Allied Bank vs.

Lim Sio Wan, 

G.R. No. 133179March 27, 2008

Facts:

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, as evidenced by Provisional
Receipt No. 1356 dated November 14, 1983. On December 5, 1983, 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.
The bank issued Manager’s Check No. 035669 for PhP 1,158,648.49. 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 Metropolitan Bank and Trust Co. (Metrobank), with the forged signature of Lim Sio Wan
as indorser. on September 21, 1983, FCC had deposited a money market placement for 2 million pesos with respondent
Producers Bank. Santos was the money market trader assigned to handle FCC’s account. The placement matured on
October 25, 1983 and was rolled-over until December 5, 1983.
When the placement matured, FCC demanded the payment of the proceeds of the placement.16 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.
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. Lim Sio Wan deposited with Allied a second
money market placement to mature on January 9, 1984.
Upon the maturity date of the first money market placement, Lim Sio Wan went to Allied to withdraw it.21 She
was then informed that the placement had been pre-terminated upon her instructions. She denied giving any instructions
and receiving the proceeds thereof.
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.
Lim Sio Wan filed with the RTC a Complaint against Allied to recover the proceeds of her first money market
placement which ordered Allied Bank to pay Lim Sio Wan.
Allied filed an appeal with CA which modified the RTC’s decision.

Issue:

Whether or not Allied Bank is correct in saying that Producers Bank was unjustly enriched?

Ruling:

Yes. Under Article 22 of the Civil Code, there is unjust enrichment when the following concur:

1.     A person is unjustly benefited

2.     Such benefit is derived at the expense of or with damages to another

In the instant case, Lim Sio Wans money market placement in Allied Bank was preterminated and withdrawn
without her consent. Moreover, the proceeds of the placement were deposited in Producers Banks account in Metrobank
without any justification. It cannot be validly claimed that FCC, and not Producers Bank, should be considered as having
been unjustly enriched. It must be remembered that FCCs money market placement with Producers Bank was already due
and demandable; thus, Producers Banks payment thereof was justified.

1
Clearly, Producers Bank must be held liable to Allied and Metrobank for the amount of the check plus 12% interest per
annum, moral damages, attorney’s fees, and costs of suit which Allied and Metrobank are adjudged to pay Lim Sio Wan
based on a proportion of 60:40. Thus, the Supreme Court held that the CA’s ruling be upheld with modification. Producers
Bank was ordered to pay Allied and Metrobank the amounts.

Associated Bank vs. Tan, 

G.R. No. 156940, Dec. 14, 2004

FACTS:

Vicente Henry Tan is a businessman and a regular depositor-creditor of the Associated Bank, he deposited a
postdated UCPB check in the amount of P101,000.00 issued to him by Willy Cheng from Tarlac. The check was duly
entered in his bank record thereby making his balance in the amount of P297,000.00, as of October 1, 1990, from his
original deposit of P196,000.00. 

Allegedly, upon advice and instruction of Associated Bank that the P101,000.00 check was already cleared and
backed up by sufficient funds, TAN, on the same date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. 

However, his suppliers and business partners went back to him alleging that the checks he issued bounced for
insufficiency of funds. Thereafter, TAN, thru his lawyer, informed the BANK to take positive steps regarding the matter for
he has adequate and sufficient funds to pay the amount of the subject checks. 

ISSUE: WHETHER OR NOT ASSOCIATED BANK PROPERLY EXERCISED ITS RIGHT TO SETOFF.

RULING: YES.

A bank generally has a right of setoff over the deposits therein for the payment of any withdrawals on the part of
a depositor. The right of a collecting bank to debit a client’s account for the value of a dishonored check that has
previously been credited has fairly been established by jurisprudence. 

Hence, the relationship between banks and depositors has been held to be that of creditor and debtor. Thus,
legal compensation under Article 1278of the Civil Code may take place "when all the requisites mentioned in Article 1279
are present," as follows:

"(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of
the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

2
 (5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor." 

Nonetheless, the real issue here is not so much the right of Associated Bank to debit Vicente Tan’s account but,
rather, the manner in which it exercised such right. 

In BPI v. Casa Montessori, the Court has emphasized that the banking business is impressed with public interest.
"Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even
required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with
meticulous care." 

Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals has held that "the
degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their
relationship with their depositors is concerned." Indeed, the banking business is vested with the trust and confidence of
the public; hence the "appropriate standard of diligence must be very high, if not the highest, degree of diligence." The
standard applies, regardless of whether the account consists of only a few hundred pesos or of millions.

Allied Banking Corporation vs. Sps. Macam,

 G.R. No. 200635,  February 01, 2021

Facts:

Caña, a branch manager of ABC-Alabang Las Piñas, overrode the verification requirements and approved the Php
46 Million fund transfer transactions, allegedly anticipating a deposit from a certain Helen Garcia on Feb 6 2003. When
the 46 Million was distributed to five accounts, one account holder, Valeria, withdrew from his account 1.7 M and
deposited 1.59 M to the account of Sps Macam. Macam then opened a new savings account where they deposited the
said 1.59 M and subsequently and on different dates, withdrew amounts totaling to 490K, leaving 1.1 M in their savings
account.

Due to the significant discrepancy, Allied Bank investigated the branch, AB-ALP, and its transactions on February
6, 2003.

