BANK POWERS AND LIABILITIES from the safety deposit box only upon both parties’ joint signatures

osit box only upon both parties’ joint signatures and

CA Agro-Industrial v. CA that no evident was submitted to reveal that the loss if the certificates
was due to the fraud or negligence of the Security Bank.
FACTS:
1. On July 3, 1979, CA-Agro and Sps. Pugao entered into a Sia v. CA
purchase agreement of 2 parcels of land. Among the terms
and conditions of the agreement were that the titles to the lots FACTS:
shall be transferred upon full payment, and that the owner’s 1. Sia rented a safety deposit box of Security Bank at its
copies of the TCR shall be deposited in a safety deposit box Binondo branch wherein he placed his collection of stamps.
of any bank (Security Bank). The same could only be The location of the boxes were at the bottom or at the lowest
withdrawn upon signature of both parties upon full payment. level of the column.
2. CA-Agro and Sps. Pugao rented safety deposit box of 2. During the floods, water entered into the bank and seeped
Security Bank signifying their agreement in a contract of into the safety deposit boxes, causing damage to Sia’s stamp
lease, with the following conditions: collection. He then claimed for compensation but was denied
“13. The bank is not a depositary of the contents by the bank. Hence, an action for damage was filed.
of the safe and it has neither the possession nor 3. Security bank claims that what was between them and Sia
control of the same. was a contract of lease and that the flooding was beyond their
control.
14. The bank has no interest whatsoever in said 4. RTC directed an ocular inspection. They found out that the
contents, except herein expressly provided, and it stamps were badly damaged. Thus, ruling in favor of Sia.
assumes absolutely no liability in connection 5. Upon appeal, CA, however, reversed the RTC decision. It
therewith.” ruled that the lease agreement constitutes terms and
conditions that were agreed by the parties. The said
3. Two renter’s key were given to the renters and a guard key provisions limited the exercise of diligence of the bank only
remained in the possession of the bank. The safety deposit to prevent the opening the box by any person other than the
bank has two keyholes—one can be unlocked only by the renter.
renter’s key and the other by the guard key. 6. Hence, this appeal before the SC.
4. Thereafter, Mrs. Ramos expressed her willingness to buy the
parcel of land. The renters went to the bank to get the title ISSUE: Whether or not Security bank can be held liable for the
but were surprised when the box yielded no such certificates. irreparable damage to the contents of the safety deposit box.
Mrs. Ramos withdrew her offer. Hence, the complaint of
CA-Agro against Security Bank. RULING: The court ruled on the basis of CA-Agro. However,
5. The RTC favored Security Bank on the basis of conditions declaring that the bank in this case failed to exercise the reasonable
#13 and #14 which extinguished its liability in the lost care and prudence expected of a good father of a family, thereby
contents of the safety deposit box. becoming a party to the aggravation of the injury or loss.
6. The CA affirmed RTC decision on the basis that
the Bank retained no right to open the said box DILIGENCE REQUIRED OF BANKS
because it had neither the possession nor control Simex v. CA
over it and its contents.
FACTS: Petitioner, a private corporation engaged in the exportation
ISSUE: Whether or not Security Bank can be held liable for the loss of food products, was a depositor maintaining a checking account with
of the contents of the safety deposit box. respondent Traders Royal Bank. Petitioner deposited to its account
increasing its balance and subsequently, issued several checks but was
RULING: The court ruled that the contract of the rent of safety deposit surprised to learn that it had been dishonored for insufficient funds. As
box in not an ordinary contract of lease. However, it does not subscribe a consequence, petitioner received demand letters from its suppliers
that it is a contract of deposit that must be strictly governed by the for the dishonored checks. Investigation disclosed that the deposit was
provisions of deposit in the Civil Code. It declared that the agreement not credited to it. The error was rectified and the dishonored checks
was a special kind of deposit. were consequently paid. Petitioner demanded reparation from
respondent bank for its gross and wanton negligence but the later did
It cannot be characterized as an ordinary contract of lease under Art. not heed. Petitioner then filed before the RTC which later held that
1643 because the full and absolute possession and control of the safety respondent bank was guilty of negligence but petitioner nonetheless
deposit box was not given to the joint renters. On the other hand, the was not entitled to moral damages. CA affirmed.
bank could not likewise open the box without the renter’s key. ISSUE: Whether or not petitioner is entitled to damages due to
respondent bank’s negligence.
The relation between a bank renting out safe deposit boxes and its
customer with respect to the contents of the box is that of a bailor and RULING: YES. As the Court sees it, the initial carelessness of the
bailee, the bailment being for hire and mutual benefit. respondent bank, aggravated by the lack of promptitude in repairing its
error, justifies the grant of moral damages. This rather lackadaisical
It is clear from Sec. 72 of the GBA that the bank performs such services attitude toward the complaining depositor constituted the gross
as depositaries. In relation to this, Art. 1306 of the Civil Code allows negligence, if not wanton bad faith, that the respondent court said had
the parties to stipulate on the terms for as long as it is not contrary to not been established by the petitioner. We shall recognize that the
law, morals, good customs, public order or public policy. Reviewing petitioner did suffer injury because of the private respondent’s
the words of conditions #13 and #14 would make it seem as an invalid negligence that caused the dishonor of the checks issued by it. The
provision. Hence, absent this two, the bank will be deemed liable. immediate consequence was that its prestige was impaired because of
the bouncing checks and confidence in it as a reliable debtor was
The court, however, ruled for the dismissal of the complaint because diminished.
although it was a special contract of deposit, petitioner failed to show
that respondent was aware of the agreement between the petitioner and The point is that as a business affected with public interest and because
Sps. Pugaos to the effect that the certificates of title were withdrawable of the nature of its functions, the bank is under obligation to treat the

Page 1 of 42
accounts of its depositors with meticulous care, always having in mind Diaz was a check that it had “long closed.” PBC
the fiduciary nature of their relationship. In the case at bar, it is obvious subsequently dishonored the check because of
that the respondent bank was remiss in that duty and violated that insufficient funds and because the signature in the
relationship. What is especially deplorable is that, having been check differed from PBC’s specimen signature.
informed of its error in not crediting the deposit in question to the 3. The following day, 15 August 1991, L.C. Diaz through its
petitioner, the respondent bank did not immediately correct it but did Chief Executive Officer, Diaz, called up Solidbank to stop
so only one week later or twenty-three days after the deposit was made. any transaction using the same passbook until L.C. Diaz
It bears repeating that the record does not contain any satisfactory could open a new account.
explanation of why the error was made in the first place and why it was a. On the same day, Diaz formally wrote Solidbank
not corrected immediately after its discovery. Such ineptness comes to make the same request. It was also on the same
under the concept of the wanton manner contemplated in the Civil day that L.C. Diaz learned of the unauthorized
Code that calls for the imposition of exemplary damages. withdrawal the day before, 14 August 1991, of
P300,000 from its savings account. The
Consolidated Bank v. CA withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C.
G.R. No. 138569. September 11, 2003.* Diaz, namely Diaz and Rustico L. Murillo. The
THE CONSOLIDATED BANK and TRUST CORPORATION, signatories, however, denied signing the
petitioner, vs. COURT OF APPEALS and L.C. DIAZ and withdrawal slip. A certain Noel Tamayo received
COMPANY, CPA’s, respondents. the P300,000.
4. In an Information dated 5 September 1991, L.C. Diaz
DOCTRINE: Bank tellers must exercise a high degree of diligence in charged its messenger, Ilagan and one Verdazola with Estafa
insuring that they return the passbook only to the depositor or to his through Falsification of Commercial Document.
authorized representative. a. The Regional Trial Court of Manila dismissed the
criminal case after the City Prosecutor filed a
FACTS: Motion to Dismiss on 4 August 1992.
1. On 14 August 1991, L.C. Diaz through its cashier, 5. On 24 August 1992, L.C. Diaz through its counsel demanded
Macaraya, filled up a savings (cash) deposit slip for P990 from Solidbank the return of its money.
and a savings (checks) deposit slip for P50. a. Solidbank refused.
a. Macaraya instructed the messenger of L.C. Diaz, 6. On 25 August 1992, L.C. Diaz filed a Complaint for
Calapre, to deposit the money with Solidbank. Recovery of a Sum of Money against Solidbank with the
Macaraya also gave Calapre the Solidbank RTC.
passbook. a. RTC dimissed the complaint and absolved
b. Calapre went to Solidbank and presented to Teller Solidbank
No. 6 the two deposit slips and the passbook. b. the trial court applied the rules on savings account
c. The teller acknowledged receipt of the deposit by written on the passbook. The rules state that
returning to Calapre the duplicate copies of the “possession of this book shall raise the
two deposit slips. Teller No. 6 stamped the deposit presumption of ownership and any payment or
slips with the words “DUPLICATE” and payments made by the bank upon the production
“SAVING TELLER 6 SOLIDBANK HEAD of the said book and entry therein of the
OFFICE.” withdrawal shall have the same effect as if made
d. Since the transaction took time and Calapre had to to the depositor personally.”
make another deposit for L.C. Diaz with Allied c. Another provision of the rules on savings account
Bank, he left the passbook with Solidbank. states that the depositor must keep the passbook
Calapre then went to Allied Bank. “under lock and key.” When another person
e. When Calapre returned to Solidbank to presents the passbook for withdrawal prior to
retrieve the passbook, Teller No. 6 informed Solidbank’s receipt of the notice of loss of the
him that “somebody got the passbook.” Calapre passbook, that person is considered as the owner
went back to L.C. Diaz and reported the incident of the passbook. The trial court ruled that the
to Macaraya. passbook presented during the questioned
2. Macaraya immediately prepared a deposit slip in duplicate transaction was “now out of the lock and key and
copies with a check of P200,000. presumptively ready for a business transaction.”
a. Macaraya, together with Calapre, went to d. At the time of the alleged unauthorized
Solidbank and presented to Teller No. 6 the withdrawal, a certain Tamayo was not only in
deposit slip and check. possession of the passbook, he also presented a
b. The teller stamped the words “DUPLICATE” and withdrawal slip with the signatures of the
“SAVING TELLER 6 SOLIDBANK HEAD authorized signatories of L.C. Diaz. The
OFFICE” on the duplicate copy of the deposit slip. specimen signatures of these persons were in the
c. When Macaraya asked for the passbook, Teller signature cards. The teller stamped the withdrawal
No. 6 told Macaraya that someone got the slip with the words “Saving Teller No. 5.”
passbook but she could not remember to whom she e. The teller then passed on the withdrawal slip to
gave the passbook. Manuel for authentication. Manuel verified the
d. When Macaraya asked Teller No. 6 if Calapre got signatures on the withdrawal slip. The withdrawal
the passbook, Teller No. 6 answered that someone slip was then given to another officer who
shorter than Calapre got the passbook. Calapre compared the signatures on the withdrawal slip
was then standing beside Macaraya. with the specimen on the signature cards.
e. Teller No. 6 handed to Macaraya a deposit slip f. The trial court concluded that Solidbank acted
dated 14 August 1991 for the deposit of a check with care and observed the rules on savings
for P90,000 drawn on Philippine Banking account when it allowed the withdrawal of
Corporation (“PBC”). This PBC check of L.C. P300,000 from the savings account of L.C. Diaz.

Page 2 of 42
 g. The trial court believed that Solidbank’s act of and its tellers an even higher degree of diligence in
allowing the withdrawal of P300,000 was not safeguarding the passbook.
the direct and proximate cause of the loss. The a. If the tellers give the passbook to the wrong
trial court held that L.C. Diaz’s negligence person, they would be clothing that person
caused the unauthorized withdrawal. Three presumptive ownership of the passbook,
facts establish L.C. Diaz’s negligence: (1) the facilitating unauthorized withdrawals by that
possession of the passbook by a person other person.
than the depositor L.C. Diaz; (2) the b. For failing to return the passbook to Calapre, the
presentation of a signed withdrawal receipt by authorized representative of L.C. Diaz, Solidbank
an unauthorized person; and (3) the possession and Teller No. 6 presumptively failed to observe
by an unauthorized person of a PBC check such high degree of diligence in safeguarding the
“long closed” by L.C. Diaz, which check was passbook, and in insuring its return to the party
deposited on the day of the fraudulent authorized to receive the same.
withdrawal. 3. In culpa contractual, once the plaintiff proves a breach of
7. LC Diaz appealed before the CA. contract, there is a presumption that the defendant was at
a. The CA reversed the RTC decision. fault or negligent. The burden is on the defendant to prove
b. The Court of Appeals ruled that Solidbank’s that he was not at fault or negligent.
negligence was the proximate cause of the a. In contrast, in culpa aquiliana the plaintiff has the
unauthorized withdrawal of P300,000 from the burden of proving that the defendant was
savings account of L.C. Diaz. negligent.
c. The appellate court stated that the teller, who was b. In the present case, L.C. Diaz has established that
not presented by Solidbank during trial, should Solidbank breached its contractual obligation to
have called up the depositor because the money to return the passbook only to the authorized
be withdrawn was a significant amount. Had the representative of L.C. Diaz. There is thus a
teller called up L.C. Diaz, Solidbank would have presumption that Solidbank was at fault and its
known that the withdrawal was unauthorized. The teller was negligent in not returning the passbook
teller did not even verify the identity of the to Calapre.
impostor who made the withdrawal. c. The burden was on Solidbank to prove that there
d. The appellate court ruled that while L.C. Diaz was was no negligence on its part or its employees.
also negligent in entrusting its deposits to its However, it failed to discharge its burden.
messenger and its messenger in leaving the 4. Solidbank is bound by the negligence of its employees under
passbook with the teller, Solidbank could not the principle of respondeat superior or command
escape liability because of the doctrine of “last responsibility.
clear chance.” Solidbank could have averted the a. The defense of exercising the required diligence in
injury suffered by L.C. Diaz had it called up L.C. the selection and supervision of employees is not
Diaz to verify the withdrawal. a complete defense in culpa contractual, unlike
e. The appellate court ruled that the degree of in culpa aquiliana.
diligence required from Solidbank is more than b. The bank must not only exercise “high standards
that of a good father of a family. The business of integrity and performance,” it must also insure
and functions of banks are affected with public that its employees do likewise because this is the
interest. Banks are obligated to treat the only way to insure that the bank will comply with
accounts of their depositors with meticulous its fiduciary duty. Solidbank failed to present the
care, always having in mind the fiduciary teller who had the duty to return to Calapre the
nature of their relationship with their clients. passbook, and thus failed to prove that this teller
The Court of Appeals found Solidbank remiss exercised the “high standards of integrity and
in its duty, violating its fiduciary relationship performance” required of Solidbank’s employees.
with L.C. Diaz. 5. Solidbank failed to fulfill its contractual obligation
f. Solidbank filed for a MR but was denied by CA. because it gave the passbook to another person.
8. Hence, this petition for review on certioriari a. L.C. Diaz was not at fault that the passbook landed
in the hands of the impostor.
ISSUE: Whether or not Solidbank should be held liable for the loss b. Solidbank was in possession of the passbook while
of its client LC Diaz. it was processing the deposit.
c. After completion of the transaction, Solidbank had
HELD: the contractual obligation to return the passbook
1. We hold that Solidbank is liable for breach of contract due only to Calapre, the authorized representative of
to negligence, or culpa contractual. L.C. Diaz.
a. The savings deposit agreement between the bank 6. The proximate cause of the unauthorized withdrawal
and the depositor is the contract that determines was Solidbank’s negligence in not returning the
the rights and obligations of the parties. passbook to Calapre.
b. This fiduciary relationship means that the bank’s a. We do not subscribe to the appellate court’s theory
obligation to observe “high standards of integrity that the proximate cause of the unauthorized
and performance” is deemed written into every withdrawal was the teller’s failure to call up L.C.
deposit agreement between a bank and its Diaz to verify the withdrawal.
depositor. The fiduciary nature of banking 7. Last clear chance: We do not apply the doctrine of last clear
requires banks to assume a degree of diligence chance to the present case.
higher than that of a good father of a family. a. Solidbank is liable for breach of contract due to
2. When the passbook is in the possession of Solidbank’s negligence in the performance of its contractual
tellers during withdrawals, the law imposes on Solidbank obligation to L.C. Diaz.

Page 3 of 42
 b. This is a case of culpa contractual, where neither after deducting the original value of the check in the amount
the contributory negligence of the plaintiff nor his of P1,000.00.
last clear chance to avoid the loss, would exonerate a. Such written demand notwithstanding,
the defendant from liability. Such contributory Metrobank still failed or refused to comply with
negligence or last clear chance by the plaintiff its obligation.
merely serves to reduce the recovery of damages 5. Cabilzo filed a civil action for damages against Metrobank
by the plaintiff but does not exculpate the before the RTC.
defendant from his breach of contract. a. For its part, Metrobank countered that upon the
8. WHEREFORE, the decision of the Court of Appeals is receipt of the said check through the PCHC on 14
AFFIRMED with MODIFICATION. Petitioner Solidbank November 1994, it examined the genuineness and
Corporation shall pay private respondent L.C. Diaz and the authenticity of the drawer’s signature
Company, CPA’s only 60% of the actual damages awarded appearing thereon and the technical entries on the
by the Court of Appeals. The remaining 40% of the actual check including the amount in figures and in
damages shall be borne by private respondent L.C. Diaz and words to determine if there were alterations,
Company, CPA’s. Proportionate costs. erasures, superimpositions or intercalations
thereon, but none was noted.
Metro Bank v. Cabilzo b. After verifying the authenticity and propriety of
the aforesaid entries, including the indorsement of
G.R. No. 154469. December 6, 2006.* the collecting bank located at the dorsal side of the
METROPOLITAN BANK AND TRUST COMPANY, check which stated that, "all prior indorsements
petitioner, vs. RENATO D. CABILZO, respondent. and lack of indorsement guaranteed," Metrobank
cleared the check.
DOCTRINE: The point is that as a business affected with public c. Anent thereto, Metrobank claimed that as a
interest and because of the nature of its functions, the bank is under collecting bank and the last indorser, Westmont
obligation to treat the accounts of its depositors with meticulous care, Bank should be held liable for the value of the
always having in mind the fiduciary nature of their relationship. check. Westmont Bank indorsed the check as the
an unqualified indorser, by virtue of which it
FACTS: assumed the liability of a general indorser, and
1. On 12 November 1994, Cabilzo issued a Metrobank thus, among others, warranted that the instrument
Check No. 985988, payable to "CASH" and postdated on 24 is genuine and in all respect what it purports to be.
November 1994 in the amount of P1,000.00. d. Metrobank also claims that the proximate cause of
a. The check was drawn against Cabilzo’s Account the loss is Cabilzo’s negligence in the preparation
with Metrobank and was paid by Cabilzo to a and issuance of checks with spaces that made the
certain Mr. Marquez, as his sales commission. fraudulent insertion of the amount and figures
b. Subsequently, the check was presented to possible.
Westmont Bank for payment. Westmont Bank, 6. RTC ordered Metrobank to pay the sum of P90,000.
in turn, indorsed the check to Metrobank for a. The court stressed the fiduciary nature of the
appropriate clearing. After the entries thereon relationship between the bank and its clients and
were examined, including the availability of funds the negligence of the drawee bank in failing to
and the authenticity of the signature of the drawer, detect an apparent alteration on the check.
Metrobank cleared the check for encashment in 7. Metrobank appealed to the CA, reiterating the it is Westmont
accordance with the Philippine Clearing House Bank that should be held liable.
Corporation (PCHC) Rules. a. Even more, Metrobank argued that in clearing the
2. On 16 November 1994, Cabilzo’s representative was at check, it was not remiss in the performance of its
Metrobank to make some transaction when he was asked by duty as the drawee bank, but rather, it exercised
a bank personnel if Cabilzo had issued a check in the amount the highest degree of diligence in accordance with
of P91,000.00 to which the former replied in the negative. the generally accepted banking practice.
a. On the afternoon of the same date, Cabilzo b. It further insisted that the entries in the check
himself called Metrobank to reiterate that he were regular and authentic and alteration
did not issue a check in the amount could not be determined even upon close
of P91,000.00 and requested that the examination.
questioned check be returned to him for 8. The CA affirmed the decision of RTC.
verification, to which Metrobank complied. a. Metrobank filed an MR but was also denied by
b. Upon receipt of the check, Cabilzo discovered CA.
that Metrobank Check No. 985988 which he
issued on 12 November 1994 in the amount ISSUE: Whether or not Metrobank is liable for the alterations on the
of P1,000.00 was altered to P91,000.00 and the check bearing the authentic signature of the drawer. YES.
date 24 November 1994 was changed to 14
November 1994. HELD:
3. Cabilzo demanded that Metrobank re-credit the amount 1. An alteration is said to be material if it changes the effect of
of P91,000.00 to his account. the instrument. It means that an unauthorized change in an
a. Metrobank, however, refused reasoning that it has instrument that purports to modify in any respect the
to refer the matter first to its Legal Division for obligation of a party or an unauthorized addition of words or
appropriate action. numbers or other change to an incomplete instrument
b. Repeated verbal demands followed but Metrobank relating to the obligation of a party.
still failed to re-credit the amount of P91,000.00 to a. In the case at bar, the check was altered so that the
Cabilzo’s account. amount was increased from P1,000.00
4. On 30 June 1995, Cabilzo, thru counsel, finally sent a letter- to P91,000.00 and the date was changed from 24
demand to Metrobank for the payment of P90,000.00, November 1994 to 14 November 1994.

Page 4 of 42
 Apparently, since the entries altered were among compared with the words "ONE THOUSAND
those enumerated under Section 1 and 125, PESOS ONLY." The letters of the word "NINETY"
namely, the sum of money payable and the date of are likewise a little bigger when compared with
the check, the instant controversy therefore the letters of the words "ONE THOUSAND
squarely falls within the purview of material PESOS ONLY".
alteration. c. Metrobank failed to detect the above
b. Section 124 of the NIL: Where a negotiable alterations which could not escape the attention
instrument is materially altered without the assent of even an ordinary person. This negligence was
of all parties liable thereon, it is avoided, except exacerbated by the fact that, as found by the trial
as against a party who has himself made, court, the check in question was examined by the
authorized, and assented to the cash custodian whose functions do not include the
alteration and subsequent indorsers. examinations of checks indorsed for payment
c. The degree of diligence required of a reasonable against drawer’s accounts. Obviously, the
man in the exercise of his tasks and the employee allowed by Metrobank to examine the
performance of his duties has been faithfully check was not verse and competent to handle such
complied with by Cabilzo. In fact, he was wary duty.
enough that he filled with asterisks the spaces d. we need to reiterate that by the very nature of their
between and after the amounts, not only those work the degree of responsibility, care and
stated in words, but also those in numerical trustworthiness expected of their employees and
figures, in order to prevent any fraudulent officials is far better than those of ordinary clerks
insertion, but unfortunately, the check was still and employees. Banks are expected to exercise the
successfully altered, indorsed by the collecting highest degree of diligence in the selection and
bank, and cleared by the drawee bank, and supervision of their employees.
encashed by the perpetrator of the fraud, to the 4. the bank on which the check is drawn, known as the drawee
damage and prejudice of Cabilzo. bank, is under strict liability to pay to the order of the payee
2. In every case, the depositor expects the bank to treat his in accordance with the drawer’s instructions as reflected on
account with the utmost fidelity, whether such account the face and by the terms of the check. Payment made under
consists only of a few hundred pesos or of millions. The bank materially altered instrument is not payment done in
must record every single transaction accurately, down to the accordance with the instruction of the drawer.
last centavo, and as promptly as possible. This has to be done 5. Metrobank failed to comply with the degree required by
if the account is to reflect at any given time the amount of the nature of its business as provided by law and
money the depositor can dispose of as he sees fit, confident jurisprudence.
that the bank will deliver it as and to whomever he directs. a. If indeed it was not remiss in its obligation, then it
a. The point is that as a business affected with public would be inconceivable for it not to detect an
interest and because of the nature of its functions, evident alteration considering its vast knowledge
the bank is under obligation to treat the accounts and technical expertise in the intricacies of the
of its depositors with meticulous care, always banking business.
having in mind the fiduciary nature of their b. Metrobank’s contention that it relied on the
relationship. The appropriate degree of diligence strength of collecting bank’s indorsement may be
required of a bank must be a high degree of merely a lame excuse to evade liability, or may be
diligence, if not the utmost diligence. indeed an actual banking practice. In either case,
3. In the present case, it is obvious that Metrobank was remiss such act constitutes a deplorable banking practice
in that duty and violated that relationship. and could not be allowed by this Court bearing in
a. As observed by the Court of Appeals, there are mind that the confidence of public in general is of
material alterations on the check that are visible to paramount importance in banking business.
the naked eye. c. What is even more deplorable is that, having been
b. x x x The number "1" in the date is clearly imposed informed of the alteration, Metrobank did not
on a white figure in the shape of the number "2". immediately re-credit the amount that was
The appellant’s employees who examined the said erroneously debited from Cabilzo’s account but
check should have likewise been put on guard as permitted a full blown litigation to push through,
to why at the end of the amount in words, i.e., after to the prejudice of its client.
the word "ONLY", there are 4 asterisks, while at 6. WHEREFORE, premises considered, the instant Petition
the beginning of the line or before said phrase, is DENIED. The Decision dated 8 March 2002 and the
there is none, even as 4 asterisks have been placed Resolution dated 26 July 2002 of the Court of Appeals
before and after the word "CASH" in the space for are AFFIRMED with modification that exemplary damages
payee. In addition, the 4 asterisks before the words in the amount of P50,000.00 be awarded. Costs against the
"ONE THOUSAND PESOS ONLY" have petitioner.
noticeably been erased with typing correction
paper, leaving white marks, over which the word PNB v. Pike
"NINETY" was superimposed. The same can be
said of the numeral "9" in the amount "91,000",
which is superimposed over a whitish mark, G.R. No. 157845. September 20, 2005.*
obviously an erasure, in lieu of the asterisk which PHILIPPINE NATIONAL BANK, petitioner, vs. NORMAN Y.
was deleted to insert the said figure. The PIKE, respondent.
appellant’s employees should have again noticed
why only 2 asterisks were placed before the DOCTRINE: It bears emphasizing that negligence of banking
amount in figures, while 3 asterisks were placed institutions should never be countenanced—though its employees may
after such amount. The word "NINETY" is also be the ones negligent, a bank’s liability as an obligor is not merely
typed differently and with a lighter ink, when

Page 5 of 42
vicarious but primary, as banks are expected to exercise the highest ISSUE: Whether or not PNB should be held responsible for the
degree of diligence in the selection and supervision of their employees. unauthorized withdrawals in the account of Pike.

