CENTRAL BANK OF PHILIPPINES v. CA, GR No.

76118, 1993-03-30

Facts:

the Monetary Board (MB) issued on 31 May 1985 Resolution No. 596 ordering the closure of
TSB, forbidding it from doing business in the

Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver.

On 11 June 1985, TSB filed a complaint with the Regional Trial Court of Quezon City,
docketed as Civil Case No. Q-45139, against Central Bank and Ramon V. Tiaoqui to annul
MB Resolution No. 596, with prayer for injunction, challenging in the process the...
constitutionality of Sec. 29 of R.A. 269, otherwise known as "The Central Bank Act," as
amended, insofar as it authorizes the Central Bank to take over a banking institution even if
it is not charged with violation of any law or regulation, much less found guilty... thereof.

Issues:

May a Monetary Board resolution placing a private bank under receivership be annulled on
the ground of lack of prior notice and hearing?

Ruling:

Under Sec. 29 of R.A. 265,[15] the Central Bank, through the Monetary Board, is vested
with exclusive authority to assess, evaluate and determine the condition of any bank, and...
finding such condition to be one of insolvency, or that its continuance in business would
involve probable loss to its depositors or creditors, forbid the bank or non-bank financial
institution to do business in the Philippines; and shall designate an... official of the CB or
other competent person as receiver to immediately take charge of its assets and liabilities.
The fourth paragraph,[16] which was then in effect at the time the action was... commenced,
allows thefiling of a case to set aside the actions of the Monetary Board which are tainted
with arbitrariness and bad faith.

Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and
hearing before a bank may be directed to stop operations and placed under receivership.
When par. 4 (now par. 5, as amended by E.O. 289) provides for the filing of a... case within
ten (10) days after the receiver takes charge of the assets of the bank, it is unmistakable
that the assailed actions should precede the filing of the case. Plainly, the legislature could
not have intended to authorize "no prior notice and hearing" in the... closure of the bank and
at the same time allow a suit to annul it on the basis of absence thereof.
MANUEL M. SERRANO, petitioner,

vs. Notwithstanding series of demands for encashment of the aforementioned time deposits
from the respondent Overseas Bank of Manila, dating from December 6, 1967 up to March
4, 1968, not a single one of the time deposit certificates was honored by respondent
Overseas Bank of Manila.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS BANK OF MANILA; EMERITO M.
RAMOS, SUSANA B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA RAMOS DELA RAMA,
HORACIO DELA RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS LEDESMA,
RODOLFO LEDESMA, VICTORIA RAMOS TANJUATCO, and TEOFILO TANJUATCO,
respondents.

The Petitioner filed a petition for mandamus and prohibition, with preliminary injunction, that
seeks the establishment of joint and solidary liability to the amount of Three Hundred Fifty
Thousand Pesos, with interest, against the respondents, on the alleged failure of the
Overseas Bank of Manila to return the time deposits made by petitioner. The petition was
dismissed because of lack of merit.
February 14, 1980

ISSUE

Whether or not the petitioner had the right to intervene and file a case against Central Bank
FACTS
of the Philippines and Overseas Bank of Manila and its stockholders on the alleged failure of
the Overseas Bank of Manila to return the time deposits made by the depositors.

On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one year
with 6% interest, of P150,000.00 with the respondent Overseas Bank of Manila. 
HELD
Concepcion Maneja also made a time deposit, for one year with 6-½% interest, on March 6,
1967, of Two Hundred Thousand Pesos (P200,000.00) with the same respondent Overseas
Bank of Manila. On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano,
assigned and conveyed to petitioner Manuel M. Serrano, her time deposit of P200,000.00
with respondent Overseas Bank of Manila.
No. The court did not allow the petitioner to intervene in that case, on the ground that his
claim as depositor of the Overseas Bank of Manila should properly be ventilated in the Court
of First Instance, and if this Court were to allow Serrano to intervene as depositor in G.R.
No. L-29352, thousands of other depositors would follow and thus cause an avalanche of
cases in this Court.

Furthermore, both parties overlooked one fundamental principle in the nature of bank
deposits when the petitioner claimed that there should be created a constructive trust in his
favor when the respondent Overseas Bank of Manila increased its collaterals in favor of
respondent Central Bank for the former's overdrafts and emergency loans, since these
collaterals were acquired by the use of depositors' money.
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER,
Petitioners,
vs.HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge
of
Manila, Branch 28; RURAL BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE
(BATANGAS), INC.; RURAL BANK OF CARMEN (CEBU), INC.; PILIPINO RURAL BANK,
INC.;
PHILIPPINE COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF CALATAGAN
(BATANGAS),
INC. (now DYNAMIC RURAL BANK); RURAL BANK OF DARBCI, INC.; RURAL BANK OF
KANANGA (LEYTE), INC. (now FIRST INTERSTATE RURAL BANK); RURAL BANK OF
BISAYAS
MINGLANILLA (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT
BANK, INC.
G.R. No. 184778, THIRD DIVISION, October 2, 2009, Velasco Jr., J
The issuance by the RTC of writs of preliminary injunction is an unwarranted interference
with the
powers of the MB refer to the appointment of a conservator or a receiver for a bank, which is
a power
of the MB for which they need the ROEs done by the supervising or examining department.
The writs of
preliminary injunction issued by the trial court hinder the MB from fulfilling its function under
the law.
The "close now, hear later" scheme is grounded on practical and legal considerations to
prevent
unwarranted dissipation of the bank’s assets and as a valid exercise of police power to
protect the
depositors, creditors, stockholders, and the general public.
Moreover, the respondent banks have failed to show that they are entitled to copies of the
ROEs. They
can point to no provision of law, no section in the procedures of the BSP that shows that the
BSP is
required to give them copies of the ROEs. Sec. 28 of RA 7653, provides that the ROE shall
be submitted
to the MB; the bank examined is not mentioned as a recipient of the ROE.
FACTS
Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP)
conducted
examinations of the books of the following banks:
Rural Bank of Parañaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank
of Carmen
(Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of
Calatagan (Batangas), Inc. (now Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural
Bank of
Kananga (Leyte), Inc. (now First Interstate Rural Bank), Rural Bank de Bisayas Minglanilla
(now
Bank of East Asia), and San Pablo City Development Bank, Inc.
After the examinations, exit conferences were held with the officers of the banks wherein
SED
provided copies of Lists of Findings containing the deficiencies discovered during the
examinations.
Banks were then required to comment and to undertake the remedial measures which
included the
infusion of additional capital. Though the banks claimed that they made the additional capital
infusions, petitioner Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to
the Board of Directors of each bank, informing them that the SED found that the banks failed
to carry out the
required remedial measures. In response, the banks requested that they be given time to
obtain
BSP approval to amend their Articles of Incorporation, that they have an opportunity to seek
investors. They requested as well that the basis for the capital infusion figures be disclosed,
and
noted that none of them had received the Report of Examination (ROE) which finalizes the
audit
findings. In response, Fonacier reiterated the banks’ failure to comply with the directive for
additional capital infusions.
RBPI filed a complaint for nullification of the BSP ROE with application for a TRO and writ of
preliminary injunction before the RTC. Praying that Fonacier, her subordinates, agents, or
any other
person acting in her behalf be enjoined from submitting the ROE or any similar report to the
Monetary Board (MB), or if the ROE had already been submitted, the MB be enjoined from
acting on
the basis of said ROE, on the allegation that the failure to furnish the bank with a copy of the from implementing and enforcing the CA Decision. By reason of the TRO issued by this
ROE Court, the
violated its right to due process. SED was able to submit their ROEs to the MB. The MB then prohibited the respondent
The rest of the banks followed suit filing complaints with the RTC substantially similar to that banks from
of transacting business and placed them under receivership
RBPI.
RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a motion for ISSUES
reconsideration the next day.Respondent Judge Nina Antonio-Valenzuela of Branch 28 a. Whether or not the TRO issued by the RTC violated section 25 of the New Central Bank
granted Act that
RBPI’s prayer for the issuance of a TRO. prevented the MB to discharge functions.
The other banks separately filed motions for consolidation of their cases in Branch 28, which b. Whether or not the respondents are required to be given copies of the ROEs before
motions were granted. Petitioners assailed the validity of the consolidation of the nine cases submission
before of such to the Monetary Board.
the RTC, alleging that the court had already prejudged the case by the earlier issuance of a
TRO and RULING
moved for the inhibition of respondent judge. Petitioners filed a motion for reconsideration (A.) YES, Requisites for preliminary injunctive relief are: (a) the invasion of right sought to be
regarding the consolidation of the subject cases. protected is material and substantial; (b) the right of the complainant is clear and
The RTC ruled that the banks were entitled to the writs of preliminary injunction prayed for. It unmistakable;
held and (c) there is an urgent and paramount necessity for the writ to prevent serious
that it had been the practice of the SED to provide the ROEs to the banks before submission damage.The twin
to the requirements of a valid injunction are the existence of a right and its actual or threatened
MB. It further held that as the banks are the subjects of examinations, they are entitled to violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation
copies of against that right must be shown. These requirements are absent in the present case.
the ROEs. The denial by petitioners of the banks’ requests for copies of the ROEs was held The issuance by the RTC of writs of preliminary injunction is an unwarranted interference
to be a with the
denial of the banks’ right to due process. powers of the MB refer to the appointment of a conservator or a receiver for a bank, which is
Petitioners claims grave abuse of discretion on the part of Judge Valenzuela. The CA ruled a
that the power of the MB for which they need the ROEs done by the supervising or examining
RTC committed no grave abuse of discretion when it ordered the issuance of a writ of department.
preliminary The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its
injunction and when it ordered the consolidation of the 10 cases. It held that petitioners function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 "may not
should be
have first filed a motion for reconsideration of the assailed orders, and failed to justify why restrained or set aside by the court except on petition for certiorari on the ground that the
they action
resorted to a special civil action of certiorari instead. taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to
On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and lack or
respondents
excess of jurisdiction. The respondent banks have shown no necessity for the writ of to undertake remedial measures stated in said lists. Despite these instructions, respondent
preliminary banks
injunction to prevent serious damage. The serious damage contemplated by the trial court failed to comply with the SED’s directive.
was the Respondent banks are already aware of what is required of them by the BSP, and cannot
possibility of the imposition of sanctions upon respondent banks, even the sanction of claim
closure. violation of their right to due process simply because they are not furnished with copies of
Under the law, the sanction of closure could be imposed upon a bank by the BSP even the
without ROEs
notice and hearing. This "close now, hear later" scheme is grounded on practical and legal
considerations to prevent unwarranted dissipation of the bank’s assets and as a valid
exercise of
police power to protect the depositors, creditors, stockholders, and the general public.
Judicial review enters the picture only after the MB has taken action; it cannot prevent such
action
by the MB. The threat of the imposition of sanctions, even that of closure, does not violate
their
right to due process, and cannot be the basis for a writ of preliminary injunction.
The "close now, hear later" doctrine has already been justified as a measure for the
protection of
the public interest.
(B) NO, The respondent banks have failed to show that they are entitled to copies of the
ROEs. They
can point to no provision of law, no section in the procedures of the BSP that shows that the
BSP is
required to give them copies of the ROEs. Sec. 28 of RA 7653, provides that the ROE shall
be
submitted to the MB; the bank examined is not mentioned as a recipient of the ROE.
The respondent banks cannot claim a violation of their right to due process if they are not
provided
with copies of the ROEs. The same ROEs are based on the lists of findings/exceptions
containing the
deficiencies found by the SED examiners when they examined the books of the respondent
banks.
As found by the RTC, these lists of findings/exceptions were furnished to the officers or
representatives of the respondent banks, and the respondent banks were required to
comment and
Teodoro Bañas, et. al. vs Asia Pacific Finance Corporation G.R. No. 128703. October 18, Issue:
2000
Whether the disputed transaction between petitioners and APCOR violated banking laws,
Facts: hence, null and void.

Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon Construction for value
received. He promised to pay the sum of P390, 000.00 in installments of P32, 500.00 every
25th day of the month starting from September 25, 1980 up to August 25, 1981.
C. G. Dizon Construction endorsed with recourse the Promissory Note to Asia Pacific
Finance Corporation (APCOR). To secure payment of the promissory note, C. G. Dizon
Construction, through its corporate officers, Cenen Dizon, President, and Juliette B. Dizon,
Vice President and Treasurer, executed a Deed of Chattel Mortgage covering three (3)
heavy equipment units of Caterpillar Bulldozer Crawler Tractors.  In addition, Cenen Dizon
executed a Continuing Undertaking wherein he bound himself to pay the obligation solidarily
with C. G. Dizon Construction.
G. Dizon Construction made three installment payments to APCOR for a total of P130,
000.00. However, C. G. Dizon Construction defaulted in the payment of the remaining
installments, prompting APCOR to send a Statement of Account to Cenen Dizon for the
unpaid balance of P267, 737.50. This includes interest and charges and attorney’s fees.
As the demand was ignored, APCOR filed a complaint for a sum of money with prayer for a
writ of replevin against Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon. The trial
court issued a writ of replevin against defendant C. G. Dizon Construction for the surrender
of the bulldozer crawler tractors. Of the three bulldozer crawler tractors, only two were
actually turned over by defendants which units were subsequently foreclosed by APCOR to
satisfy the obligation.
Held:
No. The transaction did not violate banking laws and is therefore valid and binding to the
parties.
As defined in Sec. 2, par. (a), of the Revised Securities Act, securities “shall include x x x x
commercial papers evidencing indebtedness of any person, financial or non-financial entity,
irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to
another with or without recourse, such as promissory notes x x x x”.
REPORT THIS AD
Clearly, the transaction between petitioners and respondent was one involving not a loan
but purchase of receivables at a discount, well within the purview of “investing, reinvesting
or trading in securities” which an investment company, like APCOR, is authorized to perform
and does not constitute a violation of the General Banking Act.
What is prohibited by law is for investment companies to lend funds obtained from the public
through receipts of deposit, which is a function of banking institutions. But here, the funds
supposedly “lent” to petitioners have not been shown to have been obtained from the public
by way of deposits, hence, the inapplicability of banking laws.

Petitioners claim that the disputed Promissory Note, Deed of Chattel Mortgage and
Continuing Undertaking were not intended to be valid and binding on the parties as they
were merely devices to conceal their real intention which was to enter into a contract of
loan in violation of banking laws. APCOR was organized as an investment house which
could not engage in the lending of funds obtained from the public through receipt of
deposits.

