BANK POWERS AND LIABILITIES from the safety deposit box only upon both parties’ joint signatures
osit box only upon both parties’ joint signatures and
CA Agro-Industrial v. CA
FACTS:
1. On July 3, 1979, CA-Agro and Sps. Pugao entered into a
purchase agreement of 2 parcels of land. Among the terms
and conditions of the agreement were that the titles to the lots
shall be transferred upon full payment, and that the owner’s
copies of the TCR shall be deposited in a safety deposit box
of any bank (Security Bank). The same could only be
withdrawn upon signature of both parties upon full payment.
2. CA-Agro and Sps. Pugao rented safety deposit box of
Security Bank signifying their agreement in a contract of
lease, with the following conditions:
“13. The bank is not a depositary of the contents
of the safe and it has neither the possession nor
control of the same.
14. The bank has no interest whatsoever in said
contents, except herein expressly provided, and it
assumes absolutely no liability in connection
therewith.”
3. Two renter’s key were given to the renters and a guard key
remained in the possession of the bank. The safety deposit
bank has two keyholes—one can be unlocked only by the
renter’s key and the other by the guard key.
4. Thereafter, Mrs. Ramos expressed her willingness to buy the
parcel of land. The renters went to the bank to get the title
but were surprised when the box yielded no such certificates.
Mrs. Ramos withdrew her offer. Hence, the complaint of
CA-Agro against Security Bank.
5. The RTC favored Security Bank on the basis of conditions
#13 and #14 which extinguished its liability in the lost
contents of the safety deposit box.
6. The CA affirmed RTC decision on the basis that
the Bank retained no right to open the said box
because it had neither the possession nor control
over it and its contents.
ISSUE: Whether or not Security Bank can be held liable for the loss
of the contents of the safety deposit box.
RULING: The court ruled that the contract of the rent of safety deposit
box in not an ordinary contract of lease. However, it does not subscribe
that it is a contract of deposit that must be strictly governed by the
provisions of deposit in the Civil Code. It declared that the agreement
was a special kind of deposit.
It cannot be characterized as an ordinary contract of lease under Art.
1643 because the full and absolute possession and control of the safety
deposit box was not given to the joint renters. On the other hand, the
bank could not likewise open the box without the renter’s key.
The relation between a bank renting out safe deposit boxes and its
customer with respect to the contents of the box is that of a bailor and
bailee, the bailment being for hire and mutual benefit.
It is clear from Sec. 72 of the GBA that the bank performs such services
as depositaries. In relation to this, Art. 1306 of the Civil Code allows
the parties to stipulate on the terms for as long as it is not contrary to
law, morals, good customs, public order or public policy. Reviewing
the words of conditions #13 and #14 would make it seem as an invalid
provision. Hence, absent this two, the bank will be deemed liable.
The court, however, ruled for the dismissal of the complaint because
although it was a special contract of deposit, petitioner failed to show
that respondent was aware of the agreement between the petitioner and
Sps. Pugaos to the effect that the certificates of title were withdrawable
Page 1 of 42
that no evident was submitted to reveal that the loss if the certificates
was due to the fraud or negligence of the Security Bank.
Sia v. CA
FACTS:
1. Sia rented a safety deposit box of Security Bank at its
Binondo branch wherein he placed his collection of stamps.
The location of the boxes were at the bottom or at the lowest
level of the column.
2. During the floods, water entered into the bank and seeped
into the safety deposit boxes, causing damage to Sia’s stamp
collection. He then claimed for compensation but was denied
by the bank. Hence, an action for damage was filed.
3. Security bank claims that what was between them and Sia
was a contract of lease and that the flooding was beyond their
control.
4. RTC directed an ocular inspection. They found out that the
stamps were badly damaged. Thus, ruling in favor of Sia.
5. Upon appeal, CA, however, reversed the RTC decision. It
ruled that the lease agreement constitutes terms and
conditions that were agreed by the parties. The said
provisions limited the exercise of diligence of the bank only
to prevent the opening the box by any person other than the
renter.
6. Hence, this appeal before the SC.
ISSUE: Whether or not Security bank can be held liable for the
irreparable damage to the contents of the safety deposit box.
RULING: The court ruled on the basis of CA-Agro. However,
declaring that the bank in this case failed to exercise the reasonable
care and prudence expected of a good father of a family, thereby
becoming a party to the aggravation of the injury or loss.
DILIGENCE REQUIRED OF BANKS
Simex v. CA
FACTS: Petitioner, a private corporation engaged in the exportation
of food products, was a depositor maintaining a checking account with
respondent Traders Royal Bank. Petitioner deposited to its account
increasing its balance and subsequently, issued several checks but was
surprised to learn that it had been dishonored for insufficient funds. As
a consequence, petitioner received demand letters from its suppliers
for the dishonored checks. Investigation disclosed that the deposit was
not credited to it. The error was rectified and the dishonored checks
were consequently paid. Petitioner demanded reparation from
respondent bank for its gross and wanton negligence but the later did
not heed. Petitioner then filed before the RTC which later held that
respondent bank was guilty of negligence but petitioner nonetheless
was not entitled to moral damages. CA affirmed.
ISSUE: Whether or not petitioner is entitled to damages due to
respondent bank’s negligence.
RULING: YES. As the Court sees it, 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. 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.
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. 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.
Consolidated Bank v. CA
G.R. No. 138569. September 11, 2003.*
THE CONSOLIDATED BANK and TRUST CORPORATION,
petitioner, vs. COURT OF APPEALS and L.C. DIAZ and
COMPANY, CPA’s, respondents.
DOCTRINE: Bank tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or to his
authorized representative.
FACTS:
1. On 14 August 1991, L.C. Diaz through its cashier,
Macaraya, filled up a savings (cash) deposit slip for P990
and a savings (checks) deposit slip for P50.
a. Macaraya instructed the messenger of L.C. Diaz,
Calapre, to deposit the money with Solidbank.
Macaraya also gave Calapre the Solidbank
passbook.
b. Calapre went to Solidbank and presented to Teller
No. 6 the two deposit slips and the passbook.
c. The teller acknowledged receipt of the deposit by
returning to Calapre the duplicate copies of the
two deposit slips. Teller No. 6 stamped the deposit
slips with the words “DUPLICATE” and
“SAVING TELLER 6 SOLIDBANK HEAD
OFFICE.”
d. Since the transaction took time and Calapre had to
make another deposit for L.C. Diaz with Allied
Bank, he left the passbook with Solidbank.
Calapre then went to Allied Bank.
e. When Calapre returned to Solidbank to
retrieve the passbook, Teller No. 6 informed
him that “somebody got the passbook.” Calapre
went back to L.C. Diaz and reported the incident
to Macaraya.
2. Macaraya immediately prepared a deposit slip in duplicate
copies with a check of P200,000.
a. Macaraya, together with Calapre, went to
Solidbank and presented to Teller No. 6 the
deposit slip and check.
b. The teller stamped the words “DUPLICATE” and
“SAVING TELLER 6 SOLIDBANK HEAD
OFFICE” on the duplicate copy of the deposit slip.
c. When Macaraya asked for the passbook, Teller
No. 6 told Macaraya that someone got the
passbook but she could not remember to whom she
gave the passbook.
d. When Macaraya asked Teller No. 6 if Calapre got
the passbook, Teller No. 6 answered that someone
shorter than Calapre got the passbook. Calapre
was then standing beside Macaraya.
e. Teller No. 6 handed to Macaraya a deposit slip
dated 14 August 1991 for the deposit of a check
for P90,000 drawn on Philippine Banking
Corporation (“PBC”). This PBC check of L.C.
Page 2 of 42
Diaz was a check that it had “long closed.” PBC
subsequently dishonored the check because of
insufficient funds and because the signature in the
check differed from PBC’s specimen signature.
3. The following day, 15 August 1991, L.C. Diaz through its
Chief Executive Officer, Diaz, called up Solidbank to stop
any transaction using the same passbook until L.C. Diaz
could open a new account.
a. On the same day, Diaz formally wrote Solidbank
to make the same request. It was also on the same
day that L.C. Diaz learned of the unauthorized
withdrawal the day before, 14 August 1991, of
P300,000 from its savings account. The
withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C.
Diaz, namely Diaz and Rustico L. Murillo. The
signatories, however, denied signing the
withdrawal slip. A certain Noel Tamayo received
the P300,000.
4. In an Information dated 5 September 1991, L.C. Diaz
charged its messenger, Ilagan and one Verdazola with Estafa
through Falsification of Commercial Document.
a. The Regional Trial Court of Manila dismissed the
criminal case after the City Prosecutor filed a
Motion to Dismiss on 4 August 1992.
5. On 24 August 1992, L.C. Diaz through its counsel demanded
from Solidbank the return of its money.
a. Solidbank refused.
6. On 25 August 1992, L.C. Diaz filed a Complaint for
Recovery of a Sum of Money against Solidbank with the
RTC.
a. RTC dimissed the complaint and absolved
Solidbank
b. the trial court applied the rules on savings account
written on the passbook. The rules state that
“possession of this book shall raise the
presumption of ownership and any payment or
payments made by the bank upon the production
of the said book and entry therein of the
withdrawal shall have the same effect as if made
to the depositor personally.”
c. Another provision of the rules on savings account
states that the depositor must keep the passbook
“under lock and key.” When another person
presents the passbook for withdrawal prior to
Solidbank’s receipt of the notice of loss of the
passbook, that person is considered as the owner
of the passbook. The trial court ruled that the
passbook presented during the questioned
transaction was “now out of the lock and key and
presumptively ready for a business transaction.”
d. At the time of the alleged unauthorized
withdrawal, a certain Tamayo was not only in
possession of the passbook, he also presented a
withdrawal slip with the signatures of the
authorized signatories of L.C. Diaz. The
specimen signatures of these persons were in the
signature cards. The teller stamped the withdrawal
slip with the words “Saving Teller No. 5.”
e. The teller then passed on the withdrawal slip to
Manuel for authentication. Manuel verified the
signatures on the withdrawal slip. The withdrawal
slip was then given to another officer who
compared the signatures on the withdrawal slip
with the specimen on the signature cards.
f. The trial court concluded that Solidbank acted
with care and observed the rules on savings
account when it allowed the withdrawal of
P300,000 from the savings account of L.C. Diaz.
 g. The trial court believed that Solidbank’s act of
allowing the withdrawal of P300,000 was not
the direct and proximate cause of the loss. The
trial court held that L.C. Diaz’s negligence
caused the unauthorized withdrawal. Three
facts establish L.C. Diaz’s negligence: (1) the
possession of the passbook by a person other
than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal receipt by
an unauthorized person; and (3) the possession
by an unauthorized person of a PBC check
“long closed” by L.C. Diaz, which check was
deposited on the day of the fraudulent
withdrawal.
7. LC Diaz appealed before the CA.
a. The CA reversed the RTC decision.
b. The Court of Appeals ruled that Solidbank’s
negligence was the proximate cause of the
unauthorized withdrawal of P300,000 from the
savings account of L.C. Diaz.
c. The appellate court stated that the teller, who was
not presented by Solidbank during trial, should
have called up the depositor because the money to
be withdrawn was a significant amount. Had the
teller called up L.C. Diaz, Solidbank would have
known that the withdrawal was unauthorized. The
teller did not even verify the identity of the
impostor who made the withdrawal.
d. The appellate court ruled that while L.C. Diaz was
also negligent in entrusting its deposits to its
messenger and its messenger in leaving the
passbook with the teller, Solidbank could not
escape liability because of the doctrine of “last
clear chance.” Solidbank could have averted the
injury suffered by L.C. Diaz had it called up L.C.
Diaz to verify the withdrawal.
e. The appellate court ruled that the degree of
diligence required from Solidbank is more than
that of a good father of a family. The business
and functions of banks are affected with public
interest. Banks are obligated to treat the
accounts of their depositors with meticulous
care, always having in mind the fiduciary
nature of their relationship with their clients.
The Court of Appeals found Solidbank remiss
in its duty, violating its fiduciary relationship
with L.C. Diaz.
f. Solidbank filed for a MR but was denied by CA.
8. Hence, this petition for review on certioriari
ISSUE: Whether or not Solidbank should be held liable for the loss
of its client LC Diaz.
HELD:
1. We hold that Solidbank is liable for breach of contract due
to negligence, or culpa contractual.
a. The savings deposit agreement between the bank
and the depositor is the contract that determines
the rights and obligations of the parties.
b. 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.
2. When the passbook is in the possession of Solidbank’s
tellers during withdrawals, the law imposes on Solidbank
Page 3 of 42
and its tellers an even higher degree of diligence in
safeguarding the passbook.
a. If the tellers give the passbook to the wrong
person, they would be clothing that person
presumptive ownership of the passbook,
facilitating unauthorized withdrawals by that
person.
b. For failing to return the passbook to Calapre, the
authorized representative of L.C. Diaz, Solidbank
and Teller No. 6 presumptively failed to observe
such high degree of diligence in safeguarding the
passbook, and in insuring its return to the party
authorized to receive the same.
3. In culpa contractual, once the plaintiff proves a breach of
contract, there is a presumption that the defendant was at
fault or negligent. The burden is on the defendant to prove
that he was not at fault or negligent.
a. In contrast, in culpa aquiliana the plaintiff has the
burden of proving that the defendant was
negligent.
b. In the present case, L.C. Diaz has established that
Solidbank breached its contractual obligation to
return the passbook only to the authorized
representative of L.C. Diaz. There is thus a
presumption that Solidbank was at fault and its
teller was negligent in not returning the passbook
to Calapre.
c. The burden was on Solidbank to prove that there
was no negligence on its part or its employees.
However, it failed to discharge its burden.
4. Solidbank is bound by the negligence of its employees under
the principle of respondeat superior or command
responsibility.
a. The defense of exercising the required diligence in
the selection and supervision of employees is not
a complete defense in culpa contractual, unlike
in culpa aquiliana.
b. The bank must not only exercise “high standards
of integrity and performance,” it must also insure
that its employees do likewise because this is the
only way to insure that the bank will comply with
its fiduciary duty. Solidbank failed to present the
teller who had the duty to return to Calapre the
passbook, and thus failed to prove that this teller
exercised the “high standards of integrity and
performance” required of Solidbank’s employees.
5. Solidbank failed to fulfill its contractual obligation
because it gave the passbook to another person.
a. L.C. Diaz was not at fault that the passbook landed
in the hands of the impostor.
b. Solidbank was in possession of the passbook while
it was processing the deposit.
c. After completion of the transaction, Solidbank had
the contractual obligation to return the passbook
only to Calapre, the authorized representative of
L.C. Diaz.
6. The proximate cause of the unauthorized withdrawal
was Solidbank’s negligence in not returning the
passbook to Calapre.
a. We do not subscribe to the appellate court’s theory
that the proximate cause of the unauthorized
withdrawal was the teller’s failure to call up L.C.
Diaz to verify the withdrawal.
7. Last clear chance: We do not apply the doctrine of last clear
chance to the present case.
a. Solidbank is liable for breach of contract due to
negligence in the performance of its contractual
obligation to L.C. Diaz.
 b. This is a case of culpa contractual, where neither
the contributory negligence of the plaintiff nor his
last clear chance to avoid the loss, would exonerate
the defendant from liability. Such contributory
negligence or last clear chance by the plaintiff
merely serves to reduce the recovery of damages
by the plaintiff but does not exculpate the
defendant from his breach of contract.
8. 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.
Metro Bank v. Cabilzo
G.R. No. 154469. December 6, 2006.*
METROPOLITAN BANK AND TRUST COMPANY,
petitioner, vs. RENATO D. CABILZO, respondent.
DOCTRINE: 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.
FACTS:
1. On 12 November 1994, Cabilzo issued a Metrobank
Check No. 985988, payable to "CASH" and postdated on 24
November 1994 in the amount of P1,000.00.
a. The check was drawn against Cabilzo’s Account
with Metrobank and was paid by Cabilzo to a
certain Mr. Marquez, as his sales commission.
b. Subsequently, 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.
2. On 16 November 1994, Cabilzo’s representative was at
Metrobank to make some transaction when he was asked by
a bank personnel if Cabilzo had issued a check in the amount
of P91,000.00 to which the former replied in the negative.
a. On the afternoon of the same date, Cabilzo
himself called Metrobank to reiterate that he
did not issue a check in the amount
of P91,000.00 and requested that the
questioned check be returned to him for
verification, to which Metrobank complied.
b. Upon receipt of the check, Cabilzo discovered
that Metrobank Check No. 985988 which he
issued on 12 November 1994 in the amount
of P1,000.00 was altered to P91,000.00 and the
date 24 November 1994 was changed to 14
November 1994.
3. Cabilzo demanded that Metrobank re-credit the amount
of P91,000.00 to his account.
a. Metrobank, however, refused reasoning that it has
to refer the matter first to its Legal Division for
appropriate action.
b. Repeated verbal demands followed but Metrobank
still failed to re-credit the amount of P91,000.00 to
Cabilzo’s account.
4. On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-
demand to Metrobank for the payment of P90,000.00,
Page 4 of 42
after deducting the original value of the check in the amount
of P1,000.00.
a. Such written demand notwithstanding,
Metrobank still failed or refused to comply with
its obligation.
5. Cabilzo filed a civil action for damages against Metrobank
before the RTC.
a. For its part, Metrobank countered that upon the
receipt of the said check through the PCHC on 14
November 1994, 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.
b. After verifying the authenticity and propriety of
the aforesaid entries, including the indorsement of
the collecting bank located at the dorsal side of the
check which stated that, "all prior indorsements
and lack of indorsement guaranteed," Metrobank
cleared the check.
c. Anent thereto, Metrobank claimed that as a
collecting bank and the last indorser, Westmont
Bank should be held liable for the value of the
check. Westmont Bank indorsed the check as the
an unqualified indorser, by virtue of which it
assumed the liability of a general indorser, and
thus, among others, warranted that the instrument
is genuine and in all respect what it purports to be.
d. Metrobank also claims that the proximate cause of
the loss is Cabilzo’s negligence in the preparation
and issuance of checks with spaces that made the
fraudulent insertion of the amount and figures
possible.
6. RTC ordered Metrobank to pay the sum of P90,000.
a. The court stressed 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.
7. Metrobank appealed to the CA, reiterating the it is Westmont
Bank that should be held liable.
a. Even more, Metrobank argued that in clearing the
check, it was not remiss in the performance of its
duty as the drawee bank, but rather, it exercised
the highest degree of diligence in accordance with
the generally accepted banking practice.
b. It further insisted that the entries in the check
were regular and authentic and alteration
could not be determined even upon close
examination.
8. The CA affirmed the decision of RTC.
a. Metrobank filed an MR but was also denied by
CA.
ISSUE: Whether or not Metrobank is liable for the alterations on the
check bearing the authentic signature of the drawer. YES.
HELD:
1. An alteration is said to be material if it changes the effect of
the instrument. It means that an unauthorized change in an
instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words or
numbers or other change to an incomplete instrument
relating to the obligation of a party.
a. In the case at bar, the check was altered so that the
amount was increased from P1,000.00
to P91,000.00 and the date was changed from 24
November 1994 to 14 November 1994.
 Apparently, since the entries altered were among
those enumerated under Section 1 and 125,
namely, the sum of money payable and the date of
the check, the instant controversy therefore
squarely falls within the purview of material
alteration.
b. Section 124 of the NIL: Where a negotiable
instrument is materially altered without the assent
of all parties liable thereon, it is avoided, except
as against a party who has himself made,
authorized, and assented to the
alteration and subsequent indorsers.
c. The degree of diligence required of a reasonable
man in the exercise of his tasks and the
performance of his duties has been faithfully
complied with by Cabilzo. In fact, he was wary
enough that he filled with asterisks the spaces
between and after the amounts, not only those
stated in words, but also those in numerical
figures, in order to prevent any fraudulent
insertion, but unfortunately, the check was still
successfully altered, indorsed by the collecting
bank, and cleared by the drawee bank, and
encashed by the perpetrator of the fraud, to the
damage and prejudice of Cabilzo.
2. 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. 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. The appropriate degree of diligence
required of a bank must be a high degree of
diligence, if not the utmost diligence.
3. In the present case, it is obvious that Metrobank was remiss
in that duty and violated that relationship.
a. As observed by the Court of Appeals, there are
material alterations on the check that are visible to
the naked eye.
b. x x x The number "1" in the date is clearly imposed
on a white figure in the shape of the number "2".
The appellant’s employees who examined the said
check should have likewise been put on guard as
to why at the end of the amount in words, i.e., after
the word "ONLY", there are 4 asterisks, while at
the beginning of the line or before said phrase,
there is none, even as 4 asterisks have been placed
before and after the word "CASH" in the space for
payee. In addition, the 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. The same can be
said of the 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 to insert the said figure. The
appellant’s employees should have again noticed
why only 2 asterisks were placed before the
amount in figures, while 3 asterisks were placed
after such amount. The word "NINETY" is also
typed differently and with a lighter ink, when
Page 5 of 42
compared with the words "ONE THOUSAND
PESOS ONLY." The letters of the word "NINETY"
are likewise a little bigger when compared with
the letters of the words "ONE THOUSAND
PESOS ONLY".
c. Metrobank failed to detect the above
alterations which could not escape the attention
of even an ordinary person. This negligence was
exacerbated by the fact that, as found by the trial
court, the check in question was examined by the
cash custodian whose functions do not include the
examinations of checks indorsed for payment
against drawer’s accounts. Obviously, the
employee allowed by Metrobank to examine the
check was not verse and competent to handle such
duty.
d. we need to reiterate that by the very nature of their
work the degree of responsibility, care and
trustworthiness expected of their employees and
officials is far better 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.
4. the bank on which the check is drawn, known as the drawee
bank, is under strict liability to pay to the order of the payee
in accordance with the drawer’s instructions as reflected on
the face and by the terms of the check. Payment made under
materially altered instrument is not payment done in
accordance with the instruction of the drawer.
5. Metrobank failed to comply with the degree required by
the nature of its business as provided by law and
jurisprudence.
a. If indeed it was not remiss in its obligation, then it
would be inconceivable for it not to detect an
evident alteration considering its vast knowledge
and technical expertise in the intricacies of the
banking business.
b. Metrobank’s contention that it relied on the
strength of collecting bank’s indorsement may be
merely a lame excuse to evade liability, or may be
indeed an actual banking practice. In either case,
such act constitutes a deplorable banking practice
and could not be allowed by this Court bearing in
mind that the confidence of public in general is of
paramount importance in banking business.
c. What is even more deplorable is that, having been
informed of the alteration, Metrobank did not
immediately re-credit the amount that was
erroneously debited from Cabilzo’s account but
permitted a full blown litigation to push through,
to the prejudice of its client.
6. 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. Costs against the
petitioner.
PNB v. Pike
G.R. No. 157845. September 20, 2005.*
PHILIPPINE NATIONAL BANK, petitioner, vs. NORMAN Y.
PIKE, respondent.
DOCTRINE: It bears emphasizing that negligence of banking
institutions should never be countenanced—though its employees may
be the ones negligent, a bank’s liability as an obligor is not merely
vicarious but primary, as banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees.
FACTS:
1. Sometime in 1991, pike opened a US Dollar Savings
Account with PNB Buendia where he was issued a passbook.
a. The complaint alleged that before Pike left for
Japan on March 18, 1993, he kept the passbook
under lock and key in his home.
2. On March 18, 1993, after his arrival in Japan, he discovered
that some of his valuables were missing including the
passbook.
a. He immediately reported the incident to the police
which led to the arrest and prosecution of a certain
Davasol.
b. Pike also discovered that Davasol made 2
unauthorized withdrawals from his account at the
PNB Buendia amounting to $7,500.00
c. He went to the bank to verbally protest the
unauthorized withdrawals but PNB refused to
credit such amount claiming that it exercised due
diligence in the handling of the said account.
d. on 06 May 1993, complainant Pike wrote
defendant PNB simply to request that the hold-
account be lifted so that he may withdraw the
remaining balance left in his U.S.$ Savings
Account and nothing else.
3. PNB claims that Pike, together with Davasol, went to see
PNB AVP Val purposely to withdraw the amount of
$2,000.00.
a. Pike also informed AVP Val that the he is leaving
for Japan and made verbal instruction to honor all
withdrawals to be transmitted by his Talent
Manager and Choreographer Davasol who shall
present pre-signed withdrawal slips bearing Pike’s
signatures.
4. On April 19, 1993, Balmaceda, Pike’s sister, executed an
affidavit on the lost passbook.
a. It was submitted to the police and a request to issue
a hold-order on the passbook was then submitted
to PNB.
b. Pike later on sent a letter requesting the lifting of
the hold-order so that he could withdraw the
remaining balance of the account.
5. A demand letter was also sent to PNB for the recrediting of
the amount lost to Davasol’s unauthorozed withdrawals.
a. PNB replied that it cannot accede to such request
because it exercised due diligence of a good father
in the handling of the transaction.
b. Furthermore, it said that Pike’s withdrawal of the
remaining balance effectively estops him from
claiming the alleged unauthorized withdrawals.
6. RTC rendered a decision holding bank responsible for
the unauthorized withdrawals.
a. The court compared the signatures in the
questioned withdrawal slips with the known
signatures of the depositor and is convinced that
the signatures in the unauthorized withdrawal slips
do not correspond to the true signatures of the
depositor.
7. On appeal, CA affirmed the RTC decision.
a. The court cannot also understand why the bank did
not require the correct, proper and the usual
procedure of requiring a depositor who is
withdrawing the money through a representative
to fill up the back portion of the withdrawal slips,
which form was issued by the bank itself.
b. PNB filed a MR but was denied.
8. Hence, this petition for review on certiorari.
Page 6 of 42
ISSUE: Whether or not PNB should be held responsible for the
unauthorized withdrawals in the account of Pike.
HELD:
1. Finding no other alternative but to affirm their finding that
petitioner PNB negligently allowed the unauthorized
withdrawals subject of the case at bar, the instant petition for
review must necessarily fail.
2. The negligence here lies in the lackadaisical attitude
exhibited by employees of petitioner PNB in their
treatment of respondent Pike’s US Dollar Savings
Account that resulted in the unauthorized withdrawal of
$7,500.00.
a. Nevertheless, though its employees may be the
ones negligent, a bank’s liability as an obligor is
not merely vicarious but primary, as banks are
expected to exercise the highest degree of
diligence in the selection and supervision of their
employees, and having such obligation, this Court
cannot ignore the circumstances surrounding the
case at bar – how the employees of petitioner PNB
turned their heads, nay, closed their eyes to the
suspicious circumstances enfolding the two
withdrawals subject of the case at bar.
b. It may even be said that they went out of their ways
to disregard standard operating procedures
formulated to ensure the security of each and every
account that they are handling.
c. Petitioner PNB does not deny that the withdrawal
slips used were in breach of standard operating
procedures of banks in the ordinary and usual
course of banking operations
d. Ordinarily, banks allow withdrawal by someone
who is not the account holder so long as the
account holder authorizes his representative to
withdraw and receive from his account by signing
on the space provided particularly for such
transactions, usually found at the back of
withdrawal slips.
e. By his own testimony, the witness negated the
very reason for the bank’s bizarre
"accommodation" of the alleged verbal request of
respondent Pike – that he was a "valued client."
