Republic of the Philippines vs. Security Credit and Acceptance Corporation G.R. No.

L-20583, January 23, 1967 Facts: Articles of Incorporation of defendant corporation were registered with the Securities and Exchange Commission. When they applied with SEC for the registration and licensing of their securities under the Securities Act , the latter referred it to the Central Bank which in turn rendered a n opinion classifying defendant corporation as engaged in banking. SEC then ad vised the corporation to comply with the requirements under the General Banking Act. 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 s ame, 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. In lieu of the memorandum, the Monetary Bo ard issued a resolution declaring that the corporation is performing banking o perations without first complying with the provisions of Republic Act No. 337. Notwithstanding such resolution, the corporation, have been and still are per forming the functions and activities which had been declared to constitute illeg al banking operations; the corporation had 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 i nduce the public to open 59,463 savings deposit accounts with an aggreg ate deposit of P1,689,136.74; Accordingly, the Solicitor General commenced this quo warranto proceedings for the dissolution of the corporation, with a p rayer that, meanwhile, a writ of preliminary injunction be issued ex parte, enjo ining the corporation and its branches, as well as its officers and agents, from performing the banking operations complained of, and that a receiver be appoint ed pendente lite. Superintendent of Banks of the Central Bank was then appointe d by the Supreme Court as receiver pendente lite of defendant corporation. Issue: Whether or not defendant corporation was engaged in banking operations. Held. Yes. 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 hav e been made by the public with the corporation and its 74 branches, with an agg regate deposit of P1,689,136.74, which has been lent out to such perso ns as the corporation deemed suitable therefore. It is clear that these transa ctions 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 engag ing in banking without securing the administrative authority required in Republi c Act No. 337. Accordingly, the defendant corporation was ordered dissolved and appointment of receiver was made permanent. Consolidated Bank and Trust Corporation vs. Court of Appeals G.R. No. 138569, September 11, 2003 Facts: Solidbank is a domestic banking corporation while private respondent L.C . Diaz and Company, CPAs (L.C. Diaz), is a professional partnership engaged in the practice of accounting and which opened a savings account with Solidbank. Di az through its cashier, Mercedes Macaraya , filled up a savings cash deposit sli p and a savings checks deposit slip. Macaraya instructed the messenger o f L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank and give hi m the Solidbank passbook. Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged receipt of th e deposit by returning to Calapre the duplicate copies of the two deposit slips . Since the transaction took time and Calapre had to make another deposit for L .C. Diaz with Allied Bank, he left the passbook with Solidbank. When Calapre re turned to Solidbank to retrieve the passbook, Teller No. 6 informed him that som

ebody got the passbook. Calapre went back to L.C. Diaz and reported the incident to Macaraya. The following day,, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz called up Solidbank to stop any transaction using the same passboo k until L.C. Diaz could open a new account followed by a formal written request later that day. It was also on the same day that L.C. Diaz learned of the unauth orized withdrawal the day before of P300,000 from its savings account. The withdrawal slip bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico Murillo. The signatories, however, denied signi ng the withdrawal slip. A certain No Tamayo received the P300,000. L.C. Diaz demanded from Solidbank the return of its money but to no avail Hence, L.C. Diaz filed a Complaint for Recovery of a Sum of Money again So lidbank with the Regional Trial Court. After trial, the trial court r endered decision absolving Solidbank and dismissing the complaint. Court of Appear reversed the decision of the trial court. Issue: Whether or not Solidbank must be held liable for the fraudulent withdrawa l of private respondents account. Held: The petition is partly meritorious. Solidbank is liable for breach of con tract due to negligence, or culpa contractual. The contract between the bank and its depositor is governed by the provisions of the Civil Code on sim ple loan. There is a debtor-creditor relationship between the bank and its depos itor. The bank is the debtor and the depositor is the creditor. The law imposes on banks high standards in view of the fiduciary nature of banking. RA 8791 declares that the State recognizes the fiduciary nature of banking that requires high standards of integrity and performance. This new provision in the general banking law, introduced in 2000, is a statutory affirmation of S upreme Court decisions holding that the bank is under obligation to treat the acc ounts of its depositors with meticulous care, always having in mind the fiducia ry nature of their relationship. However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust. Solidbanks tellers must exercise a high degree of diligence in insuring that the y return the passbook only to the depositor or his authorized representative. Th e tellers know, or should know, that the rules on savings account provide that any person in possession of the passbook is presumptively its owner. If the te llers give the passbook to the wrong person, they would be clothing that person presumptive ownership of the passbook, facilitating unauthorized withdrawals b y that person. For failing to return the passbook to Calapre, the authorized rep resentative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to obs erve such high degree of diligence in safeguarding the passbook, and in insuri ng its return to the party authorized to receive the same. However, L.C. Diaz was guilty of contributory negligence in withdrawal slip signed by its authorized signatories to fall into f an impostor. Thus, the liability of Solidbank should be reduced. liability of Solidbank for actual damages was reduced to only 60%, ng 40% was borne by private respondent. allowing a the hands o Hence, the the remaini

