G.R. No.

147800

November 11, 2003

UNITED COCONUT PLANTERS BAN , Petitioner, vs. TEO!ILO C. RA"OS, Respondent. DECISION CALLE#O, SR., J.: Before us is a petition for review on certiorari of the March 3 , ! " Decision " of the Court of #ppea$s in C#%&.R. C' No. ()*3* which affir+ed the Decision! of the Re,iona$ -ria$ Court .R-C/ of Ma0ati Cit1, Branch "23, in Civi$ Case No. 42%"3!!. -he #ntecedents On Dece+5er !!, "433, the petitioner 6nited Coconut P$anters Ban0 .6CPB/ ,ranted a $oan of P!,3 , to 7a+5oan,a Deve$op+ent Corporation .7DC/ with 'enicio Ra+os and the Spouses -eofi$o Ra+os, Sr. and #+e$ita Ra+os as sureties. -eofi$o Ra+os, Sr. was the E8ecutive Officer of the I,$esia ni Cristo. In March "432, the petitioner ,ranted an additiona$ $oan to 7DC, a,ain with 'enicio Ra+os and the Spouses -eofi$o Ra+os and #+e$ita Ra+os as sureties.3 9owever, the 7DC fai$ed to pa1 its account to the petitioner despite de+ands. -he $atter fi$ed a co+p$aint with the R-C of Ma0ati a,ainst the 7DC, 'enicio Ra+os and the Spouses -eofi$o Ra+os, Sr. for the co$$ection of the corporation:s account. -he case was doc0eted as Civi$ Case No. ")2(3. On ;e5ruar1 "(, "434, the R-C of Ma0ati, Branch "32, rendered <ud,+ent in favor of the petitioner and a,ainst the defendants. -he decreta$ portion of the decision reads= ". -o pa1 p$aintiff the su+ of -9REE MI>>ION ONE 96NDRED ;I;-? -9O6S#ND PESOS .P3,"( , p$us interest, pena$ties and other char,es@ !. -o pa1 p$aintiff the su+ of P! , 3. -o pa1 the cost of suit.2 -he decision 5eca+e fina$ and e8ecutor1. On +otion of the petitioner, the court issued on Dece+5er "3, "44 a writ of e8ecution for the enforce+ent of its decision orderin, Deput1 Sheriff PioAuinto P. 'i$$apaBa to $ev1 and attach a$$ the rea$ and persona$ properties 5e$on,in, to the aforesaid defendants to satisf1 the <ud,+ent. ( In the writ of e8ecution, the na+e of one of the defendants was correct$1 stated as -eofi$o Ra+os, Sr. -o he$p the Sheriff i+p$e+ent the writ, #tt1. Cesar Borda$5a, the head of the >iti,ation and Enforce+ent Division .>ED/ of the petitioner, reAuested Eduardo C. Reniva, an appraiser of the petitioner:s Credit and #ppraisa$ Investi,ation Depart+ent .C#ID/ on Cu$1 "*, "44! to ascertain if the defendants had an1 $evia5$e rea$ and persona$ propert1. -he $aw1er furnished Reniva with a cop1 of -a8 Dec$aration B% !3% *) %R coverin, a propert1 in DueEon Cit1. ) In the course of his investi,ation, Reniva found that the propert1 was a residentia$ $ot, identified as >ot "!, B$oc0 (, Oca+po #venue, Don Cose Su5division, DueEon Cit1, with an area of 2 sAuare +eters, covered 51 -C- No. !*(")* .PR% "3" 3/ under the na+e of -eofi$o C. Ra+os, President and Chair+an of the Board of Directors of the Ra+dustria$ Corporation, +arried to Re5ecca ;. Ra+os.* -he propert1 was covered 51 -a8 Dec$aration No. B% !3% *) %R under the na+es of the said spouses. Reniva went to the propert1 to inspect it and to verif1 the identit1 of the owner thereof. 9e saw wor0ers on the propert1 constructin, a 5un,a$ow. 3 9owever, he fai$ed to ta$0 to the owner of the propert1. Per infor+ation ,athered fro+ the nei,h5orhood, Reniva confir+ed that the Spouses -eofi$o C. Ra+os and Re5ecca Ra+os owned the propert1. On Cu$1 !!, "44!, Reniva su5+itted a report on his appraisa$ of the propert1. 9e stated therein that the fair +ar0et va$ue of the propert1 as of #u,ust ", "44! was P4 , and that the owner thereof was -eofi$o C. Ra+os, +arried to . for attorne1:s fees@ and . /

Re5ecca Ra+os. Fhen appraised 51 the petitioner of the said report, the Sheriff prepared a notice of $ev1 in Civi$ Case No. ")2(3 statin,, inter a$ia, that the defendants were -eofi$o Ra+os, Sr. and his wife #+e$ita Ra+os and caused the annotation thereof 51 the Re,ister of Deeds on the said tit$e. 4 Meanwhi$e, in #u,ust of "443, Ra+dustria$ Corporation app$ied for a $oan with the 6CPB, a sister co+pan1 of the petitioner, usin, the propert1 covered 51 -C- No. !*(")* .PR%"3" 3/ as co$$atera$ therefor. -he Ra+dustria$ Corporation intended to use the proceeds of the $oan as additiona$ capita$ as it needed to participate in a 5iddin, pro<ect of San Mi,ue$ Corporation." In a +eetin, ca$$ed for 51 the 6CPB, the respondent was infor+ed that upon verification, a notice of $ev1 was annotated in -C- No. !*(")* in favor of the petitioner as p$aintiff in Civi$ Case No. ")2(3, entit$ed 6nited Coconut P$anters Ban0 v. 7a+5oan,a Rea$t1 Deve$op+ent Corporation, 'enicio #. Ra+os and -eofi$o Ra+os, Sr., 5ecause of which the 5an0 had to ho$d in a5e1ance an1 action on its $oan app$ication. -he respondent was shoc0ed 51 the infor+ation. 9e was not a part1 in the said case@ neither was he aware that his propert1 had 5een $evied 51 the sheriff in the said case. 9is 5$ood te+perature rose so +uch that i++ediate$1 after the +eetin,, he proceeded to his doctor, Dr. &atcha$ian, at the St. >u0es Medica$ Center, who ,ave the respondent the usua$ treat+ent and +edication for cardio%vascu$ar and h1pertension pro5$e+s. "" 6pon advise fro+ his $aw1er, #tt1. Car+e$ito Montano, the respondent e8ecuted an affidavit of denia$ "! dec$arin, that he and -eofi$o Ra+os, Sr., one of the <ud,+ent de5tors in Civi$ Case No. ")2(3, were not one and the sa+e person. On Septe+5er 3 , "443, the respondent, throu,h counse$, #tt1. Car+e$ito #. Montano, wrote Sheriff 'i$$apaBa, infor+in, hi+ that a notice of $ev1 was annotated on the tit$e of the residentia$ $ot of the respondent, covered 51 -CNo. !*(")* .PR%"3" 3/@ and that such annotation was irre,u$ar and un$awfu$ considerin, that the respondent was not -eofi$o Ra+os, Sr. of I,$esia ni Cristo, the defendant in Civi$ Case No. ")2(3. 9e de+anded that Sheriff 'i$$apaBa cause the cance$$ation of the said annotation within five da1s fro+ notice thereof, otherwise the respondent wou$d ta0e the appropriate civi$, cri+ina$ or ad+inistrative action a,ainst hi+. #ppended thereto was the respondent:s affidavit of denia$. ;or his part, Sheriff 'i$$apaBa furnished the petitioner with a cop1 of the said $etter. In a conversation over the phone with #tt1. Car+e$ito Montano, #tt1. Cesar Borda$5a, the head of the petitioner:s >ED, su,,ested that the respondent fi$e the appropriate p$eadin, in Civi$ Case No. ")2(3 to prove his c$ai+ that #tt1. Montano:s c$ient, -eofi$o C. Ra+os, was not defendant -eofi$o Ra+os, Sr., the defendant in Civi$ Case No. ")2(3. On Octo5er !", "443, the respondent was infor+ed 51 the 6CPB that Ra+dustria$ Corporation:s credit $ine app$ication for P!, , had 5een approved."3 Su5seAuent$1, on Octo5er !!, "443, the respondent, in his capacit1 as President and Chair+an of the Board of Directors of Ra+dustria$ Corporation, and Re5ecca ;. Ra+os e8ecuted a pro+issor1 note for the said a+ount pa1a5$e to the 6CPB in insta$$+ents for a period of "3 da1s. "2 Si+u$taneous$1, the respondent and his wife Re5ecca ;. Ra+os acted as sureties to the $oan of Ra+dustria$ Corporation. "( 9owever, the respondent was concerned 5ecause when the proceeds of the $oan were re$eased, the 5iddin, period for the San Mi,ue$ Corporation pro<ect had a$read1 e$apsed. ") #s 5usiness did not ,o we$$, Ra+dustria$ Corporation found it difficu$t to pa1 the $oan. It thus app$ied for an additiona$ $oan with the 6CPB which was, however, denied. -he corporation then app$ied for a $oan with the P$anters Deve$op+ent Ban0 .PDB/, the proceeds of which wou$d 5e used to pa1 its account to the 6CPB. -he respondent offered to use his propert1 covered 51 -C- No. !*(")* as co$$atera$ for its $oan. PDB a,reed to pa1 off the outstandin, $oan o5$i,ation of Ra+dustria$ Corporation with 6CPB, on the condition that the +ort,a,e with the $atter wou$d 5e re$eased. 6CPB a,reed. Pendin, ne,otiations with 6CPB, the respondent discovered that the notice of $ev1 annotated on -C- No. !*(")* .PR%"3" 3/ at the instance of the petitioner had not 1et 5een cance$$ed."* Fhen apprised thereof, PDB withhe$d the re$ease of the $oan pendin, the cance$$ation of the notice of $ev1. -he account of Ra+dustria$ Corporation with 6CPB thus re+ained outstandin,. -he +onth$1 a+ortiEation on its $oan fro+ 6CPB 5eca+e due and re+ained unpaid. Fhen the respondent went to the petitioner for the cance$$ation of the notice of $ev1 annotated on his tit$e, the petitioner:s counse$ su,,ested to the respondent that he fi$e a +otion to cance$ the $ev1 on e8ecution to ena5$e the court to reso$ve the issue. -he petitioner assured the respondent that the +otion wou$d not 5e opposed. Rather than wait for the petitioner to act, the respondent, throu,h counse$, fi$ed the said +otion on #pri$ 3, "442. #s pro+ised, the petitioner did not oppose the +otion. -he court ,ranted the +otion and issued an order on #pri$ "!, "442 orderin, the Re,ister of Deeds to cance$ the $ev1. -he Re,ister of Deeds of DueEon Cit1 co+p$ied and cance$$ed the notice of $ev1. "3

