Simex International (Manila) Inc. vs. Court of Appeals G.R. No.

88013, March 19,

1990

A bank may be held liable for damages by reason of its unjustified dishonor of a
check, which caused damage to its client’s credit standing. 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 at 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. The bank is a fiduciary of the depositor’s
money.

Facts: Simex International is a private corporation engaged in the exportation of

food products. It buys these products from various local suppliers and then sells
them abroad to the Middle East and the United States. Most of its exports are
purchased by the petitioner on credit. Simex was a depositor of the Far East
Savings Bank and maintained a checking account 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 insufficient funds. As a consequence, several suppliers
sent a letter of demand to the 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. One supplier also cancelled the petitioner’s credit line and
demanded that future payments be made by it in cash or certified check. The
petitioner complained to the respondent bank. Investigation disclosed that the sum
of P100,000.00 deposited 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 were re-deposited. The petitioner then filed a complaint in the then Court
of First Instance of Rizal against the bank for its gross and wanton negligence.

Issue: Whether or not the bank can be held liable for negligence by reason of
its unjustified dishonor of a check

Held: The depositor expects the bank to treat his account with the utmost
fidelity 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 at 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 blunder on
the part of the bank, such as the dishonour of a check without good reason, can
cause the depositor not a little embarrassment if not also financial loss and perhaps
even civil and criminal litigation.

Article 2205 of the Civil Code provides that actual or compensatory damages may be
received “(2) for injury to the plaintiff s business standing or commercial credit.”
There is no question that the petitioner did sustain actual injury as a result of the
dishonored checks and that the existence of the loss having been established
“absolute certainty as to its amount is not required.” 7 Such injury should bolster all
the more the demand of the petitioner for moral damages and justifies the
examination by this Court of the validity and reasonableness of the said claim.
Consolidated Bank and Trust Corporation vs Court of Appeals and L.C. Diaz and
Company, CPA’s

L.C. Diaz and Company (LC Diaz), an accounting firm, has a savings account with
Consolidated Bank and Trust Corporation (now called Solidbank Corporation).

On August 14, 1991, the firm’s messenger, a certain Ismael Calapre, deposited an
amount with the bank but due to a long line and the fact that he still needs to
deposit a certain amount in another bank, the messenger left the firm’s passbook
with a teller of Solidbank. But when the messenger returned, the passbook is already
missing. Apparently, the teller returned the passbook to someone else.

On August 15, 1991, LC Diaz made a formal request ordering Solidbank not to honor
any transaction concerning their account with them until the firm is able to acquire a
new passbook. It appears however that in the afternoon of August 14, 1991, the
amount of P300,000.00 was already withdrawn from the firm’s account.

LC Diaz demanded Solidbank to refund the said amount which the bank refused. LC
Diaz then sued Solidbank. In its defense, Solidbank contends that under their banking
rules, they are authorized to honor withdrawals if presented with the passbook; that
when the P300k was withdrawn, the passbook was presented. Further, the
withdrawer presented a withdrawal slip which bore the signatures of the
representatives of LC Diaz.

The RTC ruled in favor of Solidbank. It found LC Diaz to be negligent in handling its
passbook. The loss of the P300k was not the result of Solidbank’s negligence.

On appeal, the Court of Appeals reversed the decision of the RTC. The CA used the
rules on quasi-delict (Article 2176 of the Civil Code).

ISSUE: Whether or not the relations between Solidbank and LC Diaz, the depositor, is
governed by quasi-delict in determining the liability of Solidbank.

HELD: No. Solidbank is liable for the loss of the P300k but it’s liability is grounded on
culpa contractual.

The contract between the bank and its depositor is governed by the provisions of the
Civil Code on simple loan (Article 1980, Civil Code). There is a debtor-creditor
relationship between the bank and its depositor. The bank is the debtor and the
depositor is the creditor. The depositor lends the bank money and the bank agrees
to pay the depositor on demand. The savings deposit agreement between the bank
and the depositor is the contract that determines the rights and obligations of the
parties.