The Regional Trial Court ruled in favor of APCOR holding the defendants jointly and
severally liable for the unpaid balance of the obligation under the Promissory Note. The
Court of Appeals affirmed the decision of the trial court.
 FIRST PLANTERS PAWNSHOP VS. CIR
G.R. No. 174134
July 30, 2008
FACTS: In a Pre-assessment Notice, petitioner was informed by the BIR that it has an
existing tax deficiency on its VAT and Documentary Stamp Tax (DST) liabilities for the year
2000. Petitioner protested the assessment for lack of legal and factual bases.
Petitioner subsequently received a Formal Assessment Notice, directing payment of VAT
deficiency and DST deficiency, inclusive of surcharge and interest.  Petitioner filed a protest,
which was denied by the Acting Regional Director.
Petitioner then filed a petition for review with the CTA, which upheld the deficiency
assessment.  Petitioner filed an MR which was denied.
Petitioner appealed to the CTA En Banc which denied the Petition for Review. Petitioner
sought reconsideration but this was denied by the CTA.. Hence, the present petition for
review under Rule 45 of the ROC.
The core of petitioner’s argument is that it is not a lending investor within the purview of
Section 108(A) of the NIRC, as amended, and therefore not subject to VAT.  Petitioner also
contends that a pawn ticket is not subject to DST because it is not proof of the pledge
transaction, and even assuming that it is so, still, it is not subject to tax since a DST is levied
on the document issued and not on the transaction.
ISSUE: is petitioner in this case liable for:
1. VAT
2. DST
HELD:
1. NO
The determination of petitioner’s tax liability depends on the tax treatment of a pawnshop
business. It was the CTA’s view that the services rendered by pawnshops fall under the
general definition of “sale or exchange of services” under Section 108(A) of the Tax Code of
1997.
The Court finds that pawnshops should have been treated as non-bank financial
intermediaries from the very beginning, subject to the appropriate taxes provided by law.
At the time of the disputed assessment, that is, for the year 2000, pawnshops were not
subject to 10% VAT under the general provision on “sale or exchange of services” as
defined under Section 108(A) of the Tax Code of 1997. Instead, due to the specific nature of
its business, pawnshops were then subject to 10% VAT under the category of non-bank
financial intermediaries, as provided in the same Section 108(A), which reads:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –
(A) xx
The phrase “sale or exchange of services” means the performance of all kinds or services in
the Philippines for others for a fee, remuneration or consideration, including x x x services
of banks, non-bank financial intermediaries and finance companies; and non-life
insurance companies (except their crop insurances), including surety, fidelity, indemnity and
bonding companies..xx
Coming now to the issue at hand – Since petitioner is a non-bank financial intermediary, it is
subject to 10% VAT for the tax years 1996 to 2002; however, with the levy, assessment
and collection of VAT from non-bank financial intermediaries being specifically
deferred by law, then petitioner is not liable for VAT during these tax years.  But with
the full implementation of the VAT system on non-bank financial intermediaries starting
January 1, 2003, petitioner is liable for 10% VAT for said tax year.  And beginning 2004 up
to the present, by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is
subject to percentage tax on gross receipts from 0% to 5 %, as the case may be.
1. YES
Applying jurisprudence, it was ruled that the subject of DST is not limited to the document
alone.  Pledge, which is an exercise of a privilege to transfer obligations, rights or properties
incident thereto, is also subject to DST, thus –
xx..  the subject of a DST is not limited to the document embodying the enumerated
transactions. A DST is an excise tax on the exercise of a right or privilege to transfer
obligations, rights or properties incident thereto… xx
Pledge is among the privileges, the exercise of which is subject to DST. A pledge may be
defined as an accessory, real and unilateral contract by virtue of which the debtor or a third
person delivers to the creditor or to a third person movable property as security for the
performance of the principal obligation, upon the fulfillment of which the thing pledged, with
all its accessions and accessories, shall be returned to the debtor or to the third person
True, the law does not consider said ticket as an evidence of security or indebtedness.
However, for purposes of taxation, the same pawn ticket is proof of an exercise of a
taxable privilege of concluding a contract of pledge. At any rate, it is not said ticket that
creates the pawnshop’s obligation to pay DST but the exercise of the privilege to enter into a
contract of pledge. There is therefore no basis in petitioner’s assertion that a DST is literally
a tax on a document and that no tax may be imposed on a pawn ticket.
Also,  Section 195 of the NIRC unqualifiedly subjects all pledges to DST. It states that
“[o]n every x x x pledge x x x there shall be collected a documentary stamp tax x x x.” It is
clear, categorical, and needs no further interpretation or construction.
In the instant case, there is no law specifically and expressly exempting pledges entered
into by pawnshops from the payment of DST. Section 199 of the NIRC enumerated certain
documents which are not subject to stamp tax; but a pawnshop ticket is not one of them.
Hence, petitioner’s nebulous claim that it is not subject to DST is without merit.
EQUITABLE BANKING CORPORATION 2)
v. A culpable act or omission factually established;
CALDERON 3)
2004 Dec 14 G. R. No. 156168 Proof that the wrongful act or omission of the defendant is the proximate cause of the
Facts: damages sustained by the claimant; and
 Jose Calderon, a prominent businessman, applied and was issu 4)
e d   a n Equitable International Visa card which can be used for both pes  That the case is predicated on any of the instances expressed or envisioned byA r t i c l e s
o   a n d d o l l a r transactions within and outside the Philippines. In its dollar transactions, 2219 and 2220 of the Civil Code.
respondentis required to maintain a dollar account with a minimum deposit of $3, 000.00, (Philippine Telegraph & TelephoneCorporation vs. Court of Appeals)
thebalance shall serve as a credit limit. In one of his trips to Hongkong, together with Particularly, in culpa contractual or breach of contract, moral damages
afriend, he went to a Gucci Department Store where he tried to purchase arerecoverable only if the defendant has
severalGucci items (which amounted to HK$4,030.00 or equivalent to US$523.00) using acted fraudulently
hisVisa card. The saleslady informed him in front of his friend and other shoppers thatthe or
transaction failed because his Visa card was blacklisted. Upon his return to thePhilippines, in bad faith
Calderon filed a complaint for damages claiming he suffered , or is
mucht o r m e n t   a n d   e m b a r r a s s m e n t   o n   a c c o u n t   o f   found guilty of gross negligence amounting to bad faith
E B C ’ s   w r o n g f u l   a c t   o f   blacklisting/suspending his Visa card while at , o r i n
the Gucci Store in Hongkong. The trialcourt ruled in favor of Caldeon. On appeal, the wantondisregard of his contractual obligations
CA affirmed the ruling of the lower court but reducing the moral damages awarded by . Verily, the breach must be
the latter and justified that EBCwas negligent in not informing Calderon that his credit card wanton,reckless, malicious or in bad faith, oppressive or abusive
was already .In the present case, the CA  ruled, and rightly so, that no malice or bad
suspendede v e n   b e f o r e   h e   l e f t   f o r   H o n g k o n g ,   r a t i o c i n a t i n g   t h a faithattended petitioner’s dishonor of respondent’s credit card. For, as found no less bythe
t   p e t i t i o n e r ’ s   r i g h t   t o automatically suspend a cardholder’s privileges same court, petitioner was justified in doing so under the provisions of its CreditCard
without notice should not havebeen indiscriminately used in the case of respondent Agreement with respondent, paragraph 3 of which states:
because the latter has alreadypaid his past obligations and has an existing dollar deposit in
an amount more
thant h e   r e q u i r e d   m i n i m u m   f o r   c r e d i t   c a r d   a t   t h e   t i m e   h e   m a d e   h i s    xxx the CARDHOLDER agrees not to exceed his/her approved creditlimit, otherwise, all charges
p u r c h a s e s   i n Hongkong. incurred including charges incurred through theuse of the extension CARD/S, if any in excess of
Issue:
credit limit shall become dueand demandable and the credit privileges shall
 Whether or not the Court of Appeals erred in holding that the respondent
isentitled to moral damages notwithstanding its finding that petitioner’s actions havenot be automatically suspendedwithout notice to the CARDHOLDER in accordance with Section 11
been attended with any malice or bad faith? hereof.
Ruling:
In law, moral damages include physical suffering, mental anguish, We are thus at a loss to understand why, despite its very own finding of absence of bad faith or
fright,serious anxiety, besmirched reputation, wounded feelings, moral shock, so malice on the part of the petitioner, the CA nonethelessadjudged it liable for moral damages to
cialhumiliation and similar injury. However, to be entitled to the award thereof, it is respondent.Calderon’s card privileges for dollar transactions were suspended because of his past
note n o u g h   t h a t   o n e   m e r e l y   s u f f e r e d   s l e e p l e s s   n i g h t s ,   m e n t a l   a n g u i s h   o r  
s e r i o u s anxiety as a result of the actuations of the other party. due and demandable obligations. He made a deposit of US$14,000.00 in hisdollar account but did
Conditions to be met in order that moral damages may be recovered: not bother to request the petitioner for the reinstatement of his credit card privileges for dollar
1) transactions, thus the same remained
Evidence of besmirched reputation, or physical, mental or psychological sufferingsustained undersuspension. On account of this, and with the express provision on automaticsuspension
by the claimant;
without notice under paragraph 3 of the parties’ Credit Card Agreement,there is simply no basis for
holding petitioner negligent for not notifying respondentof the suspended status of his credit card
privileges. And, certainly, respondentcould not have justifiably assumed that petitioner must have
reinstated his card
byreason alone of his having deposited US$14,000.00 a day before he left forHongkong. As issuer of 
the card, petitioner has the option to decide whether toreinstate or altogether terminate a credit ca
rd previously suspended onconsiderations which the petitioner deemed proper, not
the least of which are thecardholder’s payment record, capacity to pay and compliance with any
additionalrequirements imposed by it.Even on the aspect of negligence, therefore, petitioner could
not have beenproperly adjudged liable for moral damages.Unquestionably, respondent suffered
damages as a result of the dishonor of his card. There is, however, a material distinction between
damages and injury. Toquote from the decision in
BPI Express Card Corporation vs. Court of Appeals
:Injury is the illegal invasion of a legal right; damage is the loss, hurt or harm whichresults from the
injury; and damages are the recompense or compensation awardedfor the damage
suffered. Thus, there can be damage without injury in thoseinstances in which the loss or harm was
not the result of a violation of a legal duty.In such cases the consequences must be borne by the
injured person alone, the lawaffords no remedy for damages resulting from an act which does not
amount to alegal injury or wrong. These situations are often called damnum absque injuria.In other
words, in order that a plaintiff may maintain an action for the injuriesof which he complains, he
must establish that such injuries resulted from a breachof duty which the defendant owed to the
plaintiff- a concurrence of injury to theplaintiff and legal responsibility by the person causing it. The
underlying basis
forthe award of tort damages is the premise that an individual was injured incontemplation of
law. Thus, there must first be a breach of some duty and theimposition of liability for that breach
before damages may be awarded; and thebreach of such duty should be the proximate cause of the
injury.In the situation in which respondent finds himself, his is a case of damnumabsque injuria.On a
final note, x x x “moral damages are in the category of an awarddesigned to compensate the claim
for actual injury suffered and not to impose apenalty on the wrongdoer.”
Sia vs. Court of Appeals G.R. No. 102970,
May 13, 1990
MARCH 16, 2014LEAVE A COMMENT
Contract of the use of a safety deposit box of a bank is not a deposit but a
lease under Sec 72, A of General Banking Act.   Accordingly, it should have lost
no time in notifying the petitioner in order that the box could have been
opened to retrieve the stamps, thus saving the same from further
deterioration and loss. The bank’s negligence aggravated the injury or
damage to the stamp collection..
 Facts:    Plaintiff Luzon Sia rented a safety deposit box of Security Bank and Trust Co.
(Security Bank) at its Binondo Branch wherein he placed his collection of stamps. The
said safety deposit box leased by the plaintiff was at the bottom or at the lowest level of
the safety deposit boxes of the defendant bank. During the floods that took place in
1985 and 1986, floodwater entered into the defendant bank’s premises, seeped into the
safety deposit box leased by the plaintiff and caused, according damage to his stamps
collection. Security Bank rejected the plaintiff’s claim for compensation for his damaged
stamps collection.
Sia, thereafter, instituted an action for damages against the defendant bank. Security
Bank contended that its contract with the Sia over safety deposit box was one of lease
and not of deposit and, therefore, governed by the lease agreement which should be the
applicable law; the destruction of the plaintiff’s stamps collection was due to a calamity
beyond obligation on its part to notify the plaintiff about the floodwaters that inundated
its premises at Binondo branch which allegedly seeped into the safety deposit box leased
to the plaintiff. The trial court rendered in favor of plaintiff Sia and ordered Sia to pay
damages.
 Issue:    Whether or not the Bank is liable for negligence.
Held: Contract of the use of a safety deposit box of a bank is not a deposit but a lease.
Section 72 of the General Banking Act [R.A. 337, as amended] pertinently provides: In
addition to the operations specifically authorized elsewhere in this Act, banking
institutions other than building and loan associations may perform the following services
(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit
boxes for the safequarding of such effects.
As correctly held by the trial court, Security Bank was guilty of negligence. The bank’s
negligence  aggravated  the injury or damage to the stamp collection. SBTC was aware of
the floods of 1985 and 1986; it also knew that the floodwaters inundated the room where
the safe deposit box was located. In view thereof, it should have lost no time in notifying
the petitioner in order that the box could have been opened to retrieve the stamps, thus
saving the same from further deterioration and loss. In this respect, it failed to exercise
the reasonable care and prudence expected of a good father of a family, thereby
becoming a party to the aggravation of the injury or loss. Accordingly, the
aforementioned fourth characteristic of a fortuitous event is absent. Article 1170 of the
Civil Code, which reads “Those who in the performance of their obligation are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages” is applicable. Hence, the petition was granted.

