TABLE OF CONTENTS prescribing the rules on the conversion of the Bank's
assets into money, processing of claims against it and the
Fidelity Savings v. Cenzon 1 manner and time of distributing the proceeds from the
Cancio v. CA 2 assets of the Bank. The liquidation proceedings is still
Salvacion v. CB 4 pending;
GSIS v. CA 5 
Simex v. CA 7 demanding the immediate payment of the aforementioned
BPI v. IAC 9 savings and time deposits.
BPI v. CA 10
Consolidated v. CA 14
PBC v. CA 16
Fidelity Savings v. Cenzon | Chrissa
April 5, 1990
FIDELITY SAVINGS AND MORTGAGE BANK, petitioner, vs.
HON. PEDRO D. CENZON, in his capacity as Presiding Judge of
the Court of First Instance of Manila (Branch XL) and SPOUSES
TIMOTEO AND OLIMPIA SANTIAGO, respondents.
REGALADO, J.:
NATURE: action for a sum of money with damages
SUMMARY: Sps. Santiago deposited a total of 100k with Fidelity
Savings Bank. The bank became insolvent and underwent
liquidation proceedings. The Sps instituted an action for a sum of
money and damages. CFI awarded the unpaid 90k with accrued
interest until fully paid, as well as moral and exemplary damages
and atty’s fees. SC reversed and held that cannot be held liable to
pay interest on bank deposits which accrued during the period
when the bank is actually closed and non-operational. Thus the
bank was only liable for interests up to Feb 19, 1969 when the bank
was prohibited to continue with banking operations
DOCTRINE: Unless a bank can lend money, engage in
international transactions, acquire foreclosed mortgaged properties
or their proceeds and generally engage in other banking and
financing activities from which it can derive income, it is
inconceivable how it can carry on as a depository obligated to pay
stipulated interest…Tthe obligation to pay interest on the deposit
ceases the moment the operation of the bank is completely
suspended by the duly constituted authority, the Central Bank.
FACTS:
 May 16, 1968, Sps. Santiago deposited with Fidelity
Savings Bank P50,000.00. Sometime on July 6, 1968,
Sps. Santiago,- deposited P50,000.00. total deposits =
100k
 February 18, 1969, the Monetary Board, after finding the
report of the Superintendent of Banks, that the condition of
the defendant Fidelity Savings and Mortgage Bank is one
of insolvency, to be true, issued Resolution No. 350
deciding:
1) To forbid the Fidelity Savings Bank to do
business in the Philippines;
2) To instruct the Acting Superintendent of Banks
to take charge, in the name of the Monetary
Board, of the Bank's assets
 The Superintendent of Banks took charge in the name of
the Monetary Board, of the assets of the banks on
February 19, 1969;
 Philippine Deposit Insurance Corporation paid the plaintiffs
the amount P10k on the aggregate deposits of P100k
pursuant to RA 5517, thereby leaving a deposit balance of
P90k
 The Monetary Board issued its Resolution No. 2124
directing the liquidation of the affairs of defendant
Fidelity Savings Bank;
 The SolGen filed a "Petition for Assistance and
Supervision in Liquidation" of the affairs of the bank with
the CFI
 The Liquidation Court promulgated the Bank Rules and
Regulations to govern the liquidation of the affairs of
defendant Fidelity Savings and Mortgage Bank,
The Sps. sent demand letters to herein defendants,
 Sps. Santiago instituted this present action for a sum of
money with damages against Fidelity Savings and
Mortgage Bank, Central Bank of the Philippines, et al. (the
case vs et al were eventually dismissed )
 CFI the bank to pay subject to the Bank Liquidation Rules
and Regulations:
(a) P90,000.00 with accrued interest until fully
paid;
(b) P30,000,00 as exemplary damages; and
(c) P10,000.00 as and for attorney's fees.
ISSUE 1: WON an insolvent bank like the Fidelity Savings and
Mortgage Bank may be adjudged to pay INTEREST on unpaid
deposits even after its closure by the Central Bank by reason of
insolvency (NO)
RATIO 1:
 It is settled jurisprudence that a banking institution which
has been declared insolvent and subsequently ordered
closed by the Central Bank of the Philippines cannot be
held liable to pay interest on bank deposits which
accrued during the period when the bank is actually closed
and non-operational.
 The Overseas Bank of Manila vs. Court of Appeals and
Tony D. Tapia:
o It is a matter of common knowledge, which We
take judicial notice of, that what enables a bank
to pay stipulated interest on money deposited
with it is that thru the other aspects of its
operation it is able to generate funds to cover
the payment of such interest. Unless a bank
can lend money, engage in international
transactions, acquire foreclosed mortgaged
properties or their proceeds and generally
engage in other banking and financing activities
from which it can derive income, it is
inconceivable how it can carry on as a depository
obligated to pay stipulated interest. Conventional
wisdom dictates this inexorable fair and just
conclusion. And it can be said that all who
deposit money in banks are aware of such a
simple economic proposition. Consequently, it
should be deemed read into every contract of
deposit with a bank that the obligation to pay
interest on the deposit ceases the moment
the operation of the bank is completely
suspended by the duly constituted authority,
the Central Bank.
 It is manifest that petitioner cannot be held liable for
interest on bank deposits which accrued from the time
it was prohibited by the Central Bank to continue with
its banking operations, that is, when Resolution No. 350
to that effect was issued on February 18, 1969.
ISSUE 2: WON Sps. are entitled to damages (NO)
 We find the awards of moral and exemplary damages and
attorney's fees to be erroneous.
 The trial court found, and it is not disputed, that there was
no fraud or bad faith on the part of petitioner bank and the
other defendants in accepting the deposits of private
respondents.
 Demand to pay was made and Civil Case No. 84800 was
filed in the trial court several months after the Central
Bank had ordered petitioner's closure.
BANKING: Week 1 | 1
  Further, this case is not one of the specified or analogous
cases wherein moral damages may be recovered.
 There is no valid basis for the award of exemplary
damages which is supposed to serve as a warning to
other banks from dissipating their assets in anomalous
transactions as there was no proof of such. Neither did the
offending party act in a wanton, fraudulent, reckless,
oppressive or malevolent manner.
 Neither may attorney's fees be awarded.
 In the absence of fraud, bad faith, malice or wanton
attitude, petitioner bank may, therefore, not be held
responsible for damages which may be reasonably
attributed to the non-performance of the obligation
ISSUE 3: WON Sps’ claim would be violative of the provisions on
concurrence and preference of credits (NO)
 We agree that the Sps' claims should he been filed in the
liquidation proceedings in Civil Case No. 86005, entitled
"In Re: Liquidation of the Fidelity Savings and Mortgage
Bank," in the CFI.
 However, we do not believe that the decision rendered in
the instant case would be violative of the legal provisions
on preference and concurrence of credits. As the trial
court puts it:
o . . . But this order of payment should not be
understood as raising these deposits to the
category of preferred credits of the defendant
Fidelity Savings and Mortgage Bank but shall be
paid in accordance with the Bank Liquidation
Rules and Regulations embodied in the Order of
the CFI
DISPOSITIVE: Decision MODIFIED. Bank to pay private
respondents Timoteo and Olimpia Santiago the sum of P90,000.00,
with accrued interest until February 18, 1969. Award for damages
DELETED.
Cancio vs. CA| Karl
October 22, 1987
ROSA CANCIO, petitioner, vs.
HON. COURT OF TAX APPEALS and HON. COMMISSIONER
OF CUSTOMS, respondents.
MELENCIO-HERRERA, J.:
NATURE: MR of August 11 1986 Resolution
SUMMARY:
Cancio was leaving the Philippines with undeclared foreign
currency. These were confiscated due to her failure to present a
Central Bank Authority to transfer these funds. The CTA upheld the
seizure. However, the Supreme Court, finding that Cancio is a
foreign currency depositor, reversed the CTA in so far as the
money which was seized given that the Foreign Currency Deposit
Act grants the depositor unrestricted transferability of his/her funds.
Therefore, in this case, Cancio did not have to present any Central
Bank Authority.
DOCTRINE (related to topic):
 The transferability abroad of foreign currency deposits is
unrestricted. Only one exception is provided for therein,
which is, any restriction " from the contract between the
depositor and the bank." Neither is a Central Bank
authority required for the transferability abroad of foreign
currency deposits.
 Indeed, given the underlying objective of the Foreign
Currency Deposit Act, as amended, which is to attract and
invite the deposit of foreign currencies which are
acceptable as part of the international reserve in duly
authorized banks in order that they may be put into the
stream of the banking system, it would be to defeat the
very purpose of the law to place undue restrictions on the
transferability of such funds.
 The countervailing effect would be to discourage
prospective foreign currency depositors to the detriment of
the banking system.
 In fine, Central Bank Circulars Nos. 265 and 534 requiring
prior Central Bank authority for the taking out of the
country of foreign currency should not be made to
encompass foreign currency depositors whose rights are
expressly defined and guaranteed in a special law, the
Foreign Currency Deposit Act (RA 6426, as amended). As
a foreign currency depositor, therefore, petitioner cannot
be adjudged to have violated the aforestated Central Bank
Circulars.
FACTS:
 Claimant Mrs. Rosa Cancio bearing Philippine Passport
No. 11797799 while clearing through the Pre-Boarding
(AVSECOM) Area of MIA with her husband and three (3)
children to board PR 306 for Hongkong in the morning of
June 12, 1981, was apprehended with
o One Hundred Two Thousand Nine Hundred
Dollars (US$102,900.00) in cash,
o six hundred dollars (US$600.00) in two travelers
checks, and
o one thousand five hundred (Pl,500.00) Pesos;
 Such apprehension was effected only thru an alarm
sounded by the scanner (metal detecting device) of the
AVSECOM men, when Mrs. Cancio who did not declare
her currency had already passed the Customs inspection
area;
 Subject currencies were placed and concealed inside the
two fairly-sized carton boxes for local chocolates, securely
wrapped and taped with tin foil-back paper; and, that in
view of claimant's failure, upon being required, to present
the Central Bank Authority, the said currencies were
accordingly confiscated and a seizure Receipt No. 013
was issued to her;
o Hence, this seizure proceedings.
 At the hearing of this case, Cancio, thru counsel,
presented the following, attesting to the fact that claimant
Rosa Cancio had withdrawn from her FCDU Account a
certain amount of United States currency which tended to
show that claimant herein was a foreign currency
depositor pursuant to the provisions of Republic Act No.
6426, as implemented by Central Bank Circular No. 343.
o certified xerox copy of her Bank Book (Exhibit "I")
for foreign currency deposit with the Philippine
Commercial and Industrial Bank under Account
FCDU No. 0265,
o dollar remittances in telegraphic transfers from
abroad for deposits in her account from May 13,
1981 to May 21, 1981, and
o withdrawal cards (Exhibit "l-A" to "1-E", inclusive),
 Cancio testified that because her foreign currency deposit
could not be withdrawn at one time, she made her
withdrawal on several occasions starting from May 14,
1981 up to May 27, 1981 when she closed her account
preparatory to her departure which was scheduled in the
morning of June 12, 1981 for Hongkong;
o From Hongkong, she and her family intended to
proceed to the United States for medical
treatment of her heart ailment as advised by her
two attending physicians from the UST Hospital;
o The US currency that they were carrying and
confiscated from them on June 12, 1981 was
intended principally for such medical purpose and
for other miscellaneous and necessary expenses,
and, that the subject currencies were concealed
and hidden by them inside the two chocolate
boxes solely for security reasons.
 By reason of the forfeiture decreed by respondent
Commissioner of Customs of both the foreign and local
BANKING: Week 1 | 2
 currencies due to petitioner's failure to present a Central
Bank (CB) authority to bring said currencies out of the
country, petitioner appealed to respondent Court of Tax
Appeals.
 CTA: affirmed the forfeiture of the US$102,900.00 in cash,
and US$600.00 in travellers' checks for having been in
violation of Central Bank Circulars Nos. 265 and 534, in
relation to Section 2530(f) of the Tariff and Customs Code,
as amended.
o It reversed, however, the forfeiture of P1,500.00
on the ground that since petitioner was travelling
with her husband and three (3) children, the said
amount did not exceed the P500.00 at that each
traveller is allowed to bring out of the country
without a CB permit pursuant to paragraph 4 of
CB Circular No. 383.
 Petitioner's unimpugned evidence shows that she was a
foreign currency depositor at the Philippine Commercial
and Industrial Bank at Makati, Metro Manila, and that the
subject foreign currency was part of the total amount of
US$116,000.00 she had withdrawn from said bank from
May 14 to 27, 1981 for her travel and medical expenses in
the United States via Hongkong.
 Admitted, too, is the fact that petitioner failed to present to
the apprehending customs authorities a Central Bank
authority to bring out of the country the said currencies
while at the pre-boarding area of the Manila International
Airport on June 12, 1981 on her scheduled flight to
Hongkong together with her husband and three children.
ISSUE : Whether or not respondent Court had committed
reversible error in upholding the forfeiture of the foreign
currencies in question.--YES
RATIO:
 A second look at the facts and the equity of the case, the
pertinent laws, and the CB Circulars involved constrains
us to rule in the affirmative and, accordingly, to grant
reconsideration of our Resolution of August 11, 1986
denying review.