From the aforequoted, it appears that the
witness, Lorenzo Bal, was not even reasonably
familiar with respondent Pike, yet, he was
ready, willing and able to accommodate
the verbal request of said depositor. Worse still,
the witness still approved the withdrawal
transaction without asking for any proof of
identification for the reason that: 1) Davasol was
in possession of a pre-signed withdrawal slip; and
2) the witness "recognized" the signature of
respondent Pike – even after admitting that he did
not bother to counter check the signature on the
slip with the specimen signature card of
respondent Pike and that he met respondent Pike
just once so that he cannot seem to recall what the
latter looks like.
f. Clearly, petitioner bank’s employee, Lorenzo
T. Bal, an Assistant Vice President at that, was
exceedingly careless in his treatment of
respondent Pike’s savings account.
3. From the foregoing, the evidence clearly showed that the
petitioner bank did not exercise the degree of diligence
that it ought to have exercised in dealing with their
clients.
a. With banks, the degree of diligence required,
contrary to the position of petitioner PNB, is more
 than that of a good father of a family considering
that the business of banking is imbued with public
interest due to the nature of their functions.
b. The stability of banks largely depends on the
confidence of the people in the honesty and
efficiency of banks.
c. Thus, the law imposes on banks a high degree of
obligation to treat the accounts of its depositors
with meticulous care, always having in mind the
fiduciary nature of banking. Section 2 of Republic
Act No. 8791,25 which took effect on 13 June
2000, makes a categorical declaration that the
State recognizes the "fiduciary nature of banking
that requires high standards of integrity and
performance."
BPI v. Lifetime Marketing
G.R. No. 176434. June 25, 2008.*
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs.
LIFETIME MARKETING CORPORATION, respondent.
DOCTRINE: The degree of diligence required of banks is more than
that of a reasonable man or a good father of a family; In view of 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.
FACTS:
1. On October 22, 1981, LMC opened an account with BPI
where its sales agents would deposit their collections or
payments to the former.
a. LMC and BPI made a special arrangement that
LMC’s agents will accomplishe 3 copies of the
deposit slips. The 3rd copy to be retained and held
by the tellec until LMC’s authorized reps, Mongon
and Ancajas, shall retrieve them on the following
banking day.
2. Sometime in 1986, LMC availed of BPI’s interbranch
banking network services, whereby the former’s agents
could make a deposit to any BPI branch in Metro Manila
under the same account.
a. Under this system, BPI's bank tellers were no
longer obliged to retain the extra copy of the
deposit slips instead, they will rely on the
machine-validated deposit slip, to be submitted by
LMC's agents.
b. For its part, BPI would send to LMC a monthly
bank statement relating to the subject account.
This practice was observed and complied with by
the parties.
3. As a business practice, the registered sales agents of LMC
can get books from the latter on consignment basis, then they
would go directly to their clients to sell.
a. These agents would then pay to LMC, 7 days after
they pick up all the books to be sold.
b. Since LMC have several agents, it required to
remit their payments through BPI, where LMC
maintained its account.
c. It has been LMC's practice to require its agents to
present a validated deposit slip and, on that basis,
LMC would issue to the latter an
acknowledgement receipt.
4. On various dates covering the period from May 1991 to
August 1992, Laurel, a sales agent of LMC, deposited
checks to LMC’s account at different branches of BPI.
a. A verification with BPI by LMC showed that
Alice Laurel made check deposits with the named
BPI branches and, after the check deposit slips
Page 7 of 42
were machine-validated, requested the teller to
reverse the transactions.
b. Based on general banking practices, however, the
cancellation of deposit or payment transactions
upon request by any depositor or payor, requires
that all copies of the deposit slips must be retrieved
or surrendered to the bank. This practice, in effect,
cancels the deposit or payment transaction, thus, it
leaves no evidence for any subsequent claim or
misrepresentation made by any innocent third
person.
c. Notwithstanding this, the verbal requests of
Alice Laurel and her husband to reverse the
deposits even after the deposit slips were
already received and consummated were
accommodated by BPI tellers.
d. Laurel presented the machine-validated
deposit slips to LMC which considered her
account paid.
e. LMC even granted her certain privileges or prizes
based on the deposits she made.
f. the total aggregate amount of Laurel’s deposit
slips was P2,767,594, and for which , LMC paid
Laurel the total sum of P560,726 by way of sales
discounts and promo prizes.
5. the fraudulent transactions of Laurel and her husband was
made possible through BPI teller’s failure to retrieve the
duplicate original copies of the deposit slips from the former,
every time they ask for cancellation or reversal of the deposit
or payment transaction.
a. Upon discovery of this fraud in early August 1992,
LMC made queries from the BPI branches
involved.
b. In reply to said queries, BPI branch managers
formally admitted that they cancelled, without the
permission of or due notice to LMC, the deposit
transactions made by Alice and her husband, and
based only upon the latter's verbal request or
representation.
6. LMC filed a complaint for Estafa against Laurel before the
RTC.
a. the case, however, was archived because summons
could not be served upon the spouses as they have
absconded.
7. LMC filed a claim for damages against BPI.
a. RTC ruled in favor of LMC.
8. BPI filed an appeal before the CA.
a. CA affirmed the decision of the RTC but increased
the award of actual damages to P2M.
9. Hence, this petition for review on certiorari.
a. BPI insists that LMC should have presented
evidence to prove not only the amount of the
checks that were deposited and subsequently
reversed, but also the actual delivery of the books
and the payment of "sales and promo prizes" to
Alice Laurel.
b. Failing this, there was allegedly no basis for the
award of actual damages. Moreover, the actual
damages should not have been increased because
the decision of the trial court became conclusive
as regards LMC when it did not appeal the said
decision.
c. BPI further avers that LMC's negligence in
considering the machine-validated check
deposit slips as evidence of Alice Laurel's
payment was the proximate cause of its own
loss.
d. Furthermore, LMC allegedly ignored the express
notice indicated in its monthly bank statements
 and consequently failed to check the accuracy of
the transactions reflected therein.
ISSUE: Whether BPI observed the highest degree of care in handling
LMC's account.
HELD:
1. In this case, both the trial court and the Court of Appeals
found that the reversal of the transactions in question was
unilaterally undertaken by BPI's tellers without following
normal banking procedure which requires them to ensure
that all copies of the deposit slips are surrendered by the
depositor. The machine-validated deposit slips do not
show that the transactions have been cancelled, leading
LMC to rely on these slips and to consider Alice Laurel's
account as already paid.
2. 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 not do.
a. Negligence in this case lies in the tellers'
disregard of the validation procedures in place
and BPI's utter failure to supervise its
employees.
b. Notably, BPI's managers admitted in several
correspondences with LMC that the deposit
transactions were cancelled without LMC's
knowledge and consent and based only upon the
request of Alice Laurel and her husband.
3. BPI cannot escape liability because of LMC's failure to
scrutinize the monthly statements sent to it by the bank.
a. This omission does not change the fact that were it
not for the wanton and reckless negligence of
BPI's tellers in failing to require the surrender of
the machine-validated deposit slips before
reversing the deposit transactions, the loss would
not have occurred.
b. BPI's negligence is undoubtedly the proximate
cause of the loss. Proximate cause is that cause
which, in a natural and continuous sequence,
unbroken by any efficient intervening cause,
produces the injury, and without which the result
would not have occurred.
4. It is also true, however, that LMC should have been more
vigilant in managing and overseeing its own financial
affairs. The damages awarded to it were correctly reduced
on account of its own contributory negligence in accordance
with Article 1172 of the Civil Code.
BPI v. Casa Montessori
G.R. No. 149454. May 28, 2004.*
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA
MONTESSORI INTERNATIONALE and LEONARDO T.
YABUT, respondents.
G.R. No. 149507. May 28, 2004.*
CASA MONTESSORI INTERNATIONALE,
petitioner, vs. BANK OF THE PHILIPPINE ISLANDS,
respondents.
DOCTRINE: Since the banking business is impressed with public
interest, of paramount importance thereto is the trust and confidence
of the public in general—the highest degree of diligence is expected,
and high standards of integrity and performance are even required of
it; 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
Page 8 of 42
of its own funds, and cannot ordinarily charge the amount so paid to
the account of the depositor whose name was forged.
FACTS:
1. On November 8, 1982, CASA Montessori opened an
account with BPI, with CASA’s President Lebron as one of
its authorized signatories.
2. In 1991, after conducting an investigation, CASA discovered
that 9 of its checks had been encashed by a certain Santos in
1990 in the total amount of P782,000.
a. It turned out that Santos was a fictitious name used
by third party defendant Yabut who worked as
external auditor of CASA.
b. Yabut admitted that he forged the signature of
Lebron and encashed the checks.
3. On March 4, 1991, CASA filed a complaint for collection
against BPI praying that the latter be ordered to reinstate the
amount of P782,500 in its account.
a. RTC ruled in favor of CASA.
4. Upon appeal, CA ruled that the loss should be apportioned
between BPI and CASA.
a. The appellate court took into account CASA’s
contributory negligence that resulted in the
undetected forgery.
b. It then ordered Leonardo T. Yabut to reimburse
BPI half the total amount claimed; and CASA, the
other half.
c. It also disallowed attorney’s fees and moral and
exemplary damages.
ISSUE: Whether or not both BPI and CASA are negligent in the
unauthorized encashment of checks. BPI LANG!!!
HELD:
1. Section 23 of NIL renders a forged signature as wholly
inoperative.
a. Yabut admitted that he forged Lebron’s signature.
2. Having established the forgery of the drawer’s signature,
BPI—the drawee—erred in making payments by virtue
thereof. The forged signatures are wholly inoperative, and
CASA—the drawer whose authorized signatures do not
appear on the negotiable instruments—cannot be held liable
thereon. Neither is the latter precluded from setting up
forgery as a real defense.
a. BPI contends that it has a signature verification
procedure, in which checks are honored only when
the signatures therein are verified to be the same
with or similar to the specimen signatures on the
signature cards.
b. Nonetheless, it still failed to detect the eight
instances of forgery. Its negligence consisted in
the omission of that degree of diligence
required78 of a bank.
c. It cannot now feign ignorance, for very early on
we have already ruled 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."
d. In fact, BPI was the same bank involved when we
issued this ruling seventy years ago.
3. Neither Waiver nor Estoppel Results from Failure to
Report Error in Bank Statement: This notice is a simple
confirmation or "circularization" -- in accounting parlance -
- that requests client-depositors to affirm the accuracy of
items recorded by the banks.
 a. Its purpose is to obtain from the depositors a direct
corroboration of the correctness of their account
balances with their respective banks.
b. Internal or external auditors of a bank use it as a
basic audit procedure -- the results of which its
client-depositors are neither interested in nor privy
to -- to test the details of transactions and balances
in the bank’s records.
c. Evidential matter obtained from independent
sources outside a bank only serves to provide
greater assurance of reliability than that obtained
solely within it for purposes of an audit of its own
financial statements, not those of its client-
depositors.
d. BPI has no right to impose a condition
unilaterally and thereafter consider failure to
meet such condition a waiver. Neither may
CASA renounce a right it has never possessed.
4. For allowing payment on the checks to a wrongful and
fictitious payee, BPI -- the drawee bank -- becomes liable to
its depositor-drawer.
a. Since the encashing bank is one of its
branches, BPI can easily go after it and hold it
liable for reimbursement.
b. It "may not debit the drawer’s account and is not
entitled to indemnification from the drawer."
c. Pursuant to its prime duty to ascertain well the
genuineness of the signatures of its client-
depositors on checks being encashed, BPI is
"expected to use reasonable business
prudence."108 In the performance of that
obligation, it is bound by its internal banking rules
and regulations that form part of the contract it
enters into with its depositors.
5. Unfortunately, BPI failed in that regard.
a. First, Yabut was able to open a bank account in
one of its branches without privity;110 that is,
without the proper verification of his
corresponding identification papers.
b. Second, BPI was unable to discover early on not
only this irregularity, but also the marked
differences in the signatures on the checks and
those on the signature card.
c. Third, despite the examination procedures it
conducted, the Central Verification Unit111of the
bank even passed off these evidently different
signatures as genuine.
d. Without exercising the required prudence on its
part, BPI accepted and encashed the eight checks
presented to it.
e. As a result, it proximately contributed to the fraud
and should be held primarily liable112 for the
"negligence of its officers or agents when acting
within the course and scope of their
employment."113
f. BPI must bear the loss.
6. In this jurisdiction, the negligence of the party invoking
forgery is recognized as an exception114 to the general rule
that a forged signature is wholly inoperative.115
a. Contrary to BPI’s claim, however, we do not find
CASA negligent in handling its financial affairs.
b. CASA, we stress, is not precluded from setting up
forgery as a real defense
Central Bank v. Citytrust Bank
G.R. No. 141835. February 4, 2009.*
Page 9 of 42
CENTRAL BANK OF THE PHILIPPINES, petitioner, vs.
CITYTRUST BANKING CORPORATION, respondent.
DOCTRINE: 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 fiduciary nature of banking requires
banks to assume a degree of diligence higher than that of a good father
of a family.
FACTS:
1. Pursuant to Republic Act No. 625, the old Central Bank Law,
Citytrust, formerly Feati Bank, maintained a demand deposit
account with petitioner Central Bank of the Philippines, now
Bangko Sentral ng Pilipinas.
2. As required, Citytrust furnished petitioner with the names
and corresponding signatures of five of its officers
authorized to sign checks and serve as drawers and indorsers
for its account.
a. It provided petitioner with the list and
corresponding signatures of its roving tellers
authorized to withdraw, sign receipts and perform
other transactions on its behalf.
b. Petitioner later issued security identification cards
to the roving tellers one of whom was Flores.
3. On July 15, 1977, Flores presented for payment to
petitioner’s Senior Teller Iluminada 2 Citytrust checks of
even date, payable to Citytrust, one in the amount of
₱850,000 and the other in the amount of ₱900,000, both of
which were signed and indorsed by Citytrust’s authorized
signatory-drawers.
a. After the checks were certified by CB’s
Accounting Department, Iluminada verified them,
prepared the cash transfer slip on which she
affixed her signature, stamped the checks with the
notation "Received Payment" and asked Flores to,
as he did, sign on the space above such notation.
b. Instead of signing his name, however, Flores
signed as "Rosauro C. Cayabyab" – a fact
Iluminada failed to notice.
c. Iluminada thereupon sent the cash transfer slip and
checks to petitioner’s Cash Department where an
officer verified and compared the drawers’
signatures on the checks against their specimen
signatures provided by Citytrust, and finding the
same in order, approved the cash transfer slip and
paid the corresponding amounts to Flores.
d. CB then debited the amount of the checks totaling
₱1,750,000 from Citytrust’s demand deposit
account.
4. More than a year and nine months later, Citytrust, by letter
dated April 23, 1979, alleging that the checks were already
cancelled because they were stolen, demanded petitioner to
restore the amounts covered thereby to its demand deposit
account.
a. Petitioner did not heed the demand, however.
5. Citytrust later filed a complaint for estafa, with reservation
on the filing of a separate civil action, against Flores. Flores
was convicted.
6. Citytrust thereafter filed before the RTC of Manila a
complaint for recovery of sum of money with damages
against petitioner which it alleged erred in encashing the
checks and in charging the proceeds thereof to its account,
despite the lack of authority of "Rosauro C. Cayabyab."
a. RTC Manila found both Citytrust and petitioner
negligent and accordingly held them equally
liable for the loss.
7. Both parties appealed before the CA.
a. CA affirmed the RTC decision.
 b. the appellate court noted that while "Citytrust
failed to take adequate precautionary measures to
prevent the fraudulent encashment of its checks,"
petitioner was not entirely blame-free in light of its
failure to verify the signature of Citytrust’s agent
authorized to receive payment.
8. Hence, this appeal.
a. CB maintains that Flores, having been an
authorized roving teller, Citytrust is bound by his
acts.
b. Also maintaining that it was not negligent in
releasing the proceeds of the checks to Flores, the
failure of its teller to properly verify his signature
notwithstanding, petitioner contends that
verification could be dispensed with, Flores
having been known to be an authorized roving
teller of Citytrust who had had numerous
transactions with it (petitioner) on its (Citytrust’s)
behalf for five years prior to the questioned
transaction.
c. Drawing attention to Citytrust’s considerable
delay in demanding the restoration of the proceeds
of the checks, petitioners argue that, assuming
arguendo that its teller was negligent, Citytrust’s
negligence, which preceded that committed by the
teller, was the proximate cause of the loss or fraud.
ISSUE: Whether or not Citytrust negligence is the proximate cause
of the loss or fraud to its account.
HELD:
1. Petitioner’s teller Iluminada did not verify Flores’ signature
on the flimsy excuse that Flores had had previous
transactions with it for a number of years.
a. That circumstance did not excuse the teller from
focusing attention to or at least glancing at Flores
as he was signing, and to satisfy herself that the
signature he had just affixed matched that of his
specimen signature.
b. Had she done that, she would have readily been
put on notice that Flores was affixing, not his but
a fictitious signature
2. The law imposes on banks high standards in view of the
fiduciary nature of banking. Section 2 of Republic Act No.
8791 ("RA 8791"), which took effect on 13 June 2000,
declares that the State recognizes the "fiduciary nature of
banking that requires high standards of integrity and
performance." This new provision in the general banking
law, introduced in 2000, is a statutory affirmation of
Supreme Court decisions, starting with the 1990 case of
Simex International v. Court of Appeals, holding that "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."
3. Citytrust’s failure to timely examine its account, cancel the
checks and notify petitioner of their alleged loss/theft should
mitigate petitioner’s liability, in accordance with Article
2179 of the Civil Code which provides that if the plaintiff’s
negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of
due care, the plaintiff may recover damages, but the courts
shall mitigate the damages to be awarded.
a. For had Citytrust timely discovered the loss/theft
and/or subsequent encashment, their proceeds or
part thereof could have been recovered.
4. In line with the ruling in Consolidated Bank, the Court
deems it proper to allocate the loss between petitioner and
Citytrust on a 60-40 ratio.
Page 10 of 42
PBCom v. CA
G.R. No. 97626. March 14, 1997.*
PHILIPPINE BANK OF COMMERCE, now absorbed by
PHILIPPINE COMMERCIAL INTERNATIONAL BANK,
ROGELIO LACSON, DIGNA DE LEON, MARIA ANGELITA
PASCUAL, et al., petitioners, vs. THE COURT OF APPEALS,
ROMMEL’S MARKETING CORP., represented by ROMEO
LIPANA, its President & General Manager, respondents.
DOCTRINE: A blunder on the part of the bank, such as the failure to
duly credit him his deposits as soon as they are made, can cause the
depositor not a little embarrassment if not financial loss and perhaps
even civil and criminal litigation.
FACTS:
1. RMC, represented by its president and GM Lipana, filed a
complaint to recover from PBC, the sum of P309,979.74
representing various deposits it had made in its current
account but which were not credited to its account, and were
instead deposited to the account of Cotas, allegedly due to
the gross and inexcusable negligence of the petitioner bank.
a. RMC maintained 2 separate accounts with PBC in
connection with its business of selling appliances.
b. In the ordinary and usual course of banking
operations, current account deposits are accepted
by the bank on the basis of deposit slips prepared
and signed by the depositor, or the latter's agent or
representative, who indicates therein the current
account number to which the deposit is to be
credited, the name of the depositor or current
account holder, the date of the deposit, and the
amount of the deposit either in cash or checks.
c. The deposit slip has an upper portion or stub,
which is detached and given to the depositor or his
agent; the lower portion is retained by the bank.
d. In some instances, however, the deposit slips are
prepared in duplicate by the depositor. The
original of the deposit slip is retained by the bank,
while the duplicate copy is returned or given to the
depositor.
2. From May 5, 1975 to July 16, 1976, petitioner Romeo
Lipana claims to have entrusted RMC funds in the form of
cash totalling P304,979.74 to his secretary, Yabut, for the
purpose of depositing said funds in the current accounts of
RMC with PBC.
a. It turned out, however, that these deposits, on all
occasions, were not credited to RMC's account but
were instead deposited to Account No. 53-01734-
7 of Yabut's husband, Bienvenido Cotas who
likewise maintains an account with the same bank.
b. During this period, petitioner bank had, however,
been regularly furnishing private respondent with
monthly statements showing its current accounts
balances.
c. Unfortunately, it had never been the practice of
Romeo Lipana to check these monthly statements
of account reposing complete trust and confidence
on petitioner bank.
3. Yabut’s modus operandi: She would accomplish 2 copies
of the deposit slip, an original and a duplicate.
a. The original showed the name of her husband as
depositor and his current account number.
b. On the duplicate copy was written the account
number of her husband but the name of the account
holder was left blank.
c. PBC's teller, Azucena Mabayad, would,
however, validate and stamp both the original
 and the duplicate of these deposit slips
retaining only the original copy despite the lack
of information on the duplicate slip. The second
copy was kept by Irene Yabut allegedly for record
purposes.
d. After validation, Yabut would then fill up the
name of RMC in the space left blank in the
duplicate copy and change the account number
written thereon, which is that of her husband's,
and make it appear to be RMC's account
number, i.e., C.A. No. 53-01980-3.
e. With the daily remittance records also prepared by
Ms. Yabut and submitted to private respondent
RMC together with the validated duplicate slips
with the latter's name and account number, she
made her company believe that all the while the
amounts she deposited were being credited to its
account when, in truth and in fact, they were being
deposited by her and credited by the petitioner
bank in the account of Cotas.
f. This went on in a span of more than one (1) year
without private respondent's knowledge.
4. Upon discovery of the loss of its funds, RMC demanded
from petitioner bank the return of its money, but as its
demand went unheeded, it filed a collection suit before the
RTC
a. RTC found PBC negligent
5. On appeal, CA affirmed the RTC decision.
6. Hence, this petition
ISSUE: Whether or not PBC should be held liable for the loss of LMC.
YESSSSSS
HELD:
1. The proximate cause of the loss was the negligent act of the
bank, thru its teller Mabayad, in validating the deposit slips,
both original and duplicate, presented by Ms. Yabut to Ms.
Mabayad, notwithstanding the fact that one of the deposit
slips was not completely accomplished.
2. There is no dispute as to the damage suffered by the RMC in
the amount of P304,979.74. It is in ascribing fault or
negligence which caused the damage where the parties point
to each other as the culprit.
3. 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.
a. The seventy-eight (78)-year-old, yet still relevant,
case of Picart v. Smith,8 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.
b. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability
by that.
c. Applying the above test, it appears that the
bank's teller, Ms. Azucena Mabayad, 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
Page 11 of 42
proper validation of deposit slips, original or
duplicate, as testified to by Ms. Mabayad
herself
4. 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 Vice-President, 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
a. 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.
5. In this case, absent the act of Ms. Mabayad in negligently
validating the incomplete duplicate copy of the deposit slip,
Ms. Irene Yabut would not have the facility with which to
perpetrate her fraudulent scheme with impunity.
6. 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.
a. 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.
b. 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.
7. In the case of banks, however, 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.
a. 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.
b. 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.
c. Considering, however, that the fraud was
committed in a span of more than one (1) year
covering various deposits, common human
experience dictates that the same would not have
been possible without any form of collusion
between Ms. Yabut and bank teller Mabayad. Ms.
Mabayad was negligent in the performance of her
duties as bank teller nonetheless.
 d. Thus, the petitioners are entitled to claim
reimbursement from her for whatever they shall be
ordered to pay in this case.
8. The foregoing notwithstanding, it cannot be denied that,
indeed, RMC was likewise negligent in not checking its
monthly statements of account.
a. Had it done so, the company would have been
alerted to the series of frauds being committed
against RMC by its secretary.
b. The damage would definitely not have ballooned
to such an amount if only RMC, particularly
Romeo Lipana, had exercised even a little
vigilance in their financial affairs.
c. This omission by RMC amounts to contributory
negligence which shall mitigate the damages that
may be awarded to the private respondent 23 under
Article 2179 of the New Civil Code
9. In view of this, we believe that the demands of substantial
justice are satisfied by allocating the damage on a 60-40
ratio.
a. 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;
b. 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.
Reyes v. CA
G.R. No. 118492. August 15, 2001.*
GREGORIO H. REYES and CONSUELO PUYAT-REYES,
petitioners, vs. THE HON. COURT OF APPEALS and FAR
EAST BANK AND TRUST COMPANY, respondents.
FACTS: Gregorio Reyes, the director and VP for Finance of the
Philippine Racing Club, Inc. (PRCI, for brevity) through Godofredo
Reyes applied a demand draft in the amount One Thousand Six
Hundred Ten Australian Dollars (AU$1,610.00) payable to the order
of the 20th Asian Racing Conference Secretariat of Sydney, Australia.
Godofredo 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 for brevity)
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 for brevity). This arrangement has been customarily
resorted to since the 1960s and the procedure has proven to be
problem-free. PRCI and the petitioner Gregorio H. Reyes, acting
through Godofredo, agreed to this arrangement or approach in order to
effect the urgent transfer of Australian dollars payable to the
Secretariat of the 20th Asian Racing Conference.
On July 28, 1988, the respondent bank approved the said
application of PRCI and issued Foreign Exchange Demand Draft
(FXDD) No. 209968 in the sum applied for, that is, One Thousand Six
Hundred Ten Australian Dollars (AU$1,610.00), payable to the order
of the 20th Asian Racing Conference Secretariat of Sydney, Australia,
and addressed to Westpac-Sydney as the drawee bank.
On August 10, 1988, upon due presentment of the foreign
exchange demand draft, denominated as FXDD No. 209968, the same
was dishonored, with the notice of dishonor stating the following: xxx
Page 12 of 42
No account held with Westpac. Meanwhile, on August 16, 1988,
Westpac-New York sent a cable to respondent bank informing the
latter that its dollar account in the sum of One Thousand Six Hundred
Ten Australian Dollars (AU$1,610.00) was debited. On August 19,
1988, 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 FXDD No. 209968,
drawn against the Westpac-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
Westpac-New York requesting the latter to honor the reimbursement
claim of Westpac-Sydney. On September 14, 1988, upon its second
presentment for payment, FXDD No. 209968 was again dishonored by
Westpac-Sydney for the same reason, that is, that the respondent bank
has no deposit dollar account with the drawee Westpac-Sydney.
On September 18, 1988, Gregorio presented the foreign
exchange draft at the registration desk of the racing conference in
the presence of the other delegates in Sydney, Australia. He was
informed by the conference secretariat that he could not register
because the foreign exchange demand draft for his registration fee
had been dishonored for the second time. Same thing happened to
Consuelo when she tried to register at the racing conference. This
event caused unnecessary shock and social humiliation for the
petitioners. Thus, they filed a complaint for damages against the
respondent bank.
RTC and CA rendered the decision in favour of the
respondent bank. Hence, this petition for certiorari commences.
ISSUE: WON the bank should have applied a higher degree of
diligence, which is imposed by law upon banks, rather than the
standard of diligence of an ordinary prudent person
HELD: SC sustained the factual finding of the CA in which
respondent bank did not cause an erroneous transmittal of its
SWIFT cable message to Westpac-Sydney. It was the erroneous
decoding of the cable message on the part of Westpac-Sydney that
caused the dishonor of the subject foreign exchange demand draft.
An employee of Westpac-Sydney in Sydney, Australia mistakenly read
the printed figures in the SWIFT cable message of respondent bank as
MT799 instead of as MT199. As a result, Westpac-Sydney construed
the said cable message as a format for a letter of credit, and not for a
demand draft.
