Simex International Inc. vs. CA [G.R. No.

88013 March 19, 1990]

Post under case digests, Commercial Law at Monday, February 27, 2012 Posted by
Schizophrenic Mind
Facts: Simex International is a private corporation engaged in the exportation of food
products. It buys these products from various local suppliers and then sells them
abroad, particularly in the United States, Canada and the Middle East. Most of its
exports are purchased by the petitioner on credit.
Simex is a depositor of TRB and maintained a checking account in its Cubao branch.
Simex maintained an account in the amount of P100,000.00, thus increasing its
balance as of that date to P190,380.74. Subsequently, the petitioner issued several
(8) checks against its deposit but was surprised to learn later that they had been
dishonored for insufficient funds.
As a consequence, actions on the pending orders of SIMEX with the other suppliers
(California Manufacturing Comp., Malabon Longlife Trading Corp., etc.) whose checks
were dishonored was deferred. And thus made these companies send demand letters
to SIMEX threatening prosecution if the checks were not made good.
SIMEX complained to TRB and found out that the sum of P100,000.00 deposited had
not been credited. The error was rectified on June 17, 1981, and the dishonored
checks were paid after they were re-deposited. SIMEX sent demand letter for
reparation against TRB, which was not met, thus a complaint was filed in CFI Rizal by
SIMEX. 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 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. It said:
The essential ingredient of moral damages is proof of bad faith (De Aparicio vs.
Parogurga, 150 SCRA 280). 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.
It is this ruling that is faulted in the petition now before us.
Issue: Whether or not TRB is guilty of negligence which warrants SIMEX reparation for
damages.
Held: YES. Award SIMEX with moral damages (P20,000) and exemplary damages
(P50,000).
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.
There was also prejudice suffered by SIMEX in the fact 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.

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.
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.
PBC v. CA
Facts:
Rommels Marketing Corporation (RMC) maintains 2 current accounts with petitioner
Philippine Bank of Commerce. Respondent Romeo Lipana is the President and
General Manager of RMC. From May 1, 1975 to July 16, 1976, Lipana entrusted RMC
funds totalling P304,979.74 to its secretary Irene Yabut for the purpose of depositing
the funds to the companys account with PBC. It turned out, however, that all those
deposits were not credited to the RMC, but to the account of Yabuts husband,
Bienvenido Cotas, with the same bank. Yabut was able to defraud RMC by using
duplicate deposit slips. On the original copy which is being submitted to the bank,
she would write the account name and account number of her husband. On the
duplicate copy which is returned to the company, she would write the same account
number but would leave the account name blank. After obtaining the validation
stamp on the second copy, she would place thereon RMCs account name, and
change the account number to that of the company. This went on for more than a
year without respondents knowledge. Upon discovery of the losses, respondent
demanded the return of its funds from the bank. Not being heeded, he filed a
collection suit. The trial court, and later on the Court of Appeals, found the bank
negligent. The bank filed this instant petition for review.
Petitioners submit that the proximate cause of the loss is the negligence of RMC in
entrusting its funds to a dishonest employee, as there is no way for them to know
who the owner of the funds is. Respondents, on the other hand, maintain that the
loss was due to the negligence of the banks teller, Azucena Mabayad, in validating
the duplicate deposit slips bearing no account name.
Issue:
What is the proximate cause of the loss, to the tune of P304,979.74, suffered by the
private respondent RMC - petitioner bank's negligence or that of private
respondent's?
Held:
There are three elements of a quasi-delict: (a) damages suffered by the plaintiff; (b)
fault or negligence of the defendant, or some other person for whose acts he must
respond; and (c) the connection of cause and effect between the fault or negligence