On February 19, 2003, Angela Barcelona, Region Head, Retail Banking Group for Allied Bank's South Metro
Manila Branches, ordered the debit of the remaining P 1.1 Million from the account of the Spouses Mario Macam which
resulted in the closure thereof.

Issue:

Whether or Not Allied Bank is liable for unilaterally debiting and closing the deposit account of the Spouses
Mario Macam.

Held: 

Yes. The savings deposit agreement between the bank and the depositor is the contract that determines the
rights and obligations of the parties as in a simple loan. In contemplation of the fiduciary nature of a bank-depositor

3
relationship, the law imposes on the bank a higher standard of integrity and performance in complying with its obligations
under the contract of simple loan, beyond those required of non-bank debtors under a similar contract of simple loan.

Allied Bank cannot obliquely repudiate the resulting banking relationship with the Spouses Mario Macam and the
fiduciary nature thereof when it accepted the spouses' initial deposit of P 1,590,000.00, the very same funds it now claims
as its own. It cannot belatedly claim ignorance of its performance of a core banking function, i.e., accepting or creating
demand deposits.

With its acceptance of the Spouses Mario Macam's deposit and their opening of an account with the bank's
Pasong Tamo Branch on February 6, 2003, Allied Bank explicitly recognized the spouses' ownership and title over the P
1,590,000.00. Notably, the bank repeatedly acknowledged the creditor-debtor relationship and its obligation to pay the
Spouses Mario Macam on demand when the latter withdrew money from the said account on three separate occasions.
Undoubtedly, Allied Bank is liable to the Spouses Mario Macam for the P1 .1 Million in their deposit account.

Consolidated Bank v. CA & Diaz, 

G.R. No. 138569. Sept. 11, 2003

Facts:   

Solidbank is a domestic banking corporation while private respondent L.C. Diaz and Company, CPA’s   (“L.C. Diaz”), is a
professional partnership engaged in the practice of accounting and which opened a savings account with Solidbank. Diaz
through its cashier, Mercedes Macaraya , filled up a savings cash deposit slip and a savings checks deposit slip.   Macaraya
instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank and give him the Solidbank
passbook.  Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook.  The teller
acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips.  Since the
transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with
Solidbank.  When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that somebody got
the passbook. Calapre went back to L.C. Diaz and reported the incident to Macaraya. The following day,, L.C. Diaz through
its Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any transaction using the same passbook until L.C. Diaz
could open a new account followed by a formal written request later that day. It was also on the same day that L.C. Diaz
learned of the unauthorized withdrawal the day before of P300,000 from its savings account.  The withdrawal slip bore
the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however,
denied signing the withdrawal slip. A certain Noel Tamayo received the P300,000.

4
L.C. Diaz demanded from Solidbank the return of its money but to no avail.  Hence, L.C. Diaz filed a Complaint for
Recovery of a Sum of Money against Solidbank with the Regional Trial Court. After trial, the trial court rendered a decision
absolving Solidbank and dismissing the complaint.  Court of Appeals reversed the decision of the trial court.

Issue:   

Whether or not Solid bank must be held liable for the fraudulent withdrawal on private respondent’s account.

Held: 

Yes. The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. There
is a debtor-creditor relationship between the bank and its depositor.  The bank is the debtor and the depositor is the
creditor. The law imposes on banks high standards in view of the fiduciary nature of banking.  RA 8791 declares that the
State recognizes the “fiduciary nature of banking that requires high standards of integrity and performance.” This new
provision in the general banking law, introduced in 2000, is a statutory affirmation of Supreme Court decisions holding
that “the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.”

Solid bank’s tellers must exercise a high degree of diligence in insuring that they return the passbook only to the
depositor or his authorized representative. The tellers know, or should know, that the rules on savings account provide
that any person in possession of the passbook is presumptively its owner.  If the tellers give the passbook to the wrong
person, they would be clothing that person presumptive ownership of the passbook, facilitating unauthorized
withdrawals by that person.  For failing to return the passbook to Calapre, the authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 presumptively failed to observe such high degree of diligence in safeguarding the passbook,
and in insuring its return to the party authorized to receive the same. However, L.C. Diaz was guilty of contributory
negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands of an impostor.   Thus,
the liability of Solidbank should be reduced. Hence, the liability of Solid bank for actual damages was reduced to only
60%, the remaining 40% was borne by private respondent.

PNB v. CA, 

G.R. No. 127469, Jan. 15, 2004

Facts:

Leonilo Marcos filed in court a complaint for sum of money with damages against Phil. Banking Corporation (PBC).
Marcos allegedly made a time deposit in 2 occasions the amt. ofP664,897.67 andP764,897.67 through the persuasion of
his friend Pagsaligan, one of the bank’s officials. The bank issued receipt for the first deposit while a letter-certification
was issued for his second deposit by Pagsaligan. Pagsaligan kept the various time deposit certificates. Marcos claimed that
from the time of the deposit, he had not received the principal amount or its interest. When Marcos wanted to withdraw
his time deposit and its accumulated interest Pagsaligan convinced him to keep his time deposits intact and instead to
open several letters of credit to the bank by executing 3 trust receipts agreement. Since Marcos trusted the Bank and
Pagsaligan, hesigned blank forms for domestic letter of credits, trust receipts agreements and promissory notes. He was
required to deposit 30% of the total amount of credit and his time deposit will secure the remaining 70% of the letters of
credit. He   is   now   accusing   the   bank   for   unjustly   collecting   payment   without deducting the 30% of his down
payment and charging him with accumulating interests   since   his   time   deposit   serves   as   collateral   for   his  

