Banking (Law 181 A) 18 Ong Bun v.

Bank of the Philippine Islands

Part B / C. Degree of Diligence March 14, 2018 Peralta, J.
Article 1173, Civil Code; Section 2, General Banking Complaint for collection of a
Earl Bautista
Law; Section 1001, Manual for Regulation of Banks sum of money and damages

SUMMARY: In 2002, Ong Bun discovered that Custodian Certificates representing Certificates of
Deposit purchased from Far East Bank & Trust Company (FEBTC) have not been withdrawn since
their maturity in 1991. After BPI (the surviving entity in an FEBTC-BPI merger in 2000) denied his
claim for the payment of the certificates, Ong Bun filed a complaint for collection of a sum of money
before the RTC, which ruled in his favor. The CA reversed the RTC, but the SC reinstated the RTC’s
decision. The SC held that (1) the possession by Ong Bun of the certificates prove that he is still unpaid
because (2) the surrender of the certificates is mandatory for payment thereof, which is consistent
with the high standards of care and prudence expected of a bank, whose business is imbued with
public interest.
DOCTRINE: Banks, their business being impressed with public interest, are expected to exercise more
care and prudence than private individuals in their dealings.

FACTS

 In 1989, Ma. Lourdes Ong (“Ong”), the wife of Jose Ong Bun (“Ong Bun”) (collectively, “spouses”),
purchased 3 Silver1 Custodian Certificates (“CCs”) in the spouses’ name from the Far East Bank &
Trust Company (“FEBTC”). The CCs are in the name of “Jose Ong Bun OR Ma. Lourdes Ong” and are in
the amounts of P100,000, P500,000 and P150,000 for a total of P750,000.
 In 2000, FEBTC merged with Bank of the Philippine Islands (“BPI”), with BPI as the remaining entity.
 In December 2002, Ong Bun discovered after Ong’s death that the 3 CCs were still in his wife’s vault
and were not surrendered to FEBTC.
 Thereafter, on August 12, 2003, Ong Bun wrote a letter to BPI asking about how to redeem the CCs. BPI
replied, however, that upon its merger with FEBTC, there were no CCs outstanding and payable in its
records, which meant that Ong Bun’s CCs had already been fully paid by the time the CCs matured in
1991.
 After further exchanges proved futile, and a denial of his final letter of demand, Ong Bun filed on
March 7, 2006 a Complaint for Collection of a Sum of Money and Damages against BPI before the Iloilo
City RTC.
 BPI interposed the following defenses in its Answer:2
1. Upon maturity of all CCs in 1991, they have been paid;
2. When it merged with FEBTC in 2000, there were no outstanding CCs in FEBTC’s books;
3. Presentation or surrender of the CCs is not a condition precedent for its payment; thus, that
Ong Bun is still in possession of the CCs does not ipso facto mean that there had been no
payment yet;
 RTC: Ruled in favor of Ong Bun, and ordered BPI to pay the sum of P750,000 plus interest, legal
interest, moral damages, exemplary damages, attorney’s fees, and costs.
 CA: Reversed the RTC, after an appeal by BPI. The CA held that Ong Bun failed to prove that the CCs
are still unpaid and outstanding:
1. The CCs by themselves do not prove an outstanding deposit. On the contrary, they merely
certify that FEBTC had in its custody, in behalf of Ong Bun or his wife, the corresponding
Silver Certificates of Deposit represented by the CCs.
2. Surrender of the CCs is not required for the redemption/withdrawal of the Certificates of
Deposit.

1
These custodian certificates were issued by FEBTC on the occasion of their 25 th year anniversary, hence the name “silver,” and
does not pertain in any way to an investment related to the precious metal silver.
2
BPI also interposed the defense of prescription, alleging that Ong Bun filed his Complaint only on August 12, 2003, which is more
than 12 years after the CCs’ maturity in 1991, in violation of Article 1144 of the Civil Code which provides that actions based on a
written contract must be brought within 10 years from the time the right accrues. However, this was not passed upon by the RTC, CA, or
SC.
 ISSUE/S and RATIO

W/N the possession by Ong Bun of the CCs prove that a deposit is outstanding and unpaid by
FEBTC, and now BPI — YES

(Note: Because the RTC and CA are at variance with regard to their findings of fact, the SC deemed it
proper to rule on questions of fact, as an exception to the rule that the SC is not a trier of facts.)