Bank of the Philippine Islands v Court of Appeals G.R. No 112392, February 29,20 00 FACTS: Private Respondent Napiza deposited in Foreign Currency Deposit Unit (FCD U) Savings Account which he maintained in petitioners bank Continental Bank Manag ers Check payable to cash in the amount of Two Thousand Five Hundred Dollars and duly endorsed by Napiza on its dorsal side. It appears that the check belonged t o Henry Chan who went to the office of Napiza and requested him to deposit the c

heck in his dollar account. Napiza agreed to deliver to Chan a signed blank with drawal slip with the understanding that as soon as the check is cleared , both o f them would withdraw upon Napizas presentation of his passbook. Using the blank withdrawal slip , one Ruben Gayon Jr was able to withdraw the amount. It was lat er found out that the check was counterfeit. Petitioner filed a complaint agains t Napiza praying for the return of the amount of $2,500.00 plus interest. ISSUES: 1. Is respondent Napiza liable under his warranties as a general indorser? 2. Is petitioner grossly negligent in allowing the withdrawal? HELD: 1. Ordinarily, private respondent may be held liable as in indorser of the check or even as an accommodation party. Under the law, the holder or last indo rsee of a negotiable instrument has the right to enforce payment of the instrume nt for the full amount thereof against all parties liable thereon. Among the par ties liable thereon is an indorser of the instrument. Such an indorser who indor ses without qualification inter alia engages that on due presentment the instrume nt shall be accepted or paid, or both,as the case may be, according to its tenor and that if it be dishonored ,he will pay the amount thereof to the holder. However, to hold Napiza liable without considering the attending circumstances i n the case would result in an injustice and in erosion of the public trust in th e banking system. The interest of justice thus demands looking into the events t hat led to the encashment of the check. 2. Yes. To withdraw the amount, a duly-filled up withdrawal slip and depositors p assbook must be presented. Such requirements were not complied with yet the amou nt was withdrawn. Petitioner violated its own rules by allowing the withdrawal o f an amount that is definitely over and above the aggregate amount of private re spondents dollar deposits that had yet to be cleared. The negligence of petitioners personnel was the proximate cause of the loss that petitioner sustained. The proximate cause of the withdrawal and eventual loss of the amount was part of the petitioners negligence in allowing such withdrawal in disregard of its own rules. BPI vs. IAC [G.R. No. 69162 February 21, 1992] Facts: Spouses Arthur & Vivienne Canlas opened a joint account in Commercial Ban k & Trust Comp (CBTC) with initial deposit of P2,250. Arthur Canlas had an exist ing separate personal account in the same branch. Upon opening the joint account , the new accounts teller pulled out form the banks files the old and existing sign ature card of Arthur Canlas, for ID and reference. By mistake, she placed the ol d personal account number of Arthur Canlas on the deposit slip for the new joint checking account of the spouses so that the initial deposit of P2,250 for the j oint checking account was miscredited to Arthur s personal account. The spouses subsequently deposited other amounts in their joint account. As a consequence, two checks were dishonored which the Canlas had issued against their joint account. The bank was unable to contract the spouses because of a wr ong address. Spouses Canlas filed a complaint for damages against CBTC in CFI Pampanga. Durin g the pendency of the case, the Bank of the Philippine Islands (BPI) and CBTC we re merged. As the surviving corporation under the merger agreement and under Sec tion 80 (5) of the Corporation Code of the Philippines, BPI took over the prosec ution and defense of any pending claims, actions or proceedings by and against C BTC.

