G.R.No.108957.June14,1993.

PRUDENTIALBANK,petitioner,vs.THECOURTOFAPPEALS,
AURORACRUZ,respondents.
Commercial Law Banks or Banking Institutions A banking
corporation is liable to innocent third persons where the representation is
made in the course of its business by an agent acting within the general
scopeofhisauthorityeventhoughtheagentissecretlyabusinghisauthority
and attempting to perpetrate a fraud upon his principal or some other
person for his own ultimate benefit.Conformably, we have declared in
countless decisions that the principal is liable for obligations contracted by
the agent. The agents apparent representation yields to the principals true
representationandthecontractisconsid
________________
*FIRSTDIVISION.

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PrudentialBankvs.CourtofAppeals

ered as entered into between the principal and the third person. A bank is
liableforwrongfulactsofitsofficersdoneintheinterestsofthebankorin
thecourseofdealingsoftheofficersintheirrepresentativecapacitybutnot
foractsoutsidethescopeoftheirauthority.(9c.q.s.p.417)Abankholding
out its officers and agent as worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled to perpetrate in the apparent
scopeoftheiremploymentnorwillitbepermittedtoshirkitsresponsibility
for such frauds, even though no benefit may accrue to the bank therefrom
(10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to
innocent third persons where the representation is made in the course of its
business by an agent acting within the general scope of his authority even
though,intheparticularcase,theagentissecretlyabusinghisauthorityand
attemptingtoperpetrateafrauduponhisprincipalorsomeotherperson,for
his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204
NW818,40ALR1021.)

SameSameCivilLawDamages Petitioner is liable for moral and

exemplarydamageswhenitactedinbadfaithindenyingCruztheobligation
she was claiming against it.We agree with the lower courts that the
petitioneractedinbadfaithindenyingCruztheobligationshewasclaiming
against it. It was obvious that an irregularity had been committed by the
bankspersonnel,butinsteadofrepairingtheinjurytoCruzbyimmediately
restoring her money to her, it sought to gloss over the anomaly in its own
operations. Cruz naturally suffered anxious moments and mental anguish
over the loss of the investment. The amount of P200,000.00 is not small
even by present standards. By unjustly withholding it from her on the
unproved defense that she had already withdrawn it, the bank violated the
trust she had reposed in it and thus subjected itself to further liability for
moralandexemplarydamages.

PETITIONforreviewofthedecisionoftheCourtofAppeals.
ThefactsarestatedintheopinionoftheCourt.
MoniqueQ.Ignacioforpetitioner.
EduardoC.Tutaanforprivaterespondent.
CRUZ,J.:
We deal here with another controversy involving the integrity of a
bank.
Thecomplaintinthiscasearosewhenprivaterespondent
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SUPREMECOURTREPORTSANNOTATED
PrudentialBankvs.CourtofAppeals
**

Aurora F. Cruz, with her sister as codepositor, invested

P200,000.00 in Central Bank bills with the Prudential Bank at its
branch in Quezon Avenue, Quezon City, on June 23, 1986. The
placement was for 63 days at 13.75% annual interest. For this
purpose, the amount of P196,122.88 was withdrawn from the
depositors Savings Account No. 2546 and applied to the
investment. The difference of P3,877.07 represented the prepaid
interest.
1
The transaction was evidenced by a Confirmation of2 Sale
deliveredtoCruztwodayslater,togetherwithaDebitMemo inthe
amount withdrawn and applied to the confirmed sale. These
documentswereissuedbySusanQuimbo,theemployeeofthebank
to whom Cruz was
referred and who was apparently in charge of
3
suchtransactions.
Upon maturity of the placement on August 25, 1986, Cruz
returned to the bank to rollover or renew her investment.4
Quimbo, who again attended to her, prepared a Credit Memo
crediting the amount of P200,000.00 in Cruzs savings account
passbook. She also prepared a Debit Memo for the amount of
P196,122.88 to cover the reinvestment
of P200,000.00 minus the
5
prepaidinterestofP3,877.02.
6
This time, Cruz was asked to sign a Withdrawal Slip for

This time, Cruz was asked to sign a Withdrawal Slip for

P196,122.98, representing the amount to be reinvested after
deductionoftheprepaidinterest.Quimboexplainedthiswasanew
requirement of the bank.
Several days later, Cruz received
another
7
8
ConfirmationofSale andacopyoftheDebitMemo.
On October 27, 1986, Cruz returned to the bank and sought to
withdraw her P200,000.00. After verification of her records,
however, she was informed that the investment appeared to have
beenalreadywithdrawnbyheronAugust25,1986.There
_______________
**Thepetitionerisnotrelatedtotheponente.
1DecisionofRTCJudgeRodolfoA.Ortiz,p.3.
2DecisionofRTCJudgeRodolfoA.Ortiz,p.3.
3Rollo,p.28.
4DecisionofRTCJudgeRodolfoA.Ortiz,p.4.
5Rollo,p.29.
6Rollo,p.29.
7Rollo,p.29.
8Rollo,p.29.