 It is true that in so far as the exportation or taking out of
foreign currency from the country is concerned, Central
Bank Circular No. 265, issued on November 20, 1968,
particularly paragraph 3 thereof, mandates:
“3. No person shall take out or export from the Philippines foreign
currency or any other foreign exchange except as otherwise
authorized by the Central Bank.”
 Similarly, Central bank Circular No. 534, issued on July
19, 1976, reiterates and provides in Sec. 3 thereof as
follows:
o “Sec. 3. Unless specifically authorized by the
Central Bank or allowed under existing
international agreements or Central Bank
regulations, no person shall take or transmit or
attempt to take or transmit foreign exchange, in
any form out of the Philippines only, through
other persons, through the mails, or through
international carriers.
o The provisions of this Section shall not apply to
tourists and non-resident temporary visitors who
are taking or sending out of the Philippines their
own foreign exchange brought in by them.”
 However, peculiar to the present controversy is the
fact that, as stated previously, petitioner is a foreign
currency depositor. Relevant and applicable to her is the
following provision of the "Foreign Currency Deposit Act of
the Philip pines" (Republic Act No. 6426, as amended),
which took effect upon its approval on April 4,1972:
SEC. 5. Withdrawability and transferability of deposits. — There
shall be no restriction on the withdrawal by the depositor of his
deposit or on the transferability of the same abroad except those
arising from the contract between the depositor and the bank.
 Under the foregoing provision, the transferability abroad of
foreign currency deposits is unrestricted. Only one
exception is provided for therein, which is, any restriction "
from the contract between the depositor and the bank."
Neither is a Central Bank authority required for the
transferability abroad of foreign currency deposits.
 Attention is called, however, to the implementing rules and
regulations to said Republic Act 6426, as embodied in CB
Circular No. 343 issued on April 24, 1972, which provides:
SEC. 11. Withdrawability and Liquidity of Deposits.
a. x x x x x x x x x
b. Subject only to the terms of the contract between the bank and
the depositor, the latter shall have a general license to withdraw his
deposit, notwithstanding any change in policy or regulations.
xxx xxx xxx
 Respondent Court has taken the position that the
foregoing provision its the right of the depositor to that of
withdrawal and withholds from him the right of
transferability abroad.
o That is not so. Circular-Letter, dated August
3, 1978, issued by the Central Bank reads in
explicit terms:
TO: ALL BANKS AUTHORIZED TO ACCEPT FOREIGN
CURRENCY DEPOSITS UNDER THE PROVISIONS OF RA 6426,
AS AMENDED AND PRESIDENTIAL DECREE NO. 1035.
Effective immediately, the banks authorized to accept foreign
currency deposits under the provisions of RA 6426, as amended,
and PD 1035 and as implemented by Central Bank Circular 343
and 547, are hereby instructed to advise their foreign currency
depositors who are withdrawing funds for travel purposes to carry
with them the certificate of withdrawal that the banks shall issue.
The travellers shall present the certifications to the Customs and
Central Bank personnel at the MIA, if requested.
The banks shall issue a uniform certification, as follows:
___________________
Date
TO WHOM IT MAY CONCERN:
This certifies that ________________________whose signature
appears below has withdrawn today, the amount of
____________in cash (US$ _______________) and Travellers
Check (US$___________________________) against his/her
foreign currency account maintained with us.
The funds herein withdrawn are represented to be used in
connection with the depositor's foreign travel scheduled on or about
____________________197_________.
___________________________
(Signature of Authorized
Official OverPrinted Name)
_______________________
(Signature of Depositor)
Please be guided accordingly.
(SGD
 As instructed in the Circular-Letter abovequoted, it is the
authorized depository bank which should advise its
depositors to carry with them the certificate of withdrawal.
At any rate, respondent Court has found that petitioner
has presented in evidence her foreign currency bank book
and her withdrawal cards.
o These may be considered as substantial
compliance for purposes of this case.
 Indeed, given the underlying objective of the Foreign
Currency Deposit Act, as amended, which is to attract
and invite the deposit of foreign currencies which are
BANKING: Week 1 | 3
 acceptable as part of the international reserve in duly
authorized banks in order that they may be put into
the stream of the banking system, it would be to
defeat the very purpose of the law to place undue
restrictions on the transferability of such funds.
 The countervailing effect would be to discourage
prospective foreign currency depositors to the detriment of
the banking system.
 In fine, Central Bank Circulars Nos. 265 and 534
requiring prior Central Bank authority for the taking
out of the country of foreign currency should not be
made to encompass foreign currency depositors
whose rights are expressly defined and guaranteed in
a special law, the Foreign Currency Deposit Act (RA
6426, as amended). As a foreign currency depositor,
therefore, petitioner cannot be adjudged to have
violated the aforestated Central Bank Circulars.
 It follows that neither is there room for the application of
Section 2530(f) of the Tariff and Customs Code, as
amended, which provides for the forfeiture of any article
and other objects, the exportation of which is effected or
attempted contrary to law.
 This is not to condone petitioner's failure to declare the
foreign currency she was carrying out of the country but
just to stress that the Foreign Currency Deposit Act grants
petitioner the right of transferability of her funds abroad
except that she was not advised by her bank to secure,
and consequently was unable to present, the necessary
certificate of withdrawal from said bank.
DISPOSITION: CTA Decision is set aside in so far as it upheld the
forfeiture by respondent Commissioner of Customs of the sums of
US$102,900.00 in cash, and US$600.00 in traveller's checks, which
amounts should now be returned to petitioner's heirs, but
AFFIRMED in so far as it reversed the forfeiture by the same official
of the sum of P1,500.00.
Salvacion v. Central Bank / Ish
August 21, 1997
KAREN E. SALVACION, MINOR, thru FEDERICO N.
SALVACION, JR., FATHER AND NATURAL GUARDIAN, and
SPOUSES FEDERICO N. SALVACION, JR., and EVELINA E.
SALVACION, petitioners, vs. CENTRAL BANK OF THE
PHILIPPINES, CHINA BANKING CORPORATION and GREG
BARTELLI Y NORTHCOTT, respondents.
TORRES, JR., J.
NATURE: Declaratory relief
SUMMARY: Karen Salvacion, then 12 years old, was raped by
Greg Bartelli, an American. A criminal case was filed against him,
but as Bartelli escaped from detention, it was archived. Salvacion
filed a civil case for damages. In that case, the court issued a writ of
preliminary attachment covering certain foreign currency deposits
with Chinabank. The writ of attachment was unsatisfied because
foreign currency deposits are exempt from attachment under CB
Circular No. 960. The trial court eventually ruled in favor of
Salvacion. The writ of execution also remained unsatisfied in view
of the CB Circular. The SC ruled in favor of Salvacion, holding that
the CB Circular does not apply to transient depositors like Bartelli.
DOCTRINE:
 One reason for exempting the foreign currency deposits
from attachment, garnishment or any other order process
of any court, is to assure the development and speedy
growth of the Foreign Currency Deposit System and the
Offshore Banking System in the Philippines.
 Another reason is to encourage the inflow of foreign
currency deposits into the banking institutions thereby
placing such institutions more in a position to properly
channel the same to loans and investments in the
Philippines, thus directly contributing to the economic
development of the country.
 Obviously, the foreign currency deposit made by a
transient or tourist is not the kind of deposit given
incentives and protection by our laws because such
depositor stays only for a few days in the country and,
therefore, will maintain his deposit in the bank only for a
short time.
FACTS:
 On February 4, 1989, Karen Salvacion (Salvacion) was at
the Plaza Fair Makati Cinema Square, with her friend
Edna Tangile whiling away her free time.
 She was approached by an American, Greg Bartelli
(Bartelli), who told her that he had a niece about her age
back at his house along Kalayaan Ave.
 Bartelli gave Salvacion a stuffed toy in order to convince
her to go back to his house with him, purportedly to teach
his niece Filipino.
 When they arrived at his home, there was no niece.
Bartelli tied Salvacion’s hands and covered her mouth with
packing tape. He first inserted his finger into her sex organ
and later proceeded to have carnal knowledge with her,
using Johnson’s Baby Oil as lubricant.
 For the following three days, following breakfast consisting
of biscuits and coke, Bartelli raped Salvacion. The rapes
took place thrice a day.
 On February 6, Salvacion was able to cry for help through
a window in the bathroom of Bartelli’s house. However,
the neighbor who heard her got angry and called her
“istorbo.”
 Finally, on February 7, 1989, policemen came to Bartelli’s
house and Karen was finally rescued. Bartelli was arrested
and taken to the police station. Among the items
recovered from Bartelli was a Chinabank passbook for a
dollar account.
 Karen’s sworn statement was taken by the police and
made the basis of a criminal complaint for four (4) counts
of rape filed against Bartelli. An Information for Serious
Illegal Detention was also filed against him.
 Simultaneously with the criminal cases, herein petitioners
also filed a civil case for damages with the RTC of Makati
with prayer for preliminary attachment.
 Bartelli escaped from jail. As a result, the criminal cases
were archived.
 Meanwhile, in the civil case, the judge issued an Order
dated February 22, 1989 granting the application of herein
petitioners, for the issuance of the writ of preliminary
attachment.
 On March 1, 1989, the Deputy Sheriff of Makati served a
Notice of Garnishment on China Banking Corporation.
o Chinabank resisted the same invoking Act No.
1405 (The Secrecy of Bank Deposits Law).
o Later, it invoked invoked Section 113 of
Central Bank Circular No. 960 to the effect
that the dollar deposits of defendant Greg
Bartelli are exempt from attachment,
garnishment, or any other order or process of
any court, legislative body, government
agency or any administrative body,
whatsoever.
o The Circular provides:
Exemption from attachment. — Foreign currency
deposits shall be exempt from attachment,
garnishment, or any other order or process of any
court, legislative body, government agency or
any administrative body whatsoever.
BANKING: Week 1 | 4
  The Salvacions wrote to the Central Bank (CB) seeking
clarification on whether Section 113 of CB Circular No.
960 has any exception or whether said section has been
repealed or amended.
o In reply, the CB stated that the cited provision is
absolute in application. It does not admit of any
exception, nor has the same been repealed nor
amended.
 Meanwhile, on April 10, 1989, the trial court granted
petitioners’ motion for leave to serve summons by
publication in the civil case.
 Bartelli was declared in default and judgment was
rendered in favor of Salvacion, awarding a total of P1
million in moral damages, P100k in exemplary damages,
25% attorney’s fees, litigation expenses of P10,000 and
the costs of the suit.
 The Salvacions petitioners tried to execute on Bartelli’s
dollar deposit with China Banking Corporation. Likewise,
the bank invoked Section 113 of Central Bank Circular No.
960.
 Hence, this petition.
ISSUE #1 (MAIN):
 W/N Section 113 of Central Bank Circular No. 960 may
be invoked to defeat the garnishment of Bartelli’s
foreign currency deposits (NO)
RATIO #1 (MAIN):
 The Circular is inapplicable to a transient or tourist.
 §113 was copied from §8 of RA 6426, as amended by PD
1426, which authorized certain banks to accept foreign
currency deposits.
 The exemption [from garnishment] as well as certain
incentives were provided for under RA 6426, as amended
by PD 1426, and PD 1034 (authorizing the establishment
of an offshore banking system in the PH), in order order to
assure the development and speedy growth of the Foreign
Currency Deposit System and the Offshore Banking
System in the Philippines.
 As stated in the WHEREAS clauses of said laws, the
purposes of according protection to foreign currency
deposits against court processes are:
o To encourage the inflow of foreign currency
deposits into the banking institutions authorized
to accept such deposits in the Philippines thereby
placing such institutions more in a position to
properly channel the same to loans and
investments in the Philippines, thus directly
contributing to the economic development of the
country;
o To have as wide access as possible to the
sources of capital funds for economic
development;
o To develop the Philippines as another financial
center in Asia, among others.
 Obviously, the foreign currency deposit made by a
transient or a tourist is not the kind of deposit
encourage by PD Nos. 1034 and 1035 and given
incentives and protection by said laws because such
depositor stays only for a few days in the country and,
therefore, will maintain his deposit in the bank only for
a short time.
o Respondent Greg Bartelli, as stated, is just a
tourist or a transient. He deposited his dollars
with respondent China Banking Corporation only
for safekeeping during his temporary stay in the
Philippines.
 If the Court rules that the Circular is applicable to a foreign
transient, injustice would result especially to a citizen
aggrieved by a foreign guest like accused Greg Bartelli.
o This would negate Article 10 of the New Civil
Code which provides that “in case of doubt in the
interpretation or application of laws, it is
presumed that the lawmaking body intended right
and justice to prevail.”
ISSUE #2:
 W/N the Court has original jurisdiction over a petition
for declaratory relief (NO)
RATIO #2:
 Salvacion deserves to receive the damages awarded to
her by the court. But this petition for declaratory relief can
only be entertained and treated as a petition for
mandamus to require respondents to honor and comply
with the writ of execution in the civil case.
 The Court has no original and exclusive jurisdiction over a
petition for declaratory relief. There are, however,
exceptions to this rule.
 Thus, where the petition has far-reaching implications and
raises questions that should be resolved, it may be treated
as one for mandamus.
DISPOSITION:
 The provisions of Section 113 of CB Circular No. 960 and
PD No. 1246, insofar as it amends Section 8 of R.A. 6426
are hereby held to be INAPPLICABLE to this case
because of its peculiar circumstances.