5
remaining obligation. He further denied making a loan of P500,000 with 25% interest per annum covered by a promissory
note produced by the bank. The bank explained that the promissory notes he executed are distinct from the trust receipt
agreement and denied falsifying the promissory note covering for the loan of P500,000. The evidence presented on the
promissory note however is merely a machine copy of the document. The said loan was already paid by offsetting it from
his time deposit. The Trial Court ruled in favor of Marcos and directed the PBC to return his time deposit in the sum of
971, 2922.49 with interest thereon at the legal rate until fully restituted.  The trial court noted the Bank’s defective
documentation of its transaction and attributed the Bank’s lapses to Pagsaligan’s scheme to defraud Marcos of his time
deposit. The Court of Appeals, however, differed with the finding of the trial court as to the amount of time deposits since
the certification letter issued was the aggregate or total amount of the time deposits of Marcos as of that date.   CA
modified the decision of the trial court and a new judgment is rendered ordering PBC to return the time deposit in the
sum of P764,897.67 with interest.  Hence this petition.

Issue:

Whether or not the bank failed to take a proper account on Marcos’ depositsand payment of his loans.

Held: 

YES, The SC held that the Bank is liable for offsetting the time deposit of Marcos to the fictitious promissory note for the
500,000 loan. The court upheld the findings of the lower court on the discrepancies shown by the machine copy of the
duplicate of the promissory note and the suspicious claim of the bank that it could not produce the original copy thereof.
The mere machine copy of the document has no evidentiary value before the court. The court held that the Bank did not
forge the promissory note. Pagsaligan did to cover up his failure to give the proper account of Marcos’ time deposits. This
however does not excuse the Bank to return to Marcos the correct amount of his time deposit with interest. Bank has the
fiduciary duty before its clients.   The fiduciary nature of banking requires banks to assume a degree higher than that of a
good father of a family.  Thus, the bank’s fiduciary duty imposes upon it a higher level of accountability than that
expected of depositor.     Its duty is to observe the highest standards of integrity and performance. The business of
banking is imbued with public interest.  The stability of banks largely depends on the confidence of the people in the
honesty and efficiency of banks.   By the nature of its business, the Bank should have had in its possession the copies of
the disputed promissory note and the records and ledgers evidencing the offsetting of the loan with the time deposits of
Marcos. The Bank inexplicably failed to produce the original copies of these documents.  Clearly, the Bank failed to treat
the account of Marcos with meticulous care.  Assuming Pagsaligan is responsible for the spurious promissory note the
court held that a Bank is liable for the wrongful acts of its officers. A banking corporation is liable to innocent third
persons where the representation is made in the course of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent secretly abusing his authority and attempting to perpetrate a
fraud upon his principal or some other person.  

PNB v. Pike, 

G.R. No. 157845, Sept. 20, 2005

Facts:

A petition to review on certiorari under Rule 45, which seeks to reverse the decision of both the CA and RTC, in favor of
herein respondent Norman Pike.

Norman Pike, a gay entertainer who travels often to and from Japan, opened a US Dollar savings account with petitioner
PNB Buendia Branch for which he was issued a corresponding passbook. Pike alleged that he left his passbook inside a
locked cabinet before leaving for Japan. On April 19, 1993, few hours after he arrived from Japan, he discovered that

6
some of his valuables were missing including the passbook. He reported the incident which led to the arrest of Mr. Joy
Manuel Davasol. Davasol was found to have made 2 unauthorized withdrawals from Pike’s savings account.

March 31, 1993 ------------ $ 3,500

April 5, 1993 ----------------- $ 4,000

Pike demanded PNB Buendia the return of the $7,500 on the ground that he never authorized anybody to withdraw from
his US dollar savings account, that the signatures appearing on the subject withdrawal slips were clearly forgeries.

Defendant PNB refused, stating that it exercised due diligence of a good father of the family in handling the account.

Issue:

WON PNB exercised the degree of diligence that it ought to have exercised in dealing with their client?

Ruling:

No. With banks, the degree of diligence required, contrary to the position of petitioner PNB, is more than that of a good
father of a family considering that the business of banking is imbued with public interest due to the nature of their
functions. The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks.
Thus, the law imposes on banks a high degree of obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of banking. Section 2 of Republic Act No. 8791, which took effect on 13 June
2000, makes a categorical declaration that the State recognizes the “fiduciary nature of banking that requires high
standards of integrity and performance. That the said fiduciary relationship means that the bank’s obligation to observe
“highest standards of integrity and performance” is deemed written into every deposit agreement between a bank and its
depositor.

BPI v. Lifetime Marketing, 

G.R. No. 176434, June 25, 2008

7
FACTS:

Lifetime Marketing Corporation (LMC) opened a current account with the Bank of Philippine Islands in Greenhills EDSA
branch.