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PrudentialBankvs.CourtofAppeals

wasnocopyonfileoftheConfirmationofSaleandtheDebitMemo
allegedly issued to her by Quimbo. Quimbo herself was not
availableforquestioningasshehadnotbeenreportingforthepast
week. Shocked by this information, Cruz became hysterical and
burst into tears. The branch manager,
Roman Santos, assured her
9
thathewouldlookintothematter.
Everydaythereafter,Cruzwenttothebanktoinquireabouther
requesttowithdrawherinvestment.Shereceivednodefiniteanswer,
not even to the10 letter she wrote the bank which was received by
Santoshimself. Finally, Cruz sent the bank a demand letter dated
11
November12,1986fortheamountofP200,000.00plusinterest. In
areplydatedNovember20,1986,thebanksVicePresidentLauroJ.
JocsonsaidthatthereappearedtobeananomalyandrequestedCruz12
to defer court action as they hoped to settle the matter amicably.
Increasingly
worried, Cruz sent another letter reiterating her
13
demand. This time the reply of the bank was unequivocal and
negative.Shewastoldthatherrequesthadtobedeniedbecauseshe
14
hadalreadywithdrawntheamountshewasclaiming.
Cruzs reaction was to file a complaint for breach of contract
againstPrudentialBankintheRegionalTrialCourtofQuezonCity.
Shedemandedthereturnofhermoneywithinterest,plusdamages
andattorneysfees.Initsanswer,thebankdeniedliability,insisting
thatCruzhadwithdrawnherinvestment.Thebankalsoinstituteda
thirdparty complaint against Quimbo, who did not file an answer
15

and was declared in default. The bank, however, did not present

15

and was declared in default. The bank, however, did not present
anyevidenceagainsther.
Aftertrial,JudgeRodolfoA.Ortizrenderedjudgmentinfavorof
theplaintiffsanddisposedasfollows:
ACCORDINGLY,judgmentisherebyrenderedorderingthedefendant/third
partyplaintifftopaytotheplaintiffsthefollowing
________________
9Rollo,p.30.
10Rollo,p.30.
11Rollo,p.30.
12Rollo,p.31.
13Rollo,p.31.
14Rollo,p.31.
15Rollo,p.36.

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SUPREMECOURTREPORTSANNOTATED
PrudentialBankvs.CourtofAppeals

amounts:
1. P200,000.00,plusinterestthereonattherateof13.75%perannum
fromOctober27,1986,untilfullypaid
2. P30,000.00,asmoraldamages
3. P20,000.00,asexemplarydamagesand
4. P25,000.00,asreasonableattorneysfees.
The counterclaim and the thirdparty complaint of the defendant/ third
partyplaintiffaredismissed.
Withcostsagainstthedefendant/thirdpartyplaintiff.

Thedecisionwasaffirmedintotoonappealtotherespondentcourt.
16
The judgment of the Court of Appeals is now faulted in this
petition, mainly on the ground that the bank should not have been
found liable for a quasidelict when it was sued for breach of
contract.
The petition shall fail. The petitioner is quibbling. It appears to
be merely temporizing to delay enforcement of the liability clearly
establishedagainstit.
The basic issues are factual. The private respondent claims she
has not yet collected her investment of P200,000.00 and has
submittedinproofoftheircontentiontheConfirmationofSaleand
theDebitMemoissuedtoherbyQuimboontheofficialformsofthe
bank.ThepetitionerdeniesherclaimandpointstotheWithdrawal
Slip, which it says Cruz has not denied having signed. It also
contendsthattheConfirmationofSaleandtheDebitMemoarefake
andshouldnothavebeengivencredencebythelowercourts.

Thefindingsofthetrialcourtontheseissueshavebeenaffirmed
bytherespondentcourtandweseenoreasontodisturbthem.The
petitionerhasnotshownthattheyhavebeenreachedarbitrarilyorin
disregard of the evidence of record. On the contrary, we find
substantial basis for the conclusion that the private respondents
signedtheWithdrawalSliponlyaspartofthebanksnewprocedure
ofreinvestment.Shedidnotactuallyreceivetheamountindicated
therein,whichshewasmadetounderstandwasbeingreinvestedin
hername.Thebankitselfso
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16Rollo,pp.3946.

