The degree of extraordinary diligence applies only to cases where banks act under their fiduciary
capacity, that is, as depositary of the deposits of their depositors. But the same higher degree of
diligence is not expected to be exerted by banks in commercial transactions that do not involve their
fiduciary relationship with their depositors.

Facts: Godofredo, Casheir 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

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

Held: Yes. The evidence also shows that the respondent bank exercised that degree of diligence
expected of an ordinary prudent person under the circumstances obtaining; the respondent bank
advised Westpac-New York to honor the reimbursement claim of Westpac-Sydney and to debit the
dollar accountof respondent bank with the former. 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 applies only to cases where banks act
under their fiduciary capacity, that is, as depositary of the deposits of their depositors. But the same
higher degree of diligence is not expected to be exerted by banks in commercial transactions that do
not involve their fiduciary relationship with their depositors. The case at bar does not involve the
handling of petitioners’ deposit, if any, with the respondent bank. Instead, the relationship involved
was that of a buyer and seller.

RP V. SECURITY CREDIT ET AL (G.R. NO. L-20583)

An investment company which loans out the money of its customers, collects the interest and
charges a commission to both lender and borrower, is a bank. It is conceded that a total of 59,463
savings account deposits have been made by the public with the corporation and its 74 branches,
with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as the
corporation deemed suitable therefore. It is clear that these transactions partake of the nature of
banking, as the term is used in Section 2 of the General Banking Act.

Facts: The Solicitor General filed a petition for quo warranto to dissolve the Security and Acceptance
Corporation, alleging that the latter was engaging in banking operations without the authority
required therefor by the General Banking Act (Republic Act No. 337). Pursuant to a search warrant
issued by MTC Manila, members of Central Bank intelligence division and Manila police seized
documents and records relative to the business operations of the corporation. After examination of
the same, the intelligence division of the Central Bank submitted a memorandum to the then Acting
Deputy Governor of Central Bank finding that the corporation is engaged in banking operations. It
was found that Security and Acceptance Corporation established 74 branches in principal cities and
towns throughout the Philippines; that through a systematic and vigorous campaign undertaken by
the corporation, the same had managed to induce the public to open 59,463 savings deposit
accounts with an aggregate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced
this quo warranto proceedings for the dissolution of the corporation, with a prayer that, meanwhile,
a writ of preliminary injunction be issued ex parte, enjoining the corporation and its branches, as
well as its officers and agents, from performing the banking operations complained of, and that a
receiver be appointed pendente lite. Superintendent of Banks of the Central Bank was then
appointed by the Supreme Court as receiver pendente lite of defendant corporation.

In their defense, Security and Acceptance Corporation averred that the the corporation had filed
with the Superintendent of Banks an application for conversion into a Security Savings and Mortgage
Bank, with defendants Zapa, Balatbat, Tanjutco (Pablo and Vito, Jr.), Soriano, Beltran and Sebastian
as proposed directors.

Issue: Whether or not defendant corporation was engaged in banking operations.

Held. An investment company which loans out the money of its customers, collects the interest
and charges a commission to both lender and borrower, is a bank. It is conceded that a total of
59,463 savings account deposits have been made by the public with the corporation and its 74
branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such persons as
the corporation deemed suitable therefore. It is clear that these transactions partake of the nature
of banking, as the term is used in Section 2 of the General Banking Act. Hence, defendant
corporation has violated the law by engaging in banking without securing the administrative
authority required in Republic Act No. 337.

That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is
apparent from the fact that the foregoing misuser of the corporate funds and franchise affects the
essence of its business, that it is willful and has been repeated 59,463 times, and that its continuance
inflicts injury upon the public, owing to the number of persons affected thereby.

CENTRAL BANK V. MORFE (G.R. NO. 20119)

FACTS: First Mutual Savings and Loan Organization encourage savings among its members and
extend financial assistance thru loans. Central bank said that the Organization and others with
similar nature are banking institutions and that the Org have never been authorized. CB applied for
SW because of the Org’s illegal receipt of deposits of money for deposit, disbursements…without
compliance with RA 337. The SW includes articles such as book of original entry…and others. They
said that the SW is general in its terms and that the use of the word “and others” permits the
unreasonable search and seizure of documents which have no relation to any specific criminal act.

HELD: SW is upheld.

– Depending on the circumstances, while in one instance the particular wording of the warrant
may make it assume the character of a general warrant, in another context it may be considered
perfectly alright.
– SW only for one offense, if issued for more than two, it is void. Scatter shot warrant.

– In illegal possession of shabu, marijuana, paraphernalia- one SW ok!

– SW may be partially void

– Undetermined amount of marijuana ok!

– Purpose of Particularity of Description:

Readily identify the items to be seized, thus prevent them from seizing the wrong items

Leave officers with no discretion regarding articles to be seized and thus prevent unreasonable
searches and seizure

– Not required that technical precision of description be required

– “narcotics paraphernalia”, “any and all narcotics”, and “a quantity of loose heroin”- ok!

