Simex International (Manila), Inc. vs. Court of Appeals, GR No. 88013, March 19, 1990.

“A bank is under obligation to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.”

Facts: The petitioner was a depositor of the respondent Traders Royal Bank and maintained a checking
account. The petitioner deposited to its account in the said bank the amount of P100,000.00. Subsequently,
the petitioner issued several checks against its deposit but they had been dishonored for insufficient funds.

The petitioner complained to the respondent bank on June 10, 1981. The investigation disclosed that the
sum of P100,000.00 deposited by the petitioner had not been credited to it. The error was only rectified on
July 17, 1981 and the dishonored checks were paid after they were deposited.

Petitioner demanded reparation from the respondent bank for its “gross and wanton negligence” but this
demand was not met. Thus, petitioner filed a complaint for damages against the private respondent.

Issue: Whether the respondent bank was negligent?

Held: In the case at bar, it is obvious that the respondent bank was remiss in his duty to treat the accounts
of its depositors with meticulous care and violated the fiduciary nature of their relationship. What is
especially deplorable is that, having been informed of its error in not crediting the deposit in question to the
petitioner, the respondent bank did not immediately correct it but did so only one week later of twenty-three
days after the deposit was made. It bears repeating that the record does not contain any satisfactory
explanation of why the error was made in the first place and why it was not corrected immediately after its
delivery.

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of millions. The bank must record every single transaction
accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to
reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that
the bank will deliver it as and to whomever he directs. A blunder on the part of the bank, such as the
dishonour of a check without good reason, can cause the depositor not a little embarrassment if not also
financial loss and perhaps even civil and criminal litigation.

Consolidated Bank and Trust Corporation vs. Court of Appeals, GR No. 138569, September 11,
2003.

“The State recognizes the ‘fiduciary nature of banking that requires high standards of integrity and
performance’.”

Facts: LC Diaz opened a savings account with Solidbank. They deposited certain amount of money with
Solidbank through its messenger Calapre. Calapre presented to Teller No. 6 the two deposit slips and the
passbook.

Since the transaction took time and he had to make another deposit with another bank, Calapre left the
passbook with Solidbank. When he returned to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook.

LC Diaz, through its CEO, Luis C. Diaz, called up Solidbank to stop any transaction using the same
passbook until LC Diaz could open a new account. However, they learned that unauthorized withdrawal
from its savings account had already been made. LC Diaz through its counsel demanded from Solidbank
the return of its mioney. Solidbank refused.

L.C. Diaz filed a complaint for Recovery of a Sum of Money against Solidbank.
Issue: Whether Solidbank was negligent?

Held: The Court held that Solidbank is liable for breach of contract due to negligence, or culpa contractual.

The law imposes on banks high standards in view of the fiduciary nature of banking. The fiduciary
relationship means that the bank’s obligation to observe high standards 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.

Calapre left the passbook with Solidbank because the transaction took time and he had to go to Allied Bank
for another transaction. The passbook was still in the hands of the employees of Solidbank for the
processing of the deposit when Calapre left Solidbank. Solidbank’s rules on savings account require that
the “deposit book should be carefully guarded by the depositor and kept under lock and key, if possible.”
When the passbook is in the possession of Solidbank’s tellers during withdrawals, the law imposes on
Solidbank and its tellers an even higher degree of diligence in safeguarding the passbook.

Likewise, Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or his authorized representative. The tellers know, or should know, that the
rules on savings account provide that any person in possession of the passbook is presumptively its owner.
If the tellers give the passbook to the wrong person, they would be clothing that person presumptive
ownership of the passbook, facilitating unauthorized withdrawals by that person. For failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively
failed to observe such high degree of diligence in safeguarding the passbook, and in insuring its return to
the party authorized to receive the same.

The bank must not only exercise “high standards of integrity and performance,” it must also insure that its
employees do likewise because this is the only way to insure that the bank will comply with its fiduciary
duty. Solidbank failed to present the teller who had the duty to return to Calapre the passbook, and thus
failed to prove that this teller exercised the “high standards of integrity and performance” required of
Solidbank’s employees.

Metropolitan Bank and Trust Company vs. Cabilzo, GR No. 154469, December 6, 2006

“The point is that as a business affected with public interest and because of the nature of its functions, the
bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind
the fiduciary nature of their relationship. The appropriate degree of diligence required of a bank must be a
high degree of diligence, if not the utmost diligence.”

