Allied Banking v. Lim

ALLIED BANKING CORPORATION v. LIM SIO WAN, GR No.
133179, 2008-03-27
FACTS
On November 14, 1983, Respondent Lim Sio Wan deposited with petitioner Allied Banking
Corporation (Allied) a money market placement of PhP 1,152,597.35 for a term of 31 days to
mature on December 15, 1983.
One day, a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and
instructed the latter to pre-terminate Lim Sio Wan's money market placement, to issue a
manager's check representing the proceeds of the placement, and to give the check to one
Deborah Dee Santos who would pick up the check.
Later, Santos arrived at the bank and signed the application form for a manager's check to be
issued. The bank issued Manager's Check for PhP 1,158,648.49, representing the proceeds of
Lim Sio Wan's money market placement in the name of Lim Sio Wan, as payee.
The check was cross-checked "For Payee's Account Only" and given to Santos.
Thereafter, the manager's check was deposited in the account of Filipinas Cement Corporation
(FCC) at respondent (Metrobank), with the forged signature of Lim Sio Wan as indorser.
FCC had deposited a money market placement for PhP 2 million with respondent Producers
Bank. Santos was the money market trader assigned to handle FCC's account.
When the placement matured, FCC demanded the payment of the proceeds of the placement.
On December 5, 1983, the same date that So received the phone call instructing her to pre-
terminate Lim Sio Wan's placement, the manager's check in the name of Lim Sio Wan was
deposited in the account of FCC, purportedly representing the proceeds of FCC's money market
placement with Producers Bank. In other words, the Allied check was deposited with Metrobank
in the account of FCC as Producers Bank's payment of its obligation to FCC.
To clear the check and in compliance with the requirements of the Philippine Clearing House
Corporation (PCHC) Rules and Regulations, Metrobank stamped a guaranty on the check,
which reads: "All prior endorsements and/or lack of endorsement guaranteed."
The check was sent to Allied through the PCHC. Upon the presentment of the check, Allied
funded the check even without checking the authenticity of Lim Sio Wan's purported
indorsement. Thus, the amount on the face of the check was credited to the account of FCC.
On December 9, 1983, Lim Sio Wan deposited with Allied a second money market placement to
mature on January 9, 1984.
On December 14, 1983, upon the maturity date of the first money market placement, Lim Sio
Wan went to Allied to withdraw it. She was then informed that the placement had been pre-
terminated upon her instructions. She denied giving any instructions and receiving the proceeds
thereof. She desisted from further complaints when she was assured by the bank's manager
that her money would be recovered.
Lim Sio Wan, realizing that the promise that her money would be recovered would not
materialize, sent a demand letter to Allied asking for the payment of the first placement. Allied
refused to pay Lim Sio Wan, claiming that the latter had authorized the... pre-termination of the
placement and its subsequent release to Santos.
Consequently, Lim Sio Wan filed with the RTC a Complaint against Allied to recover the
proceeds of her first money market placement. The RTC ruled in favor of Lim Sio Wan and
ordered Allied Banking Corporation to pay plaintiff the amount of P1,158,648.49 plus 12%
interest per annum from March 16, 1984 until fully paid;
Allied appealed to the CA, which in turn issued the assailed Decision on March 18, 1998,
modifying the RTC Decision ordering and sentencing defendant-appellant Allied Banking
Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust
Company forty (40%) of... the amount of P1,158,648.49 plus 12% interest per annum
Hence, Allied filed the instant petition.
ISSUE
Whether Allied Banking is liable to pay Lim Sio Wan
RULING
YES
The Liability of the Parties
The Court held that Allied is liable to Lim Sio Wan. The court cited doctrine that the relationship
between a bank and a client is one of debtor-creditor. Articles 1953 and 1980 of the Civil Code
provide:
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.
Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan.
Thus, the Court ruled in a line of cases that a bank deposit is in the nature of a simple
loan or mutuum. Briefly, in Citibank, N.A. (Formerly First National City Bank) v.
Sabeniano, the Court ruled that a money market placement is a simple loan or mutuum.
Further, the Court defined a money market in Cebu International Finance Corporation v. Court
of Appeals, as follows:
[A] money market is a market dealing in standardized short-term credit instruments (involving
large amounts) where lenders and borrowers do not deal directly with each other but through a
middle man or dealer in open market. In a money market transaction, the... investor is a lender
who loans his money to a borrower through a middleman or dealer.
Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment
upon her request, or upon maturity of the placement, or until the bank is released from its
obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains
unextinguished.
Art. 1231 of the Civil Code enumerates the instances when obligations are considered
extinguished, thus:
Art. 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of
a resolutory condition, and prescription, are governed elsewhere in this Code.
From the factual findings of the trial and appellate courts that Lim Sio Wan did not authorize the
release of her money market placement to Santos and the bank had been negligent in so doing,
there is no question that the obligation of Allied to pay Lim Sio Wan had not been extinguished.
Art. 1240 of the Code states that "payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or any person authorized to receive
it." As commented by Arturo Tolentino:
Payment made by the debtor to a wrong party does not extinguish the obligation as to the
creditor, if there is no fault or negligence which can be imputed to the latter. Even when the
debtor acted in utmost good faith and by mistake as to the person of his creditor,... or through
error induced by the fraud of a third person, the payment to one who is not in fact his creditor, or
authorized to receive such payment, is void, except as provided in Article 1241. Such payment
does not prejudice the creditor, and accrual of interest is not... suspended by it.
Since there was no effective payment of Lim Sio Wan's money market placement, the
bank still has an obligation to pay her at six percent (6%) interest from March 16, 1984
until the payment thereof.
Fundamental and familiar is the doctrine that the relationship between a bank and a client is
one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide:
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.
Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions
shall be governed by the provisions concerning simple loan.
Thus, the Court ruled in a line of cases that a bank deposit is in the nature of a simple loan or
mutuum. More succinctly, in Citibank, N.A. v. Sabeniano, the Court ruled that a money
market placement is a simple loan or mutuum.
Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment
upon her request, or upon maturity of the placement, or until the bank is released from its
obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains
unextinguished.
Art. 1240 of the Code states that "payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or any person authorized to
receive it." As commented by Arturo Tolentino:
Payment made by the debtor to a wrong party does not extinguish the obligation as to the
creditor, if there is no fault or negligence which can be imputed to the latter. xxx
Since there was no effective payment of Lim Sio Wan's money market placement, the bank
still has an obligation to pay her at six percent (6%) interest from March 16, 1984 until the
payment thereof.

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ALLIED BANKING CORPORATION v. LIM SIO WAN, GR No.

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