G.R. No.

160260
October 24, 2012
WESTMONT BANK, formerly ASSOCIATED BANK now UNITED OVERSEAS BANK
PHILIPPINES, Petitioner,
vs.
MYRNA DELA ROSA-RAMOS, DOMINGO TAN and WILLIAM CO, Respondents.
Facts:
1. Myrna Dela Rosa-Ramos maintained a checking/current account with the United
Overseas Bank. In her several transactions with the Bank, Dela Rosa-Ramos got
acquainted with Domingo Tan.
2. In the course of their acquaintance, Tan offered Dela Rosa-Ramos a "special
arrangement" wherein he would finance or place sufficient funds in her account
whenever there would be an overdraft or when the amount of said checks would
exceed the balance of her current account. It was their arrangement to make sure that
the checks she would issue would not be dishonored. Tan offered the service for a fee
of P50.00 a day for every P40,000.00 he would finance. This financier-debtor
relationship lasted for almost 11 years.
3. In order to guarantee payment for such funding, Dela Rosa-Ramos issued postdated
checks. There were also times when she just paid in cash. Relative to their said
agreement, Dela Rosa issued and delivered to Tan Associated Bank checks drawn
against her current account and payable to "cash,".
4. According to Dela Rosa, Check No. 467322 for P200,000.00 was a "stale" guarantee
check. The check was originally dated August 28, 1987 but was altered to make it
appear that it was dated May 8, 1988. Tan then deposited the check in the account of
William Co, despite the obvious superimposed date. As a result, the amount of
P200,00.00 or the value indicated in the check was eventually charged against her
checking account.
5. Check No. 510290 for P232,500.00, dated June 10, 1988, was issued in payment of
cigarettes that Dela Rosa-Ramos bought from Co. This check allegedly "bounced" so
she replaced it with her "good customers check and cash" and gave it to Tan who did
not return the bounced check to her. Instead, he "redeposited" it in Cos account.
6. Check No. 613307 for P200,000.00, was another guarantee check that was also
"undated." Dela Rosa-Ramos claimed that it was Tan who placed the date "June 14,
1988." For this check, an order to stop payment was issued because of insufficient
funds. Expectedly, the words "PAYMENT STOPPED" were stamped on both sides of the
check. This check was not returned to her either and, instead, it was "redeposited" in
Cos account.
7. Dela Rosa-Ramos got the opportunity to confront Co regarding their deposit
of the two checks, the latter disclosed that her two checks were deposited in
his account to cover for his P432,500.00 cash which was taken by Tan. Then,
with a threat to expose her relationship with a married man, Tan and Co were
able to coerce her to replace the other checks with another one.
8. Check No. 613306 for P290,595.00, was also undated when delivered to Tan who later
placed the date, July 4, 1988. Dela Rosa-Ramos pointed out that as of July 5, 1988, her
checking account had P121,989.66 which was insufficient to answer for the value of
said check. A check of a certain Lee See Bin in the amount of P170,000.00 was,
however, deposited in her checking account. As a result, Tan was able to encash Check
No. 613306 and withdrew her P121,989.66 balance. Later, Dela Rosa-Ramos found out
that the Lee See Bin Check was not funded because the Banks bookkeeper demanded
from her the return of the deficiency.
9. Claiming that the four checks mentioned were deposited by Tan without her
consent, Dela Rosa-Ramos instituted a complaint against Tan, Co and the Bank before
the RTC seeking, among other things, to recover from the Bank the sum of 754,689.66
representing the total amount charged or withdrawn from her current
account.

10. Tan died.

11. RTC: In favor of Dela Rosa and ordered Tan to pay.
12.ISSUE:
WON THE BANK IS MADE LIABLE FROM THE FRAUD OF THEIR
EMPLOYEE DOMINGO TAN
13. It must be remembered that public interest is intimately carved into the banking
industry because the primordial concern here is the trust and confidence of the public.
14. This fiduciary nature of every banks relationship with its clients/depositors impels it to
exercise the highest degree of care.
15. It is, therefore, required to treat the accounts and deposits of these individuals with
meticulous care.
16. The banking system has become an indispensable institution in the modern world and
plays a vital role in the economic life of every civilized society banks have attained a
ubiquitous presence among the people, who have come to regard them with respect
and even gratitude and most of all, confidence, and it is for this reason, banks should
guard against injury attributable to negligence or bad faith on its part.
17. Considering that banks can only act through their officers and employees,
the fiduciary obligation laid down for these institutions necessarily extends
to their employees. Thus, banks must ensure that their employees observe the same
high level of integrity and performance for it is only through this that banks may meet
and comply with their own fiduciary duty.
18. It has been repeatedly held that "a banks liability as an obligor is not merely
vicarious, but primary" since they are expected to observe an equally high degree of
diligence, not only in the selection, but also in the supervision of its employees.
19.Thus, even if it is their employees who are negligent, the banks
responsibility to its client remains paramount making its liability to the same
to be a direct one.
20.Guided by the following standard, the Bank, given the fiduciary nature of its
relationship with Dela Rosa- Ramos, should have exerted every effort to safeguard and
protect her money which was deposited and entrusted with it.
21. Ramos was defrauded and she lost her money because of the negligence attributable
to the Bank and its employees.
22. The factual circumstances attending the repeated irregular entries and transactions
involving the current account of the plaintiff-appellee is evidently due to, if not
connivance, gross negligence of other bank officers since the repeated assailed
transactions could not possibly be committed by defendant Tan alone
considering the fact that the processing of the questioned checks would pass
the hands of various bank officers who positively identified their initials
therein. Having a number of employees commit mistake or gross negligence at the
same situation is so puzzling and obviates the appellant banks laxity in hiring and
supervising its employees.
4. AMOUNT OF LIABILITY OF THE BANK a. FIRST CHECK - Banks Argument As regards the 1 ST Check, Dela Rosa- Ramos acquiesced to
the change of the date in the said check. It argues that her continued acts of dealing and
transacting with the Bank like subsequently issuing checks despite her experience with this check
only shows her acquiescence which is tantamount to giving her consent.
Obviously, the Bank has not taken to heart its fiduciary responsibility to its clients. Rather
than ask and wonder why there were indeed subsequent transactions, the more
paramount issue is why the Bank through its several competent employees and
officers, did not stop, double check and ascertain the genuineness of the date of the
check which displayed an obvious alteration. This failure on the part of the Bank
makes it liable for that loss.