FACTS: HELD:
1. Sometime in 1991, pike opened a US Dollar Savings 1. Finding no other alternative but to affirm their finding that
Account with PNB Buendia where he was issued a passbook. petitioner PNB negligently allowed the unauthorized
a. The complaint alleged that before Pike left for withdrawals subject of the case at bar, the instant petition for
Japan on March 18, 1993, he kept the passbook review must necessarily fail.
under lock and key in his home. 2. The negligence here lies in the lackadaisical attitude
2. On March 18, 1993, after his arrival in Japan, he discovered exhibited by employees of petitioner PNB in their
that some of his valuables were missing including the treatment of respondent Pike’s US Dollar Savings
passbook. Account that resulted in the unauthorized withdrawal of
a. He immediately reported the incident to the police $7,500.00.
which led to the arrest and prosecution of a certain a. Nevertheless, though its employees may be the
Davasol. ones negligent, a bank’s liability as an obligor is
b. Pike also discovered that Davasol made 2 not merely vicarious but primary, as banks are
unauthorized withdrawals from his account at the expected to exercise the highest degree of
PNB Buendia amounting to $7,500.00 diligence in the selection and supervision of their
c. He went to the bank to verbally protest the employees, and having such obligation, this Court
unauthorized withdrawals but PNB refused to cannot ignore the circumstances surrounding the
credit such amount claiming that it exercised due case at bar – how the employees of petitioner PNB
diligence in the handling of the said account. turned their heads, nay, closed their eyes to the
d. on 06 May 1993, complainant Pike wrote suspicious circumstances enfolding the two
defendant PNB simply to request that the hold- withdrawals subject of the case at bar.
account be lifted so that he may withdraw the b. It may even be said that they went out of their ways
remaining balance left in his U.S.$ Savings to disregard standard operating procedures
Account and nothing else. formulated to ensure the security of each and every
3. PNB claims that Pike, together with Davasol, went to see account that they are handling.
PNB AVP Val purposely to withdraw the amount of c. Petitioner PNB does not deny that the withdrawal
$2,000.00. slips used were in breach of standard operating
a. Pike also informed AVP Val that the he is leaving procedures of banks in the ordinary and usual
for Japan and made verbal instruction to honor all course of banking operations
withdrawals to be transmitted by his Talent d. Ordinarily, banks allow withdrawal by someone
Manager and Choreographer Davasol who shall who is not the account holder so long as the
present pre-signed withdrawal slips bearing Pike’s account holder authorizes his representative to
signatures. withdraw and receive from his account by signing
4. On April 19, 1993, Balmaceda, Pike’s sister, executed an on the space provided particularly for such
affidavit on the lost passbook. transactions, usually found at the back of
a. It was submitted to the police and a request to issue withdrawal slips.
a hold-order on the passbook was then submitted e. By his own testimony, the witness negated the
to PNB. very reason for the bank’s bizarre
b. Pike later on sent a letter requesting the lifting of "accommodation" of the alleged verbal request of
the hold-order so that he could withdraw the respondent Pike – that he was a "valued client."
remaining balance of the account. From the aforequoted, it appears that the
5. A demand letter was also sent to PNB for the recrediting of witness, Lorenzo Bal, was not even reasonably
the amount lost to Davasol’s unauthorozed withdrawals. familiar with respondent Pike, yet, he was
a. PNB replied that it cannot accede to such request ready, willing and able to accommodate
because it exercised due diligence of a good father the verbal request of said depositor. Worse still,
in the handling of the transaction. the witness still approved the withdrawal
b. Furthermore, it said that Pike’s withdrawal of the transaction without asking for any proof of
remaining balance effectively estops him from identification for the reason that: 1) Davasol was
claiming the alleged unauthorized withdrawals. in possession of a pre-signed withdrawal slip; and
6. RTC rendered a decision holding bank responsible for 2) the witness "recognized" the signature of
the unauthorized withdrawals. respondent Pike – even after admitting that he did
a. The court compared the signatures in the not bother to counter check the signature on the
questioned withdrawal slips with the known slip with the specimen signature card of
signatures of the depositor and is convinced that respondent Pike and that he met respondent Pike
the signatures in the unauthorized withdrawal slips just once so that he cannot seem to recall what the
do not correspond to the true signatures of the latter looks like.
depositor. f. Clearly, petitioner bank’s employee, Lorenzo
7. On appeal, CA affirmed the RTC decision. T. Bal, an Assistant Vice President at that, was
a. The court cannot also understand why the bank did exceedingly careless in his treatment of
not require the correct, proper and the usual respondent Pike’s savings account.
procedure of requiring a depositor who is 3. From the foregoing, the evidence clearly showed that the
withdrawing the money through a representative petitioner bank did not exercise the degree of diligence
to fill up the back portion of the withdrawal slips, that it ought to have exercised in dealing with their
which form was issued by the bank itself. clients.
b. PNB filed a MR but was denied. a. With banks, the degree of diligence required,
8. Hence, this petition for review on certiorari. contrary to the position of petitioner PNB, is more

Page 6 of 42
 than that of a good father of a family considering were machine-validated, requested the teller to
that the business of banking is imbued with public reverse the transactions.
interest due to the nature of their functions. b. Based on general banking practices, however, the
b. The stability of banks largely depends on the cancellation of deposit or payment transactions
confidence of the people in the honesty and upon request by any depositor or payor, requires
efficiency of banks. that all copies of the deposit slips must be retrieved
c. Thus, the law imposes on banks a high degree of or surrendered to the bank. This practice, in effect,
obligation to treat the accounts of its depositors cancels the deposit or payment transaction, thus, it
with meticulous care, always having in mind the leaves no evidence for any subsequent claim or
fiduciary nature of banking. Section 2 of Republic misrepresentation made by any innocent third
Act No. 8791,25 which took effect on 13 June person.
2000, makes a categorical declaration that the c. Notwithstanding this, the verbal requests of
State recognizes the "fiduciary nature of banking Alice Laurel and her husband to reverse the
that requires high standards of integrity and deposits even after the deposit slips were
performance." already received and consummated were
accommodated by BPI tellers.
BPI v. Lifetime Marketing d. Laurel presented the machine-validated
deposit slips to LMC which considered her
G.R. No. 176434. June 25, 2008.* account paid.
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. e. LMC even granted her certain privileges or prizes
LIFETIME MARKETING CORPORATION, respondent. based on the deposits she made.
f. the total aggregate amount of Laurel’s deposit
DOCTRINE: The degree of diligence required of banks is more than slips was P2,767,594, and for which , LMC paid
that of a reasonable man or a good father of a family; In view of the Laurel the total sum of P560,726 by way of sales
fiduciary nature of their relationship with their depositors, banks are discounts and promo prizes.
duty-bound to treat the accounts of their clients with the highest degree 5. the fraudulent transactions of Laurel and her husband was
of care. made possible through BPI teller’s failure to retrieve the
duplicate original copies of the deposit slips from the former,
FACTS: every time they ask for cancellation or reversal of the deposit
1. On October 22, 1981, LMC opened an account with BPI or payment transaction.
where its sales agents would deposit their collections or a. Upon discovery of this fraud in early August 1992,
payments to the former. LMC made queries from the BPI branches
a. LMC and BPI made a special arrangement that involved.
LMC’s agents will accomplishe 3 copies of the b. In reply to said queries, BPI branch managers
deposit slips. The 3rd copy to be retained and held formally admitted that they cancelled, without the
by the tellec until LMC’s authorized reps, Mongon permission of or due notice to LMC, the deposit
and Ancajas, shall retrieve them on the following transactions made by Alice and her husband, and
banking day. based only upon the latter's verbal request or
2. Sometime in 1986, LMC availed of BPI’s interbranch representation.
banking network services, whereby the former’s agents 6. LMC filed a complaint for Estafa against Laurel before the
could make a deposit to any BPI branch in Metro Manila RTC.
under the same account. a. the case, however, was archived because summons
a. Under this system, BPI's bank tellers were no could not be served upon the spouses as they have
longer obliged to retain the extra copy of the absconded.
deposit slips instead, they will rely on the 7. LMC filed a claim for damages against BPI.
machine-validated deposit slip, to be submitted by a. RTC ruled in favor of LMC.
LMC's agents. 8. BPI filed an appeal before the CA.
b. For its part, BPI would send to LMC a monthly a. CA affirmed the decision of the RTC but increased
bank statement relating to the subject account. the award of actual damages to P2M.
This practice was observed and complied with by 9. Hence, this petition for review on certiorari.
the parties. a. BPI insists that LMC should have presented
3. As a business practice, the registered sales agents of LMC evidence to prove not only the amount of the
can get books from the latter on consignment basis, then they checks that were deposited and subsequently
would go directly to their clients to sell. reversed, but also the actual delivery of the books
a. These agents would then pay to LMC, 7 days after and the payment of "sales and promo prizes" to
they pick up all the books to be sold. Alice Laurel.
b. Since LMC have several agents, it required to b. Failing this, there was allegedly no basis for the
remit their payments through BPI, where LMC award of actual damages. Moreover, the actual
maintained its account. damages should not have been increased because
c. It has been LMC's practice to require its agents to the decision of the trial court became conclusive
present a validated deposit slip and, on that basis, as regards LMC when it did not appeal the said
LMC would issue to the latter an decision.
acknowledgement receipt. c. BPI further avers that LMC's negligence in
4. On various dates covering the period from May 1991 to considering the machine-validated check
August 1992, Laurel, a sales agent of LMC, deposited deposit slips as evidence of Alice Laurel's
checks to LMC’s account at different branches of BPI. payment was the proximate cause of its own
a. A verification with BPI by LMC showed that loss.
Alice Laurel made check deposits with the named d. Furthermore, LMC allegedly ignored the express
BPI branches and, after the check deposit slips notice indicated in its monthly bank statements

Page 7 of 42
 and consequently failed to check the accuracy of of its own funds, and cannot ordinarily charge the amount so paid to
the transactions reflected therein. the account of the depositor whose name was forged.

ISSUE: Whether BPI observed the highest degree of care in handling FACTS:
LMC's account. 1. On November 8, 1982, CASA Montessori opened an
account with BPI, with CASA’s President Lebron as one of
HELD: its authorized signatories.
1. In this case, both the trial court and the Court of Appeals 2. In 1991, after conducting an investigation, CASA discovered
found that the reversal of the transactions in question was that 9 of its checks had been encashed by a certain Santos in
unilaterally undertaken by BPI's tellers without following 1990 in the total amount of P782,000.
normal banking procedure which requires them to ensure a. It turned out that Santos was a fictitious name used
that all copies of the deposit slips are surrendered by the by third party defendant Yabut who worked as
depositor. The machine-validated deposit slips do not external auditor of CASA.
show that the transactions have been cancelled, leading b. Yabut admitted that he forged the signature of
LMC to rely on these slips and to consider Alice Laurel's Lebron and encashed the checks.
account as already paid. 3. On March 4, 1991, CASA filed a complaint for collection
2. Negligence is the omission to do something which a against BPI praying that the latter be ordered to reinstate the
reasonable man, guided by those considerations which amount of P782,500 in its account.
ordinarily regulate the conduct of human affairs, would do, a. RTC ruled in favor of CASA.
or the doing of something which a prudent and reasonable 4. Upon appeal, CA ruled that the loss should be apportioned
man would not do. between BPI and CASA.
a. Negligence in this case lies in the tellers' a. The appellate court took into account CASA’s
disregard of the validation procedures in place contributory negligence that resulted in the
and BPI's utter failure to supervise its undetected forgery.
employees. b. It then ordered Leonardo T. Yabut to reimburse
b. Notably, BPI's managers admitted in several BPI half the total amount claimed; and CASA, the
correspondences with LMC that the deposit other half.
transactions were cancelled without LMC's c. It also disallowed attorney’s fees and moral and
knowledge and consent and based only upon the exemplary damages.
request of Alice Laurel and her husband.
3. BPI cannot escape liability because of LMC's failure to ISSUE: Whether or not both BPI and CASA are negligent in the
scrutinize the monthly statements sent to it by the bank. unauthorized encashment of checks. BPI LANG!!!
a. This omission does not change the fact that were it
not for the wanton and reckless negligence of HELD:
BPI's tellers in failing to require the surrender of 1. Section 23 of NIL renders a forged signature as wholly
the machine-validated deposit slips before inoperative.
reversing the deposit transactions, the loss would a. Yabut admitted that he forged Lebron’s signature.
not have occurred. 2. Having established the forgery of the drawer’s signature,
b. BPI's negligence is undoubtedly the proximate BPI—the drawee—erred in making payments by virtue
cause of the loss. Proximate cause is that cause thereof. The forged signatures are wholly inoperative, and
which, in a natural and continuous sequence, CASA—the drawer whose authorized signatures do not
unbroken by any efficient intervening cause, appear on the negotiable instruments—cannot be held liable
produces the injury, and without which the result thereon. Neither is the latter precluded from setting up
would not have occurred. forgery as a real defense.
4. It is also true, however, that LMC should have been more a. BPI contends that it has a signature verification
vigilant in managing and overseeing its own financial procedure, in which checks are honored only when
affairs. The damages awarded to it were correctly reduced the signatures therein are verified to be the same
on account of its own contributory negligence in accordance with or similar to the specimen signatures on the
with Article 1172 of the Civil Code. signature cards.
b. Nonetheless, it still failed to detect the eight
instances of forgery. Its negligence consisted in
BPI v. Casa Montessori the omission of that degree of diligence
required78 of a bank.
c. It cannot now feign ignorance, for very early on
G.R. No. 149454. May 28, 2004.* we have already ruled that a bank is "bound to
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA know the signatures of its customers; and if it pays
MONTESSORI INTERNATIONALE and LEONARDO T. a forged check, it must be considered as making
YABUT, respondents. the payment out of its own funds, and cannot
G.R. No. 149507. May 28, 2004.* ordinarily charge the amount so paid to the
CASA MONTESSORI INTERNATIONALE, account of the depositor whose name was forged."
petitioner, vs. BANK OF THE PHILIPPINE ISLANDS, d. In fact, BPI was the same bank involved when we
respondents. issued this ruling seventy years ago.
3. Neither Waiver nor Estoppel Results from Failure to
DOCTRINE: Since the banking business is impressed with public Report Error in Bank Statement: This notice is a simple
interest, of paramount importance thereto is the trust and confidence confirmation or "circularization" -- in accounting parlance -
of the public in general—the highest degree of diligence is expected, - that requests client-depositors to affirm the accuracy of
and high standards of integrity and performance are even required of items recorded by the banks.
it; A bank is bound to know the signatures of its customers, and if it
pays a forged check, it must be considered as making the payment out

Page 8 of 42
 a. Its purpose is to obtain from the depositors a direct CENTRAL BANK OF THE PHILIPPINES, petitioner, vs.
corroboration of the correctness of their account CITYTRUST BANKING CORPORATION, respondent.
balances with their respective banks.
b. Internal or external auditors of a bank use it as a DOCTRINE: The bank is under obligation to treat the accounts of its
basic audit procedure -- the results of which its depositors with meticulous care, always having in mind the fiduciary
client-depositors are neither interested in nor privy nature of their relationship; The fiduciary nature of banking requires
to -- to test the details of transactions and balances banks to assume a degree of diligence higher than that of a good father
in the bank’s records. of a family.
c. Evidential matter obtained from independent
sources outside a bank only serves to provide FACTS:
greater assurance of reliability than that obtained 1. Pursuant to Republic Act No. 625, the old Central Bank Law,
solely within it for purposes of an audit of its own Citytrust, formerly Feati Bank, maintained a demand deposit
financial statements, not those of its client- account with petitioner Central Bank of the Philippines, now
depositors. Bangko Sentral ng Pilipinas.
d. BPI has no right to impose a condition 2. As required, Citytrust furnished petitioner with the names
unilaterally and thereafter consider failure to and corresponding signatures of five of its officers
meet such condition a waiver. Neither may authorized to sign checks and serve as drawers and indorsers
CASA renounce a right it has never possessed. for its account.
4. For allowing payment on the checks to a wrongful and a. It provided petitioner with the list and
fictitious payee, BPI -- the drawee bank -- becomes liable to corresponding signatures of its roving tellers
its depositor-drawer. authorized to withdraw, sign receipts and perform
a. Since the encashing bank is one of its other transactions on its behalf.
branches, BPI can easily go after it and hold it b. Petitioner later issued security identification cards
liable for reimbursement. to the roving tellers one of whom was Flores.
b. It "may not debit the drawer’s account and is not 3. On July 15, 1977, Flores presented for payment to
entitled to indemnification from the drawer." petitioner’s Senior Teller Iluminada 2 Citytrust checks of
c. Pursuant to its prime duty to ascertain well the even date, payable to Citytrust, one in the amount of
genuineness of the signatures of its client- ₱850,000 and the other in the amount of ₱900,000, both of
depositors on checks being encashed, BPI is which were signed and indorsed by Citytrust’s authorized
"expected to use reasonable business signatory-drawers.
prudence."108 In the performance of that a. After the checks were certified by CB’s
obligation, it is bound by its internal banking rules Accounting Department, Iluminada verified them,
and regulations that form part of the contract it prepared the cash transfer slip on which she
enters into with its depositors. affixed her signature, stamped the checks with the
5. Unfortunately, BPI failed in that regard. notation "Received Payment" and asked Flores to,
a. First, Yabut was able to open a bank account in as he did, sign on the space above such notation.
one of its branches without privity;110 that is, b. Instead of signing his name, however, Flores
without the proper verification of his signed as "Rosauro C. Cayabyab" – a fact
corresponding identification papers. Iluminada failed to notice.
b. Second, BPI was unable to discover early on not c. Iluminada thereupon sent the cash transfer slip and
only this irregularity, but also the marked checks to petitioner’s Cash Department where an
differences in the signatures on the checks and officer verified and compared the drawers’
those on the signature card. signatures on the checks against their specimen
c. Third, despite the examination procedures it signatures provided by Citytrust, and finding the
conducted, the Central Verification Unit111of the same in order, approved the cash transfer slip and
bank even passed off these evidently different paid the corresponding amounts to Flores.
signatures as genuine. d. CB then debited the amount of the checks totaling
d. Without exercising the required prudence on its ₱1,750,000 from Citytrust’s demand deposit
part, BPI accepted and encashed the eight checks account.
presented to it. 4. More than a year and nine months later, Citytrust, by letter
e. As a result, it proximately contributed to the fraud dated April 23, 1979, alleging that the checks were already
and should be held primarily liable112 for the cancelled because they were stolen, demanded petitioner to
"negligence of its officers or agents when acting restore the amounts covered thereby to its demand deposit
within the course and scope of their account.
employment."113 a. Petitioner did not heed the demand, however.
f. BPI must bear the loss. 5. Citytrust later filed a complaint for estafa, with reservation
on the filing of a separate civil action, against Flores. Flores
6. In this jurisdiction, the negligence of the party invoking was convicted.
forgery is recognized as an exception114 to the general rule 6. Citytrust thereafter filed before the RTC of Manila a
that a forged signature is wholly inoperative.115 complaint for recovery of sum of money with damages
a. Contrary to BPI’s claim, however, we do not find against petitioner which it alleged erred in encashing the
CASA negligent in handling its financial affairs. checks and in charging the proceeds thereof to its account,
b. CASA, we stress, is not precluded from setting up despite the lack of authority of "Rosauro C. Cayabyab."
forgery as a real defense a. RTC Manila found both Citytrust and petitioner
negligent and accordingly held them equally
liable for the loss.
Central Bank v. Citytrust Bank 7. Both parties appealed before the CA.
G.R. No. 141835. February 4, 2009.* a. CA affirmed the RTC decision.

Page 9 of 42
 b. the appellate court noted that while "Citytrust
failed to take adequate precautionary measures to PBCom v. CA
prevent the fraudulent encashment of its checks,"
petitioner was not entirely blame-free in light of its G.R. No. 97626. March 14, 1997.*
failure to verify the signature of Citytrust’s agent PHILIPPINE BANK OF COMMERCE, now absorbed by
authorized to receive payment. PHILIPPINE COMMERCIAL INTERNATIONAL BANK,
8. Hence, this appeal. ROGELIO LACSON, DIGNA DE LEON, MARIA ANGELITA
a. CB maintains that Flores, having been an PASCUAL, et al., petitioners, vs. THE COURT OF APPEALS,
authorized roving teller, Citytrust is bound by his ROMMEL’S MARKETING CORP., represented by ROMEO
acts. LIPANA, its President & General Manager, respondents.
b. Also maintaining that it was not negligent in
releasing the proceeds of the checks to Flores, the DOCTRINE: A blunder on the part of the bank, such as the failure to
failure of its teller to properly verify his signature duly credit him his deposits as soon as they are made, can cause the
notwithstanding, petitioner contends that depositor not a little embarrassment if not financial loss and perhaps
verification could be dispensed with, Flores even civil and criminal litigation.
having been known to be an authorized roving
teller of Citytrust who had had numerous FACTS:
transactions with it (petitioner) on its (Citytrust’s) 1. RMC, represented by its president and GM Lipana, filed a
behalf for five years prior to the questioned complaint to recover from PBC, the sum of P309,979.74
transaction. representing various deposits it had made in its current
c. Drawing attention to Citytrust’s considerable account but which were not credited to its account, and were
delay in demanding the restoration of the proceeds instead deposited to the account of Cotas, allegedly due to
of the checks, petitioners argue that, assuming the gross and inexcusable negligence of the petitioner bank.
arguendo that its teller was negligent, Citytrust’s a. RMC maintained 2 separate accounts with PBC in
negligence, which preceded that committed by the connection with its business of selling appliances.
teller, was the proximate cause of the loss or fraud. b. In the ordinary and usual course of banking
operations, current account deposits are accepted
ISSUE: Whether or not Citytrust negligence is the proximate cause by the bank on the basis of deposit slips prepared
of the loss or fraud to its account. and signed by the depositor, or the latter's agent or
representative, who indicates therein the current
HELD: account number to which the deposit is to be
1. Petitioner’s teller Iluminada did not verify Flores’ signature credited, the name of the depositor or current
on the flimsy excuse that Flores had had previous account holder, the date of the deposit, and the
transactions with it for a number of years. amount of the deposit either in cash or checks.
a. That circumstance did not excuse the teller from c. The deposit slip has an upper portion or stub,
focusing attention to or at least glancing at Flores which is detached and given to the depositor or his
as he was signing, and to satisfy herself that the agent; the lower portion is retained by the bank.
signature he had just affixed matched that of his d. In some instances, however, the deposit slips are
specimen signature. prepared in duplicate by the depositor. The
b. Had she done that, she would have readily been original of the deposit slip is retained by the bank,
put on notice that Flores was affixing, not his but while the duplicate copy is returned or given to the
a fictitious signature depositor.
2. The law imposes on banks high standards in view of the 2. From May 5, 1975 to July 16, 1976, petitioner Romeo
fiduciary nature of banking. Section 2 of Republic Act No. Lipana claims to have entrusted RMC funds in the form of
8791 ("RA 8791"), which took effect on 13 June 2000, cash totalling P304,979.74 to his secretary, Yabut, for the
declares that the State recognizes the "fiduciary nature of purpose of depositing said funds in the current accounts of
banking that requires high standards of integrity and RMC with PBC.
performance." This new provision in the general banking a. It turned out, however, that these deposits, on all
law, introduced in 2000, is a statutory affirmation of occasions, were not credited to RMC's account but
Supreme Court decisions, starting with the 1990 case of were instead deposited to Account No. 53-01734-
Simex International v. Court of Appeals, holding that "the 7 of Yabut's husband, Bienvenido Cotas who
bank is under obligation to treat the accounts of its depositors likewise maintains an account with the same bank.
with meticulous care, always having in mind the fiduciary b. During this period, petitioner bank had, however,
nature of their relationship." been regularly furnishing private respondent with
3. Citytrust’s failure to timely examine its account, cancel the monthly statements showing its current accounts
checks and notify petitioner of their alleged loss/theft should balances.
mitigate petitioner’s liability, in accordance with Article c. Unfortunately, it had never been the practice of
2179 of the Civil Code which provides that if the plaintiff’s Romeo Lipana to check these monthly statements
negligence was only contributory, the immediate and of account reposing complete trust and confidence
proximate cause of the injury being the defendant’s lack of on petitioner bank.
due care, the plaintiff may recover damages, but the courts 3. Yabut’s modus operandi: She would accomplish 2 copies
shall mitigate the damages to be awarded. of the deposit slip, an original and a duplicate.
a. For had Citytrust timely discovered the loss/theft a. The original showed the name of her husband as
and/or subsequent encashment, their proceeds or depositor and his current account number.
part thereof could have been recovered. b. On the duplicate copy was written the account
4. In line with the ruling in Consolidated Bank, the Court number of her husband but the name of the account
deems it proper to allocate the loss between petitioner and holder was left blank.
Citytrust on a 60-40 ratio. c. PBC's teller, Azucena Mabayad, would,
however, validate and stamp both the original

Page 10 of 42
 and the duplicate of these deposit slips proper validation of deposit slips, original or
retaining only the original copy despite the lack duplicate, as testified to by Ms. Mabayad
of information on the duplicate slip. The second herself
copy was kept by Irene Yabut allegedly for record 4. Negligence here lies not only on the part of Ms. Mabayad
purposes. but also on the part of the bank itself in its lackadaisical
d. After validation, Yabut would then fill up the selection and supervision of Ms. Mabayad. This was
name of RMC in the space left blank in the exemplified in the testimony of Mr. Romeo Bonifacio, then
duplicate copy and change the account number Manager of the Pasig Branch of the petitioner bank and now
written thereon, which is that of her husband's, its Vice-President, to the effect that, while he ordered the
and make it appear to be RMC's account investigation of the incident, he never came to know that
number, i.e., C.A. No. 53-01980-3. blank deposit slips were validated in total disregard of the
e. With the daily remittance records also prepared by bank's validation procedures
Ms. Yabut and submitted to private respondent a. It was this negligence of Ms. Azucena Mabayad,
RMC together with the validated duplicate slips coupled by the negligence of the petitioner bank in
with the latter's name and account number, she the selection and supervision of its bank teller,
made her company believe that all the while the which was the proximate cause of the loss suffered
amounts she deposited were being credited to its by the private respondent, and not the latter's act
account when, in truth and in fact, they were being of entrusting cash to a dishonest employee, as
deposited by her and credited by the petitioner insisted by the petitioners.
bank in the account of Cotas. 5. In this case, absent the act of Ms. Mabayad in negligently
f. This went on in a span of more than one (1) year validating the incomplete duplicate copy of the deposit slip,
without private respondent's knowledge. Ms. Irene Yabut would not have the facility with which to
4. Upon discovery of the loss of its funds, RMC demanded perpetrate her fraudulent scheme with impunity.
from petitioner bank the return of its money, but as its 6. Furthermore, under the doctrine of "last clear chance"
demand went unheeded, it filed a collection suit before the (also referred to, at times as "supervening negligence" or as
RTC "discovered peril"), petitioner bank was indeed the culpable
a. RTC found PBC negligent party.
5. On appeal, CA affirmed the RTC decision. a. This doctrine, in essence, states that where both
6. Hence, this petition parties are negligent, but the negligent act of one
is appreciably later in time than that of the other,
ISSUE: Whether or not PBC should be held liable for the loss of LMC. or when it is impossible to determine whose fault
YESSSSSS or negligence should be attributed to the incident,
the one who had the last clear opportunity to avoid
HELD: the impending harm and failed to do so is
1. The proximate cause of the loss was the negligent act of the chargeable with the consequences thereof.
bank, thru its teller Mabayad, in validating the deposit slips, b. Here, assuming that private respondent RMC was
both original and duplicate, presented by Ms. Yabut to Ms. negligent in entrusting cash to a dishonest
Mabayad, notwithstanding the fact that one of the deposit employee, thus providing the latter with the
slips was not completely accomplished. opportunity to defraud the company, as advanced
2. There is no dispute as to the damage suffered by the RMC in by the petitioner, yet it cannot be denied that the
the amount of P304,979.74. It is in ascribing fault or petitioner bank, thru its teller, had the last clear
negligence which caused the damage where the parties point opportunity to avert the injury incurred by its
to each other as the culprit. client, simply by faithfully observing their self-
3. Negligence is the omission to do something which a imposed validation procedure.
reasonable man, guided by those considerations which 7. In the case of banks, however, the degree of diligence
ordinarily regulate the conduct of human affairs, would required is more than that of a good father of a family.
do, or the doing of something which a prudent and Considering the fiduciary nature of their relationship with
reasonable man would do. their depositors, banks are duty bound to treat the accounts
a. The seventy-eight (78)-year-old, yet still relevant, of their clients with the highest degree of care.
case of Picart v. Smith,8 provides the test by a. While it is true that had private respondent
which to determine the existence of negligence in checked the monthly statements of account sent by
a particular case which may be stated as follows: the petitioner bank to RMC, the latter would have
Did the defendant in doing the alleged negligent discovered the loss early on, such cannot be used
act use that reasonable care and caution which by the petitioners to escape liability.
an ordinarily prudent person would have used b. This omission on the part of the private
in the same situation? If not, then he is guilty of respondent does not change the fact that were
negligence. it not for the wanton and reckless negligence of
b. The law considers what would be reckless, the petitioners' employee in validating the
blameworthy, or negligent in the man of ordinary incomplete duplicate deposit slips presented by
intelligence and prudence and determines liability Ms. Irene Yabut, the loss would not have
by that. occurred.
c. Applying the above test, it appears that the c. Considering, however, that the fraud was
bank's teller, Ms. Azucena Mabayad, was committed in a span of more than one (1) year
negligent in validating, officially stamping and covering various deposits, common human
signing all the deposit slips prepared and experience dictates that the same would not have
presented by Ms. Yabut, despite the glaring been possible without any form of collusion
fact that the duplicate copy was not completely between Ms. Yabut and bank teller Mabayad. Ms.
accomplished contrary to the self-imposed Mabayad was negligent in the performance of her
procedure of the bank with respect to the duties as bank teller nonetheless.