Facts: Cabilzo issued a postdated Metrobank Check payable to “CASH” in the amount of One Thousand
Pesos (P1,000.00). The check was drawn against Cabilzo’s Account with Metrobank and was paid by
Cabilzo to a certain Mr. Marquez, as his sales commission.

Subsequently, the check was presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed
the check to Metrobank for appropriate clearing. After the entries thereon were examined, including the
availability of funds and the authenticity of the signature of the drawer, Metrobank cleared the check for
encashment in accordance with the Philippine Clearing House
Corporation (PCHC) Rules.

Later on, Cabilzo discovered that the Metrobank check he issued on 12 November 1994 in the amount of
P1,000.00 was altered to P91,000.00 and the date 24 November 1994 was changed to 14 November 1994.

Hence, Cabilzo demanded that Metrobank recredit the amount of P91,000.00 to his account. Metrobank,
however, refused reasoning that it has to refer the matter first to its Legal Division for appropriate action.
Repeated verbal demands followed but Metrobank still failed to recredit the amount of P91,000.00 to
Cabilzo’s account. Cabilzo instituted a civil action for damages against Metrobank.
For its part, Metrobank countered that upon the receipt of the said check through the PCHC on 14
November 1994, it examined the genuineness and the authenticity of the drawer’s signature appearing
thereon and the technical entries on the check including the amount in figures and in words to determine if
there were alterations, erasures, superimpositions or intercalations thereon, but none was noted. After
verifying the authenticity and propriety of the aforesaid entries, including the indorsement of the collecting
bank located at the dorsal side of the check which stated that, “all prior indorsements and lack of
indorsement guaranteed,” Metrobank cleared the check.

Issue: Whether Metrobank is liable due to its negligent?

Held: In the present case, it is obvious that Metrobank was remiss in that duty and violated that relationship.
As observed by the Court of Appeals, there are material alterations on the check that are visible to the
naked eye. Thus:

“x x x The number “1” in the date is clearly imposed on a white figure in the shape of the number “2.” The
appellant’s employees who examined the said check should have likewise been put on guard as to why at
the end of the amount in words, i.e., after the word “ONLY”, there are 4 asterisks, while at the beginning of
the line or before said phrase, there is none, even as 4 asterisks have been placed before and after the
word “CASH” in the space for payee. In addition, the 4 asterisks before the words “ONE THOUSAND
PESOS ONLY” have noticeably been erased with typing correction paper, leaving white marks, over which
the word “NINETY” was superimposed. The same can be said of the numeral “9” in the amount “91,000,”
which is superimposed over a whitish mark, obviously an erasure, in lieu of the asterisk which was deleted
to insert the said figure. The appellant’s employees should have again noticed why only 2 asterisks were
placed before the amount in figures, while 3 asterisks were placed after such amount. The word “NINETY”
is also typed differently and with a lighter ink, when compared with the words “ONE THOUSAND PESOS
ONLY.” The letters of the word “NINETY” are likewise a little bigger when compared with the letters of the
words “ONE THOUSAND PESOS ONLY.”

Surprisingly, however, Metrobank failed to detect the above alterations which could not escape the attention
of even an ordinary person. This negligence was exacerbated by the fact that, as found by the trial court,
the check in question was examined by the cash custodian whose functions do not include the examinations
of checks indorsed for payment against drawer’s accounts. Obviously, the employee allowed by Metrobank
to examine the check was not versed and competent to handle such duty. These factual findings of the trial
court are conclusive upon this court especially when such findings were affirmed the appellate court.

The banking system is an indispensable institution in the modern world and plays a vital role in the economic
life of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or
as active instruments of business and commerce, banks have become an ubiquitous presence among the
people, who have come to regard them with respect and even gratitude and, most of all, confidence.

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.

The point is that as a business affected with public interest and because of the nature of its functions, the
bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind
the fiduciary nature of their relationship. The appropriate degree of diligence required of a bank must be a
high degree of diligence, if not the utmost diligence.

Philippine National Bank vs. Pike, GR No. 157845, September 20, 2005
“With banks, the degree of diligence required is more than that of a good father of a family considering that
the business of banking is imbued with public interest due to the nature of their functions—the law imposes
on banks a high degree of obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of banking.”

