Nafarrete, P.

| I2023

CHINA BANKING CORPORATION vs. DOLORES PADILLA

 GR 202532, Oct 21, 2015
J. Kapunan

Topic: Liability of Parites – Liability of Primary Parties - Status of drawee prior to acceptance or payment; effect
of stop order

Case Summary: Dolores gave Marvic a check for P700 in words but the numerical value was 700K. After the
Estafa and BP 22 cases were dismissed, they filed for damages against CBC for dishonoring the check in the first
place for lack of funds. CBC claims that NIL 17 is not absolute and that it cannot be held liable for the acts of the
employee who cleared the check. The SC ruled that [DOCTRINE]. CBC’s arguments violate the principle that
they must be held to the highest degree of diligence required.

Doctrine:
The banking business is so impressed with public interest, where the trust and confidence of the public in general
is of paramount importance, such that the appropriate standard of diligence must be very high, if not the highest
degree of diligence.

A bank's liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence
in the selection and supervision of its employees is unavailing.

Banks can only act through their officers and employees, the fiduciary obligation laid down for these institutions
necessarily extends to their employees.

Facts:
 Dolores and Loida issued a CBC check in the amount of (P700.00) in favor of Marivic Samonte.  Numerical
was 700,000, but the words were for 700.
o Padilla purchased imported canned goods from Marvic.
 Taking advantage of the error, Marivic deposited the check in her CBC account. The check was dishonored for
the reason "drawn against insufficient funds"  Then Filed for ESTAFA and BP22 against Padilla. [Dismissed]
 July 28, 1997, the Padilla filed a complaint for damages against CBC.  CBC failed to exercise due diligence
required of Banks, resulting in the situtaiton.
 CBC: Cashier (Michael Yu) confirmed with Dolores herself that the check was for P700,000.00.
 RTC: NIL 17.
o Where the sum payable is expressed in words and also in figures and there is a discrepancy between the
two, the sum denoted by the words is the sum payable, but if the words are ambiguous or uncertain,
reference maybe had to the figures to fix the amount.
o Confirmation through telephone was not enough considering the situation, not to mention the huge amount
involved. The degree of diligence required was more than that of a good father of a family because the
banking business was imbued with public interest.
 CA: Affirmed with Modifications
o CBC could not escape liability from Yu's negligent act committed by Yu. Considering that its business
was imbued with public
o interest and that the relationship between it and its depositors is fiduciary in
o nature, the diligence required is more than that of a good father of a family

Issues + Held: W/N CBC is Liable – YES.

● CBC Argument:
○ It does not prohibit the drawee bank, if it so chooses, to make a direct personal confirmation with the
drawer on the true and correct amount written in the disputed check.

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 Nafarrete, P. | I2023

○ While the drawee bank has the option to return the check to the payee by reason of such discrepancy, no
law exists, however, which prevents the drawee from completing the transaction upon confirmation by the
drawer of the amount intended in the check.
● SC:
○ In its declaration of policy, the GBL of 2000 requires of banks the highest standards of integrity and
performance. A bank is under obligation to treat the accounts of its depositors with meticulous care.
○ The banking business is so impressed with public interest, where the trust and confidence of the
public in general is of paramount importance, such that the appropriate standard of diligence must
be very high, if not the highest degree of diligence.
○ A bank's liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due
diligence in the selection and supervision of its employees is unavailing.
 Banks can only act through their officers and employees, the fiduciary obligation laid down for
these institutions necessarily extends to their employees.
○ CBC's arguments runs afoul with a bank's duty to exercise the highest degree of diligence.
Considering the amount involved in the check, it would have been more prudent for CBC to call Dolores
and require her to countersign the check. Convenience cannot defeat the bank's paramount fiduciary
responsibility to its clients.
○ CBC failed to show convincing evidence that it had exercised the diligence required by law.
 To stress, CBC merely presented Yu's affidavit which stated that he called Dolores to verify the
amount of the check.
 Further, it appears that Yu was subsequently terminated in 1998 due to his unsound banking
practices. His infractions consisted of private lending and approving encashment of unfunded
checks.

Ruling: Petition is Dismissed.

Dispositive Portion: WHEREFORE, the petition is DENIED.