Under their contract, it is the duty of LC Diaz to secure its passbook. However, this
duty is also applicable to Solidbank when it gains possession of said passbook which
it did when the messenger left it to the bank’s possession through the bank’s teller.
The act of the teller returning the passbook to someone else other than Calapre, the
firm’s authorized messenger, is a clear breach of contract. Such negligence binds the
bank under the principle of respondeat superior or command responsibility.

No contract of trust between bank and depositor

The Supreme Court emphasized that the contractual relation between the bank and
the depositor is that of a simple loan. This is despite the wording of Section 2 of
Republic Act 8791 (The General Banking Law of 2000) which states that the State
recognizes the “fiduciary nature of banking that requires high standards of integrity
and performance.” That “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.”

This fiduciary relationship means that the bank’s obligation to observe “high
standards of integrity and performance” is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father of a
family.

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.

In short, the General Banking Act simply imposes on the bank a higher standard of
integrity and performance in complying with its obligations under the contract of
simple loan, beyond those required of non-bank debtors under a similar contract of
simple loan. The General Banking Law in no way modified Article 1980 of the Civil
Code.
Metropolitan Bank And Trust Co. V. Cablizo (2006)

FACTS:

November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank Check payable to

"CASH" and postdated on November 24, 1994 in the amount of P1,000 drawn
against his Metrobank account to Mr. Marquez, as his sales commission

check was presented to Westmont Bank for payment who indorsed it to Metrobank
for appropriate clearing

After the entries thereon were examined, including the availability of funds and the
authenticity of the signature of the drawer, Metrobank cleared the check for
encashment in accordance with the Philippine Clearing House Corporation (PCHC)
Rules

November 16, 1994: Cabilzo’s representative was at Metrobank when he was asked
by a bank personnel if Cabilzo had issued a check in the amount of P91K to which he
replied in negative

That afternoon: Cabilzo called Metrobank to reiterate that he did not issue the check

He later discovered that the check of P1K was altered to P91K and date was changed
from Nov 24 to Nov 14.

Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account

June 30, 1995: Through counsel sent a letter-demand for the amount of P90K

CA affirmed RTC: Favored Cablizo

ISSUE: W/N Cablizo can recover from Metrobank

HELD: YES. CA Affirmed

material alteration

changes the items which are required to be stated under Section 1 of the Negotiable
Instruments Law

Section 1. Form of negotiable instruments. - An instrument to be negotiable must

conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand or at a fixed determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise

indicated therein with reasonable certainty.

changes the effect of the instrument

Section 125. What constitutes material alteration. – Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;

(c) The time or place of payment;

(d) The number or the relation of the parties;

(e) The medium or currency in which payment is to be made;

Or which adds a place of payment where no place of payment is specified, or any

other change or addition which alters the effect of the instrument in any respect is a
material alteration.

In the case at bar, the check was altered so that the amount was increased from
P1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14
November 1994.

Section 124. Alteration of instrument; effect of. – Where a negotiable instrument is

materially altered without the assent of all parties liable thereon, it is avoided,
except as against a party who has himself made, authorized,and assented to the
alteration and subsequent indorsers.

But when the instrument has been materially altered and is in the hands of a holder
in due course not a party to the alteration, he may enforce the payment thereof
according to its original tenor.
Cabilzo was not the one who made nor authorized the alteration. Neither did he
assent to the alteration by his express or implied acts

There is no showing that he failed to exercise such reasonable degree of diligence

required of a prudent man which could have otherwise prevented the loss.

bank must be a high degree of diligence, if not the utmost diligence

Surprisingly, however, Metrobank failed to detect the above alterations which could
not escape the attention of even an ordinary person

"NINETY" is also typed differently and with a lighter ink

only 2 asterisks were placed before the amount in figures, while 3 asterisks were
placed after such amount

"NINETY" are likewise a little bigger when compared with the letters of the words
"ONE THOUSAND PESOS ONLY"

When the drawee bank pays a materially altered check, it violates the terms of the
check, as well as its duty to charge its client’s account only for bona fide
disbursements he had made.