Despite the cance$$ation of the notice of $ev1, the respondent fi$ed, on Ma1 !), "442, a co+p$aint for da+a,es a,ainst the petitioner and Sheriff 'i$$apaBa 5efore the R-C of Ma0ati Cit1, raff$ed to Branch "23 and doc0eted as Civi$ Case No. 42%"3!!. -herein, the respondent .as p$aintiff/ a$$e,ed that he was the owner of a parce$ of $and covered 51 -CNo. !*(")*@ that -eofi$o Ra+os, Sr., one of the <ud,+ent de5tors of 6CPB in Civi$ Case No. ")2(3, was on$1 his na+esa0e@ that without an1 $e,a$ 5asis, the petitioner and Sheriff 'i$$apaBa caused the annotation of a notice to $ev1 on the -C- of his aforesaid propert1 which caused the disapprova$ of his $oan fro+ 6CPB and, thus +ade hi+ $ose an opportunit1 to participate in the 5iddin, of a considera5$e pro<ect@ that 51 reason of such wron,fu$ annotation of notice of $ev1, he suffered s$eep$ess ni,hts, +ora$ shoc0, +enta$ an,uish and a$+ost a heart attac0 due to hi,h 5$ood pressure. 9e thus pra1ed= F9ERE;ORE, pre+ises considered, it is +ost respectfu$$1 pra1ed of the 9onora5$e Re,iona$ -ria$ Court that after due hearin,, <ud,+ent 5e rendered in his favor 51 orderin, defendants <oint$1 and severa$$1, to pa1 as fo$$ows= ". P3, !. 3 3. ! 2. ! , , , , . . . . as +ora$ da+a,es@

as e8e+p$ar1 da+a,es@ as actua$ da+a,es@ as attorne1:s fees@

(. Cost of suit."4 In its answer, the petitioner, whi$e ad+ittin, that it +ade a +ista0e in causin, the annotation of notice of $ev1 on the -C- of the respondent, denied that it was +otivated 51 +a$ice and 5ad faith. -he petitioner a$$e,ed that after ascertainin, that it indeed +ade a +ista0e, it proposed that the respondent fi$e a +otion to cance$ $ev1 with a pro+ise that it wou$d not oppose the said +otion. 9owever, the respondent di$$1%da$$ied and fai$ed to fi$e the said +otion@ forthwith, if an1 da+a,es were sustained 51 the respondent, it was 5ecause it too0 hi+ Auite a $on, ti+e to fi$e the +otion. -he petitioner shou$d not thus 5e +ade to suffer for the conseAuences of the respondent:s de$a1. -he petitioner further asserted that it had no 0now$ed,e that there were two persons 5earin, the sa+e na+e -eofi$o Ra+os@ it was on$1 when Sheriff 'i$$apaBa notified the petitioner that a certain -eofi$o C. Ra+os who appeared to 5e the re,istered owner of -C- No. !*(")* that it $earned for the first ti+e the notice of $ev1 on the respondent:s propert1@ forthwith, the petitioner he$d in a5e1ance the sa$e of the $evied propert1 at pu5$ic auction@ 5arred 51 the fai$ure of the respondent to fi$e a third%part1 c$ai+ in Civi$ Case No. ")2(3, the petitioner cou$d not cause the re+ova$ of the $ev1@ in $ieu thereof, it su,,ested to the respondent the fi$in, of a +otion to cance$ $ev1 and that the petitioner wi$$ not oppose such +otion@ surprisin,$1, it was on$1 on #pri$ "!, "442 that the respondent fi$ed such +otion@ the petitioner was thus surprised that the respondent fi$ed an action for da+a,es a,ainst it for his fai$ure to secure a ti+e$1 $oan fro+ the 6CPB and PDB. -he petitioner thus pra1ed= F9ERE;ORE, in view of the fore,oin, pre+ises, it is respectfu$$1 pra1ed of this 9onora5$e Court that <ud,+ent 5e rendered in favor of defendant 6CPB, dis+issin, the co+p$aint in toto and orderin, the p$aintiff to= ". pa1 +ora$ da+a,es in the a+ount of PESOS= -9REE MI>>ION P3, a+ount of PESOS= ;I'E 96NDRED -9O6S#ND P( , . @ , . and e8e+p$ar1 da+a,es in the

!. pa1 attorne1:s fees and $iti,ation e8penses in an a+ount of not $ess than PESOS= -FO 96NDRED -9O6S#ND P! , . @ Other re$iefs and re+edies dee+ed <ust and eAuita5$e under the pre+ises are a$so pra1ed for. ! In the +eanti+e, in "44(, PDB re$eased the proceeds of the $oan of Ra+dustria$ Corporation which the $atter re+itted to 6CPB.

On March 2, "44*, the R-C rendered a decision in favor of the respondent. -he co+p$aint a,ainst Sheriff 'i$$apaBa was dis+issed on the ,round that he was +ere$1 perfor+in, his duties. -he decreta$ part of the decision is herein Auoted= F9ERE;ORE, pre+ises considered, <ud,+ent is here51 rendered in favor of the p$aintiff and a,ainst the defendant 6CPB, and the $atter is here51 ordered to pa1 the fo$$owin,= ."/ P3 .!/ P" .3/ P" , , , . . . as +ora$ da+a,es@ as e8e+p$ar1 da+a,es@ as attorne1:s fees@

.2/ Cost of suit.!" -he tria$ court found that contrar1 to the contention of the petitioner, it acted with caution in $oo0in, for $evia5$e properties of the <ud,+ent de5torsGdefendants in Civi$ Case No. ")2(3, it proceeded with haste as it did not ta0e into consideration that the defendant -eofi$o Ra+os was +arried to #+e$ita Ra+os and had a HSr.H in his na+e, whi$e the respondent was +arried to Re5ecca Ra+os and had HCH for his +idd$e initia$. -he investi,ation conducted 51 C#ID appraiser Eduardo C. Reniva did not conc$usive$1 ascertain if the respondent and -eofi$o Ra+os, Sr. were one and the sa+e person. -he tria$ court further stated that whi$e it was Ra+dustria$ Corporation which app$ied for a $oan with 6CPB and PDB, the respondent, as Chair+an of Ra+dustria$ Corporation, with his wife Re5ecca Ra+os, si,ned in the pro+issor1 note and acted as sureties on the said o5$i,ations. Moreover, the propert1 which was $evied was the respondent:s on$1 propert1 where he and his fa+i$1 resided. -hus, the thou,ht of $osin, it for reasons not of his own doin, ,ave rise to his entit$e+ent to +ora$ da+a,es. -he tria$ court further ru$ed that the +ere fact that the petitioner did not fi$e an opposition to the respondent:s +otion to cance$ $ev1 did not ne,ate its ne,$i,ence and 5ad faith. 9owever, the court considered the cance$$ation of annotation of $ev1 as a +iti,atin, factor on the da+a,es caused to the respondent. ;or fai$ure to show that he suffered actua$ da+a,es, the court a Auo dis+issed the respondent:s c$ai+ therefor. Dissatisfied, the petitioner interposed an appea$ to the Court of #ppea$s .C#/. On March 3 , ! ", the C# rendered a decision affir+in,, in toto, the decision of the tria$ court, the decreta$ portion of which is herein Auoted= F9ERE;ORE, 5ased on the fore,oin, pre+ises, the assai$ed decision is here51 #;;IRMED. !! -he C# ru$ed that the petitioner was ne,$i,ent in causin, the annotation of notice of $ev1 on the tit$e of the petitioner for its fai$ure to deter+ine with certaint1 whether the defendant -eofi$o Ra+os, Sr. in Civi$ Case No. ")2(3 was the re,istered owner of the propert1 covered 51 -C- No. !*(")*, and to infor+ the sheriff that the re,istered owners of the propert1 were the respondent and his wife Re5ecca Ra+os, and thereafter reAuest for the cance$$ation of the +otion of $ev1 on the propert1. Disappointed, the petitioner fi$ed this instant petition assi,nin, the fo$$owin, errors= I IN #;;IRMIN& -9E -RI#> CO6R-:S ORDER, -9E CO6R- O; #PPE#>S COMMI--ED M#NI;ES->? MIS-#IEN IN;ERENCES #ND E&RE&IO6S MIS#PPRE9ENSION O; ;#C-S #ND &R#'E ERRORS O; >#F, CONSIDERIN& -9#-=

#. ON -9E E'IDENCE, -9E BORROFER O; -9E >O#N, F9IC9 RESPONDEN- R#MOS C>#IMED 9E -RIED -O OB-#IN, F#S R#MD6S-RI#> CORPOR#-ION. 9ENCE, #N? D#M#&E RES6>-IN& ;ROM -9E #NNO-#-ION F#S S6;;ERED B? -9E CORPOR#-ION #ND NO- B? RESPONDEN- R#MOS. B. -9E DE>#? IN -9E C#NCE>>#-ION O; -9E #NNO-#-ION F#S O; RESPONDEN- R#MOS:S .SIC/ OFN DOIN&. C. -9E >O#N #PP>IC#-IONS FI-9 6NI-ED COCON6- S#'IN&S B#NI #ND P>#N-ERS DE'E>OPMEN- B#NI FERE &R#N-ED PRIOR -O -9E C#NCE>>#-ION O; -9E #NNO-#-ION ON -9E -I->E O; -9E S6BCEC- PROPER-?. II -9E CO6R- O; #PPE#>S: DECISION #;;IRMIN& -9E -RI#> CO6R-:S #F#RD O; MOR#> D#M#&ES -O RESPONDEN- R#MOS IN -9E #MO6N- O; P3 , ON # ;INDIN& O; NE&>I&ENCE IS CON-R#R? -O >#F #ND E'IDENCE. #. 6CPB F#S NO- NE&>I&EN- F9EN I- C#6SED -9E >E'? ON -9E S6BCEC- PROPER-?. B. #S # M#--ER O; >#F, MOR#> D#M#&ES C#NNO- BE #F#RDED ON # ;INDIN& O; MERE NE&>I&ENCE. C. IN #N? E'EN-, -9E #F#RD O; MOR#> D#M#&ES -O RESPONDEN- R#MOS F#S 6NRE#SON#B>E #ND OPPRESSI'E. III -9E #F#RD O; EJEMP>#R? D#M#&ES #ND #--ORNE?:S ;EES IS CON-R#R? -O >#F SINCE -9E #F#RD O; MOR#> D#M#&ES F#S IMPROPER IN -9E ;IRS- P>#CE.!3 6CPB pra1ed that= F9ERE;ORE, petitioner 6NI-ED COCON6- P>#N-ERS B#NI respectfu$$1 pra1s that this 9onora5$e Court render <ud,+ent reversin, and settin, aside the Court of #ppea$s: Decision dated 3 March ! ", and orderin, the dis+issa$ of respondent Ra+os: Co+p$aint dated ( Ma1 "442.!2 In his co++ent, the respondent a$$e,ed that the C# did not err in affir+in,, in toto, the decision of the tria$ court. 9e pra1ed that the petition 5e denied due course. -he issues posed for our reso$ution are the fo$$owin,= .a/ whether or not the petitioner acted ne,$i,ent$1 in causin, the annotation of $ev1 on the tit$e of the respondent@ .5/ if so, whether or not the respondent was the rea$ part1%in%interest as p$aintiff to fi$e an action for da+a,es a,ainst the petitioner considerin, that the $oan app$icant with 6CPB and PDB was R#MD6S-RI#> CORPOR#-ION@ .c/ if so, whether or not the respondent is entit$ed to +ora$ da+a,es, e8e+p$ar1 da+a,es and attorne1:s fees. On the first issue, we ru$e that the petitioner acted ne,$i,ent$1 when it caused the annotation of the notice of $ev1 in -C- No. !*(")*. It 5ears stressin, that the petitioner is a 5an0in, corporation, a financia$ institution with power to issue its pro+issor1 notes intended to circu$ate as +one1 .0nown as 5an0 notes/@ or to receive the +one1 of others on ,enera$ deposit, to for+ a <oint fund that sha$$ 5e used 51 the institution for its own 5enefit, for one or +ore of the purposes of +a0in, te+porar1 $oans and discounts, of dea$in, in notes, forei,n and do+estic 5i$$s of e8chan,e, coin 5u$$ion, credits, and the re+ission of +one1@ or with 5oth these powers, and with the privi$e,es, in addition to these 5asic powers, of

