Indispensable Institution

Metropolitan Bank and Trust Co. v. Cabilzo ​GR No. 154469 | December 6, 2006 | Chico-Nazario, J.

​PETITIONERS/PROSECUTORS: Metropolitan Bank and Trust Company RESPONDENTS/DEFENDANTS: Renato Cabilzo

CASE SUMMARY:

Cabilzo issued a Metrobank check. The date and amount of the check were altered, thus Metrobank debited P91k from his
account instead of P1k. He sued the bank for reimbursement and damages. The Court held that Metrobank was liable for the
amount for failing to detect the material alteration. Because of its negligence, Metrobank failed to exercise the highest degree of
diligence which is required of banking institutions.

DOCTRINE: ​Banking institutions are of remarkable significance 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.

FACTS:

·​ ​Renato Cabilzo had a current account with Metrobank Pasong Tamo Branch.

· ​On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to “CASH” and postdated on 24
November 1994 in the amount of P1,000 drawn against his account. It was paid by Cabilzo to a certain Mr. Marquez,
as his sales commission.

· ​The check was presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed the check to Metrobank
for appropriate clearing. After the entries thereon were examined, including the availability of funds and the
authenticity of the signature of the drawer, Metrobank cleared the check for encashment in accordance with the
Philippine Clearing House Corporation (PCHC) Rules.

· ​On 16 November 1994, Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some transaction
when he was asked by a bank personnel if Cabilzo had issued a check in the amount of P91,000 to which the former
replied in the negative.

· ​ nd requested that
​That same afternoon, Cabilzo called Metrobank to reiterate that he did not issue a check for P91,000 a
the questioned check be returned to him for verification, to which Metrobank complied.

· ​Cabilzo discovered that the check he previously issued was altered, with the amount changed from P1,000 to P91,000,
and the date from Nov. 24 to Nov. 14.

·​ ​Cabilzo demanded that Metrobank re-credit the amount of P91,000 to his account. Metrobank, however, refused.

· ​On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank for the payment of P90,000 (original
P1k was deducted). Metrobank still refused, thus prompting Cabilzo to file a civil action for damages against
Metrobank before the RTC.

· ​Metrobank countered that upon the receipt of the said check through the PCHC, it examined the genuineness and the
authenticity of the drawer’s signature appearing thereon and the technical entries on the check including the amount in
 figures and in words to determine if there were alterations, erasures, superimpositions or intercalations thereon, but
none was noted.

· ​Metrobank claimed that as a collecting bank and the last indorser, Westmont Bank should be held liable for the value of
the check.

· ​In addition, Metrobank, claimed that Cabilzo was the proximate cause of the loss because he left spaces on the check,
which, made the fraudulent insertion of the amount and figures thereon, possible.

· ​RTC ruled in favor of Cabilzo. In stressing the fiduciary nature of the relationship between the bank and its clients and
the negligence of the drawee bank in failing to detect an apparent alteration on the check, the trial court ordered for the
payment of exemplary damages, attorney’s fees and cost of litigation.

· ​Metrobank appealed to the CA, where it argued that it exercised the highest degree of diligence in accordance with the
generally accepted banking practice in clearing the check.

·​ ​CA affirmed the RTC decision.

ISSUES and RULING: WON CA erred in holding Metrobank, as drawee bank, liable for the alterations on the check –
No

​The check was materially altered.

· ​An alteration is said to be material if it changes the effect of the instrument. It results in a modification of the obligation
of a party.

o ​Analteration of one of the items required to be stated under Sec. 1 of the Negotiable Instruments Law[1] is a
material alteration.

o​ S
​ ec. 125 is also instructive:

Section 125. W​hat constitutes material alteration.​—Any alteration which changes:

a) The date;

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

c) The time or place of payment;

d) The number or the relation of the parties;

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

Or which adds a place of payment where no place of payment is

specified, or any other change or addition which alters the effect

of the instrument in any respect is a material alteration

·​ ​Effect of material alteration – under Sec. 124, the instrument is void, except as against a party who has himself made,
authorized, and assented to the alteration and subsequent indorsers
·​ ​Cabilzo was not the one who made nor authorized the alteration. Neither did he assent to the alteration.

·​ ​There is no showing that he failed to exercise such reasonable degree of diligence required of a prudent man which
could have otherwise prevented the loss.

o​ ​He placed asterisks before and after the amount in words and figures in order to forewarn the subsequent
holders that nothing follows before and after the amount indicated.

·​ ​Undoubtedly, Cabilzo was an innocent party in this instant controversy. He was just an ordinary businessman who, in
order to facilitate his business transactions, entrusted his money with a bank, not knowing that the latter would yield a
substantial amount of his deposit to fraud.

·​ ​Banking institutions are of remarkable significance 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.

·​ ​Thus, even the humble wage-earner does not hesitate 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 a businessman like the respondent, the bank is a trusted and active associate that
can help in the running of his affairs, not only in the form of loans when needed but more often in the conduct of their
dayto-day transactions like the issuance or encashment of checks.

·​ ​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 appropriate degree of diligence required of a bank must be a high degree of diligence, if not the
utmost diligence.

·​ ​Metrobank was remiss in that duty and violated that relationship.

o​ T
​ he material alterations on the check were visible to the naked eye.

§​ “​ 1” in the date is clearly imposed on a white

figure in the shape of the number “2.”

§​ t​ he 4 asterisks before the words “ONE THOUSAND PESOS ONLY” have noticeably been erased
with typing correction

paper, leaving white marks, over which the word “NINETY” was superimposed.

§​ t​ he numeral “9” in the amount “91,000,” which is superimposed over a whitish mark, obviously an
erasure, in lieu of the asterisk which was deleted

o​ T
​ his negligence was exacerbated by the fact that the employee allowed by Metrobank to examine the check
was not versed and competent to handle such duty.