GSIS v. CA | Nice
June 8, 2011
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs.
THE HONORABLE 15th DIVISION OF THE COURT OF
APPEALS and INDUSTRIAL BANK OF KOREA, TONG YANG
MERCHANT BANK, HANAREUM BANKING CORP., LAND
BANK OF THE PHILIPPINES, WESTMONT BANK and DOMSAT
HOLDINGS, INC., Respondents.
PEREZ, J.
NATURE: Petition for certiorari of CA decision
SUMMARY: Domsat Holdings (Domsat) obtained a USD 11 M loan
from several banks to lease or purchase a Gorizon Satellite. To
facilitate said loan, the GSIS executed a surety bond on the
condition that the loan proceeds would be used as payment for said
lease/purchase. When Domsat failed to pay, the Banks sued
Domsat and GSIS for the money. GSIS refused to pay, alleging that
Domsat deposited the amount with Westmont Bank (one of the
creditor banks) and its obligation was contingent upon the use of
the money to lease/purchase the satellite. During trial, GSIS
requested for the issuance of subpoenas duces tecum covering
Domsat’s accounts with Westmont. Domsat and the Banks
opposed, alleging that the secrecy of said deposits were protected
under the Foreign Currency Deposit Act. The RTC at first issued
the subpoenas, but then reversed itself. CA upheld. SC affirmed
CA, holding that the deposits were covered by the Foreign
Currency Deposit Act as a special law, and the Bank Secrecy Act
did not apply.
DOCTRINE (related to topic):
 These two laws both support the confidentiality of bank
deposits. RA 1405 was enacted for the purpose of giving
encouragement to the people to deposit their money in
banking institutions and to discourage private hoarding so
that the same may be properly utilized by banks in
authorized loans to assist in the economic development of
the country. It covers all bank deposits in the Philippines
and no distinction was made between domestic and
foreign deposits. Thus, RA 1405 is considered a law of
general application.
 On the other hand, RA 6426 was intended to encourage
deposits from foreign lenders and investors. It is a
special law designed especially for foreign currency
BANKING: Week 1 | 5
 deposits in the Philippines. A general law does not
nullify a specific or special law. Generalia specialibus
non derogant. Therefore, it is beyond cavil that RA
6426 applies in this case.
FACTS:
 This case is incident to Civil Case No. 99-1853, which is
the main case for collection of sum of money with
damages filed by Industrial Bank of Korea, Tong Yang
Merchant Bank, First Merchant Banking Corporation, Land
Bank of the Philippines, and Westmont Bank (the Banks)
against Domsat Holdings, Inc. (Domsat) and the GSIS.
 The collection case stemmed from a Loan Agreement,
whereby the Banks agreed to lend USD 11 Million to
Domsat for the purpose of financing the lease and/or
purchase of a Gorizon Satellite from the International
Organization of Space Communications (Intersputnik).
 To secure the payment of the loan, Domsat obtained a
surety bond from GSIS. Said surety bond provided:
THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS:
WHEREAS, the above bounden PRINCIPAL, on the 12th day of
December, 1996 entered into a contract agreement with the
aforementioned OBLIGEES to fully and faithfully:
Guarantee the repayment of the principal and interest on the loan
granted the PRINCIPAL to be used for the financing of the two (2)
year lease of a Russian Satellite from INTERSPUTNIK, in
accordance with the terms and conditions of the credit package
entered into by the parties.
This bond shall remain valid and effective until the loan including
interest has been fully paid and liquidated,
a copy of which contract/agreement is hereto attached and made
part hereof;
WHEREAS, the aforementioned OBLIGEES require said
PRINCIPAL to give a good and sufficient bond in the above stated
sum to secure the full and faithful performance on his part of said
contract/agreement.
NOW, THEREFORE, if the PRINCIPAL shall well and truly perform
and fulfill all the undertakings, covenants, terms, conditions, and
agreements stipulated in said contract/agreements, then this
obligation shall be null and void; otherwise, it shall remain in full
force and effect.
 When Domsat failed to pay, GSIS refused pay as well,
arguing that Domsat did not use the loan proceeds for the
payment of rental for the satellite. GSIS alleged that:
o Domsat, with Westmont Bank as the conduit,
transferred the USD 11 M loan proceeds from the
Industrial Bank of Korea to Citibank New York
account of Westmont Bank and from there to the
Binondo Branch of Westmont Bank.
 The Banks filed a complaint before the RTC of Makati
against Domsat and GSIS.
 During hearing, GSIS requested for the issuance of a
subpoena duces tecum to the custodian of records of
Westmont Bank to produce the following documents:
o Ledger covering the account of DOMSAT with
Westmont Bank (now United Overseas Bank),
any and all documents, records, files, books,
deeds, papers, notes and other data and
materials relating to the account or transactions
of DOMSAT with or through Westmont from
January 1997 to December 2002;
o All applications for cashier’s/ manager’s checks
and bank transfers funded by the account of
DOMSAT with or through Westmont from
January 1997 to December 2002, and all other
data and materials covering said applications;
o Ledger covering the account of Philippine Agila
Satellite, Inc. with Westmont, any and all
documents, records, files, books, deeds, papers,
notes and other data and materials relating to the
account or transactions of Philippine Agila
Satellite, Inc. with or through Westmont for the
same period;
o All applications for cashier’s/manager’s checks
funded by the account of Philippine Agila
Satellite, Inc. with or through Westmont for the
same period, and all other data and materials
covering said applications.
 The RTC issued a subpoena decus tecum on 21
November 2002.
 A motion to quash was filed by the banks (and joined by
Domsat) on three grounds:
o 1) the subpoena is unreasonable, oppressive and
does not establish the relevance of the
documents sought;
o 2) request for the documents will violate the Law
on Secrecy of Bank Deposits; and
o 3) GSIS failed to advance the reasonable cost of
production of the documents.
 9 April 2003: the RTC issued an Order denying the motion
to quash, ruling that the case was for the collection of a
sum of money initiated by the banks against Domsat and
GSIS, the latter being surety. The RTC considered the
contention of GSIS that the proceeds of the loan was
deviated to purposes other than to what the loan was
extended, hence, it ruled that quashal of the subpoena
would deny GSIS its right to prove its defenses.
 The Banks filed first MR; denied. The Banks filed 2 nd MR,
which the RTC granted, quashing the subpoenas. The
RTC invoked the ruling in Intengan v. Court of Appeals,
where it was ruled that foreign currency deposits are
absolutely confidential and may be examined only when
there is a written permission from the depositor.
 GSIS filed MR; denied.
 Upon appeal, the CA partially ruled in favor of the Banks,
ruling that that Domsat’s deposit in Westmont Bank is
covered by Republic Act No. 6426 (Foreign Currency
Deposit Act of the Philippines) or the Bank Secrecy Law. It
held that:
o the ruling in Van Twest vs. Court of Appeals
(relied upon by GSIS) was rendered during the
effectivity of CB Circular 960, and under Sec. 102
thereof, transfer to foreign currency deposit
account or receipt from another foreign currency
deposit account, whether for payment of
legitimate obligation or otherwise, are not eligible
for deposit under the System.
o However, said CB Circular has already been
superseded by CB Circular 1318 and later by CB
Circular 1389, and CB Circular 960 has not been
re-enacted. Hence, the ruling in Intengan v. CA
(the case used by the RTC and relied upon by
the Banks) is the applicable case.
o Moreover, GSIS had inappropriately invoked the
provisions of CB Circular 343 which has already
been superseded by more recently issued CB
Circulars. CB Circular 343 requires the surrender
to the banking system of foreign exchange,
including proceeds of foreign borrowings. This
requirement, however, can no longer be found in
later circulars.
o As to GSIS’ argument that “assuming CB Circular
1389 was the applicable circular, Domsat violated
it since under Section 27 thereof, the USD 11 M
BANKING: Week 1 | 6
 should have been paid directly to Intersputnik
and not deposited to Westmont,” the CA held that
Section 27 does not prescribe the conditions
before any foreign currency deposit can be
entitled to the confidentiality provisions of R.A.
6426.
o Lastly, as to the argument of GSIS that “since the
President of Westmont Bank had already testified
during trial as to the USD 11 M deposit, hence, it
was no longer confidential,” the CA ruled that it
was not the written consent contemplated by R.A.
6426.
 However, the CA upheld the issuance of subpoena
praying for the production of applications for cashier’s or
manager’s checks by Domsat through Westmont, as well
as a copy of an the agreements between Domsat and/or
Philippine Agila Satellite and Intersputnik for the
acquisition and/or lease of a Gorizon Satellite. The CA
held that the production of these documents does not
involve the examination of Domsat’s account since it will
never be known how much money was deposited into it or
withdrawn therefrom and how much remains therein.
 GSIS filed MR; denied. In its petition to the SC, it argues
that:
o Domsat’s deposit with Westmont Bank can be
examined and inquired into, since the Bank
Secrecy Act allows the disclosure of bank
deposits in cases where the money deposited is
the subject matter of the litigation.
o the subject matter of the litigation is the USD 11
M obtained by Domsat from the Banks to
supposedly finance the lease of a Russian
satellite from Intersputnik, and whether or not it
should be held liable as a surety is contingent
upon whether Domsat indeed utilized the amount
to lease a Russian satellite as agreed upon.
o the whereabouts of the USD 11 M is the subject
matter of the case and the disclosure of bank
deposits relating to the USD 11 M should be
allowed.
o the concerted refusal of Domsat and the banks to
divulge the whereabouts of the USD 11 M will
greatly prejudice and burden the GSIS pension
fund considering that a substantial portion of this
fund is earmarked every year to cover the surety
bond issued.
ISSUE #1 (MAIN):
 W/N the subpoena for the bank ledger of Domsat’s
account should issue (NO)
RATIO #1:
 GSIS invokes Republic Act No. 1405 to justify the
issuance of the subpoena while the banks cite Republic
Act No. 6426 to oppose it. The core issue is which of the
two laws should apply in the instant case.
 RA 1405 was enacted in 1955. Section 2 thereof was first
amended by PD 1792 in 1981 and further amended by RA
7653 in 1993. It reads:
Section 2. All deposits of whatever nature with banks or banking
institutions in the Philippines including investments in bonds issued
by the Government of the Philippines, its political subdivisions and
its instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked
into by any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where
the money deposited or invested is the subject matter of the
litigation.
 Section 8 of RA 6426, enacted in 1974, and amended by
PD 1035 and later by PD1246, provides:
Section 8. Secrecy of Foreign Currency Deposits. – All foreign
currency deposits authorized under this Act, as amended by
Presidential Decree No. 1035, as well as foreign currency deposits
authorized under Presidential Decree No. 1034, are hereby
declared as and considered of an absolutely confidential nature
and, except upon the written permission of the depositor, in no
instance shall foreign currency deposits be examined, inquired or
looked into by any person, government official, bureau or office
whether judicial or administrative or legislative or any other entity
whether public or private; Provided, however, That said foreign
currency deposits shall be exempt from attachment, garnishment,
or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.
 RA 1405 provides for four exceptions (actually 5, pero 4
yung sabi ng SC) when records of deposits may be
disclosed. These are under any of the following instances:
o a) upon written permission of the depositor,
o (b) in cases of impeachment,
o (c) upon order of a competent court in the case of
bribery or dereliction of duty of public officials or,
o (d) when the money deposited or invested is the
subject matter of the litigation, and
o e) in cases of violation of the Anti-Money
Laundering Act (AMLA), the Anti-Money
Laundering Council (AMLC) may inquire into a
bank account upon order of any competent court.
 The lone exception to the non-disclosure of foreign
currency deposits, under RA 6426, is disclosure upon the
written permission of the depositor.
 These two laws both support the confidentiality of bank
deposits. RA 1405 was enacted for the purpose of giving
encouragement to the people to deposit their money in
banking institutions and to discourage private hoarding so
that the same may be properly utilized by banks in
authorized loans to assist in the economic development of
the country. It covers all bank deposits in the Philippines
and no distinction was made between domestic and
foreign deposits. Thus, RA 1405 is considered a law of
general application.
 On the other hand, RA 6426 was intended to encourage
deposits from foreign lenders and investors. It is a
special law designed especially for foreign currency
deposits in the Philippines. A general law does not
nullify a specific or special law. Generalia specialibus
non derogant. Therefore, it is beyond cavil that RA
6426 applies in this case.
 Intengan v. Court of Appeals affirmed the above-cited
principle and categorically declared that for foreign
currency deposits, such as U.S. dollar deposits, the
applicable law is RA 6426.
o In said case, Citibank filed an action against its
officers for persuading their clients to transfer
their dollar deposits to competitor banks. Bank
records, including dollar deposits of petitioners,
purporting to establish the deception practiced by
the officers, were annexed to the complaint.
Petitioners now complained that Citibank violated
RA 1405. The SC ruled that since the accounts in
question are U.S. dollar deposits, the applicable
law therefore is not RA 1405 but RA 6426.
 Applying Section 8 of RA 6426, absent the written
permission from Domsat, Westmont Bank cannot be
legally compelled to disclose the bank deposits of Domsat,
otherwise, it might expose itself to criminal liability under
the same act.
DISPOSITION
 Petition for certiorari is DISMISSED. The Decision dated
29 February 2008 and 19 June 2009 Resolution of the
Court of Appeals are hereby AFFIRMED.