Since LMC have several agents around the Philippines, it required to remit their payments through BPI, where LMC
maintained its current account. It has been LMC's practice to require its agents to present a validated deposit slip and, on
that basis, LMC would issue to the latter an acknowledgement receipt.

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

A verification with BPI by LMC showed that Alice after the check deposits were machine-validated, Alice would request
the teller to reverse the transactions.  Based on general banking practices, the cancellation of deposit or payment
transactions upon request by any depositor or payor, requires that all copies of deposit slips must be retrieved or
surrendered to the bank. Notwithstanding this, the verbal requests of Alice Laurel and her husband to reverse the
deposits even after the deposit slips were already received and consummated were accommodated by BPI tellers.

Alice Laurel presented the machine-validated deposit slips to LMC which, on the strength thereof, considered her account
paid. LMC even granted her certain privileges or prizes based on the deposits she made.

A claim for damages was instituted against BPI and the trial court rendered a decision in favor of LMC, in which was
affirmed by the Court of Appeals.

ISSUE:

Whether or not BPI observed the highest degree of care in handling LMC’s account.

RULING:

NO. The reversal of the transactions in question was unilaterally undertaken by BPI's tellers without following normal
banking procedure which requires them to ensure that all copies of the deposit slips are surrendered by the depositor.
The machine-validated deposit slips do not show that the transactions have been cancelled, leading LMC to rely on these
slips and to consider Alice Laurel's account as already paid.

It is well to reiterate that the degree of diligence required of banks is more than that of a reasonable man or a good father
of a family. In view of the fiduciary nature of their relationship with their depositors, banks are duty-bound to treat the
accounts of their clients with the highest degree of care. BPI cannot escape liability because of LMC's failure to scrutinize
the monthly statements sent to it by the bank. This omission does not change the fact that were it not for the wanton and
reckless negligence of BPI's tellers in failing to require the surrender of the machine-validated deposit slips before
reversing the deposit transactions, the loss would not have occurred. BPI's negligence is undoubtedly the proximate cause
of the loss. Proximate cause is that cause which, in a natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred.

8
 BPI v. Casa Montessori,

G.R. No. 149454, May 28, 2004

FACTS: 

CASA Montessori (CASA) filed a complaint for collection with damages against petitioner bank after it discovered that nine
checks had been encashed by a certain Sonny Santos in the total amount of P782,000.00. it turned out that the signatures
on the checks were made by the external auditor of CASA. RTC ruled in favor of CASA. However, on appeal, the CA
apportioned the loss between BPI and CASA. It took into account CASA’s contributory negligence that resulted in the
undetected forgery. 

ISSUE: Whether or not BPI is liable? 

RULING: 

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

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

9
 Central Bank vs. City trust Bank, 

G.R. No. 141835, Feb. 4, 2009

FACTS:

Respondent Citytrust bank maintained  a  demand  deposit  account  with  petitioner Central Bank. Citytrust furnished
petitioner with the names and corresponding signatures of ︎5 of its  officers  authorized  to  sign  checks  and  serve  as 
drawers  and  indorsers  for  its  account.  It also provided  petitioner  with  the  list  and  corresponding  signatures  of  its 
roving  tellers  authorized  to withdraw,  sign  receipts  and  perform  other  transactions  on  its  behalf.  Petitioner later
issued security identification cards to the roving tellers one of whom was "Rounceval Flores" (Flores). Flores  presented 
for  payment  to  petitioner’s  Senior  Teller  2  Citytrust  checks,  payable  to Citytrust,  both  of  which  were  signed  and 
indorsed  by  Citytrust's  authorized  signatory-drawers. After  the  checks  were  certified  by  petitioner’s  Accounting 
Department,  the  Senior  Teller  asked Flores to sign on the notation. Instead of signing his name, however, Flores signed
as "Rosauro C. Cayabyab" — a fact the Senior Teller failed to notice. Petitioner then debited the amount of the checks
totaling P1, 750,000 from Citytrust's demand deposit account. Citytrust  bank,  alleging  that  the  checks  were  already 
cancelled  because  they  were stolen,  demanded  petitioner  to  restore  the  amounts.  Citytrust  filed  before  RTC  a 
complaint  for recovery  of  sum  of  money  with  damages  against  petitioner  alleging  that  it  erred  in  encashing the
checks and in charging the proceeds thereof to its account, despite the lack of authority of “Rosauro C. Cayabyab”. 

ISSUE:

Whether or not petitioner bank is liable. 

RULING:

YES. Petitioner’s teller did not verify Flores’ signature on the flimsy excuse that Flores had had previous transactions with
it for a number of years. The law imposes on banks high standards in view of the ︎fiduciary nature of banking. Section 2 of
Republic Act No. 8791 declares that the State  recognizes  the  "︎fiduciary  nature  of  banking  that  requires  high 
standards  of  integrity  and performance.”  The  bank  is  under  obligation  to  treat  the  accounts  of  its  depositors  with
meticulous care, always having in mind the ︎fiduciary nature of their relationship. This fiduciary relationship means that
the bank's obligation to observe "high standards of integrity  and  performance"  is  deemed  written  into  every  deposit 
agreement  between  a  bank and  its  depositor.  The fiduciary  nature  of  banking  requires  banks  to  assume  a  degree 
of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence
required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good
father of a family. Section 2 of RA 8791 prescribes the  statutory  diligence  required  from  banks  —  that  banks  must 
observe  "high  standards  of integrity and performance" in servicing their depositors. However,  Citytrust's  failure  to 
timely  examine  its  account,  cancel  the  checks  and  notify petitioner  of  their  alleged  loss/theft  should  mitigate 
petitioner's  liability,  in  accordance  with Article 2179 of the Civil Code.