The corollary liability of Westmont Ban's indorsement, if any, is separate and

independent from the liability of Metrobank to Cabilzo.
PNB vs Pike

Facts: Norman Pike often traveled to and from Japan as a gay entertainer in said
country. Sometime in 1991, heopened U.S. Dollar Savings Account with PNB Buendia
branch for which he was issued a passbook. The complaintalleged that before Pike
left for Japan on 18 March 1993, he kept the passbook inside a cabinet under lock
and key,in his home. A few hours after he arrived from Japan, he discovered that
some of his valuables were missingincluding the passbook; that he immediately
reported the incident to the police which led to the arrest andprosecution of a
certain Mr. Joy Manuel Davasol. Pike also discovered that Davasol made 2
unauthorizedwithdrawals from his U.S. Dollar Savings Account.

Pike went to PNB’s Buendia branch and verbally protested the unauthorized
withdrawals and likewise demanded the return of the total withdrawn amount of U.S.
$7,500.00, on the ground that he never authorizedanybody to withdraw from his
account as the signatures appearing on the subject withdrawal slips were
clearlyforgeries. PNB refused to credit said amount back to Pike’s U.S. Dollar Savings
Account , and instead, the bankwrote him that it exercised due diligence in the
handling of said account.

Pike filed a case against PNB. PNB, on the other hand, claimed that before Pike went
to Japan, he and Davasol went to see PNB AVP Mr. Lorenzo Val and instructed the
latter to honor all withdrawals to be made by Davasol. After the loss of Pike’s
passbook, he allegedly withdraw the balance from his passbook and executed an
affidavit promising not to hold responsible the bank and its officers for the
withdrawal made.The trial court ruled that the bank is liable for the unauthorized
withdrawals. The bank was negligent in the performance of its duties such that
unauthorized withdrawals were made in the deposit of Pike. The CA affirmed the
findings of the RTC that indeed defendant-appellant PNB was negligent in exercising
the diligencerequired of a business imbued with public interest such as that of the
banking industry, however, it modified therate of interest and award for damages.

Issue: WON PNB is liable for the unauthorized withdrawals

Held: Yes

Ratio A priori, it is quite evident that the petition is anchored on a plea to review or
re-examine the factualconclusions reached by the trial court and affirmed by the CA,
and for this Court to hold otherwise. Whether:
1) Pike’s signatures appearing on the pertinent

withdrawal slips used by Joy Manuel Davasol to withdraw the amount of $7,500.00,
wereforgeries, as found by the trial court and affirmed by the Court of Appeals, or
were authentic as claimed by petitioner bank; and2) Pike in fact executed a waiver
absolving petitioner bank from any legal responsibility due to the unauthorized
withdrawals, as maintained bypetitioner bank, or the paragraph containing said
waiver was intercalated by some other person, thus, amounting no waiver at all, as
held bythe courts a quo.

Are questions of fact and not of law. Inexorably, these issues call for an inquiry into
the facts and evidence onrecord. This, as we have so often held, we cannot
do.Elementary is the rule that this Court is not the appropriate venue to consider
anew the factual issues as itis not a trier of facts, and, it generally does not weigh
anew the evidence already passed upon by the Court of Appeals. When this Court is
tasked to go over once more the evidence presented by both parties, and
analyze,assess and weigh them to ascertain if the trial court and the appellate court
were correct in according superiorcredit to this or that piece of evidence of one party
or the other, the Court cannot and will not do the same.Finding no other alternative
but to affirm their finding that petitioner PNB negligently allowed the unauthorized
withdrawals subject of the case at bar, the instant petition for review must
necessarily fail. It bears emphasizing that negligence of banking institutions should
never be countenanced. The negligence here lies in the lackadaisical attitude
exhibited by employees of PNB in their treatment of respondent Pike’s US Dollar
Savings Account that resulted in the unauthorized withdrawal of $7,500.
Nevertheless, though its employees may be the ones negligent, a bank’s liability as
an obligor is not merely vicarious but primary, as banks are expected to exercise the
highest degree of diligence in the selection and supervision of their employees, and
having such obligation, this Court cannot ignore the circumstances surrounding the
case at bar how the employees of PNB turned their heads, nay, closed their eyes to
the suspicious circumstances enfolding the two withdrawals subject of the case at
bar. It may even be said that they went out of their ways to disregard standard
operating procedures formulated to ensure the security of each and every account
that they are handling. PNB does not deny that the withdrawal slips used were in
breach of standard operating procedures of banks in the ordinary and usual course of
banking operations as testified to by one of its witnesses, Mr. Lorenzo T. Bal.

