FEBTC v. Diaz Realty Digest

Far East Bank & Trust v. Diaz Realty Inc.

G.R. No. 138588, August 23, 2001

Facts:

1. Diaz and Co. obtained a loan from Pacific Banking Corp. in 1974 in the amount of P720,000 at 12% interest p.a. which was increased thereafter.  The said loan was secured with a real estate mortgage over two parcels of land owned by Diaz Realty, herein respondent. Subsequently, the loan account was purchased by the petitioner Far East Bank (FEBTC). Two years after, the respondent through its President inquired about its obligation and upon learning of the outstanding obligation, it tendered payment in the form of an Interbank check in the amount of P1,450,000 in order to avoid the further imposition of interests. The payment was with a notation for the full settlement of the obligation.

2. The petitioner accepted the check but it alleged in its defense that it was merely a deposit. When the petitioner refused to release the mortgage, the respondent filed a suit. The lower court ruled that there was a valid tender of payment and ordered the petitioner to cancel the mortgage. Upon appeal, the appellate court affirmed the decision.

Issue: Whether or not there was a valid tender of payment to extinguish the obligation of the respondent

RULING: Yes. Although jurisprudence tells us that a check is not a legal tender and a creditor may validly refuse it, this dictum does not prevent a creditor from accepting a check as payment. Herein, the petitioner accepted the check and the same was cleared. 

A tender of payment is the definitive act of of offering the creditor what is due him or her, together with the demand that he accepts it. More important is that there must be a concurrence of intent, ability and capability  to make good such offer, and must be absolute and must cover the amount due. The acts of the respondent manifest its intent, ability and capability. Hence, there was a valid tender of payment. 

Meanwhile, the transfer of credit from Pacific Bank to the petitioner did not involve an effective novation but an assignment of credit. As such, the petitioner has the right to collect the full value of the credit from the respondent subject to the conditions of the promissory note previously executed. 

Papa v. Valencia Digest

Papa v. Valencia

G.R. No. 105188 January 23, 1998

Banking; Checks

Facts:

1. The case arose from a sale of a parcel of land allegedly made to private respondent Penarroyo by petitioner acting as attorney-in-fact of Anne Butte. The purchaser, through Valencia, made a check payment in the amount of P40,000 and in cash, P5,000. Both were accepted by petitioner as evidenced by various receipts. It appeared that the said property has already been mortgaged to the bank previously together with other properties of Butte.

2. When Butte passed away, the private respondent Penarroyo now demanded that the title to the property be conveyed to him, however the bank refused. Hence, the filing of a suit for specific performance by private respondents against the petitioner. The lower court ruled in favor of the private respondents and ordered herein petitioner the conveyance or the property or if not, its payment. The petitioner appealed the lower court's decision alleging that the sale was not consummated as he never encashed the check given as part of the purchase price. 

3. The Court of Appeals affirmed with modifications the lower court's decision. It held that there was a consummated sale of the subject property despite.

Issue: Whether or not the check is a valid tender of payment/Whether or not there was a valid sale of the subject property

RULING: Yes. While it is true that the delivery of check produces payment only when encashed (pursuant to Art. 1249, Civil Code), the rule is otherwise if the debtor is prejudiced by the delay in presentment. (Here in this case, the petitioner now alleges that he did not present the check, ten years after the same was paid to him as part of the purchase price of the property.)

Check acceptance implied an undertaking of due diligence in presenting it for payment. If the person who receives it sustains loss by want of this diligence, this will operated as actual payment of the debt or obligation for which the check was given. The debtor cannot now be held liable if non-presentment of the check was through the fault of the creditor.

PNB v. Pike Digest

PNB v. Pike

G.R. No. 157845 September 20, 2005

Ponente: Phil. SC Justice Chico-Nazario

Facts: The petitioner PNB allowed a representative of Defendant (his talent manager) to withdraw from his dollar account with the use of a pre-signed withrdawal slip.

Issue: Whether or not the bank is liable

HELD: Yes. PNB was held liable due to the negligence of its employees in allowing the unauthorized withdrawal. This was shown by the lackadaisical attitude of its employees in treating Pike's US dollar account, an act which resulted to the loss of $7,500. Such warrants for the award of damages. The slips used were in breach of the standard operating procedure of the bank in the ordinary and usual course of business.

Even if it is the employees who are negligent, the bank's liability as the obligor is not merely vicarious but primary since banks are expected to exercise the degree of diligence in the selection and supervision of their employees.

FEBTC v. Pacilan Digest

Far East Bank vs. Pacilan

G.R. 157314 July 29, 2005

Callejo Sr, J.:

Facts:

1. Pacilan maintains a current account with petitioner bank (now BPI). He issued several postdated checks, the last one being check no. 2434886 amounting to P680. The said check was presented to petitioner bank for payment on April 4, 1988 but was dishonored. It appeared that the account of Pacilan has been closed on the evening of April 4 on the ground that it was 'improperly handled'.

2. It appeared that the plaintiff issued four checks from March 30 - April 4, 1988 amounting in total to P7,410, on one hand, his funds in the bank only amounted to P6,981.43, thus an overdraft of P 428.57 resulted therefrom. Consequently, the last check was dishonored despite the fact that plaintiff deposited the amount the following day.

3. Pacilan wrote a complaint to the bank but after the bank did not reply, he filed an action for damages against it and the employee (Villadelgado) who closed the account. The plaintiff alleged that the immediate closure of his account was malicious and intended to embarrass him.

4. The lower court ruled in favor of the plaintiff and awarded actual damages (P100,000) and exemplary damages (P50,000). The bank appealed, but the CA affirmed the lower court's decision with modifications and held that the closure of the bank of plaintiff's account despite its rules and regulation allowing a re-clearing of a check returned for insufficiency of funds, is patently malicious and unjustifiable. Hence, this appeal.