10
 Landbank vs. Gualberto Catadman, 

G.R. No. 200407, June 17, 2020

Facts:

On March 21, 1999, Land Bank of the Philippines (Land Bank) received the following Development Bank of the Philippines
(DBP) Checks: (1) No. 1731263 in the amountofl."8,500.00payableto GCNKMerchandising, ovvned by respondent
Gualberto Catadman (Catadman), to be credited to his Land Bank Account No. 2562-0016-49; (2) No. 151837 in the
amount of Pl 00,000.00 payable to National Economic Development Authority (NEDA) -   Regional Office XI and to be
credited to its Land Bank Account No. 2562-001-46; and (3) No. 358896 in the amount of !'6,502.68 payable to Benjamin
S. Reyno (Reyno) and to be credited to his Land Bank Account No. 2561-0135-70. These three checks were all drawn by
DBP Mati Branch and endorsed to Bajada Branch of Land Bank thru its Davao Branch.

Land Bank discovered the erroneous transactions, which prompted it to send a  formal demand letter to Catadman for the
return of the amount of 1'115,002.68 which represents the total amount credited to his account less the 1'8,500.00 which
rightfully belonged to him. Catadman, however, did not heed Land Bank's letter.

Land Bank sent another demand letter to Catadman. Thereafter, there was an exchange of correspondence between
them. Finally, in his February 11, 2002 letter, Catadman acknowledged that the amount was credited to his account and
that he had already spent it. As a way of settlement, he promised to pay the amount of 1'2,000.00 monthly until the
whole amount is returned.

Catadman did as he promised. However, after paying an accumulated amount of Pl 5,000.00, he stopped and refused to
make further payments. The matter was referred to the legal counsel of Land Bank.

Issue:

Whether the Honorable Court of Appeals erred in not finding the petitioner liable for the full amount mistakenly credited
despite concluding that the latter was unjustly enriched at the expense of Land Bank and acted in bad faith.

Ruling:

Based on the established facts of the case, Catadman, as a depositor, did not suffer any financial loss or damage when his
account was credited with an additional Pl 15,002.68. It was the bank which suffered the loss albeit it was primarily

11
caused by the negligent act of its employee. Truth be told, however, that Catadman was unjustly enriched when he chose
to not return and just appropriated to himself the Pl 15,002.68 knowing fully well that the same does not belong to him.

Here, Land Bank had caused no loss or damage to Catadman. In truth, Catadman is undeniably at fault when he
appropriated the Pl 15,002.68 even knowing fully well that it did not belong to him.

Pursuant to Article 22 of the Civil Code, Catadman must unconditionally return the 1'115,002.68 to Land Bank, less the
P15,000.00 he has already paid. Contrary to his claim, the doctrine on the fiduciary nature of banking institutions in the
cases of Simex and BPI Family Bank does not preclude Land Bank from recovering the money from him. The ruling of this
Court would have been different if it were NEDA and Reyno who filed a complaint against Land Bank. 

Finally, this Court reprimands Land Bank for its negligence. This shall serve as a reminder to Land Bank that the law
imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act (R.A.) No. 8791,31
declares that the State recognizes the "fiduciary nature of banking that requires high standards of integrity and
performance."

The bank is under obligation to treat the accounts of all its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship. This fiduciary relationship means that the bank's obligation to observe "high
standards of integrity and performance" is deemed written into every deposit agreement between a  bank and its
depositor. ikewise, Section 2 of R.A. No. 8791 prescribes the statutory diligence required from banks -  that banks must
observe "high standards of integrity and performance" in servicing their depositors.

Go vs. BSP, 

G.R. No. G.R. No. 178429, October 23, 2009

FACTS: 

Jose Go, the Director and the President and Chief Executive Officer of the Orient Commercial Banking
Corporation (Orient Bank) was charged before the RTC for violation of Section 83 of RA 337 or the
General Banking Act. Go allegedly borrowed the deposits/funds of the Orient Bank and/or acting as
guarantor, indorser of obligor for loans to other persons. He then used the borrowed deposits/funds
in facilitating and granting and/or of credit lines/loans to the New Zealand Accounts loans in the total
amount of PHP 2,754,905,857. He completed the alleged transaction without the written approval of
the majority of the Board of Directors of said Orient Bank.

Go then filed a motion to quash the Information. He averred that the use of the word "and/or" meant
that he was charged for being either a borrower or a guarantor, or for being both. Thus the charge do
not constitute an offense. That the Section 83 of RA 337 penalized only directors and officers xxx who
acted either as borrower or as guarantor, but not as both. Also that the Information did not
constitute an offense since the information failed to state the amount he purportedly borrowed.
According to Go, the second paragraph of Section 83, serves as an exception to the first paragraph
which allows the banks to extend credit accommodations to their directors, officers, and
stockholders, provided it is "limited to an amount equivalent to the respective outstanding deposits
and book value of the paid-in capital contribution in the bank."
ISSUE:

12
Whether or not banks were created for the benefit of their directors and officers/ whether or not
they can use the assets of the bank for their own benefit.