·​ ​ hen the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge
W
its client’s account only for ​bona fide ​disbursements he had made. Since the drawee bank, in the instant case, did not
 pay as directed by the drawer, then it has no right to claim reimbursement from the drawer, much less, the right to
deduct the erroneous payment it made from the drawer’s account.

DISPOSITIVE:

WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 8 March 2002 and the Resolution dated
26 July 2002 of the Court of Appeals are AFFIRMED with modification that exemplary damages in the amount of P50,000.00 be
awarded

[1]​ Section 1. F​orm of negotiable instruments.​—An instrument to be

negotiable must conform to the following requirements:

a) It must be in writing and signed by the maker or drawer;

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

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

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

e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty

Impressed with Public Interest / Degree of Diligence

Simex International v. CA (Repeat Case) ​GR No. 88013 | March 19, 1990 | Cruz

P: ​SIMEX INTERNATIONAL (MANILA), INCORPORATED ​R: ​CA and TRADERS ROYAL BANK

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. It buys
these products from various local suppliers and then sells them abroad to the Middle East and the United States. Most of its
exports are purchased by the petitioner on credit.

· ​On May 25, 1981, petitioner deposited to its account in Traders Royal Bank (Cubao Branch) the amount of
P100,000.00, thus increasing its balance as of that date to P190,380.74.

· ​Petitioner issued several checks against its deposit but was surprised to learn later that they had been dishonored for
insufficient funds.

· ​As a consequence, several suppliers sent a letter of demand to the petitioner, threatening prosecution if the
dishonored check issued to it was not made good and also withheld delivery of the order made by the petitioner.
 o ​Malabon Long Life Trading also cancelled the petitioner’s credit line and demanded that future
payments be made by it in cash or certified check.

o​ O
​ ther suppliers deferred action on the pending orders of petitioner

· ​The petitioner complained to the respondent bank. Investigation disclosed that ​the sum of P100,000.00 deposited by
the petitioner on May 25, 1981, had not been credited to it. The error was rectified only June 17, 1981 (23 days
after the deposit), and the dishonored checks were paid after they were re-deposited​.

· ​After its demand letter went unheeded Simex filed a ​complaint for damages (moral for P1M and exemplary for
P500k, plus 25% atty fees) against Traders Royal Bank.

· ​The court denied the moral & exemplary damages but upheld and ordered TRB to pay for nominal damages in the
amount of P20,000.00 plus attys fees & costs, which was then affirmed in toto by the CA.

· ​The CA found with the trial court that the private respondent was guilty of negligence ​but agreed that the petitioner was
nevertheless not entitled to moral damages.

o The essential ingredient of moral damages is proof of bad faith/ Indeed, there was the omission by the
defendant-appellee bank to credit appellant's deposit of P100,000.00 on May 25, 1981. But the bank
rectified its records. It credited the said amount in favor of plaintiff-appellant in less than a month. The
dishonored checks were eventually paid. These circumstances negate any imputation or insinuation of
malicious, fraudulent, wanton and gross bad faith and negligence on the part of the defendant-appellant.

ISSUES and RULING:

·​ ​WON petitioner is entitled to moral damages -- YES

o The initial carelessness of the respondent 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, that the respondent court said had not been established by the petitioner.

o The fact is that the petitioner’s 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 respondent bank which was undeniably remiss in its duty to
the petitioner​.

o 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, the petitioner is seeking such damages for the prejudice sustained by it as a result of the private
respondent’s fault.

o CA is wrong in denying moral damages on the basis that the claimed losses are purely speculative and are not supported by
substantial evidence. ​Moral damages are not susceptible of pecuniary estimation.

o Article 2216 of the Civil Code specifically provides that “no proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages may be adjudicated.” 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.”
o General rule: 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

o Exception​: where the corporation has a good reputation that is debased, resulting in its social humiliation.

o We shall recognize that the petitioner did suffer injury because of the private respondent’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​.

·​ ​WON petitioner is entitled to nominal damages -- NO

o 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​.”

o As we have found that the petitioner has indeed incurred loss through the fault of the private respondent, 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.

·​ ​WON petitioner is entitled to exemplary damages -- YES

o The Civil Code provides:

§ ​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.

o The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every
civilized nation.[1]

o 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​.

o In the case at bar, it is obvious that the respondent 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 the petitioner, ​the
respondent bank did not immediately correct it but did so only one week later or twenty-three days after the deposit
was made​. It bears repeating that ​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​. Such ineptness comes under the concept
of the wanton manner contemplated in the Civil Code that calls for the imposition of exemplary damages.

DISPOSITIVE: ​CA MODIFIED; Moral: Ps20k; Exemplary: P50k; atty. Feees: P5k

​·​ ​NCC: Article x, Section y, par. Z: ​“​xxx​important section of law​xxx​”

·​ ​P.D. No. 139843: ​“​xxx​important section of special laws

[1] 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 the petitioner, 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.

BPI v. IAC

GR No. 69162| February 21, 1992| Grino-Aquino

PETITIONERS: ​BANK OF THE PHILIPPINE ISLANDS

RESPONDENTS: ​THE INTERMEDIATE APPELLATE COURT and the SPOUSES ARTHUR CANLAS and VIVIENE
CANLAS

TOPIC: Degree of diligence

CASE SUMMARY: ​The “new accounts” teller of the Commercial Bank and Trust Company of the Philippines (now Bank of
the Philippine Islands) mistakenly placed the old existing separate personal account number of Arthur Canlas on the deposit slip
for the new joint checking account of Arthur and Vivienne that the initial deposit for the joint checking account was miscredited
to Arthur’s personal account. Because of this, one of the checks issued by Vivienne was dishonored for insufficient funds. BPI
argued that it was not negligent and liable for damages on account of the inadvertence of its bank employee, considered that it
was an honest mistake and not tainted with malice and bad faith. But for the Supreme Court, citing ​Simex International (Manila)
v. Court of Appeals​, a banking business is 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.