PNB’s witness was utterly remiss in protecting the bank’s client, as well as the bank
itself, when he allowed an account holder to make it appear as if he was the one
actually withdrawing from an account andactually receiving the withdrawn amount.
Ordinarily, banks allow withdrawal by someone who is not the accountholder so long
as the account holder authorizes his representative to withdraw and receive from his
account bysigning on the space provided particularly for such transactions, usually
found at the back of withdrawal slips. Asfittingly found by the courts a quo, if indeed,
respondent Pike signed the withdrawal slips in the presence of Lorenzo Bal, PNB’s
AVP at its Buendia branch, why did he not call Pike’s attention and refer him to the
space provided for authorizing representatives to withdraw from and receive the
proceeds of such withdrawal? Or, atthe very least, sign or initial the same so that he
could identify the pre-signed withdrawal slips made by Mr. Pike?

By his own testimony, the witness negated the very reason for the bank’s bizarre
“accommodation” of the alleged verbal request of Pike that he was a “valued client.”
From the aforequoted, it appears that Lorenzo Bal,was not even reasonably familiar
with Pike, yet, he was ready, willing and able to accommodate the verbal requestof
said depositor. Worse still, the witness still approved the withdrawal transaction
without asking for any proof of identification for the reason that: 1) Davasol was in
possession of a pre-signed withdrawal slip; and 2) the witness “recognized” the
signature of respondent Pike – even after admitting that he did not bother to counter
check thesignature on the slip with the specimen signature card of Pike and that he
met respondent Pike just once so thathe cannot seem to recall what the latter looks
like.Having admitted that pre-signed withdrawal slips do not constitute the normal
procedure with respect to withdrawals by representatives should have already put
PNB’s employees on guard. Rather than readily validating and permitting said
withdrawals, they should have proceeded more cautiously. Clearly, Lorenzo T. Bal,
anAssistant Vice President at that, was exceedingly careless in his treatment of
respondent Pike’s savings account.

From the foregoing, the evidence clearly showed that the bank did not exercise the
degree of diligencethat it ought to have exercised in dealing with their clients.With
banks, the degree of diligence required, contrary to the position of petitioner PNB, is
more than thatof a good father of a family considering that the business of banking is
imbued with public interest due to thenature of their functions. The stability of banks
largely depends on the confidence of the people in the honesty andefficiency of
banks. Thus, the law imposes on banks a high degree of obligation to treat the
accounts of itsdepositors with meticulous care, always having in mind the fiduciary
nature of banking. Section 2 of Republic ActNo. 8791,[25] which took effect on 13
June 2000, makes a categorical declaration that the State recognizes the “fiduciary
nature of banking that requires high standards of integrity and performance.”
BPI VS, LIFETIME MARKETING CORPORATION

