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.

China Bank v. CA, Gotianuy Digest

China Bank v. CA, Gotianuy Digest
G.R. No. 140687 December 18, 2006
Ponente: Phil. SC Justice Chico-Nazario

Facts: 

1. The case stems from a complaint for a recovery of sums of money and annulment of sales ofreal property and shares of stocks filed by Jose Gotianuy against his son-in-law George Dee and his daughter Mary Margaret Dee.

2. Gotianuy accused his daughter of stealing his properties, US Dollar deposits with Citybank amounting to P35M and $864,000. Margaret Dee obtained these amounts through check issued by Citybank naming her as a co-payee of Gotianuy. She allegedly deposited the checks with petitioner bank. Gotianuy died during the pendency of the case and was substituted by his daughter Elizabeth.

3. Subsequently, employees of China Bank were sent subpoena to testify re:bank  deposits of Margaret Dee but petitioner invoked RA 1405 (Bank Secrecy Law). The lower court held that the disclosure of the name only of a depositor does not constitute a violation of RA 1405. The CA affirms the lower court's decision.

Issue: Whether or not the petitioner can validly invoke the bank secrecy law to prevent the disclosure 

HELD: No.

Jose Gotianuy is a co-payee of the checks deposited in China Bank hence, he is deemed also a depositor. A depositor is one who pays money into the bank in the usual course of business to be placed to his credit and subject to his check of the beneficiary of the funds held by the bank as trustee. As such, no  written consent from Margaret Dee is needed in order to inquire into the said deposits. Moreover, there was no issue as to the real source of the funds since even Marygaret Dee declared that Gotianuy was the source of the Citibank US Dollar checks. As the owner of the funds unlawfully taken and now deposited with the petitioner bank, Gotianuy has the right to inquire into the said deposit. Clearly, it was not the intention of the lawmakers to perpetrate injustice when it enacted the Bank Secrecy Law or RA 1405.

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.

Citybank N.A. vs. Cabamongan 488 SCRA 517 Digest

Citybank v. Cabamongan 

488 SCRA 517 

G.R. No. 146918 May 2, 2006

Ponente: Austria-Martinez, J.:

Bank negligent

Facts:

1. The Cabamongan spouses Luis and Carmelita are both based in California, USA. The spouses opened a foreign currency time deposit account for their children with petitioner CityBank with a 180-day term. An impostor who claimed to be Carmelita (wife) succeeded to preterminate the time deposit after presenting passport, credit card and other identification.

2. The bank personnel who attended to the transaction ignored several red flags which could have alerted the bank as to the real identity of the person claiming to be 'Carmelita'. For one, she failed to present the certificate of time deposit, there was also a discrepancy in her signature with that in the signature cards of the bank. Finally, the photo in the bank's file did not look like this person claiming to be Carmelita. Despite all these irregularities, the bank went through with the transaction, which only took 40 minutes. The document waiver which the impostor signed was also not notarized, as required under bank's procedures.

3. To the aghast of the spouses, they only came to learn of the incident through a daughter-in-law who called them up in the US. Apparently, a break-in occurred previously in their US residence and several important documents were lost to the thief. The spouses demanded payment from the bank who refused. Hence the filing of the suit against petitioner bank.

4. The spouses presented a PNP Document Examiner expert who analysed the signature and concluded that the signature was forged, hence the discrepancy between the signature of the impostor and the one written in the signature cards held by the bank. 

4. The trial court ruled in favor of the spouses Cabamongan, held the bank negligent and awarded actual, moral and exemplary damages. The bank appealed to the CA which affirmed the lower court's decision. Both parties filed a petition for review on certiorari before the SC where the petitioner insisted that it Carmela who preterminated the TD despite claims to the contrary, while the Cabamongan spouses contended that Citybank's negligence was established by evidence.

Issue: Whether or not the bank is negligent and therefor should be held liable when it allowed the pretermination of the TD in favor of the impostor

HELD:

YES. The bank was indeed negligent as it failed to exercise the highest degree of care and diligence required of it. The banking business is impressed with public interest and of paramount importance thereto is the trust and confidence of the public in general. The Court has held that the bank "is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged."(San Carlos Milling Ltd. vs. BPI)

It has been sufficiently shown that the signatures of Carmelita in the pretermination were forged. The petitioner, even with its signature verification procedure failed to detect the forgeries. Citybank cannot label its negligence as mere error. For not exercising the degree of diligence required of banking institutions, it is liable for damages.

Related Digests:
FEBTC v. Pacilan Digest
Bank of America v. PRC Digest
BPI v. Suarez Digest
City Trust Bank v. Cruz Digest

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.

BPI v. Suarez Digest

G.R. No. 167750

March 15, 2010

Carpio, J.:

Facts:

1. Reynaldo Suarez is a lawyer who used to maintain both savings and current account with petitioner in its Ermita branch. Sometime in 1997, respondent had a client who wanted to buy several parcels  of land in Tagaytay but the latter did not want to deal directly with the owners of said land. 

2. Suarez and his client entered into an agreement where the former will be the one to purchase the lands. Both likewise agreed that the client would deposit money in Suarez' BPI account and thereafter, he would issue the checks for the sellers.

3. The client deposited a check with BPI branch. Aware that a check has 3-days clearing time, Suarez' assistant called the bank which confirmed that the said amount had been credited to his account on that same day. Relying on this confirmation, Suarez issued five (5) checks in the name of the sellers. Unfortunately, all checks were dishonored due to insufficient funds. A penalty amounting P57,000 was also debited from his account. The checks were dishonored despite the assurance by RCBC, the drawee bank that the amount has been debited from the account of the drawee. 

4. On top of this, the bank noted on the checks 'DAIF' (drawn against insufficient fund) and not 'DAUD''  (drawn against uncollected deposit). The bank offered to reverse the penalty but denied Suarez claim for damages. Suarez rejected this offer hence the case filed for damages.

5. The lower court ruled in favor of Suarez and awarded actual, moral, and exemplary damages. BPI appealed but the Court of Appeals affirmed the lower court ruling. The CA ruled that the bank was negligent in handling the accounts of the respondent hence the latter's entitlement to damages. Hence this petition.

Issue: Whether or not petitioner bank is liable for its negligence in handling the respondent's account

1. No, BPI was not negligent because it was justified in dishonoring the checks for lack of sufficient funds in Suarez account. There was no sufficient evidence to prove that BPI conclusively confirmed the same-day crediting of the amount of the check to Suarez account. While BPI has the discretion to disregard the 3-day clearing policy, Suarez failed to prove his entitlement to such privilege. 

2. The award of actual damages is without basis since BPI is justified in dishonoring the checks for being drawn against uncollected deposit, hence BPI can rightfully impose the said penalty charges against Suarez' account.

3. The award of moral damages has no basis because Suarez failed to prove that his claimed injury was proximately caused by the erroneous marking of the 'DAIF' on the checks.

4. Suarez is however entitled to nominal damages due to BPI's failure to exercise the diligence required as the bank's business is deemed to be affected with public interest. The bank must at all times maintain a high level of meticulousness and should guard against injury attributableto negligence or bad faith on its part. Suarez therefore has the right to expect a high level of care and and diligence from BPI.

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.