RTC Pampanga rendered a decision against BPI, ordering them to pay actual damage s (P5,000), moral damages (P300,000), and exemplary damages (P150,000). On appea l, the IAC deleted the actual damages and reduced the other awardsactual damages (P50,000), moral damages (P50,000) and exemplary damages (P50,000). Issue: Whether or not BPI is guilty of gross negligence in the handling of the s pouses Canlas bank account. Held: YES. IAC decision modified by deleting the award of exemplary damages. The bank is not expected to be infallible but it must bear the blame for not dis covering the mistake of its teller despite the established procedure requiring t he papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. Apparently, the offici als and employees tasked to do that did not perform their duties with due care, as may be gathered from the testimony of the bank s lone witness, Antonio Enciso , who casually declared that "the approving officer does not have to see the acc ount numbers and all those things. Those are very petty things for the approving manager to look into." Unfortunately, it was a "petty thing," like the incorrect account number that the bank teller wrote on the initial deposit slip for the n ewly-opened joint current account of the Canlas spouses that sparked this half-a -million-peso damage suit against the bank. While the bank s negligence may not have been attended with malice and bad faith , nevertheless, it caused serious anxiety, embarrassment and humiliation to the private respondents for which they are entitled to recover reasonable moral dama ges. However, the absence of malice and bad faith renders the award of exemplary dama ges improper. 8. Reyes vs. Court of Appeals G.R. No. 118492, August 15, 2001 Facts: In view of the 20th Asian Racing Conference then scheduled to be held in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI) sent four delegates to the said conference. PRCI, through its officers, applied to the respondent ba nk for a foreign exchange demand draft in Australian dollars. Godofredo, clubs chief cashier, 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 Conferen ce Secretariat of Sydney, Australia. He was attended to by respondent b ank 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 ba nk in Sydney. Godofredo asked if there could be a way for respondent bank to acc ommodate PRCI s urgent need to remit Australian dollars to Sydney. Yasis of resp ondent bank then informed Godofredo of a roundabout way of effecting the req uested 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). This arrangement has been customarily resorted to since the 1960 s and the procedure has proven to be problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through Godofredo, agreed to this arrangement or approach in order to effect the urgent transfer of Australian dollars payable to the Secretariat of the 20th Asian Rac ing Conference. Pursuant thereto, respondent bank approved the said application of PRCI and issued foreign exchange demand draft in the sum applied for payable to the order of the 20th Asian Racing Conference Secretariat of Sydney, Austr alia, and addressed to Westpac-Sydney as the drawee bank.