The provisions contended by Security Bank in the lease agreement which are meant to
exempt SBTC from any liability for damage, loss or destruction of the contents of the
safety deposit box which may arise from its own agents’ fraud, negligence or delay must
be stricken down for being contrary to law and public policy.
CA Agro-Industrial Development Corporation vs CA GR No. 90027. March 3, 1993 CA: Affirmed

Facts:

                   CA Agro (through its President, Aguirre) and spouses Pugao entered into an agreement Issue:
whereby the former purchased two parcels of land for P350, 525 with a P75, 725 down payment
while the balance was covered by three (3) postdated checks. Among the terms embodied in a           Whether or not the contractual relation between a commercial bank and another party in the
contract of rent of a safety deposit box is one of bailor and bailee.
Memorandum of True and Actual Agreement of Sale of Land were that titles to the lots shall be
transferred to the petitioner upon full payment of the purchase price and that the owner’s copies of
the certificates of titles thereto shall be deposited in a safety deposit box of any bank. The same
could be withdrawn only upon the joint signatures of a representative of the petitioner upon full Ruling:
payment of the purchase price. They then rented Safety Deposit box of private respondent Security
          Yes.
Bank and Trust Company (SBTC). For this purpose, both signed a contract of lease which contains
the following conditions:           The contract in the case at bar is a special kind of deposit. It cannot be characterized as an
ordinary contract of lease under Article 1643 because the full and absolute possession and control
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor
of the safety deposit box was not given to the joint renters – the petitioner and Pugaos.
control of the same.
          American Jurisprudence:
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it
assumes absolutely no liability in connection therewith.           The prevailing rule is that the relation between a bank renting out safe-deposit boxes and its
customer with respect to the contents of the box is that of a bail or bailee, the bailment being for
hire and mutual benefit.
After the execution of the contract, two (2) renter’s key were given to Aguirre, and Pugaos. A key
guard remained with the bank. The safety deposit box has two key holes and can be opened with
the use of both keys. Petitioner claims that the CTC were placed inside the said box.           Our provisions on safety deposit boxes are governed by Section 72 (a) of the General Banking
Act, and this primary function is still found within the parameters of a contract of deposit like the
receiving in custody of funds, documents and other valuable objects for safekeeping. The renting
Thereafter, a certain Mrs. Ramos offered to buy from the petitioner the two (2) lots at a price of out of the safety deposit boxes is not independent from, but related to or in conjunction with, this
P225 per sqm. Mrs. Ramose demanded the execution of a deed of sale which necessarily entailed principal function. Thus, depositary’s liability is governed by our civil code rules on obligation and
the production of the CTC. Aguirre and Pugaos then proceeded to the bank to open the safety contracts, and thus the SBTC would be liable if, in performing its obligation, it is found guilty of
deposit box. However, when opened in the presence of bank’s representative, the box yielded no fraud, negligence, delay or contravention of the tenor of the agreement.
certificates. Because of the delay in reconstitution of title, Mrs. Ramos withdrew her earlier offer
and as a consequence petitioner failed to realize the expected profit of P280 , 500. Hence, the latter
filed a complaint for damages.

RTC: Dismissed the complaint

CITYSTATE SAVINGS BANK, Petitioner, v. TERESITA TOBIAS AND SHELLIDIE VALDEZ,
Respondents.
G.R. No. 227990, SECOND DIVISION, March 07, 2018, REYES, JR., J.
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of
dealings of the officers in their representative capacity but not for acts outside the scope of their
authority. A bank holding out its officers and agent as worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled to perpetuate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for such frauds, even though no
benefit
may accrue to the bank therefrom. Accordingly, a banking corporation is liable to innocent third
persons where the representation is made in the course of its business by an agent acting
within the general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit.
Application of these principles in especially necessary because banks have a fiduciary relationship
with
the public and their stability depends on the confidence of the people in their honesty and
efficiency.
Such faith will be eroded where banks do not exercise strict care in the selection and
supervision of its employees, resulting in prejudice to their depositors.
As aptly pointed by the CA, petitioner's evidence bolsters the case against it, as they support the
finding that Robles as branch manager, has been vested with the apparent or implied
authority to act for the petitioner in offering and facilitating banking transactions. In this light,
respondents cannot be blamed for believing that Robles has the authority to transact for and on
behalf
of the petitioner and for relying upon the representations made by him. After all, Robles as branch
manager is recognized "within his field and as to third persons as the general agent and is in general
charge of the corporation, with apparent authority commensurate with the ordinary business
entrusted him and the usual course and conduct thereof."
FACTS
Rolando Robles, a CPA, has been employed with petitioner Citystate Savings Bank since July 1998.
Robles was eventually promoted as manager for petitioner's Baliuag, Bulacan branch. Sometime in
2002, respondent Teresita Tobias was introduced by her youngest son to Robles. Robles persuaded
Tobias to open an account with the petitioner and place her money in some high interest rate
mechanism, to which the latter yielded.
Tobias was later offered by Robles to sign-up in petitioner's back-to-back scheme which is
supposedly offered only to petitioner's most valued clients. Under the scheme, the depositors
authorize the bank to use their bank deposits and invest the same in different business ventures
that yield high interest. Lured by the attractive offer, Tobias signed the pertinent documents
without reading its contents and invested a total of Php 1,800,000 to petitioner through Robles.
Later, Tobias included her daughter respondent Valdez, as co-depositor in her accounts with the
petitioner.
In 2005, Robles failed to remit to respondents the interest as scheduled. In a meeting with Robles'
siblings, it was disclosed to the respondents that Robles withdrew the money and appropriated it for
personal use. Robles later talked to the respondents, promised that he would return the money.
Robles, however, reneged on his promise.
On January 8, 2007, respondents filed a Complaint for sum of money and damages against Robles
and the petitioner. Respondents alleged that Robles committed fraud in the performance of his
duties as branch manager when he lured Tobias in signing several pieces of blank documents,
under the assurance as bank manager of petitioner, everything was in order. The RTC ruled in favor
of respondents. The CA modified the decision and ruled that petitioner and Robles are jointly and
solidarily liable.
ISSUE
Whether the petitioner should be held liable. (YES)
RULING
The business of banking is one imbued with public interest. As such, banking institutions are
obliged to exercise the highest degree of diligence as well as high standards of integrity and
performance in all its transactions. The law expressly imposes upon the banks a fiduciary duty
towards its clients and to treat in this regard the accounts of its depositors with meticulous care.
The contract between the bank and its depositor is governed by the provisions of the Civil Code on
simple loan or mutuum, with the bank as the debtor and the depositor as the creditor.
In light of these, banking institutions may be held liable for damages for failure to exercise the
diligence required of it resulting to contractual breach or where the act or omission complained of
constitutes an actionable tort.
In the case at bar, petitioner does not deny the validity of respondents' accounts, in fact it suggests
that transactions with it have all been accounted for as it is based on official documents containing
authentic signatures of Tobias. In fine, respondents' claim for damages is not predicated on breach
of their contractual relationship with petitioner, but rather on Robles' act of misappropriation. At
any rate, it cannot be said that the petitioner is guilty of breach of contract so as to warrant the
imposition of liability solely upon it.
Nonetheless, while it is clear that the proximate cause of respondents' loss is the misappropriation
of Robles, petitioner is still liable under Article 1911 of the Civil Code, to wit:
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarity liable
with the agent if the former allowed the latter to act as though he had full powers.
The case of Prudential Bank v. CA lends support to this conclusion. There, this Court first laid down
the doctrine of apparent authority, with specific reference to banks, viz.:
Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the principal's
true representation and the contract is considered as entered into between the
principal and the third person,
depositors.
The existence of apparent or implied authority is measured by previous acts that have been ratified
or approved or where the accruing benefits have been accepted by the principal. It may also be
established by proof of the course of business, usages and practices of the bank; or knowledge that
the bank or its officials have, or is presumed to have of its responsible officers' acts regarding bank
branch affairs.
As aptly pointed by the CA, petitioner's evidence bolsters the case against it, as they support the
finding that Robles as branch manager, has been vested with the apparent or implied authority to
act for the petitioner in offering and facilitating banking transactions. In this light, respondents
cannot be blamed for believing that Robles has the authority to transact for and on behalf of the
petitioner and for relying upon the representations made by him. After all, Robles as branch
manager is recognized "within his field and as to third persons as the general agent and is in
general charge of the corporation, with apparent authority commensurate with the ordinary
business entrusted him and the usual course and conduct thereof."