The evidence also shows that the respondent bank
exercised that degree of diligence expected of an ordinary prudent
person under the circumstances obtaining. Prior to the first dishonor
of the subject foreign exchange demand draft, the respondent bank
advised Westpac-New York to honor the reimbursement claim of
Westpac-Sydney and to debit the dollar account of respondent bank
with the former. As soon as the demand draft was dishonored, the
respondent bank, thinking that the problem was with the
reimbursement and without any idea that it was due to
miscommunication, re-confirmed the authority of Westpac-New York
to debit its dollar account for the purpose of reimbursing Westpac-
Sydney. Respondent bank also sent two (2) more cable messages to
Westpac-New York inquiring why the demand draft was not honored.
The respondent bank did not misrepresent that it was
maintaining a deposit account with Westpac-Sydney and it had
explained how the transfer of Australian dollars would be effected
through Westpac-New York where the respondent bank has a dollar
account to Westpac-Sydney where the subject foreign exchange
demand draft (FXDD No. 209968) could be encashed by the payee, the
20th Asian Racing Conference Secretariat. Gregorio Reyes agreed to
the arrangement presented by the bank.
 Based on Philippine Bank of Commerce v. Court of Appeals,
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. Hence, the
respondent 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 the subject
foreign exchange demand draft. The relationship involved was that of
a buyer and seller, that is, between the respondent bank as the seller of
the subject foreign exchange demand draft, and PRCI as the buyer of
the same, with the 20th Asian Racing Conference Secretariat in Sydney,
Australia as the payee thereof. The evidence shows that the respondent
bank did everything within its power to prevent the dishonor of the
subject foreign exchange demand draft.
NATURE OF BANK FUNDS AND DEPOSITS
BPI v. Suarez
FACTS:
1. In 1997, Atty. Surarez had a client who planned to purchase
several parcels of land in Tagaytay City, but preferred not to
deal directly with the land owners.
a. Suarez transacted with the owners of the
properties, making it appear that he was the buyer
of the lots.
b. Suarez and his client made an arrangement that the
latter would deposit money in the lawyer’s BPI
account and then he would be the one issuing
checks to the sellers.
c. Hence, the client deposited an RCBC check with
the value of P19,129,100 in BPI Pasong Tamo
branch to be credited in Suarez’s account in
Ermita.
2. Aware of the banking system’s 3-day check clearing policy,
Suarez instructed his secretary Garaygay to confirm from
BPI if the value of the deposited check was already credited
to his account.
a. Garaygay confirmed that the check has already
been credited to Suarez’s account.
b. Subsequently, Suarez issued 5 checks of different
amount totaling P19,129,100 for the payment of
the lots.
3. The next day, Suarez left for the US for a vacation.
a. However, Garaygay informed him that 5 of the
checks that he issued were dishonored by BPI for
insufficiency of funds and that his current account
has been debited P57,200 as penalty for the
dishonor.
b. This was despite the assurance given by RCBC to
Garaygay that the check was fully funded to the
BPI account.
4. the payees of the 5 BPI checks that Suarez issued presented
the checks again since the RCBC check has been cleared.
a. The checks were honored by BPI.
5. Suarez sent a letter to BPI demanding an apology and the
reversal of charges debited from his account.
a. A meeting was set but it did not transpire.
b. Hence, a letter was handed to Suarez explaining
that when the checks he issued against his account
were received by the bank for clearing, the checks
were not yet cleared.
Page 13 of 42
c. The bank said that it believes there has been no
damage as to Suarez because the return was
“DAIF” and not “DAUD”.
6. BPI delivered Suarez the dishonored checks.
a. Suarez, however, claims that the checks were
tampered with, specifically for the reason of
dishonor, prompting him to send another letter
informing BPI of its act of falsification by making
it appear that it marked the checks with “drawn
against uncollected deposit” and not “drawn
against insufficient fund”
b. BPI reversed the penalty charges but denied his
claim of damages.
7. Suarez filed a complaint for damages before the Makati RTC
a. RTC rendered judgment in favor of Suarez.
8. BPI appealed before the CA
a. CA affirmed the RTC decision
b. Filed MR was also denied.
c. It ruled that there was negligence on BPI’s
handling of the account of Suarez. It dishonored
the check despite clearance from RCBC.
d. Furthermore, it was also proven that defendant-
appellant bank through its employee inadvertently
marked the dorsal sides of the checks as DAIF
instead of DAUD. A closer look at the checks
would indicate that intercalations were made
marking the acronym DAIF thereon to appear as
DAUD. Although the intercalation was obvious in
the ₱12 million check, still the fact that there was
intercalation made in the said check cannot be
denied.
e. A check dishonored for reasons of DAIF would
unduly expose herein plaintiff-appellee to
criminal prosecution for violation of B.P. 22
while a check dishonored for reasons of DAUD
would not. Thus, it was erroneous on the part
of defendant-appellant bank to surmise that
plaintiff-appellee would not suffer damages
anyway for the dishonored checks for reasons
of DAUD or DAIF because there was dishonor
nonetheless.
9. Hence, this petition for fore review.
ISSUE: Whether or not BPI was negligent in handling the account of
Suarez.
Whether or not erroneous marking of DAIF, instead of DAUD, give
rise to BPI’s liability for damages.
HELD:
1. Negligence is defined as "the omission to do something
which a reasonable man, guided upon those considerations
which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent man
and reasonable man could not do."
a. Based on the records, there is no sufficient
evidence to show that BPI conclusively
confirmed the same-day crediting of the RCBC
check which Suarez’s client deposited late on 16
June 1997. Garaygay failed to substantiate such
claim.
b. Moreover, a same-day clearing of a ₱19,129,100
check requires approval of designated bank
official or officials, and not any bank official can
grant such approval.
c. BPI was not estopped from dishonoring the checks
for inadequacy of available funds in Suarez’s
account since the RCBC check remained
uncleared at that time.
 2. Suarez had no credit or bill purchase line with BPI which
would qualify him to the exceptions to the 3-day check
clearing policy.
a. Considering that there was no binding
representation on BPI’s part as regards the same-
day crediting of the RCBC check, no negligence
can be ascribed to BPI’s dishonor of the checks
precisely because BPI was justified in
dishonoring the checks for lack of available
funds in Suarez’s account.
3. However, BPI mistakenly marked the dishonored checks
with "drawn against insufficient funds (DAIF), " instead
of "drawn against uncollected deposit (DAUD)."
DAUD DAIF
the account has, on its face, sufficient funds but not a condition in which a
yet available to the drawer because the deposit, depositor’s balance is
usually a check, had not yet been cleared inadequate for the bank to pay a
check
the depositor has, on its face, sufficient funds in his the depositor lacks sufficient
account, although it is not available yet at the time funds in his account to pay the
the check was drawn check
does not expose the drawer to possible prosecution DAIF subjects the depositor to
for estafa and violation of BP 22 liability for such offenses.
4. In the present case, Suarez failed to establish that his claimed
injury was proximately caused by the erroneous marking of
DAIF on the checks.
a. There is nothing in Suarez’s testimony which
convincingly shows that the erroneous marking of
DAIF on the checks proximately caused his
alleged psychological or social injuries.
b. Suarez merely testified that he suffered
humiliation and that the prospective consolidation
of the titles to the Tagaytay properties did not
materialize due to the dishonor of his checks, not
due to the erroneous marking of DAIF on his
checks.
c. Hence, Suarez had only himself to blame for his
hurt feelings and the unsuccessful transaction
with his client as these were directly caused by
the justified dishonor of the checks.
d. Suarez cannot recover compensatory damages
for his own negligence.
5. While the erroneous marking of DAIF, which BPI belatedly
rectified, was not the proximate cause of Suarez’s claimed
injury, the Court reminds BPI that its business is affected
with public interest.
a. It must at all times maintain a high level of
meticulousness and should guard against injury
attributable to negligence or bad faith on its part.
Suarez had a right to expect such high level of care
and diligence from BPI.
b. Thus, we award Suarez ₱75,000.00 nominal
damages.
6. No actual damage
7. Baka lang tanungin: The following are the conditions for the
award of moral damages: (1) there is an injury — whether
physical, mental or psychological — clearly sustained by the
claimant; (2) the culpable act or omission is factually
established; (3) the wrongful act or omission of the
defendant is the proximate cause of the injury sustained by
the claimant; and (4) the award of damages is predicated on
any of the cases stated in Article 221921 of the Civil Code.
Allied Bank v. Lim Sio Wan
DOCTRINE: An exception to the rule that the collecting bank which
indorses a check bearing a forged indorsement and presents it to the
drawee bank guarantees all prior indorsements, including the forged
Page 14 of 42
indorsement itself, and ultimately should be held liable therefor is
when the issuance of the check itself was attended with negligence.
FACTS:
1. On September 21, 1983, FCC had deposited a money market
placement for P2M with Producers Bank.
a. Santos was the money market trader assigned to
handle FCC’s account.
b. When the placement matured on October 1983 and
was rolled-over until December 5, 1983, FCC
demanded the payment of the proceeds of the
placement.
2. Lim Sio Wan deposited with Allied a money market
placement of P1,152,597.35 for a term of 31 days to mature
on December 15, 1983, as evidenced by a provisional
receipt.
a. 10 days before the maturity of the instrument, a
person claiming to be Lim Sio Wan called up
Cristina So, an officer of Allied, and instructed the
latter to pre-terminate Lim Sio Wan’s money
market placement, to issue a manager’s check
representing the proceeds of the placement, and to
give the check to one Deborah Dee Santos who
would pick up the check.
b. Lim Sio Wan described the appearance of Santos
so that the bank could easily identify her.
c. Santos was issued a manager’s check in the name
of Lim Sio Wan, as payee. The check was cross-
checked “For Payee’s Account Only”.
d. The Allied check was thereafter deposited in the
account of FCC at Metrobank with forged
signature of Lim Sio Wan as indorser.
3. The Allied check was deposited with Metrobank in the
account of FCC as Producers Bank’s payment of its
obligation to FCC.
a. To clear the check and in compliance with the
requirements of the PCHC Rules and Regulations,
Metrobank stamped a guaranty on the check,
which reads: "All prior endorsements and/or lack
of endorsement guaranteed."
b. The check was sent to Allied through the PCHC.
c. Upon the presentment of the check, Allied funded
the check even without checking the authenticity
of Lim Sio Wan’s purported indorsement.
d. Thus, the amount on the face of the check was
credited to the account of FCC.
4. Lim Sio Wan deposited with Allied a second money market
placement to mature on January 9, 1984.
5. Upon the supposed maturity of the first money market
placement, Lim Sio Wan went to Allied to withdraw it.
a. She was then informed that the placement has been
pre-terminated upon her instruction.
b. She denied giving such instructions.
c. She desisted from further complaints when she
was assured by the bank’s manager that her money
would be recovered.
6. When Lim Sio Wan’s second placement matured on January
9, 1984, So called Lim Sio Wan to ask for the latter’s
instructions on the second placement.
a. Lim Sio Wan instructed So to roll-over the
placement for another 30 days.
7. On January 24, 1984, Lim Sio Wan, realizing that the
promise that her money would be recovered would not
materialize, sent a demand letter to Allied asking for the
payment of the first placement.
a. Allied refused to pay Lim Sio Wan, claiming that
the latter had authorized the pre-termination of the
placement and its subsequent release to Santos.
 8. Lim Sio Wan filed with the RTC a complaint to recover the
proceeds of her first money market placement.
a. Thereafter, she withdrew her second money
market placement.
b. Allied filed a third-party complaint against
Metrobank and Santos.
c. Metrobank filed a fourth-party complaint against
FCC.
d. FCC for its part filed a fifth-party complaint
against Producers Bank.
e. Summonses were duly served upon all the parties
except for Santos, who was no longer connected
with Producers Bank.
9. More than 6 months after funding the check, Allied informed
Metrobank that the signature on the check was forged.
a. Thus, Metrobank withheld the amount represented
by the check from FCC.
b. Later on, Metrobank agreed to release the
amount to FCC after the latter executed an
Undertaking, promising to indemnify Metrobank
in case it was made to reimburse the amount.
10. Lim Sio Wan thereafter filed an amended complaint to
include Metrobank as a party-defendant, along with Allied.
a. Allied’s third party complaint against Metrobank
was converted into a cross-claim and the latter’s
fourth party complaint against FCC was converted
into a third party complaint.
11. The RTC ordered Allied to ay Lim Sio Wan with damages.
Allied’s cross claim against Metrobank, Metrobank’s third-
party complaint against FCC, and FCC/s fourth-party
complaint against Producer’s Bank were all dismissed.
12. Upon Allied’s appeal, the CA modified the RTC decision.
a. Judgment is rendered ordering and sentencing
defendant-appellant Allied Banking Corporation
to pay sixty (60%) percent and defendant-appellee
Metropolitan Bank and Trust Company forty
(40%) of the amount of P1,158,648.49 plus 12%
interest per annum from March 16, 1984 until fully
paid.
13. Hence, this petition for review on certiorari.
ISSUE:
HELD:
1. As to the liability of the parties, we find that Allied is liable
to Lim Sio Wan.
a. In Cebu International Finance Corporation v.
Court of Appeals, as follows: [A] money market is
a market dealing in standardized short-term
credit instruments (involving large amounts)
where lenders and borrowers do not deal directly
with each other but through a middle man or dealer
in open market. In a money market transaction, the
investor is a lender who loans his money to a
borrower through a middleman or dealer.
2. In the case at bar, the money market transaction between the
petitioner and the private respondent is in the nature of a loan
a. Lim Sio Wan, as creditor of the bank for her
money market placement, is entitled to payment
upon her request, or upon maturity of the
placement, or until the bank is released from its
obligation as debtor.
b. Until any such event, the obligation of Allied to
Lim Sio Wan remains unextinguished.
3. From the factual findings of the trial and appellate courts that
Lim Sio Wan did not authorize the release of her money
market placement to Santos and the bank had been negligent
in so doing, there is no question that the obligation of Allied
to pay Lim Sio Wan had not been extinguished.
Page 15 of 42
a. Art. 1240 of the Code states that "payment shall be
made to the person in whose favor the obligation
has been constituted, or his successor in interest,
or any person authorized to receive it."
b. As commented by Arturo Tolentino: Payment
made by the debtor to a wrong party does not
extinguish the obligation as to the creditor, if
there is no fault or negligence which can be
imputed to the latter. Even when the debtor acted
in utmost good faith and by mistake as to the
person of his creditor, or through error induced by
the fraud of a third person, the payment to one who
is not in fact his creditor, or authorized to receive
such payment, is void, except as provided in
Article 1241. Such payment does not prejudice the
creditor, and accrual of interest is not suspended
by it. (Emphasis supplied.)
4. We cannot, however, say outright that Allied is solely liable
to Lim Sio Wan.
a. Proximate cause is "that cause, which, in natural
and continuous sequence, unbroken by any
efficient intervening cause, produces the injury
and without which the result would not have
occurred." Thus, there is an efficient supervening
event if the event breaks the sequence leading
from the cause to the ultimate result. To
determine the proximate cause of a
controversy, the question that needs to be asked
is: If the event did not happen, would the injury
have resulted? If the answer is NO, then the
event is the proximate cause.
b. where the collecting bank is generally held liable,
in two of the cases where the checks were
negligently issued, this Court held the institution
issuing the check just as liable as or more liable
than the collecting bank.
c. In isolated cases where the checks were deposited
in an account other than that of the payees on the
strength of forged indorsements, we held the
collecting bank solely liable for the whole amount
of the checks involved for having indorsed the
same.
5. In the instant case, the trial court correctly found Allied
negligent in issuing the manager’s check and in transmitting
it to Santos without even a written authorization.
a. In fact, Allied did not even ask for the certificate
evidencing the money market placement or call up
Lim Sio Wan at her residence or office to confirm
her instructions.
b. Allied’s negligence must be considered as the
proximate cause of the resulting loss.
6. Metrobank as an indorser: The liability of Allied,
however, is concurrent with that of Metrobank as the last
indorser of the check.
a. When Metrobank indorsed the check in
compliance with the PCHC Rules and Regulations
without verifying the authenticity of Lim Sio
Wan’s indorsement and when it accepted the
check despite the fact that it was cross-checked
payable to payee’s account only, its negligent and
cavalier indorsement contributed to the easier
release of Lim Sio Wan’s money and perpetuation
of the fraud.
b. Given the relative participation of Allied and
Metrobank to the instant case, both banks cannot
be adjudged as equally liable.
c. Hence, the 60:40 ratio of the liabilities of Allied
and Metrobank, as ruled by the CA, must be
upheld.
 7. FCC, having no participation in the negotiation of the check
and in the forgery of Lim Sio Wan’s indorsement, can raise
the real defense of forgery as against both banks.
8. As to Producers Bank, Allied Bank’s argument that
Producers Bank must be held liable as employer of Santos
under Art. 2180 of the Civil Code is erroneous. Art. 2180
pertains to the vicarious liability of an employer for quasi-
delicts that an employee has committed. Such provision of
law does not apply to civil liability arising from delict.
9. From the facts of the instant case, we see that Santos could
be the architect of the entire controversy. Unfortunately,
since summons had not been served on Santos, the courts
have not acquired jurisdiction over her.60 We, therefore,
cannot ascribe to her liability in the instant case.
10. Clearly, Producers Bank must be held liable to Allied and
Metrobank for the amount of the check plus 12% interest
per annum, moral damages, attorney’s fees, and costs of
suit which Allied and Metrobank are adjudged to pay
Lim Sio Wan based on a proportion of 60:40.
Associated Bank v. Tan
DOCTRINE: While banks are granted by law the right to debit the
value of a dishonored check from a depositor’s account, they must do
so with the highest degree of care, so as not to prejudice the depositor
unduly.
FACTS:
1. Tan is a businessman and a regular depositor-creditor of the
Associated Bank.
2. Sometime in September 1990, he deposited a UCPB PDC
with Associated Bank in the amount of P101,000 issued to
him by a certain Willy Cheng from Tarlac.
a. The check was duly entered in his bank record
thereby making his balance in the amount
of P297,000.00, as of October 1, 1990, from his
original deposit of P196,000.00.
b. Allegedly, upon advice and instruction of the
Associated Bank that the P101,000.00 check was
already cleared and backed up by sufficient
funds, TAN, on the same date, withdrew the sum
of P240,000.00, leaving a balance of P57,793.45.
c. A day after, TAN deposited the amount
of P50,000.00 making his existing balance in the
amount of P107,793.45, because he has issued
several checks to his business partners.
3. However, his suppliers and business partners went back to
him alleging that the checks he issued bounced for
insufficiency of funds.
a. Thereafter, TAN, thru his lawyer, informed the
BANK to take positive steps regarding the matter
for he has adequate and sufficient funds to pay the
amount of the subject checks.
b. Nonetheless, the BANK did not bother nor offer
any apology regarding the incident.
4. Consequently, TAN, as plaintiff, filed a Complaint for
Damages on December 19, 1990, with the RTC of
Cabanatuan City, against the Associated, as defendant.
a. he alleged that he had sufficient funds to pay the
subject checks and alleged that his suppliers
decreased in number for lack of trust.
b. He further claimed that he suffered
embarrassment, humiliation, besmirched
reputation, mental anxieties and sleepless nights
because of the said unfortunate incident. Also, he
continuously lost profits in the amount
of P250,000.00.
c. Associated Bank alleged that no banking
institution would give an assurance to any of its
Page 16 of 42
client/depositor that the check deposited by him
had already been cleared and backed up by
sufficient funds but it could only presume that the
same has been honored by the drawee bank in view
of the lapse of time that ordinarily takes for a
check to be cleared.
d. Furthermore, on October 2, 1990, it gave notice to
the Tan as to the return of his UCPB check deposit
in the amount of P101,000.00, hence, on even
date, Tan deposited the amount of P50,000.00 to
cover the returned check.
5. The RTC ruled in favor of Tan and against Associated.
a. It ruled that Tan was not officially informed about
the debiting of the P101,000 from his existing
balance and that the bank merely allowed Tan to
use the fund prior to clearing merely for
accommodation because the bank considered him
as one of its valued clients.
b. The trial court ruled that the bank manager was
negligent in handling the particular checking
account of Tan stating that such lapses caused all
the inconveniences to the him.
6. Associated appeal to the CA.
a. Affirming the trial court, the CA ruled that the
bank should not have authorized the
withdrawal of the value of the deposited check
prior to its clearing.
b. Having done so, contrary to its obligation to treat
respondent’s account with meticulous care, the
bank violated its own policy. It thereby took upon
itself the obligation to officially inform respondent
of the status of his account before unilaterally
debiting the amount of P101,000. Without such
notice, it is estopped from blaming him for failing
to fund his account.
c. Thus, the supposed accommodation accorded by
petitioner to him is the proximate cause of his
business woes and shame, for which it is liable for
damages.
7. Hence, this petition for review.
ISSUE: Whether or not the petitioner, which is acting as a collecting
bank, has the right to debit the account of its client for a check deposit
which was dishonored by the drawee bank.
HELD:
1. A bank generally has a right of setoff over the deposits
therein for the payment of any withdrawals on the part of a
depositor.
a. The right of a collecting bank to debit a client’s
account for the value of a dishonored check that
has previously been credited has fairly been
established by jurisprudence.
b. Article 1980 of the Civil Code provides that
"[f]ixed, savings, and current deposits of money in
banks and similar institutions shall be governed by
the provisions concerning simple loan."
c. The relationship between banks and depositors has
been held to be that of creditor and debtor. Thus,
legal compensation under Article 1278 of the Civil
Code may take place “when all the requisites
mentioned in Article 1279 are present,” as follows:
“(1) That each one of the obligors be bound
principally, and that he be at the same time a
principal creditor of the other; (2) That both debts
consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of
the same quality if the latter has been stated; (3)
That the two debts be due; (4) That they be
 liquidated and demandable; (5) That over neither
of them there be any retention or controversy,
commenced by third persons and communicated in
due time to the debtor.”
2. Obligation as Depositary Bank: Under ordinary banking
practice, after receiving a check deposit, a
bank either immediately credit the amount to a depositor’s
account; or infuse value to that account only after the drawee
bank shall have paid such amount.23Before the check shall
have been cleared for deposit, the collecting bank can only
"assume" at its own risk -- as herein petitioner did -- that the
check would be cleared and paid out.
a. Reasonable business practice and prudence,
moreover, dictated that petitioner should not have
authorized the withdrawal by respondent
of P240,000 on October 1, 1990, as this amount
was over and above his outstanding cleared
balance of P196,793.45.24 Hence, the lower courts
correctly appreciated the evidence in his favor.
3. Obligation as collecting agent: In the past, we have
expressed doubt about the binding force of such conditions
unilaterally imposed by a bank without the consent of the
depositor.26 It is indeed arguable that "in signing the deposit
slip, the depositor does so only to identify himself and not to
agree to the conditions set forth at the back of the deposit
slip."
a. As a general rule, a bank is liable for the
wrongful or tortuous acts and declarations of
its officers or agents within the course and
scope of their employment.
b. Due to the very nature of their business, banks are
expected to exercise the highest degree of
diligence in the selection and supervision of their
employees.
c. Jurisprudence has established that the lack of
diligence of a servant is imputed to the negligence
of the employer, when the negligent or wrongful
act of the former proximately results in an injury
to a third person; in this case, the depositor.
4. The manager of the bank’s Cabanatuan branch, Consorcia
Santiago, categorically admitted that she and the employees
under her control had breached bank policies.
a. They admittedly breached those policies when,
without clearance from the drawee bank in
Baguio, they allowed respondent to withdraw on
October 1, 1990, the amount of the check
deposited.
b. Santiago testified that respondent "was not
officially informed about the debiting of
the P101,000 from his existing balance
of P170,000 on October 2, 1990 x x x."
c. Being the branch manager, Santiago clearly acted
within the scope of her authority in authorizing the
withdrawal and the subsequent debiting without
notice.
BPI v. CA
DOCTRINE: If instruments payable to named payees or to their order
have not been indorsed in blank, only such payees or their indorsees
can be holders and entitled to receive payment in their own right.
FACTS: Salazar had in her possession three crossed checks with an
aggregate amount of P267, 692.50. These checks were payable to the
order of JRT Construction and Trading which was the name of
Templonuevo’s business.
Despite lack of knowledge and endorsement of Templonuevo, Salazar
was able to deposit the checks in her personal savings account with
Page 17 of 42
BPI and encash the same. The three checks were deposited in three
different occasions over the span of eight months.
A year after the last encashment, Templonuevo protested the
purportedly unauthorized encashments and demanded from BPI the
aggregate amount of the checks.
BPI complied with Templonuevo’s demand.
Since the money could no longer be debited from the account of
Salazar where she deposited the checks, they froze her other account
with them.
Later on, BPI issued a cashier’s check in favor of Templonuevo for the
aggregate amount and debited P267, 707.70 from Salazar’s account
representing the aggregate amount and the bank charges for the
cashier’s check. Salazar filed a complaint against BPI.
Trial court ruled in favor of her which was affirmed by CA.
Hence, this petition.
ISSUE:
1. Did BPI have the authority to unilaterally withdraw from
Salazar’s account the amount it has previously paid upon
certain unendorsed order instrument?
2. Did BPI act judiciously in debiting Salazar’s account?
HELD:
1. Yes. Records show that no prior arrangement existed
between Salazar and Templonuevo regarding the transfer of
ownership of the checks. This fact is crucial as Salazar’s
entitlement to the value of the instruments is based on the
assumption that she is a transferee within the contemplation
of Section 49 of the NIL.
Section 49 of the NIL contemplates a situation where the
payee or endorsee delivers a negotiable instrument for value
without endorsing it.
The underlying premise of this provision, however, is that a
valid transfer of ownership of the negotiable instrument in
question has taken place.
Transferees in this situation do not enjoy the presumption of
ownership in favor of holders since they are neither payees
nor endorsees of such instruments.
Mere possession of a negotiable instrument does not in itself
conclusively establish either the right of the possessor to
receive payment, or of the right of one who has made
payment to be discharged from liability. Something more
than mere possession is necessary to authorize payment to
such possessor.
The one-year delay of Templonuevo in asserting ownership
over the checks is not enough to prove that there has a valid
transfer of ownership has taken place. Salazar failed to
discharge the burden of presumption of ownership in
Templonuevo’s favor as the designated payee.
Thus, the return of the check proceeds to Templonuevo was
therefore warranted. It is immaterial that the account debited
by BPI was di fferent from the original account to which the
proceeds of the check were credited because both belonged
to Salazar anyway.
2. No. Solely upon the prompting of Templonuevo, BPI
debited the account of Salazar without even serving due
notice upon her.

Consequently, this caused damage to Salazar such as having
checks she issued dishonored because she was not given
prior notice of the deduction from her account. As such, the
award of damages must be sustained.
BPI Family Bank v. Franco
FACTS:
 15 Aug 1989: Tevetesco Arrastre-Stevedoring Co., Inc.
opened a savings and current account with BPI-FB
(petitioner)
 25 Aug: First Metro Investment Corporation (FMIC) also
opened a time deposit account w/ same branch of BPI-FB
(San Francisco del Monte) in a series of transactions
 31 Aug: Amado Franco (respondent) opened three (3)
accounts (current, savings, and time-deposit) w/ BPI-FB.