BANKING: Week 1 | 7

Simex International (Manila), Inc. v. CA | Kat
March 19, 1990 SIMEX INTERNATIONAL (MANILA),
INCORPORATED, petitioner, vs. THE HONORABLE COURT OF
APPEALS and TRADERS ROYAL BANK, respondents.
CRUZ, J.
SUMMARY: Traders bank was negligent in failing to credit Simex’
depoit to its account of P100,000. As a result, several checks
issued by Simex were dishonored. Its credit line was canceled and
its order were not acted upon. It filed a complaint for damages
since its demand for reparation from the bank went unheeded.
While the lower courts found that the bank was guilty of negligence,
it did not award moral and exemplary damages. The SC held that
Simex is entitled to P20K moral damages and P50K exemplary
damages. The bank was remiss in its duty and violated its fiduciary
relationship with its depositor. It failed to correct its mistake
immediately and took almost a month to do so. There was even no
satisfactory reason given to justify the mistakes.
DOCTRINE: As a business affected with public interest and
because of the nature of its functions, 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.
FACTS:
 Simex International (Manila), Inc. is a private corporation
engaged in the exportation of food products.
o It buys these products from various local
suppliers and then sells them abroad, particularly
in the US, Canada and the Middle East.
o Most of its exports are purchased by it on credit.
 Simex was a depositor of Traders Royal Bank and
maintained a checking account in its branch at Romulo
Avenue, Cubao, Quezon City.
 May 25, 1981: Simex deposited to its account in the bank
P100,000 thus increasing its balance to P190,380.74.
 Subsequently, Simex issued several checks against its
deposit but was suprised to learn later that they had been
dishonored for insufficient funds.
 As a consequence, the California Manufacturing
Corporation (one of payees) sent on June 9, 1981, a letter
of demand to Simex, threatening prosecution if the
dishonored check issued to it was not made good. It also
withheld delivery of the order made by the Simex.
o Similar letters were sent to Simex by the Malabon
Long Life Trading, on June 15, 1981, and by the
G. and U. Enterprises, on June 10, 1981.
Malabon also canceled Simex’ credit line and
demanded that future payments be made by it in
cash or certified check.
 Meantime, action on the pending orders of Simex with the
other suppliers whose checks were dishonored was also
deferred.
 June 10, 1981: Simex complained to the bank
 Investigation disclosed that P100,000.00 deposited had
not been credited to it.
o The error was rectified on June 17, 1981, and the
dishonored checks were paid after they were re-
deposited.
 In its letter dated June 20, 1981, Simex demanded
reparation from the bank for its "gross and wanton
negligence." This demand was not met.
 Simex filed a complaint in CFI of Rizal claiming from the
bank moral damages of P1M and exemplary damages of
P500K, plus 25% attorney's fees, and costs.
 CFI: Moral and exemplary damages were not called for
under the circumstances. Since Simex’ right had been
violated, the bank should pay nominal damages
P20,000.00 plus P5,000.00 attorney's fees and costs.
 CA affirmed CFI
o The bank was guilty of negligence but Simex was
not entitled to moral damages.
o The essential ingredient of moral damages is
proof of bad faith (De Aparicio vs. Parogurga).
o There was the omission by the bank to credit
Simex’ deposit of P100,000K on May 25, 1981.
But the bank rectified its records. It credited the
said amount in favor of Simex in less than a
month. The dishonored checks were eventually
paid.
o These circumstances negate any imputation or
insinuation of malicious, fraudulent, wanton and
gross bad faith and negligence on the part of the
defendant-appellant.
ISSUE: W/N Simex is entitled to moral and exemplary damages?
YES to both. In what amounts? P20K moral, P50K exemplary
RATIO:
 The error should not have been committed in the first
place.
 The bank has not even explained why it was committed at
all.
 It is true that the dishonored checks were "eventually"
paid. However, this took almost a month when, properly,
the checks should have been paid immediately upon
presentment.
 The initial carelessness of the bank, aggravated by the
lack of promptitude in repairing its error, justifies the grant
of moral damages.
 This rather lackadaisical attitude toward the complaining
depositor constituted the gross negligence, if not wanton
bad faith.
 While stressing the rectification made by the respondent
bank, the decision practically ignored the prejudice
suffered by Simex. This was simply glossed over if not,
indeed, disbelieved.
 The fact is that the Simex’ credit line was canceled and its
orders were not acted upon pending receipt of actual
payment by the suppliers. Its business declined. Its
reputation was tarnished. Its standing was reduced in the
business community. All this was due to the fault of the
bank which was undeniably remiss in its duty to the
Simex.
 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."
 Simex 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." Such injury should bolster all the
more the demand of Simex for moral damages and
justifies the examination by this Court of the validity and
reasonableness of the said claim.
 Moral damages are not awarded to penalize the defendant
but to compensate the plaintiff for the injuries he may have
suffered.
 In the case at bar, Simex is seeking such damages for the
prejudice sustained by it as a result of the bank's fault.
 The CA said that the claimed losses are purely speculative
and are not supported by substantial evidence, but if failed
to consider that the amount of such losses need not be
established with exactitude precisely because of their
nature.
 Moral damages are not susceptible of pecuniary
estimation.
 Article 2216 of the Civil Code specifically provides that "no
BANKING: Week 1 | 8
 proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages
may be adjudicated."
o That is why the determination of the amount to be
awarded (except liquidated damages) is left to
the sound discretion of the court, according to
"the circumstances of each case."
 From every viewpoint except that of Simex’, its claim of
moral damages in the amount of P1,000,000.00 is nothing
short of preposterous.
 Its business certainly is not that big, or its name that
prestigious, to sustain such an extravagant pretense.
 Moreover, a corporation is not as a rule entitled to moral
damages because, not being a natural person, it cannot
experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish and
moral shock.
 The only exception to this rule is where the corporation
has a good reputation that is debased, resulting in its
social humiliation.
 Simex did suffer injury because of the bank’s negligence
that caused the dishonor of the checks issued by it.
 The immediate consequence was that its prestige was
impaired because of the bouncing checks and confidence
in it as a reliable debtor was diminished.
 The bank makes much of the one instance when the
Simex was sued in a collection case, but that did not prove
that it did not have a good reputation that could not be
marred, more so since that case was ultimately settled.
 It does not appear that Simex is an unsavory and
disreputable entity that has no good name to protect.
 The award of nominal damages in the sum of P20,000.00
was not the proper relief to which Simex was entitled.
 Under Article 2221 of the Civil Code, "nominal damages
are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him."
 As we have found that Simex has indeed incurred loss
through the fault of the bank, the proper remedy is the
award to it of moral damages, which we impose, in our
discretion, in the same amount of P20,000.00.
EXEMPLARY DAMAGES
 Art. 2229. Exemplary or corrective damages are imposed,
by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or
compensatory damages.
 Art. 2232. In contracts and quasi-contracts, the court may
award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent
manner.
 The banking system is an indispensable institution in the
modern world and plays a vital role in the economic life of
every civilized nation. Whether as mere passive entities
for the safekeeping and saving of money or as active
instruments of business and commerce, banks have
become an ubiquitous presence among the people, who
have come to regard them with respect and even gratitude
and, most of all, confidence. Thus, even the humble wage-
earner has not hesitated to entrust his life's savings to the
bank of his choice, knowing that they will be safe in its
custody and will even earn some interest for him. The
ordinary person, with equal faith, usually maintains a
modest checking account for security and convenience in
the settling of his monthly bills and the payment of
ordinary expenses. As for business entities like Simex, the
bank is a trusted and active associate that can help in the
running of their affairs, not only in the form of loans when
needed but more often in the conduct of their day-to-day
transactions like the issuance or encashment of checks.
 In every case, 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 dishonor 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.
 As a business affected with public interest and
because of the nature of its functions, 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.
 The bank was remiss in that duty and violated that
relationship. What is especially deplorable is that, having
been informed of its error in not crediting the deposit in
question to Simex, the bank did not immediately correct it
but did so only one week later or twenty-three days after
the deposit was made. The record does not contain any
satisfactory explanation of why the error was made in the
first place and why it was not corrected immediately after
its discovery.
o Such ineptness comes under the concept of the
wanton manner contemplated in the Civil Code
that calls for the imposition of exemplary
damages.
 The Court, in the exercise of its discretion, hereby
imposes upon the r bank exemplary damages in the
amount of P50,000.00, "by way of example or correction
for the public good," in the words of the law.
DISPOSITIVE: Bank is ordered to pay Simex, in lieu of nominal
damages, moral damages in the amount of P20,000.00, and
exemplary damages in the amount of P50,000.00 plus the original
award of attorney's fees in the amount of P5,000.00, and costs.
BPI v. IAC | Apa
February 21, 1992
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. THE
INTERMEDIATE APPELLATE COURT and the SPOUSES
ARTHUR CANLAS and VIVIENE CANLAS, respondents.
REGALADO, J.
NATURE: Petition for review of IAC decision
SUMMARY: An employee of CBTC, now BPI, mistakenly placed
the information of Arthur Canlas’s personal account in the
documents of his and his spouse’s joint account, causing the initial
deposit to be accredited to the personal account. In light of the
aforementioned, one of the checks drawn by Mrs. Canlas on the
joint account was dishonored for insufficient funds. The RTC and
IAC ruled in the Spouses favor. The Supreme Court affirmed said
ruling finding that BPI failed to exercise the diligence of a good
father of a family.
DOCTRINE (related to topic):
 NCC Art. 1173 requires banks to exercise the diligence of
a good father of a family.
 BPI Is a business affected with public interest to the
depositor expects 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.
BANKING: Week 1 | 9
 A blunder on the part of the bank can cause the
depositor not a little embarrassment if not also
financial loss and perhaps even civil and criminal
litigation.
FACTS:
 Arthur and Vivienne Canlas opened a joint current account
with the Commercial Bank and Trust Company of the
Philippines (CBTC) with an initial deposit of P2,250. Prior
thereto, Arthur Canlas had an existing separate personal
checking account No. 210-442-41 in the same branch.
 When the spouses opened their joint account, the "new
accounts" teller of the bank pulled out from the bank's files
an old and existing signature card of respondent Arthur
Canlas for use as I D and reference..
 By mistake, she placed said old personal account number
of Arthur Canlas on the deposit slip for the new joint
checking account for use as ID and reference.
 Because of this error, the initial deposit of P2,250 was
erroneously credited to Arthur’s personal account.
 Notwithstanding subsequently depositing other amounts in
the joint account, one of the checks issued by Vivienne
Canlas was dishonored for insufficient funds.
o It was never stated, but naturally this means that
the funds subsequently deposited weren’t much.
 In light of the overdrawings, CBTC tried to call the
spouses, but apparently the telephone number the Canlas’
left belonged to Mrs. Canlas' parents.
 The Spouses Canlas filed a complaint for damages
against CBTC.
 Bank filed a motion to dismiss the complaint for improper
venue. The motion was denied.
 During the pendency of the case, BPI and CBTC were
merge, with BPI surviving.
 RTC: ruled in favor of the Spouses.
 Their ruling was affirmed with modification by the IAC
which deleted Actual Damages, but sustained, granted
reduced, the award for Moral and Exemplary Damages, as
well as that for attorney’s fees.
ISSUE #1:
WoN the Spouses Canlas filed their petition in accordance
with the rules on venue (Yes)
RATIO #1:
 Personal actions may be instituted in the Court of the
province in which either the defendant/s or plaintiff/s
reside, at the election of the plaintiff.
 In this case, the residence of the Spouses Canlac is
clearly in B. Sacan, Porac, Pampanga.
 The City Address of Mrs. Canlas’ parents were placed at
the suggestion of the new accounts teller to facilitate
mailing of the bank statements.
 In any case, such does not amount to a waiver of their
provincial residence for purposes of determining the venue
of an action.
ISSUE #2 (MAIN)
WoN the IAC properly found that the new accounts teller of
BPI constituted "serious" negligence (Yes)
RATIO #2:
 The Court further stressed that it cannot absolve the
petitioner from liability for damages to the private
respondents, even on the assumption of an honest
mistake on its part, because of the embarrassment that
even an honest mistake can cause its depositors
 NCC Art. 1173 only requires it to exercise the diligence of
a good father of a family.
 Simex International v. CA: The SC stressed the fiduciary
nature of the relationship between a bank and its
depositors and the extent of diligence expected.
o In every case, 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 dishonor 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.
 The bank is not expected to be infallible but, as correctly
observed by respondent Appellate Court, in this instance,
it must bear the blame for not discovering the mistake of
its teller despite the established procedure requiring the
papers and bank books to pass through a battery of bank
personnel whose duty it is to check and countercheck
them for possible errors.
 The point is that as a business affected with public
interest and because of the nature of its functions, 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.
 As seen from BPI’s lone witness, Antonio Enciso, the
employees of the bank did not perform their duties with
due care. Enciso casually declared that "the approving
officer does not have to see the account numbers and all
those things. Those are very petty things for the approving
manager to look into.”
 In the absence of bad faith, hence the award of exemplary
damages was improper. However, said error nonetheless
caused serious anxiety, embarrassment and humiliation to
the private respondents for which they are entitled to
recover reasonable moral damages.
 The award of reasonable attorney's fees is proper for the
private respondents were compelled to litigate
DISPOSITIVE: WHEREFORE, the petition for review is granted.