In the first place, it should have readily rejected the obviously altered plaintiffs
P200,000.00-check, thus, avoid its unwarranted deposit in defendant-Cos account and its
corollary loss from plaintiffs deposit, had its other employees, even excepting TAN,
performed their duties efficiently and well. RTC
A careful scrutiny of the evidence shows that indeed the date of Check No. 467322 had
been materially altered from August 1987 to May 8, 1988 in accordance with Section 125 of
the Negotiable Instruments Law. It is worthy to take note of the fact that such alteration
was not countersigned by the drawer to make it a valid correction of its date as
consented by its drawer as the standard operating procedure of the appellant bank in
such situation as admitted by its bank manager. - CA
SECOND CHECK - Banks Argument: As regards to the 2 nd check, the CA erred in considering that the said
check was debited against the account of Dela Rosa-Ramos when the fact was that it was dishonored for
having been drawn against insufficient funds. This means that the check was not charged against her
account. -- In this regard, the Court agrees with the Bank. Indeed, the admission made by Dela RosaRamos that she had to issue a replacement check for Check No. 613307 as well as for Check No.
510290 only proves that these checks were never paid and charged or debited against her account.
The replacement check is, of course, a totally different matter and is not covered as an issue in this case.

THIRD CHECK - Lastly, with respect to Check No. 613306, the Court agrees with the CA when it found that
no manifest irregularity exists as shown from the Statement of Accounts for the month of July 1988 that as
of July 4, 1988, the plaintiff-appellee had an outstanding deposit of P121,989.66. It was also cleared therein
that, on July 5, 1988, P170,000.00, through the check of Lee See Bin with the same UNITED OVERSEAS
BANK-Sto. Cristo Branch, was deposited on the account of the plaintiff-appellee and on the very same day
Check No. 613306 in the amount of P290,595.00 was approved and processed and its equivalent was
debited from the account of the plaintiff-appellee since the check is an on-us check which is deposited to
an account of another with the same branch as that of the drawer of the said check, and is considered as
good as cash if funded, hence, may be withdrawn on the very same day it was deposited. Thus, there was
no irregularity. The burden of proof was on Dela Rosa-Ramos to establish that Lee See Bin was
fictitious and that the money which purportedly came from him was merely simulated. She
unfortunately failed to discharge this burden.
THUS the Bank should only be made to answer the value of Check No. 467322 in the amount of
P200,000.00 plus the legal rate of interest. This must be further tempered down for there is no denying
that it was Dela Rosa-Ramos who exposed herself to risk when she entered into that "special
arrangement" with Tan. She is nevertheless equally guilty of contributory negligence. It has been
held that where the bank and a depositor are equally negligent, they should equally suffer the loss. The two
must both bear the consequences of their mistakes. Thus, the Bank should only pay 50% of the actual
damages awarded while Dela Rosa-Ramos should have to shoulder the remaining 50%. The Bank
can seek compensation from Tan since he was primarily responsible for the damages.
EQUITABLE PCI BANK, Petitioner,
vs.
ARCELITO B. TAN, Respondent.
FACTS:

1.