A bank is liable for wrongful acts of its officers done in the interests of the bank or in the
course of dealings of the officers in their representative capacity but not for acts outside the
scope of their authority. A bank holding out its officers and agent as worthy of confidence
will not be permitted to profit by the frauds they may thus be enabled to perpetuate in the
apparent scope of their employment; nor will it be permitted to shirk its responsibility for
such frauds, even though no benefit may accrue to the bank therefrom. Accordingly, a
banking corporation is liable to innocent third persons where the representation is
made in the course of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent is secretly abusing his
authority and attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit.
Application of these principles in especially necessary because banks have a fiduciary
relationship with the public and their stability depends on the confidence of the people in
their honesty and efficiency. Such faith will be eroded where banks do not exercise strict
care in the selection and supervision of its employees, resulting in prejudice to their
PHILIPPINE NATIONAL BANK, Petitioner, v. JUAN F. VILA, Respondent.
G.R. No. 213241, THIRD DIVISION, August 01, 2016, PEREZ, J.
Thus, before approving a loan application, it is a standard operating practice for these
institutions to conduct an ocular inspection of the property offered for mortgage and to verify
the genuineness of the title to determine the real owner thereof. The apparent purpose of an
ocular inspection is to protect the "true owner" of the property as well as innocent third parties with
a Vila, the Spouses Cormsta were nonetheless allowed to buy back the subject property by tendering
right, interest or claim thereon from a usurper who may have acquired a fraudulent certificate of
titlethereto. Here, [the] PNB has failed to exercise the requisite due diligence in ascertaining the
status and
condition of the property being offered to it as security for the loan before it approved the same.
We never fail to stress the remarkable significance of a banking institution to commercial
transactions, in particular, and to the country's economy in general. 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.
Consequently, the highest degree of diligence is expected, and high standards of integrity and
performance are even required, of it.
PNB clearly failed to observe the required degree of caution in readily approving the loan and
accepting the collateral offered by the Spouses Cornista without first ascertaining the real ownership
of the property. It should not have simply relied on the face of title but went further to physically
ascertain the actual condition of the property. That the property offered as security was in the
possession of the person other than the lone applying for the loan and the taxes were declared not
in
their names could have raised a suspicion. A person who deliberately ignores a significant fact that
could create suspicion in an otherwise reasonable person is not an innocent purchaser for value.
FACTS
Sometime in 1986, Spouses Reynaldo Cormsta and Erlinda Gamboa Cornista (Spouses Cornista)
obtained a loan from Traders Royal Bank (Traders Bank).5To secure the said obligation, the
Spouses Cornista mortgaged to the bank a parcel of land.
For failure of the Spouses Cornista to make good of their loan obligation after it has become due,
Traders Bank foreclosed the mortgage constituted on the security of the loan. After the notice and
publication requirements were complied with, the subject property was sold at the public auction
on 23 December 1987. During the public sale, respondent Juan F. Vila (Vila) was declared as the
highest bidder after he offered to buy the subject property for P50,000.00. The Certificate of Sale
dated 13 January 1988 was duly recorded in TCT No. 131498 under Entry No. 623599.
Despite the lapse of the redemption period and the fact of issuance of a Certificate of Final Sale to
the amount of P50,000.00.
Claiming that the Spouses Cornista already lost their right to redeem the subject property, Vila filed
an action for nullification of redemption, transfer of title and damages against the Spouses Cornista
and Alfredo Vega in his capacity as the Register of Deeds of Pangasinan.
On 3 February 1995, the RTC rendered a Decision in in favor of Vila thereby ordering the Register
of Deeds to cancel the registration of the certificate of redemption and the annotation thereof on
TCT No. 131498.In order to enforce the favorable decision, Vila filed before the RTC a Motion for the
Issuance of
Writ of Execution which was granted by the court. Accordingly, a Writ of Execution was issued by
the RTC on 14 December 1997.
By unfortunate turn of events, the Sheriff could not successfully enforce the decision because the
certificate of title covering the subject property was no longer registered under the names of the
Spouses Cornista. Hence, the judgment was returned unsatisfied as shown in Sheriffs Return dated
13 July 1999.
Upon investigation it was found out that during the interregnum the Spouses Cornista were able to
secure a loan from the PNB in the amount of P532,000.00 using the same property subject of
litigation as security. The Real Estate Mortgage (REM) was recorded on 28 September 1992 under
Entry No. 75817113 or month before the Notice of Lis Pendens was annotated.
Eventually, the Spouses Cornista defaulted in the payment of their loan obligation with the PNB
prompting the latter to foreclose the property offered as security. The bank emerged as the highest
bidder during the public sale as shown at the Certificate of Sale issued by the Sheriff. As with the
prior mortgage, the Spouses Cornista once again failed to exercise their right of redemption within
the required period allowing PNB to consolidate its ownership over the subject property.
Accordingly, TCT No. 131498 in the name of the Spouses Cornista was cancelled and a new one
under TCT No. 216771 under the name of the PNB was issued.
The foregoing turn of events left Vila with no other choice but to commence another round of
litigation against the Spouses Cornista and PNB before the RTC of Viliasis, Pangasinan, Branch 50. In
his Complaint docketed as Civil Case No. V-0567, Vila sought for the nullification of TCT No. 216771
issued under the name of PNB and for the payment of damages.
To refute the allegations of Vila, PNB pounded that it was a mortgagee in good faith pointing the
fact
that at the time the subject property was mortgaged to it, the same was still free from any liens and
encumbrances and the Notice of Lis Pendens was registered only a month after the REM was
annotated on the title. PNB meant to say that at the time of the transaction, the Spouses Cornista
were still the absolute owners of the property possessing all the rights to mortgage the same to
third persons. PNB also harped on the fact that a close examination of title was conducted and
nowhere was it shown that there was any cloud in the title of the Spouses Cornista, the latter having
redeemed the property after they have lost it in a foreclosure sale.
ISSUE
Whether PNB is a mortgagee in good faith. (NO)
RULING
Resonating the findings of the RTC, the CA also declared that PNB fell short in exercising the degree
of diligence expected from bank and financial Institutions. We hereby quote with approval the
disquisition of the appellate court:Thus, before approving a loan application, it is a standard
operating practice for these
institutions to conduct an ocular inspection of the property offered for mortgage and
to verify the genuineness of the title to determine the real owner thereof. The
apparent purpose of an ocular inspection is to protect the "true owner" of the property as
well as innocent third parties with a right, interest or claim thereon from a usurper who
may have acquired a fraudulent certificate of title thereto. Here, [the] PNB has failed to
exercise the requisite due diligence in ascertaining the status and condition of the
property being offered to it as security for the loan before it approved the same.
Clearly, the PNB failed to observe the exacting standards required of banking institutions which are
behooved by statutes and jurisprudence to exercise greater care and prudence before entering into
a mortgage contract.
No credible proof on the records could substantiate the claim of PNB that a physical inspection of
the property was conducted. We agree with, both the RTC and CA that if in fact it were true that
ocular inspection was conducted, a suspicion could have been raised as to the real status of
property. By failing to uncover a crucial fact that the mortgagors were not the possessors of the
subject property. We could not lend credence to claim of the bank that an ocular inspection of the
property was conducted. What further tramples upon PNB's claim is the fact that, as shown on the
records, it was Vila who was religiously paying the real property tax due on the property from 1989
to 1996, another significant fact that could have raised a red flag as to the real ownership of the
property. The failure of the mortgagee to take precautionary steps would mean negligence on his
part and would thereby preclude it from invoking that it is a mortgagee in good faith.
Before approving a loan application, it is standard operating procedure for banks and
financial institutions to conduct an ocular inspection of the property offered for mortgage
and to determine the real owner(s) thereof The apparent purpose of an ocular inspection is
to protect the "true owner" of the property as well as innocent third parties with a right,
interest or claim thereon from a usurper who may have acquired a fraudulent certificate of
title thereto.
In this case, it was adjudged by the courts of competent jurisdiction in a final and executory
decision that the Spouses Cornista's reacquisition of the property after the lapse of the redemption
period is fraudulent and the property used by the mortgagors as collateral rightfully belongs to Vila,
an innocent third party with a right, could have been protected if PNB only observed the degree
diligence expected from it.
In Land Bank of the Philippines v. Belle Corporation, the Court exhorted banks to exercise the
highest degree of diligence in its dealing with properties offered as securities for the loan
obligation:
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or
mortgagees for value is applied more strictly. Being in the business of extending loans
secured by real estate mortgage, banks are presumed to be familiar with the rules on land
registration. Since the banking business-is impressed with public interest, they are expected
to be more cautious, to exercise a higher degree of diligence, care and prudence, than
private individuals in their dealings, even those involving registered lands. Banks may not simply rely
on the face of the certificate of title. Hence, they cannot assume that, xxx the title
offered as security is on its face free of any encumbrances or lien, they are relieved of the
responsibility of taking further steps to verify the title and inspect the properties to be
mortgaged. As expected, the ascertainment of the status or condition of a property offered
to it as security for a loan must be a standard and indispensable part of the bank's
operations.
We never fail to stress the remarkable significance of a banking institution to commercial
transactions, in particular, and to the country's economy in general. 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. Consequently, the highest degree of diligence is expected, and high standards of
integrity and performance are even required, of it.