The appealed decision is MODIFIED by deleting the award of
exemplary damages to the private respondents. In all other
respects, the decision of the Intermediate Appellate Court, now
Court of Appeals, is AFFIRMED. No costs.
BPI vs. CA | Erika
February 29, 2000
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF
APPEALS and BENJAMIN C. NAPIZA, respondents.
YNARES-SANTIAGO, J.
NATURE: Petition for review on certiorari of the Decision of CA
SUMMARY: As accommodation to one Chan, respondent Napiza
deposited a Continental Bank Manager’s Check in the amount of
$2,500 to an FCDU Savings Account he maintained in BPI
Buendia. He also delivered a signed blank withdrawal slip to Chan
with the understanding that they will withdraw the proceeds
together after the check is cleared. However, before said check
was cleared, one Gayon was able to withdraw $2,541.67 using the
blank withdrawal slip. Said withdrawal was made without the
presentation of Napiza’s passbook. The check later proved to be
counterfeit. BPI sued Napiza to recover the withdrawn amount. The
RTC, CA, and SC all dismissed the case against Napiza, the SC
saying that the bank should bear the loss for its noncompliance with
its own rules and the clearing requirement in the banking system,
revealing negligence on its part and on the part of its employees.
BANKING: Week 1 | 10
DOCTRINE: The banking business is affected with public interest.
By the nature of its functions, a bank is under obligation to treat the
accounts of its depositors "with meticulous care, always having in
mind the fiduciary nature of their relationship." As such, in dealing
with its depositors, a bank should exercise its functions not only
with the diligence of a good father of a family but it should do so
with the highest degree of care.
FACTS:
 Sept 3, 19841: private respondent Benjamin Napiza
deposited in Foreign Currency Deposit Unit (FCDU)
Savings Account which he maintained in BPI’s Buendia
Avenue Extension Branch, Continental Bank Managers
Check dated Aug 17, 1984, payable to "cash" in the
amount of $2,500 and duly endorsed by Napiza on its
dorsal side.
 It appears that the check belonged to a certain Henry
Chan who went to the office of Napiza and requested him
to deposit the check in his dollar account by way of
accommodation and for the purpose of clearing the
same. Napiza acceded, and agreed to deliver to Chan a
signed blank withdrawal slip, with the understanding
that as soon as the check is cleared, both of them would
go to the bank to withdraw the amount of the check upon
Napiza’s presentation to the bank of his passbook.
 Oct 23, 1984: Using the blank withdrawal slip given by
Napiza to Chan one Ruben Gayon, Jr. was able to
withdraw the amount of $2,541.67 from FCDU Savings
Account. Notably, the withdrawal slip shows that the
amount was payable to Ramon A. de Guzman and Agnes
C. de Guzman and was duly initialed by the branch
assistant manager, Teresita Lindo.
 Nov 20, 1984: BPI received communication from the Wells
Fargo Bank International of New York that the said check
deposited by Napiza was a counterfeit check because it
was "not of the type or style of checks issued by
Continental Bank International."
 Mr. Ariel Reyes, the manager of BPI’s Buendia Avenue
Extension Branch, instructed one of its employees,
Benjamin D. Napiza IV, who is Napiza’s son, to inform his
father that the check bounced. Reyes himself sent a
telegram to Napiza regarding the dishonor of the check.
 In turn, Napiza’s son wrote to Reyes stating that the check
had been assigned "for encashment" to Ramon A. de
Guzman and/or Agnes C. de Guzman after it shall have
been cleared upon instruction of Chan. He also said that
upon learning of the dishonor of the check, his father
immediately tried to contact Chan but the latter was out of
town.
 Napiza’s son undertook to return $2,500 to BPI.
 Dec 18, 1984: Reyes reminded Napiza of his son’s
promise and warned that should he fail to return that
amount within 7 days, the matter would be referred to the
bank’s lawyers for appropriate action to protect the bank’s
interest. This was followed by a letter of the banks lawyer
dated Apr 8, 1985 demanding the return of the $2,500
 Apr 20, 1985: In reply, Napiza wrote BPI’s counsel stating
that he deposited the check "for clearing purposes" only to
accommodate Chan.
o "xxx said check was deposited on Sept 3, 1984
and withdrawn on Oct 23, 1984, or a total period
of 50 days had elapsed at the time of withdrawal.
xxx I merely signed an authority to withdraw said
deposit subject to its clearing, the reason why the
transaction is not reflected in the passbook xxx I
did not receive its proceeds as may be gleaned
from the withdrawal slip xxx
1
Text has a typo, saying it’s 1987.
o If at all, my obligation on the transaction is moral
in nature xxx exerting utmost and maximum
efforts to collect from Mr. Henry Chan xxx”
 Aug 12, 1986: BPI filed a complaint against Napiza,
praying for the return of $2,500 or the prevailing peso
equivalent plus legal interest from date of demand to date
of full payment; 20% of the total amount due as attorney's
fees, and litigation and/or costs
 Napiza’s Answer: admitted that he indeed signed a
"blank" withdrawal slip with the understanding that the
amount deposited would be withdrawn only after the check
in question has been cleared.
o he instructed the party to whom he issued the
signed blank withdrawal slip to return it to him
after the bank draft’s clearance so that he could
lend that party his passbook for the purpose of
withdrawing $2,500. However, without his
knowledge, said party was able to withdraw
the amount of $2,541.67 from his dollar
savings account through collusion with one
of BPI’s employees.
o He had given BPI 51 days with which to clear the
bank draft in question. BPI should have
disallowed the withdrawal because his
passbook was not presented.
o BPI had no one to blame except itself "for
being grossly negligent;" in fact, it had
allegedly admitted having paid the amount in the
check "by mistake" x x x "if not altogether due to
collusion and/or bad faith on the part of (its)
employees."
o Charging BPI with "apparent ignorance of routine
bank procedures," by way of counterclaim,
Napiza prayed for moral damages (100K),
exemplary damages (50K) and attorneys fees of
30% plus an honorarium of P500 per appearance
 Napiza also filed a motion for admission of a third party
complaint against Chan. He alleged that "thru strategem
and/or manipulation," Chan was able to withdraw the
amount of $2,500 even without Napiza’s passbook.
o prayed that Chan be made to refund to him the
amount withdrawn and to pay attorneys fees of
P5K plus P300 honorarium per appearance.
 BPI’s comment on the motion: per paragraph 2 of the
Rules and Regulations governing BPI savings accounts,
Napiza alone was liable "for the value of the credit given
on account of the draft or check deposited."
o Napiza was estopped from disclaiming liability
because he himself authorized the withdrawal of
the amount by signing the withdrawal slip
o Napiza’s claim could be ventilated in another
case
 Napiza’s reply: for the parties to obtain complete relief
and to avoid multiplicity of suits, the motion to admit third
party complaint should be granted
 Aug 25 and Oct 28, 1987: RTC issued orders directing
Napiza to actively participate in locating Chan. After
Napiza failed to comply, RTC dismissed the third party
complaint without prejudice on May 18, 1988.
 RTC Makati (Nov 4, 1991): dismissed the complaint
o BPI could not hold Napiza liable based on the
checks face value alone.
o To so hold him liable would render inutile the
requirement of clearance from the drawee bank
before the value of a particular foreign check or
draft can be credited to the account of a
depositor making such deposit.
o It was incumbent upon BPI to credit the value of
the check in question to the account of the
Napiza only upon receipt of the notice of final
BANKING: Week 1 | 11
 payment and should not have authorized the
withdrawal
o Having admitted that it committed a "mistake" in
not waiting for the clearance of the check before
authorizing the withdrawal of its value or
proceeds, BPI should suffer the resultant loss.
 CA: affirmed RTC
o BPI committed "clear gross negligence" in
allowing Ruben Gayon, Jr. to withdraw the
money without presenting Napiza’s passbook
and, before the check was cleared and in
crediting the amount indicated therein in Napiza’s
account
o The mere deposit of a check in Napiza’s account
did not mean that the check was already
Napiza’s property. The check still had to be
cleared and its proceeds can only be withdrawn
upon presentation of a passbook in accordance
with the banks rules and regulations.
o BPI’s contention that Napiza warranted the
checks genuineness by endorsing it is untenable
for it would render useless the clearance
requirement. Likewise, the requirement of
presentation of a passbook to ascertain the
propriety of the accounting reflected would be a
meaningless exercise. After all, these
requirements are designed to protect the bank
from deception or fraud.
o Cited Roman Catholic Bishop of Malolos, Inc. v.
IAC, where SC stated that a personal check is
not legal tender or money, and held that the
check deposited in this case must be cleared
before its value could be properly transferred to
Napiza's account.
 Without filing an MR, BPI filed this petition for review on
certiorari
ISSUE: W/N Napiza should be held liable for the value of the check
(NO)
RATIO:
 BPI: Napiza, having affixed his signature at the dorsal side
of the check, should be liable for the amount stated therein
in accordance with the Negotiable Instruments Law (Act
No. 2031)2
 People v. Maniego: SC described the liabilities of an
indorser:
o Such an indorser who indorses without
qualification, inter alia engages that on due
presentment, the instrument shall be accepted or
paid, or both, as the case may be, according to
its tenor, and that if it be dishonored, and the
necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the
2
SEC. 66. Liability of general indorser. Every indorser who indorses without
qualification, warrants to all subsequent holders in due course
(a)......The matters and things mentioned in subdivisions (a), (b), and (c) of the next
preceding section; and
(b)......That the instrument is at the time of his indorsement, valid and subsisting.
And, in addition, he engages that on due presentment, it shall be accepted or paid, or
both, as the case may be, according to its tenor, and that if it be dishonored, and the
necessary proceedings on dishonor be duly taken, he will pay the amount thereof to
the holder, or to any subsequent indorser who may be compelled to pay it.
Section 65, on the other hand, provides for the ff. warranties of a person negotiating an
instrument by delivery or by qualified indorsement: (a) that the instrument is genuine
and in all respects what it purports to be; (b) that he has a good title to it, and (c) that
all prior parties had capacity to contract.
holder, or any subsequent indorser who may be
compelled to pay it. xxx she is under the law
liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking
the instrument knew her to be only an
accommodation party, although she has the right,
after paying the holder, to obtain reimbursement
from the party accommodated, since the relation
between them is in effect that of principal and
surety xxx
 SC: It is thus clear that ordinarily Napiza may be held
liable as an indorser of the check or even as an
accommodation party. However, to hold Napiza liable
for the amount of the check he deposited by the strict
application of the law and without considering the
attending circumstances in the case would result in
an injustice and in the erosion of the public trust in
the banking system. The interest of justice thus demands
looking into the events that led to the encashment of the
check.
 BPI asserts that by signing the withdrawal slip, Napiza
"presented the opportunity for the withdrawal of the
amount in question." BPI relied "on the genuine signature
on the withdrawal slip, the personality of Napiza’s son and
the lapse of more than 50 days from date of deposit of the
Continental Bank draft, without the same being returned
yet.
 We hold, however, that the propriety of the withdrawal
should be gauged by compliance with the rules thereon
that both BPI and its depositors are duty-bound to
observe.
 In the passbook that BPI issued to Napiza, the ff. rules on
withdrawal of deposits appear:
o Withdrawals must be made by the depositor
personally but in some exceptional
circumstances, the Bank may allow withdrawal by
another upon the depositors written authority duly
authenticated; and neither a deposit nor a
withdrawal will be permitted except upon the
presentation of the depositors savings
passbook, in which the amount deposited
withdrawn shall be entered only by the Bank.
o Withdrawals may be made by draft, mail or
telegraphic transfer in currency of the account at
the request of the depositor in writing on the
withdrawal slip or by authenticated cable. Such
request must indicate the name of the payee/s,
amount and the place where the funds are to be
paid. Any stamp, transmission and other charges
related to such withdrawals shall be for the
account of the depositor and shall be paid by
him/her upon demand. Withdrawals may also be
made in the form of travellers checks and in
pesos. Withdrawals in the form of notes/bills are
allowed subject however, to their (availability).
o Deposits shall not be subject to withdrawal by
check, and may be withdrawn only in the manner
above provided, upon presentation of the
depositors savings passbook and with the
withdrawal form supplied by the Bank at the
counter.
 Under these rules, to be able to withdraw from the savings
account deposit under the Philippine foreign currency
deposit system, 2 requisites must be presented to BPI
by the person withdrawing an amount:
o (a) a duly filled-up withdrawal slip, and
o (b) the depositors passbook.
 Napiza admits that he signed a blank withdrawal slip
ostensibly in violation of Rule No. 6 requiring that the
request for withdrawal must name the payee, the amount
BANKING: Week 1 | 12
 to be withdrawn and the place where such withdrawal
should be made. That the withdrawal slip was in fact a
blank one with only Napiza’s 2 signatures affixed on the
proper spaces is buttressed by BPI’s allegation in the
instant petition that had Napiza indicated therein the
person authorized to receive the money, then Ruben
Gayon, Jr. could not have withdrawn any amount. BPI
contends that "(i)n failing to do so (i.e., naming his
authorized agent), he practically authorized any possessor
thereof to write any amount and to collect the same."