DOCTRINE: ​The bank is not expected to be infallible, 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 is
to check and countercheck them for possible errors.
FACTS:

· ​Arthur and Vivienne Canlas opened a joint current account in the Commercial Bank and Trust Company of the
Philippines (CBTC) with an initial deposit of P2,250. Arthur already had an existing personal checking account there.

· ​When spouses Canlas opened their joint current account, the bank's “new accounts” teller pulled out from their files
Arthur’s old and existing signature card as ID and reference. But the teller mistakenly placed the old personal account
number of Arthur on the deposit slip for the spouses' new joint checking account, so that the P2,250 deposit was
miscredited to his personal account.

·​ ​The spouses subsequently deposited other amounts in their joint account.

· ​Later, Vivienne issued a P1,639.89 check in April 1977 and another P1,160 check on June 1, 1977. One of the checks
was dishonored by the bank for insufficient funds and a penalty of P20 was deducted from the account in both
instances.

· ​Spouses Canlas filed a complaint for damages against CBTC in the Court of First Instance of Pampanga. During the
trial, the bank’s lone witness, Antonio 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.”

· ​Thetrial court (by then the Regional Trial Court) ordered the bank (by then Bank of the Philippine Islands, or BPI) to
pay actual, moral and exemplary damages to spouses Canlas.

· ​The Intermediate Appellate Court affirmed the trial court's ruling. The appellate court stressed that BPI cannot be
absolved from liability for damages to the spouses even on the assumption of an honest mistake on its part, because of
the embarrassment that even an honest mistake can cause its depositors.

· ​Before the Supreme Court, BPI argued, among others, that it cannot be considered negligent, much less held liable, on
account of the inadvertence of its bank employee for Article 1173 of the Civil Code supposedly only required it to
exercise the diligence of a good father of a family.

ISSUES and RULING:

·​ ​WON Bank of the Philippine Islands was liable for the negligence of its “new accounts” teller? Yes

o The bank is not expected to be infallible, 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 is to
check and countercheck them for possible errors.

o In this case the “petty thing” the bank's lone witness say, the incorrect account number that the bank teller wrote on the
initial deposit slip for the newly-opened joint current account of the spouses Canlas, sparked the half-a-million-peso damage
suit against the bank. Further, that statement from the bank's witness indicate that bank's officials and employees tasked to
do their duties with due care apparently did not perform such with due care.

o Simex International (Manila) v. Court of Appeals​: “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 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.

· ​WON the spouses were entitled to moral and exemplary damages, and to attorney's fees? Moral damages and
attorney’s fees only

o While the bank’s negligence may not have been attended with malice and bad faith, nevertheless, it caused serious anxiety,
embarrassment and humiliation to the private respondents for which they are entitled to recover reasonable moral damages
(​American Express International v. IAC​).

o The award of reasonable attorney’s fees is proper for the private respondents were compelled to litigate to protect their
interest (Article 2208, Civil Code).

o However, the absence of malice and bad faith renders the award of exemplary damages improper (​Globe Mackay Cable and
Radio Corp. v. Court of Appeals​).

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.

BPI v. CA

GR No. 112392 | February 29, 2000| YNARES-SANTIAGO, J.

PETITIONERS/PROSECUTORS: BANK OF THE PHILIPPINE ISLANDS

RESPONDENTS/DEFENDANTS: COURT OF APPEALS and BENJAMIN C. NAPIZA

TOPIC: Degree of Diligence

CASE SUMMARY:

BPI allowed the withdrawal of the amount indicated on a check indorsed by Napizo despite obvious flaws. The Court ruled that
BPI cannot use a basis for its claim something that arose from its own negligence.
DOCTRINE:

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:

· ​Napiza deposited in Foreign Currency Deposit Unit (FCDU) Savings Account ​which he maintained in petitioner
bank’s Buendia Avenue Extension Branch, Continental Bank Managers Check dated August 17, 1984, payable to
"cash" in the amount of Two Thousand Five Hundred Dollars ($2,500.00) 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 private respondent and requested
him to deposit the check in his dollar account by way of accommodation and for the purpose of clearing the same

o ​Napiza 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
presentation of his passbook

· Using the blank withdrawal slip given by private respondent to Chan, on October 23, 1984, one Gayon, was able to
withdraw the amount of $2,541.67 from the same FCDU account

o​ W
​ ithdrawal slip was signed by the branch manager

· November 20, 1984, BPI received communication from the Wells Fargo Bank International of New York that the said
check deposited by private respondent was a counterfeit check7 because it was "not of the type or style of checks
issued by Continental Bank International."

o​ N
​ apiza was informed of the said incident by his son, an employee of BPI

o 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.

o ​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 pay the balance of $2500

o ​Upon failure to pay, BPI filed a complaint against private respondent, praying for the return of the amount
of $2,500.00 or the prevailing peso equivalent plus legal interest from date of demand to date of full
payment, a sum equivalent to 20% of the total amount due as attorney's fees, and litigation and/or costs
of suit.