5.  The petitioner contended that in closing the account, it acted in good faith and in accordance with the pertinent banking rules and regulations governing the operations of a regular demand deposit, allowing it to close an account if the depositor frequently draws checks against insufficient funds or uncollected deposits.

Issue: Whether or not the petitioner is liable for damages

NO. The award of damages under Art. 19 of the Civil Code is unjustifiable. The petitioner has the right to close the account of plaintiff based on the rules and regulations on regular demand deposits. The facts do not show that the petitioner abused its rights in the exercise of its duties. The evidence negates the existence of bad faith and malice on the part of the petitioner bank, which are the second and third elements necessary to prove an abuse of right in violation of Art. 19.

The records also showed that indeed plaintiff has mishandled his account by issuing checks previously against insufficient funds not just once, but more than a hundred times.

Moreover, the acceptance by the bank of the deposit the day after the closure of the account cannot be considered as bad faith nor done with malice but a mere simple negligence of its personnel.

As a result, whatever damage the plaintiff has suffered (by virtue of the subsequent dishonor of the other checks he issued) should be borne by him alone as these was the result of his own act in irregularly handling his account.

Bank of America v. PRC Digest

Bank of America vs. Philippine Racing Club

G.R. 150228  July 30, 2009

Ponente: Leonardo-De Castro, J:

Facts:

1. Plaintiff PRCI is a domestic corporation which maintains a current account with petitioner Bank of America. Its authorized signatories are the company President and Vice-President. By virtue of a travel abroad for these officers, they pre-signed checks to accommodate any expenses that may come up while they were abroad for a business trip. The said pre-signed checks were left for safekeeping by PRCs accounting officer. Unfortunately, the two (2) of said checks came into the hands of one of its employees who managed to encash it with petitioner bank. The said check was filled in with the use of a check-writer, wherein in the blank for the 'Payee', the amount in words was written, with the word 'Cash' written above it.

2. Clearly there was an irregularity with the filling up of the blank checks as both showed similar infirmities and irregularities and yet, the petitioner bank did not try to verify with the corporation and proceeded to encash the checks.

3. PRC filed an action for damages against the bank. The lower court awarded actual and exemplary damages. On appeal, the CA affirmed the lower court's decision and held that the bank was negligent. Hence this appeal. Petitioner contends that it was merely doing its obligation under the law and contract in encashing the checks, since the signatures in the checks are genuine.

Issue: Whether or not the petitioner can be held liable for negligence and thus should pay damages to PRC

Both parties are held to be at fault but the bank has the last clear chance to prevent the fraudulent encashment hence it is the one foremost liable .

1. There was no dispute that the signatures in the checks are genuine but the presence of irregularities on the face of the check should have alerted the bank to exercise caution before encashing them. It is well-settled that banks are in the business impressed with public interest that they  are duty bound to protect their clients and their deposits at all times.  They must treat the accounts of these clients with meticulousness and a highest degree of care considering the fiduciary nature of their relationship. The diligence required of banks are more than that of a good father of a family.

2. The PRC officers' practice of pre-signing checks is a seriously negligent and highly risky behavior which makes them also contributor to the loss. It's own negligence must therefore mitigate the petitioner's liability. Moreover, the person who stole the checks is also an employee of the plaintiff, a cleck in its accounting department at that. As the employer, PRC supposedly should have control and supervision over its own employees.

3. The court held that the petitioner is liable for 60% of the total amount of damages while PRC should shoulder 40% of the said amount.

City Trust Bank v. Cruz Digest

G.R. No. 157049

August 11, 2010

Bersamin, J.:

Facts:

1. Respondent Carlos Romulo Cruz, an architect and a businessman, maintained both current and savings account with the petitioner bank in their Loyola Heights Branch. Due to an oversight by its bank employee, the savings account of respondent was closed. This resulted to extreme embarrassment of the respondent when checks he issued could not be honored despite the fact that his savings account has sufficient funds. 

2. Unmoved by the apologies and adjustments made by the bank, respondent filed a complaint for damages before the RTC wherein the said court awarded exemplary damages (P100,000) and moral damages (P20,000) plus attorneys fees. The bank appealed to the CA, but CA affirmed the lower court's decision. The Court of Appeals said that the erroneous closure of the respondent's account would not have occurred if the bacnk had not been careless in supervising its employees. Moreover, the CA explained that the negligence of the bank's personnel was the proximate cause of the damage to the respondent. The CA also denied the bank's motion for reconsideration. Hence, this appeal.

3. Petitioner contends that there were decisive situation facts showing excusable negligence and good faith that did not justify the award of damages.

Issue: Whether or not the bank is liable for the damages caused to the respondent

YES. The petition has no merit. 

1. The petitioner as a banking institution has the direct obligation to supervise closely its employees handling its depositors' account. It should always be mindful of the fiduciary nature of its relationship with the depositors which require it and its employees to record accurately every single transaction, considering that the depositor's account should always reflect the amounts of money the depositors could dispose of as they saw fit. If the bank fell short of this obligation, it should bear the responsibility for the consequences to the depositors, who, like the herein respondent, suffered embarrassment due to the negligence in the handling of his account. 

2. Moreover, in several court decisions, banks are made liable for negligence even without sufficient proof of malice or bad faith and awarded damages each time to the suing depositors in proper consideration of their reputation and social standing. 

3. Finally, it is never overemphasized that the public always relies on a bank's profession of diligence and meticulousness in rendering service. Its failure to exercise such warrants its liability for exemplary damages and reasonable attorney's fees.