receivin, specia$ deposits, and +a0in, co$$ection for the ho$ders of ne,otia5$e paper, if the institution sees fit to en,a,e in such 5usiness.!( In fundin, these 5usinesses, the 5an0 invests the +one1 that it ho$ds in trust of its depositors. ;or this reason, we have he$d that the 5usiness of a 5an0 is one affected with pu5$ic interest, for which reason the 5an0 shou$d ,uard a,ainst $oss due to ne,$i,ence or 5ad faith. !) In approvin, the $oan of an app$icant, the 5an0 concerns itse$f with proper infor+ations re,ardin, its de5tors. -he petitioner, as a 5an0 and a financia$ institution en,a,ed in the ,rant of $oans, is e8pected to ascertain and verif1 the identities of the persons it transacts 5usiness with. !* In this case, the petitioner 0new that the sureties to the $oan ,ranted to 7DC and the defendants in Civi$ Case No. 42%"3!! were the Spouses -eofi$o Ra+os, Sr. and #+e$ita Ra+os. -he na+es of the Spouses -eofi$o Ra+os, Sr. and #+e$ita Ra+os were specified in the writ of e8ecution issued 51 the tria$ court. -he petitioner, with #tt1. Borda$5a as the Chief of >ED and hand$in, $aw1er of Civi$ Case No. ")2(3, in coordination with the sheriff, caused the annotation of notice of $ev1 in the respondent:s tit$e despite its 0now$ed,e that the propert1 was owned 51 the respondent and his wife Re5ecca Ra+os, who were not privies to the $oan avai$+ent of 7DC nor parties%defendants in Civi$ Case No. ")2(3. Even when the respondent infor+ed the petitioner, throu,h counse$, that the propert1 $evied 51 the sheriff was owned 51 the respondent, the petitioner fai$ed to have the annotation cance$$ed 51 the Re,ister of Deeds. In deter+inin, whether or not the petitioner acted ne,$i,ent$1, the constant test is= HDid the defendant in doin, the ne,$i,ent act use that reasona5$e care and caution which an ordinari$1 prudent person wou$d have used in the sa+e situationK If not, then he is ,ui$t1 of ne,$i,ence.H !3 Considerin, the testi+onia$ and docu+entar1 evidence on record, we are convinced that the petitioner fai$ed to act with the reasona5$e care and caution which an ordinari$1 prudent person wou$d have used in the sa+e situation. -he petitioner has access to +ore faci$ities in confir+in, the identit1 of their <ud,+ent de5tors. It shou$d have acted +ore cautious$1, especia$$1 since so+e uncertaint1 had 5een reported 51 the appraiser who+ the petitioner had tas0ed to +a0e verifications. It appears that the petitioner treated the uncertaint1 raised 51 appraiser Eduardo C. Reniva as a f$i+s1 +atter. It p$aced +ore i+portance on the infor+ation re,ardin, the +ar0eta5i$it1 and +ar0et va$ue of the propert1, utter$1 disre,ardin, the identit1 of the re,istered owner thereof. It shou$d not 5e a+iss to note that the <ud,+ent de5tor:s na+e was -eofi$o Ra+os, Sr. Fe note, as the Supre+e Court of Fashin,ton in "4 4 had, that a $e,a$ na+e consists of one ,iven na+e and one surna+e or fa+i$1 na+e, and a +ista0e in a +idd$e na+e is not re,arded as of conseAuence. 9owever, since the use of initia$s, instead of a ,iven na+e, 5efore a surna+e, has 5eco+e a practice, the necessit1 that these initia$s 5e a$$ ,iven and correct$1 ,iven in court proceedin,s has 5eco+e of i+portance in ever1 case, and in +an1, a5so$ute$1 essentia$ to a correct desi,nation of the person intended.!4 # +idd$e na+e is ver1 i+portant or even decisive in a case in which the issue is as 5etween two persons who have the sa+e first na+e and surna+e, did the act co+p$ained of, or is in<ured or sued or the $i0e. 3 In this case, the na+e of the <ud,+ent de5tor in Civi$ Case No. ")2(3 was -eofi$o Ra+os, Sr., as appearin, in the <ud,+ent of the court and in the writ of e8ecution issued 51 the tria$ court. -he na+e of the owner of the propert1 covered 51 -C- No. !*(")* was -eofi$o C. Ra+os. It 5ehooved the petitioner to ascertain whether the defendant -eofi$o Ra+os, Sr. in Civi$ Case No. ")2(3 was the sa+e person who appeared as the owner of the propert1 covered 51 the said tit$e. If the petitioner had done so, it wou$d have sure$1 discovered that the respondent was not the suret1 and the <ud,+ent de5tor in Civi$ Case No. ")2(3. -he petitioner fai$ed to do so, and +ere$1 assu+ed that the respondent and the <ud,+ent de5tor -eofi$o Ra+os, Sr. were one and the sa+e person. In su+, we find that the petitioner acted ne,$i,ent$1 in causin, the annotation of notice of $ev1 in the tit$e of the herein respondent, and that its ne,$i,ence was the pro8i+ate cause of the da+a,es sustained 51 the respondent. On the second issue, the petitioner insists that the respondent is not the rea$ part1%in%interest to fi$e the action for da+a,es, as he was not the one who app$ied for a $oan fro+ 6CPB and PDB 5ut Ra+dustria$ Corporation, of which he was +ere$1 the President and Chair+an of the Board of Directors.

Fe do not a,ree. -he respondent ver1 c$ear$1 stated in his co+p$aint that as a resu$t of the un$awfu$ $ev1 51 the petitioner of his propert1, he suffered s$eep$ess ni,hts, +ora$ shoc0, and a$+ost a heart attac0 due to hi,h 5$ood pressure.3" It +ust 5e underscored that the re,istered owner of the propert1 which was un$awfu$$1 $evied 51 the petitioner is the respondent. #s owner of the propert1, the respondent has the ri,ht to en<o1, encu+5er and dispose of his propert1 without other $i+itations than those esta5$ished 51 $aw. -he owner a$so has a ri,ht of action a,ainst the ho$der and possessor of the thin, in order to recover it.3! Necessari$1, upon the annotation of the notice of $ev1 on the -C-, his ri,ht to use, encu+5er and dispose of his propert1 was di+inished, if not ne,ated. 9e cou$d no $on,er +ort,a,e the sa+e or use it as co$$atera$ for a $oan. #risin, fro+ his ri,ht of ownership over the said propert1 is a cause of action a,ainst persons or parties who have distur5ed his ri,hts as an owner.33 #s an owner, he is one who wou$d 5e 5enefited or in<ured 51 the <ud,+ent, or who is entit$ed to the avai$s of the suit32 for an action for da+a,es a,ainst one who distur5ed his ri,ht of ownership. 9ence, re,ard$ess of the fact that the respondent was not the $oan app$icant with the 6CPB and PDB, as the re,istered owner of the propert1 whose ownership had 5een un$awfu$$1 distur5ed and $i+ited 51 the un$awfu$ annotation of notice of $ev1 on his -C-, the respondent had the $e,a$ standin, to fi$e the said action for da+a,es. In 5oth instances, the respondent:s propert1 was used as co$$atera$ of the $oans app$ied for 51 Ra+dustria$ Corporation. Moreover, the respondent, to,ether with his wife, was a suret1 of the aforesaid $oans. 1wphi1 Fhi$e it is true that the $oss of 5usiness opportunities cannot 5e used as a reason for an action for da+a,es arisin, fro+ $oss of 5usiness opportunities caused 51 the ne,$i,ent act of the petitioner, the respondent, as a re,istered owner whose ri,ht of ownership had 5een distur5ed and $i+ited, c$ear$1 has the $e,a$ persona$it1 and cause of action to fi$e an action for da+a,es. Not even the respondent:s fai$ure to have the annotation cance$$ed i++ediate$1 after he ca+e to 0now of the said wron,fu$ $ev1 ne,ates his cause of action. On the third issue, for the award of +ora$ da+a,es to 5e ,ranted, the fo$$owin, +ust e8ist= ."/ there +ust 5e an in<ur1 c$ear$1 sustained 51 the c$ai+ant, whether ph1sica$, +enta$ or ps1cho$o,ica$@ .!/ there +ust 5e a cu$pa5$e act or o+ission factua$$1 esta5$ished@ .3/ the wron,fu$ act or o+ission of the defendant is the pro8i+ate cause of the in<ur1 sustained 51 the c$ai+ant@ and .2/ the award for da+a,es is predicated on an1 of the cases stated in #rtic$e !!"4 of the Civi$ Code.3( In the case at 5ar, a$thou,h the respondent was not the $oan app$icant and the 5usiness opportunities $ost were those of Ra+dustria$ Corporation, a$$ four reAuisites were esta5$ished. ;irst, the respondent sustained in<uries in that his ph1sica$ hea$th and cardio%vascu$ar ai$+ent were a,,ravated@ his fear that his one and on$1 propert1 wou$d 5e forec$osed, hounded hi+ end$ess$1@ and his reputation as +ort,a,or had 5een tarnished. Second, the annotation of notice of $ev1 on the -C- of the private respondent was wron,fu$, arisin, as it did fro+ the petitioner:s ne,$i,ent act of a$$owin, the $ev1 without verif1in, the identit1 of its <ud,+ent de5tor. -hird, such wron,fu$ $ev1 was the pro8i+ate cause of the respondent:s +iser1. ;ourth, the award for da+a,es is predicated on #rtic$e !!"4 of the Civi$ Code, particu$ar$1, nu+5er " thereof.3) #$thou,h the respondent was a5$e to esta5$ish the petitioner:s ne,$i,ence, we cannot, however, a$$ow the award for e8e+p$ar1 da+a,es, a5sent the private respondent:s fai$ure to show that the petitioner acted with +a$ice and 5ad faith. It is a reAuisite in the ,rant of e8e+p$ar1 da+a,es that the act of the offender +ust 5e acco+panied 51 5ad faith or done in a wanton, fraudu$ent or +a$evo$ent +anner. 3* #ttorne1:s fees +a1 5e awarded when a part1 is co+pe$$ed to $iti,ate or to incur e8penses to protect his interest 51 reason of an un<ustified act of the other part1. In this case, the respondent was co+pe$$ed to en,a,e the services of counse$ and to incur e8penses of $iti,ation in order to protect his interest to the su5<ect propert1 a,ainst the petitioner:s un$awfu$ $ev1. -he award is reasona5$e in view of the ti+e it has ta0en this case to 5e reso$ved. 33 In su+, we ru$e that the petitioner acted ne,$i,ent$1 in $ev1in, the propert1 of the respondent despite dou5ts as to the identit1 of the respondent vis%L%vis its <ud,+ent de5tor. B1 reason of such ne,$i,ent act, a wron,fu$ $ev1 was +ade,

causin, ph1sica$, +enta$ and ps1cho$o,ica$ in<uries on the person of the respondent. Such in<uries entit$e the respondent to an award of +ora$ da+a,es in the a+ount of P3 , . No e8e+p$ar1 da+a,es can 5e awarded 5ecause the petitioner:s ne,$i,ent act was not tainted with +a$ice and 5ad faith. B1 reason of such wron,fu$ $ev1, the respondent had to hire the services of counse$ to cause the cance$$ation of the annotation@ hence, the award of attorne1:s fees. F9ERE;ORE, the decision of the Court of #ppea$s in C#%&.R. C' No. ()*3* is #;;IRMED FI-9 MODI;IC#-ION. -he award for e8e+p$ar1 da+a,es is de$eted. No costs. SO ORDERED.

G.R. No. 10$83% "&r'( 7, 1))4 SPOUSES GEORGE "ORAN &*+ LIBRADA P. "ORAN, petitioners, vs. T,E ,ON. COURT O! APPEALS &*+ CIT-TRUST BAN ING CORPORATION, respondents. Gonzales, Batiller, Bilog & Associates for petitioners. Agcaoli & Associates for private respondent.