Facts: Pike opened U.S. Dollar Savings Account with petitioner PNB Buendia branch for which he was
issued a corresponding passbook. Subsequently, he discovered that the passbook was missing together
with some of his valuables. He also discovered that two (2) unauthorized withdrawals from his U.S. Dollar
Savings Account were made.

Pike went to PNB’s Buendia branch and verbally protested the unauthorized withdrawals and likewise
demanded the return of the total withdrawn amount of U.S. $7,500.00, on the ground that he never
authorized anybody to withdraw from his account as the signatures appearing on the subject withdrawal
slips were clearly forgeries. However, PNB refused to credit said amount back to complainant’s U.S. Dollar
Savings Account without justifiable reason, and instead PNB wrote him that it exercised due diligence in
the handling of said account.

In its Motion to Dismiss, PNB alleged that Pike made verbal instruction to honor all withdrawals to be
transmitted by his Talent Manager and Choreographer, Joy Davasol who shall present pre-signed
withdrawal slips bearing his signature.

Petitioner PNB contends that due to the verbal instructions of respondent Pike, a valued depositor, it
allowed the withdrawal by another person. Plus, the fact that said respondent withdrew the remaining
balance in his US Savings Account and executed a waiver releasing petitioner PNB from any liability due
to the loss of the funds should rightly negate a finding of negligence on its part.

Ruling: The Court ruled that PNB negligently allowed the unauthorized withdrawals subject of the case at
bar.

It bears emphasizing that negligence of banking institutions should never be countenanced. The negligence
here lies in the lackadaisical attitude exhibited by employees of petitioner PNB in their treatment of
respondent Pike’s US Dollar Savings
Account that resulted in the unauthorized withdrawal of $7,500.00. Nevertheless, though its employees
may be the ones negligent, a bank’s liability as an obligor is not merely vicarious but primary, as banks are
expected to exercise the highest degree of diligence in the selection and supervision of their employees,
and having such obligation, the Court cannot ignore the circumstances surrounding the case at bar—how
the employees of petitioner PNB turned their heads, nay, closed their eyes to the suspicious circumstances
enfolding the two withdrawals subject of the case at bar. It may even be said that they went out of their
ways to disregard standard operating procedures formulated to ensure the security of each and every
account that they are handling.

PNB’s witness was utterly remiss in protecting the bank’s client, as well as the bank itself, when he allowed
an account holder to make it appear as if he was the one actually withdrawing from an account and actually
receiving the withdrawn amount. Ordinarily, banks allow withdrawal by someone who is not the account
holder so long as the account holder authorizes his representative to withdraw and receive from his account
by signing on the space provided particularly for such transactions, usually found at the back of withdrawal
slips.

By his own testimony, the witness negated the very reason for the bank’s bizarre “accommodation” of the
alleged verbal request of respondent Pike—that he was a “valued client.” From the aforequoted, it appears
that the witness, Lorenzo Bal, was not even reasonably familiar with respondent Pike, yet, he was ready,
willing and able to accommodate the verbal request of said depositor. Worse still, the witness still approved
the withdrawal transaction without asking for any proof of identification for the reason that: 1) Davasol was
in possession of a pre-signed withdrawal slip; and 2) the witness “recognized” the signature of respondent
Pike—even after admitting that he did not bother to counter check the signature on the slip with the
specimen signature card of respondent Pike and that he met respondent Pike just once so that he cannot
seem to recall what the latter looks like.

Having admitted that pre-signed withdrawal slips do not constitute the normal procedure with respect to
withdrawals by representatives should have already put petitioner PNB’s employees on guard. Rather than
readily validating and permitting said withdrawals, they should have proceeded more cautiously. Clearly,
petitioner bank’s employee, Lorenzo T. Bal, an Assistant Vice President at that, was exceedingly careless
in his treatment of respondent Pike’s savings account.

With banks, the degree of diligence required, contrary to the position of petitioner PNB, is more than that
of a good father of a family considering that the business of banking is imbued with public interest due to
the nature of their functions. The stability of banks largely depends on the confidence of the people in the
honesty and efficiency of banks. Thus, the law imposes on banks a high degree of obligation to treat the
accounts of its depositors with meticulous care, always having in mind the fiduciary nature of banking.

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 New 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 family. In
every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such
accounts consist only of a few hundred pesos or of millions of pesos.

BPI vs. Lifetime Marketing Corporation, GR No. 176434, June 25, 2008

“The highest degree of diligence is expected, and high standards of integrity and performance are required
of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of its relationship with them.”