FACTS:OnOctober 22, 1981, Lifetime Marketing Corporation (LMC, for

brevity), opened a current account with the Bank of the Philippine Islands (BPI,
for brevity),Greenhills-Edsa branch, denominated as Account No. 3101-0680-63. In
this account, the “sales agents” of LMC would have to deposit their collections or
payments to the latter. Sometime in 1986, LMC availed of the BPI’s inter-branch
banking network services in Metro Manila, whereby the former’s agents
could make [a] deposit to any BPI branch in Metro Manila under the same account.
Under this system, BPI’s bank tellers were no longer obliged to retain the extra copy
of the deposit slips instead, they will rely on the machine-validated deposit slip, to be
submitted by LMC’s agents. For its part, BPI would send to LMC a monthly bank
statement relating to the subject account. This practice was observed and complied
with by the parties.As a business practice, the registered sales agents or the Lifetime
Educational Consultants of LMC, can getthe books from the latter on
consignment basis, then they would go directly to their clients to
sell.Since LMC have several agents around thePhilippines, it required to
remit their payments through BPI,where LMC maintained its current
account. It has been LMC’s practice to require its agents to present a validated
deposit slip and, on that basis, LMC would issue to the latter an acknowledgement
receipt.Alice Laurel, is one of LMC’s “Educational Consultants” or agents.On various
dates covering the period from May, [sic] 1991 up to August, 1992,
Alice Laurel deposited checks to LMC’s subject account at different branches of
BPI,Each check thus deposited were retrieved by Alice Laurel after the deposit
slips were machine-validated, except thirteen(13) checks. A verification with BPI by
LMC showed that Alice Laurel made check deposits with the named BPI branches and,
after the check deposit slips were machine-validated, requested the teller to reverse
thetransactions.fraudulent transactions of Alice Laurel and her husband was made
possible through BPI teller’s failure to retrieve the duplicate original copies of
the deposit slips from the former, every time they ask for cancellation or
reversal of the deposit or payment transaction.Upon discovery of this fraud in early
August 1992, LMC made queries from the BPI branches involved. In reply to said
queries, BPI branch managers formally admitted that they cancelled, without the
permission of or due notice to LMC, the deposit transactions made by Alice and her
husband, and based only upon the latter’s verbal request or
representation.Thereafter, LMC immediately instituted a criminal action for Estafa
against Alice Laurel and her husbandThomas Limoanco, before the Regional
Trial Court of Makati,This case for estafa, however, was archived
because summons could not be served upon the spouses as they have
absconded.Thus, the BPI’s apparent reluctance to admit liability and settle LMC’s
claim for damages, and a hopeless case of recovery from Alice Laurel and her
husband, has left LMC, with no option but to recover damages from BPI.On July 24,
1995, LMC, through its representative, Miss Consolacion C. Rogacion, the President
of the company, filed a Complaint for Damages against BPI, and was
raffled to Regional Trial Courtof Makati City, Branch 141.After trial on
the merits, the courta quorendered a Decision in favor of LMC.Only BPI filed an
appeal.The Court of Appeals affirmed the decision of the trial court but increased
the award ofactual damages toP2,075,695.50 and deleted the award
ofP100,000.00 as attorney’s fees.[3]Citing public interest, the appellate court
denied reconsideration in a Resolution[4]dated30 January 2007.In this
Petition for Review[5]dated 19 March2007,

ISSUE:whether or not BPI observed the highest degree of care in handling LMC’s
accountis the subject of the inquiry in this case.

HELD:Negligence in this case lies in the tellers’ disregard of the validation procedures
in place and BPI’s utter failure to supervise its employees.Notably, BPI’s
managers admitted in several correspondences with LMC

that the deposit transactions were cancelled without LMC’s knowledge and
consentand based only upon the request of Alice Laurel and her husband.[12]BPI
cannot escape liability because of LMC’s failure to scrutinize the monthly statements
sent to it by the bank.This omission does not change the fact that were it not
for the wanton and reckless negligence of BPI’s tellers in failing to require the
surrender of the machine-validated deposit slips before reversing the deposit
transactions, theloss would not have occurred.BPI’s negligence is undoubtedly the
proximate cause of the loss.It is also true, however, that LMC should have been more
vigilant in managing and overseeing its own financial affairs. The damages
awarded to it were correctly reduced on account of its own
contributory negligence in accordance with Article 1172 of the Civil Code.Be
that as it may, we find the appellate court’s decision increasing the award of actual
damages in favor of LMC improper since the latter did not appeal from the decision
of the trial court.It is well-settled that a party who does not appeal from the decision
may not obtain any affirmative relief from the appellate court other than what he
has obtained from the lower court whose decision is brought up on appeal.The
exceptions to this rule, such as where there are (1) errors affecting the lower court’s
jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical
errors, do not apply in this case.
BPI v. Casa Montessori

FACTS:

CASA Montessori International opened a current account with BPI with

CASAs President Ms. Ma. Carina C. Lebron as one of its authorized signatories. In
1991, after conducting an investigation, plaintiff discovered that nine (9) of its checks
had been encashed by a certain Sonny D. Santos since 1990 in the total amount of
P782,000.00. It turned out that Sonny D. Santos with account at BPIs Greenbelt
Branch [was] a fictitious name used by third party defendant Leonardo T. Yabut who
worked as external auditor of CASA. Third party defendant voluntarily admitted that
he forged the signature of Ms. Lebron and encashed the checks.