·​ ​Respondent (Napiza) filed a counterclaim:

o admitting 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 likewise alleged that he instructed the party to whom he issued the signed blank withdrawal slip to
return it to him after the bank drafts clearance so that he could lend that party his passbook for the
purpose of withdrawing the amount of $2,500.00.

o ​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 petitioners employees.

o ​Privaterespondent added that he had "given the Plaintiff fifty one (51) days with which to clear the bank
draft in question." Petitioner should have disallowed the withdrawal because his passbook was not
presented.

o ​He claimed that petitioner 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 petitioner with "apparent ignorance of routine bank procedures," by way of counterclaim,
private respondent prayed for moral damages of P100,000.00, exemplary damages of P50,000.00 and
attorneys fees of 30% of whatever amount that would be awarded to him plus an honorarium of P500.00
per appearance in court.

·​ ​Respondent (Napiza) also filed for admission of third party complaint against Chan

·​ ​Petitioner filed a comment on the motion to admit third party complaint:

o Napiza was estopped from disclaiming liability because he himself authorized the withdrawal of the
amount by signing the withdrawal slip

·​ ​RTC ruled in favor of Napiza:

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 the petitioner to credit the value of the check in question to the account of the
private respondent only upon receipt of the notice of final payment and should not have authorized the
withdrawal from the latters account of the value or proceeds of the check." 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, petitioner should suffer the resultant loss

·​ ​CA affirmed the RTC ruling

o ​BPI committed "clear gross negligence" in allowing Ruben Gayon, Jr. to withdraw the money without
presenting private respondents passbook and, before the check was cleared and in crediting the amount
indicated therein in private respondents account.

ISSUES and RULING:

· ​ ON NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A GENERAL INDORSER—Ordinarily yes, but

W
in this case no
o ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party. However,
to hold private respondent 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.

o After receiving the deposit, under its own rules, petitioner shall credit the amount in private respondents 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.

·​ ​WON ​ AS GROSSLY NEGLIGENT IN ALLOWING THE WITHDRAWAL.-- YES

BPI​ W

o In Banco Atlantico v Auditor General : ​Court 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."

o 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.

o In this case, BPI ​failed to exercise the diligence of a good father of a family. In total disregard of its own rules, petitioners
personnel negligently handled private respondents account to petitioners detriment. As this Court once said on this matter:

"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 seventy-eight (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 case which may be stated as
follows: 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."

· While it is true that private respondents 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 petitioners personnel was the proximate cause of the
loss that petitioner sustained. Proximate cause, which is 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."37 The proximate cause of the withdrawal and
eventual loss of the amount of $2,500.00 on petitioners part was its personnels negligence in allowing such withdrawal in
disregard of its own rules and the clearing requirement in the banking system. In so doing, petitioner assumed the risk of
incurring a loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage.
DISPOSITIVE:

WHEREFORE , the petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
37392 is AFFIRMED.

PROVISIONS:

·​ ​NCC: Article x, Section y, par. Z: ​“​xxx​important section of law​xxx​”

·​ ​P.D. No. 139843: ​“​xxx​important section of special laws

Consolidated Bank v. CA (Repeat Case)