Total amount of P2M use to open these accounts is traceable
to a check issued by Tevesteco allegedly in consideration of
respondent Franco’s introduction of Eladio Teves (looking
for a conduit bank to facilitate Tevetesco’s business
transactions) to Jaime Sebastian (BPI-FB’s Branch
Manager). The P2M is part of the P80M debited by BPI-FB
from FMCI’s time deposit account and credited to
Tevetesco’s current account pursuant to an Authority to
Debit allegedly signed by FMCI’s officers w/c appears to be
forged.
o Current: Initial deposit of P500k
o Savings: Initial deposit of P500k
o Time deposit: P1M w/ maturity date of 31 Aug
1990
 4 Sept: Antonio Ong, upon being shown the Authority to
debit, personally declared his signature to be a forgery.
 Tevetesco already effected several withdrawals from its
current account amounting to P37,455,410.54 including the
P2M paid to respondent Franco.
 8 Sept: BPI-FB, through Senior VP Severino Cornamcion,
instructed Jesus Arangorin to debit Franco’s savings &
current accounts for the amounts remaining therein but the
latter’s time deposit account couldn’t be debited due to
computer limitations.
 2 checks drawn by Franco against BPI-FB current account
were dishonored upon presentment for payment & stamped
w/ notation account under garnishment.
o Garnished by virtue of an Order of Attachment
issued by Makati RTC in a civil case filed by BPI-
FB against Franco, etc. to recover the
P37,455,410.54 (Tevetesco’s total withdrawals
from its account)
o Dishonored checks were issued by respondent
Franco & presented for payment at BPI-FB prior
to Franco’s receipt of notice of garnishment. At the
time the notice dated 27 Sept was served on BPI-
FB, respondent Franco has yet to be impleaded in
said case where writ of attachment was issued. It
was only on 15 May 1990 that respondent Franco
was impleaded. The attachment was subsequently
lifted however the funds were not released to
respondent Franco because petitioner BPI-FB
could not comply given that the money has already
been debited because of FMIC’s forgery claim.
petitioner BPI-FB’s computer that branch
indicated that the current account record was not
on file.
 As to respondent Franco’s savings account he agreed to an
arrangement as a favor to Sebastian where P400K from said
account was temporarily transferred to Domingo Quiaoits
savings account, subject to its immediate return upon
issuance of a certificate of deposit which Quiaoit needed in
connection with his visa application at the Taiwan Embassy.
Page 18 of 42
o Sebastian retained custody of Quiaoits’ savings
account passbook to preserve respondent Franco’s
deposits.
 17 May 1990: Respondent Franco pre-terminated his time
deposit account.
o Petitioner BPI-FB deducted P63,189 from the
remaining balance of the account representing
advance interest paid to him.
 Several cases have been filed and resolved pertaining to
these transactions.
 PET FPI-FB’s refusal to heed RES Franco’s demand to
unfreeze his accounts & release his deposits gave rise to the
latter’s filing a case with Manila RTC.
 RTC
o Rendered judgment in favor of respondent Franco
ordering Petitioner BPI-FB to pay sums of money.
 CA
o Modified decision but Petitioner BPI-FB still to
pay interest deducted rom the time-deposit of
Respondent Franco, damages, etc.
ISSUE: Who has a better right to the deposits in respondent Franco’s
accounts? (FRANCO)
HELD: No doubt that petitioner BPI-FB owns the deposited monies
in the accounts of respondent Franco, but not as a legal consequence
of its unauthorized transfer of FMIC’s deposits to Tevetesco’s account.
o The deposit of money in banks is governed by the
Civil Code provisions on simple loan or mutuum.
o As there is a debtor-creditor relationship between
a bank and its depositor, petitioner FPI-FB
ultimately acquired ownership of respondent
Franco’s deposits, but such ownership is coupled
w/ a corresponding obligation to pay him an equal
amount on demand. Although petitioner BPI-FB
owns the deposits, it cannot prevent respondent
Franco from demanding payment of the former’s
obligation by drawing checks against his current
account or asking for the released of the funds in
his savings account.
 When respondent Franco issued checks drawn against his
current account, he had every right as creditor to expect that
those checks would be honored by petitioner BPI-FB as
debtor.
Consolidated Bank v. CA
DOCTRINE: Bank tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or to his
authorized representative.
FACTS:
9. On 14 August 1991, L.C. Diaz through its cashier,
Macaraya, filled up a savings (cash) deposit slip for P990
and a savings (checks) deposit slip for P50.
a. Macaraya instructed the messenger of L.C. Diaz,
Calapre, to deposit the money with Solidbank.
Macaraya also gave Calapre the Solidbank
passbook.
b. Calapre went to Solidbank and presented to Teller
No. 6 the two deposit slips and the passbook.
c. The teller acknowledged receipt of the deposit by
returning to Calapre the duplicate copies of the
two deposit slips. Teller No. 6 stamped the deposit
slips with the words “DUPLICATE” and
“SAVING TELLER 6 SOLIDBANK HEAD
OFFICE.”
d. Since the transaction took time and Calapre had to
make another deposit for L.C. Diaz with Allied
 Bank, he left the passbook with Solidbank.
Calapre then went to Allied Bank.
e. When Calapre returned to Solidbank to
retrieve the passbook, Teller No. 6 informed
him that “somebody got the passbook.” Calapre
went back to L.C. Diaz and reported the incident
to Macaraya.
10. Macaraya immediately prepared a deposit slip in duplicate
copies with a check of P200,000.
a. Macaraya, together with Calapre, went to
Solidbank and presented to Teller No. 6 the
deposit slip and check.
b. The teller stamped the words “DUPLICATE” and
“SAVING TELLER 6 SOLIDBANK HEAD
OFFICE” on the duplicate copy of the deposit slip.
c. When Macaraya asked for the passbook, Teller
No. 6 told Macaraya that someone got the
passbook but she could not remember to whom she
gave the passbook.
d. When Macaraya asked Teller No. 6 if Calapre got
the passbook, Teller No. 6 answered that someone
shorter than Calapre got the passbook. Calapre
was then standing beside Macaraya.
e. Teller No. 6 handed to Macaraya a deposit slip
dated 14 August 1991 for the deposit of a check
for P90,000 drawn on Philippine Banking
Corporation (“PBC”). This PBC check of L.C.
Diaz was a check that it had “long closed.” PBC
subsequently dishonored the check because of
insufficient funds and because the signature in the
check differed from PBC’s specimen signature.
11. The following day, 15 August 1991, L.C. Diaz through its
Chief Executive Officer, Diaz, called up Solidbank to stop
any transaction using the same passbook until L.C. Diaz
could open a new account.
a. On the same day, Diaz formally wrote Solidbank
to make the same request. It was also on the same
day that L.C. Diaz learned of the unauthorized
withdrawal the day before, 14 August 1991, of
P300,000 from its savings account. The
withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C.
Diaz, namely Diaz and Rustico L. Murillo. The
signatories, however, denied signing the
withdrawal slip. A certain Noel Tamayo received
the P300,000.
12. In an Information dated 5 September 1991, L.C. Diaz
charged its messenger, Ilagan and one Verdazola with Estafa
through Falsification of Commercial Document.
a. The Regional Trial Court of Manila dismissed the
criminal case after the City Prosecutor filed a
Motion to Dismiss on 4 August 1992.
13. On 24 August 1992, L.C. Diaz through its counsel demanded
from Solidbank the return of its money.
a. Solidbank refused.
14. On 25 August 1992, L.C. Diaz filed a Complaint for
Recovery of a Sum of Money against Solidbank with the
RTC.
a. RTC dimissed the complaint and absolved
Solidbank
b. the trial court applied the rules on savings account
written on the passbook. The rules state that
“possession of this book shall raise the
presumption of ownership and any payment or
payments made by the bank upon the production
of the said book and entry therein of the
withdrawal shall have the same effect as if made
to the depositor personally.”
Page 19 of 42
c. Another provision of the rules on savings account
states that the depositor must keep the passbook
“under lock and key.” When another person
presents the passbook for withdrawal prior to
Solidbank’s receipt of the notice of loss of the
passbook, that person is considered as the owner
of the passbook. The trial court ruled that the
passbook presented during the questioned
transaction was “now out of the lock and key and
presumptively ready for a business transaction.”
d. At the time of the alleged unauthorized
withdrawal, a certain Tamayo was not only in
possession of the passbook, he also presented a
withdrawal slip with the signatures of the
authorized signatories of L.C. Diaz. The
specimen signatures of these persons were in the
signature cards. The teller stamped the withdrawal
slip with the words “Saving Teller No. 5.”
e. The teller then passed on the withdrawal slip to
Manuel for authentication. Manuel verified the
signatures on the withdrawal slip. The withdrawal
slip was then given to another officer who
compared the signatures on the withdrawal slip
with the specimen on the signature cards.
f. The trial court concluded that Solidbank acted
with care and observed the rules on savings
account when it allowed the withdrawal of
P300,000 from the savings account of L.C. Diaz.
g. The trial court believed that Solidbank’s act of
allowing the withdrawal of P300,000 was not
the direct and proximate cause of the loss. The
trial court held that L.C. Diaz’s negligence
caused the unauthorized withdrawal. Three
facts establish L.C. Diaz’s negligence: (1) the
possession of the passbook by a person other
than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal receipt by
an unauthorized person; and (3) the possession
by an unauthorized person of a PBC check
“long closed” by L.C. Diaz, which check was
deposited on the day of the fraudulent
withdrawal.
15. LC Diaz appealed before the CA.
a. The CA reversed the RTC decision.
b. The Court of Appeals ruled that Solidbank’s
negligence was the proximate cause of the
unauthorized withdrawal of P300,000 from the
savings account of L.C. Diaz.
c. The appellate court stated that the teller, who was
not presented by Solidbank during trial, should
have called up the depositor because the money to
be withdrawn was a significant amount. Had the
teller called up L.C. Diaz, Solidbank would have
known that the withdrawal was unauthorized. The
teller did not even verify the identity of the
impostor who made the withdrawal.
d. The appellate court ruled that while L.C. Diaz was
also negligent in entrusting its deposits to its
messenger and its messenger in leaving the
passbook with the teller, Solidbank could not
escape liability because of the doctrine of “last
clear chance.” Solidbank could have averted the
injury suffered by L.C. Diaz had it called up L.C.
Diaz to verify the withdrawal.
e. The appellate court ruled that the degree of
diligence required from Solidbank is more than
that of a good father of a family. The business
and functions of banks are affected with public
interest. Banks are obligated to treat the
 accounts of their depositors with meticulous
care, always having in mind the fiduciary
nature of their relationship with their clients.
The Court of Appeals found Solidbank remiss
in its duty, violating its fiduciary relationship
with L.C. Diaz.
f. Solidbank filed for a MR but was denied by CA.
16. Hence, this petition for review on certioriari
ISSUE: Whether or not Solidbank should be held liable for the loss
of its client LC Diaz.
HELD:
9. We hold that Solidbank is liable for breach of contract due
to negligence, or culpa contractual.
a. The savings deposit agreement between the bank
and the depositor is the contract that determines
the rights and obligations of the parties.
b. 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.
10. When the passbook is in the possession of Solidbank’s
tellers during withdrawals, the law imposes on Solidbank
and its tellers an even higher degree of diligence in
safeguarding the passbook.
a. If the tellers give the passbook to the wrong
person, they would be clothing that person
presumptive ownership of the passbook,
facilitating unauthorized withdrawals by that
person.
b. For failing to return the passbook to Calapre, the
authorized representative of L.C. Diaz, Solidbank
and Teller No. 6 presumptively failed to observe
such high degree of diligence in safeguarding the
passbook, and in insuring its return to the party
authorized to receive the same.
11. In culpa contractual, once the plaintiff proves a breach of
contract, there is a presumption that the defendant was at
fault or negligent. The burden is on the defendant to prove
that he was not at fault or negligent.
a. In contrast, in culpa aquiliana the plaintiff has the
burden of proving that the defendant was
negligent.
b. In the present case, L.C. Diaz has established that
Solidbank breached its contractual obligation to
return the passbook only to the authorized
representative of L.C. Diaz. There is thus a
presumption that Solidbank was at fault and its
teller was negligent in not returning the passbook
to Calapre.
c. The burden was on Solidbank to prove that there
was no negligence on its part or its employees.
However, it failed to discharge its burden.
12. Solidbank is bound by the negligence of its employees under
the principle of respondeat superior or command
responsibility.
a. The defense of exercising the required diligence in
the selection and supervision of employees is not
a complete defense in culpa contractual, unlike
in culpa aquiliana.
b. The bank must not only exercise “high standards
of integrity and performance,” it must also insure
that its employees do likewise because this is the
only way to insure that the bank will comply with
its fiduciary duty. Solidbank failed to present the
Page 20 of 42
teller who had the duty to return to Calapre the
passbook, and thus failed to prove that this teller
exercised the “high standards of integrity and
performance” required of Solidbank’s employees.
13. Solidbank failed to fulfill its contractual obligation
because it gave the passbook to another person.
a. L.C. Diaz was not at fault that the passbook landed
in the hands of the impostor.
b. Solidbank was in possession of the passbook while
it was processing the deposit.
c. After completion of the transaction, Solidbank had
the contractual obligation to return the passbook
only to Calapre, the authorized representative of
L.C. Diaz.
14. The proximate cause of the unauthorized withdrawal
was Solidbank’s negligence in not returning the
passbook to Calapre.
a. We do not subscribe to the appellate court’s theory
that the proximate cause of the unauthorized
withdrawal was the teller’s failure to call up L.C.
Diaz to verify the withdrawal.
15. Last clear chance: We do not apply the doctrine of last clear
chance to the present case.
a. Solidbank is liable for breach of contract due to
negligence in the performance of its contractual
obligation to L.C. Diaz.
b. This is a case of culpa contractual, where neither
the contributory negligence of the plaintiff nor his
last clear chance to avoid the loss, would exonerate
the defendant from liability. Such contributory
negligence or last clear chance by the plaintiff
merely serves to reduce the recovery of damages
by the plaintiff but does not exculpate the
defendant from his breach of contract.
16. 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.
Ursua v. CA
G.R. No. 112170. April 10, 1996.*
CESARIO URSUA, petitioner, vs. COURT OF APPEALS AND
PEOPLE OF THE PHILIPPINES, respondents.
DOCTRINE: The enactment of C.A. No. 142 as amended was made
primarily to curb the common practice among the Chinese of adopting
scores of different names and aliases which created tremendous
confusion in the field of trade.
FACTS:
1. Ursua was a Community Environment and Natural
Resources Officer assigned in Kidapawan, Cotabato.
a. On 9 May 1989, the Provincial Governor of
Cotabato requested the Office of the Ombudsman
in Manila to conduct an investigation on a
complaint for bribery, dishonesty, abuse of
authority and giving of unwarranted benefits by
Ursua and other officials of the Department of
Environment and Natural Resources.
b. The complaint was initiated by the Sangguniang
Panlalawigan of Cotabato through a resolution
advising the Governor to report the involvement of
petitioner and others in the illegal cutting of
mahogany trees and hauling of illegally-cut logs in
the area.
 2. Ursua’s counsel, Atty. Palmones wrote the Ombudsman for
the copy of the complaint.
a. He asked Ursua to take his request to the office of
the ombudsman because his messenger Perez had
to attend some personal matters.
b. Before proceeding to the Office, Ursua talked to
Perez and told him that he was reluctant to
personally ask for the document since he was one
of the parties in the case.
c. However, Perez advised him not to worry as Ursua
could just sign Perez’ name if ever he would be
required to acknowledge the receipt of the
complaint.
d. He wrote his name in the visitors’ logbook.
e. Furthermore, he signed the acknowledgment
receipt of the complaint using Perez’ name before
the Administrative Division Chief Kahulugan.
3. Before petitioner could leave the premises he was greeted by
an acquaintance, Josefa Amparo, who also worked in the
same office. They conversed for a while then he left.
a. When Kahulugan learned that the person who
introduced himself as "Oscar Perez" was actually
petitioner Cesario Ursua, a customer of Josefa
Amparo in her gasoline station, Kahulugan
reported the matter to the Deputy Ombudsman
who recommended that petitioner be accordingly
charged.
4. after the prosecution had completed the presentation of its
evidence, Ursua without leave of court filed a demurrer to
evidence alleging that the failure of the prosecution to prove
that his supposed alias was different from his registered
name in the local civil registry was fatal to its cause.
Petitioner argued that no document from the local civil
registry was presented to show the registered name of
accused which according to him was a condition sine qua
non for the validity of his conviction.
a. The trial court rejected his contentions and found
him guilty of violating Sec. 1 of C.A. No. 142 as
amended by R.A. No. 6085.
5. Upon appeal to the CA, the RTC decision was affirmed.
6. Hence, this petition for review on certiorari.
a. He contends that he has not violated C.A. No. 142
as amended by R.A. No. 6085 as he never used
any alias name; neither is "Oscar Perez" his alias.
b. An alias, according to him, is a term which
connotes the habitual use of another name by
which a person is also known.
c. He claims that he has never been known as "Oscar
Perez" and that he only used such name on one
occasion and it was with the express consent of
Oscar Perez himself.
d. It is his position that an essential requirement for a
conviction under C.A. No. 142 as amended by
R.A. No. 6085 has not been complied with when
the prosecution failed to prove that his
supposed alias was different from his
registered name in the Registry of Births.
e. He further argues that the Court of Appeals erred
in not considering the defense theory that he was
charged under the wrong law.
ISSUE: Whether or not Ursua should be charged for using Perez’
name.
HELD:
1. CA No. 142 provides:
Sec. 1. Except as a pseudonym solely for literary, cinema,
television, radio or other entertainment purposes and in athletic
events where the use of pseudonym is a normally accepted
practice, no person shall use any name different from the one
Page 21 of 42
with which he was registered at birth in the office of the local
civil registry or with which he was baptized for the first time, or
in case of all alien, with which he was registered in the bureau of
immigration upon entry; or such substitute name as may have
been authorized by a competent court: Provided, That persons
whose births have not been registered in any local civil registry
and who have not been baptized, have one year from the approval
of this act within which to register their names in the civil registry
of their residence. The name shall comprise the patronymic name
and one or two surnames.
Sec. 2. Any person desiring to use an alias shall apply for
authority therefor in proceedings like those legally provided to
obtain judicial authority for a change of name and no person shall
be allowed to secure such judicial authority for more than
one alias. The petition for an alias shall set forth the person's
baptismal and family name and the name recorded in the civil
registry, if different, his immigrant's name, if an alien, and his
pseudonym, if he has such names other than his original or real
name, specifying the reason or reasons for the desired alias. The
judicial authority for the use of alias, the Christian name and the
alien immigrant's name shall be recorded in the proper local civil
registry, and no person shall use any name or names other than
his original or real name unless the same is or are duly recorded
in the proper local civil registry.
2. For a bit of history, the enactment of C.A. No. 142 as
amended was made primarily to curb the common practice
among the Chinese of adopting scores of different names
and aliases which created tremendous confusion in the
field of trade.
a. Such a practice almost bordered on the crime of
using fictitious names which for obvious reasons
could not be successfully maintained against the
Chinese who, rightly or wrongly, claimed they
possessed a thousand and one names.
b. C.A. No. 142 thus penalized the act of using
an alias name, unless such alias was duly
authorized by proper judicial proceedings and
recorded in the civil register.
3. Hence, the use of a fictitious name or a different name
belonging to another person in a single instance without any
sign or indication that the user intends to be known by this
name in addition to his real name from that day forth does
not fall within the prohibition contained in C.A. No. 142 as
amended. This is so in the case at bench.
4. There is no question then that "Oscar Perez" is not
an alias name of petitioner.
a. There is no evidence showing that he had used or
was intending to use that name as his second name
in addition to his real name. The use of the name
"Oscar Perez" was made by petitioner in an
isolated transaction where he was not even legally
required to expose his real identity.
b. For, even if he had identified himself properly at
the Office of the Ombudsman, petitioner would
still be able to get a copy of the complaint as a
matter of right, and the Office of the Ombudsman
could not refuse him because the complaint was
part of public records hence open to inspection and
examination by anyone under the proper
circumstances.
5. While the act of petitioner may be covered by other
provisions of law, such does not constitute an offense within
the concept of C.A. No. 142 as amended under which he is
prosecuted.
a. The confusion and fraud in business transactions
which the anti-alias law and its related statutes
seek to prevent are not present here as the
circumstances are peculiar and distinct from those
contemplated by the legislature in enacting C.A.
No. 142 as amended. There exists a valid
presumption that undesirable consequences were
never intended by a legislative measure and that a
 construction of which the statute is fairly
susceptible is favored, which will avoid all
objectionable, mischievous, indefensible,
wrongful, evil and injurious
consequences. 12 Moreover, as C.A. No. 142 is a
penal statute, it should be construed strictly against
the State and in favor of the accused. 13 The reason
for this principle is the tenderness of the law for
the rights of individuals and the object is to
establish a certain rule by conformity to which
mankind would be safe, and the discretion of the
court limited. 14 Indeed, our mind cannot rest easy
on the proposition that petitioner should be
convicted on a law that does not clearly penalize
the act done by him.
6. WHEREFORE, the questioned decision of the Court of
Appeals affirming that of the Regional Trial Court of Davao
City is REVERSED and SET ASIDE and petitioner
CESARIO URSUA is ACQUITTED of the crime charged.
People v. Estrada
FACTS: On April 4, 2001, an Information for plunder was filed with
the Sandiganbayan against respondent Estrada, among other accused.
A separate Information for illegal use of alias, was likewise filed
against him. In the information, it was alleged that on or about 04
February 2000, in the City of Manila, then President Estrada without
having been duly authorized, judicially or administratively, taking
advantage of his position and committing the offense in relation to
office, i.e., in order to CONCEAL THE ill-gotten wealth HE
ACQUIRED during his tenure and his true identity as THE President
of the Republic of the Philippines, did then and there, willfully,
unlawfully and criminally REPRESENT HIMSELF AS ‘JOSE
VELARDE’ IN SEVERAL TRANSACTIONS AND use and employ
the SAID alias “Jose Velarde” which IS neither his registered name at
birth nor his baptismal name, in signing documents with Equitable PCI
Bank and/or other corporate entities.
Estrada was subsequently arrested on the basis of a warrant of arrest
that the Sandiganbayan issued. A Special Division in the
Sandiganbayan was made to try, hear, and decide the charges of
plunder and related against respondent Estrada. At the trial, the People
presented testimonial and documentary evidence to prove the
allegations of the Informations for plunder, illegal use of alias, and
perjury.
After the People rested in all three cases, the defense moved to be
allowed to file a demurrer to evidence in these cases. In its Joint
Resolution, the Sandiganbayan only granted the defense leave to file
demurrers in illegal use of alias and perjury. The Sandiganbayan ruled
that the people failed to present evidence that proved Estrada’s
commission of the offense.
ISSUE: Whether the court a quo gravely erred and abused its
discretion in dismissing Crim. Case No. 26565 and in applying R.A.
No. 1405 as an exception to the illegal use of alias punishable under
Commonwealth Act No. 142
HELD: No. The Sandiganbayan position that the rule in the law of
libel – that mere communication to a third person is publicity – does
not apply to violations of CA No. 142. In order to be held liable for a
violation of CA No. 142, the user of the alias must have held himself
out as a person who shall publicly be known under that other name. In
other words, the intent to publicly use the alias must be manifest. The
presence of Lacquian and Chua when Estrada signed as Jose Velarde
and opened Trust Account No. C-163 does not necessarily indicate his
intention to be publicly known henceforth as Jose Velarde. Thus,
Estrada could not be said to have intended his signing as Jose Velarde
to be for public consumption by the fact alone that Lacquian and Chua
were also inside the room at that time. The same holds true for
Page 22 of 42
Estrada’s alleged representations with Ortaliza and Dichavez,
assuming the evidence for these representations to be admissible. All
of Estrada’s representations to these people were made in privacy and
in secrecy, with no iota of intention of publicity.
Bank deposits under R.A. No. 1405 (the Secrecy of Bank Deposits
Law) are statutorily protected or recognized zones of privacy. Given
the private nature of Estrada’s act of signing the documents as “Jose
Velarde” related to the opening of the trust account, the People cannot
claim that there was already a public use of alias when Ocampo and
Curato witnessed the signing. Petition was denied.
STIPULATIONS ON INTEREST
Floirendo v. Metrobank
G.R. No. 148325 September 3, 2007
REYNALDO P. FLOIRENDO, JR., petitioner,
vs.
METROPOLITAN BANK and TRUST COMPANY, respondent.
DOCTRINE: Increases of interest rate unilaterally imposed by
respondent bank without petitioner’s assent are violative of the
principle of mutuality of contracts ordained in Article 1308 of the Civil
Code
FACTS:
1. Floreindo is the president and chairman of Reymill Realty
Corporation.
2. Floirendo obtained a loan of P1M from Metrobank to infuse
additional working capital for his company.
a. as security for the loan, Floirendo executed a REM
in favor of Metrobank over his 4 parcels of land in
CDO.
b. The loan was renewed for another year secured by
the same REM.
c. Floirendo signed a PN fixing the rate of interest at
“15.446% per annum for the first 30 days, subject
to upward/downward adjustment every 30 days
thereafter”; and a penalty charge of 18% per
annum “based on any unpaid principal to be
computed from date of default until payment of the
obligation.”
d. The PN provides: “The rate of interest and/or bank charges
herein stipulated, during the term of this Promissory Note, its
extension, renewals or other modifications, may be increased,
decreased, or otherwise changed from time to time by the Bank
without advance notice to me/us in the event of changes in the
interest rate prescribed by law or the Monetary Board of the
Central Bank of the Philippines, in the rediscount rate of member
banks with the Central Bank of the Philippines, in the interest
rates on savings and time deposits, in the interest rates on the
bank’s borrowings, in the reserve requirements, or in the overall
costs of funding or money”
3. respondent bank started imposing higher interest rates on
petitioner’s loan which varied through the months, in fact, as
high as 30.244% in October 1997.
a. As a result, petitioner could no longer pay the high
interest rates charged by respondent bank. Thus,
he negotiated for the renewal of his loan.
b. Respondent bank agreed provided petitioner
would pay the arrears in interest amounting to the
total sum of P163,138.33.
4. Despite payment by petitioner, respondent bank, instead of
renewing the loan, filed a petition for foreclosure of
mortgage which was granted. Hence, the auction sale was
set.
5. Floirendo filed with the RTC a complaint for reformation of
REM contract and PN.
a. Referring to the real estate mortgage and the
promissory note as "contracts of adhesion,"
petitioner alleged that the increased interest rates
 unilaterally imposed by respondent bank are
scandalous, immoral, illegal and
unconscionable.
b. He also alleged that the terms and conditions of the
real estate mortgage and the promissory note are
such that they could be interpreted by respondent
bank in whatever manner it wants, leaving
petitioner at its mercy.
6. The RTC issued a TRO and a writ of preliminary injunction1
7. Metrobank contends that the interest stipulated in the PN is
not per annum but on a month to month basis.
a. The 15.446% interest appearing therein was good
only for the first 30 days of the loan, subject to
upward and downward adjustment every 30 days
thereafter.
b. The terms of the real estate mortgage and
promissory note voluntarily entered into by
petitioner are clear and unequivocal.
8. The RTC dismissed the complaint for reformation, dissolved
the writ of preliminary injunction, and directed the sale at
public auction of the REM.
a. Furthermore, the escalation clause was ruled valid.
b. MR was filed but was denied for lack of merit.
9. Hence, this petition for review on certiorari.
ISSUE: Whether or not the escalation clause is illegal, excessive, and
arbitrary.