of the defendant and the damages incurred by the plaintiff. 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 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.
Applying the above test, it appears that the bank's teller was negligent in validating,
officially stamping and signing all the deposit slips prepared and presented by Ms.
Yabut, despite the glaring fact that the duplicate copy was not completely
accomplished contrary to the self-imposed procedure of the bank with respect to the
proper validation of deposit slips, original or duplicate. The fact that the duplicate slip
was not compulsorily required by the bank in accepting deposits should not relieve
the petitioner bank of responsibility. The odd circumstance alone that such duplicate
copy lacked one vital information - that of the name of the account holder - should
have already put Ms. Mabayad on guard. Rather than readily validating the
incomplete duplicate copy, she should have proceeded more cautiously by being
more probing as to the true reason why the name of the account holder in the
duplicate slip was left blank while that in the original was filled up. She should not
have been so naive in accepting hook, line and sinker the too shallow excuse of Ms.
Irene Yabut to the effect that since the duplicate copy was only for her personal
record, she would simply fill up the blank space later on. A "reasonable man of
ordinary prudence" would not have given credence to such explanation and would
have insisted that the space left blank be filled up as a condition for validation.
Unfortunately, this was not how bank teller Mabayad proceeded thus resulting in
huge losses to the private respondent. Negligence here lies not only on the part of
Ms. Mabayad but also on the part of the bank itself in its lackadaisical selection and
supervision of Ms. Mabayad. This was exemplified in the testimony of Mr. Romeo
Bonifacio, then Manager of the Pasig Branch of the petitioner bank and now its VicePresident, to the effect that, while he ordered the investigation of the incident, he
never came to know that blank deposit slips were validated in total disregard of the
bank's validation procedures. It was this negligence of Ms. Azucena Mabayad,
coupled by the negligence of the petitioner bank in the selection and supervision of
its bank teller, which was the proximate cause of the loss suffered by the private
respondent, and not the latter's act of entrusting cash to a dishonest employee, as
insisted by the petitioners.
Furthermore, under the doctrine of "last clear chance" (also referred to, at times as
"supervening negligence" or as "discovered peril"), petitioner bank was indeed the
culpable party. This doctrine, in essence, states that where both parties are negligent,
but the negligent act of one is appreciably later in time than that of the other, or
when it is impossible to determine whose fault or negligence should be attributed to
the incident, the one who had the last clear opportunity to avoid the impending harm
and failed to do so is chargeable with the consequences thereof. Stated differently,
the rule would also mean that an antecedent negligence of a person does not
preclude the recovery of damages for the supervening negligence of, or bar a
defense against liability sought by another, if the latter, who had the last fair chance,
could have avoided the impending harm by the exercise of due diligence. Here,
assuming that private respondent RMC was negligent in entrusting cash to a
dishonest employee, thus providing the latter with the opportunity to defraud the
company, as advanced by the petitioner, yet it cannot be denied that the petitioner
bank, thru its teller, had the last clear opportunity to avert the injury incurred by its
client, simply by faithfully observing their self-imposed validation procedure.

In the case of banks, the degree of diligence required is more than that of a good
father of a family. Considering the fiduciary nature of their relationship with their
depositors, banks are duty bound to treat the accounts of their clients with the
highest degree of care. 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.
While it is true that had private respondent checked the monthly statements of
account sent by the petitioner bank to RMC, the latter would have discovered the loss
early on, such cannot be used by the petitioners to escape liability. This omission on
the part of the private respondent does not change the fact that were it not for the
wanton and reckless negligence of the petitioners' employee in validating the
incomplete duplicate deposit slips presented by Ms. Irene Yabut, the loss would not
have occurred. The foregoing notwithstanding, it cannot be denied that, indeed,
private respondent was likewise negligent in not checking its monthly statements of
account. This omission by RMC amounts to contributory negligence which shall
mitigate the damages that may be awarded to the private respondent. We believe
that the demands of substantial justice are satisfied by allocating the damage on a
60-40 ratio. Thus, 40% of the damage awarded by the respondent appellate court,
except the award of P25,000.00 attorney's fees, shall be borne by private respondent
RMC; only the balance of 60% needs to be paid by the petitioners. The award of
attorney's fees shall be borne exclusively by the petitioners.
WESTMONT BANK V. ONG
373 SCRA 212
FACTS:
Ong was supposed to be the payee of the checks issued by Island Securities.
Ong has a current account with petitioner bank. He opted to sell his shares of
stock through Island Securities. The company in turn issued checks in favor of
Ong but unfortunately, the latter wasn't able to receive any. His signatures were
forged by Tamlinco and the checks were deposited in his own account with
petitioner. Ong then sought to collect the money from the family of Tamlinco first
before filing a complaint with the Central Bank. As his efforts were futile to recover
his money, he filed an action against the petitioner.
The trial and appellate
court decided in favor of Ong.
HELD:
Since the signature of the payee
deemed inoperative and ineffectual.
erred in making payment by virtue of
respondent, should therefore be allowed

was forged, such signature should be

Petitioner, as the collecting bank, grossly
said forged signature. The payee, herein
to collect from the collecting bank.