L.C. Diaz, an accounting firm, was a depositor of Solidbank. One day, L.C. Diaz sent its messenger to
make a deposit with the bank. The messenger left the passbook with the teller while he went to perform
other errands, and in the meantime another person managed to take the passbook and make an
unauthorized withdrawal of P300,000 pesos. L.C. Diaz claims that the bank should bear the loss for being
negligent in not confirming the person's identity before giving him the passbook. On the other hand,
Solidbank claims that L.C. Diaz was negligent in allowing the impostor to come into possession of a
withdrawal slip with legitimate signatures of the firm's signatories. The Court held that Solidbank was
liable for contractual breach when its teller gave the passbook to someone who was not the depositor's
authorized representative. It failed to exercise the requisite degree of diligence in verifying the impostor's
identity. Since the parties' rights and obligations are governed by contract, the doctrine of last clear
chance is not applicable, but since L.C. Diaz was also negligent, the Court ruled that Solidbank should
bear only 60% of the loss.
DOCTRINE:
The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple
loan. Article 1980 of the Civil Code expressly provides that “x x x savings x x x deposits of money in
banks and similar institutions shall be governed by the provisions concerning simple loan.” There is a
debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor
is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand.
The savings deposit agreement between the bank and the depositor is the contract that determines the
rights and obligations of the parties. 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. Diaz’s savings account, jurisprudence at the time of the withdrawal already imposed
on banks the same high standard of diligence required under RA No. 8791.
FACTS:
L.C. Diaz is an accounting firm which had a savings account with Solidbank. On 14 August 1991, the
firm's cashier Mercedes Macaraya sent its messenger Israel Calapre to make a deposit at the bank.
Macaraya gave Calapre the two deposit slips and the passbook.
Calapre gave the deposit slips and the passbook to Teller No. 6 at the bank. Since the transaction was
taking time, Calapre left the passbook with the teller while he performed other errands. Upon his return,
the teller told him that someone else got the passbook.
 Calapre returned to Macaraya to report the incident, and the two went to the bank. The teller informed
them that she could not remember to whom she gave the passbook, but it was someone shorter than
Calapre. That person, a certain Noel Tamayo, managed to withdraw P300,000 from L.C. Diaz's account.
It turns out that Tamayo, with the assistance of Emerano Ilagan, who was a messenger of L.C. Diaz,
managed to acquire a withdrawal slip with the firm's signatories, as well as a blank check of the firm's
account with the Philippine Banking Corporation. Tamayo filled up the check with forged signatures and
the amount of P90,000, then deposited it with Solidbank's account in order to deflect suspicion. Teller No.
6 then gave him the passbook, which he used with the withrdrawal slip in order to make the withdrawal
with a different teller.
o The later bounced a few days later for being drawn against a closed account. The withdrawal was
allowed after the signatures on the withdrawal slip were verified.
L.C. Diaz demanded that Solidbank reimburse the unauthorized withdrawal, arguing that the bank was
negligent in allowing the passbook to fall into the hands of an unauthorized person, and that it should
have verified Tamayo's identity or called L.C. Diaz to confirm such a large withdrawal.
Solidbank, in its defense, claimed that it was L.C. Diaz's negligence which resulted in the unauthorized
withdrawal. It argued that it was L.C. Diaz's fault for letting Tamayo come into possession of the passbook
and signed withdrawal slip.
The trial court ruled for the bank, finding that the bank acted with due care when it verified the signatures
on the withdrawal slip. The court found that the bank had a right to rely on Tamayo's possession of the
passbook as presumptive ownership based on the bank's savings deposit agreement with its depositors.
The court held that L.C. Diaz was negligent in allowing a stranger to come into possession of the
passbook and the signed withdrawal slip.
The Court of Appeals ruled that the bank's negligence was the proximate cause of the unauthorized
withdrawal, finding that the bank should have verified the withdrawal of a significant amount by calling the
depositor. The appellate court acknowledged that L.C. Diaz was also negligent in entrusting its deposits
to its messenger, but it applied the doctrine of last clear chance in imputing liability to Solidbank.
ISSUES and RULING:
WON Solidbank is liable for the unauthorized withdrawal -- YES
o While the Court agrees with the CA that Solidbank should be liable, the basis of liability is culpa
contractual, not quasi-delict as the CA ruled. The relationship of a bank and its depositor is
debtor-creditor, governed by the Civil Code provisions on simple loan and by the contract between the
parties, which in this case is the Savings Deposit Agreement
o Under the Savings Deposit Agreement, the “deposit book should be carefully guarded by the depositor
and kept under lock and key, if possible” and that “any person in possession of the passbook is
presumptively its owner.”
o Since the bank was given possession of the passbook when Calapre left to do other errands, it had the
duty of safeguarding the passbook and ensuring that it would be returned only to the depositor or his
authorized representative. This duty must be exercised with the statutorily required degree of diligence,
especially considering that the bank knows its rules regarding possession of the passbook. Since the
bank failed to return the passbook to Calapre, it breached its contractual obligation to L.C. Diaz, and is
presumed to have failed to exercise the requisite degree of diligence. Since this is culpa contractual, the
principle of respondeat superior is applicable and the bank is bound by the negligence of Teller No. 6.
The bank cannot raise the defense of diligence in the selection and supervision of its employees, unlike a
case of quasi-delict.
o The Court also disagreed with some pronouncements of the CA:
The doctrine of last clear chance is not applicable since, again, this is a case of culpa contractual.
 The proximate cause of the unauthorized withdrawal is not the failure of Teller No. 5 to call L.C. Diaz.
Neither the law nor the savings agreement imposes this duty upon the bank or its employees. The
proximate cause, rather, is Teller No. 6's failure to return the passbook to Calabre.
o However, under Art. 1172 of the Civil Code, liability for breach of contract may be regulated by the
courts, according to the circumstances. In this case, L.C. Diaz was also negligent when it allowed an
impostor to acquire a withdrawal slip signed by its signatories. Thus, it held that L.C. Diaz should
shoulder 40% of the damages.
DISPOSITIVE: WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION.
Petitioner Solidbank Corporation shall pay private respondent L.C. Diaz and Company, CPA’s only 60%
of the actual damages awarded by the Court of Appeals. The remaining 40% of the actual damages shall
be borne by private respondent L.C. Diaz and Company, CPA’s. Proportionate costs. SO ORDERED.

Philippine Banking Corp. v. CA (Repeat Case)​ 127469 | January 15, 2004 | Carpio

PETITIONERS/PROSECUTORS: ​PHILIPPINE BANKING CORPORATION/​Noel S.R. Jose

RESPONDENTS/DEFENDANTS: ​COURT OF APPEALS and LEONILO MARCOS/​Edgardo M. Salandanan

CASE SUMMARY: ​Leonilo Marcos filed in court a complaint for sum of money with damages against Phil. Banking
Corporation (PBC). Marcos allegedly made a time deposit in 2 occasions the amt. of P664,897.67 and P764,897.67 through the
persuasion of his friend Pagsaligan, one of the bank’s officials. The bank issued receipt for the first deposit while a
letter-certification was issued for his second deposit by Pagsaligan. Pagsaligan kept the various time deposit certificates. When
Marcos wanted to withdraw his time deposit and its accumulated interest Pagsaligan encouraged him to open a letter of credit to
the bank by executing 3 trust receipts agreement. He signed blank forms for domestic letter of credits, trust receipts agreements
and promissory notes. He was required to deposit 30% of the total amount of credit and his time deposit will secure the remaining
70% of the letters of credit.

He is now accusing the bank for unjustly collecting payment without deducting the 30% of his down payment and charging him
with accumulating interests since his time deposit serves as collateral for his remaining obligation. He further denied making a
loan of P500,000 with 25% interest per annum covered by a promissory note produced by the bank. The bank explained that the
promissory notes he executed are distinct from the trust receipt agreement and denied falsifying the promissory note covering for
the loan of P500,000. The evidence presented on the promissory note however is merely a machine copy of the document. The
said loan was already paid by offsetting it from his time deposit.

The Court held that Philippine Banking Corp was liable to Marcos. The court upheld the findings of the lower court on the
discrepancies shown by the machine copy of the duplicate of the promissory note and the suspicious claim of the bank that it
could not produce the original copy thereof. The mere machine copy of the document has no evidentiary value before the court.
Assuming Pagsaligan was behind the spurious promissory note, the bank would still be accountable to Marcos. 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. Further, a bank has the fiduciary duty before its clients. The fiduciary relationship means that
the bank’s obligation to observe high standards of integrity and performance is deemed written into every deposit agreement
between a bank and its depositor.