REGALADO, J.: Petitioner spouses &eor,e and >i5rada Moran are the owners of the Fac0%Fac0 Petron ,aso$ine station $ocated at Shaw Bou$evard, corner O$d Fac0%Fac0 Road, Manda$u1on,, Metro Mani$a. -he1 re,u$ar$1 purchased 5u$0 fue$ and other re$ated products fro+ Petrophi$ Corporation on cash on de$iver1 .COD/ 5asis. Orders for 5u$0 fue$ and other re$ated products were +ade 51 te$ephone and pa1+ents were effected 51 persona$ chec0s upon de$iver1. 1 Petitioners +aintained three <oint accounts, na+e$1 one current account .No. 3*% ))%*/ and two savin,s accounts, .Nos. " 3* !33* and " 3* "3*!/ with the Shaw Bou$evard 5ranch of Cit1trust Ban0in, Corporation. #s a specia$ privi$e,e to the Morans, who+ it considered as va$ued c$ients, the 5an0 a$$owed the+ to +aintain a Eero 5a$ance in their current account. -ransfers fro+ Savin, #ccount No. " 3* !33* to their current account cou$d 5e +ade on$1 with their prior authoriEation, 5ut the1 ,ave written authorit1 to Cit1trust to auto+atica$$1 transfer funds fro+ their Savin,s #ccount No. " 3* "3*! to their Current #ccount No. 3*% ))%* at an1 ti+e whenever the funds in their current account were insufficient to +eet withdrawa$s fro+ said current account. Such arran,e+ent for auto+atic transfer of funds was ca$$ed a pre%authoriEed transfer .P#-/ a,ree+ent. 2 -he P#- $etter%a,ree+ent entered into 51 the parties on March "4, "43! contained the fo$$owin, provisions= 888 888 888 ". -he transfer +a1 5e effected on the da1 fo$$owin, the overdrawin, of the current account, but the check/s would be honored if the savings account has sufficient balance to cover the overdraft . !. -he re,u$ar char,es on overdraft, and activit1 fees wi$$ 5e i+posed 51 the Ban0. 3. -his is +ere$1 an acco++odation on our part and we have the ri,ht, at a$$ ti+es and for an1 reason whatsoever, to refuse to effect transfer of funds at our sole and absolute option and discretion, reserving our ri,ht to ter+inate this arran,e+ent at an1 ti+e without written notice to 1ou. 2. ou hold !"# #$%&# free and har'less for an( and all o'issions or oversight in e)ecuting this auto'atic transfer of funds@ . . . 3 888 888 888 On Dece+5er "!, "433, petitioners, throu,h >i5rada Moran, drew a chec0 .Cit1trust No. 2"4) / for P( ,(*). pa1a5$e to Petrophi$ Corporation. 4 -he ne8t da1, Dece+5er "3, "433, petitioners, a,ain throu,h >i5rada Moran, issued another chec0

.Cit1trust No. 2"4)!/ in the a+ount of P(), 4 . was P" ),))). .

in favor of the sa+e corporation. $ -he tota$ su+ of the two chec0s

On Dece+5er "2, "433, Petrophi$ Corporation deposited the two afore+entioned chec0s to its account with the Pandacan 5ranch of the Phi$ippine Nationa$ Ban0 .PNB/, the co$$ectin, 5an0. In turn, PNB, Pandacan 5ranch presented the+ for c$earin, with the Phi$ippine C$earin, 9ouse Corporation in the afternoon of the sa+e da1. -he records show that on Dece+5er "2, "433, Current #ccount No. 3*% ))%* had a Eero 5a$ance, whi$e Savin,s #ccount No. " 3* "3*! .covered 51 the P#-/ had an avai$a5$e 5a$ance of P!)," 2.3 % and Savin,s #ccount No. " 3* !33* had an avai$a5$e 5a$ance of P23,!)3.34. 7 #t a5out ten oMc$oc0 in the +ornin, of the fo$$owin, da1, Dece+5er "(, "433, petitioner &eor,e Moran went to the 5an0, as was his re,u$ar practice, to persona$$1 oversee their dai$1 transactions with the 5an0. 9e deposited in their Savin,s #ccount No. " 3* !33* the a+ounts of P" ,3*2.(3 and P),*(2.!(, 8 and he $i0ewise deposited in their Savin,s #ccount No. " 3* "3*! the a+ounts of P(,4 . , P3(," . and 3 . . ) -he a+ount of P2 , . was then transferred 51 hi+ fro+ Savin, #ccount No. " 3* !33* to their current account 51 +eans of a pro for'a withdrawa$ for+ .a de5it +e+orandu+/, which was provided 51 the 5an0, authoriEin, the $atter to +a0e the necessar1 transfer. #t the sa+e ti+e, the a+ount of P)),))). was transferred fro+ Savin,s #ccount No. " 3* "3*! to the sa+e current account throu,h the pre%authoriEed transfer .P#-/ a,ree+ent. 10 So+eti+e on Dece+5er "( or "), "433 &eor,e Moran was infor+ed 51 his wife >i5rada, that Petrophi$ refused to de$iver their orders on a credit 5asis 5ecause the two chec0s the1 had previous$1 issued were dishonored upon present+ent for pa1+ent. #pparent$1, the 5an0 dishonored the chec0s due to Hinsufficienc1 of funds.H 11 -he non% de$iver1 of ,aso$ine forced petitioners to te+porari$1 stop 5usiness operations, a$$e,ed$1 causin, the+ to suffer $oss of earnin,s. In addition, Petrophi$ cance$$ed their credit acco++odation, forcin, the+ to pa1 for their purchases in cash. 12 &eor,e Moran, furious and upset, de+anded an e8p$anation fro+ Rau$ DiaE, the 5ranch +ana,er. ;ai$in, to ,et a sufficient e8p$anation, he ta$0ed to a certain 'i$$area$, a 5an0 officer, who a$$e,ed$1 to$d hi+ that #+1 Be$en Ra,odo, the custo+er service officer, had co++itted a H,rave errorH. 13 On Dece+5er ") or "*, "433, DiaE went to the Moran residence to ,et the si,natures of the petitioners on an app$ication for a +ana,erMs chec0 so that the dishonored chec0s cou$d 5e redee+ed. DiaE then went to Petrophi$ to persona$$1 present the chec0s in pa1+ent for the two dishonored chec0s. 14 In a chance +eetin, around Ma1 or Cune, "432, &eor,e Moran $earned fro+ one Constancio Ma,no, credit +ana,er of Petrophi$, that the $atter received fro+ Cit1trust, throu,h DiaE, a $etter dated Dece+5er "), "433, notif1in, the+ that the two afore+entioned chec0s were Hinadvertent$1 dishonored . . . due to operationa$ error.H Said $etter was received 51 Petrophi$ on Canuar1 2, "432. 1$ On Cu$1 !2, "432, or a $itt$e over si8 +onths after the incident, petitioners, throu,h counse$, wrote Cit1trust c$ai+in, that the 5an0Ms dishonor of the chec0s caused the+ 5es+irched 5usiness and persona$ reputation, sha+e and an8iet1, hence the1 were conte+p$atin, the fi$in, of the necessar1 $e,a$ actions un$ess the 5an0 issued a certification c$earin, their na+e and paid the+ P", , . as +ora$ da+a,es. 1% -he 5an0 did not act favora5$1 on their de+ands, hence petitioners fi$ed a co+p$aint for da+a,es on Septe+5er 3, "432, with the Re,iona$ -ria$ Court, Branch "(4 at Pasi,, Metro Mani$a, which was doc0eted therein as Civi$ Case No. ("(24. In turn, Cit1trust fi$ed a counterc$ai+ for da+a,es, a$$e,in, that the case fi$ed a,ainst it was unfounded and un<ust. #fter tria$, a decision dated Octo5er 4, "434 was rendered 51 the tria$ court dis+issin, 5oth the co+p$aint and the counterc$ai+. 17 On appea$, the Court of #ppea$s rendered <ud,+ent in C#%&.R. C' No. !( 4 on Octo5er 4, "434 affir+in, the decision of the tria$ court. 18 Fe start so+e 5asic and accepted ru$es, statutor1 and doctrina$. # chec0 is a 5i$$ of e8chan,e drawn on a 5an0 pa1a5$e on de+and. 1) -hus, a chec0 is a written order addressed to a 5an0 or persons carr1in, on the 5usiness of

5an0in,, 51 a part1 havin, +one1 in their hands, reAuestin, the+ to pa1 on present+ent, to a person na+ed therein or to 5earer or order, a na+ed su+ of +one1. 20 ;i8ed savin,s and current deposits of +one1 in 5an0s and si+i$ar institutions sha$$ 5e ,overned 51 the provisions concernin, si+p$e $oan. 21 In other words, the re$ationship 5etween the 5an0 and the depositor is that of a de5tor and creditor. 22 B1 virtue of the contract of deposit 5etween the 5an0er and its depositor, the 5an0er a,rees to pa1 chec0s drawn 51 the depositor provided that said depositor has +one1 in the hands of the 5an0. 23 9ence, where the 5an0 possesses funds of a depositor, it is 5ound to honor his chec0s to the e8tent of the a+ount of his deposits. -he fai$ure of a 5an0 to pa1 the chec0 of a +erchant or a trader, when the deposit is sufficient, entit$es the drawer to su5stantia$ da+a,es without an1 proof of actua$ da+a,es. 24 Converse$1, a 5an0 is not $ia5$e for its refusa$ to pa1 a chec0 on account of insufficient funds, notwithstandin, the fact that a deposit +a1 5e +ade $ater in the da1. 2$ Before a 5an0 depositor +a1 +aintain a suit to recover a specific a+ount fro+ his 5an0, he +ust first show that he had on deposit sufficient funds to +eet his de+and. 2% -he present action for da+a,es accordin,$1 hin,es on the reso$ution of the inAuir1 as to whether or not petitioners had sufficient funds in their accounts when the 5an0 dishonored the chec0s in Auestion. In view of the factua$ findin,s of the two $ower courts the correctness of which are cha$$en,ed 51 what appear to 5e p$ausi5$e, ar,u+ents, we fee$ that the sa+e shou$d proper$1 5e reso$ved 51 us. -his wou$d necessari$1 reAuire us to inAuire into 5oth the savin,s and current accounts of petitioners in re$ation to the P#- arran,e+ent. On Dece+5er "2, "433, when PNB, Pandacan 5ranch, presented the chec0s for co$$ection, the avai$a5$e 5a$ance for Savin,s #ccount No. " 3* "3*! was P!)," 2.3 whi$e Current #ccount No. 3*% ))%* e8pected$1 had a Eero 5a$ance. On Dece+5er "(, "433, at appro8i+ate$1 ten oMc$oc0 in the +ornin,, petitioners, throu,h &eor,e Moran, $earned that P)),))). fro+ Savin, #ccount No. " 3* "3*! was transferred to their current account. #nother P2 , . was transferred fro+ Savin, #ccounts No. " 3* !33* to the current account. Considerin, that the transfers were 51 then sufficient to cover the two chec0s, it is asserted 51 petitioners that such fact shou$d have prevented the dishonor of the chec0s. It appears, however, that it was not so. #s e8p$ained 51 respondent court in its decision, &erard E. Rionisto, head of the centra$iEed c$earin, unit of Cit1trust, detai$ed on the witness stand the standard c$earin, procedure adopted 51 respondent 5an0 and the Phi$ippine C$earin, 9ouse Corporation, to wit=. D= >et +e a,ain re%phase the Auestion. Most of .sic/ these two chec0s issued 51 Mrs. >i5rada Moran under the accounts of the p$aintiffs with Cit1trust Ban0in, Corporation were drawn dated Dece+5er "!, "433 and Dece+5er "3, "433.and/ these two .!/ chec0s were +ade pa1a5$e to Petrophi$ Corporation. On record, Petrophi$ Corporation presented these two .!/ chec0s for c$earin, with PNB Pandacan Branch on Dece+5er "2, "433. Now in accordance with the 5an0, what wou$d happen with these chec0s drawn with .sic/ PNB on Dece+5er "2, "433K. #= &o these checks will now be presented b( *+B with the *hilippine !learing ,ouse on -ece'ber 1., and then the *hilippine !learing ,ouse will process it until 'idnight of -ece'ber 1.. !it(trust will send a clearing representative to the *hilippine !learing ,ouse at around /011 o2clock in the 'orning of -ece'ber 13 and then get the checks. #he checks will now be processed at the !it(trust !o'puter at around 4011 o2clock in the 'orning of -ece'ber 1. 5sic6but it will be processed for balance of !it(trust as of -ece'ber 1. because for one, we have not opened on -ece'ber 13 at 4011 o2clock. %nder the clearing house rules, we are supposed to process it on the date it was presented for clearing. .tsn, Septe+5er 4, "433, pp. 4%" /. 27