It should be liable for the loss because it is its legal duty to ascertain that the
payees endorsement was genuine before cashing the check.
As a general
rule, a bank or corporation who has obtained possession of a check with an
unauthorized or forged indorsement of the payees signature and who collects the
amount of the check other from the drawee, is liable for the proceeds thereof to the
payee or the other owner, notwithstanding that the amount has been paid to the
person from whom the check was obtained.

DOCTRINE OF DESIRABLE SHORT CUTplaintiff uses one action to reach, by

desirable short cut, the person who ought to be ultimately liable as among the
innocent persons involved in the transaction. In other words, the payee ought to be
allowed to recover directly from the collecting bank, regardless of whether the check
was delivered to the payee or not.
On the issue of laches, Ong didn't sit on his rights. He immediately sought the
intervention of Tamlincos family to collect the sum of money, and later the Central
Bank. Only after exhausting all the measures to settle the issue amicably did
he file the action.
Reyes vs. Court of Appeals G.R. No. 118492, August 15, 2001
MARCH 16, 2014 LEAVE A COMMENT
The degree of extraordinary diligence applies only to cases where banks act under
their fiduciary capacity, that is, as depositary of the deposits of their depositors. But
the same higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with their
depositors.
Facts:
Godofredo, Casheir of the Philippine Racing Club (PCRI), went to respondent
bank to apply for a demand draft in the amount AU$1,610.00 payable to the order of
the 20th Asian Racing Conference Secretariat of Sydney, Australia. He was attended
to by respondent banks assistant cashier, Mr. Yasis, who at first denied the
application for the reason that respondent bank did not have an Australian dollar
account in any bank in Sydney. Godofredo asked if there could be a way for
respondent bank to accommodate PRCIs urgent need to remit Australian dollars to
Sydney. Yasis of respondent bank then informed Godofredo of a roundabout way of
effecting the requested remittance to Sydney thus: the respondent bank would draw
a demand draft against Westpac Bank in Sydney, Australia (Westpac-Sydney) and
have the latter reimburse itself from the U.S. dollar account of the respondent in
Westpac Bank in New York, U.S.A. (Westpac-New York).
However, upon due presentment of the foreign exchange demand draft, the same
was dishonored, with the notice of dishonor stating that there is No account held
with Westpac. Meanwhile, Wespac-New York sent a cable to respondent bank
informing the latter that its dollar account in the sum of AU$ 1,610.00 was debited. In
response to PRCIs complaint about the dishonor of the said foreign exchange
demand draft, respondent bank informed Westpac-Sydney of the issuance of the said
demand draft, drawn against the Wespac-Sydney and informing the latter to be
reimbursed from the respondent banks dollar account in Westpac-New York. The
respondent bank on the same day likewise informed Wespac-New York requesting the
latter to honor the reimbursement claim of Wespac-Sydney. Upon its second
presentment for payment, the demand draft was again dishonored by WestpacSydney for the same reason, that is, that the respondent bank has no deposit dollar
account with the drawee Wespac-Sydney. Gregorio Reyes and Consuelo Puyat-Reyes
arrived in Sydney on a separate date and both were humiliated and embarrassed in
the presence of international audience after being denied registration of the
conference secretariat since the foreign exchange draft was dishonored. Petitioners
were only able to attend the conference after promising to pay in cash instead which
they fulfilled
Issue: Whether or not respondent bank is liable for damages due to the dishonor of
the foreign exchange demand drafts.
Held: Yes. The evidence also shows that the respondent bank exercised that degree