Page 11 of 42
 d. Thus, the petitioners are entitled to claim No account held with Westpac. Meanwhile, on August 16, 1988,
reimbursement from her for whatever they shall be Westpac-New York sent a cable to respondent bank informing the
ordered to pay in this case. latter that its dollar account in the sum of One Thousand Six Hundred
8. The foregoing notwithstanding, it cannot be denied that, Ten Australian Dollars (AU$1,610.00) was debited. On August 19,
indeed, RMC was likewise negligent in not checking its 1988, in response to PRCIs complaint about the dishonor of the said
monthly statements of account. foreign exchange demand draft, respondent bank informed Westpac-
a. Had it done so, the company would have been Sydney of the issuance of the said demand draft FXDD No. 209968,
alerted to the series of frauds being committed drawn against the Westpac-Sydney and informing the latter to be
against RMC by its secretary. reimbursed from the respondent banks dollar account in Westpac-New
b. The damage would definitely not have ballooned York. The respondent bank on the same day likewise informed
to such an amount if only RMC, particularly Westpac-New York requesting the latter to honor the reimbursement
Romeo Lipana, had exercised even a little claim of Westpac-Sydney. On September 14, 1988, upon its second
vigilance in their financial affairs. presentment for payment, FXDD No. 209968 was again dishonored by
c. This omission by RMC amounts to contributory Westpac-Sydney for the same reason, that is, that the respondent bank
negligence which shall mitigate the damages that has no deposit dollar account with the drawee Westpac-Sydney.
may be awarded to the private respondent 23 under
Article 2179 of the New Civil Code On September 18, 1988, Gregorio presented the foreign
9. In view of this, we believe that the demands of substantial exchange draft at the registration desk of the racing conference in
justice are satisfied by allocating the damage on a 60-40 the presence of the other delegates in Sydney, Australia. He was
ratio. informed by the conference secretariat that he could not register
a. Thus, 40% of the damage awarded by the because the foreign exchange demand draft for his registration fee
respondent appellate court, except the award of had been dishonored for the second time. Same thing happened to
P25,000.00 attorney's fees, shall be borne by Consuelo when she tried to register at the racing conference. This
private respondent RMC; event caused unnecessary shock and social humiliation for the
b. only the balance of 60% needs to be paid by the petitioners. Thus, they filed a complaint for damages against the
petitioners. The award of attorney's fees shall be respondent bank.
borne exclusively by the petitioners.
RTC and CA rendered the decision in favour of the
Reyes v. CA respondent bank. Hence, this petition for certiorari commences.

ISSUE: WON the bank should have applied a higher degree of

G.R. No. 118492. August 15, 2001.* diligence, which is imposed by law upon banks, rather than the
GREGORIO H. REYES and CONSUELO PUYAT-REYES, standard of diligence of an ordinary prudent person
petitioners, vs. THE HON. COURT OF APPEALS and FAR
EAST BANK AND TRUST COMPANY, respondents. HELD: SC sustained the factual finding of the CA in which
respondent bank did not cause an erroneous transmittal of its
FACTS: Gregorio Reyes, the director and VP for Finance of the SWIFT cable message to Westpac-Sydney. It was the erroneous
Philippine Racing Club, Inc. (PRCI, for brevity) through Godofredo decoding of the cable message on the part of Westpac-Sydney that
Reyes applied a demand draft in the amount One Thousand Six caused the dishonor of the subject foreign exchange demand draft.
Hundred Ten Australian Dollars (AU$1,610.00) payable to the order An employee of Westpac-Sydney in Sydney, Australia mistakenly read
of the 20th Asian Racing Conference Secretariat of Sydney, Australia. the printed figures in the SWIFT cable message of respondent bank as
Godofredo was attended to by respondent banks assistant cashier, Mr. MT799 instead of as MT199. As a result, Westpac-Sydney construed
Yasis, who at first denied the application for the reason that respondent the said cable message as a format for a letter of credit, and not for a
bank did not have an Australian dollar account in any bank in Sydney. demand draft.
Godofredo asked if there could be a way for respondent bank to
accommodate PRCIs urgent need to remit Australian dollars to The evidence also shows that the respondent bank
Sydney. Yasis of respondent bank then informed Godofredo of a exercised that degree of diligence expected of an ordinary prudent
roundabout way of effecting the requested remittance to Sydney person under the circumstances obtaining. Prior to the first dishonor
thus: the respondent bank would draw a demand draft against of the subject foreign exchange demand draft, the respondent bank
Westpac Bank in Sydney, Australia (Westpac-Sydney for brevity) advised Westpac-New York to honor the reimbursement claim of
and have the latter reimburse itself from the U.S. dollar account of Westpac-Sydney and to debit the dollar account of respondent bank
the respondent in Westpac Bank in New York, U.S.A (Westpac- with the former. As soon as the demand draft was dishonored, the
New York for brevity). This arrangement has been customarily respondent bank, thinking that the problem was with the
resorted to since the 1960s and the procedure has proven to be reimbursement and without any idea that it was due to
problem-free. PRCI and the petitioner Gregorio H. Reyes, acting miscommunication, re-confirmed the authority of Westpac-New York
through Godofredo, agreed to this arrangement or approach in order to to debit its dollar account for the purpose of reimbursing Westpac-
effect the urgent transfer of Australian dollars payable to the Sydney. Respondent bank also sent two (2) more cable messages to
Secretariat of the 20th Asian Racing Conference. Westpac-New York inquiring why the demand draft was not honored.

On July 28, 1988, the respondent bank approved the said The respondent bank did not misrepresent that it was
application of PRCI and issued Foreign Exchange Demand Draft maintaining a deposit account with Westpac-Sydney and it had
(FXDD) No. 209968 in the sum applied for, that is, One Thousand Six explained how the transfer of Australian dollars would be effected
Hundred Ten Australian Dollars (AU$1,610.00), payable to the order through Westpac-New York where the respondent bank has a dollar
of the 20th Asian Racing Conference Secretariat of Sydney, Australia, account to Westpac-Sydney where the subject foreign exchange
and addressed to Westpac-Sydney as the drawee bank. demand draft (FXDD No. 209968) could be encashed by the payee, the
20th Asian Racing Conference Secretariat. Gregorio Reyes agreed to
On August 10, 1988, upon due presentment of the foreign the arrangement presented by the bank.
exchange demand draft, denominated as FXDD No. 209968, the same
was dishonored, with the notice of dishonor stating the following: xxx

Page 12 of 42
 Based on Philippine Bank of Commerce v. Court of Appeals, c. The bank said that it believes there has been no
the degree of diligence required of banks is more than that of a good damage as to Suarez because the return was
father of a family where the fiduciary* nature of their relationship with “DAIF” and not “DAUD”.
their depositors is concerned. In other words banks are duty bound to 6. BPI delivered Suarez the dishonored checks.
treat the deposit accounts of their depositors with the highest degree of a. Suarez, however, claims that the checks were
care. But the said ruling applies only to cases where banks act under tampered with, specifically for the reason of
their fiduciary capacity, that is, as depositary of the deposits of their dishonor, prompting him to send another letter
depositors. But the same higher degree of diligence is not expected to informing BPI of its act of falsification by making
be exerted by banks in commercial transactions that do not involve it appear that it marked the checks with “drawn
their fiduciary relationship with their depositors. Hence, the against uncollected deposit” and not “drawn
respondent bank is not required to exert more than the diligence of a against insufficient fund”
good father of a family in regard to the sale and issuance of the subject b. BPI reversed the penalty charges but denied his
foreign exchange demand draft. The relationship involved was that of claim of damages.
a buyer and seller, that is, between the respondent bank as the seller of 7. Suarez filed a complaint for damages before the Makati RTC
the subject foreign exchange demand draft, and PRCI as the buyer of a. RTC rendered judgment in favor of Suarez.
the same, with the 20th Asian Racing Conference Secretariat in Sydney, 8. BPI appealed before the CA
Australia as the payee thereof. The evidence shows that the respondent a. CA affirmed the RTC decision
bank did everything within its power to prevent the dishonor of the b. Filed MR was also denied.
subject foreign exchange demand draft. c. It ruled that there was negligence on BPI’s
handling of the account of Suarez. It dishonored
the check despite clearance from RCBC.
NATURE OF BANK FUNDS AND DEPOSITS d. Furthermore, it was also proven that defendant-
BPI v. Suarez appellant bank through its employee inadvertently
marked the dorsal sides of the checks as DAIF
FACTS: instead of DAUD. A closer look at the checks
1. In 1997, Atty. Surarez had a client who planned to purchase would indicate that intercalations were made
several parcels of land in Tagaytay City, but preferred not to marking the acronym DAIF thereon to appear as
deal directly with the land owners. DAUD. Although the intercalation was obvious in
a. Suarez transacted with the owners of the the ₱12 million check, still the fact that there was
properties, making it appear that he was the buyer intercalation made in the said check cannot be
of the lots. denied.
b. Suarez and his client made an arrangement that the e. A check dishonored for reasons of DAIF would
latter would deposit money in the lawyer’s BPI unduly expose herein plaintiff-appellee to
account and then he would be the one issuing criminal prosecution for violation of B.P. 22
checks to the sellers. while a check dishonored for reasons of DAUD
c. Hence, the client deposited an RCBC check with would not. Thus, it was erroneous on the part
the value of P19,129,100 in BPI Pasong Tamo of defendant-appellant bank to surmise that
branch to be credited in Suarez’s account in plaintiff-appellee would not suffer damages
Ermita. anyway for the dishonored checks for reasons
2. Aware of the banking system’s 3-day check clearing policy, of DAUD or DAIF because there was dishonor
Suarez instructed his secretary Garaygay to confirm from nonetheless.
BPI if the value of the deposited check was already credited 9. Hence, this petition for fore review.
to his account.
a. Garaygay confirmed that the check has already ISSUE: Whether or not BPI was negligent in handling the account of
been credited to Suarez’s account. Suarez.
b. Subsequently, Suarez issued 5 checks of different
amount totaling P19,129,100 for the payment of Whether or not erroneous marking of DAIF, instead of DAUD, give
the lots. rise to BPI’s liability for damages.
3. The next day, Suarez left for the US for a vacation.
a. However, Garaygay informed him that 5 of the HELD:
checks that he issued were dishonored by BPI for 1. Negligence is defined as "the omission to do something
insufficiency of funds and that his current account which a reasonable man, guided upon those considerations
has been debited P57,200 as penalty for the which ordinarily regulate the conduct of human affairs,
dishonor. would do, or the doing of something which a prudent man
b. This was despite the assurance given by RCBC to and reasonable man could not do."
Garaygay that the check was fully funded to the a. Based on the records, there is no sufficient
BPI account. evidence to show that BPI conclusively
4. the payees of the 5 BPI checks that Suarez issued presented confirmed the same-day crediting of the RCBC
the checks again since the RCBC check has been cleared. check which Suarez’s client deposited late on 16
a. The checks were honored by BPI. June 1997. Garaygay failed to substantiate such
5. Suarez sent a letter to BPI demanding an apology and the claim.
reversal of charges debited from his account. b. Moreover, a same-day clearing of a ₱19,129,100
a. A meeting was set but it did not transpire. check requires approval of designated bank
b. Hence, a letter was handed to Suarez explaining official or officials, and not any bank official can
that when the checks he issued against his account grant such approval.
were received by the bank for clearing, the checks c. BPI was not estopped from dishonoring the checks
were not yet cleared. for inadequacy of available funds in Suarez’s
account since the RCBC check remained
uncleared at that time.

Page 13 of 42
 2. Suarez had no credit or bill purchase line with BPI which indorsement itself, and ultimately should be held liable therefor is
would qualify him to the exceptions to the 3-day check when the issuance of the check itself was attended with negligence.
clearing policy.
a. Considering that there was no binding FACTS:
representation on BPI’s part as regards the same- 1. On September 21, 1983, FCC had deposited a money market
day crediting of the RCBC check, no negligence placement for P2M with Producers Bank.
can be ascribed to BPI’s dishonor of the checks a. Santos was the money market trader assigned to
precisely because BPI was justified in handle FCC’s account.
dishonoring the checks for lack of available b. When the placement matured on October 1983 and
funds in Suarez’s account. was rolled-over until December 5, 1983, FCC
3. However, BPI mistakenly marked the dishonored checks demanded the payment of the proceeds of the
with "drawn against insufficient funds (DAIF), " instead placement.
of "drawn against uncollected deposit (DAUD)." 2. Lim Sio Wan deposited with Allied a money market
DAUD DAIF placement of P1,152,597.35 for a term of 31 days to mature
the account has, on its face, sufficient funds but not a condition in which a on December 15, 1983, as evidenced by a provisional
yet available to the drawer because the deposit, depositor’s balance is
usually a check, had not yet been cleared inadequate for the bank to pay a receipt.
check a. 10 days before the maturity of the instrument, a
the depositor has, on its face, sufficient funds in his the depositor lacks sufficient person claiming to be Lim Sio Wan called up
account, although it is not available yet at the time funds in his account to pay the
the check was drawn check
Cristina So, an officer of Allied, and instructed the
does not expose the drawer to possible prosecution DAIF subjects the depositor to latter to pre-terminate Lim Sio Wan’s money
for estafa and violation of BP 22 liability for such offenses. market placement, to issue a manager’s check
representing the proceeds of the placement, and to
4. In the present case, Suarez failed to establish that his claimed give the check to one Deborah Dee Santos who
injury was proximately caused by the erroneous marking of would pick up the check.
DAIF on the checks. b. Lim Sio Wan described the appearance of Santos
a. There is nothing in Suarez’s testimony which so that the bank could easily identify her.
convincingly shows that the erroneous marking of c. Santos was issued a manager’s check in the name
DAIF on the checks proximately caused his of Lim Sio Wan, as payee. The check was cross-
alleged psychological or social injuries. checked “For Payee’s Account Only”.
b. Suarez merely testified that he suffered d. The Allied check was thereafter deposited in the
humiliation and that the prospective consolidation account of FCC at Metrobank with forged
of the titles to the Tagaytay properties did not signature of Lim Sio Wan as indorser.
materialize due to the dishonor of his checks, not 3. The Allied check was deposited with Metrobank in the
due to the erroneous marking of DAIF on his account of FCC as Producers Bank’s payment of its
checks. obligation to FCC.
c. Hence, Suarez had only himself to blame for his a. To clear the check and in compliance with the
hurt feelings and the unsuccessful transaction requirements of the PCHC Rules and Regulations,
with his client as these were directly caused by Metrobank stamped a guaranty on the check,
the justified dishonor of the checks. which reads: "All prior endorsements and/or lack
d. Suarez cannot recover compensatory damages of endorsement guaranteed."
for his own negligence. b. The check was sent to Allied through the PCHC.
5. While the erroneous marking of DAIF, which BPI belatedly c. Upon the presentment of the check, Allied funded
rectified, was not the proximate cause of Suarez’s claimed the check even without checking the authenticity
injury, the Court reminds BPI that its business is affected of Lim Sio Wan’s purported indorsement.
with public interest. d. Thus, the amount on the face of the check was
a. It must at all times maintain a high level of credited to the account of FCC.
meticulousness and should guard against injury 4. Lim Sio Wan deposited with Allied a second money market
attributable to negligence or bad faith on its part. placement to mature on January 9, 1984.
Suarez had a right to expect such high level of care 5. Upon the supposed maturity of the first money market
and diligence from BPI. placement, Lim Sio Wan went to Allied to withdraw it.
b. Thus, we award Suarez ₱75,000.00 nominal a. She was then informed that the placement has been
damages. pre-terminated upon her instruction.
6. No actual damage b. She denied giving such instructions.
7. Baka lang tanungin: The following are the conditions for the c. She desisted from further complaints when she
award of moral damages: (1) there is an injury — whether was assured by the bank’s manager that her money
physical, mental or psychological — clearly sustained by the would be recovered.
claimant; (2) the culpable act or omission is factually 6. When Lim Sio Wan’s second placement matured on January
established; (3) the wrongful act or omission of the 9, 1984, So called Lim Sio Wan to ask for the latter’s
defendant is the proximate cause of the injury sustained by instructions on the second placement.
the claimant; and (4) the award of damages is predicated on a. Lim Sio Wan instructed So to roll-over the
any of the cases stated in Article 221921 of the Civil Code. placement for another 30 days.
7. On January 24, 1984, Lim Sio Wan, realizing that the
promise that her money would be recovered would not
Allied Bank v. Lim Sio Wan materialize, sent a demand letter to Allied asking for the
payment of the first placement.
DOCTRINE: An exception to the rule that the collecting bank which a. Allied refused to pay Lim Sio Wan, claiming that
indorses a check bearing a forged indorsement and presents it to the the latter had authorized the pre-termination of the
drawee bank guarantees all prior indorsements, including the forged placement and its subsequent release to Santos.

Page 14 of 42
 8. Lim Sio Wan filed with the RTC a complaint to recover the a. Art. 1240 of the Code states that "payment shall be
proceeds of her first money market placement. made to the person in whose favor the obligation
a. Thereafter, she withdrew her second money has been constituted, or his successor in interest,
market placement. or any person authorized to receive it."
b. Allied filed a third-party complaint against b. As commented by Arturo Tolentino: Payment
Metrobank and Santos. made by the debtor to a wrong party does not
c. Metrobank filed a fourth-party complaint against extinguish the obligation as to the creditor, if
FCC. there is no fault or negligence which can be
d. FCC for its part filed a fifth-party complaint imputed to the latter. Even when the debtor acted
against Producers Bank. in utmost good faith and by mistake as to the
e. Summonses were duly served upon all the parties person of his creditor, or through error induced by
except for Santos, who was no longer connected the fraud of a third person, the payment to one who
with Producers Bank. is not in fact his creditor, or authorized to receive
9. More than 6 months after funding the check, Allied informed such payment, is void, except as provided in
Metrobank that the signature on the check was forged. Article 1241. Such payment does not prejudice the
a. Thus, Metrobank withheld the amount represented creditor, and accrual of interest is not suspended
by the check from FCC. by it. (Emphasis supplied.)
b. Later on, Metrobank agreed to release the 4. We cannot, however, say outright that Allied is solely liable
amount to FCC after the latter executed an to Lim Sio Wan.
Undertaking, promising to indemnify Metrobank a. Proximate cause is "that cause, which, in natural
in case it was made to reimburse the amount. and continuous sequence, unbroken by any
10. Lim Sio Wan thereafter filed an amended complaint to efficient intervening cause, produces the injury
include Metrobank as a party-defendant, along with Allied. and without which the result would not have
a. Allied’s third party complaint against Metrobank occurred." Thus, there is an efficient supervening
was converted into a cross-claim and the latter’s event if the event breaks the sequence leading
fourth party complaint against FCC was converted from the cause to the ultimate result. To
into a third party complaint. determine the proximate cause of a
11. The RTC ordered Allied to ay Lim Sio Wan with damages. controversy, the question that needs to be asked
Allied’s cross claim against Metrobank, Metrobank’s third- is: If the event did not happen, would the injury
party complaint against FCC, and FCC/s fourth-party have resulted? If the answer is NO, then the
complaint against Producer’s Bank were all dismissed. event is the proximate cause.
12. Upon Allied’s appeal, the CA modified the RTC decision. b. where the collecting bank is generally held liable,
a. Judgment is rendered ordering and sentencing in two of the cases where the checks were
defendant-appellant Allied Banking Corporation negligently issued, this Court held the institution
to pay sixty (60%) percent and defendant-appellee issuing the check just as liable as or more liable
Metropolitan Bank and Trust Company forty than the collecting bank.
(40%) of the amount of P1,158,648.49 plus 12% c. In isolated cases where the checks were deposited
interest per annum from March 16, 1984 until fully in an account other than that of the payees on the
paid. strength of forged indorsements, we held the
13. Hence, this petition for review on certiorari. collecting bank solely liable for the whole amount
of the checks involved for having indorsed the
ISSUE: same.
5. In the instant case, the trial court correctly found Allied
HELD: negligent in issuing the manager’s check and in transmitting
1. As to the liability of the parties, we find that Allied is liable it to Santos without even a written authorization.
to Lim Sio Wan. a. In fact, Allied did not even ask for the certificate
a. In Cebu International Finance Corporation v. evidencing the money market placement or call up
Court of Appeals, as follows: [A] money market is Lim Sio Wan at her residence or office to confirm
a market dealing in standardized short-term her instructions.
credit instruments (involving large amounts) b. Allied’s negligence must be considered as the
where lenders and borrowers do not deal directly proximate cause of the resulting loss.
with each other but through a middle man or dealer 6. Metrobank as an indorser: The liability of Allied,
in open market. In a money market transaction, the however, is concurrent with that of Metrobank as the last
investor is a lender who loans his money to a indorser of the check.
borrower through a middleman or dealer. a. When Metrobank indorsed the check in
2. In the case at bar, the money market transaction between the compliance with the PCHC Rules and Regulations
petitioner and the private respondent is in the nature of a loan without verifying the authenticity of Lim Sio
a. Lim Sio Wan, as creditor of the bank for her Wan’s indorsement and when it accepted the
money market placement, is entitled to payment check despite the fact that it was cross-checked
upon her request, or upon maturity of the payable to payee’s account only, its negligent and
placement, or until the bank is released from its cavalier indorsement contributed to the easier
obligation as debtor. release of Lim Sio Wan’s money and perpetuation
b. Until any such event, the obligation of Allied to of the fraud.
Lim Sio Wan remains unextinguished. b. Given the relative participation of Allied and
3. From the factual findings of the trial and appellate courts that Metrobank to the instant case, both banks cannot
Lim Sio Wan did not authorize the release of her money be adjudged as equally liable.
market placement to Santos and the bank had been negligent c. Hence, the 60:40 ratio of the liabilities of Allied
in so doing, there is no question that the obligation of Allied and Metrobank, as ruled by the CA, must be
to pay Lim Sio Wan had not been extinguished. upheld.

