B. Fiduciary Duty i.

Section 2 of the GBL the State recognizes the fiduciary nature of banking that requires high standards of integrity and performance. Statutory declaration echoes the earlier pronouncement of the Supreme Court (Simex International Manila Inc vs. CA) requiring banks to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. ( Ibid)

Bank). The law simply imposes a higher degree of integrity and performance in complying with its obligations under the contract of simple loan, beyond those of non-bank debtors. ii. The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept deposits to enrich depositors but to earn money themselves. D. Indispensable Instiution The Supreme Court never fails to express the importance of banking institutions with regard to commercial transactions and to the countrys economy in general. (Metropolitan Bank and Trust Company vs. Cabilzo) The Banking system is indispensable in the modern world and plays a vital role in the economic life of every civilized nation. Whether as 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, gratitude and confidence. E. Impressed with Public Interest i. The business of banking is imbued with public interest. The stability of banks largely depends on the confidence of the public/people in the honesty and efficiency of banks.

ii. The fiduciary relationship means that the banks obligation to observe the high standards of integrity and performance is deemed written into every deposit between the bank and the depositor. iii. The fiduciary nature of banking requires banks to assume diligence higher than that of a good father of a family. The banks fiduciary duty imposes upon it a higher level of accountability than that expected of a depositor (Philippine Banking Corporation vs. CA) C. Not a Trust Agreement i. The fiduciary relationship does not convert a simple loan to a trust agreement, whether express or implied. Failure of a bank to pay a simple loan is not a breach of trust (Serrano vs. Central

** In every case, the depositor expects the banks 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. (Simex International vs. CA, 183 SCRA 360, March 19, 1990) ii. 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 (diligence higher than pater familias or good father of a family. BPI vs CA, 383, Phil, 538) is expected ( Philippine Commercial International Bank vs. CA, 350 SCRA 446) F. Degree of Diligence i. Philippine Bank of Commerce vs. Court of Appeals (Reyes vs. Court of Appeals, G.R. No. 118492, August 15, 2001), upholding a long standing doctrine, the SC ruled that the degree of diligence required by 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. EXCEPTIONS:

1. The same higher degree is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. 2. A bank is not required to exert more than the diligence of a good father of a family in regard to the SALE and ISSUANCE of FOREIGN EXCHANGE DEMAND DRAFT. It does not involve the handling of deposit, if any, with the bank. Instead the relationship involved is that of a buyer and a seller of the foreign exchange demand draft, and the buyer of the same (Reyes vs. Court of Appeals) NOTE: Diligence Extends to Financial Institutions: 1. A government financial institution (GSIS) is expected to exercise greater care and prudence in its dealings, including those involving registered lands (GSIS vs. Santiago) 2. Due diligence required of banks even to persons, or institutions, regularly engaged in the business of lending money recurred by real estate mortgages (Adriano vs. Pangilinan). G. Treatment of Accounts with Meticulous Care 1. A bank is under obligation to treat the accounts of its depositors with meticulous care. (Firestone Tire vs. CA) 2. The depositor expects the bank to treat his account with utmost fidelity. A blunder on the part of the bank 777