RULING:
No. Banks were not created for the benefit of their directors and officers; they cannot use the assets
of the bank for their own benefit, except as may be permitted by law. Congress has thus deemed it
essential to impose restrictions on borrowings by bank directors and officers in order to protect the
public, especially the depositors.

While the first paragraph of Section 83 is penal in nature, and by principle should be strictly
construed in favour of the accused, the Court is unwilling to adopt a liberal construction that would
defeat the legislature’s intent in enacting the statute. The objective of the law should allow for a
reasonable flexibility in its construction. Section 83 of RA 337, as well as other banking laws adopting
the same prohibition, was enacted to ensure that loans by banks and similar financial institutions to
their own directors, officers and stockholders are above aboard.

When the law prohibits directors and officers of banking institutions from becoming in any
manner an obligor of the bank (unless with the approval of the board), the terms of the prohibition
shall be the standards to be applied to directors’ transactions such as those involved in the present
case.

Soriano vs. BSP, 

G.R. No. 162336, Feb. 1, 2010

FACTS:

Two separate informations were filed against petitioner Hilario Soriano. He was the president of Rural Bank of San Miguel
when he ordered, facilitated and received the proceeds of the loan worth 8 million to Spouses Enrico and Amalia Carlos
without the bank officers approval. He was charged for Esatafa through falsification of commercial documents and also
for violation of DOSRI law.

In Criminal Case for violation of DOSRI Rules, the information alleged that Soriano was the President of RBSM and that he
was able to indirectly obtain a loan by putting the loan in the name of depositor Carlos and that he did this without
complying with the requisite of board approval, reportorial and ceiling requirements.

ISSUE: Whether there can be a charge for DOSRI violation in such a situation wherein the accused bank officer did not
secure a loan in his own name?

RULING: Yes. Section 83 of RA 337 (DOSRI LAW) reads:

Section 83. No director or officer of any banking institution shall, either directly or indirectly, for himself or as the
representative or agent of others, borrow any of the deposits of funds of such bank, nor shall he become a guarantor,
endorser, or surety for loans from such bank to others, or in any manner be an obligor for moneys borrowed from the
bank or loaned by it, except with the written approval of the majority of the directors of the bank, excluding the director

13
concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be
transmitted forthwith to the Superintendent of Banks. The office of any director or officer of a bank who violates the
provisions of this section shall immediately become vacant and the director or officer shall be punished by imprisonment
of not less than one year nor more than ten years and by a fine of not less than one thousand nor more than ten
thousand pesos. x x x

The prohibition in Section 83 is broad enough to cover various modes of borrowing.

It covers loans by a bank director or officer (like herein petitioner) which are made either: 

(1) directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of others. 

It applies even if the director or officer is a mere guarantor, indorser or surety for someone else's loan or is in any manner
an obligor for money borrowed from the bank or loaned by it. 

The covered transactions are prohibited unless the approval, reportorial and ceiling requirements under Section 83 are
complied with. The prohibition is intended to protect the public, especially the depositors, from the overborrowing of
bank funds by bank officers, directors, stockholders and related interests, as such overborrowing may lead to bank
failures.

A direct borrowing is obviously one that is made in the name of the DOSRI himself or where the DOSRI is a named party,
while an indirect borrowing includes one that is made by a third party, but the DOSRI has a stake in the transaction.

In the case at bar, the manner of securing the loan was an indirect borrowing: names petitioner as the benefactor of the
indirect loan; and states that the requirements of the law were not complied with. 

It contains all the required elements for a violation of Section 83, even if petitioner did not secure the loan in his own
name.

The broad interpretation of the prohibition in Section 83 is justified by the fact that it even expressly covers loans to third
parties where the third parties are aware of the transaction (such as principals represented by the DOSRI), and where the
DOSRI’s interest does not appear to be beneficial but even burdensome (such as in cases when the DOSRI acts as a mere
guarantor or surety). If the law finds it necessary to protect the bank and the banking system in such situations, it will
surely be illogical for it to exclude a case like this where the DOSRI acted for his own benefit, using the name of an
unsuspecting person. A contrary interpretation will effectively allow a DOSRI to use dummies to circumvent the
requirements of the law.

Soriano vs. People of the Philippines, 

G.R. No. 240458, Jan. 8, 2020

FACTS:

Soriano was charged for estafa through falsification of commercial documents for allegedly securing a loan of 48 million in
the name of two (2) persons when in fact these individuals did not make any loan in the bank, nor did the bank's officers
approved or had any information about the said loan. The state prosecutor conducted a Preliminary Investigation on the
basis of letters sent by the officers of Special Investigation of BSP together with 5 affidavits and filed two (2) separate
information against Soriano for estafa through falsification of commercial documents and violation of DORSI law.