 Such contention would have been valid if not for the
fact that the withdrawal slip itself indicates a special
instruction that the amount is payable to "Ramon A.
de Guzman &/or Agnes C. de Guzman." Such being the
case, BPI’s personnel should have been duly warned
that Gayon, who was also employed in BPI’s Buendia
Ave. Extension branch, was not the proper payee of
the proceeds of the check. Otherwise, either Ramon or
Agnes de Guzman should have issued another authority
to Gayon for such withdrawal. Of course, at the dorsal side
of the withdrawal slip is an "authority to withdraw" naming
Gayon the person who can withdraw the amount indicated
in the check. Napiza does not deny having signed such
authority. However, considering BPI’s clear admission
that the withdrawal slip was a blank one except for
Napiza’s signature, the unavoidable conclusion is that
the typewritten name of "Ruben C. Gayon, Jr." was
intercalated and thereafter it was signed by Gayon or
whoever was allowed by BPI to withdraw the amount.
Under these facts, there could not have been a principal-
agent relationship between Napiza and Gayon so as to
render the former liable for the amount withdrawn.
 Moreover, the withdrawal slip contains a boxed warning
that states: "This receipt must be signed and presented
with the corresponding foreign currency savings
passbook by the depositor in person. For withdrawals
thru a representative, depositor should accomplish the
authority at the back."
 The requirement of presentation of the passbook when
withdrawing an amount cannot be given mere lip service
even though the person making the withdrawal is
authorized by the depositor to do so. This is clear from
Rule No. 6 set out by BPI so that, for the protection of the
banks interest and as a reminder to the depositor, the
withdrawal shall be entered in the depositors passbook.
The fact that Napiza’s passbook was not presented during
the withdrawal is evidenced by the entries therein showing
that the last transaction that he made with the bank was
on Sept 3, 1984, the date he deposited the controversial
check in the amount of $2,500
 In allowing the withdrawal, BPI likewise overlooked
another rule that is printed in the passbook:
o All deposits will be received as current funds and
will be repaid in the same manner; provided,
however, that deposits of drafts, checks, money
orders, etc. will be accepted as subject to
collection only and credited to the account only
upon receipt of the notice of final payment.
xxx If, for any reason, the proceeds of the
deposited checks, drafts, money orders, etc.,
cannot be collected or if the Bank is required to
return such proceeds, the provisional entry
therefor made by the Bank in the savings
passbook and its records shall be deemed
automatically cancelled regardless of the time
that has elapsed, and whether or not the
defective items can be returned to the depositor
xxx
 In depositing the check in his name, Napiza did not
become the outright owner of the amount stated therein.
By depositing the check with BPI, Napiza was merely
designating BPI as the collecting bank. This is in
consonance with the rule that a negotiable instrument,
such as a check, whether a managers check or ordinary
check, is not legal tender.
 As such, after receiving the deposit, under its own rules,
BPI shall credit the amount in Napiza’s account or infuse
value thereon only after the drawee bank shall have paid
the amount of the check or the check has been cleared for
deposit. Again, this is in accordance with ordinary banking
practices and with this Courts pronouncement that "the
collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all
prior endorsements considering that the act of presenting
the check for payment to the drawee is an assertion that
the party making the presentment has done its duty to
ascertain the genuineness of the endorsements." The rule
finds more meaning in this case where the check involved
is drawn on a foreign bank and therefore collection is more
difficult than when the drawee bank is a local one even
though the check in question is a managers check.
 Banco Atlantico v. Auditor General: SC held that the
encashment of the checks without prior clearance is
"contrary to normal or ordinary banking practice specially
so where the drawee bank is a foreign bank and the
amounts involved were large."
 DEGREE OF DILIGENCE: Said ruling brings to light the
fact that the banking business is affected with public
interest. By the nature of its functions, a bank is under
obligation to treat the accounts of its depositors "with
meticulous care, always having in mind the fiduciary
nature of their relationship." As such, in dealing with its
depositors, a bank should exercise its functions not only
with the diligence of a good father of a family but it should
do so with the highest degree of care.
 CAB: BPI, in allowing the withdrawal of Napiza’s deposit,
failed to exercise the diligence of a good father of a
family. In total disregard of its own rules, BPI’s personnel
negligently handled Napiza’s account to BPI’s detriment.
 Negligence is the omission to do something which a
reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do,
or the doing of something which a prudent and reasonable
man would do. The 78-year-old, yet still relevant, case of
Picart v. Smith, provides the test by which to determine
the existence of negligence in a particular case3
 BPI violated its own rules by allowing the withdrawal of an
amount that is definitely over and above the aggregate
amount of Napiza’s dollar deposits that had yet to be
cleared.
 The banks ledger on Napiza’s account shows that before
he deposited $2,500, Napiza had a balance of only $750.
Upon Napiza’s deposit of $2,500 on Sept 3, 1984, that
amount was credited in his ledger as a deposit resulting in
the corresponding total balance of $3,250. On Sept 10,
1984, the amount of $600 and the additional charges of
$10 were indicated therein as withdrawn thereby leaving a
balance of $2,640. On Sept 30, 1984, an interest of
$11.59 was reflected in the ledger and on Oct 23, 1984,
the amount of $2,541.67 was entered as withdrawn with a
balance of $109.92. On Nov 19, 1984 the word "hold" was
3
Did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If
not, then he is guilty of negligence. The law here in effect adopts the standard
supposed to be supplied by the imaginary conduct of the discreet pater-familias of the
Roman law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
BANKING: Week 1 | 13
 written beside the balance of $109.92. That must have
been the time when Reyes, BPI’s branch manager, was
informed unofficially of the fact that the check deposited
was a counterfeit, but BPI’s Buendia Ave. Extension
Branch received a copy of the communication thereon
from Wells Fargo Bank International in New York the
following day, Nov 20, 1984. According to Reyes, Wells
Fargo Bank International handled the clearing of checks
drawn against U.S. banks that were deposited with BPI.
 From these facts on record, it is at once apparent that
BPI’s personnel allowed the withdrawal of an amount
bigger than the original deposit of $750 and the value of
the check deposited in the amount of $2,500 although they
had not yet received notice from the clearing bank in the
United States on whether or not the check was funded.
Reyes contention that after the lapse of the 35-day period
the amount of a deposited check could be withdrawn even
in the absence of a clearance thereon, otherwise it could
take a long time before a depositor could make a
withdrawal, is untenable. Said practice amounts to a
disregard of the clearance requirement of the banking
system.
 While it is true that Napiza’s having signed a blank
withdrawal slip set in motion the events that resulted
in the withdrawal and encashment of the counterfeit
check, the negligence of BPI’s personnel was the
proximate cause4 of the loss that BPI sustained. The
proximate cause of the withdrawal and eventual loss of the
amount of $2,500 on BPI’s part was its personnel’s
negligence in allowing such withdrawal in disregard of
its own rules and the clearing requirement in the
banking system. In so doing, BPI assumed the risk of
incurring a loss on account of a forged or counterfeit
foreign check and hence, it should suffer the resulting
damage.
DISPOSITION: Petition denied. CA affirmed.
CONSOLIDATED BANK AND TRUST CORPORATION v CA |
Celine
September 11, 2003
THE CONSOLIDATED BANK and TRUST CORPORATION,
petitioner, vs. COURT OF APPEALS and L.C. DIAZ and
COMPANY, CPAs, respondents.
Carpio, J.
Nature: Petition for Review of decision of CA
Summary: Solidbank is trying to reverse an adverse decision of the
CA adjudging them liable for a Php 300,000 unauthorized
withdrawal from LC Diaz’s savings account in the same bank. LC
Diaz sent a messenger to transact in the bank, but the messenger
left the passbook with the teller to attend to another transaction in a
different bank. When the messenger returned to get the passbook,
the Teller informed him that it was already released to another
person. Days after, an unauthorized withdrawal of Php 300,000
was made, and the bank honored the same, since it was
accompanied by the passbook and by authorized signatures. LC
Diaz is trying to recover the amount from Solidbank. The RTC
dismissed their case, while the CA reversed. The SC held in this
case that Solidbank was remiss in their duty to uphold higher
standards of diligence which are accorded to banks. The SC held
4
determined by a mixed consideration of logic, common sense, policy and precedent,
is "that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have
occurred
that since the passbook was in the possession of the teller,
Solidbank’s teller was obligated NOT to give it to other persons who
are unauthorized. Held that the proximate cause of the loss was
SOlidbank’s negligence.
Doctrine: Section 2 of Republic Act No. 8791 (RA 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. For failing to return the passbook to Calapre, the
authorized representative of L.C. Diaz, Solidbank and Teller No. 6
presumptively failed to observe such high degree of diligence in
safeguarding the passbook, and in insuring its return to the party
authorized to receive the same.
 LC Diaz is a professional partnership engaged in accounting.
o LC Diaz opened an account with Solidbank (Savings
Account No. S/A 200-16872-6)
 On Aug. 14 1991, LC Diaz, through cashier Mercedes
Macaraya, filled up a cash deposit slip for Php 990 and a
check deposit slip for Php 50.
o She instructed Ismael Calapre, the messenger of LC
Diaz, to deposit the money with Solidbank.
o She also gave Calapre the passbook.
 When Calapre presented the slips and passbook to Solidbank,
it was received by the teller.
o But he went taway to make another deposit for LC
Diaz with Allied Bank. He left the passbook.
o When Calapre returned to Solidbank, he was
informed that someone else got the passbook.
 When informed of the incident, the CEO of LC Diaz, Luis C.
Diaz, called up Solidbank to prevent any transaction using the
same passbook until LC Diaz could open a new account.
o On the same day, LC Diaz learned of the
unauthorized withdrawal of Php 300,000 the day
before.
o It bore the signatures of the authorized signatories for
LC Diaz, although the signatories denied signing a
withdrawal slip.
 A certain Noel Tamayo received the Php
300,000.
 In an Information dated 5 September 1991, L.C. Diaz charged
its messenger, Emerano Ilagan (Ilagan) and one Roscon
Verdazola with Estafa through Falsification of Commercial
Document.
o Dismissed.
 On 24 August 1992, L.C. Diaz through its counsel demanded
from Solidbank the return of its money.
o Solidbank refused.
 On 25 August 1992, L.C. Diaz filed a Complaint for
Recovery of a Sum of Money against Solidbank with the
Regional Trial Court of Manila, Branch 8.
o Dismissed.
o The RTC applied the rules on savings account written
on the passbook.
 The rules state that possession of this book
shall raise the presumption of ownership and
any payment or payments made by the bank
upon the production of the said book and
entry therein of the withdrawal shall have the
same effect as if made to the depositor
personally.
 At the time he made the withdrawal,
Tamayo had the passbook and the
withdrawal slip with the needed
signatures.
 Solidbank did not have any
participation in the custody and
care of the passbook. The trial court
believed that Solidbanks act of
allowing the withdrawal of P300,000
BANKING: Week 1 | 14
 was not the direct and proximate
cause of the loss.
 The trial court held that L.C. Diazs
negligence caused the unauthorized
withdrawal.
 Three facts establish L.C. Diazs
negligence: (1) the possession of
the passbook by a person other
than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal
receipt by an unauthorized person;
and (3) the possession by an
unauthorized person of a PBC
check long closed by L.C. Diaz,
which check was deposited on the
day of the fraudulent withdrawal.
 LC Diaz appealed to the CA, and the CA reversed the
decision of the trial court.
o MR of Solidbank denied.
o Applied Article 2176 of the CC.5
o The Court of Appeals pointed out that the teller of
Solidbank who received the withdrawal slip for
P300,000 allowed the withdrawal without making the
necessary inquiry.
 Had the teller called up L.C. Diaz, Solidbank
would have known that the withdrawal was
unauthorized. The teller did not even verify
the identity of the impostor who made the
withdrawal.
o Solidbank could not escape liability because of the
doctrine of last clear chance. Solidbank could have
averted the injury suffered by L.C. Diaz had it called
up L.C. Diaz to verify the withdrawal.
o Applied higher standards of diligence to Solidbank, as
the business and functions of banks are affected with
public interes. Banks are obligated to treat the
accounts of their depositors with meticulous care.
 Thus, Solidbank seeks to review the decision and resolution of
the CA.
Issue #1: Is Solidbank liable for breach of contract due to
negligence? YES.
Ratio #1:
 The contract between the bank and its depositor is governed
by the provisions of the Civil Code on simple loan
o Article 1980 of the Civil Code: x x x savings x x x
deposits of money in banks and similar institutions
shall be governed by the provisions concerning
simple loan.
o There is a debtor-creditor relationship between the
bank and its depositor.
 The law imposes on banks high standards in view of the
fiduciary nature of banking.
o Section 2 of Republic Act No. 8791 (RA 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
 Affirmed by Simex International v CA: 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
o The fiduciary nature of banking requires banks to
5
Article 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this chapter.
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 RA 8791 prescribes the
statutory diligence required from banks that
banks must observe high standards of
integrity and performance in servicing their
depositors.
 Although RA 8791 took effect almost nine
years after the unauthorized withdrawal of
the P300,000 from L.C. Diazs savings
account, jurisprudence at the time of the
withdrawal already imposed on banks the
same high standard of diligence required
under RA No. 8791. [Jurisprudence footnote
referred to Simex v CA case.]
o Note: Decision clarifies that the relationship between
bank and depositor is not a TRUST agreement, but a
failure to pay a simple loan. It’s just that there is a
higher standard of integrity and performance.