DOCTRINE: ​Banks required to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.​—S​ ection 2 of Republic Act No. 8791 (General Banking Law of 2000) 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.” This statutory declaration merely echoes the earlier pronouncement of the Supreme Court in Simex
International (Manila) Inc. v. Court of Appeals requiring banks to “treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship.” The Court reiterated this fiduciary duty of banks in subsequent
cases.

The fiduciary relationship means that the bank’s obligation to observe high standards of integrity and performance is deemed
written into every deposit agreement between a bank and its depositor.​ ​—Although RA No. 8791 took effect only in the year
2000, at the time that the BANK transacted with Marcos, jurisprudence had already imposed on banks the same high standard of
diligence required under RA No. 8791. This fiduciary relationship means that the bank’s obligation to observe “high standards of
integrity and performance” is deemed written into every deposit agreement between a bank and its depositor.

The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a
family.​—Thus, the BANK’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.

FACTS:

· ​Sometime in 1982: Philippine Banking Corp through Pagsalingan, one of the officials of the bank and a close friend of
Marcos persuaded him to deposit money with the bank.

·​ ​Marcos, yielding to Pagsalingan’s persuasions, made a time deposit with the bank on two occasions.

o Mar. 11, 1982 – Php 664,897.67

§​ T
​ he bank issued a receipt for this time deposit

o Mar. 12, 1982 – Php 764,897.67

§ T
​ he bank did not issue an official receipt for this time deposit but it acknowledged a deposit of
this amount through a letter certification Pagsalingan issued.

o The time deposits earned interest at 17% per annum and had a maturity period of 90 days.

· ​ arcos alleged that Pagsalingan kept the various time deposit certificates on the assurance that the bank would take
M
care of the certificates, interests and renewals.

o​ M
​ arcos claimed that from the time of the deposit, he had not received the principal amount or its interest.

· ​In March 1983, Marcos wanted to withdraw from the bank his time deposits and accumulated interests to buy materials
for his construction business.

o ​The bank, through Pagsalingan, convinced Marcos to keep his time deposits intact and instead to open
several domestic letters of credit.

· ​The bank required Marcos to give a deposit of 30% of the total amount of the letters of credit. The time deposits would
secure the 70% of the letters of credit.

o Marcos trusted the bank and Pagsalingan, ​he signed blank printed forms of the application for
​Since
domestic letters of credit, trust receipt agreements and promissory notes.

o​ H
​ e executed three Trust Receipt Agreements.
 ·​ ​Marcos believed that he and the BANK became creditors and debtors of each other. Marcos expected the BANK to
offset automatically a portion of his time deposits and the accumulated interest with the amount covered by the three
trust receipts totalling P851,250 less the 30% marginal deposit that he had paid. Marcos argued that if only the BANK
applied his time deposits and the accumulated interest to his remaining obligation, he would have paid completely his
debt.

· ​Marcos accused the BANK of unjustly demanding payment for the total amount of the trust receipt agreements
without deducting the 30% marginal deposit that he had already made. He decried the BANK’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 the BANK for P500,000 with interest at 25% pa
supposedly covered by Promissory Note No. 20-979-83 dated 24 October 1983.

· ​The BANK denied the allegations in the complaint. The BANK believed that the suit was Marcos’ desperate attempt
to avoid liability under several trust receipt agreements that were the subject of a criminal complaint.

· ​The BANK pointed out that Marcos delivered to the BANK the time deposit certificates by virtue of the Deed of
Assignment dated 2 June 1989. Marcos executed the Deed of Assignment to secure his various loan obligations.
When Marcos defaulted in the payment of Promissory Note No. 20-979-83, the BANK debited his time deposits and
applied the same to the obligation that is now considered fully paid. The BANK insisted that the Deed of Assignment
authorized it to apply the time deposits in payment of Promissory Note No. 20-979-83. The BANK 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, the BANK filed a complaint for violation of Presidential Decree No. 115 or the Trust Receipts
Law. Instead of initiating negotiations for the settlement of the account, Marcos filed this suit.

· ​RTC: The BANK was declared in default, but this was later set aside. The bank filed a motion praying to cross examine
Marcos who testified during the ex parte hearing. RTC denied the motion.

o​ R
​ endered its decision in favor of Marcos.

· ​CA: modified the decision by reducing the amount of actual damages and deleting the attorney’s fees awarded to
Marcos.

ISSUES and RULING:

· ​ ON there was a violation on the Bank’s right to procedural due process when the trial court denied its motion
W
to cross-examine Marcos -- NO

o Prior to the denial of the motion, the trial court had properly declared the BANK in default. Since the BANK was in default,
Marcos was able to present his evidence ​ex-parte ​including his own testimony. When the trial court lifted the order of
default, the BANK was restored to its standing and rights in the action. However, as a rule, the proceedings already taken
should not be disturbed.

o ​The records show that the BANK did not ask the trial court to restore its right to cross-examine Marcos when it sought the
lifting of the default order on 9 January 1990. Thus, the order dated 7 February 1990 setting aside the order of default did
not confer on the BANK the right to crossexamine Marcos. It was only on 2 March 1990 that the BANK filed the motion to
cross-examine Marcos. During the 12 March 1990 hearing, the trial court denied the BANK’s oral manifestation to grant its
motion to crossexamine Marcos because there was no proof of service on Marcos. The BANK’s counsel pleaded for
reconsideration but the trial court denied the plea and ordered the BANK to present its evidence. Instead of presenting its
 evidence, the BANK moved for the resetting of the hearing and when the trial court denied the same, the BANK informed
the trial court that it was elevating the denial to the “upper court.”

· ​[TOPIC] WON the bank is liable to Marcos for offsetting his time deposits with a fictitious promissory note--
YES

o The existence of the Promissory Note could have been easily proven had the Bank presented the original copies of the
promissory note and its supporting evidence.