Arcelito B.Tan maintained a current and savings account with Philippine Commercial International Bank (PCIB), now
petitioner Equitable PCI Bank.
2. Tan issued postdated PCIB Check No. 275100 in the amount of P34,588.72 in favor of Sulpicio Lines, Inc. As of May 14,
1992, respondent's balance with petitioner was P35,147.59.
3. On May 14, 1992, Sulpicio Lines, Inc. deposited the aforesaid check to its account with Solid Bank, Carbon Branch, Cebu
City.
4. After clearing, the amount of the check was immediately debited by petitioner from respondent's account thereby leaving him
with a balance of only P558.87.
5. Tan issued three checks from PCIB Check No. 275080 dated May 9, 1992, payable to Agusan del Sur Electric
Cooperative Inc. (ASELCO) for the amount of P6,427.68; PCIB Check No. 275097 dated May 10, 1992 payable to Agusan
del Norte Electric Cooperative Inc., (ANECO) for the amount of P6,472.01; and PCIB Check No. 314104 dated May 16, 1992
payable in cash for the amount of P10,000.00.
6. When presented for payment, PCIB Check Nos. 275080, 275097 and 314014 were dishonored for being drawn against
insufficient funds.
7. As a result of the dishonor of Check Nos. 275080 and 275097 which were payable to ASELCO and ANECO, respectively, the
electric power supply for the two mini-sawmills owned and operated by respondent, located in Talacogon, Agusan del Sur;
and in Golden Ribbon, Butuan City, was cut off and eventually restored.
8. Tan filed a complaint against petitioner, praying for payment of losses consisting of unrealized income in the amount
of P1,864,500.00. He also prayed for payment of moral damages, exemplary damages, attorney's fees and litigation
expenses.
Tan Claims:
1. That Check No. 275100 was a postdated check in payment of Bills of Lading Nos. 15, 16 and 17, and that his account with
petitioner would have had sufficient funds to cover payment of the three other checks were it not for the negligence of
petitioner in immediately debiting from his account Check No. 275100, in the amount of P34,588.72, even as the said
check was postdated to May 30, 1992. As a consequence of petitioner's error, which brought about the dishonor of the two
checks paid to ASELCO and ANECO, the electric supply to his two mini-sawmills was cut off, the business operations thereof
were stopped, and purchase orders were not duly served causing tremendous losses to him.
Banks Defense:
1. Denied that the questioned check was postdated May 30, 1992 and claimed that it was a current check dated May 3,
1992.
2. It alleged further that the disconnection of the electric supply to respondent's sawmills was not due to the dishonor of the
checks, but for other reasons not attributable to the bank.
ISSUE: WON the date of PCIB Check No. 275100 is May 3, 1992 as contended by the defendant, or May 30, 1992 as claimed by the
plaintiff.
RULING:
The date of the check is written as follows 5/3/0/92. From the manner by which the date of the check is written, the Court cannot
really make a pronouncement as to whether the true date of the check is May 3 or May 30, 1992, without inquiring into the background
facts leading to the issuance of said check.
1. INCONSISTENCIES IN THE ALLEGATIONS OF TAN -- According to the plaintiff, the check was issued to Sulpicio Lines in
payment of bill of lading nos. 15, 16 and 17.
a. An examination of bill of lading no. 15, however, shows that the same was issued, not in favor of plaintiff but in favor of
Coca Cola Bottlers Philippines, Inc. Bill of Lading No. 16 is issued in favor of Suson Lumber and not to plaintiff.
Likewise, Bill of Lading No. 17 shows that it was issued to Jazz Cola and not to plaintiff. Furthermore, the receipt for the
payment of the freight for the shipments reflected in these three bills of lading shows that the freight was paid by Coca Cola
Bottlers Philippines, Inc. and not by plaintiff.
b. The said receipt shows that it was paid in cash and not by check.
SUPREME COURT:
From the foregoing, the evidence on record does not support the claim of the plaintiff that Check No. 275100 was issued in
payment of bills of lading nos. 15, 16 and 17. Hence, the conclusion of the Court is that the date of the check was May 3, 1992 and
not May 30, 1992.13
RTC Ruling:
The RTC concluded that the check was dated May 3, 1992 and not May 30, 1992, because the same check was
not issued to pay for Bills of Lading Nos. 15, 16 and 17, as respondent claims. The trial court's conclusion is preposterous and
illogical. The purpose for the issuance of the check has no logical connection with the date of the check. Besides, the trial
court need not look into the purpose for which the check was issued. A reading of Check No. 275100 14 would readily show that it was
dated May 30, 1992.

CA Ruling: We agree with TAN that appellee Bank apparently erred in misappreciating the date of Check No. 275100. We have
carefully examined the check in question (Exh. DDDD) and we are convinced that it was indeed postdated to May 30, 1992 and not
May 3, 1992 as urged by appellee. The date written on the check clearly appears as "5/30/1992" (Exh. DDDD-4). The first bar (/) which
separates the numbers "5" and "30" and the second bar (/) which further separates the number "30" from the year 1992 appear to have
been done in heavy, well-defined and bold strokes, clearly indicating the date of the check as "5/30/1992" which obviously means May
30, 1992. On the other hand, the alleged bar (/) which appellee points out as allegedly separating the numbers "3" and "0,"
thereby leading it to read the date as May 3, 1992, is not actually a bar or a slant but appears to be more of an unintentional
marking or line done with a very light stroke. The presence of the figure "0" after the number "3" is quite significant. In fact, a close
examination thereof would unerringly show that the said number zero or "0" is connected to the preceeding number "3 ." In other
words, the drawer of the check wrote the figures "30" in one continuous stroke, thereby contradicting appellees theory that
the number "3" is separated from the figure "0" by a bar. Besides, appellees theory that the date of the check is May 3, 1992 is
clearly untenable considering the presence of the figure "0" after "3" and another bar before the year 1992. And if we were to accept
appellees theory that what we find to be an unintentional mark or line between the figures "3" and "0" is a bar separating the two
numbers, the date of the check would then appear as "5/3/0/1992, which is simply absurd. Hence, we cannot go along with appellees
theory which will lead us to an absurd result. It is therefore our conclusion that the check was postdated to May 30, 1992 and appellee
Bank or its personnel erred in debiting the amount of the check from appellants account even before the checks due date.
Undoubtedly, had not appellee bank prematurely debited the amount of the check from appellants account before its due date, the two
other checks (Exhs. LLLL and GGGG) successively dated May 9, 1992 and May 16, 1992 which were paid by appellant to ASELCO
and ANECO, respectively, would not have been dishonored and the said payees would not have disconnected their supply of electric
power to appellants sawmills, and the latter would not have suffered losses.
2. BANK FAILED TO EXERCISE THE DEGREE OF DILIGENCE REQUIRED FROM IT -- The law imposes on banks high standards
in view of the fiduciary nature of banking. Section 2 of R.A. 879115decrees:
Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained
development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In
furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a developing economy.
Although R.A. 8791 took effect only in the year 2000, the Court had already imposed on banks the same high standard of
diligence required under R.A. 8791 at the time of the untimely debiting of respondent's account by petitioner in May 1992.
In Simex International (Manila), Inc. v. Court of Appeals,16 which was decided in 1990, the Court held 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 diligence required of banks, therefore, is more than that of a good father of a family. 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. From the foregoing, it is clear that petitioner bank did not
exercise the degree of diligence that it ought to have exercised in dealing with its client.
3. BANKS NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE LOSS SUFFERED BY TAN -- BANK argued that it was Tans way
of writing which is the proximate cause of the dishonor of the three other checks. Contrary to the Banks view , the Court finds that its
(BANKs) negligence is the proximate cause of respondents 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. The proximate cause of the loss is not respondent's manner of
writing the date of the check, as it was very clear that he intended Check No. 275100 to be dated May 30, 1992 and not May 3,
1992. The proximate cause is petitioners own negligence in debiting the account of the respondent prior to the date as
appearing in the check, which resulted in the subsequent dishonor of several checks issued by the respondent and the
disconnection by ASELCO and ANECO of his electric supply.
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 drawers instructions as reflected on the face and by the terms of the check.20 Thus, payment made before the date specified
by the drawer is clearly against the drawee bank's duty to its client.
BANKs Argument:
Tan caused confusion on the true date of the check by writing the date of the check as 5/3/0/92.
COURT: If, indeed, petitioner was confused on whether the check was dated May 3 or May 30 because of the "/" which allegedly
separated the number "3" from the "0," petitioner should have required respondent drawer to countersign the said "/" in order to