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 debi ted. 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. Th e respondent bank on the same day likewise informed Wespac-New York requesting t he latter to honor the reimbursement claim of Wespac-Sydney. Upon its second p resentment for payment, the demand draft was again dishonored by WestpacSydn ey for the same reason,that is, that the respondent bank has no deposit dollar a ccount with the drawee Wespac-Sydney. Petitioners Gregorio Reyes and Consuelo Puyat-Reyes arrived in Sydney on a separate date and both were humiliated and embarrassed in the prese nce of international audience after being denied registration of the conferenc e secretariat since the foreign exchange draft was dishonored. Petitioners w ere only able to attend the conference after promising to pay in cash instead wh ich they fulfilled Petitioners filed in the Regional Trial Court a complaint for damages against the respondent bank. The trial court rendered judgment in favor of the respondent bank. The appellate court affirmed the decision of the trial court. Issue: Whether or not respondent bank is liable for damages due to the dishonor of the foreign exchange demand drafts. Held: No. The facts as found by the courts a quo show that respondent bank did n otcause an erroneous transmittal of its SWIFT cable message to Westpac-Sydney. It was the erroneous decoding of the cable message on the part of Westpac-Sydney that caused the dishonor of the subject foreign exchange demand draft. The evi dence also shows that the respondent bank exercised that degree of diligence ex pected 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 account of respondent bank with the former. As soon as the demand draft was dishonored, the respondent bank, thinking that the problem was with the reimbursement and without any idea that it was due to miscommunication, re-confirmed the authority of Wes tpac-New York to debit its dollar account for the purpose of reimbursi ng Westpac-Sydney. Respondent bank also sent two more cable messages to WestpacN ew York inquiring why the demand draft was not honored. The degree of diligence required of banks, is more than that of a good f ather of a family where the fiduciary nature of their relationship with their de positors 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 ruli ng 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 doe s not involve the handling of petitioners deposit, if any, with the respondent bank. Instead, the relationship involved was that of a buyer and seller. Wherefore, the decision of the Court of Appeals was affirmed. PRUDENTIAL BANK vs. COURT OF APPEALS G.R. No. 125536, March 16, 2000 FACTS: Private respondent Leticia Tupasi-Valenzuela opened an account in the Pe titioner Prudential bank. On June 1, 1988, herein private respondent deposited P

35,271.60 drawn against the PhilippineCommercial International Bank (PCIB). Ther eafter, private respondent issued Prudential Bank check in the amount of P11,500 post-dated June 20, 1988 in favor of one Belen Legaspi. Legaspi, who was in jew elry trade, endorsed the check to Philip Lhuiller, a businessman in the same fie ld. When the check was deposited with the PCIB, it was dishonored for being draw n against insufficient funds. Private respondent asked why her check was dishono red where there was sufficient funds. The bank officer told her there was no nee d to review the passbook because the bank ledger was the best proof that she did not have sufficient funds. Then he abruptly faced his typewriter and started ty ping. Later, it was found out that the bank misposted private respondents check d eposit to another account and delayed the posting of the same to the proper acco unt. The bank admitted that it was at fault. But since it is not the first time that private respondent experienced this scenario, she commenced a suit for dama ges. ISSUE: Can damages be awarded to private respondent on account of the banks negligence ? HELD: Yes. The trial court found that the misposting is a clear proof of lack of supervision on the part of the defendant bank . The appellate court also found out that while it may be true that the banks negligence in dishonoring the properly funded check might not have been attended with malice and bad faith, as appellee submits, nevertheless, it is the result of lack of due care and caution expecte d of an employee of a firm engaged in so sensitive and accurately demanding task as banking. In Simex International vs. CA, 183 SCRA 360,367 (1990), and BPI vs. IAC, 206 SCR A 408, this court had occasion to stress the fiduciary nature of the relationshi p between a bank and its depositors and the extent of diligence expected from th e former in handling the accounts entrusted to its care. In the case of PNB vs. CA, we held that a bank is under obligation to treat the a ccounts of its depositors with meticulous care whether such account consists onl y of a few hundred pesos or millions of pesos. Responsibility arising from negli gence in the performance of every kind of obligation is demandable. While petiti oners negligence in this case may not have been attended with malice and bad fait h, nevertheless, it caused serious anxiety, embarrassment and humiliation. SIMEX INTERNATIONAL (MANILA) INC. vs. COURT OF APPEALS G.R. No. 88013, March 19, 1990 FACTS: The petitioner is a private corporation engaged in the exportation of f ood products. It buys these products from various local suppliers and then sells them abroad. Most of its exports are purchased by the petitioner on credit. The petitioner was a depositor of the respondent bank and maintained a checking acc ount in its branch in Cubao, Quezon City which issued several checks against its deposit but was surprised to learn later that they had been dishonored for insu fficient funds. As a consequence, several suppliers sent a letter of demand to t he petitioner, threatening prosecution if the dishonored check issued to it was not made good and also withheld delivery of the order made by the petitioner. On e supplier also cancelled the petitioner s credit line and demanded that future payments be made by it in cash or certified check. Thepetitioner complained to t he respondent bank. Investigation disclosed that the sum of P100,000.00 deposite d by the petitioner on May 25, 1981, had not been credited to it. The error was rectified only a month after, and the dishonored checks were paid after they wer e re-deposited. The petitioner then filed a complaint in the then Court of First Instance of Rizal against the bank for its gross and want on negligence. ISSUE: Whether or not the bank can be held liable for negligence