§ ​However, in lieu of the original copies, the Bank presented “machine copies of the duplicate” of
the documents which have NO EVIDENTIARY VALUE. (Best Evidence Rule)

§ T
​ he BANK’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 bring to fore the BANK’s dismal failure to
fulfill its fiduciary duty to Marcos.

o Section 2 of Republic Act No. 8791 (General Banking Law of 2000) 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.” This statutory declaration merely echoes the earlier pronouncement of the Supreme Court in Simex
International (Manila) Inc. v. Court of Appeals requiring banks to “treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship.”

o Although RA No. 8791 took effect only in the year 2000, at the time that the BANK transacted with Marcos, jurisprudence
had already imposed on banks the same high standard of diligence required under RA No. 8791.

§ ​This fiduciary relationship means that the bank’s obligation to observe “high standards of
integrity and performance” is deemed written into every deposit agreement between a bank
and its depositor.

o The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family.
Thus, the BANK’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.

o The business of banking is imbued with public interest. The stability of banks largely depends on the confidence of the
people in the honesty and efficiency of banks.

o As the BANK’s depositor, Marcos had the right to expect that the BANK 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 the BANK had
correctly debited his outstanding obligations from his time deposits.

o By the very nature of its business, the BANK 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. The
BANK inexplicably failed to produce the original copies of these documents. Clearly, the BANK failed to treat the account
of Marcos with meticulous care.

o The BANK claims that it is a reputable banking institution and that it has no reason to forge Promissory Note No.
20-979-83. The trial court and appellate court did not rule that it was the bank that forged the promissory note. It was
Pagsaligan, the BANK’s branch manager and a close friend of Marcos, whom the trial court categorically blamed for the
 fictitious loan agreements. The trial court held that Pagsaligan made up the loan agreement to cover up his inability to
account for the time deposits of Marcos.

o Whether it was the BANK’s negligence and inefficiency or Pagsaligan’s misdeed that deprived Marcos of the amount due
him will not excuse the BANK from its obligation to return to Marcos the correct amount of his time deposits with interest.
The duty to observe “high standards of integrity and performance” imposes on the BANK that obligation. The BANK
cannot also unjustly enrich itself by keeping Marcos’ money.

o Assuming Pagsaligan was behind the spurious promissory note, the BANK would still be accountable to Marcos. We have
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.

·​ ​Total Amount Due to Marcos

o Actual Damages: P764,897.67

§ ​The BANK and Marcos do not now dispute the ruling of the Court of Appeals that the total
amount of time deposits that Marcos placed with the BANK is only P764,897.67 and not
P1,429,795.34 as found by the trial court.

§ The BANK has always argued that Marcos’ time deposits only totaled P764,897.67.43 What the
BANK insists on in this petition is the trial court’s violation of its right to procedural due
process and the absence of any obligation to pay or return anything to Marcos. Marcos, on the
other hand, merely prays for the affirmation of either the trial court or appellate court decision

§​ ​Marcos claimed that the certificates of time deposit were with Pagsaligan for safekeeping.
Marcos was only able to present the receipt dated 11 March 1982 and the letter-certification
dated 12 March 1982 to prove the total amount of his time deposits with the BANK. The
foregoing certification is clear. The total amount of time deposits of Marcos as of 12 March
1982 is P764,897.67, inclusive of the sum of P664,987.67 that Marcos placed on time deposit
on 11 March 1982. This is plainly seen from the use of the word “aggregate.”

o We modify the amount that the CA ordered the BANK to return to Marcos. The appellate court did not offset Marcos’
outstanding debt with the BANK covered by the three trust receipt agreements even though Marcos admits his obligation
under the three trust receipt agreements. The total amount of the trust receipts is P851,250 less the 30% marginal deposit of
P255,375 that Marcos had already paid the BANK. This reduced Marcos’ total debt with the BANK to P595,875 under the
trust receipts.

o The BANK’s dismal failure to account for Marcos’ money justifies the award of moral and exemplary damages. Certainly,
the bank, as employer, is liable for the negligence or the misdeed of its branch manager which caused Marcos mental
anguish and serious anxiety. Moral damages of P100,000 is reasonable and is in accord with our rulings in similar cases
involving banks’ negligence with regard to the accounts of their depositors. We also award P20,000 to Marcos as exemplary
damages. The law allows the grant of exemplary damages by way of example for the public good. The public relies on the
banks’ fiduciary duty to observe the highest degree of diligence. The banking sector is expected to maintain at all times this
high level of meticulousness

DISPOSITIVE:
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Philippine Banking
Corporation is ordered to return to private respondent Leonilo Marcos P500,404.11, the remaining principal amount of his time
deposits, with interest at 17% ​per annum ​from 30 August 1989 until full payment.

Petitioner Philippine Banking Corporation is also ordered to pay to private respondent Leonilo Marcos P211,622.96, the
accumulated interest as of 30 August 1989, plus 12% legal interest ​per annum f​ rom 30 August 1989 until full payment. Petitioner
Philippine Banking Corporation is further ordered to pay P100,000 by way of moral damages and P20,000 as exemplary damages
to private respondent Leonilo Marcos.

Citibank, N. A. v. Cabamongan ​GR No. 146918 | May 2, 2006 | Austria-Martinez

​RESPONDENTS/DEFENDANTS: ​Spouses Luis and Carmelita Cabamongan, and their sons Luis Jr. and Lito Cabamongan

Spouses Cabamongan opened a joint and/or foreign currency time deposit in favor of their two children with Citibank. On a
material date, a person who claimed to be Carmelita sought the pretermination of the account. She presented identification cards
to ascertain her identity to the then account officer. When she left with the money, she left an identification card. The account
officer then called up the address. The spouses and their family knew of the incident. They were presently residing in the US and
there was a prior incident wherein they got robbed in their house with the jewelry box and cards stolen. Spouses made several
demands for the return of the amount but Citibank refused to do so.