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PrudentialBankvs.CourtofAppeals

assured her in the Confirmation of Sale and the Debit Memo later
issuedtoherbyQuimbo.
Especially
persuasive are the following observations of the trial
17
court:
Whatismore,itcouldnotbethatplaintiffAuroraF.Cruzwithdrewonlythe
amountofP196,122.98fromtheirsavingsaccount,ifheronlyintentionwas
tomakesuchawithdrawal.For,if,indeed,itwasthedesireoftheplaintiffs
towithdrawtheirmoneyfromthedefendant/thirdpartyplaintiff,theycould
havewithdrawnanamountinroundfigures.Certainly,itisunbelievablethat
their withdrawal was in the irregular amount of P196,122.98 if they really
received it. On the contrary, this amount, which is the price of the Central
Bankbillsrolledover,indicatesthat,asclaimedbyplaintiffAuroraF.Cruz,
she did not receive this money, but it was left by her with the defendant/
thirdpartyplaintiffinordertobuyCentralBankbillsplacementforanother
sixtythree(63)days,forwhichshesignedawithdrawalslipattheinstance
ofthirdpartydefendantSusanQuimbowhotoldherthatitwasanewbank
requirement for the rollover of a matured placement which she trustingly
believed.

Indeed,thebankhasnotexplainedtheremarkablecoincidencethat
the amount indicated in the withdrawal slip is exactly the same
amountCruzwasreinvestingafterdeductingtherefromtheprepaid
interest.
Thebankhasalsonotsucceededinimpugningtheauthenticityof
theConfirmationofSaleandtheDebitMemowhichweremadeon
its officialforms.These are admittedly not available to the general
publicorevenitsdepositorsandarehandledonlybyitspersonnel.
Evenassumingthattheywerenotsignedbyitsauthorizedofficials,
as it claims, there was no obligation on the part of Cruz to verify
their authority because she had the right to presume it. The
documentshadbeenissuedintheofficeofthebankitselfandbyits
ownemployeeswithwhomshehadpreviouslydealt.Suchdealings

had not been questioned before, much less invalidated. There was
absolutely no reason why she should not have accepted their
authoritytoactonbehalfoftheiremployer.
_______________
17DecisionofRTCJudgeRodolfoA.Ortiz,pp.78.

356

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SUPREMECOURTREPORTSANNOTATED
PrudentialBankvs.CourtofAppeals

It is also worthy of noteand wonderthat although the bank

impleaded Quimbo in a thirdparty complaint, it did not pursue its
suitevenwhenshefailedtoanswerandwasdeclaredindefault.The
bankdidnotintroduce evidence against her although it could have
donesoundertherules.Nolessremarkably,itdidnotcallonherto
testify on its behalf, considering that under the circumstances
claimed by it, she would have been the best witness to show that
Cruz had actually withdrawn her P200,000.00 placement. Instead,
thebankchosetorelyonitsotheremployeeswhosetestimonywas
less direct and categorical than the testimony Quimbo could have
given.
WedonotfindthattheCourtofAppealsheldthebankliableon
aquasidelict.Theargumentofthepetitioneronthisissueispallid,
tosaytheleast,consistingasitdoesonlyoftheobservationthatthe
article cited by the respondent court on the agents liability falls
under the heading in the Civil Code on quasidelicts. On the other
hand,therespondentcourtclearlydeclaredthat:
The defendant/thirdparty plaintiff being liable for the return of the
P200,000.00 placement of the plaintiffs, the extent of the liability of the
defendant/thirdparty plaintiff for damages resultant thereof, which is
contractual, is for all damages which may be reasonably attributed to the
nonperformanceoftheobligation,xxx.
xxx
Because of the bad faith of the defendant/thirdparty plaintiff in its
breachofitscontractwiththeplaintiffs,thelatterare,therefore,entitledto
anawardofmoraldamagesxxx(Emphasissupplied)

Thereisnoquestionthatthepetitionerwasmadeliableforitsfailure
or refusal to deliver to Cruz the amount she had deposited with it
and which she had a right to withdraw upon its maturity. That
investment was acknowledged by its own employees, who had the
apparent authority to do so and so could legally bind it by its acts
visavisCruz.Whatevermighthavehappenedtotheinvestment
whether it was lost or stolen by whoeverwas not the concern of
thedepositor.Itwastheconcernofthebank.
AsfarasCruzwasconcerned,shehadtherighttowithdrawher
P200,000.00placementwhenitmaturedpursuanttothetermsofher

investment as acknowledged and reflected in the Confirmation of

Sale.Thefailureofthebanktodeliverthe
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PrudentialBankvs.CourtofAppeals

amount to her pursuant to the Confirmation of Sale constituted its

breachoftheircontract,forwhichitshouldbeheldliable.
Theliabilityoftheprincipalfortheactsoftheagentisnoteven
debatable.Lawandjurisprudenceareclearlyandabsolutelyagainst
thepetitioner.
Such liability dates back to the Roman Law maxim, Qui per
aliumfacitperseipsumfacerevidetur.Hewhodoesathingbyan
agentisconsideredasdoingithimself.Thisruleisaffirmedbythe
CivilCodethus:
Art. 1910. The principal must comply with all the obligations which the
agentmayhavecontractedwithinthescopeofhisauthority.
Art.1911.Evenwhentheagenthasexceededhisauthority,theprincipal
is solidarity liable with the agent if the former allowed the latter to act as
thoughhehadfullpowers.