14
Soriano moved for the quashal of the two (2) informations based on the ground:

1. that the court has no jurisdiction over the offense charged, for the letter transmitted by the BSP to the DOJ constituted
the complaint and was defective for failure to comply with the mandatory requirements of Sec. 3(a), Rule 112 of the Rules
of Court, such as statment of address of the petitioner and oath of subscription and the signatories were not authorized
persons to file the complaint; and 

2. that the facts charged do not constitute an offense, for the commission of estafa uner par. 1(b) of Art. 315 of the RPC is
inherently incompatible with the violation of DORSI law (Sec. 83 or RA 337 as amended by PD 1795), and therefore a
person cannot be charged of both offenses.

ISSUE:

Whether or not the complaint filed complied with the mandatory requirements of law.

Whether or not the petition for certiorari under Rule 65 is the proper remedy in an order denying a Motion to Quash.

HELD:

Yes, the letters transmitted were not intended to be the complaint but merely transmitted for preliminary investigation.
The affidavits and not the letter transmitting them initiated the preliminary investigation and therefore is the complaint
which substantially complied with the manadory requirements of law.

No. The proper procedure in such a case is for the accused to enter a plea, go to trial without prejudice on his part to
present special defenses he had invoked in his motion to quash and if after trial on the merits, an adverse decision is
rendered, to appeal therefrom in the manner authorized by law.

15
 Jose Apolinario, Jr. y Llauder Vs. People of the Philippines
G.R. No. 242977. October 13, 2021

FACTS:

In two separate lnfonnations, Apolinario, Winefredo T. Capilitan (Capilitan), Motohiko

Hagisaka (Hagisaka), and Elmer T. Magpantay (Magpantay), directors and officers of the Unitrust
Development Bank (Unitrust), were charged with violation of Section 36 of Republic Act No.
8791, in relation to Section 36 of Republic Act No. 7653.
Regional Trial Court found that Apolinario violated Section 31 53 of Batas Pambansa Bilang 68 or
the Corporation Code of the Philippines when he allowed the loans' release without the requisite
board approval and documentation. 54 It noted that Apolinario signed the Minutes of the Board
Meetings despite his knowledge that no board meetings were held approving the two loans. 55
Finally, it ruled that the prosecution established that Apolinario conspired with Capilitan in the
commission of the offense. 56
Apolinario moved for reconsideration and argued that the Regional Trial Court failed to
appreciate the testimonies of the prosecution witnesses as exculpating evidence to prove his
innocence. He also questioned the existence of conspiracy and how the prosecution failed to
present evidence that he was appointed as a Uni trust director. 57

In its January 22, 2013 Order,58 the Regional Trial Court denied Apolinario's motion for
reconsideration. 59 It held that after reassessing the evidence on record and Apolinario's allegations,
it found no reason to reverse its ruling.

ISSUE:

Whether or not the prosecution proved beyond reasonable doubt the guilt of petitioner Jose
Apolinario Jr. y Llauder for violation of Section 36 of Republic Act No. 8791, in relation to Section
36 of Republic Act No. 7653.

RULING:
When a case is brought to this Court via a Petition for Review on Certiorari under Rule 45, the
jurisdiction of this Court shall be limited to reviewing and correcting errors of law committed by
the lower courts. This Court need not review the factual issues nor reexamine and reevaluate the
evidence presented by the parties. In Philippine Savings Bank v. Sakata, this Court explained:
The general rule is that only questions of law or ··those which ask
to resolve which law applies on a given set of facts" may be raised in a Petition for Review on
Certiorari under Rule 45 of the Rules of Court. Meanwhile, questions of fact - or those which
require a review of the evidence to determine '·the truth or falsehood of alleged facts" or involve
the correctness of the lower courts' appreciation of the evidence - are not proper in a Petition for
Review on Certiorari. The function of the Court, not being a trier of facts, is limited to reviewing
errors of law committed by the lower courts. Thus. it accords finality to the factual findings of the
trial court, especially when such findings are affirmed by the appellate court.
While the general rule admits of exceptions. the party raising

16
questions of fact must not only allege the exception but should also prove and substantiate that its
case clearly falls under the exception.

BENGUET MANAGEMENT CORPORATION VS. KEPPEL BANK

G.R. No. 153571 Sept. 18, 2003

FACTS:

Benguet Management Corporation (BMC) and Keppel Bank Philippines, Inc. (KBPI), acting as trustee of the other
respondent banks, entered into a Loan Agreement and Mortgage Trust Indenture (MTI) whereby BMC, in consideration of
the syndicated loan of P190,000,000.00, constituted in favor of KBPI a mortgage on several lots located in Alaminos,
Laguna and Iba, Zambales. On September 28, 2001, for failure of BMC to pay in full the installments due on the Loan
Agreement and Mortgage Trust Indenture, , 

KBPI filed an application 4 for extra-judicial foreclosure of mortgage before the Office of the Clerk of Court of the Regional
Trial Court of Iba, Zambales. The trial court granted the foreclosure proceedings. Hence, BMC filed a petition for certiorari
with the Court of Appeals. In its Resolution dated April 5, 2002, the Court of Appeals denied BMC’s prayer to restrain the
consolidation of title in the name of KBPI. BMC filed a motion for reconsideration claiming, among others, that Section 47
of the General Banking Act (Republic Act No. 8791), which reduced the period of redemption for extra-judicially
foreclosed properties of juridical persons from one year to — "until, but not after, the registration of the certificate of
foreclosure sale . . . which in no case shall be more than three (3) months after foreclosure, whichever is earlier," is unduly
discriminatory and therefore unconstitutional. On May 28, 2002, the Court of Appeals denied BMC’s motion for
reconsideration. Hence, BMC filed the instant petition, raising the issue among others that the new law (General Banking
Law of 2000) abrogating the right to one-year redemption period of corporate mortgagors is unconstitutional.