PNB clearly failed to observe the required degree of caution in readily approving the loan and
accepting the collateral offered by the Spouses Cornista without first ascertaining the real
ownership of the property. It should not have simply relied on the face of title but went further
to physically ascertain the actual condition of the property. That the property offered as
security was in the possession of the person other than the lone applying for the loan and the taxes
were declared not in their names could have raised a suspicion. A person who deliberately ignores
a significant fact that could create suspicion in an otherwise reasonable person is not an innocent
purchaser for value.

Having laid down that the PNB is not in good faith, We are led to affirm the award of moral
damages, exemplary damages, attorney's fees and costs of litigation in favor of Vila.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA)
V. COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A.            members of the syndicate in their own personal, covert and private capacity and done without the
[G.R. No. 121413. January 29, 2001] (350 SCRA 446)
FACTS:
These consolidated petitions arose from the action filed by BIR against Citibank and PCIBank for the
recovery of the amount of Citibank Check Numbers SN-10597 and 16508. Said checks, both crossed
checks were alleged to have been negotiated fraudulently by an organized syndicate between and
among two employees of Ford (General Ledger Accountant and his assistant), and PCIBank officers.
It was established that instead of paying the crossed checks, containing two diagonal lines on its
upper left corner between which were written the words payable to the payees account only, to the
CIR for the settlement of the appropriate quarterly percentage taxes of Ford, the checks were
diverted and encashed for the eventual distribution among the members of the syndicate.  Citibank
Check No. SN-10597 amounted to P5,851,706.37, while Citibank Check No. SN-16508 amounted to
P6,311,591.73.
It was found that the pro-manager of San Andres Branch of PCIBank, Remberto Castro, received
Citibank Check Numbers SN 10597 and 16508. He passed the checks to a co-conspirator, an
Assistant Manager of PCIBanks Meralco Branch, who helped Castro open a Checking account of a
fictitious person named Reynaldo Reyes. Castro deposited a worthless Bank of America Check in
exactly the same amount of Ford checks. The syndicate tampered with the checks and succeeded in
replacing the worthless checks and the eventual encashment of Citibank Check Nos. SN 10597 and
16508. The PCIBank Pro-manager, Castro, and his co-conspirator Assistant Manager apparently
performed their activities using facilities in their official capacity or authority but for their personal
and private gain or benefit.
The trial court and the Court of Appeals found that PCIBank had no official act in the ordinary course
of business that would attribute to it the case of the embezzlement of Citibank Check Numbers SN-
10597 and 16508, because PCIBank did not actually receive nor hold the two Ford checks at all.
Neither is there any proof that defendant PCIBank contributed any official or conscious participation
in the process of the embezzlement. The Court is convinced that the switching operation (involving
the checks while in transit for clearing) were the clandestine or hidden actuations performed by the
knowledge of the defendant PCIBank.
The evidence on record shows that Citibank as drawee bank was likewise negligent in the
performance of its duties. Citibank failed to establish that its payment of Fords checks were made in
due course and legally in order. It likewise appears that although the employees of Ford initiated the
transactions attributable to an organized syndicate, their actions were not the proximate cause of
encashing the checks.
ISSUE:
Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank
(Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? 
HELD:
YES. The mere fact that the forgery was committed by a drawer-payors confidential employee or
agent, who by virtue of his position had unusual facilities for perpetrating the fraud and imposing
the forged paper upon the bank, does NOT entitle the bank to shift the loss to the drawer-payor, in
the absence of some circumstance raising estoppel against the drawer. This rule likewise applies to
the checks fraudulently negotiated or diverted by the confidential employees who hold them in
their possession.
 In this case, there was no evidence presented confirming the conscious participation of PCIBank in
the embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or
tortuous acts and declarations of its officers or agents within the course and scope of their
employment. A bank will be held liable for the negligence of its officers or agents when acting within
the course and scope of their employment. It may be liable for the tortuous acts of its officers even
as regards that species of tort of which malice is an essential element. In this case, we find a
situation where the PCIBank appears also to be the victim of the scheme hatched by a syndicate in
which its own management employees had participated.
A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by
the frauds these officers or agents were enabled to perpetrate in the apparent course of their
employment; nor will it be permitted to shirk its responsibility for such frauds, even though no
benefit may accrue to the bank therefrom. For the general rule is that a bank is liable for the
fraudulent acts or representations of an officer or agent acting within the course and apparent
scope of his employment or authority. And if an officer or employee of a bank, in his official capacity,
receives money to satisfy an evidence of indebtedness lodged with his bank for collection, the bank
is liable for his misappropriation of such sum.

Citibank must likewise answer for the damages incurred by Ford on Citibank Checks Numbers SN
10597 and 16508, because of the contractual relationship existing between the two. Citibank, as the
drawee bank breached its contractual obligation with Ford and such degree of culpability
contributed to the damage caused to the latter. 