 Article 1172 of the Civil Code provides that responsibility
arising from negligence in the performance of every kind of
obligation is demandable.
o When Calapre left the passbook in Solidbank’s hands
while he went to deposit in Allied bank, the law
imposes on Solidbank and its tellers an even higher
degree of diligence in safeguarding the passbook.
o Likewise, Solidbanks tellers must exercise a high
degree of diligence in insuring that they return the
passbook only to the depositor or his authorized
representative.
 For failing to return the passbook to Calapre,
the authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 presumptively
failed to observe such high degree of
diligence in safeguarding the passbook, and
in insuring its return to the party authorized
to receive the same.
 The record does not indicate that Teller No.
6 verified the identity of the person who
retrieved the passbook. Solidbank also failed
to adduce in evidence its standard procedure
in verifying the identity of the person
retrieving the passbook, if there is such a
procedure, and that Teller No. 6
implemented this procedure in the present
case.
 In culpa contractual, once the plaintiff proves a breach of
contract, there is a presumption that the defendant was at fault
or negligent. The burden is on the defendant to prove that he
was not at fault or negligent.
o In the present case, L.C. Diaz has established that
Solidbank breached its contractual obligation to return
the passbook only to the authorized representative of
L.C. Diaz. There is thus a presumption that Solidbank
was at fault and its teller was negligent in not
returning the passbook to Calapre.
o The burden was on Solidbank to prove that there was
no negligence on its part or its employees. Solidbank
failed to discharge its burden by failing to prove that it
exercised high standards of integrity and
performance.
Issue # 2: What was the proximate cause of the unauthorized
withdrawal? Negligence of Solidbank teller in releasing
passbook NOT to Calapre.
BANKING: Week 1 | 15

Ratio #2:
 Proximate cause is that cause which, in natural and continuous
sequence, unbroken by any efficient intervening cause,
produces the injury and without which the result would not
have occurred.
 It was the negligent act of Solidbanks Teller No. 6 that gave
the impostor presumptive ownership of the passbook.
o Had the passbook not fallen into the hands of the
impostor, the loss of P300,000 would not have
happened.
o Thus, the proximate cause of the unauthorized
withdrawal was Solidbanks negligence in not
returning the passbook to Calapre.
 We do not subscribe to the appellate courts theory that the
proximate cause of the unauthorized withdrawal was the tellers
failure to call up L.C. Diaz to verify the withdrawal.
o Solidbank did not have the duty to call up L.C. Diaz to
confirm the withdrawal.
o Teller No. 5 who processed the withdrawal could not
have been put on guard to verify the withdrawal.
o The appellate court thus erred when it imposed on
Solidbank the duty to call up L.C. Diaz to confirm the
withdrawal when no law requires this from banks and
when the teller had no reason to be suspicious of the
transaction.
Issue # 3: Is the Doctrine of Last Clear Chance applicable to
this case? NO.
Ratio #3:
 The doctrine of last clear chance states that where both parties
are negligent but the negligent act of one is appreciably later
than that of the other, or where it is impossible to determine
whose fault or negligence caused the loss, the one who had
the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss.
 We do not apply the doctrine of last clear chance to the
present case.
o Solidbank is liable for breach of contract due to
negligence in the performance of its contractual
obligation to L.C. Diaz.
o This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last
clear chance to avoid the loss, would exonerate the
defendant from liability.
DISPOSITION
 Damages allocated between the depositor and the bank
40-60. Applying PBC v CA to this case, we hold that L.C.
Diaz must shoulder 40% of the actual damages awarded
by the appellate court. Solidbank must pay the other 60%
of the actual damages.
 CA decision set aside. Affirmed TC judgment.
PBC v. CA | Gab
January 15, 2004
PHILIPPINE BANKING CORPORATION, Petitioner, vs. COURT
OF APPEALS and LEONILO MARCOS, Respondents
Carpio, J.
NATURE: Petition for review of a CA decision
SUMMARY: Leonilo Marcos made 2 time deposits with Philippine
Banking Corporation (PBC). Marcos then later opened several
domestic letters of credit, part of which was secured by his earlier
time deposits, and several trust receipt agreements. PBC then
demanded payment for the total amount of the trust receipt
agreements, later charging accumulated interest. PBC also applied
Marcos’ time deposits to an alleged loan from PBC for P500,000
with interest at 25% per annum. Marcos then filed with the RTC a
Complaint for Sum of Money with Damages against PBC. The RTC
later ruled for Marcos and the CA modified the RTC’s decision by
reducing the amount of actual damages and deleting the attorney’s
fees awarded to Marcos. After PBC filed the present petition for
review with the SC, the SC ruled that PBC wasn’t able to prove
Marcos’ outstanding obligations secured by the assignment of time
deposits, that there was no judicial admission on the genuineness
and due execution of the actionable documents appended to PBC’s
Answer, and that PBC wasn’t deprived of due process when the
lower court declared PBC to have waived presentation of further
evidence and considered the case submitted for resolution.
DOCTRINES (related to topic):
 Although RA 8791 took effect only in 2000, when PBC
transacted with Marcos, jurisprudence had already
imposed on banks the same high standard of
diligence required under RA 8791.
 The fiduciary nature of banking requires banks to
assume a degree of diligence higher than that of a
good father of a family.
FACTS:
 August 30, 1989: Leonilo Marcos filed with the RTC a
Complaint for Sum of Money with Damages against
Philippine Banking Corporation (PBC).
 Marcos alleged that sometime in 1982, PBC, through
Florencio Pagsaligan, one of PBC’s officials and a close
friend of Marcos, persuaded him to deposit money with
PBC.
 Marcos yielded to Pagsaligan’s persuasion and claimed
he made 2 time deposits with PBC:
o The 1st was on March 11, 1982 for P664,897.67
and PBC issued Receipt 635734 for this time
deposit.
o The 2nd was on March 12, 1982 for P764,897.67,
but PBC did not issue an official receipt for this
time deposit, instead acknowledging the deposit
through a letter-certification Pagsaligan issued.
 The time deposits earned interest at 17% per annum and
had a maturity period of 90 days.
 Marcos alleged that Pagsaligan kept the various time
deposit certificates on the assurance that PBC would take
care of the certificates, interests, and renewals and that
from the time of the deposit, he had not received the
principal amount or its interest.
 Sometime in March 1983, Marcos wanted to withdraw
from PBC his time deposits and the accumulated interests
to buy materials for his construction business, but PBC,
through Pagsaligan convinced Marcos to keep his time
deposits intact and instead open several domestic letters
of credit.
o PBC required Marcos to give a marginal deposit
of 30% of the total amount of the letters of credit
as the time deposits would secure 70% of the
letters of credit.
o Marcos signed blank printed forms of the
application for the domestic letters of credit, trust
receipt agreements, and promissory notes.
 Marcos executed 3 Trust Receipt Agreements
totalling P851,250: (1) Trust Receipt CD 83.7
for P300,000; (2) Trust Receipt CD 83.9 for P300,000; and
(3) Trust Receipt CD 83.10 for P251,250.
 Marcos deposited the required 30% marginal deposit for
the trust receipt agreements and claimed that his
obligation to PBC was only P595,875, representing 70% of
the letters of credit.
 Marcos believed that he and PBC became creditors and
debtors of each other, expecting PBC to automatically
offset a portion of his time deposits and the accumulated
BANKING: Week 1 | 16
 interest with the amount covered by the trust receipts less
the 30% marginal deposit he had paid.
 Marcos argued that if only PBC applied his time deposits
and the accumulated interest to his remaining obligation,
which was 70% of the total amount of the letters of credit,
he would have completely paid his debt.
 Marcos also argued that since he did not apply for a
renewal of the trust receipt agreements, PBC had no right
to renew the same.
 Marcos accused PBC of unjustly demanding payment for
the total amount of the trust receipt agreements without
deducting the 30% marginal deposit he had already made
and decried PBC’s unlawful charging of accumulated
interest because he claimed there was no agreement as to
the payment of interest.
 Marcos also denied that he obtained another loan from
PBC for P500,000 with interest at 25% per
annum supposedly covered by Promissory Note 20-979-
83, complaining that PBC’s belated claim that his time
deposits were applied to this void promissory note.
 In sum, Marcos claimed that:
o His time deposit with PBC in the total sum
of P1,428,795.34 has earned accumulated
interest since March 1982 in the total amount
of P1,727,305.45 at the rate of 17% per
annum, so his total money with PBC
is P3,156,100.79 less P595,875 representing the
70% balance of the marginal deposit and/or
balance of the trust agreements; and
o His indebtedness was only P851,250 less the
30% paid as marginal deposit or a balance
of P595,875, which PBC should have
automatically deducted from his time
deposits and accumulated interest, leaving
PBC’s indebtedness to him at P2,560,025.79.
 Marcos prayed that the RTC declare the promissory note
void and that it order PBC to pay the amount of his time
deposits with interest, also seeking the award of moral and
exemplary damages and attorney’s fees.
 PBC filed its Answer with Counterclaim, denying the
allegations in the complaint.
o PBC believed that the suit was Marcos’ attempt
to avoid liability under several trust receipt
agreements that were the subject of a criminal
complaint.
 PBC alleged that as of March 12, 1982, the total amount
of Marcos’ time deposits was only P764,897.67,
not P1,428,795.35 as alleged in the complaint.
o The P764,897.67 included the P664,897.67 that
Marcos deposited on March 11, 1982.
 PBC argued that Marcos delivered to PBC the time
deposit certificates by a Deed of Assignment, executing
the Deed of Assignment to secure his various loan
obligations.
o PBC claimed that these loans are covered by
Promissory Note 20-756-82 for P420,000 and
Promissory Note 20-979-83 for P500,000, stating
that these obligations are separate and distinct
from the trust receipt agreements.
 When Marcos defaulted in the payment of Promissory
Note 20-979-83, PBC debited his time deposits and
applied the same to the obligation now considered fully
paid, insisting that the Deed of Assignment authorized it to
apply the time deposits in payment of Promissory Note 20-
979-83.
 In March 1982, after Marcos’ wife told Pagsaligan that she
and Marcos needed to finance the purchase of
construction materials for their business, L.A. Marcos
Construction Company, Pagsaligan suggested the
opening of letters of credit and the execution of trust
receipts.
 PBC claimed that Marcos freely entered into the trust
receipt agreements.
 When Marcos failed to account for the goods delivered or
for the proceeds of the sale, PBC filed a complaint for
violation of PD 115 or the Trust Receipts Law and instead
of initiating negotiations for the settlement of the account,
Marcos filed this suit.
 PBC denied falsifying Promissory Note 20-979-83,
claiming that the promissory note is supported by
documentary evidence, such as Marcos application for this
loan and the microfilm of the cashier’s check issued for the
loan.
 PBC prayed for the dismissal of the complaint, payment of
damages, attorney’s fees, and the cost of suit.
 The RTC, upon motion of Marcos’ counsel, initially issued
an order declaring PBC in default for filing its Answer 5
days after the 15-day period to file it had lapsed, also
holding that the Answer is a mere scrap of paper because
a copy was not furnished to Marcos. The RTC LAO
allowed Marcos to present his evidence ex parte.
 Marcos later testified and presented documentary
evidence and the case was submitted for decision.
 Marcos later received a copy of PBC’s Answer with
Compulsory Counterclaim.
 PBC filed an opposition to Marcos’ motion to declare PBC
in default and then filed a motion to lift the order of default.
 The RTC set aside the default order and admitted PBC’s
Answer with Compulsory Counterclaim.
 PBC then filed a motion, praying to cross-examine
Marcos, who had testified during the ex-parte hearing.
 The RTC denied PBC’s motion and directed PBC to
present its evidence.
 After PBC presented 2 witnesses, Rodolfo Sales, PBC’s
Cubao Branch Manager since 1987, and Pagsaligan, the
PBC’s Cubao Branch Manager from 1982 to 1986.
 On April 24, 1990, Marcos’ counsel cross-examined
Pagsaligan, but due to lack of material time, the RTC reset
the continuation of the cross-examination and presentation
of other evidence.
 The succeeding hearings were postponed because of
PBC’s failure to produce its witness, Pagsaligan, and PBC
also failed to present other evidence during said hearings.
 On September 7, 1990, PBC moved to postpone the
hearing as Pagsaligan could not attend the hearing
because of illness, but the RTC denied the motion to
postpone and, on motion of Marcos’ counsel, ruled that
PBC had waived its right to present further evidence,
considering the case submitted for decision.
o PBC moved for reconsideration, which RTC
denied.
 The RTC ruled in favor of Marcos
 PBC then appealed to the CA, which modified the RTC’s
decision by reducing the amount of actual damages and
deleting the attorney’s fees awarded to Marcos.
 PBC then filed the present petition for review of the CA’s
decision.
ISSUE #1 (MAIN):
 W/N PBC was able to prove Marcos’ outstanding
obligations secured by the assignment of time
deposits (NO)
RATIO #1:
PBC’s fiduciary duty to its depositor
 PBC is liable to Marcos for offsetting his time deposits with
a fictitious promissory note.
 The existence of Promissory Note 20-979-83 could have
BANKING: Week 1 | 17
 been easily proven had PBC presented the original copies
of the promissory note and its supporting evidence, but
PBC presented the machine copies of the duplicate of the
documents.
o These substitute documents have no evidentiary
value.