HELD:
1. We hold that the increases of interest rate unilaterally
imposed by respondent bank without petitioner’s assent are
violative of the principle of mutuality of contracts ordained
in Article 1308 of the Civil Code2
2. Any contract which appears to be heavily weighed in favor
of one of the parties so as to lead to an unconscionable result
is void. Any stipulation regarding the validity or compliance
of the contract which is left solely to the will of one of the
parties is likewise invalid.
a. The provision in the promissory note authorizing
respondent bank to increase, decrease or otherwise
change from time to time the rate of interest and/or
bank charges "without advance notice" to
petitioner, "in the event of change in the interest
rate prescribed by law or the Monetary Board of
the Central Bank of the Philippines," does not give
respondent bank unrestrained freedom to charge
any rate other than that which was agreed upon.
b. Here, the monthly upward/downward adjustment
of interest rate is left to the will of respondent bank
alone.
c. It violates the essence of mutuality of the
contract.
Philippine In order that obligations arising from contracts may have the force
National Bank of law between the parties, there must be mutuality between the
v. Court of parties based on their essential equality. A contract containing a
Appeals condition which makes its fulfillment dependent exclusively upon
the uncontrolled will of one of the contracting parties, is void
(Garcia v. Rita Legarda, Inc., 21 SCRA 555). Hence, even
assuming that the P1.8 million loan agreement between the PNB
and the private respondent gave the PNB a license (although in fact
there was none) to increase the interest rate at will during the term
of the loan, that license would have been null and void for being
violative of the principle of mutuality essential in contracts. It
would have invested the loan agreement with the character of a
contract of adhesion, where the parties do not bargain on equal
footing, the weaker party’s (the debtor) participation being
reduced to the alternative "to take it or leave it" (Qua v. Law Union
1 A preliminary injunction is an order granted at any stage of an action or proceeding prior to the
judgment or final order, requiring a party or a court, agency or a person to refrain from a particular
act or acts. It may also require the performance of a particular act or acts, in which case it shall
be known as a preliminary mandatory injunction.
Page 23 of 42
& Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable
trap for the weaker party whom the courts of justice must protect
against abuse and imposition.
New we ruled that while it is true that escalation clauses are valid in
Sampaguita maintaining fiscal stability and retaining the value of money on
Builders long term contracts, however, giving respondent an unbridled right
Construction, to adjust the interest independently and upwardly would
Inc. (NSBCI) v. completely take away from petitioner the right to assent to an
Philippine important modification in their agreement, hence, would negate
National Bank the element of mutuality in their contracts. Such escalation clause
would make the fulfillment of the contracts dependent exclusively
upon the uncontrolled will of respondent bank and is therefore
void. In the present case, the promissory note gives respondent
bank authority to increase the interest rate at will during the term
of the loan. This stipulation violates the principle of mutuality
between the parties. It would be converting the loan agreement into
a contract of adhesion where the parties do not bargain on equal
footing, the weaker party’s (petitioner’s) participation being
reduced to the alternative "to take it or leave it. 9 While the Usury
Law ceiling on interest rate was lifted by Central Bank Circular
No. 905, nothing therein could possibly be read as granting
respondent bank carte blanche authority to raise interest rate to
levels which would either enslave its borrower (petitioner herein)
or lead to hemorrhaging of his assets.
Philippine It is basic that there can be no contract in the true sense in the
National Bank absence of the element of agreement, or of mutual assent of the
v. Court of parties. If this assent is wanting on the part of one who contracts,
Appeals his act has no more efficacy than if it had been done under duress
or by a person of unsound mind.
Similarly, contract changes must be made with the consent of the
contracting parties. The minds of all the parties must meet as to the
proposed modification, especially when it affects an important
aspect of the agreement. In the case of loan contracts, it cannot be
gainsaid that the rate of interest is always a vital component, for it
can make or break a capital venture. Thus, any change must
be mutually agreed upon, otherwise, it is bereft of any binding
effect.
We cannot countenance petitioner bank’s posturing that that
escalation clause at bench gives it unbridled right
to unilaterally upwardly adjust the interest on private respondents’
loan. That would completely take away from private respondents
the right to assent to an important modification in their agreement,
and would negate the element of mutuality in contracts.
3. Under Article 1310 of the Civil Code, courts are granted
authority to reduce/increase interest rates equitably
a. Obviously, the rate increases are excessive and
arbitrary.
b. It bears reiterating that respondent bank
unilaterally increased the interest rate without
petitioner’s knowledge and consent.
4. Floirendo negotiated for the renewal of his loan. As required
by respondent bank, he paid the interests due. Respondent
bank then could not claim that there was no attempt on his
part to comply with his obligation. Yet, respondent bank
hastily filed a petition to foreclose the mortgage to gain the
upperhand in taking petitioner’s four (4) parcels of land at
bargain prices. Obviously, respondent bank acted in bad
faith.
5. In sum, we find that the requisites for reformation of the
mortgage contract and promissory note are present in this
case.
a. There has been meeting of minds of the parties
upon these documents.
b. However, these documents do not express the
parties’ true agreement on interest rates. And the
failure of these documents to express their
agreement on interest rates was due to respondent
bank’s inequitable conduct.
6. WHEREFORE, we GRANT the petition. The Judgment
dated February 22, 2001 of the RTC of Cagayan de Oro City,
Branch 39 in Civil Case No. 98-476 is REVERSED. The real
2
Article 1308. The contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them.
 estate mortgage contract and the promissory note agreed
upon by the parties are reformed in the sense that any
increase in the interest rate beyond 15.446% per
annum should not be imposed by respondent bank without
the consent of petitioner. The interest he paid in excess of
15.446% should be applied to the payment of the principal
obligation.
Equitable v. Ng Sheung Ngor
G.R. No. 171545 December 19, 2007
EQUITABLE PCI BANK,* AIMEE YU and BEJAN LIONEL
APAS, Petitioners,
vs.
NG SHEUNG NGOR** doing business under the name and style
"KEN MARKETING," KEN APPLIANCE DIVISION, INC. and
BENJAMIN E. GO, Respondents.
DOCTRINE: Escalation clauses are not void per se but one “which
grants the creditor an unbridled right to adjust the interest
independently and upwardly, completely depriving the debtor of the
right to assent to an important modification in the agreement” is
void—clauses of that nature violate the principle of mutuality of
contracts
FACTS:
1. Ng, Ken Appliance Division Inc., and Go filed an action for
annulment and/or reformation of documents and contracts
against Equitable and its employees Yu and Apas in the
RTC.
a. Petitioners claim that Equitable induced them to
avail of its peso and dollar credit facilities by
offering low interest rates so they accepted the
proposal and signed the bank’s pre-printed PN on
various dates.
b. They, however, were unaware that the documents
contained identical escalation clauses granting
the bank authority to increase interest rates
without their consent.
c. Equitable, in its answer, asserted that respondents
knowingly accepted all the terms and
conditions contained in the promissory notes. In
fact, they continuously availed of and benefited
from Equitable's credit facilities for five years.
2. After trial, the RTC upheld the validity of the promissory
notes.
a. The trial court, however, invalidated the escalation
clause contained therein because it violated the
principle of mutuality of contracts.
b. Nevertheless, it took judicial notice of the steep
depreciation of the peso during the intervening
period and declared the existence of extraordinary
deflation.
c. Consequently, the RTC ordered the use of the
1996 dollar exchange rate in computing
respondents' dollar-denominated loans.
d. Lastly, because the business reputation of
respondents was (allegedly) severely damaged
when Equitable froze their accounts, the trial court
awarded moral and exemplary damages to them.
3. Upon appeal, the RTC issued an omnibus order denying
Equitable's motion for reconsideration for lack of merit and
ordered the issuance of a writ of execution in favor of
respondents because the decision has become final and
executory.
4. the CA granted Equitable’s application for injunction. A writ
of preliminary injunction was correspondingly issued.
a. Notwithstanding the writ of injunction, the
properties of Equitable previously levied upon
were sold in a public auction on July 1, 2004.
Page 24 of 42
Respondents were the highest bidders and
certificates of sale were issued to them.
b. Equitable moved to annul the July 1, 2004 auction
sale and to cite the sheriffs who conducted the sale
in contempt for proceeding with the auction
despite the injunction order of the CA.
5. The CA dismissed the petition for certiorari. It found
Equitable guilty of forum shopping because the bank filed
its petition for certiorari in the CA several hours before
withdrawing its petition for relief in the RTC.
a. Moreover, Equitable failed to disclose, both in the
statement of material dates and certificate of non-
forum shopping (attached to its petition for
certiorari in the CA), that it had a pending petition
for relief in the RTC.
6. Hence, this petition.
ISSUE:
1. Whether or not the PNs were valid.
2. Whether or not the escalation clause violated the principle of
mutuality of contracts.
HELD:
1. The RTC upheld the validity of the promissory notes
despite respondents’ assertion that those documents were
contracts of adhesion.
a. A contract of adhesion is a contract whereby
almost all of its provisions are drafted by one
party. The participation of the other party is
limited to affixing his signature or his "adhesion"
to the contract. For this reason, contracts of
adhesion are strictly construed against the party
who drafted it.
b. It is erroneous, however, to conclude that contracts
of adhesion are invalid per se. They are, on the
contrary, as binding as ordinary contracts. A party
is in reality free to accept or reject it. A contract
of adhesion becomes void only when the
dominant party takes advantage of the weakness
of the other party, completely depriving the latter
of the opportunity to bargain on equal footing.
c. if the terms and conditions offered by Equitable
had been truly prejudicial to respondents, they
would have walked out and negotiated with
another bank at the first available instance. But
they did not. Instead, they continuously availed of
Equitable's credit facilities for five long years.
d. The SC, however, remanded the case for the
determination of the amount of actual damages.
2. Escalation clauses are not void per se.
a. However, one "which grants the creditor an
unbridled right to adjust the interest
independently and upwardly, completely
depriving the debtor of the right to assent to an
important modification in the agreement" is
void. Clauses of that nature violate the principle of
mutuality of contracts. Article 1308 of the Civil
Code holds that a contract must bind both
contracting parties; its validity or compliance
cannot be left to the will of one of them.
b. A valid escalation clause provides:
i. that the rate of interest will only be
increased if the applicable maximum
rate of interest is increased by law or by
the Monetary Board; and
ii. that the stipulated rate of interest will be
reduced if the applicable maximum rate
of interest is reduced by law or by the
Monetary Board (de-escalation clause).
 c. Equitable dictated the interest rates if the term (or
period for repayment) of the loan was extended.
Respondents had no choice but to accept them.
This was a violation of Article 1308 of the Civil
Code. Furthermore, the assailed escalation clause
did not contain the necessary provisions for
validity, that is, it neither provided that the rate of
interest would be increased only if allowed by law
or the Monetary Board, nor allowed de-escalation.
For these reasons, the escalation clause was void.
d. With regard to the proper rate of interest, in New
Sampaguita Builders v. Philippine National
Bank we held that, because the escalation clause
was annulled, the principal amount of the loan was
subject to the original or stipulated rate of interest.
Upon maturity, the amount due was subject to
legal interest at the rate of 12% per annum
GRANT OF LOANS AND SECURITY REQUIREMENTS
680 Home Appliances v. CA
G.R. No. 206599 September 29, 2014
680 HOME APPLIANCES, INC., Petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE
HONORABLE MARYANNE. CORPUS-MAÑALAC, in her
capacity as the PRESIDING JUDGE OF THE REGIONAL
TRIAL COURT OF MA.KATI CITY, BRANCH 141, ATTY.
ENGRACIO ESCASINAS, JR., in his capacity as THE EX-
OFFICIO SHERIFF/CLERK OF COURT VII, OFFICE OF
THE CLERK OF COURT, REGIONAL TRIAL COURT,
MA.KATI CITY, FIRST SOVEREIGN ASSET
MANAGEMENT (SPV-AMC), INC. and ALDANCO
MERLMAR, INC., Respondents
DOCTRINE: Section 8 of Act No. 3135 finds no application when the
redemption period has expired without the debtor exercising his right,
and the purchaser in the foreclosure sale has already consolidated his
ownership over the property and moved for the issuance of the writ of
possession.
FACTS:
1. The case arose from the extrajudicial foreclosure
proceedings commenced by the creditor of 680 Home,
Deutsche Bank AG London, after the former defaulted in
paying a loan secured by a real estate mortgage over its
commercial lot and building.
2. in the foreclosure sale, FSAMI emerged as the highest bidder
of 680 Home’s mortgaged properties.
a. A certificate of sale was issued to FSAMI which
was registered with the register of deeds.
b. 3 months after, FSAMI consolidated its ownership
after 680 home failed to redeem the property.
Hence, a new TCT was issued.
3. 680 Home commenced an action to annul the mortgage and
foreclosure with the RTC.
4. FSAMI, on the other hand, commenced a petition for the ex
parte issuance of a writ of possession with the RTC.
a. 680 home moved to intervene and filed an
opposition but the RTC denied such motion.
b. RTC granted the application for a writ of
possession, as well as a notice to vacate.
c. Aldanco, the current occupant of the property in
dispute, filed a motion to intervene, claiming that
it possessed the property as lessee. The RTC
granted its motion.
d. Undeterred, 680 Home filed a petition to cancel
the writ of possession, invoking Section 8 of Act
No. 3135. It alleged the nullity of the foreclosure
as well the adverse possession of Aldanco that
Page 25 of 42
supposedly barred the ministerial issuance of the
writ of possession.
5. RTC denied the petition to cancel the writ of possession.
6. Via a petition for certiorari, CA affirmed the RTC ruling,
contending that the petition for cancellation was
prematurely filed.
a. The CA ruled that under Section 8 of Act No.
3135, a judgment debtor may file a petition for
cancellation of the writ of possession within 30
days only after the purchaser has obtained
possession of the property.
b. Although a writ of possession was issued, the
property remained in the possession of Aldanco as
680 Home’s lessee.
c. Since FSAMI did not obtain possession of the
property, the 30-day period to file a petition to
cancel the writ under Section 8 of Act No. 3135
has not yet commenced. The CA relied on the
Court’s ruling in Ong v. CA, which held that "the
purchaser must first be placed in possession of the
mortgaged property pending proceedings
assailing the issuance of the writ of possession."
7. Hence, this petition for certiorari.
ISSUE: Whether or not the petition for cancellation was prematurely
filed.
HELD:
1. 680 Home’s certiorari petition is procedurally erroneous
because of the availability of the remedies of reconsideration
and appeal.
2. As the CA correctly pointed out, a debtor may avail of the
remedy under Section 8 of Act No. 3135 only after the
purchaser has obtained possession of the property.
a. What it missed, however, is that this rule is
applicable only to a unique factual situation –
when the writ of possession sought to be
cancelled was issued during the redemption
period. In Ong where this rule was laid down, the
mortgagors sought the recall of the writ of
possession that was issued during the one-year
redemption period.
b. Section 8 of Act No. 3135 finds no application
when the redemption period has expired without
the debtor exercising his right, and the purchaser
in the foreclosure sale has already consolidated
his ownership over the property and moved for the
issuance of the writ of possession.
c. The provisions of Act No. 3135 applies until the
period of redemption; once redemption lapses and
consolidation of the purchaser’s title ensues, Act
No. 3135 finds no application
3. Act No. 3135 governs only the manner of the sale and
redemption of the mortgaged real property in an extrajudicial
foreclosure; proceedings beyond these, i.e., upon the lapse
of the redemption period and the consolidation of the
purchaser’s title, are no longer within its scope.
a. During the redemption period, the purchaser’s title
is merely inchoate. The "mere purchase and
[issuance of a] certificate of sale alone do not
confer any right to the possession or beneficial use
of the premises [in favor of the
purchaser]." Nonetheless, the purchaser may
acquire possession of the property during the
redemption period by exercising the privilege
granted to him under Section 7 of Act No. 3135
(writ of possession)
b. The debtor, on the other hand, is provided
opportunity to contest the transfer of possession
 during the redemption period under Section 8 of
Act No. 3135, as he remains to be the owner of the
foreclosed property. (cancellation of writ of
possession)
4. The writ of possession that the debtor may petition to set
aside under Section 8 of Act No. 3135 undoubtedly refers to
one issued pursuant to Section 7 of the same law "during
the redemption period."
a. Further showing Section 7 and 8’s close relation is
the bond required to be filed by the purchaser
in Section 7 that the debtor may proceed against in
Section 8.
b. Section 7 states that the petition for the issuance of
a writ of possession should be accompanied by a
bond which, under Section 8, shall "indemnify the
debtor in case it be shown that the sale was made
without violating the mortgage or without
complying with the requirements of [Act No.
3135]."
c. A bond is no longer required to be filed in support
of a petition for writ of possession filed after the
redemption period has expired without the
mortgagor exercising his right of redemption.
At this point, the purchaser’s right over the
property is consolidated and his right to obtain
possession of the property stems from his right of
ownership.
5. WHEREFORE, we hereby DISMISS the petition. For the
reasons stated above, we UPHOLD the decision dated
February 13, 2013 of the Court of Appeals in CA-G.R. SP
No. 124735 insofar as it affirmed the dismissal of the
petitioner 680 Home Appliances, Inc.' s petition for
cancellation of writ of possession by the Regional Trial
Court of Makati, Branch 141 in its Orders dated December
20, 2011 and March 23, 2012.
Prudencio v. CA
G.R. No. 128053 June 10, 2004
SPOUSES PRUDENCIO ROBLES AND SUSANA DE
ROBLES, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, SECOND
LAGUNA DEVELOPMENT BANK AND SPOUSES NILO DE
ROBLES and ZENAIDA DE ROBLES, respondents.
DOCTRINE: The statements of the Sheriff are entitled to belief unless
rebutted by evidence proving otherwise. The presumption of regularity
in the performance of duty applies in this case in favor of the Sheriff.
Since petitioners have not rebutted such valid presumption, we have
no reason to believe that the Sheriff was remiss in his duties.
FACTS:
1. Sps. Prudencio and Susana obtained a loan of P48,000 from
Laguna Development bank.
a. As security, they executed a deed of real estate
mortgage over a parcel of land registered in their
names.
2. On account of the petitioners’ failure to pay their loan on due
date, respondent bank caused the subject land to be sold at
public auction.
a. Respondents state that the sale occurred on May
15, 1984 while petitioners claim that it happened
on May 14, 1984.
b. LDB was the highest bidder. Hence, a certificate
of sale was issued in its favor.
3. The one-year redemption period expired on May 31, 1985
without the spouses exercising their right of redemption.
a. Hence, a TCT was issued in favor of LDB.
Page 26 of 42
b. respondent bank sold the subject land to
respondent spouses Nilo and Zenaida de Robles
and a new title
4. Sometime in the first week of December 1990, petitioners
went to respondent bank and offered to redeem the subject
land.
a. The bank informed them that the property had
already been sold to respondent spouses and
accordingly rejected petitioners’ offer.
5. This prompted petitioners to file the case for "Annulment of
Certificate of Sale, Deed of Absolute Sale, Reconveyance,
Damages and Preliminary Injunction".
a. Respondent spouses prevailed in the case, with the
trial court rendering its decision, declaring the
foreclosure sale proper and legal and
respondent spouses the lawful owners of the
subject property.
6. Petitioners’ challenge of the decision of the CA rests mainly
on their claim that the judicial foreclosure of the mortgage
on the subject property is void ab initio due to the alleged
attendant fraud and lack of the requisite notice and
publication.
a. They also beseech the Court to liberally interpret
the rules on redemption in their favor and allow
them to retake the subject property on equitable
considerations.
ISSUE: Whether or not the foreclosure and sale was valid.
HELD:
1. We affirm the validity of the foreclosure sale in favor of
respondent bank.
a. The Sheriff’s Certificate of Sale belies petitioners’
claim that the prescribed notice and publication
was not complied with.
b. Said Certificate attests to the fact that the required
twenty (20)-day written notice of the time, place
and purpose of the sale was posted in three (3)
conspicuous public places at Lumban, Laguna
where the property is situated and in three (3) other
public places in Sta. Cruz, Laguna where the
auction sale was to be held, as required by law.
c. In the same Certificate, the Sheriff also declared
that a copy of the notice was sent to the
mortgagors by registered mail.
d. The notice of sale was published once a week
within a period of twenty (20) days in a local
publication entitled "Bayanihan."4
2. In Natino v. IAC: The right to redeem becomes functus
officio on the date of its expiry, and its exercise after the
period is not really one of redemption but a repurchase.
Distinction must be made because redemption is by force of
law; the purchaser at public auction is bound to accept
redemption. Repurchase however of foreclosed property,
after redemption period, imposes no such obligation. After
expiry, the purchaser may or may not re-sell the property but
no law will compel him to do so. And, he is not bound by the
bid price; it is entirely within his discretion to set a higher
price, for after all, the property already belongs to him as
owner.
3. The court did not give credence to the allegation that there
has been a grant of extension in 1989 for that period is
already beyond the 1-year redemption period.
a. Assuming but not admitting that indeed an
extension had been granted in petitioners’ favor,
such an extension would constitute a mere offer on
the part of respondent bank to re-sell the subject
property to petitioners. Such an offer, however,
does not constitute a binding contract.
 b.
The Pasig RTC ruled that Camden’s debt
Other redemption jurisprudence amounted only to P14M but Equitable deducted
6
Doronila v. Vasquez allowed redemption in certain cases even after the lapse of the P108M from its account. Hence, it ordered the
one-year period in order to promote justice and avoid injustice. In Tolentino v. Court
of Appeals,7 the policy of the law to aid rather than defeat the right of redemption was return of the excess amount.
expressed, stressing that where no injury would ensue, liberal construction of 5. Respondent filed a notice of appeal. CII, on the other hand,
redemption laws is pursued and the exercise of the right to redemption is permitted to moved for the immediate entry and execution of the
better serve the ends of justice. In De los Reyes v. Intermediate Appellate Court,8 the
rule was liberally interpreted in favor of the original owner of the property to give him
abovementioned decision.
another opportunity, should his fortunes improve, to recover his property.
ISSUE: Whether or not the Bulacan RTC should issue the writ of
GC Dalton v. Equitable possession to Equitable.

G.R. No. 171169 August 24, 2009 HELD:

GC DALTON INDUSTRIES, INC., Petitioner, 1. The issuance of a writ of possession to a purchaser in an
vs. extrajudicial foreclosure is summary and ministerial in
EQUITABLE PCI BANK, Respondent. nature as such proceeding is merely an incident in the
DOCTRINE: Any question regarding the validity of the mortgage or transfer of title. The trial court does not exercise discretion
its foreclosure cannot be a legal ground for the refusal to issue a writ in the issuance thereof.
of possession. Regardless of whether or not there is a pending suit for a. For this reason, an order for the issuance of a writ
the annulment of the mortgage or the foreclosure itself, the purchaser of possession is not the judgment on the merits
is entitled to a writ of possession, without prejudice, of course, to the contemplated by Section 14, Article VIII of the
eventual outcome of the pending annulment case. Constitution.
b. Hence, the CA correctly upheld the December 10,
FACTS: 2005 order of the Bulacan RTC (granted the
1. Equitable extended a P30-M credit line to Camden allowing motion and a writ of possession in favor of
it to avail of several loans (covered by promissory notes) and Equitable).
to purchase trust receipts. 2. Furthermore, the mortgagor loses all legal interest over the
a. To facilitate collection, Camden executed a "hold- foreclosed property after the expiration of the redemption
out" agreement in favor of respondent authorizing period.
it to deduct from its savings account any amounts a. Under Section 47 of the General Banking Law, if
due. the mortgagor is a juridical person, it can exercise
b. To guarantee payment, petitioner GC Dalton the right to redeem the foreclosed property until,
Industries, Inc. executed a third-party but not after, the registration of the certificate of
mortgage of its real properties in Quezon City and foreclosure sale within three months after
Malolos, Bulacan as security for Camden’s loans. foreclosure, whichever is earlier. Thereafter, such
c. CII did not pay its obligations despite respondent’s mortgagor loses its right of redemption.
demands. By 2003, its outstanding consolidated b. Respondent filed the certificate of sale and
promissory notes and unpaid trust receipts had affidavit of consolidation with the Register of
reached a staggering ₱68,149,132.40. Deeds of Bulacan on September 13, 2004. This
2. Consequently, Equitable filed a petition for extrajudicial terminated the redemption period granted by
foreclosure of GC Dalton’s Bulacan properties in the RTC Section 47 of the General Banking Law 3.
of Bulacan. c. Because consolidation of title becomes a right
a. On August 3, 2004, the mortgaged properties upon the expiration of the redemption
were sold at a public auction where Equitable was period, respondent became the owner of the
declared the highest bidder. foreclosed properties.
b. Consequently, a certificate of sale was issued in d. Therefore, when petitioner opposed the ex
respondent’s favor on August 3, 2004. parte motion for the issuance of the writ of
c. GC Dalton’s TCTs were cancelled and new ones possession on January 10, 2005 in the Bulacan
were issued in favor of Equitable as the new RTC, it no longer had any legal interest in the
owner. Bulacan properties.
3. Equitable filed an ex parte motion for the issuance of the writ 3. Nevertheless, even if the ownership of the Bulacan
of possession in the RTC properties had already been consolidated in the name of
4. However, Camden previously filed an action for specific respondent, petitioner still had, and could have availed of,
performance and damages in the Pasig RTC asserting that it the remedy provided in Section 8 of Act 31354.
had allegedly paid its obligation in full to Equitable. a. It could have filed a petition to annul the August
a. Camden sought to compel Equitable to render an 3, 2004 auction sale and to cancel the December
accounting in order to prove that the bank 19, 2005 writ of possession, within 30 days after
fraudulently foreclosed on petitioner’s properties. respondent was given possession.

3
Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure, whether
judicially or extra-judicially, of any mortgage on real estate which is security for any loan or other
credit accommodation granted, the mortgagor or debtor whose real property has been sold for
the full or partial payment of his obligation shall have the right within one year after the sale of
the real estate, to redeem the property by paying the amount due under the mortgage deed, with
interest thereon at rate specified in the mortgage, and all the costs and expenses incurred by
the bank or institution from the sale and custody of said property less the income derived
therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extra-
judicial foreclosure shall have the right to enter upon and take possession of such property
immediately after the date of the confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure
proceedings instituted pursuant to this provision shall be given due course only upon the filing
by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the
damages which the bank may suffer by the enjoining or the restraint of the foreclosure
proceeding. Notwithstanding Act 3135, juridical persons whose property is being sold pursuant
to an extrajudicial foreclosure, shall have the right to redeem the property in accordance with
this provision until, but not after, the registration of the certificate of foreclosure sale with the
applicable Register of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale
prior to the effectivity of this Act shall retain their redemption rights until their expiration
4 Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later
than thirty days after the purchaser was given possession, petition that the sale be set aside and
the writ of possession cancelled, specifying the damages suffered by him, because the mortgage
was not violated or the sale was not made in accordance with the provisions hereof, and the
court shall take cognizance of this petition in accordance with the summary procedure provided
for in section one hundred and twelve of Act Numbered Four hundred and ninety-six; and if it
finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond
furnished by the person who obtained possession. Either of the parties may appeal from the
order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-
six; but the order of possession shall continue in effect during the pendency of the appeal.

Page 27 of 42
 b. Thus, inasmuch as the 30-day period to avail of the
said remedy had already lapsed, petitioner could
no longer assail the validity of the August 3, 2004
sale.