Page 15 of 42
 7. FCC, having no participation in the negotiation of the check client/depositor that the check deposited by him
and in the forgery of Lim Sio Wan’s indorsement, can raise had already been cleared and backed up by
the real defense of forgery as against both banks. sufficient funds but it could only presume that the
8. As to Producers Bank, Allied Bank’s argument that same has been honored by the drawee bank in view
Producers Bank must be held liable as employer of Santos of the lapse of time that ordinarily takes for a
under Art. 2180 of the Civil Code is erroneous. Art. 2180 check to be cleared.
pertains to the vicarious liability of an employer for quasi- d. Furthermore, on October 2, 1990, it gave notice to
delicts that an employee has committed. Such provision of the Tan as to the return of his UCPB check deposit
law does not apply to civil liability arising from delict. in the amount of P101,000.00, hence, on even
9. From the facts of the instant case, we see that Santos could date, Tan deposited the amount of P50,000.00 to
be the architect of the entire controversy. Unfortunately, cover the returned check.
since summons had not been served on Santos, the courts 5. The RTC ruled in favor of Tan and against Associated.
have not acquired jurisdiction over her.60 We, therefore, a. It ruled that Tan was not officially informed about
cannot ascribe to her liability in the instant case. the debiting of the P101,000 from his existing
10. Clearly, Producers Bank must be held liable to Allied and balance and that the bank merely allowed Tan to
Metrobank for the amount of the check plus 12% interest use the fund prior to clearing merely for
per annum, moral damages, attorney’s fees, and costs of accommodation because the bank considered him
suit which Allied and Metrobank are adjudged to pay as one of its valued clients.
Lim Sio Wan based on a proportion of 60:40. b. The trial court ruled that the bank manager was
negligent in handling the particular checking
account of Tan stating that such lapses caused all
Associated Bank v. Tan the inconveniences to the him.
DOCTRINE: While banks are granted by law the right to debit the 6. Associated appeal to the CA.
value of a dishonored check from a depositor’s account, they must do a. Affirming the trial court, the CA ruled that the
so with the highest degree of care, so as not to prejudice the depositor bank should not have authorized the
unduly. withdrawal of the value of the deposited check
prior to its clearing.
FACTS: b. Having done so, contrary to its obligation to treat
1. Tan is a businessman and a regular depositor-creditor of the respondent’s account with meticulous care, the
Associated Bank. bank violated its own policy. It thereby took upon
2. Sometime in September 1990, he deposited a UCPB PDC itself the obligation to officially inform respondent
with Associated Bank in the amount of P101,000 issued to of the status of his account before unilaterally
him by a certain Willy Cheng from Tarlac. debiting the amount of P101,000. Without such
a. The check was duly entered in his bank record notice, it is estopped from blaming him for failing
thereby making his balance in the amount to fund his account.
of P297,000.00, as of October 1, 1990, from his c. Thus, the supposed accommodation accorded by
original deposit of P196,000.00. petitioner to him is the proximate cause of his
b. Allegedly, upon advice and instruction of the business woes and shame, for which it is liable for
Associated Bank that the P101,000.00 check was damages.
already cleared and backed up by sufficient 7. Hence, this petition for review.
funds, TAN, on the same date, withdrew the sum
of P240,000.00, leaving a balance of P57,793.45. ISSUE: Whether or not the petitioner, which is acting as a collecting
c. A day after, TAN deposited the amount bank, has the right to debit the account of its client for a check deposit
of P50,000.00 making his existing balance in the which was dishonored by the drawee bank.
amount of P107,793.45, because he has issued
several checks to his business partners. HELD:
3. However, his suppliers and business partners went back to 1. A bank generally has a right of setoff over the deposits
him alleging that the checks he issued bounced for therein for the payment of any withdrawals on the part of a
insufficiency of funds. depositor.
a. Thereafter, TAN, thru his lawyer, informed the a. The right of a collecting bank to debit a client’s
BANK to take positive steps regarding the matter account for the value of a dishonored check that
for he has adequate and sufficient funds to pay the has previously been credited has fairly been
amount of the subject checks. established by jurisprudence.
b. Nonetheless, the BANK did not bother nor offer b. Article 1980 of the Civil Code provides that
any apology regarding the incident. "[f]ixed, savings, and current deposits of money in
4. Consequently, TAN, as plaintiff, filed a Complaint for banks and similar institutions shall be governed by
Damages on December 19, 1990, with the RTC of the provisions concerning simple loan."
Cabanatuan City, against the Associated, as defendant. c. The relationship between banks and depositors has
a. he alleged that he had sufficient funds to pay the been held to be that of creditor and debtor. Thus,
subject checks and alleged that his suppliers legal compensation under Article 1278 of the Civil
decreased in number for lack of trust. Code may take place “when all the requisites
b. He further claimed that he suffered mentioned in Article 1279 are present,” as follows:
embarrassment, humiliation, besmirched “(1) That each one of the obligors be bound
reputation, mental anxieties and sleepless nights principally, and that he be at the same time a
because of the said unfortunate incident. Also, he principal creditor of the other; (2) That both debts
continuously lost profits in the amount consist in a sum of money, or if the things due are
of P250,000.00. consumable, they be of the same kind, and also of
c. Associated Bank alleged that no banking the same quality if the latter has been stated; (3)
institution would give an assurance to any of its That the two debts be due; (4) That they be

Page 16 of 42
 liquidated and demandable; (5) That over neither BPI and encash the same. The three checks were deposited in three
of them there be any retention or controversy, different occasions over the span of eight months.
commenced by third persons and communicated in
due time to the debtor.” A year after the last encashment, Templonuevo protested the
2. Obligation as Depositary Bank: Under ordinary banking purportedly unauthorized encashments and demanded from BPI the
practice, after receiving a check deposit, a aggregate amount of the checks.
bank either immediately credit the amount to a depositor’s
account; or infuse value to that account only after the drawee BPI complied with Templonuevo’s demand.
bank shall have paid such amount.23Before the check shall
have been cleared for deposit, the collecting bank can only Since the money could no longer be debited from the account of
"assume" at its own risk -- as herein petitioner did -- that the Salazar where she deposited the checks, they froze her other account
check would be cleared and paid out. with them.
a. Reasonable business practice and prudence,
moreover, dictated that petitioner should not have Later on, BPI issued a cashier’s check in favor of Templonuevo for the
authorized the withdrawal by respondent aggregate amount and debited P267, 707.70 from Salazar’s account
of P240,000 on October 1, 1990, as this amount representing the aggregate amount and the bank charges for the
was over and above his outstanding cleared cashier’s check. Salazar filed a complaint against BPI.
balance of P196,793.45.24 Hence, the lower courts
correctly appreciated the evidence in his favor. Trial court ruled in favor of her which was affirmed by CA.
3. Obligation as collecting agent: In the past, we have
expressed doubt about the binding force of such conditions Hence, this petition.
unilaterally imposed by a bank without the consent of the
depositor.26 It is indeed arguable that "in signing the deposit ISSUE:
slip, the depositor does so only to identify himself and not to 1. Did BPI have the authority to unilaterally withdraw from
agree to the conditions set forth at the back of the deposit Salazar’s account the amount it has previously paid upon
slip." certain unendorsed order instrument?
a. As a general rule, a bank is liable for the
wrongful or tortuous acts and declarations of 2. Did BPI act judiciously in debiting Salazar’s account?
its officers or agents within the course and
scope of their employment. HELD:
b. Due to the very nature of their business, banks are 1. Yes. Records show that no prior arrangement existed
expected to exercise the highest degree of between Salazar and Templonuevo regarding the transfer of
diligence in the selection and supervision of their ownership of the checks. This fact is crucial as Salazar’s
employees. entitlement to the value of the instruments is based on the
c. Jurisprudence has established that the lack of assumption that she is a transferee within the contemplation
diligence of a servant is imputed to the negligence of Section 49 of the NIL.
of the employer, when the negligent or wrongful
act of the former proximately results in an injury Section 49 of the NIL contemplates a situation where the
to a third person; in this case, the depositor. payee or endorsee delivers a negotiable instrument for value
4. The manager of the bank’s Cabanatuan branch, Consorcia without endorsing it.
Santiago, categorically admitted that she and the employees
under her control had breached bank policies. The underlying premise of this provision, however, is that a
a. They admittedly breached those policies when, valid transfer of ownership of the negotiable instrument in
without clearance from the drawee bank in question has taken place.
Baguio, they allowed respondent to withdraw on
October 1, 1990, the amount of the check Transferees in this situation do not enjoy the presumption of
deposited. ownership in favor of holders since they are neither payees
b. Santiago testified that respondent "was not nor endorsees of such instruments.
officially informed about the debiting of
the P101,000 from his existing balance Mere possession of a negotiable instrument does not in itself
of P170,000 on October 2, 1990 x x x." conclusively establish either the right of the possessor to
c. Being the branch manager, Santiago clearly acted receive payment, or of the right of one who has made
within the scope of her authority in authorizing the payment to be discharged from liability. Something more
withdrawal and the subsequent debiting without than mere possession is necessary to authorize payment to
notice. such possessor.
The one-year delay of Templonuevo in asserting ownership
BPI v. CA over the checks is not enough to prove that there has a valid
DOCTRINE: If instruments payable to named payees or to their order transfer of ownership has taken place. Salazar failed to
have not been indorsed in blank, only such payees or their indorsees discharge the burden of presumption of ownership in
can be holders and entitled to receive payment in their own right. Templonuevo’s favor as the designated payee.

FACTS: Salazar had in her possession three crossed checks with an Thus, the return of the check proceeds to Templonuevo was
aggregate amount of P267, 692.50. These checks were payable to the therefore warranted. It is immaterial that the account debited
order of JRT Construction and Trading which was the name of by BPI was di fferent from the original account to which the
Templonuevo’s business. proceeds of the check were credited because both belonged
to Salazar anyway.
Despite lack of knowledge and endorsement of Templonuevo, Salazar 2. No. Solely upon the prompting of Templonuevo, BPI
was able to deposit the checks in her personal savings account with debited the account of Salazar without even serving due
notice upon her.

Page 17 of 42
 o Sebastian retained custody of Quiaoits’ savings
Consequently, this caused damage to Salazar such as having account passbook to preserve respondent Franco’s
checks she issued dishonored because she was not given deposits.
prior notice of the deduction from her account. As such, the  17 May 1990: Respondent Franco pre-terminated his time
award of damages must be sustained. deposit account.
o Petitioner BPI-FB deducted P63,189 from the
BPI Family Bank v. Franco remaining balance of the account representing
FACTS: advance interest paid to him.
 15 Aug 1989: Tevetesco Arrastre-Stevedoring Co., Inc.  Several cases have been filed and resolved pertaining to
opened a savings and current account with BPI-FB these transactions.
(petitioner)  PET FPI-FB’s refusal to heed RES Franco’s demand to
 25 Aug: First Metro Investment Corporation (FMIC) also unfreeze his accounts & release his deposits gave rise to the
opened a time deposit account w/ same branch of BPI-FB latter’s filing a case with Manila RTC.
(San Francisco del Monte) in a series of transactions  RTC
 31 Aug: Amado Franco (respondent) opened three (3) o Rendered judgment in favor of respondent Franco
accounts (current, savings, and time-deposit) w/ BPI-FB. ordering Petitioner BPI-FB to pay sums of money.
Total amount of P2M use to open these accounts is traceable  CA
to a check issued by Tevesteco allegedly in consideration of o Modified decision but Petitioner BPI-FB still to
respondent Franco’s introduction of Eladio Teves (looking pay interest deducted rom the time-deposit of
for a conduit bank to facilitate Tevetesco’s business Respondent Franco, damages, etc.
transactions) to Jaime Sebastian (BPI-FB’s Branch
Manager). The P2M is part of the P80M debited by BPI-FB ISSUE: Who has a better right to the deposits in respondent Franco’s
from FMCI’s time deposit account and credited to accounts? (FRANCO)
Tevetesco’s current account pursuant to an Authority to
Debit allegedly signed by FMCI’s officers w/c appears to be HELD: No doubt that petitioner BPI-FB owns the deposited monies
forged. in the accounts of respondent Franco, but not as a legal consequence
o Current: Initial deposit of P500k of its unauthorized transfer of FMIC’s deposits to Tevetesco’s account.
o Savings: Initial deposit of P500k o The deposit of money in banks is governed by the
o Time deposit: P1M w/ maturity date of 31 Aug Civil Code provisions on simple loan or mutuum.
1990 o As there is a debtor-creditor relationship between
 4 Sept: Antonio Ong, upon being shown the Authority to a bank and its depositor, petitioner FPI-FB
debit, personally declared his signature to be a forgery. ultimately acquired ownership of respondent
 Tevetesco already effected several withdrawals from its Franco’s deposits, but such ownership is coupled
current account amounting to P37,455,410.54 including the w/ a corresponding obligation to pay him an equal
P2M paid to respondent Franco. amount on demand. Although petitioner BPI-FB
 8 Sept: BPI-FB, through Senior VP Severino Cornamcion, owns the deposits, it cannot prevent respondent
instructed Jesus Arangorin to debit Franco’s savings & Franco from demanding payment of the former’s
current accounts for the amounts remaining therein but the obligation by drawing checks against his current
latter’s time deposit account couldn’t be debited due to account or asking for the released of the funds in
computer limitations. his savings account.
 2 checks drawn by Franco against BPI-FB current account  When respondent Franco issued checks drawn against his
were dishonored upon presentment for payment & stamped current account, he had every right as creditor to expect that
w/ notation account under garnishment. those checks would be honored by petitioner BPI-FB as
o Garnished by virtue of an Order of Attachment debtor.
issued by Makati RTC in a civil case filed by BPI-
FB against Franco, etc. to recover the
P37,455,410.54 (Tevetesco’s total withdrawals Consolidated Bank v. CA
from its account) DOCTRINE: Bank tellers must exercise a high degree of diligence in
o Dishonored checks were issued by respondent insuring that they return the passbook only to the depositor or to his
Franco & presented for payment at BPI-FB prior authorized representative.
to Franco’s receipt of notice of garnishment. At the
time the notice dated 27 Sept was served on BPI- FACTS:
FB, respondent Franco has yet to be impleaded in 9. On 14 August 1991, L.C. Diaz through its cashier,
said case where writ of attachment was issued. It Macaraya, filled up a savings (cash) deposit slip for P990
was only on 15 May 1990 that respondent Franco and a savings (checks) deposit slip for P50.
was impleaded. The attachment was subsequently a. Macaraya instructed the messenger of L.C. Diaz,
lifted however the funds were not released to Calapre, to deposit the money with Solidbank.
respondent Franco because petitioner BPI-FB Macaraya also gave Calapre the Solidbank
could not comply given that the money has already passbook.
been debited because of FMIC’s forgery claim. b. Calapre went to Solidbank and presented to Teller
petitioner BPI-FB’s computer that branch No. 6 the two deposit slips and the passbook.
indicated that the current account record was not c. The teller acknowledged receipt of the deposit by
on file. returning to Calapre the duplicate copies of the
 As to respondent Franco’s savings account he agreed to an two deposit slips. Teller No. 6 stamped the deposit
arrangement as a favor to Sebastian where P400K from said slips with the words “DUPLICATE” and
account was temporarily transferred to Domingo Quiaoits “SAVING TELLER 6 SOLIDBANK HEAD
savings account, subject to its immediate return upon OFFICE.”
issuance of a certificate of deposit which Quiaoit needed in d. Since the transaction took time and Calapre had to
connection with his visa application at the Taiwan Embassy. make another deposit for L.C. Diaz with Allied

Page 18 of 42
 Bank, he left the passbook with Solidbank. c. Another provision of the rules on savings account
Calapre then went to Allied Bank. states that the depositor must keep the passbook
e. When Calapre returned to Solidbank to “under lock and key.” When another person
retrieve the passbook, Teller No. 6 informed presents the passbook for withdrawal prior to
him that “somebody got the passbook.” Calapre Solidbank’s receipt of the notice of loss of the
went back to L.C. Diaz and reported the incident passbook, that person is considered as the owner
to Macaraya. of the passbook. The trial court ruled that the
10. Macaraya immediately prepared a deposit slip in duplicate passbook presented during the questioned
copies with a check of P200,000. transaction was “now out of the lock and key and
a. Macaraya, together with Calapre, went to presumptively ready for a business transaction.”
Solidbank and presented to Teller No. 6 the d. At the time of the alleged unauthorized
deposit slip and check. withdrawal, a certain Tamayo was not only in
b. The teller stamped the words “DUPLICATE” and possession of the passbook, he also presented a
“SAVING TELLER 6 SOLIDBANK HEAD withdrawal slip with the signatures of the
OFFICE” on the duplicate copy of the deposit slip. authorized signatories of L.C. Diaz. The
c. When Macaraya asked for the passbook, Teller specimen signatures of these persons were in the
No. 6 told Macaraya that someone got the signature cards. The teller stamped the withdrawal
passbook but she could not remember to whom she slip with the words “Saving Teller No. 5.”
gave the passbook. e. The teller then passed on the withdrawal slip to
d. When Macaraya asked Teller No. 6 if Calapre got Manuel for authentication. Manuel verified the
the passbook, Teller No. 6 answered that someone signatures on the withdrawal slip. The withdrawal
shorter than Calapre got the passbook. Calapre slip was then given to another officer who
was then standing beside Macaraya. compared the signatures on the withdrawal slip
e. Teller No. 6 handed to Macaraya a deposit slip with the specimen on the signature cards.
dated 14 August 1991 for the deposit of a check f. The trial court concluded that Solidbank acted
for P90,000 drawn on Philippine Banking with care and observed the rules on savings
Corporation (“PBC”). This PBC check of L.C. account when it allowed the withdrawal of
Diaz was a check that it had “long closed.” PBC P300,000 from the savings account of L.C. Diaz.
subsequently dishonored the check because of g. The trial court believed that Solidbank’s act of
insufficient funds and because the signature in the allowing the withdrawal of P300,000 was not
check differed from PBC’s specimen signature. the direct and proximate cause of the loss. The
11. The following day, 15 August 1991, L.C. Diaz through its trial court held that L.C. Diaz’s negligence
Chief Executive Officer, Diaz, called up Solidbank to stop caused the unauthorized withdrawal. Three
any transaction using the same passbook until L.C. Diaz facts establish L.C. Diaz’s negligence: (1) the
could open a new account. possession of the passbook by a person other
a. On the same day, Diaz formally wrote Solidbank than the depositor L.C. Diaz; (2) the
to make the same request. It was also on the same presentation of a signed withdrawal receipt by
day that L.C. Diaz learned of the unauthorized an unauthorized person; and (3) the possession
withdrawal the day before, 14 August 1991, of by an unauthorized person of a PBC check
P300,000 from its savings account. The “long closed” by L.C. Diaz, which check was
withdrawal slip for the P300,000 bore the deposited on the day of the fraudulent
signatures of the authorized signatories of L.C. withdrawal.
Diaz, namely Diaz and Rustico L. Murillo. The 15. LC Diaz appealed before the CA.
signatories, however, denied signing the a. The CA reversed the RTC decision.
withdrawal slip. A certain Noel Tamayo received b. The Court of Appeals ruled that Solidbank’s
the P300,000. negligence was the proximate cause of the
12. In an Information dated 5 September 1991, L.C. Diaz unauthorized withdrawal of P300,000 from the
charged its messenger, Ilagan and one Verdazola with Estafa savings account of L.C. Diaz.
through Falsification of Commercial Document. c. The appellate court stated that the teller, who was
a. The Regional Trial Court of Manila dismissed the not presented by Solidbank during trial, should
criminal case after the City Prosecutor filed a have called up the depositor because the money to
Motion to Dismiss on 4 August 1992. be withdrawn was a significant amount. Had the
13. On 24 August 1992, L.C. Diaz through its counsel demanded teller called up L.C. Diaz, Solidbank would have
from Solidbank the return of its money. known that the withdrawal was unauthorized. The
a. Solidbank refused. teller did not even verify the identity of the
14. On 25 August 1992, L.C. Diaz filed a Complaint for impostor who made the withdrawal.
Recovery of a Sum of Money against Solidbank with the d. The appellate court ruled that while L.C. Diaz was
RTC. also negligent in entrusting its deposits to its
a. RTC dimissed the complaint and absolved messenger and its messenger in leaving the
Solidbank passbook with the teller, Solidbank could not
b. the trial court applied the rules on savings account escape liability because of the doctrine of “last
written on the passbook. The rules state that clear chance.” Solidbank could have averted the
“possession of this book shall raise the injury suffered by L.C. Diaz had it called up L.C.
presumption of ownership and any payment or Diaz to verify the withdrawal.
payments made by the bank upon the production e. The appellate court ruled that the degree of
of the said book and entry therein of the diligence required from Solidbank is more than
withdrawal shall have the same effect as if made that of a good father of a family. The business
to the depositor personally.” and functions of banks are affected with public
interest. Banks are obligated to treat the

Page 19 of 42
 accounts of their depositors with meticulous teller who had the duty to return to Calapre the
care, always having in mind the fiduciary passbook, and thus failed to prove that this teller
nature of their relationship with their clients. exercised the “high standards of integrity and
The Court of Appeals found Solidbank remiss performance” required of Solidbank’s employees.
in its duty, violating its fiduciary relationship 13. Solidbank failed to fulfill its contractual obligation
with L.C. Diaz. because it gave the passbook to another person.
f. Solidbank filed for a MR but was denied by CA. a. L.C. Diaz was not at fault that the passbook landed
16. Hence, this petition for review on certioriari in the hands of the impostor.
b. Solidbank was in possession of the passbook while
ISSUE: Whether or not Solidbank should be held liable for the loss it was processing the deposit.
of its client LC Diaz. c. After completion of the transaction, Solidbank had
the contractual obligation to return the passbook
HELD: only to Calapre, the authorized representative of
9. We hold that Solidbank is liable for breach of contract due L.C. Diaz.
to negligence, or culpa contractual. 14. The proximate cause of the unauthorized withdrawal
a. The savings deposit agreement between the bank was Solidbank’s negligence in not returning the
and the depositor is the contract that determines passbook to Calapre.
the rights and obligations of the parties. a. We do not subscribe to the appellate court’s theory
b. This fiduciary relationship means that the bank’s that the proximate cause of the unauthorized
obligation to observe “high standards of integrity withdrawal was the teller’s failure to call up L.C.
and performance” is deemed written into every Diaz to verify the withdrawal.
deposit agreement between a bank and its 15. Last clear chance: We do not apply the doctrine of last clear
depositor. The fiduciary nature of banking chance to the present case.
requires banks to assume a degree of diligence a. Solidbank is liable for breach of contract due to
higher than that of a good father of a family. negligence in the performance of its contractual
10. When the passbook is in the possession of Solidbank’s obligation to L.C. Diaz.
tellers during withdrawals, the law imposes on Solidbank b. This is a case of culpa contractual, where neither
and its tellers an even higher degree of diligence in the contributory negligence of the plaintiff nor his
safeguarding the passbook. last clear chance to avoid the loss, would exonerate
a. If the tellers give the passbook to the wrong the defendant from liability. Such contributory
person, they would be clothing that person negligence or last clear chance by the plaintiff
presumptive ownership of the passbook, merely serves to reduce the recovery of damages
facilitating unauthorized withdrawals by that by the plaintiff but does not exculpate the
person. defendant from his breach of contract.
b. For failing to return the passbook to Calapre, the 16. WHEREFORE, the decision of the Court of Appeals is
authorized representative of L.C. Diaz, Solidbank AFFIRMED with MODIFICATION. Petitioner Solidbank
and Teller No. 6 presumptively failed to observe Corporation shall pay private respondent L.C. Diaz and
such high degree of diligence in safeguarding the Company, CPA’s only 60% of the actual damages awarded
passbook, and in insuring its return to the party by the Court of Appeals. The remaining 40% of the actual
authorized to receive the same. damages shall be borne by private respondent L.C. Diaz and
11. In culpa contractual, once the plaintiff proves a breach of Company, CPA’s. Proportionate costs.
contract, there is a presumption that the defendant was at
fault or negligent. The burden is on the defendant to prove Ursua v. CA
that he was not at fault or negligent. G.R. No. 112170. April 10, 1996.*
a. In contrast, in culpa aquiliana the plaintiff has the CESARIO URSUA, petitioner, vs. COURT OF APPEALS AND
burden of proving that the defendant was PEOPLE OF THE PHILIPPINES, respondents.
negligent.
b. In the present case, L.C. Diaz has established that DOCTRINE: The enactment of C.A. No. 142 as amended was made
Solidbank breached its contractual obligation to primarily to curb the common practice among the Chinese of adopting
return the passbook only to the authorized scores of different names and aliases which created tremendous
representative of L.C. Diaz. There is thus a confusion in the field of trade.
presumption that Solidbank was at fault and its
teller was negligent in not returning the passbook FACTS:
to Calapre. 1. Ursua was a Community Environment and Natural
c. The burden was on Solidbank to prove that there Resources Officer assigned in Kidapawan, Cotabato.
was no negligence on its part or its employees. a. On 9 May 1989, the Provincial Governor of
However, it failed to discharge its burden. Cotabato requested the Office of the Ombudsman
12. Solidbank is bound by the negligence of its employees under in Manila to conduct an investigation on a
the principle of respondeat superior or command complaint for bribery, dishonesty, abuse of
responsibility. authority and giving of unwarranted benefits by
a. The defense of exercising the required diligence in Ursua and other officials of the Department of
the selection and supervision of employees is not Environment and Natural Resources.
a complete defense in culpa contractual, unlike b. The complaint was initiated by the Sangguniang
in culpa aquiliana. Panlalawigan of Cotabato through a resolution
b. The bank must not only exercise “high standards advising the Governor to report the involvement of
of integrity and performance,” it must also insure petitioner and others in the illegal cutting of
that its employees do likewise because this is the mahogany trees and hauling of illegally-cut logs in
only way to insure that the bank will comply with the area.
its fiduciary duty. Solidbank failed to present the

Page 20 of 42
 2. Ursua’s counsel, Atty. Palmones wrote the Ombudsman for with which he was registered at birth in the office of the local
civil registry or with which he was baptized for the first time, or
the copy of the complaint. in case of all alien, with which he was registered in the bureau of
a. He asked Ursua to take his request to the office of immigration upon entry; or such substitute name as may have
the ombudsman because his messenger Perez had been authorized by a competent court: Provided, That persons
to attend some personal matters. whose births have not been registered in any local civil registry
and who have not been baptized, have one year from the approval
b. Before proceeding to the Office, Ursua talked to of this act within which to register their names in the civil registry
Perez and told him that he was reluctant to of their residence. The name shall comprise the patronymic name
personally ask for the document since he was one and one or two surnames.
of the parties in the case.
c. However, Perez advised him not to worry as Ursua Sec. 2. Any person desiring to use an alias shall apply for
could just sign Perez’ name if ever he would be authority therefor in proceedings like those legally provided to
obtain judicial authority for a change of name and no person shall
required to acknowledge the receipt of the be allowed to secure such judicial authority for more than
complaint. one alias. The petition for an alias shall set forth the person's
d. He wrote his name in the visitors’ logbook. baptismal and family name and the name recorded in the civil
registry, if different, his immigrant's name, if an alien, and his
e. Furthermore, he signed the acknowledgment pseudonym, if he has such names other than his original or real
receipt of the complaint using Perez’ name before name, specifying the reason or reasons for the desired alias. The
the Administrative Division Chief Kahulugan. judicial authority for the use of alias, the Christian name and the
3. Before petitioner could leave the premises he was greeted by alien immigrant's name shall be recorded in the proper local civil
registry, and no person shall use any name or names other than
an acquaintance, Josefa Amparo, who also worked in the his original or real name unless the same is or are duly recorded
same office. They conversed for a while then he left. in the proper local civil registry.
a. When Kahulugan learned that the person who
introduced himself as "Oscar Perez" was actually 2. For a bit of history, the enactment of C.A. No. 142 as
petitioner Cesario Ursua, a customer of Josefa amended was made primarily to curb the common practice
Amparo in her gasoline station, Kahulugan among the Chinese of adopting scores of different names
reported the matter to the Deputy Ombudsman and aliases which created tremendous confusion in the
who recommended that petitioner be accordingly field of trade.
charged. a. Such a practice almost bordered on the crime of
4. after the prosecution had completed the presentation of its using fictitious names which for obvious reasons
evidence, Ursua without leave of court filed a demurrer to could not be successfully maintained against the
evidence alleging that the failure of the prosecution to prove Chinese who, rightly or wrongly, claimed they
that his supposed alias was different from his registered possessed a thousand and one names.
name in the local civil registry was fatal to its cause. b. C.A. No. 142 thus penalized the act of using
Petitioner argued that no document from the local civil an alias name, unless such alias was duly
registry was presented to show the registered name of authorized by proper judicial proceedings and
accused which according to him was a condition sine qua recorded in the civil register.
non for the validity of his conviction. 3. Hence, the use of a fictitious name or a different name
a. The trial court rejected his contentions and found belonging to another person in a single instance without any
him guilty of violating Sec. 1 of C.A. No. 142 as sign or indication that the user intends to be known by this
amended by R.A. No. 6085. name in addition to his real name from that day forth does
5. Upon appeal to the CA, the RTC decision was affirmed. not fall within the prohibition contained in C.A. No. 142 as
6. Hence, this petition for review on certiorari. amended. This is so in the case at bench.
a. He contends that he has not violated C.A. No. 142 4. There is no question then that "Oscar Perez" is not
as amended by R.A. No. 6085 as he never used an alias name of petitioner.
any alias name; neither is "Oscar Perez" his alias. a. There is no evidence showing that he had used or
b. An alias, according to him, is a term which was intending to use that name as his second name
connotes the habitual use of another name by in addition to his real name. The use of the name
which a person is also known. "Oscar Perez" was made by petitioner in an
c. He claims that he has never been known as "Oscar isolated transaction where he was not even legally
Perez" and that he only used such name on one required to expose his real identity.
occasion and it was with the express consent of b. For, even if he had identified himself properly at
Oscar Perez himself. the Office of the Ombudsman, petitioner would
d. It is his position that an essential requirement for a still be able to get a copy of the complaint as a
conviction under C.A. No. 142 as amended by matter of right, and the Office of the Ombudsman
R.A. No. 6085 has not been complied with when could not refuse him because the complaint was
the prosecution failed to prove that his part of public records hence open to inspection and
supposed alias was different from his examination by anyone under the proper
registered name in the Registry of Births. circumstances.
e. He further argues that the Court of Appeals erred 5. While the act of petitioner may be covered by other
in not considering the defense theory that he was provisions of law, such does not constitute an offense within
charged under the wrong law. the concept of C.A. No. 142 as amended under which he is
prosecuted.
ISSUE: Whether or not Ursua should be charged for using Perez’ a. The confusion and fraud in business transactions
name. which the anti-alias law and its related statutes
seek to prevent are not present here as the
HELD: circumstances are peculiar and distinct from those
1. CA No. 142 provides: contemplated by the legislature in enacting C.A.
Sec. 1. Except as a pseudonym solely for literary, cinema,
television, radio or other entertainment purposes and in athletic No. 142 as amended. There exists a valid
events where the use of pseudonym is a normally accepted presumption that undesirable consequences were
practice, no person shall use any name different from the one never intended by a legislative measure and that a

Page 21 of 42
 construction of which the statute is fairly Estrada’s alleged representations with Ortaliza and Dichavez,
susceptible is favored, which will avoid all assuming the evidence for these representations to be admissible. All
objectionable, mischievous, indefensible, of Estrada’s representations to these people were made in privacy and
wrongful, evil and injurious in secrecy, with no iota of intention of publicity.
consequences. 12 Moreover, as C.A. No. 142 is a
penal statute, it should be construed strictly against Bank deposits under R.A. No. 1405 (the Secrecy of Bank Deposits
the State and in favor of the accused. 13 The reason Law) are statutorily protected or recognized zones of privacy. Given
for this principle is the tenderness of the law for the private nature of Estrada’s act of signing the documents as “Jose
the rights of individuals and the object is to Velarde” related to the opening of the trust account, the People cannot
establish a certain rule by conformity to which claim that there was already a public use of alias when Ocampo and
mankind would be safe, and the discretion of the Curato witnessed the signing. Petition was denied.
court limited. 14 Indeed, our mind cannot rest easy
on the proposition that petitioner should be
convicted on a law that does not clearly penalize STIPULATIONS ON INTEREST
the act done by him. Floirendo v. Metrobank
6. WHEREFORE, the questioned decision of the Court of G.R. No. 148325 September 3, 2007
Appeals affirming that of the Regional Trial Court of Davao REYNALDO P. FLOIRENDO, JR., petitioner,
City is REVERSED and SET ASIDE and petitioner vs.
CESARIO URSUA is ACQUITTED of the crime charged. METROPOLITAN BANK and TRUST COMPANY, respondent.