Conformably, we have declared in countless decisions that the

principal is liable for obligations contracted by the agent. The
agents apparent representation yields to the principals true
representationandthecontractisconsideredasenteredintobetween
18
theprincipalandthethirdperson.
Abankisliableforwrongfulactsofitsofficersdoneintheinterestsofthe
bank or in the course of dealings of the officers in their representative
capacitybutnotforactsoutsidethescopeoftheirauthority.(9c.q.s.p.417)
Abankholdingoutitsofficersandagentasworthyofconfidencewillnotbe
permitted to profit by the frauds they may thus be enabled to perpetrate in
theapparentscopeoftheiremploymentnorwillitbepermittedtoshirkits
responsibilityforsuchfrauds,eventhoughnobenefitmayaccruetothebank
therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is
liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his
authorityeventhough,intheparticularcase,theagentissecretlyabusinghis
authority and attempting to perpetrate a fraud upon his principal or some
otherperson,forhisownultimatebenefit(McIntoshv.DakotaTrustCo.,52
ND752,204NW818,40ALR1021.)
_______________
18NationalFoodAuthorityvs.IntermediateAppellateCourt,184SCRA166.

358

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SUPREMECOURTREPORTSANNOTATED

PrudentialBankvs.CourtofAppeals

Applicationoftheseprinciplesisespeciallynecessarybecausebanks
have a fiduciary relationship with the public and their stability
depends on the confidence of the people in their honesty and
efficiency. Such faith will be eroded where banks do not exercise
strictcareintheselectionandsupervisionofitsemployees,resulting
inprejudicetotheirdepositors.
It would appear from the facts established in the case before us
thatthepetitionerwaslessthaneagertopresentQuimboatthetrial
oreventoestablishherliabilityalthoughitmadetheinitialeffort
which it did not pursueto hold her answerable in the thirdparty
complaint.Whateverhappenedtoherdoesnotappearintherecord.
Her absence from the proceedings feeds the suspicion of her
possiblemisdeed,whichthebankseemstohavestudiouslyignored
by its insistence that the missing money had been actually
withdrawn by Cruz. By such insistence, the bank is absolving not
only itself but also, in effect and by extension, the disappeared
Quimbowhoapparentlyhasmuchtoexplain.
We agree with the lower courts that the petitioner acted in bad
faith in denying Cruz the obligation she was claiming against it. It
was obviousthatan irregularity had been committed by the banks
personnel,butinsteadofrepairingtheinjurytoCruzbyimmediately
restoringhermoneytoher,itsoughttoglossovertheanomalyinits
ownoperations.
Cruz naturally suffered anxious moments and mental anguish
over the loss of the investment. The amount of P200,000.00 is not
smallevenbypresentstandards.Byunjustlywithholdingitfromher
ontheunproveddefensethatshehadalreadywithdrawnit,thebank
violated the trust she had reposed in it and thus subjected itself to
furtherliabilityformoralandexemplarydamages.
Ifapersondealingwithabankdoesnotreadthefineprintinthe
contract,itisbecause hetrusts the bank and relies on its integrity.
Theordinarycustomerapplyingforaloanorevenmakingadeposit
(andsohimselfextendingtheloantothebank)doesnotbotherwith
the red tape requirements and the finicky conditions in the
documentshesigns.Hisfeelingisthathedoesnothavetobewary
of the bank because it will deal with him fairly and there is no
reason to suspect its motives. This is an attitude the bank must
justify.
Whilethisisnottosaythatbankregulationsaremeaningless
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Domagasvs.Malana

or have no binding effect, they should, however, not be used for

covering up the fault of bank employees when they blunder or,
worse, intentionally cheat him. The misdeeds of such employees
mustbereadilyacknowledgedandrectifiedwithoutdelay.Thebank

mustalwaysactingoodfaith.Theordinarycustomerdoesnotfeel
the need for a lawyer by his side every time he deals with a bank
becauseheiscertainthatitisnotapredatororapotentialadversary.
The bank should show that there is really no reason for any
apprehensionbecauseittrulydeserveshisfaithinit.
WHEREFORE, the petition is DENIED and the appealed
decision is AFFIRMED, with costs against the petitioner. It is so
ordered.
GrioAquino,BellosilloandQuiason,JJ.,concur.
Petitiondenied.Appealedjudgmentaffirmed.
o0o

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