PCIBank and Citibank are thus liable for and must share the loss, (concerning the proceeds of
Citibank Check Numbers SN 10597 and 16508 totaling P12,163,298.10) on a fifty-fifty ratio. 
CASE DIGEST: THIRD DIVISION [ G.R. No. 235511, June 20, 2018 ]
METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, VS.
JUNNEL'S MARKETING CORPORATION, PURIFICACION DELIZO,
AND BANK OF COMMERCE, RESPONDENTS.
[G.R. No. 235565] BANK OF COMMERCE, PETITIONER, VS.
JUNNEL'S MARKETING CORPORATION, PURIFICACION DELIZO,
AND METROPOLITAN BANK AND TRUST COMPANY
RESPONDENTS. DECISION. VELASCO JR., J.:
SUMMARY OF FACTS: The instant case involves the unauthorized
payment of valid checks, i.e., the payment of checks to persons other than the
payee named therein or his order. The subject checks herein are considered
valid because they are complete and bear genuine signatures.
FACTS: Respondent Junnel's Marketing Corporation (JMC) is a domestic
corporation engaged in the business of selling wines and liquors. It has a
current account with Metrobank[4] from which it draws checks to pay its
different suppliers. Among JMC's suppliers are Jardine Wines and Spirits
(Jardine) and Premiere Wines (Premiere).
ANOMALY discovered by JMC involving eleven (11) checks (subject checks)
it had issued to the orders of Jardine and Premiere on various dates between
October 1998 to May 1999. CHARGED against JMC's current account but
were, for some reason, not covered by any official receipt from Jardine or
Premiere. The subject checks, which are all crossed checks and amounting to
P1,481,292.00 in total. Seven checks to Jardine. Four checks to Premiere.
All checks deposited with Bankcom, Dau branch, under Account No. 0015-
32987-7.[6] Neither Jardine nor Premiere owns Bankcom Account No. 0015-
32987-7.
Meanwhile, on 30 April 2000, respondent Purificacion Delizo (Delizo), a
former accountant of JMC,  confessed that, during her time as an accountant
for JMC, she stole several company checks drawn against JMC's current
account. She professed that the said checks were never given to the named
payees but were forwarded by her to one Lita Bituin (Bituin). Delizo further
admitted that she, Bituin and an unknown bank manager colluded to cause
the deposit and encashing of the stolen checks and shared in the proceeds
thereof.
JMC surmised that the subject checks are among the checks purportedly
stolen by Delizo.
RTC. JMC collected sum of money[8] against Delizo, Bankcom and
Metrobank. Alleged "tortious and felonious" scheme of Delizo and the
"negligent and unlawful acts" of Bankcom and Metrobank.
RTC ruled that Bankcom and Metrobank are liable based on a 2/3-1/3 ratio.
CA agreed but said Metrobank's liability is based on failure to ascertain that
only four (4) out of the 11 subject checks were stamped by Bankcom with the
express guarantees "ALL PRIOR ENDORSEMENTS AND/OR LACK OF
ENDORSEMENT GUARANTEED" and "NON-NEGOTIABLE" as required by
Section 17 of the PCHC Rules and Regulations.[18]
ISSUES:
1. What is the sequence of payment between a drawee bank and a
collecting bank in case of payment and deposit of money in a collecting
bank under an account not belonging to the proper payee or indorsee?
2. Is Metrobank liable to JMC?
3. Does Section 17 of the PCHC Rules and Regulations and its relupon the
concomitant guarantees of Bankcom when it paid the subject checks a
valid defense on the part of Metrobank?
4. Is Bankcom liable to Metrobank?
5. Is it valid defense for Bankcom to say that the checks were never
deposited?
6. Does it affect Bankcom's liability that only 4/11 checks were stamped
with "ALL PRIOR ENDORSEMENTS AND/OR LACK OF
ENDORSEMENT GUARANTEED"?
7. If liable to Metrobank, does Bankcom have any recourse or does the
liability stop in the collecting bank?
8. Does the comparative liability (the 60-40 liability rule) apply here?
HELD: The consolidated appeals must be DENIED as neither Metrobank
nor Bankcom are entitled to absolution. HOWEVER, the Supreme Court
modified the manner by which Metrobank and Bankcom are held liable.
Instead of holding both Metrobank and Bankcom liable to JMC in accordance
with a fixed ratio, FOUND that the two banks should have been
ordered sequentially liable for the entire amount of the subject checks
pursuant to the seminal case of Bank of America v. Associated Citizens Bank.
[21]
THEREFORE, the Court held (1) Metrobank liable to return to JMC the
entire amount of the subject checks plus interest and (2) Bankcom liable to
reimburse Metrobank the same amount plus interest.
ISSUE [1]: Both Bank of America and the present case involved crossed
checks payable to the order of a specified payee that were deposited
in a collecting bank under an account not belonging to the payee or
his indorsee but which, upon presentment, were subsequently honored by
the drawee bank.
Bank of America held that, in cases involving the unauthorized payment of
valid checks, the drawee bank becomes liable to the drawer for the
amount of the checks but the drawee bank, in turn, can seek
reimbursement from the collecting bank. The rationale of this rule on
sequence of recovery lies in the very basis and nature of the liability of a
drawee bank and a collecting bank in said cases. The liability of the drawee
bank is based on its contract with the drawer and its duty to charge to the
latter's accounts only those payables authorized by him. A drawee bank is
under strict liability to pay the check only to the payee or to the payee's order.
When the drawee bank pays a person other than the payee named in the
check, it does not comply with the terms of the check and violates its duty to
charge the drawer's account only for properly payable items.(BDO Unibank v.
Lao[22])
On the other hand, the liability of the collecting bank is anchored on its
guarantees as the last endorser of the check. Under Section 66 of the
Negotiable Instruments Law, an endorser warrants "that the instrument is
genuine and in all respects what it purports to be; that he has good title to it;
that all prior parties had capacity to contract; and that the instrument is at the
time of his endorsement valid and subsisting."
It has been repeatedly held that in check transactions, the collecting bank
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. If any of
the warranties made by the collecting bank turns out to be false, then the
drawee bank may recover from it up to the amount of the check.
ISSUE [2]: Metrobank is Liable to JMC.
Metrobank, as drawee bank, is liable to return to JMC the amount of the
subject checks.
A drawee bank is contractually obligated to follow the explicit instructions of
its drawer-clients when paying checks issued by them.[23] The drawer's
instructions -- including the designation of the payee or to whom the check
should be paid -- are reflected on the face and by the terms thereof.[24] When
a drawee bank pays a person other than the payee named on the check, it
essentially commits a breach of its obligation and renders the payment it
made unauthorized.[25] In such cases and under normal circumstances, the
drawee bank may be held liable to the drawer for the amount charged against
the latter's account.[26]
Such liability is a strict liability.[27] This means that once an unauthorized
payment on a check has been made, the resulting liability of the drawee bank
to the drawer for such payment attaches even if the former had acted merely
upon the guarantees of a collecting bank.[28] Indeed, it is only when
the unauthorized payment of a check had been caused or was attended by the
fault or negligence of the drawer himself can the drawee bank be excused,
whether wholly or partially, from being held liable to the drawer for the said
payment.[29]
In the present case, it is apparent that Metrobank had breached JMC's
instructions when it paid the value of the subject checks to Bankcom for the
benefit of a certain Account No. 0015-32987-7. The payment to Account No.
0015-32987-7 was unauthorized as it was established that the said account
does not belong to Jardine or Premiere, the payees of the subject checks, or to
their indorsees. In addition, causal or concurring negligence on the part of
JMC had not been proven. Under such circumstances, Metrobank is clearly
liable to return to JMC the amount of the subject checks.
ISSUE [3]: No, Metrobank's insistence that it should be absolved for it
merely complied with Section 17 of the PCHC Rules and Regulations and
thereby only relied upon the concomitant guarantees of Bankcom when it paid
the subject checks, cannot stand insofar as JMC is concerned. The bank
on which a check is drawn, known as the drawee bank, is under strict liability,
based on the contract between the bank and its customer (drawer), to pay the
check only to the payee or the payee's order.
Accordingly, we find Metrobank liable to return to JMC the amount of the
subject checks.
ISSUE [4]: Bankcom is Liable to Metrobank
While Metrobank's reliance upon the guarantees of Bankcom does not excuse
it from being liable to JMC, such reliance ENABLES Metrobank to seek
reimbursement from Bankcom -- the collecting bank.
A collecting or presenting bank-i.e., the bank that receives a check for deposit
and that presents the same to the drawee bank for payment-is an indorser of
such check.[31] When a collecting bank presents a check to the drawee bank
for payment, the former thereby assumes the same warranties assumed by an
indorser of a negotiable instrument pursuant to Section 66 of the Negotiable
Instruments Law. These warranties are: (1) that the instrument is genuine and
in all respects what it purports to be; (2) that the indorser has good title to it;
(3) that all prior parties had capacity to contract; and (4) that the instrument
is, at the time of the indorsement, valid and subsisting.[32] If any of the
foregoing warranties turns out to be false, a collecting hank becomes liable to
the drawee bank for payments made under such false warranty.
Here, it is clear that Bankcom had assumed the warranties of an indorser
when it forwarded the subject checks to PCHC for presentment to Metrobank.
By such presentment, Bankcom effectively guaranteed to Metrobank that the
subject checks had been deposited with it to an account that has good title to
the same. This guaranty, however, is a complete falsity because the subject
checks were, in truth, deposited to an account that neither belongs to the
payees of the subject checks nor to their indorsees. Hence, as the subject
checks were paid under Bankcom's false guaranty, the latter-as collecting
bank-stands liable to return the value of such checks to Metrobank.
ISSUE [5]: No, Bankcom's assertion that it should be absolved as the subject
checks were allegedly never deposited with it must fail. Such allegation is
readily disproved by the fact that the subject checks all contained, at their
dorsal side, a stamp bearing Bankcom's tracer/ID band.[33] Under the PCHC
Rules and Regulations, the stamped tracer/ID band of Bankcom signifies that
the checks had been deposited with it and that Bankcom indorsed the said
checks and sent them to PCHC.[34]
ISSUE [6]: No, the liability of Bankcom to be affected by the fact that only
four (4) out of the eleven (11) subject checks were actually stamped with the
guarantees "ALL PRIOR ENDORSEMENTS AND/OR LACK OF
ENDORSEMENT GUARANTEED" and "NON-NEGOTIABLE" as required
under Section 17 of the PCHC Rules and Regulations. The stamping of such
guarantees is not necessary to fix the liability of Bankcom as an indorser for all
the subject checks.
To begin with, jurisprudence has it that a collecting bank's mere act of
presenting a check for payment to the drawee bank is itself an assertion, on
the part of the former, that it had done its duty to ascertain the validity of
prior indorsements. (Banco De Oro v. Equitable Banking Corporation[36])
More than such pronouncement, however, Section 17 of the PCHC Rules and
Regulations expressly provides that checks "cleared through the PCHC" that
do not bear the mentioned guarantees shall nonetheless "be deemed
guaranteed by the [collecting bank] as to all prior endorsements and/or lack of
endorsement" such that "no drawee bank shall return any [check] received by
it through clearing by reason only of the absence or lack of such guarantee ...
as long as there is evidence appearing on the [check] itself that the same had
been deposited with the [collecting bank] x x x."
In the present case, all the subject checks have been transmitted by Bankcom
to the PCHC for clearing and presentment to Metrobank. As earlier adverted
to, all of the said checks also bear the PCHC machine sprayed tracer/ID band
of Bankcom. These are enough to fix the liability of Bankcom as an indorser of
the subject checks even sans the stamp.
ISSUE [7]: The sequence of recovery in cases of unauthorized payment of
checks, however, does not ordinarily stop with the collecting bank. In the
event that it is made to reimburse the drawee bank, the collecting bank can
seek similar reimbursement from the very persons who caused the checks to
be deposited and received the unauthorized payments.[37] Such persons are
the ones ultimately liable for the unauthorized payments and their liability
rests on their absolute lack of valid title to the checks that they were able to
encash.
ISSUE: [8]: No, the doctrine of comparative negligence (the 60-40 liability
rule) does not apply here.
Instead of applying the rule on the sequence of recovery to the case at bench,
the RTC and the CA held both Metrobank and Bankcom liable to JMC in
accordance with a fixed ratio. In so doing, the RTC and the CA seemingly
relied on the doctrine of comparative negligence[38] as applied in the cases
of Bank of the Philippine Islands v. Court of Appeals[39] and Allied Banking
Corporation v. Lio Sim Wan.[40] In both cases, the Court held the drawee
bank and collecting bank liable for the wrongful encashment of checks under a
60% and 40% ratio.
It must be emphasized, however, that the factual contexts of Bank of the
Philippine Islands and Allied Banking Corporation are starkly different from
the instant case. BPI involved a cashier's check issued via a fake phone call
request and the collecting bank was duped into opening a fake account. Allied
Banking involved a manager's check issued against via a fake phone call and
the collecting bank deposited the money into a wrong account despite forgery.
A glaring peculiarity in the cases of Bank of the Philippine Islands and Allied
Banking Corporation is that the drawee bank-which is essentially also
the drawer in the scenario-is not only guilty of wrongfully paying a
check but also of negligence in issuing such check. Indeed, this is the
very reason why the drawee bank in the two cases were adjudged co-liable
with the collecting bank under a fixed ratio and the former was not allowed to
claim reimbursement from the latter.[41] The drawee bank cannot claim that
its participation in the wrongful payment of a check was merely limited to its
reliance on the guarantees of the collecting bank. In other words, the drawee
bank was held liable in its own right because it was the one that negligently
issued the checks in the first place.
SPS. CRISTINO & EDNA CARBONELL, Petitioners, v. METROPOLITAN BANK AND TRUST
COMPANY, Respondent.
G.R. No. 178467, THIRD DIVISION, April 26, 2017, BERSAMIN, J.
The General Banking Act of 2000 demands of banks the highest standards of integrity and
performance. As such, the banks are under obligation to treat the accounts of their depositors with
meticulous care. However, the banks' compliance with this degree of diligence is to be
determined in accordance with the particular circumstances of each case.
In order for gross negligence to exist as to warrant holding the respondent liable therefor, the
petitioners must establish that the latter did not exert any effort at all to avoid unpleasant
consequences, or that it wilfully and intentionally disregarded the proper protocols or
procedure in the handling of US dollar notes and in selecting and supervising its employees.
The CA and the RTC both found that the respondent had exercised the diligence required by law
in observing the standard operating procedure, in taking the necessary precautions for
handling the US dollar bills in question, and in selecting and supervising its employees.
In this connection, it is significant that the BSP certified that the falsity of the US dollar notes in
question, which were "near perfect genuine notes," could be detected only with extreme
difficulty even with the exercise of due diligence. Ms. Nanette Malabrigo, BSP's Senior Currency
Analyst, testified that the subject dollar notes were "highly deceptive" inasmuch as the paper used
for
them were similar to that used in the printing of the genuine notes. She observed that the security
fibers and the printing were perfect except for some microscopic defects, and that all lines were
clear,
sharp and well defined.
Here, although the petitioners suffered humiliation resulting from their unwitting use of the
counterfeit US dollar bills, the respondent, by virtue of its having observed the proper protocols
and procedure in handling the US dollar bills involved, did not violate any legal duty towards
them. Being neither guilty of negligence nor remiss in its exercise of the degree of diligence required
by law or the nature of its obligation as a banking institution, the latter was not liable for damages.
Given the situation being one of damnum absque injuria, they could not be compensated for the
damage sustained.
FACTS
The petitioners initiated against the respondent, an action for damages, alleging that they had
experienced emotional shock, mental anguish, public ridicule, humiliation, insults and
embarrassment during their trip to Thailand because of the respondent's release to them of five
US$100 bills that later on turned out to be counterfeit. They claimed that they had travelled to
Bangkok, Thailand after withdrawing US$1,000.00 in US$100 notes from their dollar account at the
respondent's Pateros branch; that while in Bangkok, they had exchanged five US$100 bills into
Baht, but only four of the US$100 bills had been accepted by the foreign exchange dealer because
the fifth one was "no good;" that unconvinced by the reason for the rejection, they had asked a
companion to exchange the same bill at Norkthon Bank in Bangkok; that the bank teller thereat had
then informed them and their companion that the dollar bill was fake; that the teller had then
confiscated the US$100 bill and had threatened to report them to the police if they insisted in
getting the fake dollar bill back; and that they had to settle for a Foreign Exchange Note receipt.
The petitioners claimed that later on, they had bought jewelry from a shop owner by using four of
the remaining US$100 bills as payment; that on the next day, however, they had been confronted by
the shop owner at the hotel lobby because their four US$100 bills had turned out to be counterfeit;
that the shop owner had shouted at them: "You Filipinos, you are all cheaters!;" and that the
incident had occurred within the hearing distance of tel low travelers and several foreigners.
The petitioners continued that upon their return to the Philippines, they had confronted the
manager of the respondent's Pateros branch on the fake dollar bills, but the latter had insisted that
the dollar bills she had released to them were genuine inasmuch as the bills had come from the
head office; that in order to put the issue to rest, the counsel of the petitioners had submitted the
subject US$100 bills to the Bangko Sentral ng Pilipinas (BSP) for examination; that the BSP had
certified that the four US$100 bills were near perfect genuine notes; and that their counsel had
explained by letter their unfortunate experience caused by the respondent's release of the fake US
dollar bills to them, and had demanded moral damages of P10 Million and exemplary damages.
In response, the respondent's counsel wrote to the petitioners on March 1996 expressing sympathy
with them on their experience but stressing that the respondent could not absolutely guarantee the
genuineness of each and every foreign currency note that passed through its system; that it had also
been a victim like them; and that it had exercised the diligence required in dealing with foreign
currency notes and in the selection and supervision of its employees.
ISSUE
Whether Respondent should be held liable for damages. (NO)
RULING
The General Banking Act of 2000 demands of banks the highest standards of integrity and
performance. As such, the banks are under obligation to treat the accounts of their depositors with
meticulous care. However, the banks' compliance with this degree of diligence is to be
determined in accordance with the particular circumstances of each case.
The petitioners argue that the respondent was liable for failing to observe the diligence required
from it by not doing an act from which the material damage had resulted by reason of inexcusable
lack of precaution in the performance of its duties. Hence, the respondent was guilty of gross
negligence, misrepresentation and bad faith amounting to fraud.
The petitioners' argument is unfounded.
Gross negligence connotes want of care in the performance of one's duties; it is a negligence
characterized by the want of even slight care, acting or omitting to act in a situation where there is
duty to act, not inadvertently but wilfully and intentionally, with a conscious indifference to
consequences insofar as other persons may be affected. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.
In order for gross negligence to exist as to warrant holding the respondent liable therefor, the
petitioners must establish that the latter did not exert any effort at all to avoid unpleasant
consequences, or that it wilfully and intentionally disregarded the proper protocols or
procedure in the handling of US dollar notes and in selecting and supervising its employees.
The CA and the RTC both found that the respondent had exercised the diligence required by
law in observing the standard operating procedure, in taking the necessary precautions for
handling the US dollar bills in question, and in selecting and supervising its employees. Such
factual findings by the trial court are entitled to great weight and respect especially after being
affirmed by the appellate court, and could be overturned only upon a showing of a very good reason
to warrant deviating from them.
In this connection, it is significant that the BSP certified that the falsity of the US dollar notes
in question, which were "near perfect genuine notes," could be detected only with extreme
difficulty even with the exercise of due diligence. Ms. Nanette Malabrigo, BSP's Senior
Currency Analyst, testified that the subject dollar notes were "highly deceptive" inasmuch as
the paper used for them were similar to that used in the printing of the genuine notes. She
observed that the security fibers and the printing were perfect except for some microscopic defects,
and that all lines were clear, sharp and well defined.
Here, although the petitioners suffered humiliation resulting from their unwitting use of the
counterfeit US dollar bills, the respondent, by virtue of its having observed the proper protocols and
procedure in handling the US dollar bills involved, did not violate any legal duty towards them.
Being neither guilty of negligence nor remiss in its exercise of the degree of diligence required by
law or the nature of its obligation as a banking institution, the latter was not liable for damages.
Given the situation being one of damnum absque injuria, they could not be compensated for the
damage sustained.
PHILIPPINE DEPOSIT INSURANCE CORPORATION v. CA, GR No. 118917, 1997-12-22 September 22, 1983 covering the amount or P125,846.07 xxx issued by Premiere
Financing
Facts:
Corporation."[16] At the back of said check are the words "Refer to Drawer,"[17]
Issues:
indicating that the drawee bank (Traders Royal Bank) refused to pay the value
THE CA ERRED IN HOLDING THAT THE SUBJECT CTDS ARE NEGOTIABLE represented by said check. By reason of the check's dishonor, RSB cancelled... the
INSTRUMENTS corresponding as evidenced by an RSB "ticket" dated November 4, 1983.