Considerin, the c$earin, process adopted, as e8p$ained in the aforeAuoted testi+on1, it is c$ear that the avai$a5$e 5a$ance on Dece+5er "2, "433 was used 51 the 5an0 in deter+inin, whether or not there was sufficient cash deposited to fund the two chec0s, a$thou,h what was sta+ped on the dorsa$ side of the two chec0s in Auestion was HD#I;G"!%"(%33,H since Dece+5er "(, "433 was the actua$ date when the chec0s were processed. #s ear$ier stated, when petitionersM chec0s were dishonored due to insufficienc1 of funds, the avai$a5$e 5a$ance of Savin,s #ccount No. " 3* "3*!, which was the su5<ect of the P#- a,ree+ent, was not enou,h to cover either of the two chec0s. On Dece+5er "2, "433, when PNB, Pandacan 5ranch presented the chec0s for co$$ection, the avai$a5$e 5a$ance for Savin,s #ccount No. " 3* "3*!, to repeat, was on$1 P!)," 2.3 whi$e Current #ccount No. 3*% )%* had no avai$a5$e 5a$ance. It was on$1 on Dece+5er "(, "433 at around ten oMc$oc0 in the +ornin, that the necessar1 funds were deposited, which unfortunate$1 was too $ate to prevent the dishonor of the chec0s. Petitioners ar,ue that pu5$ic respondent, 51 re$1in, heavi$1 on RionistoMs testi+on1, fai$ed to consider the fact that the witness hi+se$f ad+itted that he had no persona$ 0now$ed,e surroundin, the dishonor of the two chec0s in Auestion. -hus, a$thou,h he 0new the standard c$earin, procedure, it does not necessari$1 +ean that the sa+e procedure was adopted with re,ard to the two chec0s. Fe do not a,ree. Section 3.A/, Ru$e "3" of the Ru$es of Court provides a disputa5$e presu+ption in $aw that the ordinar1 course of 5usiness has 5een fo$$owed. In the a5sence of a contrar1 showin,, it is presu+ed that the acts in Auestion were in confor+it1 with the usua$ conduct of 5usiness. In the case at 5ar, petitioners fai$ed to present countervai$in, evidence to re5ut the presu+ption that the chec0s invo$ved underwent the sa+e re,u$ar process for c$earin, of chec0s fo$$owed 51 the 5an0 since "433. Petitioner had no reason to co+p$ain, for the1 a$one were at fau$t. # drawer +ust re+e+5er his responsi5i$ities ever1 ti+e he issues a chec0. 9e +ust persona$$1 0eep trac0 of his avai$a5$e 5a$ance in the 5an0 and not re$1 on the 5an0 to notif1 hi+ of the necessit1 to fund certain chec0 she previous$1 issued. # chec0, as distin,uished fro+ an ordinar1 5i$$ of e8chan,e, is supposed to 5e drawn a,ainst a previous deposit of funds for it is ordinari$1 intended for i++ediate$1 pa1+ent. 28 Moreover, 5etween the ti+e of the issuance of said chec0s on Dece+5er "! and "3 and the ti+e of their present+ent on Dece+5er "2, petitioners had, at the ver1 $east, twent1%four hours to rep$enish their 5a$ance in the 5an0. #s previous$1 noted, it was on$1 durin, 5usiness hours in the +ornin, of Dece+5er "(, "433, that P)),))). was auto+atica$$1 transferred fro+ Savin,s #ccount No. " 3* "3*! to Current #ccount No. 3*% ))%*, and another P2 , . was transferred fro+ Savin,s #ccount No. " 3* !33* to the sa+e current 51 a de5it +e+orandu+. Petitioners ar,ue that if indeed the chec0s were dishonored in the ear$1 +ornin, of Dece+5er "(, "433, the 5an0 wou$d not have auto+atica$$1 transferred P)),))). to said current account. -he1 theoriEe that the chec0s havin, a$read1 5een dishonored, there was no necessit1 to put into effect the pre%authoriEed transfer a,ree+ent. -hat theor1 is incorrect. Fhen the transfer fro+ 5oth savin,s accounts to the current account were +ade, the1 were done in the hope that the chec0s +a1 5e retrieved, thus preventin, their dishonor. 6nfortunate$1, respondent 5an0 did not succeed in effectuatin, its ,ood intentions. -he transfers were +ade to preserve its re$ations with petitioners who+ it 0new were va$ued c$ients, hence it wanted to prevent the dishonor of their chec0s, if the sa+e was at a$$ possi5$e. #$thou,h not ad+ittin, fau$t, it tried its 5est to +a0e sure that the chec0s wou$d not 5ounce. 6nder si+i$ar circu+stances, it was he$d in 7hit'an vs. 8irst +ational Bank 2) that a 5an0 perfor+s its fu$$ dut1 where, upon the receipt of a chec0 drawn a,ainst an account in which there are insufficient funds to pa1 it in fu$$, it endeavors to induce the drawer to +a0e ,ood his account so that the chec0 can 5e paid, and fai$in, in this, it protests the chec0 on the fo$$owin, +ornin, and notifies its correspondent 5an0 51 the te$e,raph of the protest. It cannot, therefore, 5e he$d $ia5$e to the pa1ee and ho$der of the chec0 for not protestin, it upon the da1 when it was received. In fact, the court added that the 5an0 did +ore that it was reAuired to do 51 +a0in, an effort to induce the drawer to deposit sufficient +one1 to +a0e the chec0 ,ood, and 51 notif1in, its correspondent of the dishonor of the chec0 51 te$e,ra+.

Petitioners +aintain that at the ti+e the chec0s were dishonored, the1 had a$read1 deposited sufficient funds to cover said chec0s. -o prove their point, petitioners Auoted in their petition the fo$$owin, testi+on1 of said witness Rionisto, to wit= D= Now accordin, to 1ou, 1ou wou$d receive the chec0s fro+ .5ein, deposited to/ the co$$ectin, 5an0 which in this particu$ar e8a+p$e was the Pandacan Branch of PNB which in turn wi$$ de$iver it to the Phi$ippine C$earin, 9ouse and the Phi$ippine C$earin, 9ouse wi$$ de$iver it to 1our office around "!= oMc$oc0 of Dece+5er . . . K #= #round != oMc$oc0 of Dece+5er "(. Fe sent a c$earin, representative.

D= #nd the chec0s wi$$ 5e processed in accordance with the 5a$ance avai$a5$e as of Dece+5er "2K #= ?es, sir. D= #nd natura$$1 1ou wi$$ p$ace there Hdrawn a,ainst insufficient funds, Dece+5er "2, "433HK #= ?es, sir. D= #re 1ou sure a5out thatK #= ?es, sir . . . .tsn, Septe+5er 4, "433, p. "2/
30

O5vious$1 witness Rionisto was +ere$1 confused as to the dates .Dece+5er "2 and "(/ 5ecause it did not <i5e with his previous testi+on1, wherein he cate,orica$$1 stated that Hthe chec0s wi$$ now 5e processed as the Cit1trust Co+puter at around 3= in the +ornin, of Dece+5er "2 .sic/ 5ut it wi$$ 5e processed for 5a$ance of Cit1trust as of Dece+5er "2 5ecause for one, we have not opened on Dece+5er "( at 3= oMc$oc0. 6nder the c$earin, house ru$es, we are supposed to process it on the date it was presented for c$earin,.H 31 #na$1Ein, the procedure he had previous$1 e8p$ained, and ana$1Ein, his testi+on1 in its entiret1 and not in truncated portions, it wou$d $o,ica$$1 and ine$ucta5$1 appear that he actua$$1 +eant Dece+5er "(, and not Dece+5er "2. In the ear$1 +ornin, of ever1 5usiness da1, prior to 5an0in, hours, the various 5ranches of Cit1trust wou$d receive a co+puter printout ca$$ed the Hre<ected transactionsH report fro+ the head office. -he report contains, a+on, others, a $istin, of Hchec0s to 5e funded.H Fhen Cit1trust, Shaw Bou$evard 5ranch, received said report in the ear$1 +ornin, of Dece+5er "(, "433, the two chec0s invo$ved were inc$uded in the Hchec0s to 5e funded.H -hat report was used 51 the 5an0 as its 5asis in dishonorin, the two chec0s in Auestion. Petitioner contends that the 5an0 erred when it did so 5ecause on previous occasions, the report was +ere$1 used 51 the 5an0 as a 5asis for deter+inin, whether or not it was necessar1 to notif1 the+ of the need to deposit certain a+ounts in their accounts. #+1 Be$en Ro,ado, a 5an0 e+p$o1ee, testified that she wou$d nor+a$$1 cop1 the detai$s stated in the report and transfer in on a Hpin0 s$ip.H -hese pin0 s$ips were then ,iven to &eor,e Moran. In turn, &eor,e Moran testified that he wou$d deposit the necessar1 funds stated in the pin0 s$ips. #s a +atter of fact, so petitioner asseverated, not a sin,$e chec0 written on the notices was ever dishonored after he had funded said chec0s with the 5an0. -hus, petitioner ar,ues, the chec0s were not 1et dishonored after the 5an0 received the report in the ear$1 +ornin, of Dece+5er "(, "433. Said ar,u+ent does not persuade. If ever petitioners on previous occasions were ,iven notices ever1 ti+e a chec0 was presented for c$earin, and pa1+ent and there were no adeAuate funds in their accounts, these were, at +ost, +ere acco++odations on the part of respondent 5an0. It was not a reAuire+ent or a ,enera$ 5an0in, practice, hence non%co+p$iance therewith cou$d not $a1 the 5an0 open to 5$a+e or re5u0e. >e,a$$1, the 5an0 had a$$ the ri,ht to