of diligence expected of an ordinary prudent person under the circumstances

obtaining; the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the dollar accountof
respondent bank with the former. The degree of diligence required of banks, is more
than that of a good father of a family where the fiduciary nature of their relationship
with their depositors is concerned. In other words banks are duty bound to treat the
deposit accounts of their depositors with the highest degree of care. But the said
ruling applies only to cases where banks act under their fiduciary capacity, that is, as
depositary of the deposits of their depositors. But the same higher degree of
diligence is not expected to be exerted by banks in commercial transactions that do
not involve their fiduciary relationship with their depositors. The case at bar does not
involve the handling of petitioners deposit, if any, with the respondent bank. Instead,
the relationship involved was that of a buyer and seller.
Globe Mackay vs.CA 176 SCRA 778
GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, petitioners vs.
THE HONORABLE COURT OF APPEALS and RESTITUTO M. TOBIAS, respondents.
FACTS: Private respondent Restituto M. Tobias was employed by petitioner Globe
Mackay in dual capacity as purchasing agent and administrative assistant to the
engineering operations manager. In 1972, the respondent discovered fraudulent
anomalies and transactions in the said corporation for which it lost several hundred
thousands of pesos. The private respondent reported to his superiors including
Henry, the petitioner. However, he was confronted by Hendry stating that Tobias was
the number one suspect. He was ordered to take a one week forced leave. When he
returned to work, Hendry called him crook and swindler, and left a scornful remark
to the Filipinos. The petitioners also charged six criminal cases against the
respondentfive cases of estafa and one for violating Article 290 of the RPC
(Discovering Secrets through Seizure of Correspondence). The petitioner also sent a
poison letter to RETELCO causing the respondent to be unemployed.
ISSUE: Whether or not the petitioners are liable for damages to the respondent.
HELD: Petitioners invoked the right of damnun absque injuria or the damage or loss
which does not constitute a violation of legal right or amount to a legal wrong is not
actionable. However, this is not applicable in this case. It bears repeating that even
granting that petitioners might have had the right to dismiss Tobias from work, the
abusive manner in which that right was exercised amounted to a legal wrong for
which petitioners must be held liable.
The court awarded Tobias the following: Php 80, 000 as actual damages, Php 200,
000 as moral damages, Php 20, 0000 as exemplary damages; Php 30, 000 as
attorneys fees; and, costs. Petition was denied and the decision of CA is AFFIRMED.
[ G.R. No. 131679, February 01, 2000 ]
CAVITE DEVELOPMENT BANK AND FAR EAST BANK AND TRUST COMPANY,
PETITIONERS, VS. SPOUSES CYRUS LIM AND LOLITA CHAN LIM AND COURT OF
APPEALS, RESPONDENTS.
Facts:
Rodolfo Guansing obtained a loan from Cavite Development Bank(CDB) and offered
as security his real estate property. For failing to pay his loan the property was
foreclosed and title was issued in the name of CDB.

Now here comes Lolita Chan Lim, the respondent on this case who offered to buy the
property from CDB. Mrs. Lim paid P30,000.00 as option money and was issued
receipt by CDB. However , Mrs. Lim later discovered that the title of the property is
being disputed by Perfecto Guansing, the father of the mortgagee Rodolfo Guansing.
In fact, in a separate case it was declared that Rodolfo fraudulently secured title to
the said mortgaged property and title to it was restored to Perfecto . The decision has
since become final and executory.
Aggrieved by what she considered a serious misrepresentation by CDB and its
mother company FEBTC, on their ability to sell the subject property, filed an action
for specific performance and damage against petitioners.
Issues: Was the sale between CDB and Mrs. Lim perfected?
Is CDB liable for damges?
Is the sale valid?
Decision: Contracts are not defined by the parties thereto but by the principles of law.
In determining the nature of a contract, the courts are not bound by the name or title
given to it by the contracting parties. In the case at bar, the sum of P30,000.00,
although denominated in the offer to purchase as option money is actually in the
nature of earnest money or down payment when considered with the other terms
of the offer.
It is because when Mrs. Lim offered to buy the property the 10% so called option
money forms part of the purchase price as contemplated under Art. 1482 of the Civil
Code. It is clear then that the parties in this case actually entered into a contract of
sale, partially consummated as to the payment of the price.
CDB cannot invoke the defense that it is a mortgagee in good faith. It only applies to
private individuals and not to banking institutions. They cannot be excused from the
duty of exercising the due diligence required of banking institutions. It is standard
practice for banks, before approving a loan, to investigate who are the real owners
thereof. Banking is affected with public interest that is why they are expected to
exercise more care and prudence than private individuals.
Considering CDBs negligence it is therefore liable for damages.
As to its validity, the doctrine of Nemo dat quod non habet applies. One cannot
give what one does not have. The seller not being the owner the sale is void.
t dominion or ownership any sale, disposition, mortgage, leaseor any other
transactions including quit-claims, waiver and relinquishment of rights x x x 3.
Toexercise any or all acts of strict dominion or ownership over the above-mentioned
properties,rights and interest therein.On the strength of the aforesaid SPA, Julian
obtained a loan from the respondent. Stillusing the subject property as security,
Julian obtained an additional loan from the respondent.It appears, however, that
there was no property identified in the SPA and registered with theRegistry of Deeds.
What was identified in the SPA instead was the property different from theone used
as security for loan.Julian defaulted on the payment of his loan obligations. Thus,
respondent initiated extra- judicial foreclosure proceedings over the subject property
which was subsequently sold at publicauction wherein the respondent was declared
as the highest bidder. Petitioners initiated an actionfor the annulment of REM
constituted over the subject property on the ground that the same wasnot covered
by the SPA and that the said SPA, at the time the loan obligations were contracted,no
longer had force and effect since it was previously revoked by Perla. In the absence of
authority to do so, the REM constituted by Julian over the subject property was null
and void;thus, petitioners likewise prayed that the subsequent extra-judicial
foreclosure proceedings andthe auction sale of the subject property be also nullified.
Issues:
(1) Whether or not there was a valid mortgage constituted over subject property.(2)
Whether or not there was a valid revovation of SPA.(3) Construction of powers of