People v. Estrada DOCTRINE: Increases of interest rate unilaterally imposed by

FACTS: On April 4, 2001, an Information for plunder was filed with respondent bank without petitioner’s assent are violative of the
the Sandiganbayan against respondent Estrada, among other accused. principle of mutuality of contracts ordained in Article 1308 of the Civil
A separate Information for illegal use of alias, was likewise filed Code
against him. In the information, it was alleged that on or about 04
February 2000, in the City of Manila, then President Estrada without FACTS:
having been duly authorized, judicially or administratively, taking 1. Floreindo is the president and chairman of Reymill Realty
advantage of his position and committing the offense in relation to Corporation.
office, i.e., in order to CONCEAL THE ill-gotten wealth HE 2. Floirendo obtained a loan of P1M from Metrobank to infuse
ACQUIRED during his tenure and his true identity as THE President additional working capital for his company.
of the Republic of the Philippines, did then and there, willfully, a. as security for the loan, Floirendo executed a REM
unlawfully and criminally REPRESENT HIMSELF AS ‘JOSE in favor of Metrobank over his 4 parcels of land in
VELARDE’ IN SEVERAL TRANSACTIONS AND use and employ CDO.
the SAID alias “Jose Velarde” which IS neither his registered name at b. The loan was renewed for another year secured by
birth nor his baptismal name, in signing documents with Equitable PCI the same REM.
Bank and/or other corporate entities. c. Floirendo signed a PN fixing the rate of interest at
“15.446% per annum for the first 30 days, subject
Estrada was subsequently arrested on the basis of a warrant of arrest to upward/downward adjustment every 30 days
that the Sandiganbayan issued. A Special Division in the thereafter”; and a penalty charge of 18% per
Sandiganbayan was made to try, hear, and decide the charges of annum “based on any unpaid principal to be
plunder and related against respondent Estrada. At the trial, the People computed from date of default until payment of the
presented testimonial and documentary evidence to prove the obligation.”
allegations of the Informations for plunder, illegal use of alias, and d. The PN provides: “The rate of interest and/or bank charges
herein stipulated, during the term of this Promissory Note, its
perjury. extension, renewals or other modifications, may be increased,
decreased, or otherwise changed from time to time by the Bank
After the People rested in all three cases, the defense moved to be without advance notice to me/us in the event of changes in the
interest rate prescribed by law or the Monetary Board of the
allowed to file a demurrer to evidence in these cases. In its Joint Central Bank of the Philippines, in the rediscount rate of member
Resolution, the Sandiganbayan only granted the defense leave to file banks with the Central Bank of the Philippines, in the interest
demurrers in illegal use of alias and perjury. The Sandiganbayan ruled rates on savings and time deposits, in the interest rates on the
that the people failed to present evidence that proved Estrada’s bank’s borrowings, in the reserve requirements, or in the overall
costs of funding or money”
commission of the offense. 3. respondent bank started imposing higher interest rates on
petitioner’s loan which varied through the months, in fact, as
ISSUE: Whether the court a quo gravely erred and abused its
high as 30.244% in October 1997.
discretion in dismissing Crim. Case No. 26565 and in applying R.A.
a. As a result, petitioner could no longer pay the high
No. 1405 as an exception to the illegal use of alias punishable under interest rates charged by respondent bank. Thus,
Commonwealth Act No. 142 he negotiated for the renewal of his loan.
b. Respondent bank agreed provided petitioner
HELD: No. The Sandiganbayan position that the rule in the law of
would pay the arrears in interest amounting to the
libel – that mere communication to a third person is publicity – does
total sum of P163,138.33.
not apply to violations of CA No. 142. In order to be held liable for a 4. Despite payment by petitioner, respondent bank, instead of
violation of CA No. 142, the user of the alias must have held himself
renewing the loan, filed a petition for foreclosure of
out as a person who shall publicly be known under that other name. In
mortgage which was granted. Hence, the auction sale was
other words, the intent to publicly use the alias must be manifest. The
set.
presence of Lacquian and Chua when Estrada signed as Jose Velarde
5. Floirendo filed with the RTC a complaint for reformation of
and opened Trust Account No. C-163 does not necessarily indicate his
REM contract and PN.
intention to be publicly known henceforth as Jose Velarde. Thus,
a. Referring to the real estate mortgage and the
Estrada could not be said to have intended his signing as Jose Velarde
promissory note as "contracts of adhesion,"
to be for public consumption by the fact alone that Lacquian and Chua
petitioner alleged that the increased interest rates
were also inside the room at that time. The same holds true for

Page 22 of 42
 unilaterally imposed by respondent bank are & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable
trap for the weaker party whom the courts of justice must protect
scandalous, immoral, illegal and against abuse and imposition.
unconscionable.
b. He also alleged that the terms and conditions of the New we ruled that while it is true that escalation clauses are valid in
real estate mortgage and the promissory note are Sampaguita maintaining fiscal stability and retaining the value of money on
such that they could be interpreted by respondent Builders long term contracts, however, giving respondent an unbridled right
Construction, to adjust the interest independently and upwardly would
bank in whatever manner it wants, leaving Inc. (NSBCI) v. completely take away from petitioner the right to assent to an
petitioner at its mercy. Philippine important modification in their agreement, hence, would negate
6. The RTC issued a TRO and a writ of preliminary injunction1 National Bank the element of mutuality in their contracts. Such escalation clause
would make the fulfillment of the contracts dependent exclusively
7. Metrobank contends that the interest stipulated in the PN is upon the uncontrolled will of respondent bank and is therefore
not per annum but on a month to month basis. void. In the present case, the promissory note gives respondent
a. The 15.446% interest appearing therein was good bank authority to increase the interest rate at will during the term
only for the first 30 days of the loan, subject to of the loan. This stipulation violates the principle of mutuality
between the parties. It would be converting the loan agreement into
upward and downward adjustment every 30 days a contract of adhesion where the parties do not bargain on equal
thereafter. footing, the weaker party’s (petitioner’s) participation being
b. The terms of the real estate mortgage and reduced to the alternative "to take it or leave it. 9 While the Usury
Law ceiling on interest rate was lifted by Central Bank Circular
promissory note voluntarily entered into by No. 905, nothing therein could possibly be read as granting
petitioner are clear and unequivocal. respondent bank carte blanche authority to raise interest rate to
8. The RTC dismissed the complaint for reformation, dissolved levels which would either enslave its borrower (petitioner herein)
the writ of preliminary injunction, and directed the sale at or lead to hemorrhaging of his assets.
Philippine It is basic that there can be no contract in the true sense in the
public auction of the REM. National Bank absence of the element of agreement, or of mutual assent of the
a. Furthermore, the escalation clause was ruled valid. v. Court of parties. If this assent is wanting on the part of one who contracts,
b. MR was filed but was denied for lack of merit. Appeals his act has no more efficacy than if it had been done under duress
or by a person of unsound mind.
9. Hence, this petition for review on certiorari.

ISSUE: Whether or not the escalation clause is illegal, excessive, and Similarly, contract changes must be made with the consent of the
contracting parties. The minds of all the parties must meet as to the
arbitrary. proposed modification, especially when it affects an important
aspect of the agreement. In the case of loan contracts, it cannot be
HELD: gainsaid that the rate of interest is always a vital component, for it
1. We hold that the increases of interest rate unilaterally can make or break a capital venture. Thus, any change must
be mutually agreed upon, otherwise, it is bereft of any binding
imposed by respondent bank without petitioner’s assent are effect.
violative of the principle of mutuality of contracts ordained
in Article 1308 of the Civil Code2 We cannot countenance petitioner bank’s posturing that that
2. Any contract which appears to be heavily weighed in favor escalation clause at bench gives it unbridled right
of one of the parties so as to lead to an unconscionable result to unilaterally upwardly adjust the interest on private respondents’
is void. Any stipulation regarding the validity or compliance loan. That would completely take away from private respondents
the right to assent to an important modification in their agreement,
of the contract which is left solely to the will of one of the and would negate the element of mutuality in contracts.
parties is likewise invalid. 3. Under Article 1310 of the Civil Code, courts are granted
a. The provision in the promissory note authorizing authority to reduce/increase interest rates equitably
respondent bank to increase, decrease or otherwise a. Obviously, the rate increases are excessive and
change from time to time the rate of interest and/or arbitrary.
bank charges "without advance notice" to b. It bears reiterating that respondent bank
petitioner, "in the event of change in the interest unilaterally increased the interest rate without
rate prescribed by law or the Monetary Board of petitioner’s knowledge and consent.
the Central Bank of the Philippines," does not give 4. Floirendo negotiated for the renewal of his loan. As required
respondent bank unrestrained freedom to charge by respondent bank, he paid the interests due. Respondent
any rate other than that which was agreed upon. bank then could not claim that there was no attempt on his
b. Here, the monthly upward/downward adjustment part to comply with his obligation. Yet, respondent bank
of interest rate is left to the will of respondent bank hastily filed a petition to foreclose the mortgage to gain the
alone. upperhand in taking petitioner’s four (4) parcels of land at
c. It violates the essence of mutuality of the bargain prices. Obviously, respondent bank acted in bad
contract. faith.
5. In sum, we find that the requisites for reformation of the
Philippine In order that obligations arising from contracts may have the force mortgage contract and promissory note are present in this
National Bank of law between the parties, there must be mutuality between the case.
v. Court of parties based on their essential equality. A contract containing a
Appeals condition which makes its fulfillment dependent exclusively upon a. There has been meeting of minds of the parties
the uncontrolled will of one of the contracting parties, is void upon these documents.
(Garcia v. Rita Legarda, Inc., 21 SCRA 555). Hence, even b. However, these documents do not express the
assuming that the P1.8 million loan agreement between the PNB
and the private respondent gave the PNB a license (although in fact
parties’ true agreement on interest rates. And the
there was none) to increase the interest rate at will during the term failure of these documents to express their
of the loan, that license would have been null and void for being agreement on interest rates was due to respondent
violative of the principle of mutuality essential in contracts. It bank’s inequitable conduct.
would have invested the loan agreement with the character of a
contract of adhesion, where the parties do not bargain on equal 6. WHEREFORE, we GRANT the petition. The Judgment
footing, the weaker party’s (the debtor) participation being dated February 22, 2001 of the RTC of Cagayan de Oro City,
reduced to the alternative "to take it or leave it" (Qua v. Law Union Branch 39 in Civil Case No. 98-476 is REVERSED. The real

1 A preliminary injunction is an order granted at any stage of an action or proceeding prior to the
2
judgment or final order, requiring a party or a court, agency or a person to refrain from a particular Article 1308. The contract must bind both contracting parties; its validity or compliance cannot
act or acts. It may also require the performance of a particular act or acts, in which case it shall be left to the will of one of them.
be known as a preliminary mandatory injunction.

Page 23 of 42
 estate mortgage contract and the promissory note agreed Respondents were the highest bidders and
upon by the parties are reformed in the sense that any certificates of sale were issued to them.
increase in the interest rate beyond 15.446% per b. Equitable moved to annul the July 1, 2004 auction
annum should not be imposed by respondent bank without sale and to cite the sheriffs who conducted the sale
the consent of petitioner. The interest he paid in excess of in contempt for proceeding with the auction
15.446% should be applied to the payment of the principal despite the injunction order of the CA.
obligation. 5. The CA dismissed the petition for certiorari. It found
Equitable guilty of forum shopping because the bank filed
Equitable v. Ng Sheung Ngor its petition for certiorari in the CA several hours before
G.R. No. 171545 December 19, 2007 withdrawing its petition for relief in the RTC.
EQUITABLE PCI BANK,* AIMEE YU and BEJAN LIONEL a. Moreover, Equitable failed to disclose, both in the
APAS, Petitioners, statement of material dates and certificate of non-
vs. forum shopping (attached to its petition for
NG SHEUNG NGOR** doing business under the name and style certiorari in the CA), that it had a pending petition
"KEN MARKETING," KEN APPLIANCE DIVISION, INC. and for relief in the RTC.
BENJAMIN E. GO, Respondents. 6. Hence, this petition.

DOCTRINE: Escalation clauses are not void per se but one “which ISSUE:
grants the creditor an unbridled right to adjust the interest 1. Whether or not the PNs were valid.
independently and upwardly, completely depriving the debtor of the 2. Whether or not the escalation clause violated the principle of
right to assent to an important modification in the agreement” is mutuality of contracts.
void—clauses of that nature violate the principle of mutuality of
contracts HELD:
1. The RTC upheld the validity of the promissory notes
FACTS: despite respondents’ assertion that those documents were
1. Ng, Ken Appliance Division Inc., and Go filed an action for contracts of adhesion.
annulment and/or reformation of documents and contracts a. A contract of adhesion is a contract whereby
against Equitable and its employees Yu and Apas in the almost all of its provisions are drafted by one
RTC. party. The participation of the other party is
a. Petitioners claim that Equitable induced them to limited to affixing his signature or his "adhesion"
avail of its peso and dollar credit facilities by to the contract. For this reason, contracts of
offering low interest rates so they accepted the adhesion are strictly construed against the party
proposal and signed the bank’s pre-printed PN on who drafted it.
various dates. b. It is erroneous, however, to conclude that contracts
b. They, however, were unaware that the documents of adhesion are invalid per se. They are, on the
contained identical escalation clauses granting contrary, as binding as ordinary contracts. A party
the bank authority to increase interest rates is in reality free to accept or reject it. A contract
without their consent. of adhesion becomes void only when the
c. Equitable, in its answer, asserted that respondents dominant party takes advantage of the weakness
knowingly accepted all the terms and of the other party, completely depriving the latter
conditions contained in the promissory notes. In of the opportunity to bargain on equal footing.
fact, they continuously availed of and benefited c. if the terms and conditions offered by Equitable
from Equitable's credit facilities for five years. had been truly prejudicial to respondents, they
2. After trial, the RTC upheld the validity of the promissory would have walked out and negotiated with
notes. another bank at the first available instance. But
a. The trial court, however, invalidated the escalation they did not. Instead, they continuously availed of
clause contained therein because it violated the Equitable's credit facilities for five long years.
principle of mutuality of contracts. d. The SC, however, remanded the case for the
b. Nevertheless, it took judicial notice of the steep determination of the amount of actual damages.
depreciation of the peso during the intervening 2. Escalation clauses are not void per se.
period and declared the existence of extraordinary a. However, one "which grants the creditor an
deflation. unbridled right to adjust the interest
c. Consequently, the RTC ordered the use of the independently and upwardly, completely
1996 dollar exchange rate in computing depriving the debtor of the right to assent to an
respondents' dollar-denominated loans. important modification in the agreement" is
d. Lastly, because the business reputation of void. Clauses of that nature violate the principle of
respondents was (allegedly) severely damaged mutuality of contracts. Article 1308 of the Civil
when Equitable froze their accounts, the trial court Code holds that a contract must bind both
awarded moral and exemplary damages to them. contracting parties; its validity or compliance
3. Upon appeal, the RTC issued an omnibus order denying cannot be left to the will of one of them.
Equitable's motion for reconsideration for lack of merit and b. A valid escalation clause provides:
ordered the issuance of a writ of execution in favor of i. that the rate of interest will only be
respondents because the decision has become final and increased if the applicable maximum
executory. rate of interest is increased by law or by
4. the CA granted Equitable’s application for injunction. A writ the Monetary Board; and
of preliminary injunction was correspondingly issued. ii. that the stipulated rate of interest will be
a. Notwithstanding the writ of injunction, the reduced if the applicable maximum rate
properties of Equitable previously levied upon of interest is reduced by law or by the
were sold in a public auction on July 1, 2004. Monetary Board (de-escalation clause).

Page 24 of 42
 c. Equitable dictated the interest rates if the term (or supposedly barred the ministerial issuance of the
period for repayment) of the loan was extended. writ of possession.
Respondents had no choice but to accept them. 5. RTC denied the petition to cancel the writ of possession.
This was a violation of Article 1308 of the Civil 6. Via a petition for certiorari, CA affirmed the RTC ruling,
Code. Furthermore, the assailed escalation clause contending that the petition for cancellation was
did not contain the necessary provisions for prematurely filed.
validity, that is, it neither provided that the rate of a. The CA ruled that under Section 8 of Act No.
interest would be increased only if allowed by law 3135, a judgment debtor may file a petition for
or the Monetary Board, nor allowed de-escalation. cancellation of the writ of possession within 30
For these reasons, the escalation clause was void. days only after the purchaser has obtained
d. With regard to the proper rate of interest, in New possession of the property.
Sampaguita Builders v. Philippine National b. Although a writ of possession was issued, the
Bank we held that, because the escalation clause property remained in the possession of Aldanco as
was annulled, the principal amount of the loan was 680 Home’s lessee.
subject to the original or stipulated rate of interest. c. Since FSAMI did not obtain possession of the
Upon maturity, the amount due was subject to property, the 30-day period to file a petition to
legal interest at the rate of 12% per annum cancel the writ under Section 8 of Act No. 3135
has not yet commenced. The CA relied on the
GRANT OF LOANS AND SECURITY REQUIREMENTS Court’s ruling in Ong v. CA, which held that "the
680 Home Appliances v. CA purchaser must first be placed in possession of the
mortgaged property pending proceedings
G.R. No. 206599 September 29, 2014 assailing the issuance of the writ of possession."
680 HOME APPLIANCES, INC., Petitioner, 7. Hence, this petition for certiorari.
vs.
THE HONORABLE COURT OF APPEALS, THE ISSUE: Whether or not the petition for cancellation was prematurely
HONORABLE MARYANNE. CORPUS-MAÑALAC, in her filed.
capacity as the PRESIDING JUDGE OF THE REGIONAL
TRIAL COURT OF MA.KATI CITY, BRANCH 141, ATTY. HELD:
ENGRACIO ESCASINAS, JR., in his capacity as THE EX- 1. 680 Home’s certiorari petition is procedurally erroneous
OFFICIO SHERIFF/CLERK OF COURT VII, OFFICE OF because of the availability of the remedies of reconsideration
THE CLERK OF COURT, REGIONAL TRIAL COURT, and appeal.
MA.KATI CITY, FIRST SOVEREIGN ASSET 2. As the CA correctly pointed out, a debtor may avail of the
MANAGEMENT (SPV-AMC), INC. and ALDANCO remedy under Section 8 of Act No. 3135 only after the
MERLMAR, INC., Respondents purchaser has obtained possession of the property.
DOCTRINE: Section 8 of Act No. 3135 finds no application when the a. What it missed, however, is that this rule is
redemption period has expired without the debtor exercising his right, applicable only to a unique factual situation –
and the purchaser in the foreclosure sale has already consolidated his when the writ of possession sought to be
ownership over the property and moved for the issuance of the writ of cancelled was issued during the redemption
possession. period. In Ong where this rule was laid down, the
mortgagors sought the recall of the writ of
FACTS: possession that was issued during the one-year
1. The case arose from the extrajudicial foreclosure redemption period.
proceedings commenced by the creditor of 680 Home, b. Section 8 of Act No. 3135 finds no application
Deutsche Bank AG London, after the former defaulted in when the redemption period has expired without
paying a loan secured by a real estate mortgage over its the debtor exercising his right, and the purchaser
commercial lot and building. in the foreclosure sale has already consolidated
2. in the foreclosure sale, FSAMI emerged as the highest bidder his ownership over the property and moved for the
of 680 Home’s mortgaged properties. issuance of the writ of possession.
a. A certificate of sale was issued to FSAMI which c. The provisions of Act No. 3135 applies until the
was registered with the register of deeds. period of redemption; once redemption lapses and
b. 3 months after, FSAMI consolidated its ownership consolidation of the purchaser’s title ensues, Act
after 680 home failed to redeem the property. No. 3135 finds no application
Hence, a new TCT was issued. 3. Act No. 3135 governs only the manner of the sale and
3. 680 Home commenced an action to annul the mortgage and redemption of the mortgaged real property in an extrajudicial
foreclosure with the RTC. foreclosure; proceedings beyond these, i.e., upon the lapse
4. FSAMI, on the other hand, commenced a petition for the ex of the redemption period and the consolidation of the
parte issuance of a writ of possession with the RTC. purchaser’s title, are no longer within its scope.
a. 680 home moved to intervene and filed an a. During the redemption period, the purchaser’s title
opposition but the RTC denied such motion. is merely inchoate. The "mere purchase and
b. RTC granted the application for a writ of [issuance of a] certificate of sale alone do not
possession, as well as a notice to vacate. confer any right to the possession or beneficial use
c. Aldanco, the current occupant of the property in of the premises [in favor of the
dispute, filed a motion to intervene, claiming that purchaser]." Nonetheless, the purchaser may
it possessed the property as lessee. The RTC acquire possession of the property during the
granted its motion. redemption period by exercising the privilege
d. Undeterred, 680 Home filed a petition to cancel granted to him under Section 7 of Act No. 3135
the writ of possession, invoking Section 8 of Act (writ of possession)
No. 3135. It alleged the nullity of the foreclosure b. The debtor, on the other hand, is provided
as well the adverse possession of Aldanco that opportunity to contest the transfer of possession

Page 25 of 42
 during the redemption period under Section 8 of b. respondent bank sold the subject land to
Act No. 3135, as he remains to be the owner of the respondent spouses Nilo and Zenaida de Robles
foreclosed property. (cancellation of writ of and a new title
possession) 4. Sometime in the first week of December 1990, petitioners
4. The writ of possession that the debtor may petition to set went to respondent bank and offered to redeem the subject
aside under Section 8 of Act No. 3135 undoubtedly refers to land.
one issued pursuant to Section 7 of the same law "during a. The bank informed them that the property had
the redemption period." already been sold to respondent spouses and
a. Further showing Section 7 and 8’s close relation is accordingly rejected petitioners’ offer.
the bond required to be filed by the purchaser 5. This prompted petitioners to file the case for "Annulment of
in Section 7 that the debtor may proceed against in Certificate of Sale, Deed of Absolute Sale, Reconveyance,
Section 8. Damages and Preliminary Injunction".
b. Section 7 states that the petition for the issuance of a. Respondent spouses prevailed in the case, with the
a writ of possession should be accompanied by a trial court rendering its decision, declaring the
bond which, under Section 8, shall "indemnify the foreclosure sale proper and legal and
debtor in case it be shown that the sale was made respondent spouses the lawful owners of the
without violating the mortgage or without subject property.
complying with the requirements of [Act No. 6. Petitioners’ challenge of the decision of the CA rests mainly
3135]." on their claim that the judicial foreclosure of the mortgage
c. A bond is no longer required to be filed in support on the subject property is void ab initio due to the alleged
of a petition for writ of possession filed after the attendant fraud and lack of the requisite notice and
redemption period has expired without the publication.
mortgagor exercising his right of redemption. a. They also beseech the Court to liberally interpret
At this point, the purchaser’s right over the the rules on redemption in their favor and allow
property is consolidated and his right to obtain them to retake the subject property on equitable
possession of the property stems from his right of considerations.
ownership.
5. WHEREFORE, we hereby DISMISS the petition. For the ISSUE: Whether or not the foreclosure and sale was valid.
reasons stated above, we UPHOLD the decision dated
February 13, 2013 of the Court of Appeals in CA-G.R. SP HELD:
No. 124735 insofar as it affirmed the dismissal of the 1. We affirm the validity of the foreclosure sale in favor of
petitioner 680 Home Appliances, Inc.' s petition for respondent bank.
cancellation of writ of possession by the Regional Trial a. The Sheriff’s Certificate of Sale belies petitioners’
Court of Makati, Branch 141 in its Orders dated December claim that the prescribed notice and publication
20, 2011 and March 23, 2012. was not complied with.
b. Said Certificate attests to the fact that the required
Prudencio v. CA twenty (20)-day written notice of the time, place
and purpose of the sale was posted in three (3)
G.R. No. 128053 June 10, 2004 conspicuous public places at Lumban, Laguna
SPOUSES PRUDENCIO ROBLES AND SUSANA DE where the property is situated and in three (3) other
ROBLES, petitioners, public places in Sta. Cruz, Laguna where the
vs. auction sale was to be held, as required by law.
THE HONORABLE COURT OF APPEALS, SECOND c. In the same Certificate, the Sheriff also declared
LAGUNA DEVELOPMENT BANK AND SPOUSES NILO DE that a copy of the notice was sent to the
ROBLES and ZENAIDA DE ROBLES, respondents. mortgagors by registered mail.
DOCTRINE: The statements of the Sheriff are entitled to belief unless d. The notice of sale was published once a week
rebutted by evidence proving otherwise. The presumption of regularity within a period of twenty (20) days in a local
in the performance of duty applies in this case in favor of the Sheriff. publication entitled "Bayanihan."4
Since petitioners have not rebutted such valid presumption, we have 2. In Natino v. IAC: The right to redeem becomes functus
no reason to believe that the Sheriff was remiss in his duties. officio on the date of its expiry, and its exercise after the
period is not really one of redemption but a repurchase.
FACTS: Distinction must be made because redemption is by force of
1. Sps. Prudencio and Susana obtained a loan of P48,000 from law; the purchaser at public auction is bound to accept
Laguna Development bank. redemption. Repurchase however of foreclosed property,
a. As security, they executed a deed of real estate after redemption period, imposes no such obligation. After
mortgage over a parcel of land registered in their expiry, the purchaser may or may not re-sell the property but
names. no law will compel him to do so. And, he is not bound by the
2. On account of the petitioners’ failure to pay their loan on due bid price; it is entirely within his discretion to set a higher
date, respondent bank caused the subject land to be sold at price, for after all, the property already belongs to him as
public auction. owner.
a. Respondents state that the sale occurred on May 3. The court did not give credence to the allegation that there
15, 1984 while petitioners claim that it happened has been a grant of extension in 1989 for that period is
on May 14, 1984. already beyond the 1-year redemption period.
b. LDB was the highest bidder. Hence, a certificate a. Assuming but not admitting that indeed an
of sale was issued in its favor. extension had been granted in petitioners’ favor,
3. The one-year redemption period expired on May 31, 1985 such an extension would constitute a mere offer on
without the spouses exercising their right of redemption. the part of respondent bank to re-sell the subject
a. Hence, a TCT was issued in favor of LDB. property to petitioners. Such an offer, however,
does not constitute a binding contract.