– “and the like”- not necessarily general warrant

– Where should the requisite description appear- in the caption or body of the warrant? Body
sufficient.

– What if there’s discrepancy between the address in the caption and in the body? Not
sufficient to invalidate. It is sufficient as long as you can identify the place intended and distinguish it
from other places in the community.

BPI FAMILY V. FRANCO (G.R. NO. 123498)

FACTS:

On August 15, 1989, Tevesteco opened a savings and current account with BPI-FB. Soon thereafter,
FMIC also opened a time deposit account with the same branch of BPI-FB

On August 31, 1989, Franco opened three accounts, namely, a current, savings, and time deposit,
with BPI-FB. The total amount of P2,000,000.00 used to open these accounts is traceable to a check
issued by Tevesteco allegedly in consideration of Franco’s introduction of Eladio Teves, to Jaime
Sebastian, who was then BPI-FB SFDM’s Branch Manager. In turn, the funding for the P2,000,000.00
check was part of the P80,000,000.00 debited by BPI-FB from FMIC’s time deposit account and
credited to Tevesteco’s current account pursuant to an Authority to Debit purportedly signed by
FMIC’s officers.

It appears, however, that the signatures of FMIC’s officers on the Authority to Debit were forged.
BPI-FB, debited Franco’s savings and current accounts for the amounts remaining therein. In the
meantime, two checks drawn by Franco against his BPI-FB current account were dishonored and
stamped with a notation “account under garnishment.” Apparently, Franco’s current account was
garnished by virtue of an Order of

Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB prior to
Franco’s receipt of notice that his accounts were under garnishment. It was only on May 15, 1990,
that Franco was impleaded in the Makati case. Immediately, upon receipt of such copy, Franco filed
a Motion to Discharge Attachment. On May 17, 1990, Franco pre-terminated his time deposit
account.
BPI-FB deducted the amount of P63,189.00 from the remaining balance of the time deposit account
representing advance interest paid to him. Consequently, in light of BPI-FB’s refusal to heed Franco’s
demands to unfreeze his accounts and release his deposits therein, Franco filed on June 4, 1990 with
the Manila RTC the subject suit.

ISSUE: WON Respondent had better right to the deposits in the subject accounts which are part of
the proceeds of a forged Authority to Debit

HELD: NO

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a
legal consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. BPI-FB
conveniently forgets that the deposit of money in banks is governed by the Civil Code provisions on
simple loan or mutuum. As there is a debtor-creditor relationship between a bank and its depositor,
BPI-FB ultimately acquired ownership of Franco’s deposits, but such ownership is coupled with a
corresponding obligation to pay him an equal amount on demand. Although BPI-FB owns the
deposits in Franco’s accounts, it cannot prevent him from demanding payment of BPI-FB’s obligation
by drawing checks against his current account, or asking for the release of the funds in his savings
account. Thus, when Franco issued checks drawn against his current account, he had every right as
creditor to expect that those checks would be honored by BPI-FB as debtor.

More importantly, BPI-FB 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 was
allegedly involved in. To grant BPI-FB, or any bank for that matter, 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 banking industry.

Ineluctably, BPI-FB, as the trustee in the 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, BPI-FB cannot now shift liability thereon to
Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their
respective accounts without the appropriate court writ or a favorable final judgment.

BPI V. CA (G.R. NO. 104612)

FACTS: 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.

ISSUE: Whether BPI can demand the payment of the loan despite the existence of the Holdout
Agreement and whether BPI is still liable to the private respondents on the account subject of the
withdrawal by the heirs of Velasco.

RULING: Yes, for both issues. Regarding the first, 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.

Regarding the second issue, 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.

VITUG V. CA (G.R. NO. 82027)

FACTS: Spouses Dolores and Romarico Vitug entered into a survivorship agreement with the Bank of
American National Trust and Savings Association. The said agreement contained the following
stipulations:

(1) All money deposited and to be deposited with the Bank in their joint savings current account
shall be both their property and shall be payable to and collectible or withdrawable by either or any
of them during their lifetime; and

(2) After the death of one of them, the same shall belong to and be the sole property of the surviving
spouse and payable to and collectible or withdrawable by such survivor

Dolores died naming Rowena Corona in her wills as executrix. Romarico later filed a motion asking
authority to sell certain shares of stock and real property belonging to the estate to cover his
advances to the estate which he claimed were personal funds withdrawn from their savings account.
Rowena opposed on the ground that the same funds withdrawn from the savings account were
conjugal partnership properties and part of the estate. Hence, there should be no reimbursement.
On the other hand, Romarico insists that the same are his exclusive property acquired through the
survivorship agreement.
ISSUE: Whether or not the funds of the savings account subject of the survivorship agreement were
conjugal partnership properties and part of the estate