Facts: Lifetime Marketing Corporation opened a current account with the Bank of the Philippine Islands. In
this account, the “sales agents” of LMC would have to deposit their collections or payments to the latter. As
a result, LMC and BPI, made a special arrangement that the former’s agents will accomplish three (3)
copies of the deposit slips, the third copy to be retained and held by the teller until LMC’s authorized
representatives, Mrs. Virginia Mongon and Mrs. Violeta Ancajas, shall retrieve them on the following
banking day.

LMC availed of the BPI’s inter-branch banking network services in Metro Manila, whereby the former’s
agents could make a deposit to any BPI branch in Metro Manila under the same account. Under this system,
BPI’s bank tellers were no longer obliged to retain the extra copy of the deposit slips instead, they will rely
on the machine-validated deposit slip, to be submitted by LMC’s agents. For its part, BPI would send to
LMC a monthly bank statement relating to the subject account.

Alice Laurel, one of LMC’s agents, deposited checks to LMC’s subject account at different branches of BPI.
Each check thus deposited were retrieved by Alice Laurel after the deposit slips were machine-validated,
except thirteen (13) checks, which bore no machine validation.

A verification with BPI by LMC showed that Alice Laurel made check deposits with the named BPI branches
and, after the check deposit slips were
Machine-validated, requested the teller to reverse the transactions. Based on general banking practices,
however, the cancellation of deposit or payment transactions upon request by any depositor or payor,
requires that all copies of the deposit slips must be retrieved or surrendered to the bank. This practice, in
effect, cancels the deposit or payment transaction, thus, it leaves no evidence for any subsequent claim or
misrepresentation made by any innocent third person. Notwithstanding this, the verbal requests of Alice
Laurel and her husband to reverse the deposits even after the deposit slips were already received and
consummated were accommodated by BPI tellers.
Alice Laurel presented the machine-validated deposit slips to LMC which, on the strength thereof,
considered her account paid. LMC even granted her certain privileges or prizes based on the deposits she
made. The above fraudulent transactions of Alice Laurel and her husband was made possible through BPI
teller’s failure to retrieve the duplicate original copies of the deposit slips from the former, every time they
ask for cancellation or reversal of the deposit or payment transaction.

Upon discovery of this fraud in early August 1992, LMC made queries from the BPI branches involved. In
reply to said queries, BPI branch managers formally admitted that they cancelled, without the permission
of or due notice to LMC, the deposit transactions made by Alice and her husband, and based only upon the
latter’s verbal request or representation. LMC filed a Complaint for Damages against BPI.

Ruling: In this case, both the trial court and the Court of Appeals found that the reversal of the transactions
in question was unilaterally undertaken by BPI’s tellers without following normal banking procedure which
requires them to ensure that all copies of the deposit slips are surrendered by the depositor. The machine-
validated deposit slips do not show that the transactions have been cancelled, leading LMC to rely on these
slips and to consider Alice Laurel’s account as already paid.

Negligence is the omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do. Negligence in this case lies in the tellers’ disregard of the validation
procedures in place and BPI’s utter failure to supervise its employees. Notably, BPI’s managers admitted
in several correspondences with LMC that the deposit transactions were cancelled without LMC’s
knowledge and consent and based only upon the request of Alice Laurel and her husband.

It is well to reiterate that the degree of diligence required of banks is more than that of a reasonable man
or a good father of a family. In view of the fiduciary nature of their relationship with their depositors, banks
are duty-bound to treat the accounts of their clients with the highest degree of care.

BPI cannot escape liability because of LMC’s failure to scrutinize the monthly statements sent to it by the
bank. This omission does not change the fact that were it not for the wanton and reckless negligence of
BPI’s tellers in failing to require the surrender of the machine-validated deposit slips before reversing the
deposit transactions, the loss would not have occurred. BPI’s negligence is undoubtedly the proximate
cause of the loss.

BPI vs. Casa Montessori Internationale, GR No. 149454, May 28, 2004

“A bank is bound to know the signatures of its customers, and if it pays a forged check, it must be considered
as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account
of the depositor whose name was forged.”

Facts: CASA Montessori International opened Current Account with defendant BPI, with CASA’s President
Ms. Ma. Carina C. Lebron as one of its authorized signatories.