Page 26 of 42
 b.
The Pasig RTC ruled that Camden’s debt
Other redemption jurisprudence amounted only to P14M but Equitable deducted
6
Doronila v. Vasquez allowed redemption in certain cases even after the lapse of the P108M from its account. Hence, it ordered the
one-year period in order to promote justice and avoid injustice. In Tolentino v. Court
of Appeals,7 the policy of the law to aid rather than defeat the right of redemption was return of the excess amount.
expressed, stressing that where no injury would ensue, liberal construction of 5. Respondent filed a notice of appeal. CII, on the other hand,
redemption laws is pursued and the exercise of the right to redemption is permitted to moved for the immediate entry and execution of the
better serve the ends of justice. In De los Reyes v. Intermediate Appellate Court,8 the
rule was liberally interpreted in favor of the original owner of the property to give him
abovementioned decision.
another opportunity, should his fortunes improve, to recover his property.
ISSUE: Whether or not the Bulacan RTC should issue the writ of
GC Dalton v. Equitable possession to Equitable.

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

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

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

Page 27 of 42
 b. Thus, inasmuch as the 30-day period to avail of the Issue: Whether or not Section 30 of RA 7653 (also known as the New
said remedy had already lapsed, petitioner could Central Bank Act) and applicable jurisprudence require a current and
no longer assail the validity of the August 3, 2004 complete examination of the bank before it can be closed and placed
sale. under receivership.
4. Any question regarding the validity of the mortgage or its
foreclosure cannot be a legal ground for the refusal to issue Held: Section 30 of RA 7653 does not require a current and complete
a writ of possession. Regardless of whether or not there is a examination of the bank before it can be closed and placed under
pending suit for the annulment of the mortgage or the receivership. Section 30 of RA 7653 provides:
foreclosure itself, the purchaser is entitled to a writ of
possession, without prejudice, of course, to the eventual
outcome of the pending annulment case. SECTION 30. Proceedings in Receivership and Liquidation. —
5. Needless to say, petitioner committed a misstep by Whenever, upon report of the head of the supervising or examining
completely relying and pinning all its hopes for relief on its department, the Monetary Board finds that a bank or quasi-bank:
complaint for specific performance and damages in the Pasig
RTC, instead of resorting to the remedy of annulment (of the (a) is unable to pay its liabilities as they become due in the
auction sale and writ of possession) under Section 8 of Act ordinary course of business: Provided, That this shall not
3135 in the Bulacan RTC. include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
BANKS IN DISTRESS
Rural Bank of San Miguel v. Monetary Board (b) has insufficient realizable assets, as determined by the
[BSP] to meet its liabilities; or
Facts: Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a
domestic corporation engaged in banking. On January 21, 2000, (c) cannot continue in business without involving probable
respondent Monetary Board (MB), the governing board of Bangko losses to its depositors or creditors; or
Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting
RBSM from doing business in the Philippines, placing it under
receivership and designating Philippine Deposit Insurance Corporation (d) has willfully violated a cease and desist order under
(PDIC) as receiver on the basis of its inability to pay its liabilities as Section 37 that has become final, involving acts or
they become due in the ordinary course of business and continuance in transactions which amount to fraud or a dissipation of the
business without involving probable losses to its depositors and assets of the institution; in which cases, the Monetary
creditors. Board may summarily and without need for prior
hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the banking
On January 4, 2000, RBSM declared a bank holiday. RBSM and all of institution.
its 15 branches were closed from doing business. Alarmed and
disturbed by the unilateral declaration of bank holiday, BSP wanted to
examine the books and records of RBSM but encountered problems. It is well-settled that the closure of a bank may be considered as an
RBSM’s designated comptroller submitted to the Department of Rural exercise of police power. The action of the MB on this matter is final
Banks, BSP, a Comptrollership Report on her findings on the financial and executory. Such exercise may nonetheless be subject to judicial
condition and operations of the bank. Based on these reports, the inquiry and can be set aside if found to be in excess of jurisdiction or
director of the Department of Rural Banks Supervision and with such grave abuse of discretion as to amount to lack or excess of
Examination Sector made a report to the Monetary Bank (MB). The jurisdiction.
MB after evaluating and deliberating on the findings and
recommendation, issued Resolution No. 105. Thereafter, PDIC
implemented the closure order and took over the management of The absence of an examination before the closure of RBSM did not
RBSM’s assets and affairs. mean that there was no basis for the closure order. But it is clear under
RA 7653 that the basis need not arise from an examination as required
On January 31, 2000, petitioners filed a petition for certiorari and in the old law. The court rules that the MB had sufficient basis to arrive
prohibition in the Regional Trial Court to nullify and set aside at a sound conclusion that there were grounds that would justify
Resolution No. 105.7 However, on February 7, 2000, petitioners filed RBSM’s closure. Therefore, MB and BSP complied with all the
a notice of withdrawal in the RTC and filed a special civil action for requirements of RA 7653. By relying on a report before placing a bank
certiorari and prohibition in the CA. under receivership, the MB and BSP did not only follow the letter of
the law, they were also faithful to its spirit, which was to act
expeditiously. Accordingly, the issuance of Resolution No. 105 was
untainted with arbitrariness.
In their petition before the CA, petitioners claimed that respondents
MB and BSP committed grave abuse of discretion in issuing
Resolution No. 105. The petition was dismissed by the CA on the basis Banco Filipino v. Ybañez
that the decision of the MB was based on the findings and
recommendations of the Department of Rural Banks Supervision and FACTS: On March 7, 1978, respondents obtained a loan secured by a
Examination Sector, the comptroller reports and the declaration of a Deed of Real Estate Mortgage over Transfer Certificate of Title
bank holiday. Such could be considered as substantial evidence. (TCT) from petitioner bank. The loan was used for the construction of
Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC, a commercial building in Cebu City. On October 25, 1978,
MB passed Resolution No. 966 directing PDIC to proceed with the respondents obtained an additional loan from the petitioner thus
liquidation of RBSM under Section 30 of RA 7653. increasing their obligation to one million pesos. A corresponding
Amendment of Real Estate Mortgage was thereafter executed.
Hence this petition.

Page 28 of 42
On December 24, 1982, the loan was again re-structured, increasing allowed to collect interests on its loans while under liquidation,
the loan obligation to P1,225,000 and the Real Estate Mortgage was provided that the interests were legal.
again amended. Respondents executed a Promissory Note for the sum
of P1,225,000 payable in fifteen years, with a stipulated interest of 21% WHEREFORE, the Decision of the Regional Trial Court, which was
per annum, and stipulating monthly payments. sustained by the Court of Appeals, is hereby MODIFIED as
follows: (1) the interest rate at 21% per annum is hereby declared
Respondents’ total payment from 1983 to 1988 amounted to VALID; (2) the 3% monthly surcharge is NULLIFIED for being
P1,455,385.07, However, From 1989 onwards, respondents did not violative of the Usury Law at the time; and (3) respondents are
pay a single centavo. They aver that Banco Filipino had ceased ORDERED to pay petitioner the amount of P2,581,294.93 within 30
operations and/or was not allowed to continue business, having been days from receipt of this Decision.
placed under liquidation by the Central Bank.

On January 15, 1990, respondents’ lawyer wrote Special Acting BSP-MB v. Antonio-Valenzuela
Liquidator, Renan Santos, and requested that plaintiff return the
mortgaged property of the respondents since it had sufficiently profited BANGKO SENTRAL NG PILIPINAS MONETARY BOARD
from the loan and that the interest and penalty charges were and CHUCHI FONACIER, Petitioners,
excessive. Petitioner bank denied the request. vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as
Banco Filipino was closed on January 1, 1985 and re-opened for Regional Trial Court Judge of Manila, Branch 28; RURAL
business on July 1, 1994. From its closure to its re-opening, petitioner BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE
bank did not transact any business with its customers. (BATANGAS), INC.; RURAL BANK OF CARMEN (CEBU),
INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE
On August 24, 1994, respondents were served a Notice of Extra COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF
Judicial Sale of their property covered by TCT No. 69836 to satisfy CALATAGAN (BATANGAS), INC. (now DYNAMIC RURAL
their indebtedness allegedly of P6,174,337.46 which includes the BANK); RURAL BANK OF DARBCI, INC.; RURAL BANK OF
principal, interest, surcharges and 10% attorney’s fees. KANANGA (LEYTE), INC. (now FIRST INTERSTATE
RURAL BANK); RURAL BANK OF BISAYAS
MINGLANILLA (now BANK OF EAST ASIA); and SAN
On September 19, 1994, respondents filed a suit for Injunction, PABLO CITY DEVELOPMENT BANK, INC.,Respondents.
Accounting and Damages, alleging that there was no legal and factual
basis for the foreclosure proceedings since the loan had already been
fully paid. A restraining order was issued the following day by the DOCTRINE: The issuance by RTC of WPI is an unwarranted
lower court enjoining petitioner to cease and desist from selling the interference w the powers of MB. The actions of MB under Sec. 29
property at a public auction. and 30 of New Central Bank Act “may not be restrained or set aside
by the court except on petition of certiorari on the ground that the
action taken was in excess of jurisdiction or w such grave abuse of
Lower court rendered a Decision, directing defendant Banco Filipino discretion as to amount to lack or excess of jurisdiction.”
Savings and Mortgage Bank to render a correct accounting of the
obligations of plaintiffs with it after eliminating interest from January
1, 1985 to July 1, 1994 when it was closed, and reducing interest from VELASCO, JR., J.:
21% to 17% per annum, at the time it was in operation, and totally
eliminating [the] surcharge of 1% per month, within a period of fifteen  The Supervision and Examination Dept. (SED) of BSP
(15) days from the time the judgment shall have become final and conducted examinations of the books of respondent banks.
executory.  Deficiencies were discovered during examinations.
 These banks were then required undertake the remedial
Not satisfied with the decision, both parties appealed the case to the measures stated in the List of Findings/Exceptions, including
Court of Appeals. The Court of Appeals rendered a Decision affirming the infusion of additional capital.
the decision of the trial court. Hence, this Petition.  The banks claimed they made the necessary capital infusion,
but Petitioner Chuchi Fonacier (OIC of SED) sent separate
letter to the BOD of each bank, informing them that the
ISSUE: THE COURT OF APPEALS COMMITTED AN ERROR
banks failed to carry out the required remedial measures.
IN RULING THAT THE PLAINTIFFS-BORROWERS (HEREIN
RESPONDENTS) CANNOT BE CONSIDERED TO HAVE  The banks requested that they be given time to obtain BSP
DEFAULTED IN THEIR PAYMENT SINCE DEFENDANT BANK approval to amend their Articles of Incorporation, to seek
CEASED OPERATION FROM 1985 TO 1991. new investors, and that the basis for the capital infusion be
disclosed.
 They also noted that none of them had received the Report
HELD: To resolve the controversy we shall address the following of Examination (ROE) wc finalizes the audit findings.
pertinent question: (1) What is the effect of the temporary closure of  Respondent banks filed a complaint for nullification of
Banco Filipino from January 1, 1985 to July 1, 1994 on the loan? ROE against petitioners, w TRO and WPI (Writ of
Preliminary Injunction) enjoining BSP from submitting
In Banco Filipino Savings and Mortgage Bank v. Monetary Board, the the ROE to the Monetary Board (MB) contending that the
validity of the closure and receivership of Banco Filipino was put in failure to furnish the bank w the ROE violated their right to
issue. But the pendency of the case did not diminish the authority of due process.
the designated liquidator to administer and continue the bank’s  Petitioners filed MD on procedural grounds.
transactions. The Court allowed the bank’s liquidator to continue  RTC: ruled in favour of the banks. It had been the practice
receiving collectibles and receivables or paying off creditor’s claims of SED to provide ROEs to the banks before submission to
and other transactions pertaining to normal operations of a MB. As banks are subject of examinations, they are entitled
bank. Among these transactions were the prosecution of suits against to copies of the ROEs. The denial by petitioners of the banks’
debtors for collection and for foreclosure of mortgages. The bank was

Page 29 of 42
 requests for copies of ROEs was held to be a denial of the SECRECY OF BANK DEPOSITS
banks’ right to due process. China Banking Corporation v. Ortega
 CA: affirmed the RTC decision, finding no grave abuse of No. L-34964. January 31, 1973.
discretion. CHINA BANKING CORPORATION and TAN KIM LIONG,
 SC: issued a TRO, restraining CA, RTC and respondent petitioners-appellants, vs. HON.WENCESLAO ORTEGA, as
banks from implementing and enforcing the CA decision. By Presiding Judge of the Court of First Instance of Manila, Branch VIII,
reason of this TRO, the SED was able to submit their ROEs and VICENTE G. ACABAN, respondents-appellees.
to MB. MB then prohibited the respondent banks from
transacting business and placed them under receivershop DOCTRINE: It is clear from the discussion of the conference
under Sec. 53 of RA 8791 and Sec. 30 of RA 7653. committee report on Senate Bill No. 351 and House. Bill No. 3977,
which later became RepublicAct 1405, that the prohibition against
ISSUE: WON examination of or inquiry into a bank deposit under Republic Act 1405
does not preclude its being garnished to insure satisfaction of a
judgment. Indeed there is no real inquiry in such a case, and if
I. Injunction issued by RTC violated Sec. 25 of New Central
existence of the deposit is disclosed the disclosure is purely incidental
Bank Act and effectively handcuffed the BSP from discharging
to the execution process. It is hard to conceive that it was ever within
its functions to the great and irreparable damage of the country’s
banking system; the intention of Congress to enable debtors to evade payment of their
just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank.
II. Respondent banks are entitled to be furnished copies of the
respective ROEs before the same is submitted to MB FACTS:
1. Acaban filed a complaint in the court a quo against Bautista
HELD: Logging Co., Inc., B & B Forest Development Corporation
and Marino Bautista for the collection of a sum of money.
a. Upon motion of the plaintiff the trial court
I. YES
declared the defendants in default for failure to
II. NO
answer within the reglementary period, and
1. Requisites for preliminary injunctive relief are:
authorized the Branch Clerk of Court and/or
a. Invasion of right sought to be protected is material
Deputy Clerk to receive the plaintiff’s evidence.
and substantial
b. A judgment by default was rendered against the
b. Right of the complainant is clear and unmistakable
defendants.
c. There is an urgent and paramount necessity for the
2. To satisfy the judgment, Acaban sought the garnishment of
writ to prevent serious damage
the bank deposit of the defendant B & B Forest Development
2. These requirements are absent in the present case.
Corporation with the China Banking Corporation.
3. Respondent banks have failed to show that they are entitled
a. Accordingly, a notice of garnishment was issued
to copies of the ROEs. No provision of law, nor a section in
by the Deputy Sheriff of the trial court and served
the procedures of the BSP shows that BSP is required to give
on said bank through its cashier, Tan Kim Liong.
them copies of the ROEs.
b. In reply, Tan invited the attention of the Deputy
4. Sec. 28 of the New Central Bank Act, wc governs the
Sheriff to the provisions of Republic Act No.
examinations of banking institutions, provides that the ROE
1405 which, it was alleged, prohibit the
shall be submitted to the MB; the bank examined is not
disclosure of any information relative to bank
mentioned as recipient of the ROE.
deposits.
5. The contents of the ROEs are essentially the same as those
3. Acaban filed a motion to cite Tan for contempt of court.
of the List of Findings/Exceptions provided to said banks,
a. RTC denied the motion.
wc were furnished to the them, hence they cannot claim that
b. However, Tan was ordered to “inform the Court”
their right to due process was violated. The ROEs would be
WON there is a deposit in China Bank of
superfluities.
defendant B & B Forests, and if there is any, to
6. The issuance by RTC of WPI is an unwarranted interference
hold the same intact and not allow any withdrawal
w the powers of MB. The actions of MB under Sec. 29 and
until further order.
30 of New Central Bank Act “may not be restrained or set
4. Instead of complying, Tan and China Bank filed this instant
aside by the court except on petition of certiorari on the
petition for certiorari to review the orders.
ground that the action taken was in excess of jurisdiction or
a. They alleged that according to RA 1405:
w such grave abuse of discretion as to amount to lack or “Sec. 3. It shall be unlawful for any official or
excess of jurisdiction.” employee of a banking institution to disclose to any
7. As to the 3rd reqt, the serious damage contemplated by RTC person other than those mentioned in Section two
is the sanction of closure of the banks. Under the law, the hereof any information concerning said deposits.”
sanction of closure could be imposed upon a bank by BSP
even w/o notice and hearing, to prevent unwarranted b. Petitioners argue that the disclosure of the
dissipation of bank’s assets and valid exercise of police information required by the court does not fall
power to protect the stakeholders of the banks (“close now, within any of the 4 exceptions enumerated in
hear later” doctrine). Thus, there is no serious damage to Section 2:
Sec. 2. All deposits of whatever nature with banks
speak of. or banking institutions in the Philippines including
8. “Close Now, Hear Later” Doctrine: the closure of bank investments in bonds issued by the Government of
may be considered as an exercise of police power. The action the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of
of MB on this matter is final and executory, but may be absolutely confidential nature and may not be
subject to judicial inquiry and can be set aside if found to be examined, inquired or looked into by any person,
in excess of jurisdiction or w grave abuse of discretion government official, bureau or office, except upon
amounting to lack or excess of jurisdiction. written permission of the depositor, or in cases of
impeachment, or upon order of a competent
9. The issuance of WPI would violate this doctrine. court in cases of bribery or dereliction of duty of

Page 30 of 42
 public officials, or in cases where the money JOSEPH VICTOR G. EJERCITO,
deposited or invested is the subject matter of the
litigation.
petitioner, vs. SANDIGANBAYAN (SPECIAL DIVISION) and
c. Furthermore, if the questioned orders are complied PEOPLE OF THE PHILIPPINES, respondents.
with, Tan may be criminally liable under Section
5: DOCTRINE: An examination of Republic Act No. 1405 shows that
“Sec. 5. Any violation of this law will subject the term “deposits” used therein is to be understood broadly and not
offender upon conviction, to an imprisonment of not limited only to accounts which give rise to a creditor-debtor
more than five years or a fine of not more than relationship between the depositor and the bank; If the money
twenty thousand pesos or both, in the discretion of
the court.” deposited under an account may be used by banks for authorized loans
to third persons, then such account, regardless of whether it creates a
ISSUE: Whether or not the bank deposit of judgment debtor B & B creditor-debtor relationship between the depositor and the bank, falls
Forest Development Corporation can be subject to garnishment to under the category of accounts which the law precisely seeks to protect
satisfy a final judgment against it. for the purpose of boosting the economic development of the country.

HELD: FACTS:
1. The lower court did not order an examination of or inquiry 1. In the case of People v. Estrada before the Sandiganbayan, a
into the deposit of B & B Forest Development Corporation, request for issuance of subpoena duces tecum for the
as contemplated in the law. It merely required Tan Kim issuance of a subpoena directing the president of Export and
Liong to inform the court whether or not the defendant B Industry Bank to produce documents in relation to a trust
& B Forest Development Corporation had a deposit in the account, savings account and manager’s check.
China Banking Corporation only for purposes of the 2. The Special Prosecution Panel also filed on January 20,
garnishment issued by it, so that the bank would hold the 2003, a Request for Issuance of Subpoena Duces Tecum/Ad
same intact and not allow any withdrawal until further order. Testificandum directed to the authorized representative of
a. It will be noted from the discussion of the Equitable-PCI Bank to produce statements of account
conference committee report on Republic Act No. pertaining to certain accounts in the name of "Jose Velarde"
1405, that it was not the intention of the and to testify thereon.
lawmakers to place bank deposits beyond the 3. The Sandiganbayan granted both requests by Resolution of
reach of execution to satisfy a final judgment. January 21, 2003 and subpoenas were accordingly issued.
“Mr. MARCOS. I see. Suppose there has been a 4. Upon learning from the media of the move of the special
decision, definitely establishing the liability of an prosecution panel, petitioner filed a letter asking for the
individual for taxation purposes and this judgment
is sought to be executed. . . in the execution of that
temporary restraint on the issuance of the subpoena while he
judgment, does this bill, or this proposed law, if consults his lawyer regarding the issue.
approved, allow the investigation or scrutiny of the a. He then filed a Motion to Quash the subpoena.
bank deposit in order to execute the judgment? b. He alleged that his bank accounts are covered by
“Mr. RAMOS. To satisfy a judgment which has the Secrecy of Bank Deposits Law and do not fall
become executory. under any of the exceptions stated therein.
xxx xxx xxx c. He further claimed that the specific identification
“Mr. MACAPAGAL. But let us suppose that in an
ordinary civil action for the recovery of a sum of
of documents in the questioned subpoenas,
money the plaintiff wishes to attach the properties including details on dates and amounts, could only
of the defendant to insure the satisfaction of the have been made possible by an earlier illegal
judgment. Once the judgment is rendered, does the disclosure thereof by the EIB and the PDIC in its
gentleman mean that the plaintiff cannot attach the
bank deposit of the defendant? capacity as receiver of the then Urban Bank.
“Mr. RAMOS. That was the question raised by the 5. Before the Motion to Quash was resolved by the
gentleman from Pangasinan to which I replied that Sandiganbayan, the prosecution filed another Request for the
outside the very purpose of this law it could be
reached by attachment.
Issuance of Subpoena Duces Tecum of the same documents
“Mr. MACAPAGAL. Therefore, in such ordinary with the exception of MC and additional documents
civil cases it can be attached? pertaining to a savings account.
“Mr. RAMOS. That is so. 6. The subpoenas prayed for in both requests were issued by
2. It is sufficiently clear from the foregoing discussion of the the Sandiganbayan
conference committee report of the two houses of Congress a. Petitioner filed an Urgent Motion to Quash which
that the prohibition against examination of or inquiry into a was denied by the SB.
bank deposit under Republic Act 1405 does not preclude its 7. Hence, this petition for certiorari.
being garnished to insure satisfaction of a judgment.
a. Indeed there is no real inquiry in such a case, and ISSUE:
if the existence of the deposit is disclosed the 1. Whether or not Ejercito’s Trust account is covered by the
disclosure is purely incidental to the execution term “deposit” as used in RA 1405.
process. 2. Whether or not Ejercito’s accounts are excepted from the
b. It is hard to conceive that it was ever within the protection of RA 1405.
intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the HELD:
Court, through the expedient of converting their 1. On the issue of trust account as deposit: Trust Account
assets into cash and depositing the same in a bank. No. 858 is, without doubt, one such account.
3. WHEREFORE, the orders of the lower court dated March 4 a. The Trust Agreement between petitioner and
and 27, 1972, respectively, are hereby affirmed, with costs Urban Bank provides that the trust account covers
against the petitioners-appellants. "deposit, placement or investment of funds" by
Urban Bank for and in behalf of petitioner.
JV Ejercito v. Sandiganbayan b. The money deposited under Trust Account No.
858, was, therefore, intended not merely to remain
G.R. Nos. 157294-95. November 30, 2006.* with the bank but to be invested by it elsewhere.

Page 31 of 42
 c. To hold that this type of account is not protected b. Trust Account No. 858 and Savings Account No.
by R.A. 1405 would encourage private hoarding of 0116-17345-9 in the name of petitioner fall under
funds that could otherwise be invested by banks in this description and must thus be part of the subject
other ventures, contrary to the policy behind the matter of the litigation.
law.
2. The contention that trust accounts are not covered by the SANDOVAL-GUTIERREZ dissenting:
term "deposits," as used in R.A. 1405, by the mere fact that 1. This justice aggrees that the "extremely-detailed"
they do not entail a creditor-debtor relationship between the information in the Special Prosecution Panel’s requests
trustor and the bank, does not lie. shows prior illegal disclosure of his bank accounts.
a. An examination of the law shows that the term 2. True, bank accounts at times harbor criminal plans. But this
"deposits" used therein is to be understood broadly is not a reason to declare an open season for inquiry.
and not limited only to accounts which give rise to a. Customers have a constitutionally justifiable
a creditor-debtor relationship between the expectation of privacy in the documentary details
depositor and the bank. of the financial transactions reflected in their bank
b. If the money deposited under an account may be accounts. That wall of privacy, however, is not
used by banks for authorized loans to third impregnable.
persons, then such account, regardless of whether b. Our Constitution, as well as our laws, provides
it creates a creditor-debtor relationship between procedures whereby the confidentiality of one’s
the depositor and the bank, falls under the category financial affairs may be disclosed.
of accounts which the law precisely seeks to c. In other words, access to bank records is controlled
protect for the purpose of boosting the economic by adequate legal process.
development of the country. d. Here, the subpoenae issued by respondent
SECTION 2, RA 1405
All deposits of whatever nature with banks or banking institutions in the Philippines
Sandiganbayan, tainted as they are by the vices
including investments in bonds issued by the Government of the Philippines, its that afflict the proceedings before the Office of the
political subdivisions and its instrumentalities, are hereby considered as of an Ombudsman, cannot be considered to have been
absolutely confidential nature and may not be examined, inquired or looked into by issued pursuant to such adequate legal process.
any person, government official, bureau or office, except upon written permission of
the depositor, or in cases of impeachment, or upon order of a competent court in cases Petitioner, therefore, has reason to feel aggrieved.
of bribery or dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
NOTE: The Marquez ruling notwithstanding, the above-described examination by the
Ombudsman of petitioner’s bank accounts, conducted before a case was filed with a
court of competent jurisdiction, was lawful.