dishonor the chec0s 5ecause there were no sufficient funds to spea0 of in the first p$ace. If the de+and is 51 chec0, a drawer +ust have to his credit enou,h to cover the de+and. If his credit with the 5an0 is $ess than the a+ount on the face of the chec0, the 5an0 +a1 $awfu$$1 refuse pa1+ent. 32 Pursuin, this +atter further, the 5an0 cou$d a$so not 5e fau$ted for not acceptin, either of the two chec0s. -he first chec0 issued was in the a+ount of P( ,(*). , whi$e the second one was for P(), 4 . . Savin,s #ccount No. "3 * "3*! then had a 5a$ance of on$1 P!)," 2.3 . -his 5ein, the case, Cit1trust cou$d not 5e e8pected to accept for pa1+ent either one of the two chec0s nor partia$$1 honor one chec0. # 5an0 is under no o5$i,ation to +a0e part pa1+ent on a chec0, up to on$1 the a+ount of the drawerMs funds, where the chec0 is drawn for an a+ount $ar,er than what the drawer has on deposit. Such a practice of pa1in, chec0s in part has never e8isted. 6pon partia$ pa1+ent, the chec0 ho$der cou$d not 5e ca$$ed upon to surrender the chec0, and the 5an0 wou$d 5e without a voucher affordin, a certain +eans of showin, the pa1+ent. -he ru$e is 5ased on co++ercia$ convenience, and an1 ru$e that wou$d wor0 such +anifest inconvenience shou$d not 5e reco,niEed. # chec0 is intended not on$1 to transfer a ri,ht to the a+ount na+ed in it, 5ut to serve the further purpose of affordin, evidence for the 5an0 of the pa1+ent of such a+ount when the chec0 is ta0en up. 33 On the other hand, assu+in, arguendo that Savin,s #ccount No. " 3* !33*, which is not covered 51 a pre%arran,ed auto+atic transfer a,ree+ent, had enou,h a+ount deposited to cover 5oth chec0s .which is not so in this case/, the 5an0 sti$$ had no o5$i,ation to honor said chec0s as there was then no authorit1 ,iven to it to +a0e the transfer of funds. Fhere a depositor has two accounts with a 5an0, an open account and a savin,s account, and draws a chec0 upon the open account for +ore +one1 than the account contains, the 5an0 +a1 ri,htfu$$1 refuse to pa1 the chec0, and is under no dut1 to +a0e up the deficienc1 fro+ the savin,s account. 34 Fe are a,ree with respondent Court of #ppea$s in its assess+ent and interpretation of the nature of the $etter of Cit1trust to Petrophi$, dated Dece+5er "), "433. #s apt$1 and correct$1 stated 51 said court, H. . . the $etter is not an ad+ission of $ia5i$it1 as it was written +ere$1 to +aintain the ,oodwi$$ and continued patrona,e of p$aintiff%appe$$ants. .-his/ cannot 5e characteriEed as 5ase$ess, considerin, the tota$it1 of the circu+stances surroundin, its writin,.H 3$ In the present case, the actions ta0en 51 the 5an0 after the incident c$ear$1 show that there was neither +a$ice nor 5ad faith, 5ut rather a c$ear intent to +o$$if1 an o5vious$1 a,itated c$ient. Rau$ DiaE, the 5ranch +ana,er, even went for this purpose to the Moran residence to faci$itate their app$ication for a +ana,erMs chec0. >ater, he went to the Petrophi$ Corporation to persona$$1 redee+ the chec0s. Sti$$ $ater, the $etter was sent 51 respondent 5an0 to Petrophi$ e8p$ainin, that the dishonor of the chec0s was due to Hoperationa$ error.H 9owever, we reiterate, it wou$d 5e a +ista0e to construe that $etter as an ad+ission of ,ui$t on the part of the 5an0. It 0new that it was confronted with a c$ient who o5vious$1 was not wi$$in, to ad+it an1 fau$t on his part, a$thou,h the facts show otherwise. -hus, respondent 5an0 ran the ris0 of $osin, the 5usiness of an i+portant and inf$uentia$ +e+5er of the financia$ co++unit1 if it did not do an1thin, to assua,e the fee$in,s of petitioners. It wi$$ 5e reca$$ed that the credit standin, of the Morans with Petrophi$ Corporation was invo$ved, which fact, +ore than an1thin,, disp$eased the+, to sa1 the $east. On de+and of petitioners that their na+es 5e c$eared, the 5an0 considered it +ore prudent to send the $etter. It never rea$iEed that it wou$d thereafter 5e used 51 petitioners as one of the 5ases of their $e,a$ action. It wi$$ 5e noted that there was no reason for the 5an0 to send the $etter to Petrophi$ Corporation since the $atter was not a c$ient nor was it de+andin, an1 e8p$anation. C$ear$1, therefore, the $etter was +ere$1 intended to acco++odate the reAuest of the Morans and was part of the series of da+a,e%contro$ +easures ta0en 51 the 5an0 to p$acate petitioners. Respondent Court of #ppea$s perceptive$1 o5served that Ha$$ these so+ehow pacified p$aintiffs%appe$$ants .herein petitioners/ for the1 did not thereafter ta0e i++ediate punitive action a,ainst the defendant%appe$$ee .herein private respondent/. #s pointed out 51 the court a 9uo, it too0 p$aintiffs%appe$$ants a5out si8 .)/ +onths after the dishonor of the chec0s to de+and that defendant%appe$$ee pa1 the+ P", , . as da+a,es. #t that ti+e, p$aintiffs%appe$$ants had discovered the $etter of Mr. DiaE attri5utin, the dishonor of their chec0s to Moperationa$ errorM. -he atte+pt to undu$1 ride on the $etter of Mr. DiaE spea0s for itse$f.H 3%

On the a5ove pre+ises which irresisti5$1 co++end the+se$ves to our acceptance, we find no co,ent and sufficient to award actua$, +ora$, or e8e+p$ar1 da+a,es to petitioners. #$thou,h we ta0e <udicia$ notice of the fact that there is a fiduciar1 re$ationship 5etween a 5an0 and its depositors, as we$$ as the e8tent of di$i,ence e8pected of it in hand$in, the accounts entrusted to its care, 37 the 5an0 +a1 not 5e he$d responsi5$e for such da+a,es in the a5sence of fraud, 5ad faith, +a$ice, or wanton attitude. 38 F9ERE;ORE, findin, no reversi5$e error in the <ud,+ent appea$ed fro+, the sa+e is here51 #;;IRMED, with costs a,ainst petitioners.

G.R. No. L.%8138 "&/ 13, 1))1 AGUSTIN -. GO &*+ T,E CONSOLIDATED BAN AND TRUST CORPORATION 0So12+b&*34, petitioners, vs. ,ONORABLE INTER"EDIATE APPELLATE COURT &*+ !LO5ERTO #A6"IN, respondents. !.:. -e los $e(es & Associates for petitioners. :illora & :aningding ;aw <ffices for private respondent.

!ERNAN, C. J.:p -he instant petition for review on certiorari Auestions the propriet1 of the respondent appe$$ate courtMs award of no+ina$ da+a,es and attorne1Ms fees to private respondent whose na+e was used 51 a s1ndicate in encashin, two 6.S. treasur1 chec0s at petitioner 5an0. ;$overto CaE+in is an #+erican citiEen and retired e+p$o1ee of the 6nited States ;edera$ &overn+ent. 9e had 5een a visitor in the Phi$ippines since "4*! residin, at 32 Maravi$$a Street, Man,atare+, Pan,asinan. #s pensionado of the 6.S. ,overn+ent, he received annuit1 chec0s in the a+ounts of N )*. for disa5i$it1 and N )! . for retire+ent throu,h the Man,atare+ post office. 9e used to encash the chec0s at the Prudentia$ Ban0 5ranch at C$ar0 #ir Base, Pa+pan,a. In Canuar1, "4*(, CaE+in fai$ed to receive one of the chec0s on ti+e thus pro+ptin, hi+ to inAuire fro+ the post offices at Man,atare+ and Da,upan Cit1. #s the resu$t of his inAuiries proved unsatisfactor1, on March 2, "4*(, CaE+in wrote the 6.S. Civi$ Service Co++ission, Bureau of Retire+ent at Fashin,ton, D.C. co+p$ainin, a5out the de$a1 in receivin, his chec0. -hereafter, he received a su5stitute chec0 which he encashed at the Prudentia$ Ban0 at C$ar0 #ir Base. Meanwhi$e, on #pri$ !!, "4*(, #,ustin &o, in his capacit1 as 5ranch +ana,er of the then So$id5an0 .which $ater 5eca+e the Conso$idated Ban0 and -rust Corporation/ in Ba,uio Cit1, a$$owed a person na+ed H;$overto CaE+inH to open Savin,s #ccount No. B& (! ) 51 depositin, two .!/ 6. S. treasur1 chec0s Nos. (%224% *) and (%223%34 in the respective a+ounts of N"3" . and N4"3.2 1 eAuiva$ent to the tota$ a+ount of P ! ,()(.)4, 5oth pa1a5$e to the order of ;$overto Cas+in of :aranilla St., Man,atare+, Pan,asinan and drawn on the ;irst Nationa$ Cit1 Ban0, Mani$a. -he savin,s account was opened in the ordinar1 course of 5usiness. -hus, the 5an0, throu,h its +ana,er &o, reAuired the depositor to fi$$ up the infor+ation sheet for new accounts to ref$ect his persona$ circu+stances. -he depositor indicated therein that he was ;$overto =az'in with +ai$in, address at Man,atare+, Pan,asinan and ho+e address at :aravilla St., Man,atare+, Pan,asinan@ that he was a ;i$ipino citiEen and a securit1 officer of the 6S #r+1 with the ran0 of a ser,eant 5earin, #;6S Car No. 9%!*"")(4@ that he was +arried to Mi$a,ros Bautista@ and that his initia$ deposit was P3,()(.3(. 9e wrote CS# No. "33"32 under re+ar0s or instructions and $eft 5$an0 the spaces under te$ephone nu+5er, residence certificateGa$ien certificate of re,istrationGpassport, 5an0 and trade perfor+ance and as to who introduced hi+ to the 5an0. 2 -he depositorMs si,nature speci+ens were a$so ta0en. -hereafter, the deposited chec0s were sent to the drawee 5an0 for c$earance. Inas+uch as So$id5an0 did not receive an1 word fro+ the drawee 5an0, after three .3/ wee0s, it a$$owed the depositor to withdraw the a+ount indicated in the chec0s. On Cune !4, "4*) or +ore than a 1ear $ater, the two do$$ar chee0s were returned to So$id5an0 with the notation that the a+ounts were a$tered. 3 ConseAuent$1, &o reported the +atter to the Phi$ippine Consta5u$ar1 in Ba,uio Cit1.