4. Any question regarding the validity of the mortgage or its
foreclosure cannot be a legal ground for the refusal to issue
a writ of possession. Regardless of whether or not there is a
pending suit for the annulment of the mortgage or the
foreclosure itself, the purchaser is entitled to a writ of
possession, without prejudice, of course, to the eventual
outcome of the pending annulment case.
5. Needless to say, petitioner committed a misstep by
completely relying and pinning all its hopes for relief on its
complaint for specific performance and damages in the Pasig
RTC, instead of resorting to the remedy of annulment (of the
auction sale and writ of possession) under Section 8 of Act
3135 in the Bulacan RTC.
BANKS IN DISTRESS
Rural Bank of San Miguel v. Monetary Board
Facts: Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a
domestic corporation engaged in banking. On January 21, 2000,
respondent Monetary Board (MB), the governing board of Bangko
Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting
RBSM from doing business in the Philippines, placing it under
receivership and designating Philippine Deposit Insurance Corporation
(PDIC) as receiver on the basis of its inability to pay its liabilities as
they become due in the ordinary course of business and continuance in
business without involving probable losses to its depositors and
creditors.
On January 4, 2000, RBSM declared a bank holiday. RBSM and all of
its 15 branches were closed from doing business. Alarmed and
disturbed by the unilateral declaration of bank holiday, BSP wanted to
examine the books and records of RBSM but encountered problems.
RBSM’s designated comptroller submitted to the Department of Rural
Banks, BSP, a Comptrollership Report on her findings on the financial
condition and operations of the bank. Based on these reports, the
director of the Department of Rural Banks Supervision and
Examination Sector made a report to the Monetary Bank (MB). The
MB after evaluating and deliberating on the findings and
recommendation, issued Resolution No. 105. Thereafter, PDIC
implemented the closure order and took over the management of
RBSM’s assets and affairs.
On January 31, 2000, petitioners filed a petition for certiorari and
prohibition in the Regional Trial Court to nullify and set aside
Resolution No. 105.7 However, on February 7, 2000, petitioners filed
a notice of withdrawal in the RTC and filed a special civil action for
certiorari and prohibition in the CA.
In their petition before the CA, petitioners claimed that respondents
MB and BSP committed grave abuse of discretion in issuing
Resolution No. 105. The petition was dismissed by the CA on the basis
that the decision of the MB was based on the findings and
recommendations of the Department of Rural Banks Supervision and
Examination Sector, the comptroller reports and the declaration of a
bank holiday. Such could be considered as substantial evidence.
Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC,
MB passed Resolution No. 966 directing PDIC to proceed with the
liquidation of RBSM under Section 30 of RA 7653.
Hence this petition.
Page 28 of 42
Issue: Whether or not Section 30 of RA 7653 (also known as the New
Central Bank Act) and applicable jurisprudence require a current and
complete examination of the bank before it can be closed and placed
under receivership.
Held: Section 30 of RA 7653 does not require a current and complete
examination of the bank before it can be closed and placed under
receivership. Section 30 of RA 7653 provides:
SECTION 30. Proceedings in Receivership and Liquidation. —
Whenever, upon report of the head of the supervising or examining
department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the
ordinary course of business: Provided, That this shall not
include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the
[BSP] to meet its liabilities; or
(c) cannot continue in business without involving probable
losses to its depositors or creditors; or
(d) has willfully violated a cease and desist order under
Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation of the
assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior
hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the banking
institution.
It is well-settled that the closure of a bank may be considered as an
exercise of police power. The action of the MB on this matter is final
and executory. Such exercise may nonetheless be subject to judicial
inquiry and can be set aside if found to be in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.
The absence of an examination before the closure of RBSM did not
mean that there was no basis for the closure order. But it is clear under
RA 7653 that the basis need not arise from an examination as required
in the old law. The court rules that the MB had sufficient basis to arrive
at a sound conclusion that there were grounds that would justify
RBSM’s closure. Therefore, MB and BSP complied with all the
requirements of RA 7653. By relying on a report before placing a bank
under receivership, the MB and BSP did not only follow the letter of
the law, they were also faithful to its spirit, which was to act
expeditiously. Accordingly, the issuance of Resolution No. 105 was
untainted with arbitrariness.
Banco Filipino v. Ybañez
FACTS: On March 7, 1978, respondents obtained a loan secured by a
Deed of Real Estate Mortgage over Transfer Certificate of Title
(TCT) from petitioner bank. The loan was used for the construction of
a commercial building in Cebu City. On October 25, 1978,
respondents obtained an additional loan from the petitioner thus
increasing their obligation to one million pesos. A corresponding
Amendment of Real Estate Mortgage was thereafter executed.
On December 24, 1982, the loan was again re-structured, increasing
the loan obligation to P1,225,000 and the Real Estate Mortgage was
again amended. Respondents executed a Promissory Note for the sum
of P1,225,000 payable in fifteen years, with a stipulated interest of 21%
per annum, and stipulating monthly payments.
Respondents’ total payment from 1983 to 1988 amounted to
P1,455,385.07, However, From 1989 onwards, respondents did not
pay a single centavo. They aver that Banco Filipino had ceased
operations and/or was not allowed to continue business, having been
placed under liquidation by the Central Bank.
On January 15, 1990, respondents’ lawyer wrote Special Acting
Liquidator, Renan Santos, and requested that plaintiff return the
mortgaged property of the respondents since it had sufficiently profited
from the loan and that the interest and penalty charges were
excessive. Petitioner bank denied the request.
Banco Filipino was closed on January 1, 1985 and re-opened for
business on July 1, 1994. From its closure to its re-opening, petitioner
bank did not transact any business with its customers.
On August 24, 1994, respondents were served a Notice of Extra
Judicial Sale of their property covered by TCT No. 69836 to satisfy
their indebtedness allegedly of P6,174,337.46 which includes the
principal, interest, surcharges and 10% attorney’s fees.
On September 19, 1994, respondents filed a suit for Injunction,
Accounting and Damages, alleging that there was no legal and factual
basis for the foreclosure proceedings since the loan had already been
fully paid. A restraining order was issued the following day by the
lower court enjoining petitioner to cease and desist from selling the
property at a public auction.
Lower court rendered a Decision, directing defendant Banco Filipino
Savings and Mortgage Bank to render a correct accounting of the
obligations of plaintiffs with it after eliminating interest from January
1, 1985 to July 1, 1994 when it was closed, and reducing interest from
21% to 17% per annum, at the time it was in operation, and totally
eliminating [the] surcharge of 1% per month, within a period of fifteen
(15) days from the time the judgment shall have become final and
executory.
Not satisfied with the decision, both parties appealed the case to the
Court of Appeals. The Court of Appeals rendered a Decision affirming
the decision of the trial court. Hence, this Petition.
ISSUE: THE COURT OF APPEALS COMMITTED AN ERROR
IN RULING THAT THE PLAINTIFFS-BORROWERS (HEREIN
RESPONDENTS) CANNOT BE CONSIDERED TO HAVE
DEFAULTED IN THEIR PAYMENT SINCE DEFENDANT BANK
CEASED OPERATION FROM 1985 TO 1991.
HELD: To resolve the controversy we shall address the following
pertinent question: (1) What is the effect of the temporary closure of
Banco Filipino from January 1, 1985 to July 1, 1994 on the loan?
In Banco Filipino Savings and Mortgage Bank v. Monetary Board, the
validity of the closure and receivership of Banco Filipino was put in
issue. But the pendency of the case did not diminish the authority of
the designated liquidator to administer and continue the bank’s
transactions. The Court allowed the bank’s liquidator to continue
receiving collectibles and receivables or paying off creditor’s claims
and other transactions pertaining to normal operations of a
bank. Among these transactions were the prosecution of suits against
debtors for collection and for foreclosure of mortgages. The bank was
Page 29 of 42
allowed to collect interests on its loans while under liquidation,
provided that the interests were legal.
WHEREFORE, the Decision of the Regional Trial Court, which was
sustained by the Court of Appeals, is hereby MODIFIED as
follows: (1) the interest rate at 21% per annum is hereby declared
VALID; (2) the 3% monthly surcharge is NULLIFIED for being
violative of the Usury Law at the time; and (3) respondents are
ORDERED to pay petitioner the amount of P2,581,294.93 within 30
days from receipt of this Decision.
BSP-MB v. Antonio-Valenzuela
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD
and CHUCHI FONACIER, Petitioners,
vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as
Regional Trial Court Judge of Manila, Branch 28; RURAL
BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE
(BATANGAS), INC.; RURAL BANK OF CARMEN (CEBU),
INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE
COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF
CALATAGAN (BATANGAS), INC. (now DYNAMIC RURAL
BANK); RURAL BANK OF DARBCI, INC.; RURAL BANK OF
KANANGA (LEYTE), INC. (now FIRST INTERSTATE
RURAL BANK); RURAL BANK OF BISAYAS
MINGLANILLA (now BANK OF EAST ASIA); and SAN
PABLO CITY DEVELOPMENT BANK, INC.,Respondents.
DOCTRINE: The issuance by RTC of WPI is an unwarranted
interference w the powers of MB. The actions of MB under Sec. 29
and 30 of New Central Bank Act “may not be restrained or set aside
by the court except on petition of certiorari on the ground that the
action taken was in excess of jurisdiction or w such grave abuse of
discretion as to amount to lack or excess of jurisdiction.”
VELASCO, JR., J.:
 The Supervision and Examination Dept. (SED) of BSP
conducted examinations of the books of respondent banks.
 Deficiencies were discovered during examinations.
 These banks were then required undertake the remedial
measures stated in the List of Findings/Exceptions, including
the infusion of additional capital.
 The banks claimed they made the necessary capital infusion,
but Petitioner Chuchi Fonacier (OIC of SED) sent separate
letter to the BOD of each bank, informing them that the
banks failed to carry out the required remedial measures.
 The banks requested that they be given time to obtain BSP
approval to amend their Articles of Incorporation, to seek
new investors, and that the basis for the capital infusion be
disclosed.
 They also noted that none of them had received the Report
of Examination (ROE) wc finalizes the audit findings.
 Respondent banks filed a complaint for nullification of
ROE against petitioners, w TRO and WPI (Writ of
Preliminary Injunction) enjoining BSP from submitting
the ROE to the Monetary Board (MB) contending that the
failure to furnish the bank w the ROE violated their right to
due process.
 Petitioners filed MD on procedural grounds.
 RTC: ruled in favour of the banks. It had been the practice
of SED to provide ROEs to the banks before submission to
MB. As banks are subject of examinations, they are entitled
to copies of the ROEs. The denial by petitioners of the banks’
 requests for copies of ROEs was held to be a denial of the
banks’ right to due process.
 CA: affirmed the RTC decision, finding no grave abuse of
discretion.
 SC: issued a TRO, restraining CA, RTC and respondent
banks from implementing and enforcing the CA decision. By
reason of this TRO, the SED was able to submit their ROEs
to MB. MB then prohibited the respondent banks from
transacting business and placed them under receivershop
under Sec. 53 of RA 8791 and Sec. 30 of RA 7653.
ISSUE: WON
I. Injunction issued by RTC violated Sec. 25 of New Central
Bank Act and effectively handcuffed the BSP from discharging
its functions to the great and irreparable damage of the country’s
banking system;
II. Respondent banks are entitled to be furnished copies of the
respective ROEs before the same is submitted to MB
HELD:
I. YES
II. NO
1. Requisites for preliminary injunctive relief are:
a. Invasion of right sought to be protected is material
and substantial
b. Right of the complainant is clear and unmistakable
c. There is an urgent and paramount necessity for the
writ to prevent serious damage
2. These requirements are absent in the present case.
3. Respondent banks have failed to show that they are entitled
to copies of the ROEs. No provision of law, nor a section in
the procedures of the BSP shows that BSP is required to give
them copies of the ROEs.
4. Sec. 28 of the New Central Bank Act, wc governs the
examinations of banking institutions, provides that the ROE
shall be submitted to the MB; the bank examined is not
mentioned as recipient of the ROE.
5. The contents of the ROEs are essentially the same as those
of the List of Findings/Exceptions provided to said banks,
wc were furnished to the them, hence they cannot claim that
their right to due process was violated. The ROEs would be
superfluities.
6. The issuance by RTC of WPI is an unwarranted interference
w the powers of MB. The actions of MB under Sec. 29 and
30 of New Central Bank Act “may not be restrained or set
aside by the court except on petition of certiorari on the
ground that the action taken was in excess of jurisdiction or
w such grave abuse of discretion as to amount to lack or
excess of jurisdiction.”
7. As to the 3rd reqt, the serious damage contemplated by RTC
is the sanction of closure of the banks. Under the law, the
sanction of closure could be imposed upon a bank by BSP
even w/o notice and hearing, to prevent unwarranted
dissipation of bank’s assets and valid exercise of police
power to protect the stakeholders of the banks (“close now,
hear later” doctrine). Thus, there is no serious damage to
speak of.
8. “Close Now, Hear Later” Doctrine: the closure of bank
may be considered as an exercise of police power. The action
of MB on this matter is final and executory, but may be
subject to judicial inquiry and can be set aside if found to be
in excess of jurisdiction or w grave abuse of discretion
amounting to lack or excess of jurisdiction.
9. The issuance of WPI would violate this doctrine.
Page 30 of 42
SECRECY OF BANK DEPOSITS
China Banking Corporation v. Ortega
No. L-34964. January 31, 1973.
CHINA BANKING CORPORATION and TAN KIM LIONG,
petitioners-appellants, vs. HON.WENCESLAO ORTEGA, as
Presiding Judge of the Court of First Instance of Manila, Branch VIII,
and VICENTE G. ACABAN, respondents-appellees.
DOCTRINE: It is clear from the discussion of the conference
committee report on Senate Bill No. 351 and House. Bill No. 3977,
which later became RepublicAct 1405, that the prohibition against
examination of or inquiry into a bank deposit under Republic Act 1405
does not preclude its being garnished to insure satisfaction of a
judgment. Indeed there is no real inquiry in such a case, and if
existence of the deposit is disclosed the disclosure is purely incidental
to the execution process. It is hard to conceive that it was ever within
the intention of Congress to enable debtors to evade payment of their
just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank.
FACTS:
1. Acaban filed a complaint in the court a quo against Bautista
Logging Co., Inc., B & B Forest Development Corporation
and Marino Bautista for the collection of a sum of money.
a. Upon motion of the plaintiff the trial court
declared the defendants in default for failure to
answer within the reglementary period, and
authorized the Branch Clerk of Court and/or
Deputy Clerk to receive the plaintiff’s evidence.
b. A judgment by default was rendered against the
defendants.
2. To satisfy the judgment, Acaban sought the garnishment of
the bank deposit of the defendant B & B Forest Development
Corporation with the China Banking Corporation.
a. Accordingly, a notice of garnishment was issued
by the Deputy Sheriff of the trial court and served
on said bank through its cashier, Tan Kim Liong.
b. In reply, Tan invited the attention of the Deputy
Sheriff to the provisions of Republic Act No.
1405 which, it was alleged, prohibit the
disclosure of any information relative to bank
deposits.
3. Acaban filed a motion to cite Tan for contempt of court.
a. RTC denied the motion.
b. However, Tan was ordered to “inform the Court”
WON there is a deposit in China Bank of
defendant B & B Forests, and if there is any, to
hold the same intact and not allow any withdrawal
until further order.
4. Instead of complying, Tan and China Bank filed this instant
petition for certiorari to review the orders.
a. They alleged that according to RA 1405:
“Sec. 3. It shall be unlawful for any official or
employee of a banking institution to disclose to any
person other than those mentioned in Section two
hereof any information concerning said deposits.”
b. Petitioners argue that the disclosure of the
information required by the court does not fall
within any of the 4 exceptions enumerated in
Section 2:
Sec. 2. All deposits of whatever nature with banks
or banking institutions in the Philippines including
investments in bonds issued by the Government of
the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of
absolutely confidential nature and may not be
examined, inquired or looked into by any person,
government official, bureau or office, except upon
written permission of the depositor, or in cases of
impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of
 public officials, or in cases where the money
deposited or invested is the subject matter of the
litigation.
c. Furthermore, if the questioned orders are complied
with, Tan may be criminally liable under Section
5:
“Sec. 5. Any violation of this law will subject
offender upon conviction, to an imprisonment of not
more than five years or a fine of not more than
twenty thousand pesos or both, in the discretion of
the court.”
ISSUE: Whether or not the bank deposit of judgment debtor B & B
Forest Development Corporation can be subject to garnishment to
satisfy a final judgment against it.
HELD:
1. The lower court did not order an examination of or inquiry
into the deposit of B & B Forest Development Corporation,
as contemplated in the law. It merely required Tan Kim
Liong to inform the court whether or not the defendant B
& B Forest Development Corporation had a deposit in the
China Banking Corporation only for purposes of the
garnishment issued by it, so that the bank would hold the
same intact and not allow any withdrawal until further order.
a. It will be noted from the discussion of the
conference committee report on Republic Act No.
1405, that it was not the intention of the
lawmakers to place bank deposits beyond the
reach of execution to satisfy a final judgment.
“Mr. MARCOS. I see. Suppose there has been a
decision, definitely establishing the liability of an
individual for taxation purposes and this judgment
is sought to be executed. . . in the execution of that
judgment, does this bill, or this proposed law, if
approved, allow the investigation or scrutiny of the
bank deposit in order to execute the judgment?
“Mr. RAMOS. To satisfy a judgment which has
become executory.
xxx xxx xxx
“Mr. MACAPAGAL. But let us suppose that in an
ordinary civil action for the recovery of a sum of
money the plaintiff wishes to attach the properties
of the defendant to insure the satisfaction of the
judgment. Once the judgment is rendered, does the
gentleman mean that the plaintiff cannot attach the
bank deposit of the defendant?
“Mr. RAMOS. That was the question raised by the
gentleman from Pangasinan to which I replied that
outside the very purpose of this law it could be
reached by attachment.
“Mr. MACAPAGAL. Therefore, in such ordinary
civil cases it can be attached?
“Mr. RAMOS. That is so.
2. It is sufficiently clear from the foregoing discussion of the
conference committee report of the two houses of Congress
that the prohibition against examination of or inquiry into a
bank deposit under Republic Act 1405 does not preclude its
being garnished to insure satisfaction of a judgment.
a. Indeed there is no real inquiry in such a case, and
if the existence of the deposit is disclosed the
disclosure is purely incidental to the execution
process.
b. It is hard to conceive that it was ever within the
intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the
Court, through the expedient of converting their
assets into cash and depositing the same in a bank.
3. WHEREFORE, the orders of the lower court dated March 4
and 27, 1972, respectively, are hereby affirmed, with costs
against the petitioners-appellants.
JV Ejercito v. Sandiganbayan
G.R. Nos. 157294-95. November 30, 2006.*
Page 31 of 42
JOSEPH VICTOR G. EJERCITO,
petitioner, vs. SANDIGANBAYAN (SPECIAL DIVISION) and
PEOPLE OF THE PHILIPPINES, respondents.
DOCTRINE: An examination of Republic Act No. 1405 shows that
the term “deposits” used therein is to be understood broadly and not
limited only to accounts which give rise to a creditor-debtor
relationship between the depositor and the bank; If the money
deposited under an account may be used by banks for authorized loans
to third persons, then such account, regardless of whether it creates a
creditor-debtor relationship between the depositor and the bank, falls
under the category of accounts which the law precisely seeks to protect
for the purpose of boosting the economic development of the country.
FACTS:
1. In the case of People v. Estrada before the Sandiganbayan, a
request for issuance of subpoena duces tecum for the
issuance of a subpoena directing the president of Export and
Industry Bank to produce documents in relation to a trust
account, savings account and manager’s check.
2. The Special Prosecution Panel also filed on January 20,
2003, a Request for Issuance of Subpoena Duces Tecum/Ad
Testificandum directed to the authorized representative of
Equitable-PCI Bank to produce statements of account
pertaining to certain accounts in the name of "Jose Velarde"
and to testify thereon.
3. The Sandiganbayan granted both requests by Resolution of
January 21, 2003 and subpoenas were accordingly issued.
4. Upon learning from the media of the move of the special
prosecution panel, petitioner filed a letter asking for the
temporary restraint on the issuance of the subpoena while he
consults his lawyer regarding the issue.
a. He then filed a Motion to Quash the subpoena.
b. He alleged that his bank accounts are covered by
the Secrecy of Bank Deposits Law and do not fall
under any of the exceptions stated therein.
c. He further claimed that the specific identification
of documents in the questioned subpoenas,
including details on dates and amounts, could only
have been made possible by an earlier illegal
disclosure thereof by the EIB and the PDIC in its
capacity as receiver of the then Urban Bank.
5. Before the Motion to Quash was resolved by the
Sandiganbayan, the prosecution filed another Request for the
Issuance of Subpoena Duces Tecum of the same documents
with the exception of MC and additional documents
pertaining to a savings account.
6. The subpoenas prayed for in both requests were issued by
the Sandiganbayan
a. Petitioner filed an Urgent Motion to Quash which
was denied by the SB.
7. Hence, this petition for certiorari.
ISSUE:
1. Whether or not Ejercito’s Trust account is covered by the
term “deposit” as used in RA 1405.
2. Whether or not Ejercito’s accounts are excepted from the
protection of RA 1405.
HELD:
1. On the issue of trust account as deposit: Trust Account
No. 858 is, without doubt, one such account.
a. The Trust Agreement between petitioner and
Urban Bank provides that the trust account covers
"deposit, placement or investment of funds" by
Urban Bank for and in behalf of petitioner.
b. The money deposited under Trust Account No.
858, was, therefore, intended not merely to remain
with the bank but to be invested by it elsewhere.
 c. To hold that this type of account is not protected
by R.A. 1405 would encourage private hoarding of
funds that could otherwise be invested by banks in
other ventures, contrary to the policy behind the
law.
2. The contention that trust accounts are not covered by the
term "deposits," as used in R.A. 1405, by the mere fact that
they do not entail a creditor-debtor relationship between the
trustor and the bank, does not lie.
a. An examination of the law shows that the term
"deposits" used therein is to be understood broadly
and not limited only to accounts which give rise to
a creditor-debtor relationship between the
depositor and the bank.
b. If the money deposited under an account may be
used by banks for authorized loans to third
persons, then such account, regardless of whether
it creates a creditor-debtor relationship between
the depositor and the bank, falls under the category
of accounts which the law precisely seeks to
protect for the purpose of boosting the economic
development of the country.
SECTION 2, RA 1405
All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by
any person, government official, bureau or office, except upon written permission of
the depositor, or in cases of impeachment, or upon order of a competent court in cases
of bribery or dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
3. The phrase "of whatever nature" proscribes any restrictive
interpretation of "deposits."
a. Moreover, it is clear from the immediately quoted
provision that, generally, the law applies not only
to money which is deposited but also to those
which are invested.
b. This further shows that the law was not intended
to apply only to "deposits" in the strict sense of the
word. Otherwise, there would have been no need
to add the phrase "or invested."
4. On the issue of exception of account: Petitioner contends
that since plunder is neither bribery nor dereliction of duty,
his accounts are not excepted from the protection of R.A.
1405.
Philippine National Bank v. Gancayco
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and
no reason is seen why these two classes of cases cannot be excepted from the rule
making bank deposits confidential. The policy as to one cannot be different from the
policy as to the other. This policy expresses the notion that a public office is a public
trust and any person who enters upon its discharge does so with the full knowledge
that his life, so far as relevant to his duty, is open to public scrutiny.
5. Plunder being thus analogous to bribery, the exception to
R.A. 1405 applicable in cases of bribery must also apply to
cases of plunder.
6. On petitioners claim that the money in his bank account
is not the “subject matter of litigation”: The plunder case
now pending with the Sandiganbayan necessarily involves
an inquiry into the whereabouts of the amount purportedly
acquired illegally by former President Joseph Estrada.
a. In light then of this Court’s pronouncement
in Union Bank, the subject matter of the
litigation cannot be limited to bank accounts
under the name of President Estrada alone, but
must include those accounts to which the
money purportedly acquired illegally or a
portion thereof was alleged to have been
transferred.
Page 32 of 42
b. Trust Account No. 858 and Savings Account No.
0116-17345-9 in the name of petitioner fall under
this description and must thus be part of the subject
matter of the litigation.
SANDOVAL-GUTIERREZ dissenting:
1. This justice aggrees that the "extremely-detailed"
information in the Special Prosecution Panel’s requests
shows prior illegal disclosure of his bank accounts.
2. True, bank accounts at times harbor criminal plans. But this
is not a reason to declare an open season for inquiry.
a. Customers have a constitutionally justifiable
expectation of privacy in the documentary details
of the financial transactions reflected in their bank
accounts. That wall of privacy, however, is not
impregnable.
b. Our Constitution, as well as our laws, provides
procedures whereby the confidentiality of one’s
financial affairs may be disclosed.
c. In other words, access to bank records is controlled
by adequate legal process.
d. Here, the subpoenae issued by respondent
Sandiganbayan, tainted as they are by the vices
that afflict the proceedings before the Office of the
Ombudsman, cannot be considered to have been
issued pursuant to such adequate legal process.
Petitioner, therefore, has reason to feel aggrieved.
NOTE: The Marquez ruling notwithstanding, the above-described examination by the
Ombudsman of petitioner’s bank accounts, conducted before a case was filed with a
court of competent jurisdiction, was lawful.
For the Ombudsman issued the subpoenas bearing on the bank accounts of petitioner
about four months before Marquez was promulgated on June 27, 2001.
When this Court construed the Ombudsman Act of 1989, in light of the Secrecy of
Bank Deposits Law in Marquez, that “before an in camera inspection may be allowed
there must be a pending case before a court of competent jurisdiction”, it was, in fact,
reversing an earlier doctrine found in Banco Filipino Savings and Mortgage Bank v.
Purisima.
Banco Filipino involved subpoenas duces tecum issued by the Office of the
Ombudsman, then known as the Tanodbayan, in the course of its preliminary
investigation of a charge of violation of the Anti-Graft and Corrupt Practices Act. As
the subpoenas subject of Banco Filipino were issued during a preliminary investigation,
in effect this Court upheld the power of the Tandobayan under P.D. 1630 to issue
subpoenas duces tecum for bank documents prior to the filing of a case before a court
of competent jurisdiction.
Marquez, on the other hand, practically reversed this ruling in Banco Filipino despite
the fact that the subpoena power of the Ombudsman under R.A. 6770 was essentially
the same as that under P.D. 1630.
The Marquez ruling that there must be a pending case in order for the Ombudsman to
validly inspect bank records in camera thus reversed a prevailing doctrine. Hence, it
may not be retroactively applied. The Ombudsman’s inquiry into the subject bank
accounts prior to the filing of any case before a court of competent jurisdiction was
therefore valid at the time it was conducted. In fine, the subpoenas issued by the
Ombudsman in this case were legal, hence, invocation of the “fruit of the poisonous
tree” doctrine is misplaced.
Marquez v. Desierto
G.R. No. 135882. June 27, 2001.*
LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union
Bank of the Philippines, petitioners, vs. HON. ANIANO A.
DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and
Preliminary Investigation Bureau, Office of the Ombudsman, ANGEL
C. MAYORALGO, JR., MARY ANN CORPUZ-MANALAC and
JOSE T. DE JESUS, JR., in their capacities as Chairman and Members
of the Panel, respectively, respondents.