The PNP Crime Laboratory conducted an examination of the nine (9)

checks and concluded that the handwritings thereon compared to the standard
signature of Ms. Lebron were not written by the latter.

On March 4, 1991, plaintiff filed the herein Complaint for Collection

with Damages against defendant bank.

ISSUE 1:

Was there forgery under the Negotiable Instruments Law (NIL)?

HELD:

YES. Forgery cannot be presumed. It must be established by clear, positive and

convincing evidence. Under the best evidence rule as applied to documentary
evidence like the checks in question, no secondary or substitutionary evidence may
inceptively be introduced, as the original writing itself must be produced in court.
But when, without bad faith on the part of the offeror, the original checks have
already been destroyed or cannot be produced in court, secondary evidence may be
produced. Without bad faith on its part, CASA proved the loss or destruction of the
original checks through the Affidavit of the one person who knew of that fact- Yabut.
He clearly admitted to discarding the paid checks to cover up his misdeed. In such a
situation, secondary evidence like microfilm copies may be introduced in court.

Even with respect to documentary evidence, the best evidence rule applies only
when the contents of a document -- such as the drawers signature on a check -- is
the subject of inquiry.
ISSUE 2:

Is BPI liable as the drawee bank for allowing payment on the checks to
a wrongful and fictitious payee?

HELD:

YES. BPI -- the drawee bank -- becomes liable to its depositor-drawer

for allowing payment on the checks to a wrongful and fictitious payee. Since the
encashing bank is one of its branches, BPI can easily go after it and hold it liable for
reimbursement. It may not debit the drawers account and is not entitled to
indemnification from the drawer. In both law and equity, when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must be borne by
the one whose negligence was the proximate cause of the loss or who put it into the
power of the third person to perpetrate the wrong.

A bank is bound to know the signatures of its customers; and if it pays

a forged check, it must be considered as making the payment out of its own funds,
and cannot ordinarily charge the amount so paid to the account of the depositor
whose name was forged.
CENTRAL BANK OF THE PHILIPPINES v. CITYTRUST BANKING CORPORATION 578
SCRA 27 (2009)

If the plaintiff’s negligence was only contributory, the immediate and proximate
cause of the injury being the defendant’s lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded.

The Citytrust Banking Corporation (Citytrust) gave Central Bank of the Philippines a
list of signatures of five of its officers authorized to sign checks and serve as drawers
and indorsers for its account, and also the list of the roving tellers authorized to
perform other transactions on its behalf, one of whom was Rounceval Flores (Flores).
Flores presented two checks to the Central Bank’s Senior Teller Iluminada dela Cruz
(Dela Cruz) and was subsequently approved. Dela Cruz prepared the cash transfer
slip where Flores should sign but instead he sign as one Rosauro C. Cayabyab. This
fact was missed by Dela Cruz. It was given to Cash Department and the signatures
were examined and later on paid Flores for the checks. After one year and nine
months, the Citytrust demanded that the checks be cancelled and the funds taken
out be returned because the check was stolen before. Central Bank did not heed
such call. Citytrust filed a complaint to collect the sum of money with damages
against Central Bank to the Regional Trial Court (RTC). RTC found both parties
negligent and held them equally liable for the loss. Court of Appeals affirmed the
decision.

ISSUE:

Whether or not Citytrust can collect sum of money as damages from the Central
Bank.

HELD:

The law imposes on banks high standards in view of the fiduciary nature of banking.
Section 2 of Republic Act No. 8791 (R.A. 8791), which took effect on 13 June 2000,
declares that the State recognizes the “fiduciary nature of banking that requires high
standards of integrity and performance.”