On #u,ust 3, "4*), CaE+in received radio +essa,es reAuirin, hi+ to appear 5efore the Phi$ippine Consta5u$ar1 headAuarters in Ben,uet on Septe+5er *, "4*) for investi,ation re,ardin, the co+p$aint fi$ed 51 &o a,ainst hi+ for estafa 51 passin, a$tered do$$ar chec0s. Initia$$1, CaE+in was investi,ated 51 consta5u$ar1 officers in >in,a1en, Pan,asinan and $ater, at Ca+p 9o$+es, >a -rinidad, Ben,uet. 9e was shown 8ero8 copies of 6.S. &overn+ent chec0s Nos. (%224% *) and (%223%34 pa1a5$e to the order of ;$overto =as'in in the respective a+ounts of N",3" . and N4"3.2 . -he $atter a+ount was actua$$1 for on$1 N"3.2 @ whi$e the records do not show the una$tered a+ount of the other treasur1 chec0. CaE+in denied that he was the person whose na+e appeared on the chec0s@ that he received the sa+e and that the si,nature on the indorse+ent was his. 9e $i0ewise denied that he opened an account with So$id5an0 or that he deposited and encashed therein the said chec0s. Eventua$$1, the investi,ators found that the person na+ed H;$overto CaE+inH who +ade the deposit and withdrawa$ with So$id5an0 was an i+postor. On Septe+5er !2, "4*), CaE+in fi$ed with the then Court of ;irst Instance of Pan,asinan, Branch II at >in,a1en a co+p$aint a,ainst #,ustin ?. &o and the Conso$idated Ban0 and -rust Corporation for +ora$ and e8e+p$ar1 da+a,es in the tota$ a+ount of P4 , p$us attorne1Ms fees of P(, . 9e a$$e,ed therein that &o a$$owed the deposit of the do$$ar chec0s and the withdrawa$ of their peso eAuiva$ent Hwithout ascertainin, the identit1 of the depositor considerin, the hi,h$1 suspicious circu+stances under which said deposit was +ade@ that instead of ta0in, steps to esta5$ish the correct identit1 of the depositor, &o Hi++ediate$1 and rec0$ess$1 fi$ed .the/ co+p$aint for estafa throu,h a$teration of do$$ar chec0H a,ainst hi+@ that &oMs co+p$aint was Han act of vicious and wanton rec0$essness and c$ear$1 intended for no other purpose than to harass and coerce the p$aintiff into pa1in, the peso eAuiva$ent of said do$$ar chec0s to the CB-C 5ranch office in Ba,uio Cit1H so that &o wou$d not 5e Hdiscip$ined 51 his e+p$o1er@H that 51 reason of said co+p$aint, he was Hco+pe$$ed to present and su5+it hi+se$fH to investi,ations 51 the consta5u$ar1 authorities@ and that he suffered hu+i$iation and e+5arrass+ent as a resu$t of the fi$in, of the co+p$aint a,ainst hi+ as we$$ as H,reat inconvenienceH on account of his a,e .he was a septua,enarian/ and the distance 5etween his residence and the consta5u$ar1 headAuarters. 9e averred that his peace of +ind and +enta$ and e+otiona$ tranAui$it1 as a respected citiEen of the co++unit1 wou$d not have suffered had &o e8ercised Ha $itt$e prudenceH in ascertainin, the identit1 of the depositor and, for the H,ross$1 ne,$i,ent and rec0$ess actH of its e+p$o1ee, the defendant CB-C shou$d a$so 5e he$d responsi5$e. 4 In their answer, the defendants contended that the p$aintiff had no cause of action a,ainst the+ 5ecause the1 acted in ,ood faith in see0in, the Hinvesti,ative assistanceH of the Phi$ippine Consta5u$ar1 on the swind$in, operations a,ainst 5an0s 51 a s1ndicate which specia$iEed in the theft, a$teration and encash+ent of do$$ar chec0s. -he1 contended that contrar1 to p$aintiff s a$$e,ations, the1 verified the si,nature of the depositor and their te$$ers conducted an Identit1 chec0. #s counterc$ai+, the1 pra1ed for the award of P" , as co+pensator1 and +ora$ da+a,es@ P! , as e8e+p$ar1 da+a,es@ P! , as attorne1Ms fees and P(, as $iti,ation, incidenta$ e8penses and costs. $ In its decision of March !*, "4*3 % the $ower court found that &o was ne,$i,ent in fai$in, to e8ercise H+ore care, caution and vi,i$anceH in acceptin, the chec0s for deposit and encash+ent. It noted that the chec0s were pa1a5$e to the order of ;$overto =as'in, :aranilla St., Man,atare+, Pan,asinan and not to ;$overto =az'in, :aravilla St., Man,atare+, Pan,asinan and that the differences in na+e and address shou$d have put &o on ,uard. It he$d that +ore care shou$d have 5een e8ercised 51 &o in the encash+ent of the 6.S. treasur1 chec0s as there was no ti+e $i+it for returnin, the+ for c$earin, un$i0e in ordinar1 chec0s wherein a two to three%wee0 $i+it is a$$owed. E+phasiEin, that the +ain thrust of the co+p$aint was Hthe fai$ure of the defendants to ta0e steps to ascertain the identit1 of the depositor,H the court noted that the depositor was a$$e,ed$1 a securit1 officer whi$e the p$aintiff was a retiree%pensioner. It considered as Hrec0$essH the defendantsM fi$in, of the co+p$aint with the Phi$ippine Consta5u$ar1 notin, that since the artic$e on a fa0e do$$ar chec0 rin, appeared on Cu$1 "3, "4*) in the Ba,uio Mid$and Courier, it was on$1 on #u,ust !2, "4*) or +ore than a +onth after the 5an0 had $earned of the a$tered chec0s that it fi$ed the co+p$aint and therefore, it had sufficient ti+e to ascertain the identit1 of the depositor. -he court a$so noted that instead of co+p$1in, with the Centra$ Ban0 Circu$ar >etter of Canuar1 "*, "4*3 reAuestin, a$$ 5an0in, institutions to report to the Centra$ Ban0 a$$ cri+es invo$vin, their propert1 within 23 hours fro+ 0now$ed,e of the cri+e, the 5an0 reported the +atter to the Phi$ippine Consta5u$ar1.

;indin, that the p$aintiff had sufficient$1 shown that pre<udice had 5een caused to hi+ in the for+ of +enta$ an,uish, +ora$ shoc0 and socia$ hu+i$iation on account of the defendantsM ,ross ne,$i,ence, the court, invo0in, #rtic$es !"*), !!"* and !!"4 ." / in con<unction with #rtic$e !" of the Civi$ Code, ru$ed in favor of the p$aintiff. -he dispositive portion of the decision states= F9ERE;ORE, this Court finds for p$aintiff and that he is entit$ed to the re$iefs pra1ed for in the fo$$owin, +anner= Defendant #,ustin ?. Co and the CONSO>ID#-ED B#NI #ND -R6SCORPOR#-ION are here51 ordered to pa1, <oint$1 and severa$$1, to the p$aintiff the a+ount of SIJ -9O6S#ND PESOS .P), . / as +ora$ da+a,es@ ONE -9O6S#ND PESOS .P", . / as attorne1Ms fees and costs of $iti,ation and to pa1 the costs and defendant #&6S-IN ?. &o in addition thereto in his so$e and persona$ capacit1 to pa1 the p$aintiff the a+ount of -9REE -9O6S#ND PESOS .P3, . / as e8e+p$ar1 da+a,es, a$$ with interest at si8 .)/ percent per annu' unti$ fu$$1 paid. SO ORDERED. -he defendants appea$ed to the Court of #ppea$s. On Canuar1 !2, "432, said court .then na+ed Inter+ediate #ppe$$ate Court/ rendered a decision 7 findin, as evident ne,$i,ence &oMs fai$ure to notice the su5stantia$ difference in the identit1 of the depositor and the pa1ee in the chec0, conc$uded that &oMs ne,$i,ence in the perfor+ance of his duties was Hthe pro8i+ate cause wh1 appe$$ant 5an0 was swind$edH and that denouncin, the cri+e to the consta5u$ar1 authorities H+ere$1 a,,ravated the situation.H It ru$ed that there was a cause of action a,ainst the defendants a$thou,h CaE+in had nothin, to do with the a$teration of the chec0s, 5ecause he suffered da+a,es due to the ne,$i,ence of &o. 9ence, under #rtic$e !"3 of the Civi$ Code, the 5an0 sha$$ 5e he$d $ia5$e for its +ana,erMs ne,$i,ence. -he appe$$ate court, however, disa$$owed the award of +ora$ and e8e+p$ar1 da+a,es and ,ranted no+ina$ da+a,es instead. It e8p$ained thus= Fhi$e it is true that denouncin, a cri+e is not ne,$i,ence under which a c$ai+ for +ora$ da+a,es is avai$a5$e, sti$$ appe$$ants are $ia5$e under the $aw for no+ina$ da+a,es. -he fact that appe$$ee did not suffer fro+ an1 $oss is of no +o+ent for no+ina$ da+a,es are ad<udicated in order that a ri,ht of the p$aintiff, which has 5een vio$ated or invaded 51 the defendant, +a15e vindicated or reco,niEed and not for the purpose of inde+nif1in, the p$aintiff for an1 $oss suffered 51 hi+ .#rtic$e !!!", New Civi$ Code/. -hese are da+a,es recovera5$e where a $e,a$ ri,ht is technica$$1 vio$ated and +ust 5e vindicated a,ainst an invasion that has produced no actua$ present $oss of an1 0ind, or where there has 5een a 5reach of contract and no su5stantia$ in<ur1 or actua$ da+a,es whatsoever have 5een or can 5e shown .E$,ara vs. Sandi<as, !* Phi$. !32/. -he1 are not intended for inde+nification of $oss suffered 5ut for the vindication or reco,nition of a ri,ht vio$ated or invaded .'entani$$a vs. Centeno, >%"2333, Canuar1 !3, "4)"/. #nd, where the p$aintiff as in the case at 5ar, the herein appe$$ee has esta5$ished a cause of action, 5ut was not a5$e to adduce evidence showin, actua$ da+a,es then no+ina$ da+a,es +a1 5e recovered .Sia vs. Espeni$$a C#%&.R. Nos. 2(! %2(! "%R, #pri$ !", "4*(/. ConseAuent$1, since appe$$ee has no ri,ht to c$ai+ for +ora$ da+a,es, then he +a1 not $i0ewise 5e entit$ed to e8e+p$ar1 da+a,es .Estopa vs. Piansa1, No. >%"2( 3, Septe+5er 3 , "4) /. Considerin, that he had to defend hi+se$f in the cri+ina$ char,es fi$ed a,ainst hi+, and that he was constrained to fi$e the instant case, the attorne1Ms fees to 5e a+ended .sic/ to p$aintiff shou$d 5e increased to P3, . . #ccordin,$1, the appe$$ate court ordered &o and Conso$idated Ban0 and -rust Corporation to pa1 <oint$1 and severa$$1 ;$overto CaE+in on$1 NOMIN#> D#M#&ES in the su+ of -hree -housand Pesos .P 3, . / with interest at si8 .)O/ percent per annu' unti$ fu$$1 paid and One -housand Pesos .P ", . / as attorne1Ms fees and costs of $iti,ation. &o and the 5an0 fi$ed a +otion for the reconsideration of said decision contendin, that in view of the findin, of the appe$$ate court that Hdenouncin, a cri+e is not ne,$i,ence under which a c$ai+ for +ora$ da+a,es is avai$a5$e,H the award of no+ina$ da+a,es is un<ustified as the1 did not vio$ate or invade CaE+inMs ri,hts. Coro$$ari$1, there 5ein, no ne,$i,ence on the part of &o, his e+p$o1er +a1 not 5e he$d $ia5$e for no+ina$ da+a,es.