DOCTRINE: An examination of the secrecy of bank deposits law
(R.A. No. 1405) would reveal the following exceptions: 1. Where the
depositor consents in writing; 2. Impeachment case; 3. By court order
in bribery or dereliction of duty cases against public officials; 4.
Deposit is subject of litigation; 5. Sec 8, R.A. No. 3019, in cases of
unexplained wealth as held in the case of PNB vs. Gancayco.
FACTS:
1. Petitioner Marquez received an Order from the Ombudsman
Desierto to produce several bank documents for purposes of
inspection in camera to various accounts maintained at
Union Bank Julio Vargas branch where Marquez is the
branch manager.
a. The accounts to be inspected are involved in a case
pending with the Ombudsman entitled FFIB v.
Lagdameo
2. The basis of the Ombudsman in ordering an in
camera inspection of the accounts is a trail of managers
checks purchased by one George Trivinio, a respondent in
OMB-0-97-0411, pending with the office of the
Ombudsman.
a. It would appear that Mr. George Trivinio,
purchased 51 MCs for a total amount of P272.1
Million at Traders Royal Bank, United Nations
Avenue branch, on May 2 and 3, 1995.
b. Out of the 51 MCs, 11 MCs in the amount of P70.6
million, were deposited and credited to an account
maintained at the Union Bank, Julia Vargas
Branch.
c. Atty. Macalino was allowed by the Traders for the
in camera inspection.
3. However, Marquez of the Union Bank wrote the
Ombudsman explaining to him that the accounts in question
cannot readily be identified and asked for time to respond to
the order.
a. The reason forwarded by petitioner was that
“despite diligent efforts and from the account
numbers presented, we cannot identify these
accounts since the checks are issued in cash or
bearer. We surmised that these accounts have long
been dormant, hence are not covered by the new
account number generated by the Union Bank
system. We therefore have to verify from the
Interbank records archives for the whereabouts of
these accounts.”
4. The Ombudsman replied that notwithstanding the fact that
the checks were payable to cash or bearer, nonetheless, the
name of the depositor(s) could easily be identified since the
account numbers x x x where said checks were deposited are
identified in the order.
a. Even assuming that the accounts x x x were
already classified as “dormant accounts,” the bank
is still required to preserve the records pertaining
to the accounts within a certain period of time as
required by existing banking rules and regulations.
b. Furthermore, there have already been two
extension for the compliance to the order.
5. The OMB issued an order directing the production of the
documents demanded insisting that the delay in the
investigation may constitute obstruction in the lawful
exercise of the functions of the OMB.
6. Marquez filed a petition for declaratory relief, prohibition
and injunction with the Makati RTC which was denied.
7. Petitioner likewise reiterated that she had no intention to
disobey the orders of the Ombudsman. However, she wanted
to be clarified as to how she would comply with the orders
without her breaking any law, particularly R.A. No. 1405.
Page 33 of 42
ISSUE: Whether or not the order of the Ombudsman to have an in
camera inspection of the questioned account is allowed as an
exception to the law on secrecy of bank deposits
HELD:
1. An examination of the secrecy of bank deposits law (R.A.
No. 1405) would reveal the following exceptions:
(a) Where the depositor consents in writing;
(b) Impeachment case;
(c) By court order in bribery or dereliction of duty
cases against public officials;
(d) Deposit is subject of litigation;
(e) Sec 8, R.A. No. 3019, in cases of unexplained
wealth as held in the case of PNB vs. Gancayco.
2. We rule that before an in camera inspection may be allowed,
there must be a pending case before a court of competent
jurisdiction.
a. Further, the account must be clearly identified, the
inspection limited to the subject matter of the
pending case before the court of competent
jurisdiction.
b. The bank personnel and the account holder must
be notified to be present during the inspection, and
such inspection may cover only the account
identified in the pending case.
3. In the case at bar, there is yet no pending litigation before
any court of competent authority.
a. What is existing is an investigation by the Office
of the Ombudsman.
b. In short, what the Office of the Ombudsman would
wish to do is to fish for additional evidence to
formally charge Amado Lagdameo, et al., with the
Sandiganbayan.
c. Clearly, there was no pending case in court which
would warrant the opening of the bank account for
inspection.
4. We order the Ombudsman to cease and desist from requiring
Union Bank Manager Lourdes T. Marquez, or anyone in her
place to comply with the order dated October 14, 1998, and
similar orders. No costs.
BSB Group v. Sally Go
G.R. No. 168644. February 16, 2010.*
BSB GROUP, INC., represented by its President, Mr. RICARDO
BANGAYAN, petitioner, vs. Sally Go a.k.a. SALLY GO-
BANGAYAN, respondent.
DOCTRINE: While the fundamental law has not bothered with the
triviality of specifically addressing privacy rights relative to banking
accounts, there, nevertheless, exists in our jurisdiction a legitimate
expectation of privacy governing such accounts—the source of this
right of expectation is statutory, and it is found in the Bank Secrecy
Act of 1955.
The inquiry into bank deposits allowable under Republic Act No. 1405
must be premised on the fact that the money deposited in the account
is itself the subject of the action.
FACTS:
1. Petitioner, the BSB Group, Inc., is a domestic corporation
presided by its representative, Ricardo Bangayan
(Bangayan). Respondent Sally Go, alternatively referred to
as Sally Sia Go and Sally Go-Bangayan, is Bangayan’s wife,
who was employed in the company as a cashier, and was
engaged, among others, to receive and account for the
payments made by the various customers of the company.
2. In 2002, Bangayan filed with the Manila Prosecutor’s Office
a complaint for estafa and/or qualified theft5 against
 respondent, alleging that several checks6 representing the
aggregate amount of ₱1,534,135.50 issued by the company’s
customers in payment of their obligation were, instead of
being turned over to the company’s coffers, indorsed by
respondent who deposited the same to her personal banking
account maintained at Security Bank and Trust Company
(Security Bank) in Divisoria, Manila Branch.
3. On the premise that respondent had allegedly encashed the
subject checks and deposited the corresponding amounts
thereof to her personal banking account, the prosecution
moved for the issuance of subpoena duces tecum /ad
testificandum against the respective managers or records
custodians of Security Bank’s Divisoria Branch, as well as
of the Asian Savings Bank (now Metropolitan Bank & Trust
Co. [Metrobank]), in Jose Abad Santos, Tondo, Manila
Branch.
a. The motion was granted and issued the subpoena.
4. Respondent filed a motion to quash the subpoena dated
November 4, 2003, addressed to Metrobank, noting to the
court that in the complaint-affidavit filed with the
prosecutor, there was no mention made of the said bank
account, to which respondent, in addition to the Security
Bank account identified as Account No. 01-14-006,
allegedly deposited the proceeds of the supposed checks.
a. While respondent characterized the Metrobank
account as irrelevant to the case, she, in the same
motion, nevertheless waived her objection to the
irrelevancy of the Security Bank account
mentioned in the same complaint-affidavit,
inasmuch as she was admittedly willing to address
the allegations with respect thereto.
b. The motion to quash was denied.
5. The prosecution presented Marasigan, the representative of
Security Bank as its witness.
a. She alleged that Go wwas able to run away with
the checks issued to the company and was able to
indorse and credit it to her personal account.
b. Go filed a motion to suppress invoking the
privilege of confidentiality under RA 1405.
c. The motion was denied.
6. CA reversed and set aside the orders of the RTC.
7. Hence, Bangayan filed a petition for review.
ISSUE: Whether or not the case for qualified theft brings the case
under one of the exceptions to the coverage of confidentiality under
RA1405.
HELD:
1. the Court, after deliberative estimation, finds the subject
evidence to be indeed inadmissible.
2. The allegation of theft of money, hence, necessitates that
evidence presented must have a tendency to prove that the
offender has unlawfully taken money belonging to another.
a. Interestingly, petitioner has taken pains in
attempting to draw a connection between the
evidence subject of the instant review, and the
allegation of theft in the Information by claiming
that respondent had fraudulently deposited the
checks in her own name.
b. But this line of argument works more prejudice
than favor, because it in effect, seeks to establish
the commission, not of theft, but rather of some
other crime—probably estafa.
3. as the Information in this case accuses respondent of having
stolen cash, proof tending to establish that respondent has
actualized her criminal intent by indorsing the checks and
depositing the proceeds thereof in her personal account,
becomes not only irrelevant but also immaterial and, on that
score, inadmissible in evidence.
Page 34 of 42
4. On the issue of unallowable inquiry under RA1405: It is
conceded that while the fundamental law has not bothered
with the triviality of specifically addressing privacy rights
relative to banking accounts, there, nevertheless, exists in
our jurisdiction a legitimate expectation of privacy
governing such accounts. The source of this right of
expectation is statutory, and it is found in R.A. No.
1405,39 otherwise known as the Bank Secrecy Act of 1955.
5. R.A. No. 1405 has two allied purposes.
a. It hopes to discourage private hoarding and at
the same time encourage the people to deposit
their money in banking institutions, so that it
may be utilized by way of authorized loans and
thereby assist in economic development.41
b. Owing to this piece of legislation, the
confidentiality of bank deposits remains to be a
basic state policy in the Philippines.
6. In the criminal Information filed with the trial court,
respondent, unqualifiedly and in plain language, is charged
with qualified theft by abusing petitioner’s trust and
confidence and stealing cash in the amount of
₱1,534,135.50.
a. The said Information makes no factual allegation
that in some material way involves the checks
subject of the testimonial and documentary
evidence sought to be suppressed.
b. Neither do the allegations in said Information
make mention of the supposed bank account in
which the funds represented by the checks have
allegedly been kept.
7. In other words, it can hardly be inferred from the indictment
itself that the Security Bank account is the ostensible subject
of the prosecution’s inquiry.
a. Without needlessly expanding the scope of what is
plainly alleged in the Information, the subject
matter of the action in this case is the money
amounting to ₱1,534,135.50 alleged to have been
stolen by respondent, and not the money
equivalent of the checks which are sought to be
admitted in evidence.
b. Thus, it is that, which the prosecution is bound to
prove with its evidence, and no other.
8. It comes clear that the admission of testimonial and
documentary evidence relative to respondent’s Security
Bank account serves no other purpose than to establish
the existence of such account, its nature and the amount
kept in it.
a. It constitutes an attempt by the prosecution at an
impermissible inquiry into a bank deposit account
the privacy and confidentiality of which is
protected by law.
b. On this score alone, the objection posed by
respondent in her motion to suppress should have
indeed put an end to the controversy at the very
first instance it was raised before the trial court.
9. In sum, we hold that the testimony of Marasigan on the
particulars of respondent’s supposed bank account with
Security Bank and the documentary evidence
represented by the checks adduced in support thereof,
are not only incompetent for being excluded by operation
of R.A. No. 1405.
a. They are likewise irrelevant to the case, inasmuch
as they do not appear to have any logical and
reasonable connection to the prosecution of
respondent for qualified theft. We find full merit
in and affirm respondent’s objection to the
evidence of the prosecution.
FOREIGN CURRENCY DEPOSIT ACT
 GSIS v. Industrial Bank of Korea
FACTS: On December 13, 1996, a surety bond was agreed with
DOMSAT HOLDINGS, INC. as the principal and the GSIS as
administrator and the obligees are Land Bank of the Philippines,
Tong Yang Merchant Bank, Industrial Bank of Korea and First
Merchant Banking Corporation collectively known as “The Banks”
with the loan granted to DOMSAT of US $ 11,000,000.00 to be used
for the financing of the two-year lease of a Russian Satellite from
INTERSPUTNIK.
Domsat failed to pay the loan and GSIS refused to comply with its
obligation reasoning that Domsat did not use the loan proceeds for the
payment of rental for the satellite. GSIS alleged that Domsat, with
Westmont Bank as the conduit, transferred the U.S. $11 Million loan
proceeds from the Industrial Bank of Korea to Citibank New York
account of Westmont Bank and from there to the Binondo Branch of
Westmont Bank. The Banks filed a complaint before the RTC of
Makati against Domsat and GSIS.
GSIS requested for the issuance of a subpoena duces tecum to the
custodian of records of Westmont Bank to produce bank ledger
covering the account of Domsat with the Westmont Bank (now United
Overseas Bank) and other pertinent documents. The RTC issued the
subpoena but nonetheless, the RTC then granted the second motion for
reconsideration by “The Banks” to quash the subpoena granted to
GSIS.
GSIS assailed its case to the CA and CA partially granted it’s petition
allowing it to look into documents but not the bank ledger because the
US $ 11,000,000.00 deposited by Domsat to Westmont Bank is
covered by R.A. 6426 or the Bank Secrecy Law.
GSIS now filed a petition for certiorari in the Supreme Court for the
decision of CA allowing the quashal by the RTC of a subpoena for the
production of bank ledger.
ISSUE: Whether or not the deposited US $ 11,000,000.00 by Domsat,
Inc. to Westmont Bank is covered by R.A. 6426 as what “The Banks”
contend or it is covered by R.A. 1405 as what GSIS contends.
RULING: The Supreme Court ruled in favor of R.A. 6426 and thereby
AFFIRMING the decision of Court of Appeals.
R.A. 1405 was enacted on 1955 while R.A. 6426 was enacted on 1974.
These two laws both support the confidentiality of bank deposits.
There is no conflict between them. Republic Act No. 1405 was enacted
for the purpose of giving encouragement to the people to deposit their
money in banking institutions and to discourage private hoarding so
that the same may be properly utilized by banks in authorized loans to
assist in the economic development of the country. It covers all bank
deposits in the Philippines and no distinction was made between
domestic and foreign deposits. Thus, Republic Act No. 1405 is
considered a law of general application. On the other hand, Republic
Act No. 6426 was intended to encourage deposits from foreign lenders
and investors. It is a special law designed especially for foreign
currency deposits in the Philippines. A general law does not nullify a
specific or special law. Generalia specialibus non derogant. Therefore,
it is beyond cavil that Republic Act No. 6426 applies in this case.
Intengan v. Court of Appeals affirmed the above-cited principle and
categorically declared that for foreign currency deposits, such as U.S.
dollar deposits, the applicable law is Republic Act No. 6426.
In said case, Citibank filed an action against its officers for persuading
their clients to transfer their dollar deposits to competitor banks. Bank
Page 35 of 42
records, including dollar deposits of petitioners, purporting to establish
the deception practiced by the officers, were annexed to the complaint.
Petitioners now complained that Citibank violated Republic Act No.
1405. Supreme Court ruled that since the accounts in question are U.S.
dollar deposits, the applicable law therefore is not Republic Act No.
1405 but Republic Act No. 6426.
Salvacion v. Central Bank
FACTS: Greg Bartelli, an American tourist, was arrested for
committing four counts of rape and serious illegal detention against
Karen Salvacion. Police recovered from him several dollar checks and
a dollar account in the China Banking Corp. He was, however, able to
escape from prison. In a civil case filed against him, the trial court
awarded Salvacion moral, exemplary and attorney’s fees amounting to
almost P1,000,000.00.
Salvacion tried to execute the judgment on the dollar deposit of Bartelli
with the China Banking Corp. but the latter refused arguing that
Section 11 of Central Bank Circular No. 960 exempts foreign currency
deposits from attachment, garnishment, or any other order or process
of any court, legislative body, government agency or any
administrative body whatsoever. Salvacion therefore filed this action
for declaratory relief in the Supreme Court.
ISSUE: Should Section 113 of Central Bank Circular No. 960 and
Section 8 of Republic Act No. 6426, as amended by PD 1246,
otherwise known as the Foreign Currency Deposit Act be made
applicable to a foreign transient?
HELD: NO.
The provisions of Section 113 of Central Bank Circular No. 960 and
PD No. 1246, insofar as it amends Section 8 of Republic Act No. 6426,
are hereby held to be INAPPLICABLE to this case because of its
peculiar circumstances. Respondents are hereby required to comply
with the writ of execution issued in the civil case and to release to
petitioners the dollar deposit of Bartelli in such amount as would
satisfy the judgment.
Supreme Court ruled that the questioned law makes futile the favorable
judgment and award of damages that Salvacion and her parents fully
deserve. It then proceeded to show that the economic basis for the
enactment of RA No. 6426 is not anymore present; and even if it still
exists, the questioned law still denies those entitled to due process of
law for being unreasonable and oppressive. The intention of the law
may be good when enacted. The law failed to anticipate the iniquitous
effects producing outright injustice and inequality such as the case
before us.
The SC adopted the comment of the Solicitor General who argued that
the Offshore Banking System and the Foreign Currency Deposit
System were designed to draw deposits from foreign lenders and
investors and, subsequently, to give the latter protection. However, the
foreign currency deposit made by a transient or a tourist is not the kind
of deposit encouraged by PD Nos. 1034 and 1035 and given incentives
and protection by said laws because such depositor stays only for a few
days in the country and, therefore, will maintain his deposit in the bank
only for a short time. Considering that Bartelli is just a tourist or a
transient, he is not entitled to the protection of Section 113 of Central
Bank Circular No. 960 and PD No. 1246 against attachment,
garnishment or other court processes.
Further, the SC said: “In fine, the application of the law depends on the
extent of its justice. Eventually, if we rule that the questioned Section
113 of Central Bank Circular No. 960 which exempts from attachment,
garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever, is
applicable to a foreign transient, injustice would result especially to a
citizen aggrieved by a foreign guest like accused Greg Bartelli. This
would negate Article 10 of the New Civil Code which provides that “in
case of doubt in the interpretation or application of laws, it is presumed
that the lawmaking body intended right and justice to prevail.”
___________
NOTES:
– On February 4, 1989, Greg Bartelli y Northcott, an American tourist,
coaxed and lured petitioner Karen Salvacion, then 12 years old to go
with him to his apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989 and was able to rape
the child once on February 4, and three times each day on February 5,
6, and 7, 1989. On February 7, 1989, after policemen and people living
nearby, rescued Karen, Greg Bartelli was arrested and detained at the
Makati Municipal Jail. The policemen recovered from Bartelli the
following items: 1.) Dollar Check No. 368, Control No. 021000678-
1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-
108758-8 (Peso Acct.); 3.) Dollar Account — China Banking Corp.,
US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money
(P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear)
used in seducing the complainant.
PSBank v. Senate (including the concurring opinion of J. Brion
and the dissenting opinion of J. Sereno)
FACTS: Philippine Savings Bank (PS Bank) and its President, Pascual
M. Garcia III, filed before the Supreme Court an original civil action
for certiorari and prohibition with application for temporary
restraining order and/or writ of preliminary injunction. The TRO was
sought to stop the Senate, sitting as impeachment court, from further
implementing the Subpoena Ad Testificandum et Duces Tecum, dated
February 6, 2012, that it issued against the Branch Manager of PS
Bank, Katipunan Branch. The subpoena assailed by petitioners covers
the foreign currency denominated accounts allegedly owned by the
impeached Chief Justice Renato Corona of the Philippine Supreme
Court.
ISSUE: Should a TRO be issued against the impeachment court to
enjoin it from further implementing the subpoena with respect to the
alleged foreign currency denominated accounts of CJ Corona?
RULING: [The Court en banc ISSUED A TEMPORARY
RESTRAINING ORDER enjoining the respondents from implementing
the subpoena. It also REQUIRED the respondents to COMMENT on
the [merits of the] petition.]
YES, a TRO should be issued against the impeachment court to
enjoin it from further implementing the subpoena with respect to the
alleged foreign currency denominated accounts of CJ Corona.
There are two requisite conditions for the issuance of a preliminary
injunction:
1. the right to be protected exists prima facie, and
2. the acts sought to be enjoined are violative of that right.
It must be proven that the violation sought to be prevented would
cause an irreparable injustice.
A clear right to maintain the confidentiality of the foreign currency
deposits of the Chief Justice is provided under Section 8 of Republic
Act No. 6426, otherwise known as the Foreign Currency Deposit Act
of the Philippines (RA 6426). This law establishes the absolute
confidentiality of foreign currency deposits:
xxx xxx xxx
Under R.A. No. 6426 there is only a single exception to the secrecy of
foreign currency deposits, that is, disclosure is allowed only upon the
written permission of the depositor. In Intengan v. Court of Appeals,
the Court ruled that where the accounts in question are U.S. dollar
deposits, the applicable law is not Republic Act No. 1405 but RA
6426. Similarly, in the recent case of Government Service Insurance
Page 36 of 42
System v. 15th Division of the Court of Appeals, the Court also held that
RA 6426 is the applicable law for foreign currency deposits and not
Republic Act No. 1405. xxx.
xxx xxx xxx
The written consent under RA 6426 constitutes a waiver of the
depositor’s right to privacy in relation to such deposit. In the present
case, neither the prosecution nor the Impeachment Court has presented
any such written waiver by the alleged depositor, Chief Justice Renato
C. Corona. Also, while impeachment may be an exception to the
secrecy of bank deposits under RA 1405, it is not an exemption to the
absolute confidentiality of foreign currency deposits under RA 6426.
PSBank v. Senate
DOCTRINE:
FACTS:
ISSUE:
RULING:
ANTI-MONEY LAUNDERING ACT
Republic v. Estrada
FACTS: On April 4, 2001, an Information for plunder was filed
with the Sandiganbayan against respondent Estrada, among
other accused. A separate Information for illegal use of alias,
was likewise filed against him. In the information, it was
alleged that on or about 04 February 2000, in the City of Manila,
then President Estrada without having been duly authorized,
judicially or administratively, taking advantage of his position
and committing the offense in relation to office, i.e., in order to
CONCEAL THE ill-gotten wealth HE ACQUIRED during his
tenure and his true identity as THE President of the Republic of
the Philippines, did then and there, willfully, unlawfully and
criminally REPRESENT HIMSELF AS ‘JOSE VELARDE’ IN
SEVERAL TRANSACTIONS AND use and employ the SAID
alias “Jose Velarde” which IS neither his registered name at
birth nor his baptismal name, in signing documents with
Equitable PCI Bank and/or other corporate entities.
Estrada was subsequently arrested on the basis of a warrant of
arrest that the Sandiganbayan issued. A Special Division in the
Sandiganbayan was made to try, hear, and decide the charges of
plunder and related against respondent Estrada. At the trial, the
People presented testimonial and documentary evidence to
prove the allegations of the Informations for plunder, illegal use
of alias, and perjury.
After the People rested in all three cases, the defense moved to
be allowed to file a demurrer to evidence in these cases. In its
Joint Resolution, the Sandiganbayan only granted the defense
leave to file demurrers in illegal use of alias and perjury. The
Sandiganbayan ruled that the people failed to present evidence
that proved Estrada’s commission of the offense.
ISSUE: Whether the court a quo gravely erred and abused its
discretion in dismissing Crim. Case No. 26565 and in applying
R.A. No. 1405 as an exception to the illegal use of alias
punishable under Commonwealth Act No. 142
HELD: No. The Sandiganbayan position that the rule in the
law of libel – that mere communication to a third person is
publicity – does not apply to violations of CA No. 142. In order
to be held liable for a violation of CA No. 142, the user of the
alias must have held himself out as a person who shall publicly
be known under that other name. In other words, the intent to
publicly use the alias must be manifest. The presence of
Lacquian and Chua when Estrada signed as Jose Velarde and
opened Trust Account No. C-163 does not necessarily indicate
his intention to be publicly known henceforth as Jose
Velarde. Thus, Estrada could not be said to have intended his
signing as Jose Velarde to be for public consumption by the fact
alone that Lacquian and Chua were also inside the room at that
time. The same holds true for Estrada’s alleged representations
with Ortaliza and Dichavez, assuming the evidence for these
representations to be admissible. All of Estrada’s
representations to these people were made in privacy and in
secrecy, with no iota of intention of publicity.
Bank deposits under R.A. No. 1405 (the Secrecy of Bank
Deposits Law) are statutorily protected or recognized zones of
privacy. Given the private nature of Estrada’s act of signing the
documents as “Jose Velarde” related to the opening of the trust
account, the People cannot claim that there was already a public
use of alias when Ocampo and Curato witnessed the
signing. Petition was denied.
Republic v. Eugenio
FACTS: In relation to the series of investigations concerning the
award of the NAIA 3 contracts to PIATCO undertaken by the
Ombudsman and the Compliance and Investigation Staff (CIS) of
petitioner Anti-Money Laundering Council (AMLC), Pantaleon
Alvarez (Alvarez) was charged with violation of RA No. 3019. The
CIS conducted an intelligence database search on the financial
transactions of certain individuals involved in the award, including
Alvarez, which revealed that the latter maintained eight (8) bank
accounts with six (6) different banks.
Under the authority granted by the Resolution, the AMLC filed an
application to inquire into or examine the deposits or investments of
Alvarez, Trinidad, Liongson and Cheng Yong before the RTC of
Makati. The RTC granted application being satisfied that there existed
probable cause to believe that the deposits in various bank accounts are
related to the offense of violation of Anti-Graft and Corrupt Practices
Act now the subject of criminal prosecution before the Sandiganbayan.
The CIS proceeded to inquire and examine the deposits, investments
and related web accounts of the four.
Meanwhile, the Special Prosecutor of the Office of the Ombudsman
requested the AMLC to investigate the accounts of Alvarez, PIATCO,
and several other entities involved in the nullified contract adverting to
probable cause to believe that the bank accounts were used in the
commission of unlawful activities that were committed in relation to
the criminal cases then pending before the Sandiganbayan. In response,
the AMLC authorized the executive director of the AMLC to inquire
into and examine the accounts named in the letter, including one
maintained by Alvarez with DBS Bank and two other accounts in the
name of Cheng Yong with Metrobank.
Following the AMLC Resolution, the Republic, through the AMLC,
filed an application before the Manila RTC to inquire into and/or
examine thirteen (13) accounts and two (2) related web of accounts
alleged as having been used to facilitate corruption in the NAIA 3
Project. Among said accounts were the DBS Bank account of Alvarez
Page 37 of 42
and the Metrobank accounts of Cheng Yong. The Manila RTC issued
an Order granted the Ex Parte Application
Alvarez, through counsel, filed an Urgent Motion to Stay Enforcement
of the said Order arguing that nothing in R.A. No. 9160 authorized the
AMLC to seek the authority to inquire into bank accounts ex parte.
The Manila RTC issued an Order staying the enforcement of its bank
inquiry order and giving the Republic five (5) days to respond to
Alvarez’ motion.
The Republic filed an Omnibus Motion for Reconsideration which was
granted by the Manila RTC denying Alvarez’s motion to dismiss and
reinstating in full force and effect the stayed order.
Acting on Alvarez’s latest motion, the Manila RTC issued an Order
directing the AMLC to refrain from enforcing the order until the
expiration of the period to appeal, without any appeal having been
filed. On the same day, Alvarez filed a Notice of Appeal. The Republic
filed an Urgent Omnibus Motion for Reconsideration urging that it be
allowed to immediately enforce the bank inquiry order against Alvarez
and that Alvarezs notice of appeal be expunged from the records since
appeal from an order of inquiry is disallowed under the Anti money
Laundering Act (AMLA).
Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a
Petition for Certiorari, Prohibition and Mandamus with Application for
TRO and/or Writ of Preliminary Injunction directed against the
Republic of the Philippines through the AMLC, Manila RTC Judge
Eugenio, Jr. and Makati RTC Judge Marella, Jr. imputing grave abuse
of discretion on the part of the Makati and Manila RTCs in granting
AMLCs ex parte applications for a bank inquiry order, arguing among
others that the ex parte applications violated her constitutional right to
due process, that the bank inquiry order under the AMLA can only be
granted in connection with violations of the AMLA and that the
AMLA can not apply to bank accounts opened and transactions entered
into prior to the effectivity of the AMLA or to bank accounts located
outside the Philippines.