ascertain the true intent of the drawer before honoring the check. As a matter of practice, bank tellers w ould not receive nor
honor such checks which they believe to be unclear, without the counter-signature of its drawer. Petitioner should have exercised the
highest degree of diligence required of it by ascertaining from the respondent the accuracy of the entries therein, in order to
settle the confusion, instead of proceeding to honor and receive the check.
4. BANK BRANCH MANAGERS LETTER ACKNOWLEDGED TANS CHECK TO ANECO WAS SUFFICIENTLY FUNDED - A letter
of the Banks Branch Manager, expressly acknowledged that Check No. 275097 (Exh. GGGG) which appellant paid to ANECO "was
sufficiently funded at the time it was negotiated," but it was dishonored as a "result of an earlier negotiation to PCIB-Mandaue Branch
through a deposit made on May 14, 1992 with SOLIDBANK xxx xxx xxx of a postdated check which xxx xxx passed undetected." He
further admitted that "Mr. Arcelito B. Tan was in no way responsible for the dishonor of said PCIB Check No. 275097." Needless to
state, since appellee's Manager has cleared appellant of any fault in the dishonor of the ANECO check, it [necessarily]
follows that responsibility therefor or fault for the dishonor of the check should fall on appellee bank. Appellee's attempt to
extricate itself from its inadvertence must therefore fail in the face of its Manager's explicit acknowledgment of responsibility for the
inadvertent dishonor of the ANECO check.23
5. ISSUE ON DAMAGES -- Tans claim for damages was based on purchase orders from various customers which were allegedly not
met due to the disruption of the operation of his sawmills. However, aside from the purchase orders and his testimony, respondent
failed to present competent proof on the specific amount of actual damages he suffered during the entire period his power
was cut off.
Moreover, the purchase orders and job orders reveal that the orders were due for delivery prior to the period when the power supply of
respondent's two sawmills was cut off. No Actual Damages. Respondent is entitled to temperate damages. It is apparent that
respondent suffered pecuniary loss. The negligence of petitioner triggered the disconnection of his electrical supply, which temporarily
halted his business operations and the consequent loss of business opportunity. However, due to the insufficiency of evidence before
Us, We cannot place its amount with certainty. The unexpected cutting off of respondent's electricity, which resulted in the stoppage of
his business operations, had caused him to suffer humiliation, mental anguish and serious anxiety. Bank also failed to exercise degree
of diligence required, the award of exemplary damages in the amount of P50,000.00 is in order. The Court affirms the appellate courts
award of attorneys fees in the amount of P30,000.00.

CENTRAL BANK OF THE PHILIPPINES, Petitioner,

vs.
CITYTRUST BANKING CORPORATION, Respondent.
DECISION
CARPIO MORALES, J.:
Citytrust Banking Corporation (Citytrust), formerly Feati Bank, maintained a demand deposit
account with petitioner Central Bank of the Philippines
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.
And 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.
Petitioner later issued security identification cards to the roving tellers one of whom was
"Rounceval Flores"
On July 15, 1977, Flores presented for payment to petitioners Senior Teller Iluminada dela
Cruz (Iluminada) two Citytrust checks of even date, payable to Citytrust, one in the amount
of P850,000 and the other in the amount of P900,000, both of which were signed and indorsed
by Citytrusts authorized signatory-drawers.
After the checks were certified by petitioners 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. Instead of signing his name, however, Flores signed as "Rosauro C. Cayabyab"
a fact Iluminada failed to notice.1avvphi1
Iluminada thereupon sent the cash transfer slip and checks to petitioners 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. Petitioner then debited the amount
of the checks totaling P1,750,000 from Citytrusts demand deposit account.
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. Petitioner did not heed the
demand, however.
Citytrust later filed a complaint for estafa, with reservation on the filing of a separate civil
action, against Flores. Flores was convicted.
Citytrust thereafter filed before the Regional Trial Court (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."
By Decision1 of November 13, 1991, Branch 32 of the RTC of Manila found both Citytrust and
petitioner negligent and accordingly held them equally liable for the loss. Both parties
appealed to the Court of Appeals which, by Decision 2 dated July 16, 1999, affirmed the trial
courts decision, it holding that both parties contributed equally to the fraudulent encashment
of the checks, hence, they should equally share the loss in consonance with Article 2179 3 vis a
vis Article 11724 of the Civil Code.
In arriving at its Decision, 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 Citytrusts
agent authorized to receive payment.
Brushing aside petitioners contention that it cannot be sued, the appellate court held that
petitioners Charter specifically clothes it with the power to sue and be sued.
Also brushing aside petitioners assertion that Citytrusts reservation of the filing of a separate
civil action against Flores precluded Citytrust from filing the civil action against it, the
appellate court held that the "action for the recovery of sum of money is separate and distinct
and is grounded on a separate cause of action from that of the criminal case for estafa."
Hence, the present appeal, petitioner maintaining that Flores having been an authorized
roving teller, Citytrust is bound by his acts. 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 (Citytrusts) behalf for five years prior to the questioned
transaction.
Attributing negligence solely to Citytrust, petitioner harps on Citytrusts allowing Flores to
steal the checks and failing to timely cancel them; allowing Flores to wear the issued
identification card issued by it (petitioner); failing to report Flores absence from work on the
day of the incident; and failing to explain the circumstances surrounding the supposed theft
and cancellation of the checks.
Drawing attention to Citytrusts considerable delay in demanding the restoration of the
proceeds of the checks, petitioners argue that, assuming arguendo that its teller was
negligent, Citytrusts negligence, which preceded that committed by the teller, was the
proximate cause of the loss or fraud.
The petition is bereft of merit.
Petitioners teller Iluminada did not verify Flores signature on the flimsy excuse that Flores
had had previous transactions with it for a number of years. 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.