3. The phrase "of whatever nature" proscribes any restrictive

interpretation of "deposits." For the Ombudsman issued the subpoenas bearing on the bank accounts of petitioner
about four months before Marquez was promulgated on June 27, 2001.
a. Moreover, it is clear from the immediately quoted
provision that, generally, the law applies not only
to money which is deposited but also to those When this Court construed the Ombudsman Act of 1989, in light of the Secrecy of
Bank Deposits Law in Marquez, that “before an in camera inspection may be allowed
which are invested. there must be a pending case before a court of competent jurisdiction”, it was, in fact,
b. This further shows that the law was not intended reversing an earlier doctrine found in Banco Filipino Savings and Mortgage Bank v.
to apply only to "deposits" in the strict sense of the Purisima.
word. Otherwise, there would have been no need
to add the phrase "or invested." Banco Filipino involved subpoenas duces tecum issued by the Office of the
4. On the issue of exception of account: Petitioner contends Ombudsman, then known as the Tanodbayan, in the course of its preliminary
investigation of a charge of violation of the Anti-Graft and Corrupt Practices Act. As
that since plunder is neither bribery nor dereliction of duty, the subpoenas subject of Banco Filipino were issued during a preliminary investigation,
his accounts are not excepted from the protection of R.A. in effect this Court upheld the power of the Tandobayan under P.D. 1630 to issue
1405. subpoenas duces tecum for bank documents prior to the filing of a case before a court
Philippine National Bank v. Gancayco of competent jurisdiction.
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and
no reason is seen why these two classes of cases cannot be excepted from the rule Marquez, on the other hand, practically reversed this ruling in Banco Filipino despite
making bank deposits confidential. The policy as to one cannot be different from the the fact that the subpoena power of the Ombudsman under R.A. 6770 was essentially
policy as to the other. This policy expresses the notion that a public office is a public the same as that under P.D. 1630.
trust and any person who enters upon its discharge does so with the full knowledge
that his life, so far as relevant to his duty, is open to public scrutiny.
The Marquez ruling that there must be a pending case in order for the Ombudsman to
validly inspect bank records in camera thus reversed a prevailing doctrine. Hence, it
5. Plunder being thus analogous to bribery, the exception to may not be retroactively applied. The Ombudsman’s inquiry into the subject bank
R.A. 1405 applicable in cases of bribery must also apply to accounts prior to the filing of any case before a court of competent jurisdiction was
therefore valid at the time it was conducted. In fine, the subpoenas issued by the
cases of plunder. Ombudsman in this case were legal, hence, invocation of the “fruit of the poisonous
6. On petitioners claim that the money in his bank account tree” doctrine is misplaced.
is not the “subject matter of litigation”: The plunder case
now pending with the Sandiganbayan necessarily involves Marquez v. Desierto
an inquiry into the whereabouts of the amount purportedly
G.R. No. 135882. June 27, 2001.*
acquired illegally by former President Joseph Estrada.
LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union
a. In light then of this Court’s pronouncement
Bank of the Philippines, petitioners, vs. HON. ANIANO A.
in Union Bank, the subject matter of the
DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and
litigation cannot be limited to bank accounts
Preliminary Investigation Bureau, Office of the Ombudsman, ANGEL
under the name of President Estrada alone, but
C. MAYORALGO, JR., MARY ANN CORPUZ-MANALAC and
must include those accounts to which the
JOSE T. DE JESUS, JR., in their capacities as Chairman and Members
money purportedly acquired illegally or a
of the Panel, respectively, respondents.
portion thereof was alleged to have been
transferred.

Page 32 of 42
DOCTRINE: An examination of the secrecy of bank deposits law ISSUE: Whether or not the order of the Ombudsman to have an in
(R.A. No. 1405) would reveal the following exceptions: 1. Where the camera inspection of the questioned account is allowed as an
depositor consents in writing; 2. Impeachment case; 3. By court order exception to the law on secrecy of bank deposits
in bribery or dereliction of duty cases against public officials; 4.
Deposit is subject of litigation; 5. Sec 8, R.A. No. 3019, in cases of HELD:
unexplained wealth as held in the case of PNB vs. Gancayco. 1. An examination of the secrecy of bank deposits law (R.A.
No. 1405) would reveal the following exceptions:
FACTS: (a) Where the depositor consents in writing;
1. Petitioner Marquez received an Order from the Ombudsman (b) Impeachment case;
Desierto to produce several bank documents for purposes of (c) By court order in bribery or dereliction of duty
inspection in camera to various accounts maintained at cases against public officials;
Union Bank Julio Vargas branch where Marquez is the (d) Deposit is subject of litigation;
branch manager. (e) Sec 8, R.A. No. 3019, in cases of unexplained
a. The accounts to be inspected are involved in a case wealth as held in the case of PNB vs. Gancayco.
pending with the Ombudsman entitled FFIB v. 2. We rule that before an in camera inspection may be allowed,
Lagdameo there must be a pending case before a court of competent
2. The basis of the Ombudsman in ordering an in jurisdiction.
camera inspection of the accounts is a trail of managers a. Further, the account must be clearly identified, the
checks purchased by one George Trivinio, a respondent in inspection limited to the subject matter of the
OMB-0-97-0411, pending with the office of the pending case before the court of competent
Ombudsman. jurisdiction.
a. It would appear that Mr. George Trivinio, b. The bank personnel and the account holder must
purchased 51 MCs for a total amount of P272.1 be notified to be present during the inspection, and
Million at Traders Royal Bank, United Nations such inspection may cover only the account
Avenue branch, on May 2 and 3, 1995. identified in the pending case.
b. Out of the 51 MCs, 11 MCs in the amount of P70.6 3. In the case at bar, there is yet no pending litigation before
million, were deposited and credited to an account any court of competent authority.
maintained at the Union Bank, Julia Vargas a. What is existing is an investigation by the Office
Branch. of the Ombudsman.
c. Atty. Macalino was allowed by the Traders for the b. In short, what the Office of the Ombudsman would
in camera inspection. wish to do is to fish for additional evidence to
3. However, Marquez of the Union Bank wrote the formally charge Amado Lagdameo, et al., with the
Ombudsman explaining to him that the accounts in question Sandiganbayan.
cannot readily be identified and asked for time to respond to c. Clearly, there was no pending case in court which
the order. would warrant the opening of the bank account for
a. The reason forwarded by petitioner was that inspection.
“despite diligent efforts and from the account 4. We order the Ombudsman to cease and desist from requiring
numbers presented, we cannot identify these Union Bank Manager Lourdes T. Marquez, or anyone in her
accounts since the checks are issued in cash or place to comply with the order dated October 14, 1998, and
bearer. We surmised that these accounts have long similar orders. No costs.
been dormant, hence are not covered by the new
account number generated by the Union Bank
system. We therefore have to verify from the BSB Group v. Sally Go
Interbank records archives for the whereabouts of G.R. No. 168644. February 16, 2010.*
these accounts.” BSB GROUP, INC., represented by its President, Mr. RICARDO
4. The Ombudsman replied that notwithstanding the fact that BANGAYAN, petitioner, vs. Sally Go a.k.a. SALLY GO-
the checks were payable to cash or bearer, nonetheless, the BANGAYAN, respondent.
name of the depositor(s) could easily be identified since the
account numbers x x x where said checks were deposited are DOCTRINE: While the fundamental law has not bothered with the
identified in the order. triviality of specifically addressing privacy rights relative to banking
a. Even assuming that the accounts x x x were accounts, there, nevertheless, exists in our jurisdiction a legitimate
already classified as “dormant accounts,” the bank expectation of privacy governing such accounts—the source of this
is still required to preserve the records pertaining right of expectation is statutory, and it is found in the Bank Secrecy
to the accounts within a certain period of time as Act of 1955.
required by existing banking rules and regulations.
b. Furthermore, there have already been two The inquiry into bank deposits allowable under Republic Act No. 1405
extension for the compliance to the order. must be premised on the fact that the money deposited in the account
5. The OMB issued an order directing the production of the is itself the subject of the action.
documents demanded insisting that the delay in the
investigation may constitute obstruction in the lawful FACTS:
exercise of the functions of the OMB. 1. Petitioner, the BSB Group, Inc., is a domestic corporation
6. Marquez filed a petition for declaratory relief, prohibition presided by its representative, Ricardo Bangayan
and injunction with the Makati RTC which was denied. (Bangayan). Respondent Sally Go, alternatively referred to
7. Petitioner likewise reiterated that she had no intention to as Sally Sia Go and Sally Go-Bangayan, is Bangayan’s wife,
disobey the orders of the Ombudsman. However, she wanted who was employed in the company as a cashier, and was
to be clarified as to how she would comply with the orders engaged, among others, to receive and account for the
without her breaking any law, particularly R.A. No. 1405. payments made by the various customers of the company.
2. In 2002, Bangayan filed with the Manila Prosecutor’s Office
a complaint for estafa and/or qualified theft5 against

Page 33 of 42
 respondent, alleging that several checks6 representing the 4. On the issue of unallowable inquiry under RA1405: It is
aggregate amount of ₱1,534,135.50 issued by the company’s conceded that while the fundamental law has not bothered
customers in payment of their obligation were, instead of with the triviality of specifically addressing privacy rights
being turned over to the company’s coffers, indorsed by relative to banking accounts, there, nevertheless, exists in
respondent who deposited the same to her personal banking our jurisdiction a legitimate expectation of privacy
account maintained at Security Bank and Trust Company governing such accounts. The source of this right of
(Security Bank) in Divisoria, Manila Branch. expectation is statutory, and it is found in R.A. No.
3. On the premise that respondent had allegedly encashed the 1405,39 otherwise known as the Bank Secrecy Act of 1955.
subject checks and deposited the corresponding amounts 5. R.A. No. 1405 has two allied purposes.
thereof to her personal banking account, the prosecution a. It hopes to discourage private hoarding and at
moved for the issuance of subpoena duces tecum /ad the same time encourage the people to deposit
testificandum against the respective managers or records their money in banking institutions, so that it
custodians of Security Bank’s Divisoria Branch, as well as may be utilized by way of authorized loans and
of the Asian Savings Bank (now Metropolitan Bank & Trust thereby assist in economic development.41
Co. [Metrobank]), in Jose Abad Santos, Tondo, Manila b. Owing to this piece of legislation, the
Branch. confidentiality of bank deposits remains to be a
a. The motion was granted and issued the subpoena. basic state policy in the Philippines.
4. Respondent filed a motion to quash the subpoena dated 6. In the criminal Information filed with the trial court,
November 4, 2003, addressed to Metrobank, noting to the respondent, unqualifiedly and in plain language, is charged
court that in the complaint-affidavit filed with the with qualified theft by abusing petitioner’s trust and
prosecutor, there was no mention made of the said bank confidence and stealing cash in the amount of
account, to which respondent, in addition to the Security ₱1,534,135.50.
Bank account identified as Account No. 01-14-006, a. The said Information makes no factual allegation
allegedly deposited the proceeds of the supposed checks. that in some material way involves the checks
a. While respondent characterized the Metrobank subject of the testimonial and documentary
account as irrelevant to the case, she, in the same evidence sought to be suppressed.
motion, nevertheless waived her objection to the b. Neither do the allegations in said Information
irrelevancy of the Security Bank account make mention of the supposed bank account in
mentioned in the same complaint-affidavit, which the funds represented by the checks have
inasmuch as she was admittedly willing to address allegedly been kept.
the allegations with respect thereto. 7. In other words, it can hardly be inferred from the indictment
b. The motion to quash was denied. itself that the Security Bank account is the ostensible subject
5. The prosecution presented Marasigan, the representative of of the prosecution’s inquiry.
Security Bank as its witness. a. Without needlessly expanding the scope of what is
a. She alleged that Go wwas able to run away with plainly alleged in the Information, the subject
the checks issued to the company and was able to matter of the action in this case is the money
indorse and credit it to her personal account. amounting to ₱1,534,135.50 alleged to have been
b. Go filed a motion to suppress invoking the stolen by respondent, and not the money
privilege of confidentiality under RA 1405. equivalent of the checks which are sought to be
c. The motion was denied. admitted in evidence.
6. CA reversed and set aside the orders of the RTC. b. Thus, it is that, which the prosecution is bound to
7. Hence, Bangayan filed a petition for review. prove with its evidence, and no other.
8. It comes clear that the admission of testimonial and
ISSUE: Whether or not the case for qualified theft brings the case documentary evidence relative to respondent’s Security
under one of the exceptions to the coverage of confidentiality under Bank account serves no other purpose than to establish
RA1405. the existence of such account, its nature and the amount
kept in it.
HELD: a. It constitutes an attempt by the prosecution at an
1. the Court, after deliberative estimation, finds the subject impermissible inquiry into a bank deposit account
evidence to be indeed inadmissible. the privacy and confidentiality of which is
2. The allegation of theft of money, hence, necessitates that protected by law.
evidence presented must have a tendency to prove that the b. On this score alone, the objection posed by
offender has unlawfully taken money belonging to another. respondent in her motion to suppress should have
a. Interestingly, petitioner has taken pains in indeed put an end to the controversy at the very
attempting to draw a connection between the first instance it was raised before the trial court.
evidence subject of the instant review, and the 9. In sum, we hold that the testimony of Marasigan on the
allegation of theft in the Information by claiming particulars of respondent’s supposed bank account with
that respondent had fraudulently deposited the Security Bank and the documentary evidence
checks in her own name. represented by the checks adduced in support thereof,
b. But this line of argument works more prejudice are not only incompetent for being excluded by operation
than favor, because it in effect, seeks to establish of R.A. No. 1405.
the commission, not of theft, but rather of some a. They are likewise irrelevant to the case, inasmuch
other crime—probably estafa. as they do not appear to have any logical and
3. as the Information in this case accuses respondent of having reasonable connection to the prosecution of
stolen cash, proof tending to establish that respondent has respondent for qualified theft. We find full merit
actualized her criminal intent by indorsing the checks and in and affirm respondent’s objection to the
depositing the proceeds thereof in her personal account, evidence of the prosecution.
becomes not only irrelevant but also immaterial and, on that
score, inadmissible in evidence. FOREIGN CURRENCY DEPOSIT ACT

Page 34 of 42
 GSIS v. Industrial Bank of Korea records, including dollar deposits of petitioners, purporting to establish
the deception practiced by the officers, were annexed to the complaint.
FACTS: On December 13, 1996, a surety bond was agreed with Petitioners now complained that Citibank violated Republic Act No.
DOMSAT HOLDINGS, INC. as the principal and the GSIS as 1405. Supreme Court ruled that since the accounts in question are U.S.
administrator and the obligees are Land Bank of the Philippines, dollar deposits, the applicable law therefore is not Republic Act No.
Tong Yang Merchant Bank, Industrial Bank of Korea and First 1405 but Republic Act No. 6426.
Merchant Banking Corporation collectively known as “The Banks”
with the loan granted to DOMSAT of US $ 11,000,000.00 to be used Salvacion v. Central Bank
for the financing of the two-year lease of a Russian Satellite from
INTERSPUTNIK. FACTS: Greg Bartelli, an American tourist, was arrested for
committing four counts of rape and serious illegal detention against
Domsat failed to pay the loan and GSIS refused to comply with its Karen Salvacion. Police recovered from him several dollar checks and
obligation reasoning that Domsat did not use the loan proceeds for the a dollar account in the China Banking Corp. He was, however, able to
payment of rental for the satellite. GSIS alleged that Domsat, with escape from prison. In a civil case filed against him, the trial court
Westmont Bank as the conduit, transferred the U.S. $11 Million loan awarded Salvacion moral, exemplary and attorney’s fees amounting to
proceeds from the Industrial Bank of Korea to Citibank New York almost P1,000,000.00.
account of Westmont Bank and from there to the Binondo Branch of
Westmont Bank. The Banks filed a complaint before the RTC of Salvacion tried to execute the judgment on the dollar deposit of Bartelli
Makati against Domsat and GSIS. with the China Banking Corp. but the latter refused arguing that
Section 11 of Central Bank Circular No. 960 exempts foreign currency
GSIS requested for the issuance of a subpoena duces tecum to the deposits from attachment, garnishment, or any other order or process
custodian of records of Westmont Bank to produce bank ledger of any court, legislative body, government agency or any
covering the account of Domsat with the Westmont Bank (now United administrative body whatsoever. Salvacion therefore filed this action
Overseas Bank) and other pertinent documents. The RTC issued the for declaratory relief in the Supreme Court.
subpoena but nonetheless, the RTC then granted the second motion for
reconsideration by “The Banks” to quash the subpoena granted to ISSUE: Should Section 113 of Central Bank Circular No. 960 and
GSIS. Section 8 of Republic Act No. 6426, as amended by PD 1246,
otherwise known as the Foreign Currency Deposit Act be made
applicable to a foreign transient?
GSIS assailed its case to the CA and CA partially granted it’s petition
allowing it to look into documents but not the bank ledger because the HELD: NO.
US $ 11,000,000.00 deposited by Domsat to Westmont Bank is The provisions of Section 113 of Central Bank Circular No. 960 and
covered by R.A. 6426 or the Bank Secrecy Law. PD No. 1246, insofar as it amends Section 8 of Republic Act No. 6426,
are hereby held to be INAPPLICABLE to this case because of its
GSIS now filed a petition for certiorari in the Supreme Court for the peculiar circumstances. Respondents are hereby required to comply
decision of CA allowing the quashal by the RTC of a subpoena for the with the writ of execution issued in the civil case and to release to
production of bank ledger. petitioners the dollar deposit of Bartelli in such amount as would
satisfy the judgment.
ISSUE: Whether or not the deposited US $ 11,000,000.00 by Domsat,
Inc. to Westmont Bank is covered by R.A. 6426 as what “The Banks” Supreme Court ruled that the questioned law makes futile the favorable
contend or it is covered by R.A. 1405 as what GSIS contends. judgment and award of damages that Salvacion and her parents fully
deserve. It then proceeded to show that the economic basis for the
enactment of RA No. 6426 is not anymore present; and even if it still
RULING: The Supreme Court ruled in favor of R.A. 6426 and thereby exists, the questioned law still denies those entitled to due process of
AFFIRMING the decision of Court of Appeals. law for being unreasonable and oppressive. The intention of the law
may be good when enacted. The law failed to anticipate the iniquitous
R.A. 1405 was enacted on 1955 while R.A. 6426 was enacted on 1974. effects producing outright injustice and inequality such as the case
These two laws both support the confidentiality of bank deposits. before us.
There is no conflict between them. Republic Act No. 1405 was enacted
for the purpose of giving encouragement to the people to deposit their The SC adopted the comment of the Solicitor General who argued that
money in banking institutions and to discourage private hoarding so the Offshore Banking System and the Foreign Currency Deposit
that the same may be properly utilized by banks in authorized loans to System were designed to draw deposits from foreign lenders and
assist in the economic development of the country. It covers all bank investors and, subsequently, to give the latter protection. However, the
deposits in the Philippines and no distinction was made between foreign currency deposit made by a transient or a tourist is not the kind
domestic and foreign deposits. Thus, Republic Act No. 1405 is of deposit encouraged by PD Nos. 1034 and 1035 and given incentives
considered a law of general application. On the other hand, Republic and protection by said laws because such depositor stays only for a few
Act No. 6426 was intended to encourage deposits from foreign lenders days in the country and, therefore, will maintain his deposit in the bank
and investors. It is a special law designed especially for foreign only for a short time. Considering that Bartelli is just a tourist or a
currency deposits in the Philippines. A general law does not nullify a transient, he is not entitled to the protection of Section 113 of Central
specific or special law. Generalia specialibus non derogant. Therefore, Bank Circular No. 960 and PD No. 1246 against attachment,
it is beyond cavil that Republic Act No. 6426 applies in this case. garnishment or other court processes.
Further, the SC said: “In fine, the application of the law depends on the
extent of its justice. Eventually, if we rule that the questioned Section
Intengan v. Court of Appeals affirmed the above-cited principle and
113 of Central Bank Circular No. 960 which exempts from attachment,
categorically declared that for foreign currency deposits, such as U.S.
garnishment, or any other order or process of any court, legislative
dollar deposits, the applicable law is Republic Act No. 6426.
body, government agency or any administrative body whatsoever, is
applicable to a foreign transient, injustice would result especially to a
In said case, Citibank filed an action against its officers for persuading citizen aggrieved by a foreign guest like accused Greg Bartelli. This
their clients to transfer their dollar deposits to competitor banks. Bank would negate Article 10 of the New Civil Code which provides that “in

Page 35 of 42
case of doubt in the interpretation or application of laws, it is presumed System v. 15th Division of the Court of Appeals, the Court also held that
that the lawmaking body intended right and justice to prevail.” RA 6426 is the applicable law for foreign currency deposits and not
___________ Republic Act No. 1405. xxx.
NOTES:
– On February 4, 1989, Greg Bartelli y Northcott, an American tourist, xxx xxx xxx
coaxed and lured petitioner Karen Salvacion, then 12 years old to go
with him to his apartment. Therein, Greg Bartelli detained Karen The written consent under RA 6426 constitutes a waiver of the
Salvacion for four days, or up to February 7, 1989 and was able to rape depositor’s right to privacy in relation to such deposit. In the present
the child once on February 4, and three times each day on February 5, case, neither the prosecution nor the Impeachment Court has presented
6, and 7, 1989. On February 7, 1989, after policemen and people living any such written waiver by the alleged depositor, Chief Justice Renato
nearby, rescued Karen, Greg Bartelli was arrested and detained at the C. Corona. Also, while impeachment may be an exception to the
Makati Municipal Jail. The policemen recovered from Bartelli the secrecy of bank deposits under RA 1405, it is not an exemption to the
following items: 1.) Dollar Check No. 368, Control No. 021000678- absolute confidentiality of foreign currency deposits under RA 6426.
1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-
108758-8 (Peso Acct.); 3.) Dollar Account — China Banking Corp., PSBank v. Senate
US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money
(P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) DOCTRINE:
used in seducing the complainant.
FACTS:
PSBank v. Senate (including the concurring opinion of J. Brion
and the dissenting opinion of J. Sereno) ISSUE:

FACTS: Philippine Savings Bank (PS Bank) and its President, Pascual RULING:
M. Garcia III, filed before the Supreme Court an original civil action
for certiorari and prohibition with application for temporary
restraining order and/or writ of preliminary injunction. The TRO was ANTI-MONEY LAUNDERING ACT
sought to stop the Senate, sitting as impeachment court, from further Republic v. Estrada
implementing the Subpoena Ad Testificandum et Duces Tecum, dated
February 6, 2012, that it issued against the Branch Manager of PS FACTS: On April 4, 2001, an Information for plunder was filed
Bank, Katipunan Branch. The subpoena assailed by petitioners covers with the Sandiganbayan against respondent Estrada, among
the foreign currency denominated accounts allegedly owned by the
other accused. A separate Information for illegal use of alias,
impeached Chief Justice Renato Corona of the Philippine Supreme
Court. was likewise filed against him. In the information, it was
alleged that on or about 04 February 2000, in the City of Manila,
ISSUE: Should a TRO be issued against the impeachment court to then President Estrada without having been duly authorized,
enjoin it from further implementing the subpoena with respect to the judicially or administratively, taking advantage of his position
alleged foreign currency denominated accounts of CJ Corona? and committing the offense in relation to office, i.e., in order to
CONCEAL THE ill-gotten wealth HE ACQUIRED during his
RULING: [The Court en banc ISSUED A TEMPORARY tenure and his true identity as THE President of the Republic of
RESTRAINING ORDER enjoining the respondents from implementing the Philippines, did then and there, willfully, unlawfully and
the subpoena. It also REQUIRED the respondents to COMMENT on
criminally REPRESENT HIMSELF AS ‘JOSE VELARDE’ IN
the [merits of the] petition.]
SEVERAL TRANSACTIONS AND use and employ the SAID
YES, a TRO should be issued against the impeachment court to alias “Jose Velarde” which IS neither his registered name at
enjoin it from further implementing the subpoena with respect to the birth nor his baptismal name, in signing documents with
alleged foreign currency denominated accounts of CJ Corona. Equitable PCI Bank and/or other corporate entities.

There are two requisite conditions for the issuance of a preliminary Estrada was subsequently arrested on the basis of a warrant of
injunction: arrest that the Sandiganbayan issued. A Special Division in the
Sandiganbayan was made to try, hear, and decide the charges of
1. the right to be protected exists prima facie, and
plunder and related against respondent Estrada. At the trial, the
2. the acts sought to be enjoined are violative of that right.
It must be proven that the violation sought to be prevented would People presented testimonial and documentary evidence to
cause an irreparable injustice. prove the allegations of the Informations for plunder, illegal use
of alias, and perjury.
A clear right to maintain the confidentiality of the foreign currency
deposits of the Chief Justice is provided under Section 8 of Republic After the People rested in all three cases, the defense moved to
Act No. 6426, otherwise known as the Foreign Currency Deposit Act be allowed to file a demurrer to evidence in these cases. In its
of the Philippines (RA 6426). This law establishes the absolute Joint Resolution, the Sandiganbayan only granted the defense
confidentiality of foreign currency deposits: leave to file demurrers in illegal use of alias and perjury. The
Sandiganbayan ruled that the people failed to present evidence
xxx xxx xxx
that proved Estrada’s commission of the offense.
Under R.A. No. 6426 there is only a single exception to the secrecy of
foreign currency deposits, that is, disclosure is allowed only upon the ISSUE: Whether the court a quo gravely erred and abused its
written permission of the depositor. In Intengan v. Court of Appeals, discretion in dismissing Crim. Case No. 26565 and in applying
the Court ruled that where the accounts in question are U.S. dollar R.A. No. 1405 as an exception to the illegal use of alias
deposits, the applicable law is not Republic Act No. 1405 but RA punishable under Commonwealth Act No. 142
6426. Similarly, in the recent case of Government Service Insurance

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HELD: No. The Sandiganbayan position that the rule in the and the Metrobank accounts of Cheng Yong. The Manila RTC issued
law of libel – that mere communication to a third person is an Order granted the Ex Parte Application
publicity – does not apply to violations of CA No. 142. In order
to be held liable for a violation of CA No. 142, the user of the Alvarez, through counsel, filed an Urgent Motion to Stay Enforcement
of the said Order arguing that nothing in R.A. No. 9160 authorized the
alias must have held himself out as a person who shall publicly AMLC to seek the authority to inquire into bank accounts ex parte.
be known under that other name. In other words, the intent to The Manila RTC issued an Order staying the enforcement of its bank
publicly use the alias must be manifest. The presence of inquiry order and giving the Republic five (5) days to respond to
Lacquian and Chua when Estrada signed as Jose Velarde and Alvarez’ motion.
opened Trust Account No. C-163 does not necessarily indicate
his intention to be publicly known henceforth as Jose The Republic filed an Omnibus Motion for Reconsideration which was
Velarde. Thus, Estrada could not be said to have intended his granted by the Manila RTC denying Alvarez’s motion to dismiss and
signing as Jose Velarde to be for public consumption by the fact reinstating in full force and effect the stayed order.
alone that Lacquian and Chua were also inside the room at that
Acting on Alvarez’s latest motion, the Manila RTC issued an Order
time. The same holds true for Estrada’s alleged representations directing the AMLC to refrain from enforcing the order until the
with Ortaliza and Dichavez, assuming the evidence for these expiration of the period to appeal, without any appeal having been
representations to be admissible. All of Estrada’s filed. On the same day, Alvarez filed a Notice of Appeal. The Republic
representations to these people were made in privacy and in filed an Urgent Omnibus Motion for Reconsideration urging that it be
secrecy, with no iota of intention of publicity. allowed to immediately enforce the bank inquiry order against Alvarez
and that Alvarezs notice of appeal be expunged from the records since
Bank deposits under R.A. No. 1405 (the Secrecy of Bank appeal from an order of inquiry is disallowed under the Anti money
Deposits Law) are statutorily protected or recognized zones of Laundering Act (AMLA).
privacy. Given the private nature of Estrada’s act of signing the
Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a
documents as “Jose Velarde” related to the opening of the trust Petition for Certiorari, Prohibition and Mandamus with Application for
account, the People cannot claim that there was already a public TRO and/or Writ of Preliminary Injunction directed against the
use of alias when Ocampo and Curato witnessed the Republic of the Philippines through the AMLC, Manila RTC Judge
signing. Petition was denied. Eugenio, Jr. and Makati RTC Judge Marella, Jr. imputing grave abuse
of discretion on the part of the Makati and Manila RTCs in granting
AMLCs ex parte applications for a bank inquiry order, arguing among
Republic v. Eugenio others that the ex parte applications violated her constitutional right to
due process, that the bank inquiry order under the AMLA can only be
FACTS: In relation to the series of investigations concerning the granted in connection with violations of the AMLA and that the
award of the NAIA 3 contracts to PIATCO undertaken by the AMLA can not apply to bank accounts opened and transactions entered
Ombudsman and the Compliance and Investigation Staff (CIS) of into prior to the effectivity of the AMLA or to bank accounts located
petitioner Anti-Money Laundering Council (AMLC), Pantaleon outside the Philippines.
Alvarez (Alvarez) was charged with violation of RA No. 3019. The
CIS conducted an intelligence database search on the financial The Court of Appeals, acting on Lilia Chengs petition, issued a
transactions of certain individuals involved in the award, including Temporary Restraining Order. On even date, the Manila RTC issued
Alvarez, which revealed that the latter maintained eight (8) bank an Order resolving to hold in abeyance the resolution of the urgent
accounts with six (6) different banks. omnibus motion for reconsideration then pending before it until the
resolution of Lilia Cheng’s petition for certiorari with the Court of
Under the authority granted by the Resolution, the AMLC filed an Appeals.
application to inquire into or examine the deposits or investments of
Alvarez, Trinidad, Liongson and Cheng Yong before the RTC of ISSUE: Whether or not the bank inquiry orders issued are valid and
Makati. The RTC granted application being satisfied that there existed enforceable.
probable cause to believe that the deposits in various bank accounts are
related to the offense of violation of Anti-Graft and Corrupt Practices RULING: Because of the Bank Secrecy Act, the confidentiality of
Act now the subject of criminal prosecution before the Sandiganbayan. bank deposits remains a basic state policy in the Philippines.
The CIS proceeded to inquire and examine the deposits, investments Subsequent laws, including the AMLA, may have added exceptions to
and related web accounts of the four. the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the
general rule. It falls within the zones of privacy recognized by our laws.
Meanwhile, the Special Prosecutor of the Office of the Ombudsman The framers of the 1987 Constitution likewise recognized that bank
requested the AMLC to investigate the accounts of Alvarez, PIATCO, accounts are not covered by either the right to information or under the
and several other entities involved in the nullified contract adverting to requirement of full public disclosure. Unless the Bank Secrecy Act is
probable cause to believe that the bank accounts were used in the repealed or amended, the legal order is obliged to conserve the
commission of unlawful activities that were committed in relation to absolutely confidential nature of Philippine bank deposits.
the criminal cases then pending before the Sandiganbayan. In response,
the AMLC authorized the executive director of the AMLC to inquire Any exception to the rule of absolute confidentiality must be
into and examine the accounts named in the letter, including one specifically legislated. Section 2 of the Bank Secrecy Act itself
maintained by Alvarez with DBS Bank and two other accounts in the prescribes exceptions whereby these bank accounts may be examined
name of Cheng Yong with Metrobank. by any person, government official, bureau or office; namely when: (1)
upon written permission of the depositor; (2) in cases of impeachment;
Following the AMLC Resolution, the Republic, through the AMLC, (3) the examination of bank accounts is upon order of a competent
filed an application before the Manila RTC to inquire into and/or court in cases of bribery or dereliction of duty of public officials; and
examine thirteen (13) accounts and two (2) related web of accounts (4) the money deposited or invested is the subject matter of the
alleged as having been used to facilitate corruption in the NAIA 3 litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt
Project. Among said accounts were the DBS Bank account of Alvarez Practices Act, has been recognized by this Court as constituting an