The Court of Appeals, acting on Lilia Chengs petition, issued a
Temporary Restraining Order. On even date, the Manila RTC issued
an Order resolving to hold in abeyance the resolution of the urgent
omnibus motion for reconsideration then pending before it until the
resolution of Lilia Cheng’s petition for certiorari with the Court of
Appeals.
ISSUE: Whether or not the bank inquiry orders issued are valid and
enforceable.
RULING: Because of the Bank Secrecy Act, the confidentiality of
bank deposits remains a basic state policy in the Philippines.
Subsequent laws, including the AMLA, may have added exceptions to
the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the
general rule. It falls within the zones of privacy recognized by our laws.
The framers of the 1987 Constitution likewise recognized that bank
accounts are not covered by either the right to information or under the
requirement of full public disclosure. Unless the Bank Secrecy Act is
repealed or amended, the legal order is obliged to conserve the
absolutely confidential nature of Philippine bank deposits.
Any exception to the rule of absolute confidentiality must be
specifically legislated. Section 2 of the Bank Secrecy Act itself
prescribes exceptions whereby these bank accounts may be examined
by any person, government official, bureau or office; namely when: (1)
upon written permission of the depositor; (2) in cases of impeachment;
(3) the examination of bank accounts is upon order of a competent
court in cases of bribery or dereliction of duty of public officials; and
(4) the money deposited or invested is the subject matter of the
litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt
Practices Act, has been recognized by this Court as constituting an
additional exception to the rule of absolute confidentiality and there
have been other similar recognitions as well.
The AMLA also provides exceptions to the Bank Secrecy Act. Under
Section 11, the AMLC may inquire into a bank account upon order of
any competent court in cases of violation of the AMLA, it having been
established that there is probable cause that the deposits or investments
are related to unlawful activities as defined in Section 3(i) of the law,
or a money laundering offense under Section 4 thereof. Further, in
instances where there is probable cause that the deposits or investments
are related to kidnapping for ransom certain violations of the
Comprehensive Dangerous Drugs Act of 2002 hijacking and other
violations under R.A. No. 6235, destructive arson and murder, then
there is no need for the AMLC to obtain a court order before it could
inquire into such accounts.
It cannot be successfully argued the proceedings relating to the bank
inquiry order under Section 11 of the AMLA is a litigation
encompassed in one of the exceptions to the Bank Secrecy Act which
is when the money deposited or invested is the subject matter of the
litigation. The orientation of the bank inquiry order is simply to serve
as a provisional relief or remedy. As earlier stated, the application for
such does not entail a full-blown trial.
Nevertheless, just because the AMLA establishes additional
exceptions to the Bank Secrecy Act it does not mean that the later law
has dispensed with the general principle established in the older law
that all deposits of whatever nature with banks or banking institutions
in the Philippines are considered as of an absolutely confidential
nature. Indeed, by force of statute, all bank deposits are absolutely
confidential, and that nature is unaltered even by the legislated
exceptions referred to above. There is disfavor towards construing
these exceptions in such a manner that would authorize unlimited
discretion on the part of the government or of any party seeking to
enforce those exceptions and inquire into bank deposits. If there are
doubts in upholding the absolutely confidential nature of bank deposits
against affirming the authority to inquire into such accounts, then such
doubts must be resolved in favor of the former. Such a stance would
persist unless Congress passes a law reversing the general state policy
of preserving the absolutely confidential nature of Philippine bank
accounts.
While petitioner would premise that the inquiry into Lilia Chengs
accounts finds root in Section 11 of the AMLA, it cannot be denied
that the authority to inquire under Section 11 is only exceptional in
character, contrary as it is to the general rule preserving the secrecy of
bank deposits. Even though she may not have been the subject of the
inquiry orders, her bank accounts nevertheless were, and she thus has
the standing to vindicate the right to secrecy that attaches to said
accounts and their owners. This statutory right to privacy will not
prevent the courts from authorizing the inquiry anyway upon the
fulfillment of the requirements set forth under Section 11 of the AMLA
or Section 2 of the Bank Secrecy Act; at the same time, the owner of
the accounts have the right to challenge whether the requirements were
indeed complied with.
Petition is dismissed.
PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT
PDIC v. Citibank
FACTS: Citibank, N.A. (Citibank) and Bank of America, S.T. &
N.A. (BA) are duly organized corporations and existing under the laws
of the United States of America and duly licensed to do business in
the Philippines, with offices in Makati City. Petitioner Philippine
Deposit Insurance Corporation (PDIC) conducted an examination of
the books of account of Citibank and BA in 1977and 1979
Page 38 of 42
respectively. It discovered that Citibank in the course of its banking
business, received from its head office and other foreign branches a
total of P11,923,163,908.00 in dollars from September 30, 1974 to
June 30, 1977 covered by Certificates of Dollar Time Deposit that were
interest-bearing with corresponding maturity dates. And BA a total of
P629, 311,869.10 in dollars, covered by Certificates of Dollar Time
Deposit that were interest-bearing with corresponding maturity dates
and lodged in their books under the account Due to Head
Office/Branches. For failure to report the said amounts as deposit
liabilities that were subject to assessment for insurance, PDIC sought
the remittance of deficiency premium assessments for dollar deposits.
Citibank and BA each filed a petition for declaratory relief before the
Court of First Instance stating that the money placements they received
from their head office and other foreign branches were not deposits and
did not give rise to insurable deposit liabilities under Sections 3 and 4
of R.A. No. 3591 (the PDIC Charter) and, as a consequence, the
deficiency assessments made by PDIC were improper and erroneous.
RTC ruled in favor of Citibank and BA which reasoned that there was
no depositor-depository relationship between the respondents and their
head office or other branches. Also, the placements were deposits
made outside the Philippines which are excluded under Section 3.05(b)
of the PDIC Rules and Regulations and Section 3(f) of the PDIC
Charter likewise excludes from the definition of the term deposit any
obligation of a bank payable at the office of the bank located outside
the Philippines.
PDIC argues that the head offices of Citibank and BA and their
individual foreign branches are separate and independent entities
hence not exempt in Section 3(b) of R.A. No. 3591.
PDIC appealed to the CA which affirmed the ruling of the RTC.
ISSUES:
1.) Whether or not the dollar deposits are money placements,
thus, they are not subject to the provisions of Republic Act
No. 6426 otherwise known as the Foreign Currency Deposit
Act of the Philippines.
2.) Whether or not the Philippine branch of a foreign
corporation has a separate legal personality from its foreign
head office for the purpose of PDIC.
RULING: The court ruled that the funds in question are not deposits
within the definition of the PDIC Charter and are, thus, excluded from
assessment. Pursuant to Section 3(f) of the PDIC Charter, the term
deposit means unpaid balance of money or its equivalent received by
a bank in the usual course of business and for which it has given or is
obliged to give credit to a commercial, checking, savings, time or thrift
account or which is evidenced by its certificate of deposit, and trust
funds held by such bank whether retained or deposited in any
department of said bank or deposit in another bank, together with such
other obligations of a bank as the Board of Directors shall find and
shall prescribe by regulations to be deposit liabilities of the
Bank; Provided, that any obligation of a bank which is payable at the
office of the bank located outside of the Philippines shall not be a
deposit for any of the purposes of this Act or included as part of the
total deposits or of the insured deposits. As explained by the
respondents, the transfer of funds, which resulted from the inter-branch
transactions, took place in the books of account of the respective
branches in their head office located in the United States. Hence,
because it is payable outside of the Philippines, it is not considered a
deposit.
The Court in resolving the controversy in the relationship of the
Philippine branches of Citibank and BA to their respective head offices
and their other foreign branches examined the manner by which a
foreign corporation can establish its presence in the Philippines. It may
choose to incorporate its own subsidiary as a domestic corporation, in
which case such subsidiary would have its own separate and
independent legal personality to conduct business in the country. In the
alternative, it may create a branch in the Philippines, which would not
be a legally independent unit, and simply obtain a license to do
business in the Philippines. It is apparent that the respondent banks did
not incorporate as a separate domestic corporation to represent its
business interests in the Philippines. Thus, being one and the same
entity, the funds placed by the respondents in their respective branches
in the Philippines should not be treated as deposits made by third
parties subject to deposit insurance under the PDIC Charter.
PDIC v. Abad
FACTS: Respondents had 71 Golden Time Deposits(GTDs) in
Manila Banking Corporation(MBC). HOWEVER, Bangko Sentral of
the Philippines issued a memorandum prohibiting MBC to do business
in the Philippines and placed its assets under receivership. On the next
banking day, respondent Jose Abad pre-terminated his 71 GTDs and
redposited the fund into 28 GTDs in larger denominations. Thereafter,
respondent filed their claims for the payment of the insured GTDs.
Petitioner PDIC argued that the insured GTDs should not be
recognized since they were mere derivatives of respondents previous
account balances pre-terminated at the time the MBC was aslready in
serious financial distress. Under its charter, they contend that they are
only liable for deposits received in the usual course of business.
Consequently, Petitioner filed a petition for declaratory relief against
respondents for a judicial determination of the insurability of
respondents. In turn, Jose Abad SET UP A COUNTER-CLAIM
against PDIC whereby they asked for payment of the insured deposits.
The SC later on ruled in favor of the respondents due to petitioner
having failed to overcome the presumption that it was issued in the
ordinary course of business. The trial court then ordered petitioner to
pay the balance of the deposit insurance to respondents.
MAIN ISSUE: WON the trial court erred in ordering the payment of
the deposit insurance since a petition for declaratory relief does not
essentially entail an executory process- the only relief being granted is
a declaration of the rights and duties.
HELD: NO, the RTC’s action was proper. Without doubt, a petition
for declaratory relief does not essentially entail an executory process.
HOWEVER, there is nothing in its nature that prohibits a counterclaim
from being set-up in the same action.
A special civil action is not essentially different from an ordinary civil
action, which is generally governed by Rules 1 to 56 of the Rules of
Court, except that the former deals with a special subject matter which
makes necessary some special regulation. But the identity between
their fundamental nature is such that the same rules governing ordinary
civil suits may and do apply to special civil actions if not inconsistent
with or if they may serve to supplement the provisions of the peculiar
rules governing special civil actions.
Page 39 of 42
Petitioner additionally submits that the issue of determining the
amount of deposit insurance due respondents was never tried on the
merits since the trial dwelt only on the determination of the viability or
validity of the deposits and no evidence on record sustains the holding
that the amount of deposit due respondents had been finally
determined. This issue was not raised in the court a quo, however,
hence, it cannot be raised for the first time in the petition at bar.
PDIC v. Aquero
FACTS: On September 22, 1983, plaintiffs-appellees invested in
money market placements with the Premiere Financing Corporation
(PFC) in the sum of P10,000.00 each for which they were issued by
the PFC corresponding promissory notes and checks. On the same date
(September 22, 1983), John Francis Cotaoco, for and in behalf of
plaintiffs-appellees, went to the PFC to encash the promissory notes
and checks, but the PFC referred him to the Regent Saving Bank
(RSB). Instead of paying the promissory notes and checks, the RSB,
upon agreement of Cotaoco, issued the subject 13 certificates of time
deposit with Nos. 09648 to 09660, inclusive, each stating, among
others, that the same certifies that the bearer thereof has deposited with
the RSB the sum of P10,000.00; that the certificate shall bear 14%
interest per annum; that the certificate is insured up toP15,000.00 with
the PDIC; and that the maturity date thereof is on November 3, 1983
(Exhs. “B”, “B-1” to “B-12”).
On the aforesaid maturity dated (November 3, 1983), Cotaoco went to
the RSB to encash the said certificates. Thereat, RSB Executive Vice
President Jose M. Damian requested Cotaoco for a deferment or an
extension of a few days to enable the RSB to raise the amount to pay
for the same (Exh. “D”). Cotaoco agreed. Despite said extension, the
RSB still failed to pay the value of the certificates. Instead, RSB
advised Cotaoco to file a claim with the PDIC.
Meanwhile, on June 15, 1984, the Monetary Board of the Central Bank
issued Resolution No. 788 (Exh. ‘2’, Records, p. 159) suspending the
operations of the RSB. Eventually, the records of RSB were secured
and its deposit liabilities were eventually determined. On December 7,
1984, the Monetary Board issued Resolution No. 1496 (Exh. ‘1’)
liquidating the RSB. Subsequently, a masterlist or inventory of the
RSB assets and liabilities was prepared. However, the certificates of
time deposit of plaintiffs-appellees were not included in the list on the
ground that the certificates were not funded by the PFC or duly
recorded as liabilities of RSB.
On September 4, 1984, plaintiffs-appellees filed with the PDIC their
respective claims for the amount of the certificates (Exhs. “C”, “C-1”,
to “C-12”). Sabina Yu, James Ngkaion, Elaine Ngkaion and Jeffrey
Ngkaion, who have similar claims on their certificates of time deposit
with the RSB, likewise filed their claims with the PDIC. To their
dismay, PDIC refused the aforesaid claims on the ground that the
Traders Royal Bank Check No. 299255 dated September 22, 1983 for
the amount of P125,846.07 (Exh. “B”) issued by PFC for the
aforementioned certificates was returned by the drawee bank for
having been drawn against insufficient funds; and said check was not
replaced by the PFC, resulting in the cancellation of the certificates as
indebtedness or liabilities of RSB.
Consequently, on March 31, 1987, private respondents filed an action
for collection against PDIC, RSB and the Central Bank.
On September 14, 1987, the trial court, declared the Central Bank in
default for failing to file an answer.
On May 29, 1989, the trial court rendered its decision ordering the
defendants therein to pay plaintiffs, jointly and severally, the amount
corresponding to the latter’s certificates of time deposit.
Both PDIC and RSB appealed.
ISSUE: Whether or not PDIC can be held liable for value of the
certificates of time deposit held by the petitioners.
HELD: NO. Whenever an insured bank shall have been closed on
account of insolvency, payment of the insured deposits in such bank
shall be made by the Corporation as soon as possible. The term
“deposit” means the unpaid balance of money or its equivalent
received by a bank in the usual course of business and for which it has
given or is obliged to give credit to a commercial, checking, savings,
time or thrift account or which is evidence by passbook, check and/or
certificate of deposit printed or issued in accordance with Central Bank
rules and regulations and other applicable laws, together with such
other obligations of a bank which, consistent with banking usage and
practices, the Board of Directors shall determine and prescribe by
regulations to be deposit liabilities of the Bank. These pieces of
evidence convincingly show that the subject CTDs were indeed issued
without RSB receiving any money therefor. No deposit, as defined in
Section 3 (f) of R.A. No. 3591, therefore came into existence.
Accordingly, petitioner PDIC cannot be held liable for value of the
certificates of time deposit held by private respondents.
PDIC v. Philippine Countryside Rural Bank
FACTS: On March 9, 2005, the Board of Directors of the PDIC
adopted Resolution No. 2005-03-032 approving the conduct of an
investigation, on the basis of the Reports of Examination of the Bangko
Sentral ng Pilipinas (BSP) on ten (10) banks, four (4) of which are
respondents in this petition for review. the PDIC Board adopted
another resolution, Resolution No. 2005-05-056, 4 approving the
conduct of an investigation on PCRBI based on a Complaint-Affidavit
filed by a corporate depositor, the Philippine School of
Entrepreneurship and Management.
According to PDIC, in the course of its investigation, PCRBI was
found to have granted loans to certain individuals, which were settled
by way of dacion of properties. These properties, however, had already
been previously foreclosed and consolidated under the names of PRBI,
BEAI and RBCI
Subsequently, PRBI and BEAI refused entry to their bank premises
and access to their records and documents by the PDIC Investigation
Team, upon advice of their respective counsels.
Atty. Victoria G. Noel sent letters to the PDIC informing it of her legal
advice to PCRBI and BEAI not to submit to PDIC investigation on the
ground that its investigatory power pursuant to Section 9(b-1) of R.A.
No. 3591, cannot be differentiated from the examination powers
accorded to PDIC under Section 8, paragraph 8 of the same law, under
which, prior approval from the Monetary Board is required. Thereafter,
the Banks received a letter, dated July 8, 2005, from the PDIC General
Counsel reiterating its position that prior Monetary Board approval
was not a pre-requisite to PDIC’s exercise of its investigative power.
ISSUE: Whether the Court of Appeals-Cebu erred in finding that prior
approval of the Monetary Board of the Bangko Sentral ng Pilipinas is
necessary before the PDIC may conduct an investigation of respondent
banks.
HELD: NO. After an evaluation of the respective positions of the
parties, the Court is of the view that the Monetary Board approval is
not required for PDIC to conduct an investigation on the Banks.
However, while "examination" connotes a mere generic perusal or
inspection, "investigation" refers to a more intensive scrutiny for a
more specific fact-finding purpose. The latter term is also usually
associated with proceedings conducted prior to criminal prosecution.
the process of examination covers a wider scope than that of
investigation.
Page 40 of 42
Examination involves an evaluation of the current status of a bank and
determines its compliance with the set standards regarding solvency,
liquidity, asset valuation, operations, systems, management, and
compliance with banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on specific
findings of certain acts or omissions which are subject of a complaint
or a Final Report of Examination. An examination entails a review of
essentially all the functions and facets of a bank and its operation. It
necessitates poring through voluminous documents, and requires a
detailed evaluation thereof. Such a process then involves an intrusion
into a bank's records.
In contrast, although it also involves a detailed evaluation, an
investigation centers on specific acts or omissions and, thus, requires a
less invasive assessment.
To reiterate, an examination of banks requires the prior consent of the
Monetary Board, whereas an investigation based on an examination
report, does not.
TRUTH IN LENDING ACT
DBP v. Arcilla
FACTS: Atty. Felipe Arcilla Jr. was employed by the DBP. After he
was assigned to the legal department, he decided to avail of a loan
under the Individual Housing Project (IHP) of the bank for the payment
of the parcel of land purchased by him and for its construction. When
Arcilla resigned grom DBP, the bank notified him that his loan has
been converted to a regular housing loan. Arcilla agreed to the
reservation by the DBP of its right to increase the rate of interest on the
loan, as well as all other fees and charges on loans and advances
pursuant to such policy as it may adopt from time to time during the
period of the loan.
ISSUE: Whether or not DBP violated RA 3765 otherwise known as
“The Truth in Lending Act”.
RULING: Section 1 of R.A. No. 3765 provides that prior to the
consummation of a loan transaction, the bank, as creditor, is obliged to
furnish a client with a clear statement, in writing, setting forth, to the
extent applicable and in accordance with the rules and regulations
prescribed by the Monetary Board of the Central Bank of the
Philippines, the following information:
1. the cash price or delivered price of the property or service to
be acquired;
2. the amounts, if any, to be credited as down payment and/or
trade-in;
3. the difference between the amounts set forth under clauses
(1) and (2);
4. the charges, individually itemized, which are paid or to be
paid by such person in connection with the transaction but
which are not incident to the extension of credit;
5. the total amount to be financed;
6. the finance charges expressed in terms of pesos and
centavos; and
7. the percentage that the finance charge bears to the total
amount to be financed expressed as a simple annual rate on
the outstanding unpaid balance of the obligation.
If the borrower is not duly informed of the data required by the law
prior to the consummation of the availment or drawdown, the lender
will have no right to collect such charge or increases thereof, even if
stipulated in the promissory note. However, such failure shall not
affect the validity or enforceability of any contract or transaction.
UCPB v. Sps. Beluso

FACTS: In 1996, UCPB granted the spouses Beluso a Promissory
Notes Line under a Credit Agreement whereby the latter could avail
from the former credit of up to a maximum amount of P1.2 Million
pesos for a term ending in April 1997. In addition to the promissory
notes, the spouses Beluso also constituted a real estate mortgage over
parcels of land in Roxas City. Subsequently, the said Credit
Arrangement was amended to extend the amount of the Promissory
Notes Line to a maximum of P2.35 Million pesos and to extend the
term thereof to February 1998.
The spouses executed three promissory notes which were renewed
several times. In 1997, the payment of the principal and interest of the
latter two promissory notes were debited from the spouses Beluso’s
account with UCPB; yet, a consolidated loan for P1.3 Million was
again released to the spouses Beluso under one promissory note with a
due date of 28 February 1998.
To completely avail themselves of the P2.35 Million credit line
extended to them by UCPB, the spouses Beluso executed two more
promissory notes for a total of P350 thousand. However, the spouses
Beluso alleged that the amounts covered by these last two promissory
notes were never released or credited to their account and, thus,
claimed that the principal indebtedness was only P2 Million.
In any case, UCPB applied interest rates on the different promissory
notes ranging from 18% to 34%. During the term of these promissory
notes, the Belusos were able to pay the total sum of about P760
thousand. However, they failed to pay for the interest and penalty on
their obligations. As a result, UCPB demanded that they pay their total
obligation of P2.9 millionbut the spouses Beluso failed to comply
therewith. Thereafter, UCPB foreclosed the properties mortgaged by
the spouses Beluso to secure their credit line, which, by that time,
already ballooned to nearly P3.8 million.
Two months after the foreclosure, the spouses Beluso filed a Petition
for Annulment, Accounting and Damages against UCPB with the RTC
of Makati City. UCPB moved to dismiss the case on the ground that
the spouses Beluso instituted another case before the RTC of Roxas
City, involving the same parties and issues. UCPB claims that while
the Roxas City case initially appears to be a different action, as it
prayed for the issuance of a temporary restraining order and/or
injunction to stop foreclosure of spouses Beluso’s properties, it poses
issues which are similar to those of the present case.
The spouses Beluso claim that the issue in the Roxas City case is the
propriety of the foreclosure before the true account of spouses Beluso
is determined. On the other hand, the issue in the Makati case is the
validity of the interest rate provision. The spouses Beluso claim that
the Roxas City case has become moot because, before RTC Roxas City
could act on the restraining order, UCPB proceeded with the
foreclosure and auction sale. As the act sought to be restrained has
already been accomplished, the spouses Beluso had to file a different
action, that of Annulment of the Foreclosure Sale with RTC Makati.
RTC ruled in favor of the Belusos. CA affirmed.
ISSUE: Whether or not the case should be dismissed due to forum
shopping
HELD: YES. Even if it is assumed for the sake of argument, however,
that only one cause of action is involved in the two civil actions,
namely, the violation of the right of the spouses Beluso not to have
their property foreclosed for an amount they do not owe, the Rules of
Court nevertheless allows the filing of the second action. The case in
Roxas City was dismissed before the filing of the case with RTC
Makati, since the venue of litigation as provided for in the Credit
Agreement is in Makati City.
Page 41 of 42
Rule 16, Section 5 bars the refiling of an action previously dismissed
only in the following instances:
(a) That the cause of action is barred by a prior judgment or by
the statute of limitations;
(b) That the claim or demand set forth in the plaintiff’s pleading
has been paid, waived, abandoned, or otherwise
extinguished; and
(c) That the claim on which the action is founded is
unenforceable under the provisions of the statute of frauds.
When an action is dismissed on the motion of the other party, it is only
when the ground for the dismissal of an action is either of those
aforementioned that the action cannot be refiled. As regards all the
other grounds, the complainant is allowed to file same action, but
should take care that, this time, it is filed with the proper court or after
the accomplishment of the erstwhile absent condition precedent, as the
case may be.
The MR filed by the Belusos in the Roxas City case that has not yet
been resolved upon the filing of the Makati case does not change the
SC’s findings. It is indeed the general rule that in cases where there are
two pending actions between the same parties on the same issue, it
should be the later case that should be dismissed. However, this rule is
not absolute. In the case of Allied Banking v. CA, it was ruled that:
“Even if this is not the purpose for the filing of the first action, it may
nevertheless be dismissed if the later action is the more appropriate
vehicle for the ventilation of the issues between the parties.”
Applying the said ruling in the case at bar, the Court found that the
Makati City case is the more proper action in view of the execution of
the foreclosure sale. Moreover, Makati is the proper venue of the action
as mandated by the Credit Agreement. Hence, the Court deemed that
the Makati Case is the more appropriate vehicle for litigating the issues
between the parties, as compared to the Roxas City case.
ACCESS DEVICES REGULATION ACT
Soledad v. People
FACTS:
 Sometime in June 2004, Henry C. Yu (complainant)
received a call on his mobile phone from a certain "Tess" or
"Juliet Villar" (later identified as Rochelle Bagaporo), a
credit card agent, who offered a Citifinancing loan assistance
at a low interest rate.
 Yu invited Bagaporo to go to his office in QC. Bagaporo then
indorsed Yu to her boss, a certain "Arthur" (later identified
as Mark Soledad).
 Soledad instructed Yu to submit documents to a certain
"Carlo" (later identified as Ronald Gobenchiong).
 Yu submitted various documents, such as his Globe
handyphone original platinum gold card, identification cards
and statements of accounts.
 Yu followed up his loan status but failed to get in touch with
either Soledad or Gobenchiong.
 In the first week of August 2004, Yu received his Globe
handyphone statement of account. He was charged for two
mobile phone numbers which were not his.
 Upon verification, Yu learned that he had additional five
mobile numbers in his name, and the application for those
phone lines bore his picture and his forged signature.
 Yu also learned that his Citibank Credit Card database
information was altered and he had a credit card application
with Metrobank Card Corporation.
 Yu and Metrobank’s junior assistant manager Jefferson
Devilleres lodged a complaint with the NBI which
conducted an entrapment operation.
 Entrapment operation:
 o NBI’s Special Investigator Salvador Arteche,
together with some other NBI operatives, arrived
in Las Piñas around 5PM.
o Arteche posed as the delivery boy of the
Metrobank credit card. Upon reaching the address
written on the delivery receipt, he asked for Henry
Yu.
o Soledad responded that he was Henry Yu and
presented two identification cards which bore the
name and signature of Yu, while the picture
showed Soledad’s face.
o Soledad signed the delivery receipt.
o Arteche introduced himself as an NBI operative
and apprehended Soledad.
o Arteche recovered from Soledad the two
identification cards he presented earlier.
 Soledad was charged with Violation of Section 9(e), R.A.
No. 8484 for "possessing a counterfeit access device or
access device fraudulently applied for."
 RTC found Soledad guilty as charged. CA affirmed his
conviction.

ISSUE: WoN Soledad is guilty of Violation of Section 9(e), R.A. No.

8484 (possessing a counterfeit access device or access device
fraudulently applied for)
 YES
 Since RA 8484 does not define the word "possession.", the
Court used it as defined in Article 523 of the Civil Code,
"possession is the holding of a thing or the enjoyment of a
right."
o The acquisition of possession involves two
elements:
1.) corpus – the material holding of the thing
2.) animus possidendi – the intent to possess it
 Soledad materially held the envelope containing the credit
card with the intent to possess.
 Contrary to his contention that the credit card never came
into his possession because it was only delivered to him, the
facts show that he played an active part in acquiring
possession by presenting the identification cards purportedly
showing his identity as Henry Yu. Certainly, he had the
intention to possess it.
 Moreover, his signature on the acknowledgment receipt
indicates that there was delivery and that possession was
transferred to him as the recipient.
 Undoubtedly, he knew that the envelope contained the
Metrobank credit card, as clearly indicated in the
acknowledgment receipt, coupled with the fact that he
applied for it using the identity of Yu.

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