THE CA ERRED WHEN IT HELD THAT BECAUSE THE CTDS STATE THAT THESE These pieces of evidence convincingly show that the subject CTDs were indeed issued
WERE INSURED, PETITIONER SHOULD BE HELD LIABLE FOR THE SAME. without RSB receiving any money therefor. No deposit, as defined in Section 3 (f) of R.A.
No. 3591, therefore came into existence. Accordingly, petitioner PDIC cannot be held
Ruling: liable for value of... the certificates of time deposit held by private respondents.
the subject CTDs are negotiable.
Whether the CTDs in question are negotiable or not is, however, immaterial in the
present case. The Philippine Deposit Insurance Corporation was created by law and, as
such, is governed primarily by the provisions of the special law creating it.[3] The...
liability of the PDIC for insured deposits therefore is statutory and, under Republic Act
No. 3591,[4] as amended, such liability rests upon the existence of deposits with the
insured bank, not on the negotiability or non-negotiability of the certificates... evidencing
these deposits.
The fact that the certificates state that the certificates are insured by PDIC does not ipso
facto make the latter liable for the same should the contingency insured against arise. As
stated earlier, the deposit... liability of PDIC is determined by the provisions of R.A. No.
3519, and statements in the certificates that the same are insured by PDIC are not
binding upon the latter.
x x x The mere fact that a certificate recites on its face that a certain sum has been
deposited, or that officers of the bank may have stated that the deposit is protected by
the guaranty law, does not make the guaranty fund liable for payment, if in fact a
deposit... has not been made xxx. The banks have nothing to do with the guaranty fund
as such. It is a fund raised by assessments against all state banks, administered by officers
of the state to protect deposits in banks. x x x
Did RSB receive money or its equivalent when it issued the certificates of time deposit
RSB Deputy Liquidator, testified that RSB received three (3) checks in consideration for
the issuance of several CTDs, including the ones in dispute.
The check in question appears on the records as Exhibit "3" (for Regent),[15] and is
described in RSB's offer of evidence as "Traders Royal Bank Check No. 292555 dated