Had she done that, she would have readily been put on notice that Flores was affixing, not his
but a fictitious signature.
Given that petitioner is the government body mandated to supervise and regulate banking
and other financial institutions, this Courts ruling in Consolidated Bank and Trust Corporation
v. Court of Appeals5 illumines:
The contract between the bank and its depositor is governed by the provisions of the Civil
Code on simple loan. Article 1980 of the Civil Code expressly provides that "x x x savings x x x
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loan." There is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the
bank money and the bank agrees to pay the depositor on demand. The savings deposit
agreement between the bank and the depositor is the contract that determines the rights and
obligations of the parties.
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."
This fiduciary relationship means that the banks 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. Article 1172 of the Civil Code states
that the degree of diligence required of an obligor is that prescribed by law or contract, and
absent such stipulation then the diligence of a good father of a family. Section 2 of RA 8791
prescribes the statutory diligence required from banks that banks must observe "high
standards of integrity and performance" in servicing their depositors. Although RA 8791 took
effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diazs
savings account, jurisprudence at the time of the withdrawal already imposed on banks the
same high standard of diligence required under RA No. 8791. (Emphasis supplied)
Citytrusts failure to timely examine its account, cancel the checks and notify petitioner of
their alleged loss/theft should mitigate petitioners liability, in accordance with Article 2179 of
the Civil Code which provides that if the plaintiffs negligence was only contributory, the
immediate and proximate cause of the injury being the defendants lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. For
had Citytrust timely discovered the loss/theft and/or subsequent encashment, their proceeds
or part thereof could have been recovered.
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.
WHEREFORE, the assailed Court of Appeals Decision of July 16, 1999 is hereby AFFIRMED with
MODIFICATION, in that petitioner and Citytrust should bear the loss on a 60-40 ratio.
SO ORDERED.
G.R. No. 108555 December 20, 1994
RAMON TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and RIZAL COMMERCIAL BANKING
CORPORATION, respondents.
KAPUNAN, J.:
Petitioner Ramon Tan, a trader-businessman and community leader in Puerto Princesa, had
maintained since 1976 Current Account No. 109058068 with respondent bank's Binondo

branch. On March 11, 1988, to avoid carrying cash while enroute to Manila, he secured a
Cashier's Check No. L 406000126 from the Philippine Commercial Industrial Bank (PCIB),
Puerto Princesa branch, in the amount of Thirty Thousand (P30,000.00) Pesos, payable to his
order.
He deposited the check in his account with RCBC Binondo on March 15. On the same day,
RCBC erroneously sent the same cashier's check for clearing to the Central Bank which was
returned for having been "missent" or "misrouted." 1
The next day, March 16, RCBC debited the amount covered by the same cashier's
check from the account of the petitioner. Respondent bank at this time had not informed
the petitioner of its action which the latter claims he learned of only 42 days after, specifically
on March 16, when he received the bank's debit memo. 2
Relying on the common knowledge that a cashier's check was as good as cash, that the usual
banking practice that local checks are cleared within three (3) working days and regional
checks within seven (7) working days,
and the fact that the cashier's check was accepted, petitioner issued two (2) personal checks
in the name of Go Lac and another check in the name of MS Development Trading Corporation.
Petitioner, alleging to have suffered humiliation and loss of face in the business sector due to
the bounced checks, filed a complaint against RCBC for damages in the Regional Trial Court of
Palawan and Puerto Princesa, Branch 47, docketed as Civil Case No. 2101. 5
During the trial, petitioner sought to prove:
First, that it was RCBC's responsibility to call his attention there and then that he had
erroneously filled the wrong deposit slip at the time he deposited the cashier's check with the
respondent bank's teller and it was negligence on RCBC's part not to have done so; 6
Second, that RCBC had been remiss in the performance of its obligation to the petitioner when
it "missent" the cashier's check to the Central Bank knowing, as it should, that the source of
the check, PCIB, Puerto Princesa Branch, is not included in the areas required to be cleared by
the Central Bank, a fact known to the banking world and surely to the respondent bank; 7
Third, that RCBC upon knowing of its error in "missending" the cashier's check to the Central
Bank did not attempt to rectify its "misclearing" error by clearing it seasonably with PCIB,
Puerto Princesa, thru its own RCBC Puerto Princesa Branch with whom it had direct radio
contact; 8
Fourth, that as an old client, with twelve (12) years of good standing then, RCBC should have
given him more consideration by exerting greater diligence in clearing the check with PCIB,
Puerto Princesa, to protect its client's interest; 9
Fifth, that RCBC failed to inform petitioner promptly that the check had not been cleared,
despite its debiting without delay the amount covered by the check from the account of the
petitioner and hastily charging the latter service fees immediately after the return of the
"missent checks"; 10 and
Finally, that the bounced checks resulting from RCBC's "misclearing" had put in doubt his
credibility among his business peers and sullied his reputation as a community leader which
he had painstakingly cultivated for years. His community standing as a business-socio-civic
leader was a source of pride for him in his old age of 70. He cited being Chairman of Palawan
Boy Scout Council, 2-term President of the Rotary Club of Puerto Princesa, member of Palawan
Chamber of Commerce and Industry, member of the Monitoring Team of the Palawan
Integrated Area Development Project, member of Lion's Club, Philippine Rifle Pistol Association
and the Saturday Health Club to justify his claim for moral damages. 11
In its defense, RCBC disowning any negligence, put the blame for the "misrouting" on the
petitioner for using the wrong check deposit slip. It insisted that the misuse of a local check
deposit slip, instead of a regional check deposit slip, triggered the "misrouting" by RCBC of the
cashier's check to the Central Bank and it was petitioner's negligent "misuse" of a local