After conducting an investigation, plaintiff discovered that nine (9) of its checks had been encashed by a
certain Sonny D. Santos. It turned out that ‘Sonny D. Santos’ with account at BPI’s Greenbelt Branch was
a fictitious name used by third party defendant Leonardo T. Yabut who worked as external auditor of CASA.
Third party defendant voluntarily admitted that he forged the signature of Ms. Lebron and encashed the
checks.
Plaintiff filed the herein Complaint for Collection with Damages against defendant bank.

Ruling: For allowing payment on the checks to a wrongful and fictitious payee, BPI—the drawee bank—
becomes liable to its depositor-drawer.

The Court have repeatedly emphasized that, since the banking business is impressed with public interest,
of paramount importance thereto is the trust and confidence of the public in general. Consequently, the
highest degree of diligence is expected, and high standards of integrity and performance are even required,
of it. By the nature of its functions, a bank is “under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their relationship.”

BPI contends that it has a signature verification procedure, in which checks are honored only when the
signatures therein are verified to be the same with or similar to the specimen signatures on the signature
cards. Nonetheless, it still failed to detect the eight instances of forgery. Its negligence consisted in the
omission of that degree of diligence required of a bank. It cannot now feign ignorance, for very early on we
have already ruled that a bank is “bound to know the signatures of its customers, and if it pays a forged
check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the
amount so paid to the account of the depositor whose name was forged.”

Pursuant to its prime duty to ascertain well the genuineness of the signatures of its client-depositors on
checks being encashed, BPI is “expected to use reasonable business prudence.” In the performance of
that obligation, it is bound by its internal banking rules and regulations that form part of the contract it enters
into with its depositors.

Unfortunately, it failed in that regard. First, Yabut was able to open a bank account in one of its branches
without privity, that is, without the proper verification of his corresponding identification papers. Second,
BPI was unable to discover early on not only this irregularity, but also the marked differences in the
signatures on the checks and those on the signature card. Third, despite the examination procedures it
conducted, the Central Verification Unit of the bank even passed off these evidently different signatures as
genuine. Without exercising the required prudence on its part, BPI accepted and encashed the eight checks
presented to it. As a result, it proximately contributed to the fraud and should be held primarily liable for the
“negligence of its officers or agents when acting within the course and scope of their employment.” It must
bear the loss.

Central Bank of the Philippines vs. Citytrust Banking Corporation, GR No. 141835, February 4,
2009

“The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a
good father of a family.”

Facts: Pursuant to Republic Act No. 625, the old Central Bank Law, respondent Citytrust Banking
Corporation (Citytrust), maintained a demand deposit account with petitioner Central Bank of the
Philippines, now Bangko Sentral ng Pilipinas.

Flores presented for payment to petitioner’s 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 Citytrust’s authorized signatorydrawers.

After the checks were certified by petitioner’s Accounting

Department, Iluminada verified them, prepared the cash transfer slip on which she affixed her signature,
stamped the checks with the notation “Received Payment” and asked Flores to, as he did, sign on the
space above such notation. Instead of signing his name, however, Flores signed as “Rosauro C. Cayabyab”
— a fact Iluminada failed to notice.

Iluminada thereupon sent the cash transfer slip and checks to petitioner’s Cash Department where an
officer verified and compared the drawers’ signatures on the checks against their specimen signatures
provided by Citytrust, and finding the same in order, approved the cash transfer slip and paid the
corresponding amounts to Flores. Petitioner then debited the amount of the checks totaling P1,750,000
from Citytrust’s demand deposit account. More than a year and nine months later, Citytrust, by letter,
alleging that the checks were already cancelled because they were stolen, demanded petitioner to restore
the amounts covered thereby to its demand deposit account. However, petitioner did not heed the demand.
Thus, Citytrust filed a complaint for recovery of sum of money with damages against petitioner.
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 (Citytrust’s) behalf for five years prior to the questioned
transaction.

Ruling: Petitioner’s teller Iluminada did not verify Flores’ signature on the flimsy excuse that Flores had
had previous transactions with it for a number of years. 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.

Citytrust’s failure to timely examine its account, cancel the checks and notify petitioner of their alleged
loss/theft should mitigate petitioner’s liability, in accordance with Article 2179 of the Civil Code which
provides that if the plaintiff’s negligence was only contributory, the immediate and proximate cause of the
injury being the defendant’s lack of due care, the plaintiff may recover damages, but the courts shall mitigate
the damages to be awarded. For had Citytrust timely discovered the loss/theft and/or subsequent
encashment, their proceeds or part thereof could have been recovered.