This fiduciary relationship means that the bank’s obligation to observe “high
standards of integrity and performance” is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father of a
family. Article 1172 of the Civil Code states that the degree of diligence required of
an obligor is that prescribed by law or contract, and absent such stipulation then the
diligence of a good father of a family. Section 2 of R.A. 8791 prescribes the statutory
diligence required from banks – that banks must observe “high standards of integrity
and performance” in servicing their depositors. Citytrust’s failure to timely examine
its account, cancel the checks and notify petitioner of their alleged loss/theft should
mitigate petitioner’s liability, in accordance with Article 2179 of the Civil Code which
provides that if the plaintiff’s negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of due care, the plaintiff
may recover damages, but the courts shall mitigate the damages to be awarded.
Philippine Bank Of Commerce V. CA (1997)

FACTS:

May 5, 1975 to July 16, 1976: Romeo Lipana claims to have entrusted RMC funds in
the form of cash totalling P304,979.74 to his secretary, Irene Yabut, for the purpose
of depositing said funds in the current accounts of RMC with Philippine Bank of
Commerce (PBC)

They were not credited to RMC's account but were instead deposited to Account No.
53-01734-7 of Yabut's husband, Bienvenido Cotas

Romeo Lipana never checked their monthly statements of account reposing

complete trust and confidence on PBC

Irene Yabut's modus operandi was to furnish 2 copies of deposit slip upon and both
are always validated and stamped by the teller Azucena Mabayad :

original showed the name of her husband as depositor and his current account
number - retained by the bank

duplicate copy was written the account number of her husband but the name of the
account holder was left blank

After validation, Yabut would then fill up the name of RMC in the space left blank in
the duplicate copy and change the account number to RMC's account number

This went on in a span of more than 1 year without private respondent's knowledge

Upon discovery of the loss of its funds, RMC demanded from PBC the return of its
money and later on filed in the RTC

RTC: PBC and Azucena Mabayad jointly and severally liable

CA: affirmed with modification deleting awards of exemplary damages and attorney's
fees

ISSUE:

1. W/N applying the last clear chance, PBC's teller is negligent for failing to avoid the
injury by not exercising the proper validation procedure-YES
2. W/N there was contirbutory negligence by RMC - YES

HELD: 60-40 ratio. only the balance of 60% needs to be paid by the PBC

1. YES.

The fact that the duplicate slip was not compulsorily required by the bank in
accepting deposits should not relieve the PBC of responsibility

The odd circumstance alone that such duplicate copy lacked one vital information
(Name of the account holder) should have already put Ms. Mabayad on guard.

Negligence here lies not only on the part of Ms. Mabayad but also on the part of the
bank itself in its lack in selection and supervision of Ms. Mabayad.

Mr. Romeo Bonifacio, then Manager of the Pasig Branch of the petitioner bank and
now its Vice-President, to the effect that, while he ordered the investigation of the
incident, he never came to know that blank deposit slips were validated in total
disregard of the bank's validation procedures until 7 years later

last clear chance/supervening negligence/discovered peril

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

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
the exercise of due diligence.

Here, assuming that RMC was negligent in entrusting cash to a dishonest employee,
yet it cannot be denied that PBC bank, thru its teller, had the last clear opportunity to
avert the injury incurred by its client, simply by faithfully observing their
self-imposed validation procedure.

Art. 1173. The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
In the case of banks, however, the degree of diligence required is more than that of a
good father of a family. Considering the fiduciary nature of their relationship with
their depositors, banks are duty bound to treat the accounts of their clients with the
highest degree of care

2. YES.

it cannot be denied that, indeed, private respondent was likewise negligent in not
checking its monthly statements of account. Had it done so, the company would have
been alerted to the series of frauds being committed against RMC by its secretary.
The damage would definitely not have ballooned to such an amount if only RMC,
particularly Romeo Lipana, had exercised even a little vigilance in their financial
affairs. This omission by RMC amounts to contributory negligence which shall
mitigate the damages that may be awarded to the private respondent

Article 2179 of the New Civil Code

When the plaintiff's own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendant's lack of due care,
the plaintiff may recover damages, but the courts shall mitigate the damages to be
awarded
Reyes vs. Court of Appeals G.R. No. 118492, August 15, 2001

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.