ISSUE:

W/N the General Banking Law of 2000 is Constitutional 2. W/N KBPI violated the rule against forum-shopping in filing
applications for extra-judicial foreclosure of real estate mortgage with both the RTCs in Iba and San Pablo City

HELD:

First Issue: The resolution of the constitutionality of Section 47 of the General Banking Act (Republic Act No. 8791) is not
the very lis mota of the controversy: 1. Anent the constitutional issue raised by BMC, we have repeatedly held that the
constitutionality of a law may be passed upon by the Court, where there is an actual case and that the resolution of the
constitutional question must be necessary in deciding the controversy. 2. In this case, the resolution of the
constitutionality of Section 47 of the General Banking Act (Republic Act No. 8791) which reduced the period of
redemption of extra-judicially foreclosed properties of juridical persons is not the very lis mota of the controversy. BMC is
not asserting a legal right for which it is entitled to a judicial determination at this time inasmuch as it may not even be
entitled to redeem the foreclosed properties. Until an actual controversy is brought to test the constitutionality of
Republic Act No. 8791, the presumption of validity, which inheres in every statute, must be accorded to it.

17
 SAN FERNANDO RURAL BANK, INC., PETITIONER, VS. PAMPANGA OMNIBUS DEVELOPMENT CORPORATION AND
DOMINIC G. AQUINO

G.R. NO. 168088, April 04, 2007

FACTS:

Pampanga Omnibus Development Corporation (respondent PODC) was the registered owner of a parcel of land in San
Fernando, Pampanga. Respondent PODC secured two loans from petitioner and Masantol Rural Bank, Inc. (MRBI) at an
annual interest of 24%: ₱750,000.00 on April 20, 1989, to mature on April 15, 1990; and another ₱750,000.00 on May 3,
1989, payable on April 28, 1990. The loans were evidenced by separate promissory notes executed by Federico R.
Mendoza and Anastacio E. de Vera. To secure payment of the loans, respondent PODC executed a real estate mortgage
over the subject lot in favor of the creditor banks. The contract provided that in case of failure or refusal of the mortgagor
to pay the obligation secured thereby, the real estate mortgage may be extrajudicially foreclosed in accordance with Act
No. 3135, as amended.

Eliza M. Garbes (PODC President and daughter of Federico Mendoza), together with her husband Aristedes Garbes,
secured a ₱950,000.00 loan from petitioner on March 27, 1992. The loan was to mature after 180 days or on September
23, 1992. Mendoza signed as co-borrower in the promissory note executed by the spouses. The spouses also executed a
chattel mortgage over their personal property as security for the payment of their loan account.

Upon respondent PODC’s failure to pay its loan to petitioner, the latter filed a petition for extrajudicial foreclosure of real
estate mortgage and at the auction on April 23, 2001, petitioner emerged as the winning bidder for ₱1,245,982.05.

ISSUE:

Whether or not the petitioner SAFER Bank, as well as the Honorable Court, is precluded from applying the governing law,
under which the redemption period had clearly expired.

HELD:

Yes. The CA erred in holding that the Order of the RTC granting the petition for a writ of possession was merely
interlocutory. Interlocutory orders are those that determine incidental matters and which do not touch on the merits of
the case or put an end to the proceedings. A petition for certiorari under Rule 65 of the Rules of Court is the proper
remedy to question an improvident interlocutory order On the other hand, a final order is one that disposes of the whole
matter or terminates the particular proceedings or action leaving nothing to be done but to enforce by execution what

18
has been determined. It is one that finally disposes of the pending action so that nothing more can be done with it in the
lower court The remedy to question a final order is appeal under Rule 41 of the Rules of Court.

The Supreme Court agrees with petitioner’s contention that the December 20, 2002 Order of the RTC granting the
petition for a writ of possession is final. The remedy of respondents was to appeal to the CA by filing their notice of appeal
within the period therefor Indeed, when the RTC denied on November 10, 2003 the motion of respondents to quash the
writ the court had earlier issued, respondents appealed to the CA under Rule 41 of the Rules of Court. 

The threshold issue between petitioner and respondents in the RTC was the correct amount of redemption money under
Section 47 of R.A. No. 8791. Respondent Aquino had the right to file an action against petitioner in the RTC in the exercise
of its general jurisdiction to enforce redemption within the redemption period to preserve its right to redeem the
foreclosed property.71 It bears stressing that the controversy between the parties relates to the precise amount of
redemption: petitioner contended that, under the real estate mortgage executed by respondent PODC in its favor, the
loan account of the spouses Garbes was secured by the property covered by said deed; on the other hand, respondents
averred that only the loan account of respondent PODC was secured by the mortgage of its property. Indeed, the parties
could have raised the issue of the redemption period under the second paragraph of Section 47 of R.A. No. 8791.

19