deposit slip which was the proximate cause of the "misrouting," thus he should bear the
consequence. 12
RCBC alleged that it complied strictly with accepted banking practice when it debited the
amount of P30,000.00 against petitioner's account since under Resolution No. 2202 dated
December 21, 1979 of the Monetary Board, it is a matter of policy to prohibit the drawing
against uncollected deposits (DAUDS) except when the drawings are made against uncollected
deposits representing bank manager's/cashier's/treasurer's checks, treasury warrants, postal
money orders and duly funded "on us" checks which may be permitted at the discretion of
each bank. 13 Without crediting the P30,000.00 deposit, petitioner's balance before and after
was
Two
Thousand
Seven
Hundred
Ninety-Two Pesos and the (P2,792.88) Eighty-Eight Centavos. 14 Thus, it dishonored the two (2)
checks amounting to P11,553.70 since they were drawn against insufficient funds. RCBC
added that petitioner had no bills purchase (BP) line which allows a depositor to receive or
draw from proceeds of a check without waiting it to be cleared. Besides, RCBC maintained, had
it forwarded the Cashier's Check to PCIB Puerto Princesa, Palawan, it would take at least
twenty (20) working days for the cashier's check to be cleared and it would take the same
length of time to clear the two (2) personal checks of Tan. 15
RCBC further asseverated it was merely acting as petitioner's collecting agent and it assumed
no responsibilitybeyond care in selecting correspondents under the theory that where a check
is deposited with a collecting bank the relationship created is that of agency and not creditordebtor, thus it cannot be liable. 16
Finally, respondent claimed that serious attempts were made to contact petitioner through the
telephone numbers in the signature specimen card of petitioner but to no avail. 17 The
Assistant Branch Accountant of RCBC Binondo Branch testified that the first telephone number
in the card had been deleted from the phone company's list and that when RCBC tried to
contact petitioner's daughter Evelyn Tan-Banzon thru a certain telephone number and when
they asked for Evelyn Tan, they were told there was no such person. 18
The trial court rendered a decision on December 28, 1990 in petitioner's favor, the dispositive
portion 19 of which reads:
WHEREFORE, premises considered, plaintiff having proven the allegations of his
verified complaint by preponderance of evidence, the court hereby renders
judgment ordering defendant bank, Binondo Branch, Manila, to pay him
damages and attorney's fees in the total amount of P1,035,000.00 Philippine
Currency, broken down as follows: P700,000.00 as moral damages, P200,000.00
as exemplary damages; P135,000.00 which is 15% of the sum herein awarded
to plaintiff, as attorney's fees and to pay costs of suit.
For having failed to prove by any receipt or writing to underpin it, plaintiff's
claim for actual damage is denied for lack of merit.
IT IS SO ORDERED.
RCBC appealed to the Court of Appeals contending that the trial court erred in holding RCBC
liable to petitioner on account of its alleged negligence and in awarding petitioner moral and
exemplary damages and attorney's fees.
The Court of Appeals on January 12, 1993 rendered a decision 20 with the following decretal
portion:
WHEREFORE, and upon all the foregoing, the decision of the court below is
REVERSED and this complaint is DISMISSED without pronouncement as to cost.
The Court of Appeals' decision is based on the following findings: 21
What appeared to have caused the unfortunate incident was that the plaintiff
filled up the wrong deposit slip which led to the sending of the check to the
Central Bank when the clearing should have been made elsewhere.
But the claim of the plaintiff that he was not advised that the Cashier's check
was missent does not seem to be correct. The evidence indicated that the
defendant bank thru its personnel had called him up thru telephone in the
number (No. 60-45-23) which he gave in his specimen signature card. But it