Page 37 of 42
additional exception to the rule of absolute confidentiality and there respectively. It discovered that Citibank in the course of its banking
have been other similar recognitions as well. business, received from its head office and other foreign branches a
total of P11,923,163,908.00 in dollars from September 30, 1974 to
The AMLA also provides exceptions to the Bank Secrecy Act. Under
June 30, 1977 covered by Certificates of Dollar Time Deposit that were
Section 11, the AMLC may inquire into a bank account upon order of
any competent court in cases of violation of the AMLA, it having been interest-bearing with corresponding maturity dates. And BA a total of
established that there is probable cause that the deposits or investments P629, 311,869.10 in dollars, covered by Certificates of Dollar Time
are related to unlawful activities as defined in Section 3(i) of the law, Deposit that were interest-bearing with corresponding maturity dates
or a money laundering offense under Section 4 thereof. Further, in and lodged in their books under the account Due to Head
instances where there is probable cause that the deposits or investments Office/Branches. For failure to report the said amounts as deposit
are related to kidnapping for ransom certain violations of the liabilities that were subject to assessment for insurance, PDIC sought
Comprehensive Dangerous Drugs Act of 2002 hijacking and other
the remittance of deficiency premium assessments for dollar deposits.
violations under R.A. No. 6235, destructive arson and murder, then
there is no need for the AMLC to obtain a court order before it could
inquire into such accounts. Citibank and BA each filed a petition for declaratory relief before the
Court of First Instance stating that the money placements they received
It cannot be successfully argued the proceedings relating to the bank from their head office and other foreign branches were not deposits and
inquiry order under Section 11 of the AMLA is a litigation did not give rise to insurable deposit liabilities under Sections 3 and 4
encompassed in one of the exceptions to the Bank Secrecy Act which of R.A. No. 3591 (the PDIC Charter) and, as a consequence, the
is when the money deposited or invested is the subject matter of the
deficiency assessments made by PDIC were improper and erroneous.
litigation. The orientation of the bank inquiry order is simply to serve
as a provisional relief or remedy. As earlier stated, the application for RTC ruled in favor of Citibank and BA which reasoned that there was
such does not entail a full-blown trial. no depositor-depository relationship between the respondents and their
head office or other branches. Also, the placements were deposits
Nevertheless, just because the AMLA establishes additional made outside the Philippines which are excluded under Section 3.05(b)
exceptions to the Bank Secrecy Act it does not mean that the later law of the PDIC Rules and Regulations and Section 3(f) of the PDIC
has dispensed with the general principle established in the older law
Charter likewise excludes from the definition of the term deposit any
that all deposits of whatever nature with banks or banking institutions
in the Philippines are considered as of an absolutely confidential obligation of a bank payable at the office of the bank located outside
nature. Indeed, by force of statute, all bank deposits are absolutely the Philippines.
confidential, and that nature is unaltered even by the legislated
exceptions referred to above. There is disfavor towards construing PDIC argues that the head offices of Citibank and BA and their
these exceptions in such a manner that would authorize unlimited individual foreign branches are separate and independent entities
discretion on the part of the government or of any party seeking to hence not exempt in Section 3(b) of R.A. No. 3591.
enforce those exceptions and inquire into bank deposits. If there are
doubts in upholding the absolutely confidential nature of bank deposits
against affirming the authority to inquire into such accounts, then such PDIC appealed to the CA which affirmed the ruling of the RTC.
doubts must be resolved in favor of the former. Such a stance would
persist unless Congress passes a law reversing the general state policy ISSUES:
of preserving the absolutely confidential nature of Philippine bank 1.) Whether or not the dollar deposits are money placements,
accounts. thus, they are not subject to the provisions of Republic Act
No. 6426 otherwise known as the Foreign Currency Deposit
While petitioner would premise that the inquiry into Lilia Chengs
Act of the Philippines.
accounts finds root in Section 11 of the AMLA, it cannot be denied
that the authority to inquire under Section 11 is only exceptional in 2.) Whether or not the Philippine branch of a foreign
character, contrary as it is to the general rule preserving the secrecy of corporation has a separate legal personality from its foreign
bank deposits. Even though she may not have been the subject of the head office for the purpose of PDIC.
inquiry orders, her bank accounts nevertheless were, and she thus has
the standing to vindicate the right to secrecy that attaches to said RULING: The court ruled that the funds in question are not deposits
accounts and their owners. This statutory right to privacy will not
within the definition of the PDIC Charter and are, thus, excluded from
prevent the courts from authorizing the inquiry anyway upon the
fulfillment of the requirements set forth under Section 11 of the AMLA assessment. Pursuant to Section 3(f) of the PDIC Charter, the term
or Section 2 of the Bank Secrecy Act; at the same time, the owner of deposit means unpaid balance of money or its equivalent received by
the accounts have the right to challenge whether the requirements were a bank in the usual course of business and for which it has given or is
indeed complied with. obliged to give credit to a commercial, checking, savings, time or thrift
account or which is evidenced by its certificate of deposit, and trust
Petition is dismissed. funds held by such bank whether retained or deposited in any
department of said bank or deposit in another bank, together with such
PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT other obligations of a bank as the Board of Directors shall find and
PDIC v. Citibank shall prescribe by regulations to be deposit liabilities of the
Bank; Provided, that any obligation of a bank which is payable at the
FACTS: Citibank, N.A. (Citibank) and Bank of America, S.T. & office of the bank located outside of the Philippines shall not be a
N.A. (BA) are duly organized corporations and existing under the laws deposit for any of the purposes of this Act or included as part of the
of the United States of America and duly licensed to do business in total deposits or of the insured deposits. As explained by the
the Philippines, with offices in Makati City. Petitioner Philippine respondents, the transfer of funds, which resulted from the inter-branch
Deposit Insurance Corporation (PDIC) conducted an examination of transactions, took place in the books of account of the respective
the books of account of Citibank and BA in 1977and 1979 branches in their head office located in the United States. Hence,

Page 38 of 42
because it is payable outside of the Philippines, it is not considered a
deposit. Petitioner additionally submits that the issue of determining the
amount of deposit insurance due respondents was never tried on the
merits since the trial dwelt only on the determination of the viability or
The Court in resolving the controversy in the relationship of the
validity of the deposits and no evidence on record sustains the holding
Philippine branches of Citibank and BA to their respective head offices that the amount of deposit due respondents had been finally
and their other foreign branches examined the manner by which a determined. This issue was not raised in the court a quo, however,
foreign corporation can establish its presence in the Philippines. It may hence, it cannot be raised for the first time in the petition at bar.
choose to incorporate its own subsidiary as a domestic corporation, in
which case such subsidiary would have its own separate and
independent legal personality to conduct business in the country. In the PDIC v. Aquero
FACTS: On September 22, 1983, plaintiffs-appellees invested in
alternative, it may create a branch in the Philippines, which would not
money market placements with the Premiere Financing Corporation
be a legally independent unit, and simply obtain a license to do (PFC) in the sum of P10,000.00 each for which they were issued by
business in the Philippines. It is apparent that the respondent banks did the PFC corresponding promissory notes and checks. On the same date
not incorporate as a separate domestic corporation to represent its (September 22, 1983), John Francis Cotaoco, for and in behalf of
business interests in the Philippines. Thus, being one and the same plaintiffs-appellees, went to the PFC to encash the promissory notes
entity, the funds placed by the respondents in their respective branches and checks, but the PFC referred him to the Regent Saving Bank
in the Philippines should not be treated as deposits made by third (RSB). Instead of paying the promissory notes and checks, the RSB,
upon agreement of Cotaoco, issued the subject 13 certificates of time
parties subject to deposit insurance under the PDIC Charter.
deposit with Nos. 09648 to 09660, inclusive, each stating, among
others, that the same certifies that the bearer thereof has deposited with
the RSB the sum of P10,000.00; that the certificate shall bear 14%
PDIC v. Abad interest per annum; that the certificate is insured up toP15,000.00 with
the PDIC; and that the maturity date thereof is on November 3, 1983
FACTS: Respondents had 71 Golden Time Deposits(GTDs) in (Exhs. “B”, “B-1” to “B-12”).
Manila Banking Corporation(MBC). HOWEVER, Bangko Sentral of On the aforesaid maturity dated (November 3, 1983), Cotaoco went to
the Philippines issued a memorandum prohibiting MBC to do business the RSB to encash the said certificates. Thereat, RSB Executive Vice
in the Philippines and placed its assets under receivership. On the next President Jose M. Damian requested Cotaoco for a deferment or an
banking day, respondent Jose Abad pre-terminated his 71 GTDs and extension of a few days to enable the RSB to raise the amount to pay
redposited the fund into 28 GTDs in larger denominations. Thereafter, for the same (Exh. “D”). Cotaoco agreed. Despite said extension, the
respondent filed their claims for the payment of the insured GTDs. RSB still failed to pay the value of the certificates. Instead, RSB
advised Cotaoco to file a claim with the PDIC.
Petitioner PDIC argued that the insured GTDs should not be
recognized since they were mere derivatives of respondents previous Meanwhile, on June 15, 1984, the Monetary Board of the Central Bank
account balances pre-terminated at the time the MBC was aslready in issued Resolution No. 788 (Exh. ‘2’, Records, p. 159) suspending the
serious financial distress. Under its charter, they contend that they are operations of the RSB. Eventually, the records of RSB were secured
only liable for deposits received in the usual course of business. and its deposit liabilities were eventually determined. On December 7,
1984, the Monetary Board issued Resolution No. 1496 (Exh. ‘1’)
liquidating the RSB. Subsequently, a masterlist or inventory of the
Consequently, Petitioner filed a petition for declaratory relief against RSB assets and liabilities was prepared. However, the certificates of
respondents for a judicial determination of the insurability of time deposit of plaintiffs-appellees were not included in the list on the
respondents. In turn, Jose Abad SET UP A COUNTER-CLAIM ground that the certificates were not funded by the PFC or duly
against PDIC whereby they asked for payment of the insured deposits. recorded as liabilities of RSB.

The SC later on ruled in favor of the respondents due to petitioner On September 4, 1984, plaintiffs-appellees filed with the PDIC their
having failed to overcome the presumption that it was issued in the respective claims for the amount of the certificates (Exhs. “C”, “C-1”,
ordinary course of business. The trial court then ordered petitioner to to “C-12”). Sabina Yu, James Ngkaion, Elaine Ngkaion and Jeffrey
pay the balance of the deposit insurance to respondents. Ngkaion, who have similar claims on their certificates of time deposit
with the RSB, likewise filed their claims with the PDIC. To their
dismay, PDIC refused the aforesaid claims on the ground that the
MAIN ISSUE: WON the trial court erred in ordering the payment of
Traders Royal Bank Check No. 299255 dated September 22, 1983 for
the deposit insurance since a petition for declaratory relief does not
the amount of P125,846.07 (Exh. “B”) issued by PFC for the
essentially entail an executory process- the only relief being granted is
aforementioned certificates was returned by the drawee bank for
a declaration of the rights and duties.
having been drawn against insufficient funds; and said check was not
replaced by the PFC, resulting in the cancellation of the certificates as
HELD: NO, the RTC’s action was proper. Without doubt, a petition indebtedness or liabilities of RSB.
for declaratory relief does not essentially entail an executory process.
HOWEVER, there is nothing in its nature that prohibits a counterclaim Consequently, on March 31, 1987, private respondents filed an action
from being set-up in the same action. for collection against PDIC, RSB and the Central Bank.

A special civil action is not essentially different from an ordinary civil On September 14, 1987, the trial court, declared the Central Bank in
action, which is generally governed by Rules 1 to 56 of the Rules of default for failing to file an answer.
Court, except that the former deals with a special subject matter which
makes necessary some special regulation. But the identity between On May 29, 1989, the trial court rendered its decision ordering the
their fundamental nature is such that the same rules governing ordinary defendants therein to pay plaintiffs, jointly and severally, the amount
civil suits may and do apply to special civil actions if not inconsistent corresponding to the latter’s certificates of time deposit.
with or if they may serve to supplement the provisions of the peculiar Both PDIC and RSB appealed.
rules governing special civil actions.

Page 39 of 42
ISSUE: Whether or not PDIC can be held liable for value of the
certificates of time deposit held by the petitioners. Examination involves an evaluation of the current status of a bank and
determines its compliance with the set standards regarding solvency,
HELD: NO. Whenever an insured bank shall have been closed on liquidity, asset valuation, operations, systems, management, and
account of insolvency, payment of the insured deposits in such bank compliance with banking laws, rules and regulations.
shall be made by the Corporation as soon as possible. The term
“deposit” means the unpaid balance of money or its equivalent Investigation, on the other hand, is conducted based on specific
received by a bank in the usual course of business and for which it has findings of certain acts or omissions which are subject of a complaint
given or is obliged to give credit to a commercial, checking, savings, or a Final Report of Examination. An examination entails a review of
time or thrift account or which is evidence by passbook, check and/or essentially all the functions and facets of a bank and its operation. It
certificate of deposit printed or issued in accordance with Central Bank necessitates poring through voluminous documents, and requires a
rules and regulations and other applicable laws, together with such detailed evaluation thereof. Such a process then involves an intrusion
other obligations of a bank which, consistent with banking usage and into a bank's records.
practices, the Board of Directors shall determine and prescribe by
regulations to be deposit liabilities of the Bank. These pieces of In contrast, although it also involves a detailed evaluation, an
evidence convincingly show that the subject CTDs were indeed issued investigation centers on specific acts or omissions and, thus, requires a
without RSB receiving any money therefor. No deposit, as defined in less invasive assessment.
Section 3 (f) of R.A. No. 3591, therefore came into existence.
Accordingly, petitioner PDIC cannot be held liable for value of the To reiterate, an examination of banks requires the prior consent of the
certificates of time deposit held by private respondents. Monetary Board, whereas an investigation based on an examination
report, does not.

PDIC v. Philippine Countryside Rural Bank TRUTH IN LENDING ACT

DBP v. Arcilla
FACTS: On March 9, 2005, the Board of Directors of the PDIC
adopted Resolution No. 2005-03-032 approving the conduct of an FACTS: Atty. Felipe Arcilla Jr. was employed by the DBP. After he
investigation, on the basis of the Reports of Examination of the Bangko was assigned to the legal department, he decided to avail of a loan
Sentral ng Pilipinas (BSP) on ten (10) banks, four (4) of which are under the Individual Housing Project (IHP) of the bank for the payment
respondents in this petition for review. the PDIC Board adopted of the parcel of land purchased by him and for its construction. When
another resolution, Resolution No. 2005-05-056, 4 approving the Arcilla resigned grom DBP, the bank notified him that his loan has
conduct of an investigation on PCRBI based on a Complaint-Affidavit been converted to a regular housing loan. Arcilla agreed to the
filed by a corporate depositor, the Philippine School of reservation by the DBP of its right to increase the rate of interest on the
Entrepreneurship and Management. loan, as well as all other fees and charges on loans and advances
pursuant to such policy as it may adopt from time to time during the
According to PDIC, in the course of its investigation, PCRBI was period of the loan.
found to have granted loans to certain individuals, which were settled
by way of dacion of properties. These properties, however, had already ISSUE: Whether or not DBP violated RA 3765 otherwise known as
been previously foreclosed and consolidated under the names of PRBI, “The Truth in Lending Act”.
BEAI and RBCI
RULING: Section 1 of R.A. No. 3765 provides that prior to the
Subsequently, PRBI and BEAI refused entry to their bank premises consummation of a loan transaction, the bank, as creditor, is obliged to
and access to their records and documents by the PDIC Investigation furnish a client with a clear statement, in writing, setting forth, to the
Team, upon advice of their respective counsels. extent applicable and in accordance with the rules and regulations
prescribed by the Monetary Board of the Central Bank of the
Atty. Victoria G. Noel sent letters to the PDIC informing it of her legal Philippines, the following information:
advice to PCRBI and BEAI not to submit to PDIC investigation on the
ground that its investigatory power pursuant to Section 9(b-1) of R.A. 1. the cash price or delivered price of the property or service to
No. 3591, cannot be differentiated from the examination powers be acquired;
accorded to PDIC under Section 8, paragraph 8 of the same law, under 2. the amounts, if any, to be credited as down payment and/or
which, prior approval from the Monetary Board is required. Thereafter, trade-in;
the Banks received a letter, dated July 8, 2005, from the PDIC General 3. the difference between the amounts set forth under clauses
Counsel reiterating its position that prior Monetary Board approval (1) and (2);
was not a pre-requisite to PDIC’s exercise of its investigative power. 4. the charges, individually itemized, which are paid or to be
paid by such person in connection with the transaction but
ISSUE: Whether the Court of Appeals-Cebu erred in finding that prior which are not incident to the extension of credit;
approval of the Monetary Board of the Bangko Sentral ng Pilipinas is 5. the total amount to be financed;
necessary before the PDIC may conduct an investigation of respondent 6. the finance charges expressed in terms of pesos and
banks. centavos; and
7. the percentage that the finance charge bears to the total
HELD: NO. After an evaluation of the respective positions of the amount to be financed expressed as a simple annual rate on
parties, the Court is of the view that the Monetary Board approval is the outstanding unpaid balance of the obligation.
not required for PDIC to conduct an investigation on the Banks.
If the borrower is not duly informed of the data required by the law
However, while "examination" connotes a mere generic perusal or prior to the consummation of the availment or drawdown, the lender
inspection, "investigation" refers to a more intensive scrutiny for a will have no right to collect such charge or increases thereof, even if
more specific fact-finding purpose. The latter term is also usually stipulated in the promissory note. However, such failure shall not
associated with proceedings conducted prior to criminal prosecution. affect the validity or enforceability of any contract or transaction.
the process of examination covers a wider scope than that of
investigation. UCPB v. Sps. Beluso

Page 40 of 42
 Rule 16, Section 5 bars the refiling of an action previously dismissed
FACTS: In 1996, UCPB granted the spouses Beluso a Promissory only in the following instances:
Notes Line under a Credit Agreement whereby the latter could avail (a) That the cause of action is barred by a prior judgment or by
from the former credit of up to a maximum amount of P1.2 Million the statute of limitations;
pesos for a term ending in April 1997. In addition to the promissory (b) That the claim or demand set forth in the plaintiff’s pleading
notes, the spouses Beluso also constituted a real estate mortgage over has been paid, waived, abandoned, or otherwise
parcels of land in Roxas City. Subsequently, the said Credit extinguished; and
Arrangement was amended to extend the amount of the Promissory (c) That the claim on which the action is founded is
Notes Line to a maximum of P2.35 Million pesos and to extend the unenforceable under the provisions of the statute of frauds.
term thereof to February 1998.
When an action is dismissed on the motion of the other party, it is only
The spouses executed three promissory notes which were renewed when the ground for the dismissal of an action is either of those
several times. In 1997, the payment of the principal and interest of the aforementioned that the action cannot be refiled. As regards all the
latter two promissory notes were debited from the spouses Beluso’s other grounds, the complainant is allowed to file same action, but
account with UCPB; yet, a consolidated loan for P1.3 Million was should take care that, this time, it is filed with the proper court or after
again released to the spouses Beluso under one promissory note with a the accomplishment of the erstwhile absent condition precedent, as the
due date of 28 February 1998. case may be.

To completely avail themselves of the P2.35 Million credit line The MR filed by the Belusos in the Roxas City case that has not yet
extended to them by UCPB, the spouses Beluso executed two more been resolved upon the filing of the Makati case does not change the
promissory notes for a total of P350 thousand. However, the spouses SC’s findings. It is indeed the general rule that in cases where there are
Beluso alleged that the amounts covered by these last two promissory two pending actions between the same parties on the same issue, it
notes were never released or credited to their account and, thus, should be the later case that should be dismissed. However, this rule is
claimed that the principal indebtedness was only P2 Million. not absolute. In the case of Allied Banking v. CA, it was ruled that:
“Even if this is not the purpose for the filing of the first action, it may
In any case, UCPB applied interest rates on the different promissory nevertheless be dismissed if the later action is the more appropriate
notes ranging from 18% to 34%. During the term of these promissory vehicle for the ventilation of the issues between the parties.”
notes, the Belusos were able to pay the total sum of about P760
thousand. However, they failed to pay for the interest and penalty on Applying the said ruling in the case at bar, the Court found that the
their obligations. As a result, UCPB demanded that they pay their total Makati City case is the more proper action in view of the execution of
obligation of P2.9 millionbut the spouses Beluso failed to comply the foreclosure sale. Moreover, Makati is the proper venue of the action
therewith. Thereafter, UCPB foreclosed the properties mortgaged by as mandated by the Credit Agreement. Hence, the Court deemed that
the spouses Beluso to secure their credit line, which, by that time, the Makati Case is the more appropriate vehicle for litigating the issues
already ballooned to nearly P3.8 million. between the parties, as compared to the Roxas City case.

Two months after the foreclosure, the spouses Beluso filed a Petition
for Annulment, Accounting and Damages against UCPB with the RTC ACCESS DEVICES REGULATION ACT
of Makati City. UCPB moved to dismiss the case on the ground that Soledad v. People
the spouses Beluso instituted another case before the RTC of Roxas
City, involving the same parties and issues. UCPB claims that while FACTS:
the Roxas City case initially appears to be a different action, as it  Sometime in June 2004, Henry C. Yu (complainant)
prayed for the issuance of a temporary restraining order and/or received a call on his mobile phone from a certain "Tess" or
injunction to stop foreclosure of spouses Beluso’s properties, it poses "Juliet Villar" (later identified as Rochelle Bagaporo), a
issues which are similar to those of the present case. credit card agent, who offered a Citifinancing loan assistance
at a low interest rate.
The spouses Beluso claim that the issue in the Roxas City case is the  Yu invited Bagaporo to go to his office in QC. Bagaporo then
propriety of the foreclosure before the true account of spouses Beluso indorsed Yu to her boss, a certain "Arthur" (later identified
is determined. On the other hand, the issue in the Makati case is the as Mark Soledad).
validity of the interest rate provision. The spouses Beluso claim that  Soledad instructed Yu to submit documents to a certain
the Roxas City case has become moot because, before RTC Roxas City "Carlo" (later identified as Ronald Gobenchiong).
could act on the restraining order, UCPB proceeded with the  Yu submitted various documents, such as his Globe
foreclosure and auction sale. As the act sought to be restrained has handyphone original platinum gold card, identification cards
already been accomplished, the spouses Beluso had to file a different and statements of accounts.
action, that of Annulment of the Foreclosure Sale with RTC Makati.  Yu followed up his loan status but failed to get in touch with
either Soledad or Gobenchiong.
RTC ruled in favor of the Belusos. CA affirmed.  In the first week of August 2004, Yu received his Globe
handyphone statement of account. He was charged for two
ISSUE: Whether or not the case should be dismissed due to forum mobile phone numbers which were not his.
shopping  Upon verification, Yu learned that he had additional five
mobile numbers in his name, and the application for those
HELD: YES. Even if it is assumed for the sake of argument, however, phone lines bore his picture and his forged signature.
that only one cause of action is involved in the two civil actions,
 Yu also learned that his Citibank Credit Card database
namely, the violation of the right of the spouses Beluso not to have
information was altered and he had a credit card application
their property foreclosed for an amount they do not owe, the Rules of
with Metrobank Card Corporation.
Court nevertheless allows the filing of the second action. The case in
 Yu and Metrobank’s junior assistant manager Jefferson
Roxas City was dismissed before the filing of the case with RTC
Devilleres lodged a complaint with the NBI which
Makati, since the venue of litigation as provided for in the Credit
conducted an entrapment operation.
Agreement is in Makati City.
 Entrapment operation:

Page 41 of 42
 o NBI’s Special Investigator Salvador Arteche,
together with some other NBI operatives, arrived
in Las Piñas around 5PM.
o Arteche posed as the delivery boy of the
Metrobank credit card. Upon reaching the address
written on the delivery receipt, he asked for Henry
Yu.
o Soledad responded that he was Henry Yu and
presented two identification cards which bore the
name and signature of Yu, while the picture
showed Soledad’s face.
o Soledad signed the delivery receipt.
o Arteche introduced himself as an NBI operative
and apprehended Soledad.
o Arteche recovered from Soledad the two
identification cards he presented earlier.
 Soledad was charged with Violation of Section 9(e), R.A.
No. 8484 for "possessing a counterfeit access device or
access device fraudulently applied for."
 RTC found Soledad guilty as charged. CA affirmed his
conviction.

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

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

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