Citibank was declared negligent. First, the “depositor” did not present the Certificate of Deposit. Second, from the internal
memorandum issued by the Account Officer, he admitted to the fact that the specimen signature was different from the one who
misrepresented herself as Carmelita. Third, the bank kept in its records pictures of its depositors. It is inconceivable how the bank
was duped by an impostor.

FACTS:

• ​On August 16, 1993, the spouses opened a joint “and/or” foreign currency time deposit, in trust to their sons at the
petitioner bank’s Makati branch. Its reference number was 60-22214372, with amount of $55,216.69 for 182 days (until
February 14, 1994) at 2.5625% interest per annum.

• ​On November 10, 1993 (prior to maturity), a person claiming to be Carmelita went to the bank and pre terminated the
deposit by presenting (i) a passport, (ii) a Bank of America Versatele Card, (iii) an ATM card, and (iv) a Mabuhay
Credit Card. Yeye San Pedro, an account officer, helped her fill up the necessary forms.

• ​While the transaction was processing, San Pedro casually asked the woman her personal circumstances and investment
plans. As she did not submit an original Certificate of Deposit, she needed to execute a notarised release and waiver
document in Citibank’s favour. Although the document was not notarised on that same day, the money was still given
to her.

• ​After this person left, San Pedro realised she left behind an ID. When she called up Carmelita’s listed address at
Moonwalk Village, Las Pinas, Lito’s wife Marites picked up the phone. The latter was shocked with what happened, as
she knew Carmelita was in the States at the time since the spouses work in California. The spouses were shocked upon
receiving the news.

• ​Apparently, between June 10-16, a person broke into their residence at Balwin Park Blvd. It would be eventually
discovered that Carmelita’s jewellery box, passports, bank deposit certificates, and the subject foreign currency deposit,
as well as IDs, were missing.
 • ​Thru various overseas calls, the respondent spouses informed Citibank that Carmelita was in the US and that the person
who claimed to be her was an impostor. Yeye San Pedro told them to submit the necessary documents to support their
claim, but Citibank still concluded that the pre-termination was valid.

• ​Ina letter dated September 1994, the respondent spouses made a formal demand upon Citibank for payment of their
pre terminated deposit in its amount with damages. In November, Citibank refused thru a letter, asserting that the
deposit was released upon proper identification and verification.

• ​In January 1995, the respondent spouses filed the complaint (Specific Performance w/ Damages) before the RC
Makati. Citibank’s Answer insisted that it was not negligent of its duties, since the deposit was released only upon
proper verification and identification.

• ​The spouses essentially testified that Carmelita could not have pre terminated the deposit as she was in California at the
time. Florida G. Negre, PNP Crime Lab’s Documents Examiner II, testified that an examination of the signature and
samples of Carmelita’s showed a significant difference.

• ​Citibank presented San Pedro and Cris Cabalatungan (VP and OIC of Security and Management), who both testified
that the proper procedure for the deposit’s release was complied with.

• ​RTC: petition GRANTED. Citibank to pay amount of deposit ($55,216.19), along with P50k for moral damages, P50k
for attorney’s fees and costs of suit.

• ​The RTC concluded that Citibank committed negligence, as the forgery of the signatures was categorically established
by the handwriting expert.

• ​Still, the spouses filed a Motion to Partially Reconsider the Decision, by praying for an increase of the damages
awarded. This would be granted, with the following increases: (i) moral damages of P200k, (ii) exemplary damages of
P100k, (iii) attorney’s fees of P100k, and (iv) litigation expenses of P200k.

• ​Citibank filed an appeal, but the CA affirmed the RTC Decision. It did however disagreed with the award of damages,
for being excessive.

•​ ​Dissatisfied, both parties filed petitions for review on certiorari before the Court.

ISSUES and RULING:

•​ ​W/N the Bank was negligent? YES.

o Since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of
the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and
performance are even required, of it. 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.

o Here, it has been sufficiently shown that the signatures of Carmelita in the forms for pretermination of deposits are forgeries.
Citibank, with its signature verification procedure, failed to detect the forgery. Its negligence consisted in the omission of
that degree of diligence required of banks. The Court has held that a bank is “bound to know the signatures of its customers;
and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was forged.” Such principle equally applies here.
o Citibank cannot label its negligence as mere mistake or human error. Banks handle daily transactions involving millions of
pesos. By the very nature of their works the degree of responsibility, care and trustworthiness expected of their employees
and officials is far greater than those of ordinary clerks and employees. Banks are expected to exercise the highest degree of
diligence in the selection and supervision of their employees.

DISPOSITIVE: Petition Partially Granted.

(1) ​The actual damages in principal amount of $55,216.69, representing the amount of foreign currency time deposit
shall earn interest at the stipulated rate of 2.5625% for the period August 16, 1993 to February 14, 1994;

(2) ​From February 15, 1994 to September 15, 1994, the principal amount of $55,216.69 and the interest earned as of
February 14, 1994 shall earn interest at the rate then prevailing granted by Citibank;

(3) ​From September 16, 1994 until full payment, the principal amount of $55,216.69 and the interest earned as of
September 15, 1994, shall earn interest at the legal rate of 12% per annum;

(4)​ T
​ he award of attorney’s fees is DELETED.

PROVISIONS:

•​ ​NCC: Article x, Section y, par. Z: ​“​xxx​important section of law​xxx​”

•​ ​P.D. No. 139843: ​“​xxx​important section of special laws