attorney.
Rulings:
(1) In the case at bar, it was Julian who obtained the loan obligations fromrespondent
which he secured with the mortgage of the subject property. The property
mortgagedwas owned by his wife, Perla, considered a third party to the loan
obligations between Julian andrespondent. It was, thus, a situation recognized by the
last paragraph of Article 2085 of the CivilCode that third persons who are not parties
to the principal obligation may secure the latter by pledging or mortgaging their own
property. There is no question therefore that Julian was vestedwith the power to
mortgage the pieces of property identified in the SPA, however, the subject property
was not among those enumerated therein. Julian was not conferred by Perla with
theauthority to mortgage the subject property under the terms of the SPA, the real
estate mortgagesJulian executed over the said property are therefore unenforceable.
(2) The said SPA was revoked by virtue of a public instrument executed by Perla. To
address respondents assertion that the said revocation was unenforceable against it
as a third
party to the SPA and as one who relied on the same in good faith, the rule is that an
agency isextinguished, among others, by its revocation (
Article 1999, New Civil Code of the Philippines
).The principal may revoke the agency at will, and compel the agent to return the
documentevidencing the agency. Such revocation may be express or implied (
Article 1920, supra
).(3) Rule of strict construction- where the terms of the contract are clear as to leave
noroom for interpretation, resort to circumstantial evidence to ascertain the true
intent of the parties, is not countenanced. The law is that if the terms of a contract
are clear and leave nodoubt upon the intention of the contracting parties, the literal
meaning of its stipulation shallcontrol. The clear terms of the contract should never
be the subject matter of interpretation.Equally relevant is the rule that a power of
attorney must be strictly construed and pursued. Theinstrument will be held to grant
only those powers which are specified therein, and the agent mayneither go beyond
nor deviate from the power of attorney. Where powers and duties are specifiedand
defined in an instrument, all such powers and duties are limited and are confined to
thosewhich are specified and defined, and all other powers and duties are
excluded.Qualification of the rule- this is but in accord with the disinclination of courts
to enlargethe authority granted beyond the powers expressly given and those which
incidentally flow or derive therefrom as being usual and reasonably necessary and
proper for the performance of suchexpress powers.
BPI FAMILY SAVINGS BANK, INC., petitioner,vs.FIRST METRO INVESTMENT
CORPORATION, respondent.G.R. No. 132390May 21, 2004FACTS:
On August 25, 1989, FMIC, through its Executive Vice President Antonio Ong,
openedcurrent account and deposited METROBANK check no. 898679 of P100 million
withBPI Family Bank (BPI FB) . Ong made the deposit upon request of his friend, Ador
deAsis, a close acquaintance of Jaime Sebastian, then Branch Manager of BPI FB
SanFrancisco del Monte Branch. Sebastians aim was to increase the deposit level in
hisBranch.BPI FB, through Sebastian, guaranteed the payment of P14,667,687.01
representing17% per annum interest of P100 million deposited by FMIC. The latter, in
turn,assured BPI FB that it will maintain its deposit of P100 million for a period of one
yearon condition that the interest of 17% per annum is paid in advance. This
agreement between the parties was reached through their communications
inwriting.Subsequently, BPI FB paid FMIC 17% interest or P14,667,687.01 upon
clearance of thelatters check deposit.