1. The very stipulations written on the CCs prove that FEBTC has in its custody the Certificates of
Deposit represented by the CCs. Except for the amount, the 3 CCs bear the same wordings as
follows:

“This is to certify that the TRUSTS INVESTMENTS GROUP of FAR EAST BANK AND TRUST
COMPANY (Custodian) has in its custody for and in behalf of ***** JOSE ONG BUN OR MA.
LOURDES ONG ***** (Holder) the Silver Certificate of Deposit in the amount of PESOS:
Php500,000.00.”

2. Payment, as a mode of extinguishment of obligations, has 2 requisites: (a) identity [that the very
thing due must be delivered] and (b) integrity [that the prestation be fulfilled completely].

In this case, no proof of full payment was presented by BPI, which continues to merely allege that
there were no outstanding CCs in FEBTC’s books before the merger.

However, when the existence of a debt is fully established by the evidence, the burden of proving
that it has been extinguished by payment rests on the debtor. This means that as between BPI,
who alleges payment, and Ong Bun, who alleges non-payment, it is BPI who has the burden of proof
(even though Ong Bun is the plaintiff). BPI, however, failed to discharge this burden.

3. Contrary to the CA’s ruling, the surrender of the CCs is required for the withdrawal/redemption of
the Certificates of Deposit. This is supported by the very provisions on the CCs themselves:

“This instrument is transferable only in the books of the Custodian [referring to FEBTC] by
the holder [referring to “Jose Ong Bun OR Ma. Lourdes Ong”], or in the event of transfer, by
the transferee or buyer thereof in person or by a duly authorized attorney-in-fact upon
surrender of this instrument together with an acceptable deed of assignment.

The Holder hereof or transferee can withdraw at any time during office hours his/her
Silver Certificate of Deposit herein held in custody.

This instrument shall not be valid unless duly signed by the authorized signatories of the
Bank, and shall cease to have force and effect upon payment under the terms hereof.”

[RELEVANT DISCUSSION re: Degree of Diligence] Furthermore, the surrender of such

certificates would have promoted the protection of the bank and would have been more in line
with the high standards expected of any banking institution. Banks, their business being
impressed with public interest, are expected to exercise more care and prudence than private
individuals in their dealings. A bank owes great fidelity to the public it deals with, its operation
being essentially imbued with public interest.

∴ Thus, that Ong Bun still has the CCs in his possession prove that FEBTC (now, BPI) has an outstanding
and unpaid deposit due to him.

W/N the award of moral damages, exemplary damages, and attorney’s fees is proper — NO

1. Moral damages may not be awarded for failure to show that BPI acted fraudulently or in bad faith
(Article 2220, Civil Code). Meanwhile, exemplary damages may not be awarded absent a showing
that BPI acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner (Article 2232,
 Civil Code).

On the contrary, BPI merely had an honest belief that before its merger with FEBTC, the CCs had
already been paid, since these CCs were not found on FEBTC’s books.

2. The award of attorney’s fees is the exception and not the rule. Thus, an award of attorney’s fees
pursuant to Article 2208 of the Civil Code demands that courts clearly and distinctly set forth the
basis for such award.

However, the RTC merely reasoned that such award was justified because Ong Bun was “forced to
litigate,” without any further explanation.

∴ Therefore, the award of moral damages, exemplary damages, and attorney’s fees must be deleted.

FALLO

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated May 22, 2014,
of petitioner Jose T. Ong Bun, is GRANTED. Consequently, the Decision dated September 25, 2012 and
Resolution dated March 19, 2014 of the Court of Appeals in CA-G.R. CV No. 02715 are REVERSED and SET
ASIDE, and the Decision dated June 5, 2008 of the Regional Trial Court, Branch 33, Iloilo City is AFFIRMED
and REINSTATED, with the MODIFICATION that the award of moral damages, exemplary damages and
attorney's fees be OMITTED. SO ORDERED.

SEPARATE OPINION/S - None