HELD: The depositor expects the bank to treat his account with the utmost fideli ty 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 a t 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 blund er 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 a nd perhaps even civil and criminal litigation BANK OF THE PHILIPPINE ISLANDS vs. COURT OF APPEALS G.R. No. 104612MAY 10, 1994 FACTS: Private respondents Eastern Plywood Corporation and Benigno Lim as offic er 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 Isl ands. 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 joi nt checking account had P662,522.87. By virtue of an Indemnity Undertaking execu ted 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. Easter n obtained a loan of P73,000.00 from CBTC which was not secured. However, Easter n and CBTC executed a Holdout Agreement providing that the loan was secured by t he Holdout of the C/A No. 2310-001-42 referring to the joint checking account of V elasco and Lim. Meanwhile, a judicial settlement of the estate of Velasco ordere d the withdrawal of the balance of the account of Velasco and Lim. Asserting tha t the Holdout Agreement provides for the security of the loan obtained by Easter n 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 pet ition for recovery. Private respondents Eastern and Lim, however, assert that the amount deposited in the joint account of Velas co and Lim came from Eastern and therefore rightfully belong to Eastern and/or L im. 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 t he Holdout Agreement and whether BPI is still liable to the private respondents on the account subject of the withdrawal by the heirs of Velasco. HELD: Yes, for both issues. Regarding the first, the Holdout Agreement conferred on CBTC the power, not the duty, to set off the loan from th e account subject of the Agreement. When BPI demanded payment of the loan from E astern, it exercised its right to collect payment based on the promissory note, and disregarded its option under the Holdout Agreement. Therefore, its demand wa s in the correct order. Regarding the second issue, BPI was the debtor and Easte rn was the creditor with respect to the joint checking account. Therefore, BPI w as obliged to return the amount of the said account only to the creditor. When i t 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 th e debtor to the wrong party does not extinguish its obligation to the creditor w ho is without fault or negligence. Therefore, BPI was still liable to the true c reditor, Eastern CA Agro Industrial Development Corp., vs Court of Appeals Facts: Petitioner and the spouses Ramon and Paula Pugao entered into an agreemen t whereby the former purchased from the latter two (2) parcels of land. Among th e terms and conditions of the agreement were that the titles to the lots shall b

e transferred to the petitioner upon full payment of the purchase price and that the owner s copies of the certificates of titles thereto, and that title shall be deposited shall be deposited in a safety deposit box of any bank. Petitioner and the Pugaos then rented Safety Deposit Box of private respondent Security Ban k and Trust Company. Thereafter, a certain Mrs. Margarita Ramos offered to buy f rom the petitioner the two (2) lots. Mrs. Ramos demanded the execution of a deed of sale which necessarily entailed the production of the certificates of title. In view thereof, Aguirre, accompanied by the Pugaos, then proceeded to the resp ondent Bank to open the safety deposit box and get the certificates of title. Ho wever, when opened in the presence of the Bank s representative, the box yielded no such certificates. Issue: Is the contractual relation between a commercial bank and another party in a contract of rent of a safety deposit box with respect to its contents plac ed by the latter one of bailor and bailee or one of lessor and lessee? Held: The contract for the rent of the safety deposit box is not an ordinary co ntract of lease as defined in Article 1643 of the Civil Code. However, We do not fully subscribe to its view that the same is a contract of deposit that is to b e strictly governed by the provisions in the Civil Code on deposit; the contract in the case at bar is a special kind of deposit. It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute p ossession and control of the safety deposit box was not given to the joint rente rs the petitioner and the Pugaos. The guard key of the box remained with the res pondent Bank; without this key, neither of the renters could open the box. On th e other hand, the respondent Bank could not likewise open the box without the re nter s key. In this case, the said key had a duplicate which was made so that bo th renters could have access to the box.