However, on August 29, 1989, on the basis of an Authority to Debit signed by Ongand
Ma. Theresa David, Senior Manager of FMIC, BPI FB transferred P80 million
fromFMICs current account to the savings account of Tevesteco Arrastre
Stevedoring,Inc.FMIC denied having authorized the transfer of its funds to Tevesteco,
claiming thatthe signatures of Ong and David were falsified. Thereupon, to recover
immediately itsdeposit, FMIC, on September 12, 1989, issued BPI FB check no.
129077 forP86,057,646.72 payable to itself and drawn on its deposit with BPI FB
SFDM branch.But upon presentation for payment on September 13, 1989, BPI FB
dishonored thecheck as it was "drawn against insufficient fundsConsequently, FMIC
filed A COMPLAINT against BPI FB. FMIC FILED an Information forestafa against Ong,
de Asis, Sebastian and four others. However, the Information wasdismissed on the
basis of a demurrer to evidence filed by the accused.
Issue:
1.Was
THE TRANSACTION BETWEEN FMIC AND BPI FB A TIME DEPOSIT oran INTERESTBEARING CURRENT ACCOUNT WHICH, UNDER THEEXISTING BANK REGULATIONS,
WAS AN ILLEGAL TRANSACTION?
2.Is the bank liable for the unauthorized transfer of respondents funds to Tevesteco?
Decision:
1.We hold that the parties did not intend the deposit to be treated as a
demanddeposit but rather as an interest-earning time deposit not withdrawable
anytime.When respondent FMIC invested its money with petitioner BPI FB, they
intended theP100 million as a time deposit, to earn 17% per annum interest and to
remain intactuntil its maturity date one year thereafter.Ordinarily, a time deposit is
defined as "one the payment of which cannot legally berequired within such a
specified number of days.In contrast, demand deposits are "all those liabilities of the
Bangko Sentral and of other banks which are denominated in Philippine currency and
are subject to paymentin legal tender upon demand by the presentation of
(depositors) checks.While it may be true that barely one month and seven days from
the date of deposit,respondent FMIC demanded the withdrawal of P86,057,646.72
through the issuance
of a check payable to itself, the same was made as a result of the fraudulent
andunauthorized transfer by petitioner BPI FB of its P80 million deposit to
Tevestecossavings account. Certainly, such was a normal reaction of respondent as a
depositorto petitioners failure in its fiduciary duty to treat its account with the
highest degreeof care.Under this circumstance, the withdrawal of deposit by
respondent FMIC before theone-year maturity date did not change the nature of its
time deposit to one of demand deposit.We have held that if a corporation knowingly
permits its officer, or any other agent, toperform acts within the scope of an apparent
authority, holding him out to the publicas possessing power to do those acts, the
corporation will, as against any person whohas dealt in good faith with the
corporation through such agent, be estopped fromdenying such authority.Petitioner
maintains that respondent should have first inquired whether the deposit of P100
Million and the fixing of the interest rate were pursuant to its (petitioners)internal
procedures. Petitioners stance is a futile attempt to evade an obligationclearly
established by the intent of the parties. What transpires in the corporate boardroom
is entirely an internal matter. Hence, petitioner may not impute negligence onthe
part of respondents representative in failing to find out the scope of authority of
petitioners Branch Manager. Indeed, the public has the right to rely on
thetrustworthiness of bank managers and their acts. Obviously, confidence in
thebanking system, which necessarily includes reliance on bank managers, is vital in
theeconomic life of our society Significantly, the transaction was actually
acknowledged and ratified by petitionerwhen it paid respondent in advance the
interest for one year. Thus, petitioner isestopped from denying that it authorized its

Branch Manager to enter into anagreement with respondents Executive Vice

President concerning the deposit withthe corresponding 17% interest per
annum.2.Yes. We uphold the finding of both lower courts that petitioner failed
toexercise that degree of diligence required by the nature of its obligations to
itsdepositors. A bank is under obligation to treat the accounts of its depositorswith
meticulous care, whether such account consists only of a few hundredpesos or of
million of pesos.10 Here, petitioner cannot claim it exercised such adegree of care
required of it and must, therefore, bear the consequence.