came out, that said telephone number was no longer active or was already
deleted from the list of telephone numbers.
There was an instruction on the part of the plaintiff for the bank to contact his
daughter, Mrs. Evelyn Tan Banzon and according to the plaintiff, she too, was
not contacted as per his instruction. The evidence, however, indicated that Ms.
Evelyn Tan also could not be contacted at the number supposed to pertain to
her as appeared in the specimen signature card. In other words while there was
compliance with the instructions given by the plaintiff but said instructions were
faulty. The plaintiff as a customer of the bank is under obligation to inform the
defendant of any changes in the telephone numbers to be contacted in the
event of any exigency.
All in all, the facts indicate that the refusal of RCBC to credit the amount of
P30,000.00 to the plaintiff's current account is consistent with the accepted
banking practice. As the defendant bank had claimed, under Resolution No.
2202 dated December 21, 1979 of the Monetary Board, it had been
emphatically declared as a matter of policy that no drawings should be made
against uncollected deposits except when the drawings are made against
uncollected deposits representing bank manager's/cashier's/treasurer's checks,
treasury warrants, postal money orders, and duly funded "on-us" checks as may
be permitted at the discretion of each bank.
It is clear that immediate payment without awaiting clearance of a cashier's
check is discretionary with the bank to whom the check is presented and such
being the case, the refusal to allow it as in this case is not to be equated with
negligence in the basic perception that discretion is not demandable as a right.
In the instant case, prior to the deposit of P30,000.00, the plaintiff's account
appeared to be only in the amount of P2,792.98. So the two (2) checks issued
by the plaintiff amounting to P11,553.70 had to be dishonored since they were
drawn against insufficient funds.
What the plaintiff should have done, before issuing the two (2) checks, was to
await the clearance of the Cashier's check and his failure to do so is a fault not
ascribable to the defendant who appeared under the circumstance merely to
have followed the usual banking practice.
Petitioner now seeks to reverse the decision of the Court of Appeals and affirm that of the
lower court. He raises the following errors:
1. THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND MANIFEST
ERROR IN CONCLUDING THAT THE NEGLIGENCE WAS ASCRIBABLE TO HEREIN
PETITIONER.
2. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
FINDING THAT THE RESPONDENT BANK HAD NOT BEEN REMISS IN THE
PERFORMANCE OF ITS OBLIGATIONS TO HEREIN PETITIONER.
3. THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND MANIFEST
ERROR AND GRAVE ABUSE OF DISCRETION IN REVERSING THE AWARD OF
MORAL AND EXEMPLARY DAMAGES TO THE PETITIONER.
4. THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND MANIFEST
ERROR AND GRAVE ABUSE OF DISCRETION IN NOT AWARDING ATTORNEY'S FEES
TO PETITIONER.
In a most recent case decided by this Court, City Trust Corporation v. The Intermediate
Appellate Court, 22 involving damages against City Trust Banking Corporation, the depositor,
instead of stating her correct account number 29000823 inaccurately wrote 2900823. Because
of this error, six postdated checks amounting to P20,209.00 she issued were dishonored for
insufficiency of funds. The Regional Trial Court dismissed the complaint for lack of merit. The
Court of Appeals, however, found the appeal meritorious and ordered the bank to pay nominal
damages of P2,000.00, temperate and moderate damages of P5,000.00 and attorney's fees of
P4,000.00. Upon review, this Court quoted with favor the disquisition of the appellate court:

We cannot uphold the position of defendant. For, even if it be true that there
was error on the part of the plaintiff in omitting a zero in her account number,
yet, it is a fact that her name, Emma E. Herrero, is clearly written on said
deposit slip (Exh. B). This is controlling in determining in whose account the
deposit is made or should be posted. This is so because it is not likely to commit
an error in one's name that merely relying on numbers which are difficult to
remember, especially a number with eight (8) digits as the account numbers of
defendant's depositors. We view the use of numbers as simply for the
convenience of the bank but was never intended to disregard the real name of
its depositors. The bank is engaged in business impressed with public interests,
and it is its duty to protect in return its many clients and depositors who
transact business with it. It should not be a matter of the bank alone receiving
deposits, lending out money and collecting interests. It is also its obligation to
see to it that all funds invested with it are properly accounted for and duly
posted in its ledgers.
In the case before Us, we are not persuaded that defendant bank was not free
from blame for the fiasco. In the first place, the teller should not have accepted
plaintiff's deposit without correcting the account number on the deposit slip
which, obviously, was erroneous because, as pointed out by defendant, it
contained only seven (7) digits instead of eight (8). Second, the complete name
of plaintiff depositor appears in bold letters on the deposit slip (Exh. B). There
could be no mistaking in her name, and that the deposit was made in her name,
Emma E. Herrero. In fact, defendant's teller should not have fed her deposit slip
to the computer knowing that her account number written thereon was wrong
as it contained only seven (7) digits. As it happened, according to defendant,
plaintiff's deposit had to be consigned to the suspense accounts pending
verification. This, indeed, could have been avoided at the first instance had the
teller of defendant bank performed her duties efficiently and well. For then she
could have readily detected that the account number in the name of Emma E.
Herrero was erroneous and would be rejected by the computer. That is, or
should be, part of the training and standard operating procedure of the bank's
employees. On the other hand, the depositors are not concerned with banking
procedure. That is the responsibility of the bank and its employees. Depositors
are only concerned with the facility of depositing their money, earning interest
thereon, if any, and withdrawing therefrom, particularly businessmen, like
plaintiff, who are supposed to be always on-the-go. Plaintiff's account is a
current account which should immediately be posted. After all, it does not earn
interest. At least, the forbearance should be commensurated with prompt,
efficient and satisfactory service.
Bank clients are supposed to rely on the services extended by the bank,
including the assurance that their deposits will be duly credited them as soon as
they are made. For, any delay in crediting their account can be embarrassing to
them as in the case of plaintiff.
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. (Emphasis supplied).
In the light of the above-cited case, the respondent bank cannot exculpate itself from liability
by claiming that its depositor "impliedly instructed" the bank to clear his check with the
Central Bank by filling a local check deposit slip. Such posture is disingenuous, to say the
least. First, why would RCBC follow a patently erroneous act born of ignorance or inattention or
both. Second, bank transactions pass through a succession of bank personnel whose duty is to
check and countercheck transactions for possible errors. In the instant case, the teller should
not have accepted the local deposit slip with the cashier's check that on its face was clearly a
regional check without calling the depositor's attention to the mistake at the very moment this