No. The Court ruled that a Survivorship Agreement is neither a donation mortis causa nor a donation
inter vivos. It is in the nature of an aleatory contract whereby one or both of the parties reciprocally
bind themselves to give or to do something in consideration of what the other shall give or do upon
the happening of an event which is to occur at an indeterminate time or is uncertain, such as death.
The Court further ruled that a survivorship agreement is per se not contrary to law and thus is valid
unless its operation or effect may be violative of a law such as in the following instances: (1) it is
used as a mere cloak to hide an inofficious donation; (2) it is used to transfer property in fraud of
creditors; or (3) it is used to defeat the legitime of a compulsory heir. In the instant case, none of the
foregoing instances were present. Consequently, the Court upheld the validity of the survivorship
agreement entered into by the spouses Vitug. As such, Romarico, being the surviving spouse,
acquired a vested right over the amounts under the savings account, which became his exclusive
property upon the death of his wife pursuant to the survivorship agreement. Thus, the funds of the
savings account are not conjugal partnership properties and not part of the estate of the deceased
Dolores.

BPI V. IAC (206 SCRA 408, 1992)

Facts: When the respondent spouses opened their joint current account, the “new accounts” teller
of the bank by mistake, placed the old existing separate personal account number of Arthur Canlas
on the deposit slip for the new joint checking account of the spouses so that the initial deposit for
the joint checking account was miscredited to Arthur’s personal account.

Because of this, one of the checks issued by one of the spouse was dishonoured for insufficient
funds prompting private respondents to file a complaint for damages against petitioner bank.
Petitioner bank argues that it is not considered negligent and liable for damages on account of the
inadvertence of its bank employee considered that it was an honest mistake and not tainted with
malice and bad faith.

Issue: WON the petitioner bank was guilty of gross negligence in the handling of private
respondents’ bank account.

Held: There is no merit in petitioner’s argument that it should not be considered negligent, much
less held liable for damages on account of the inadvertence of its bank employee for Article 1173 of
the Civil Code only requires it to exercise the diligence of a good father of a family.

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 (Simex vs CA, 183 SCRA 360).

GO V. IAC (197 SCRA 22, 1991)

FIRESTONE V. CA (G.R. NO. 113236)

Facts: Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon
Development Bank, the latter authorized and allowed withdrawals of funds though the medium of
special withdrawal slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit with
FirestoneTire & Rubber Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In
turn, these were deposited by the Firsestone to its bank account in Citibank. With this, relying on
such confidence and belief Firestone extended to Fojas-Arca other purchase on credit of its products
but several withdrawal slips were dishonored and not paid. As a consequence, Citibank debited the
plaintiff’s account representing the aggregate amount of the two dishonored special withdrawal
slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by and directly attributes
to defendant’s gross negligence as a result Fojas-Arca filed a complaint.

Issue: Whether or not the acceptance and payment of the special withdrawal slips without the
presentation of the depositor’s passbook thereby giving the impression that it is a negotiable
instrument like a check.

Held: No. Withdrawal slips in question were non negotiable instrument. Hence, the rules
governing the giving immediate notice of dishonor of negotiable instrument do not apply. The
essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its
freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this
character.

PBCOM V. CA (269 SCRA 695, 1997)

FACTS: Rommel’s Marketing Corporation (RMC) maintained two separate current accounts with PBC
in connection with its business of selling appliances. The RMC General Manager Lipana entrusted to
his secretary, Irene Yabut, RMC funds amounting to P300,000+ for the purpose of depositing the
same to RMC’s account with PBC. However, it turned out that Yabut deposited the amounts in her
husband’s account instead of RMC. Lipana never checked his monthly statement of accounts
regularly furnished by PBC so that Yabut’s modus operandi went on for the span of more than one
year.

ISSUE: What is the proximate cause of the loss – Lipana’s negligence in not checking his monthly
statements or the bank’s negligence through its teller in validating the deposit slips?

HELD: The bank teller was negligent in validating, officially stamping and signing all the deposit slips
prepared and presented by Yabut, despite the glaring fact that the duplicate copy was not
completely accomplished contrary to the self-imposed procedure of the bank with respect to the
proper validation of deposit slips, original or duplicate.

The bank teller’s negligence, as well as the negligence of the bank in the selection and supervision of
its bank teller, is the proximate cause of the loss suffered by the private respondent, not the latter’s
entrusting cash to a dishonest employee. Xxx Even if Yabut had the fraudulent intention to
misappropriate the funds, she would not have been able to deposit those funds in her husband’s
current account, and then make plaintiff believe that it was in the latter’s accounts wherein she had
deposited them, had it not been for the bank teller’s aforesaid gross and reckless negligence.

Doctrine of Last Clear Chance – where both parties are negligent, but the negligent act of one is
appreciably later in time than that of the other, or when it is impossible to determine whose fault or
negligence should be attributed to the incident, the one who had the last clear opportunity to avoid
the impending harm and failed to do so is chargeable with the consequences thereof. It means that
the antecedent negligence of a person does not preclude the recovery of damages for the
supervening negligence of, or bar a defense against liability sought by another, if the latter, who had
the last fair chance, could have avoided the impending harm by exercise of due diligence. (Phil. Bank
of Commerce v. CA, supra)