 PBC’s failure to explain the absence of the original
documents and to maintain a record of the offsetting of
this loan with the time deposits show PBC’s failure to fulfill
its fiduciary duty to Marcos.
 RA 8791 (General Banking Law of 2000), Sec. 2 expressly
imposes this fiduciary duty on banks when it declares that
the State recognizes the fiduciary nature of banking that
requires high standards of integrity and performance.
o This statutory declaration merely echoes the
SC’s earlier pronouncement of the Supreme
Court in Simex International (Manila) Inc. v.
CA requiring banks to treat the accounts of its
depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.
 Although RA 8791 took effect only in 2000, when PBC
transacted with Marcos, jurisprudence had already
imposed on banks the same high standard of
diligence required under RA 8791.
o This fiduciary relationship means that PBC’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.
 Thus, PBC’s fiduciary duty imposes upon it a higher
level of accountability than that expected of Marcos, a
businessman, who negligently signed blank forms and
entrusted his certificates of time deposits to Pagsaligan
without retaining copies of the certificates.
 The business of banking is imbued with public interest and
the stability of banks largely depends on the confidence of
the people in the honesty and efficiency of banks.
 Simex International (Manila) Inc. v. CA [on depositors’
reasonable expectations from a bank and PBC’s
corresponding duty to its depositor]:
o In every case, 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.
o The bank must record every single transaction
accurately, down to the last centavo, and as
promptly as possible.
o 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.
 As PBC’s depositor, Marcos had the right to expect that
PBC was accurately recording his transactions with it.
 Upon the maturity of his time deposits, Marcos also had
the right to withdraw the amount due him after PBC had
correctly debited his outstanding obligations from his time
deposits.
 By the nature of its business, PBC should have had in its
possession the original copies of the disputed promissory
note and the records and ledgers evidencing the offsetting
of the loan with the time deposits of Marcos.
 PBC failed to produce the original copies of these
documents, so PBC failed to treat the account of Marcos
with meticulous care.
 The RTC and CA did not rule that it was PBC that forged
the promissory note. It was Pagsaligan, PBC’s branch
manager and Marcos’ close friend, whom the RTC
categorically blamed for the fictitious loan agreements.
o The RTC held that Pagsaligan made up the loan
agreement to cover up his inability to account for
the time deposits of Marcos.
 Whether it was PBC’s negligence and inefficiency or
Pagsaligan’s misdeed that deprived Marcos of the amount
due him will not excuse PBC from its obligation to return to
Marcos the correct amount of his time deposits with
interest.
o The duty to observe high standards of integrity
and performance imposes on PBC that
obligation.
 Assuming Pagsaligan was behind the spurious promissory
note, PBC would still be accountable to Marcos as the
SC has held that a bank is liable for the wrongful acts of its
officers done in the interest of the bank or in their dealings
as bank representatives, but not for acts outside the scope
of their authority.
The Existence of Promissory Note 20-979-83 was not Proven
 PBC failed to produce the best evidence the original
copies of the loan application and promissory note.
 The Best Evidence Rule provides that the court shall not
receive any evidence that is merely substitutionary in its
nature, such as photocopies, as long as the original
evidence can be had.
o Absent a clear showing that the original writing
has been lost, destroyed or cannot be produced
in court, the photocopy must be disregarded,
being unworthy of any probative value and being
an inadmissible piece of evidence.
 What PBC presented were merely the machine copies of
the duplicate of the loan application and promissory note
and no explanation was offered by PBC for not producing
the original copies of the documentary evidence.
 PBC also did not comply with the orders of the RTC to
submit the originals.
 The absence of the original of the documentary evidence
casts suspicion on the existence of Promissory Note 20-
979-83, considering PBC’s fiduciary duty to efficiently
keep a record of its transactions with its depositors.
o Moreover, the circumstances enumerated by the
RTC bolster the conclusion that Promissory Note
20-979-83 is bogus.
Total amount due to Marcos
 PBC and Marcos do not dispute the CA’s ruling that the
total amount of time deposits that Marcos placed with PBC
is only P764,897.67 and not P1,429,795.34, as found by
the RTC.
 What PBC insists on in this petition is the RTC’s violation
of its right to procedural due process and the absence of
any obligation to pay or return anything to Marcos, while
Marcos, on the other hand, merely prays for the
affirmation of either the RTC or CA decision.
 The SC, thus, upholds the CA’s finding as to the amount
of the time deposits as such finding is in accord with the
evidence on record.
 Marcos claimed that the certificates of time deposit were
with Pagsaligan for safekeeping.
 Marcos was only able to present the March 11, 1982
receipt and the March 12, 1982 letter-certification to prove
the total amount of his time deposits with PBC.
 Letter-certification issued by Pagsaligan6
6
March 12, 1982
BANKING: Week 1 | 18
  The foregoing certification is clear that the total amount of
time deposits of Marcos as of March 12, 1982
is P764,897.67, inclusive of P664,987.67 that Marcos
placed in a time deposit on March 11, 1982.
o This is seen from the use of the word
“aggregate.”
 The SC did not agree with Marcos’ testimony that the
certification is actually for the 1st time deposit that he
placed.
o If the amount stated in the letter-certification is for
a single time deposit only, then Marcos should
have demanded a new letter of certification from
Pagsaligan.
o Marcos is a businessman, so while he already
made a mistake in entrusting to Pagsaligan the
certificates of time deposits, Marcos should have
known the importance of making the letter-
certification reflect the true nature of the
transaction.
o Marcos is bound by the letter-certification since
he was the one who had Pagsaligan to issue it.
 The SC thus modifies the amount that the CA ordered
PBC to return to Marcos.
o The CA did not offset Marcos’ outstanding debt
with PBC, which was covered by the 3 trust
receipt agreements, even though Marcos admits
his obligation under the 3 trust receipt
agreements.
o The total amount of the trust receipts is P851,250
less the 30% marginal deposit of P255,375 that
Marcos had already paid PBC, reducing Marcos
total debt with PBC to P595,875 under the trust
receipts.
 The 3 trust receipt agreements contained stipulations for
the payment of interest, but the parties failed to fill up the
blank spaces on the rate of interest, so PBC and Marcos
expressly agreed in writing on the payment of
interest without, however, specifying the rate of interest.
 The SC thus imposes the legal interest of 12% per annum,
the legal interest for the forbearance of money, on each of
the 3 trust receipts.
 Based on Marcos testimony’ and PBC’s letter of
demand, the trust receipt agreements became due in
March 1987.
 The records do not show exactly when in March 1987 the
obligation became due, so under NCC Art. 2212, in such a
case, the court shall fix the period of the duration of the
obligation.
 PBC’s letter of demand is dated March 6, 1989, so the SC
holsd that the trust receipts became due on that date.
 Marcos’ payment of the marginal deposit of P255,375 for
the trust receipts resulted in the proportionate reduction of
the 3 trust receipts.
 When the trust receipts became due on March 6, 1987,
Marcos owed PBC P880,812.48, which
Dear Mr. Marcos:
This is to certify that we are taking care in your behalf various Time Deposit Certificates
with an aggregate value of PESOS: SEVEN HUNDRED SIXTY FOUR THOUSAND
EIGHT HUNDRED NINETY SEVEN AND 67/100 (P764,897.67) ONLY, issued today
for 90 days at 17% p.a. with the interest payable at maturity on June 10, 1982.
Thank you.
Sgd. FLORENCIO B. PAGSALIGAN
Branch Manager
included P595,875, the principal value of the 3 trust
receipts after payment of the marginal deposit,
and P284,937.48, the interest then due on the 3 trust
receipts.
 Upon maturity of the 3 trust receipts, PBC should have
automatically deducted, by way of offsetting, Marcos’
outstanding debt to PBC from his time deposits and its
accumulated interest.
o Marcos time deposits of P764,897.67 had
already earned interest of P616,318.92 as of
March 6, 1987, so Marcos’ total funds with PBC
amounted to P1,381,216.59 as of the maturity of
the trust receipts.
 After deducting P880,812.48, the amount Marcos owed
PBC, from Marcos’ funds with PBC of P1,381,216.59,
Marcos remaining time deposits as of March 6, 1987 is
only P500,404.11.
 The accumulated interest on this P500,404.11 as of
August 30, 1989, the date of filing of Marcos’ complaint
with the RTC, is P211,622.96.
 From August 30, 1989, the interest due on the
accumulated interest of P211,622.96 should earn legal
interest at 12% per annum, pursuant to NCC, Art. 2212.
 PBCs failure to account for Marcos money justifies the
award of moral and exemplary damages.
o PBC, as employer, is liable for the negligence or
the misdeed of its branch manager, which
caused Marcos mental anguish and serious
anxiety.
o Moral damages of P100,000 is reasonable and is
in accord with the SC’s rulings in similar cases.
 The SC also awarded P20,000 to Marcos as exemplary
damages.
o The public relies on PBCs fiduciary duty to
observe the highest degree of diligence.
o The banking sector is expected to maintain at all
times this high level of meticulousness.
SUB-ISSUE #1:
 W/N Revised ROC, Rule 10, Sec. 8 may be applied so
as to create a judicial admission on the genuineness
and due execution of the actionable documents
appended to PBC’s Answer (NO)
SUB-RATIO #1:
 PBC raises for the 1st time before the SC the issue of
judicial admission on by Marcos.
 An issue raised for the 1st time on appeal and not timely
raised in the proceedings in the lower court is barred by
estoppel.
 PBC cannot claim that Marcos had admitted the due
execution of the documents attached to its Answer
because PBC filed its answer late and even failed to serve
it on Marcos.
 There was nothing that Marcos could specifically deny
under oath.
 Marcos had already completed the presentation of his
evidence when the RTC lifted the order of default and
admitted PBC’s Answer.
 The ROC’s provision governing admission of actionable
documents was not enacted to reward a party in default.
ISSUE #2:
 W/N PBC was deprived of due process when the lower
court declared PBC to have waived presentation of
further evidence and considered the case submitted
for resolution (NO)
RATIO #2:
 There was no violation of PBC’s right to procedural due
process when the RTC denied PBCs motion to cross-
examine Marcos.
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 Prior to the denial of the motion, the RTC had properly conduct a re-direct examination of Pagsaligan.
declared PBC in default and since PBC was in default, o PBC postponed the hearings 3 times because of
Marcos was able to present his evidence ex- its inability to secure Pagsaligan’s presence
parte, including his own testimony. during the hearings.
 When the RTC lifted the order of default, PBC was o PBC could have presented another witness or its
restored to its standing and rights in the action, but, as a other evidence, but it insisted on the resetting of
rule, the proceedings already taken should not be the hearing because of Pagsaligan’s absence
disturbed. allegedly due to illness.
 Nevertheless, it is within the RTC’s discretion to reopen  PBC’s motion for postponement based on Pagsaligan’s
the evidence submitted by the plaintiff and allow the illness was not even supported by documentary evidence.
defendant to challenge the same by cross-examining the o Documentary evidence of the illness is necessary
plaintiff’s witnesses or introducing countervailing evidence. before the RTC could rule that there is a
o The 1964 ROC, the rules then in effect at the sufficient basis to grant the postponement.
time of the hearing of this case, recognized the DISPOSITION
RTC’s exercise of this discretion. The 1997 ROC  The CA’s Decision is affirmed with modification.
retained this discretion.
 The records show that PBC did not ask the RTC to restore
its right to cross-examine Marcos when it sought the lifting
of the default order.
 Thus, the order setting aside the order of default did not
confer on PBC the right to cross-examine Marcos.
 The RTC also later denied PBC’s oral manifestation to
grant its motion to cross-examine Marcos because there
was no proof of service on Marcos, also denying PBC’s
plea for reconsideration and ordering PBC to present its
evidence.
o Instead of presenting its evidence, PBC moved
for the resetting of the hearing and when the RTC
denied that, PBC informed the RTC that it was
elevating the denial to the CA.
 However, the CA’s ruling that a motion to cross-examine is
a non-litigated motion and that the RTC gravely abused its
discretion when it denied the motion to cross-examine is
wrong.
 A motion to cross-examine is adversarial.
 The adverse party in this case had the right to resist the
motion to cross-examine because the movant had
previously forfeited its right to cross-examine the witness.
 The purpose of a notice of a motion is to avoid surprises
on the opposite party and to give him time to study and
meet the arguments.
 In a motion to cross-examine, the adverse party has the
right to not only prepare a meaningful opposition to the
motion, but to also be informed that his witness is being
recalled for cross-examination.
 The proof of service was indispensable and the RTC was
correct in denying the oral manifestation to grant the
motion for cross-examination.
 There was no reason to relax the application of the rule on
notice of motions to this case.
o PBC could have easily re-filed the motion to
cross-examine with the requisite notice to
Marcos, but it did not.
o PBC also waited until the RTC ruled on the
merits before questioning the interlocutory order
of denial.
 While the right to cross-examine is a vital element of
procedural due process, the right does not require an
actual cross-examination, but merely an opportunity to
exercise this right, if desired by the party entitled to it.
o PBC’s failure to cross-examine is imputable to
PBC when it lost this right as it was in default and
failed thereafter to exhaust the remedies to
secure the exercise of this right at the earliest
opportunity.
 The RTC and CA correctly ruled that PBC had waived its
right present additional evidence.
 PBC cannot now claim that it was deprived of its right to

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