was presented to her. Neither should everyone else down the line who processed the same
check for clearing have allowed the check to be sent to Central Bank. Depositors do not
pretend to be past master of banking technicalities, much more of clearing procedures. As
soon as their deposits are accepted by the bank teller, they wholly repose trust in the bank
personnel's mastery of banking, their and the bank's sworn profession of diligence and
meticulousness in giving irreproachable service.
We do not subscribe to RCBC's assertion that petitioner's use of the wrong deposit slip was the
proximate cause of the clearing fiasco and so, petitioner must bear the consequence.
In Pilipinas Bank, v. CA, 23 this Court said:
The bank is not expected to be infallible but, as correctly observed by
respondent Appellate Court, in this instance, it must bear the blame for not
discovering the mistake of its teller despite the established procedure requiring
the papers and bank books to pass through a battery of bank personnel whose
duty it is to check and countercheck them for possible errors. Apparently, the
officials and employees tasked to do that did not perform their duties with due
care, . . .
So it is in the instance case, where the conclusion is inevitable that respondent RCBC had been
remiss in the performance of its duty and obligation to its client, as well as to itself. We draw
attention to the fact that the two dishonored checks issued by petitioner, Check No. 040719
and
Check
No. 040718 were presented for payment 24 more than 45 days from the day the cashier's
check was deposited. This gave RCBC more than ample time to have cleared the cashier's
check had it corrected its "missending" the same upon return from Central Bank using the
correct slip this time so it can be cleared properly. Instead, RCBC promptly debited the amount
of P30,000.00 against petitioner's account and left it at that.
We observe, likewise, that RCBC inquired about an Evelyn Tan but no Evelyn Tan-Banzon as
specifically instructed in the same signature card. (Emphasis supplied) 25
RCBC insists that immediate payment without awaiting clearance of a cashier's check is
discretionary with the bank to whom the check is presented and such being the case, its
refusal to immediately pay the cashier's check in this case is not to be equated with
negligence on its part. We find this disturbing and unfortunate.
An ordinary check is not a mere undertaking to pay an amount of money. There is an element
of certainty or assurance that it will be paid upon presentation that is why it is perceived as a
convenient substitute for currency in commercial and financial transactions. The basis of the
perception being confidence. Any practice that destroys that confidence will impair the
usefulness of the check as a currency substitute and create havoc in trade circles and the
banking community. 26
Now, what was presented for deposit in the instant cases was not just an ordinary check but a
cashier's check payable to the account of the depositor himself. A cashier's check is a primary
obligation of the issuing bank and accepted in advance by its mere issuance. 27 By its very
nature, a cashier's check is the bank's order to pay drawn upon itself, committing in effect its
total resources, integrity and honor behind the check. A cashier's check by its peculiar
character and general use in the commercial world is regarded substantially to be as good as
the money which it represents. 28 In this case, therefore, PCIB by issuing the check created an
unconditional credit in favor of any collecting bank.
All these considered, petitioner's reliance on the layman's perception that a cashier's check is
as good as cash is not entirely misplaced, as it is rooted in practice, tradition, and principle.
We see no reason thus why this so-called discretion was not exercised in favor of petitioner,
specially since PCIB and RCBC are members of the same clearing house group relying on each
other's solvency. RCBC could surely rely on the solvency of PCIB when the latter issued its
cashier's check.
On the third and fourth issue, RCBC contends that moral damages cannot be recovered in an
action for breach of contract since under Article 2219 of the New Civil Code, the instant case is
not among those enumerated. For an award of moral damages in a breach of contract, it is

imperative that the party acted in bad faith or fraudulently as provided for in Art. 2220 of the
Civil Code, to wit:
Art. 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages
are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
In the absence of moral damages, RCBC argues, exemplary damages cannot be awarded
under Art. 2225 of the same Code which states:
Exemplary damages or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.
We hold that petitioner has the right to recover moral damages even if the bank's negligence
may not have been attended with malice and bad faith. In American Express International, Inc.
v. IAC, 29 we held:
While petitioner was not in bad faith, its negligence caused the private
respondent to suffer mental anguish, serious anxiety, embarrassment and
humiliation, for which he is entitled to recover, reasonable moral damages (Art.
2217, Civil Code).
In Zenith Insurance Corporation v. CA, 30 we also said that moral damages are not meant to
enrich a complainant at the expense of defendant. It is only intended to alleviate the moral
suffering he has undergone. In the instant case, we find the award of P700,000.00 as moral
damages excessive and, accordingly, reduce it to one hundred thousand (P100,000.00) pesos.
We find the award of exemplary damages of P200,000.00 unjustified in the absence of malice,
bad faith or gross negligence. 31 The award of reasonable attorney's fees is proper for the
petitioner was compelled to litigate to protect his interest. 32
IN VIEW WHEREOF, we REVERSE the decision of respondent Court of Appeals and hereby order
private respondent RCBC, Binondo Branch, to pay petitioner the amount of one hundred
thousand (P100,000.00) pesos as moral damages and the sum of fifty thousand (P50,000.00)
pesos as attorney's fees, plus costs.
SO ORDERED.