-he +otion for reconsideration havin, 5een denied, &o and the 5an0 interposed the instant petition for review on certiorari ar,uin, pri+ari$1 that the e+p$o1er 5an0 +a1 not 5e he$d Hco%eAua$$1 $ia5$eH to pa1 no+ina$ da+a,es in the a5sence of proof that it was ne,$i,ent in the se$ection of and supervision over its e+p$o1ee. 8 -he facts of this case revea$ that da+a,es in the for+ of +enta$ an,uish, +ora$ shoc0 and socia$ hu+i$iation were suffered 51 private respondent on$1 after the fi$in, of the petitionersM co+p$aint with the Phi$ippine Consta5u$ar1. It was on$1 then that he had to 5ear the inconvenience of trave$$in, to Ben,uet and >in,a1en for the investi,ations as it was on$1 then that he was su5<ected to e+5arrass+ent for 5ein, a suspect in the unauthoriEed a$teration of the treasur1 chec0s. 9ence, it is understanda5$e wh1 petitioners appear to have over$oo0ed the facts antecedent to the fi$in, of the co+p$aint to the consta5u$ar1 authorities and to have put undue e+phasis on the appe$$ate courtMs state+ent that Hdenouncin, a cri+e is not ne,$i,ence.H #$thou,h this Court has consistent$1 he$d that there shou$d 5e no pena$t1 on the ri,ht to $iti,ate and that error a$one in the fi$in, of a case 5e it 5efore the courts or the proper po$ice authorities, is not a ,round for +ora$ da+a,es, ) we ho$d that under the pecu$iar circu+stances of this case, private respondent is entit$ed to an award of da+a,es. Indeed, it wou$d 5e un<ust to over$oo0 the fact that petitionersM ne,$i,ence was the root of a$$ the inconvenience and e+5arrass+ent e8perienced 51 the private respondent a$5eit the1 happened after the fi$in, of the co+p$aint with the consta5u$ar1 authorities. Petitioner &oMs ne,$i,ence in fact $ed to the swind$in, of his e+p$o1er. 9ad &o e8ercised the di$i,ence e8pected of hi+ as a 5an0 officer and e+p$o1ee, he wou$d have noticed the ,$arin, disparit1 5etween the pa1eeMs na+e and address on the treasur1 chec0s invo$ved and the na+e and address of the depositor appearin, in the 5an0Ms records. -he situation wou$d have 5een different if the treasur1 chec0s were ta+pered with on$1 as to their a+ounts 5ecause the a$teration wou$d have 5een unnoticea5$e and hard to detect as the herein a$tered chec0 5earin, the a+ount of N 4"3.2 shows. But the error in the na+e and address of the pa1ee was ver1 patent and cou$d not have escaped the trained e1es of 5an0 officers and e+p$o1ees. -here is therefore, no other conc$usion than that the 5an0 throu,h its e+p$o1ees .inc$udin, the te$$ers who a$$e,ed$1 conducted an identification chec0 on the depositor/ was ,ross$1 ne,$i,ent in hand$in, the 5usiness transaction herein invo$ved. Fhi$e at that sta,e of events private respondent was sti$$ out of the picture, it definite$1 was the start of his conseAuent invo$ve+ent as his na+e was i$$e,a$$1 used in the i$$icit transaction. #,ain, 0nowin, that its via5i$it1 depended on the confidence reposed upon it 51 the pu5$ic, the 5an0 throu,h its e+p$o1ees shou$d have e8ercised the caution e8pected of it. In cri+es and 9uasi>delicts, the defendant sha$$ 5e $ia5$e for a$$ da+a,es which are the natura$ and pro5a5$e conseAuences of the act or o+ission co+p$ained of. It is not necessar1 that such da+a,es have 5een foreseen or cou$d have reasona5$1 5een foreseen 51 the defendant. 10 #s &oMs ne,$i,ence was the root cause of the co+p$ained inconvenience, hu+i$iation and e+5arrass+ent, &o is $ia5$e to private respondents for da+a,es. #nent petitioner 5an0Ms c$ai+ that it is not Hco%eAua$$1 $ia5$eH with &o for da+a,es, under the fifth para,raph of #rtic$e !"3 of the Civi$ Code, H.E/+p$o1ers sha$$ 5e $ia5$e for the da+a,es caused 51 their e+p$o1ees . . . actin, within the scope of their assi,ned tas0s.H Pursuant to this provision, the 5an0 is responsi5$e for the acts of its e+p$o1ee un$ess there is proof that it e8ercised the di$i,ence of a ,ood father of a fa+i$1 to prevent the da+a,e. 11 9ence, the 5urden of proof $ies upon the 5an0 and it cannot now disc$ai+ $ia5i$it1 in view of its own fai$ure to prove not on$1 that it e8ercised due di$i,ence to prevent da+a,e 5ut that it was not ne,$i,ent in the se$ection and supervision of its e+p$o1ees. F9ERE;ORE, the decision of the respondent appe$$ate court is here51 affir+ed. Costs a,ainst the petitioners. SO ORDERED.

G.R. No. 12$$3%

"&r'( 1%, 2000

PRUDENTIAL BAN , petitioner, vs. COURT O! APPEALS &*+ LETICIA TUPASI.5ALEN6ULA 7o2*e+ b/ (89b&*+ !r&*'29'o 5&1e*:8e1&, respondents. ;UISU"BING, J.: -his appea$ 51 certiorari under Ru$e 2( of the Ru$es of Court see0s to annu$ and set aside the Decision dated Canuar1 3", "44), and the Reso$ution dated Cu$1 !, "44*, of the Court of #ppea$s in C# &.R. C' No. 3((3!, which reversed the <ud,+ent of the Re,iona$ -ria$ Court of 'a$enEue$a, Metro Mani$a, Branch "*", in Civi$ Case No. !4"3%'%33, dis+issin, the private respondentMs co+p$aint for da+a,es." In settin, aside the tria$ courtMs decision, the Court of #ppea$s disposed as fo$$ows= F9ERE;ORE, the appea$ed decision is here51 RE'ERSED and SE- #SIDE and, another rendered orderin, the appe$$ee 5an0 to pa1 appe$$ant the su+ of P" , . 51 wa1 of +ora$ da+a,es@ P( , . 51 wa1 of e8e+p$ar1 da+a,es, P( , . for and as attorne1Ms fees@ and to pa1 the costs. SO ORDERED.! -he facts of the case on record are as fo$$ows= Private respondent >eticia -upasi%'a$enEue$a opened Savin,s #ccount No. (*22 and Current #ccount No. " ")%3 in the 'a$enEue$a Branch of petitioner Prudentia$ Ban0, with auto+atic transfer of funds fro+ the savin,s account to the current account. On Cune ", "433, herein private respondent deposited in her savin,s account Chec0 No. )))B ." 2()" of even date/ the a+ount of P3(,!*".) , drawn a,ainst the Phi$ippine Co++ercia$ Internationa$ Ban0 .PCIB/. -a0in, into account that deposit and a series of withdrawa$s, private respondent as of Cune !", "433 had a 5a$ance of P3(,443.23 in her savin,s account and P**).43 in her current account, or tota$ deposits of P3),** .2", with petitioner. -hereafter, private respondent issued Prudentia$ Ban0 Chec0 No. 43334( in the a+ount of P"",( . post%dated Cune ! , "433, in favor of one Be$en >e,aspi. It was issued to >e,aspi as pa1+ent for <ewe$r1 which private respondent had purchased. >e,aspi, who was in <ewe$r1 trade, endorsed the chec0 to one Phi$ip >hui$$ier, a 5usiness+an a$so in the <ewe$r1 5usiness. Fhen >hui$$ier deposited the chec0 in his account with the PCIB, Pasa1 Branch, it was dishonored for 5ein, drawn a,ainst insufficient funds. >hui$$ierMs secretar1 infor+ed the secretar1 of >e,aspi of the dishonor. -he $atter to$d the for+er to redeposit the chec0, >e,aspiMs secretar1 tried to contact private respondent 5ut to no avai$. 6pon her return fro+ the province, private respondent was surprised to $earn of the dishonor of the chec0. She went to the 'a$enEue$a Branch of Prudentia$ Ban0 on Cu$1 2, "433, to inAuire wh1 her chec0 was dishonored. She approached one #$5ert #n,e$es Re1es, the officer in char,e of current account, and reAuested hi+ for the $ed,er of her current account. Private respondent discovered a de5it of P3 . pena$t1 for the dishonor of her Prudentia$ Chec0 No. 43334(. She as0ed wh1 her chec0 was dishonored when there were sufficient funds in her account as ref$ected in her pass5oo0. Re1es to$d her that there was no need to review the pass5oo0 5ecause the 5an0 $ed,er was the 5est proof that she did not have sufficient funds. -hen, he a5rupt$1 faced his t1pewriter and started t1pin,.

>ater, it was found out that the chec0 in the a+ount of P3(,!*".) deposited 51 private respondent on Cune ", "433, was credited in her savin,s account on$1 on Cune !2, "433, or after a period of !3 da1s. -hus the P"",( . chec0 was redeposited 51 >hui$$ier on Cune !2, "433, and proper$1 c$eared on Cune !*, "433. Because of this incident, the 5an0 tried to +o$$if1 private respondent 51 e8p$ainin, to >e,aspi and >hui$$ier that the 5an0 was at fau$t. Since this was not the first incident private respondent had e8perienced with the 5an0, private respondent was un+oved 51 the 5an0Ms apo$o,ies and she co++enced the present suit for da+a,es 5efore the R-C of 'a$enEue$a. #fter tria$, the court rendered a decision on #u,ust 3 , "44", dis+issin, the co+p$aint of private respondent, as we$$ as the counterc$ai+ fi$ed 51 the defendant, now petitioner. 6ndeterred, private respondent appea$ed to the Court of #ppea$s. On Canuar1 3", "44), respondent appe$$ate court rendered a decision in her favor, settin, aside the tria$ courtMs decision and orderin, herein petitioner to pa1 private respondent the su+ of P" , . 51 wa1 of +ora$ da+a,es@ P( , . e8e+p$ar1 da+a,es@ P( , . for and as attorne1Ms fees@ and to pa1 the costs.3 Petitioner fi$ed a ti+e$1 +otion for reconsideration 5ut it was denied. 9ence, this petition, raisin, the fo$$owin, issues= I. F9E-9ER OR NO- -9E RESPONDEN- CO6R- O; #PPE#>S #C-ED FI-9 &R#'E #B6SE O; DISCRE-ION #MO6N-IN& -O >#CI O; C6RISDIC-ION IN DE'I#-IN& ;ROM ES-#B>IS9ED C6RISPR6DENCE IN RE'ERSIN& -9E DISMISS#> C6D&MEN- O; -9E -RI#> CO6R- #ND INS-E#D #F#RDED MOR#> D#M#&ES, EJEMP>#R? D#M#&ES #ND #--ORNE?MS ;EES. II. F9E-9ER OR NO- -9E RESPONDEN- CO6R- O; #PPE#>S #C-ED IN &R#'E #B6SE O; DISCRE-ION #MO6N-IN& -O >#CI O; C6RISDIC-ION F9ERE, E'EN IN -9E #BSENCE O; E'IDENCE #S ;O6ND B? -9E -RI#> CO6R-, #F#RDED MOR#> D#M#&ES IN -9E #MO6N- O; P" , . . III. F9E-9ER OR NO- -9E RESPONDEN- CO6R- O; #PPE#>S #C-ED IN &R#'E #B6SE O; DISCRE-ION #MO6N-IN& -O >#CI O; C6RISDIC-ION, F9ERE, E'EN IN -9E #BSENCE O; E'IDENCE #S ;O6ND B? -9E -RI#> CO6R-, #F#RDED P( , . B? F#? O; EJEMP>#R? D#M#&ES. I'. F9E-9ER OR NO- -9E RESPONDEN- CO6R- O; #PPE#>S #C-ED FI-9 &R#'E #B6SE O; DISCRE-ION F9ERE E'EN IN -9E #BSENCE O; E'IDENCE, #F#RDED #--ORNE?MS ;EES. Si+p$1 stated, the issue is whether the respondent court erred and ,rave$1 a5used its discretion in awardin, +ora$ and e8e+p$ar1 da+a,es and attorne1Ms fees to 5e paid 51 petitioner to private respondent. Petitioner c$ai+s that ,enera$$1 the factua$ findin,s of the $ower courts are fina$ and 5indin, upon this Court. 9owever, there are e8ceptions to this ru$e. One is where the tria$ court and the Court of #ppea$s had arrived at diverse factua$ findin,s.2 Petitioner fau$ts the respondent court fro+ deviatin, fro+ the 5asic ru$e that findin, of facts 51 the tria$ court is entit$ed to ,reat wei,ht, 5ecause the tria$ court had the opportunit1 to o5serve the deport+ent of witness and the eva$uation of evidence presented durin, the tria$. Petitioner contends that the appe$$ate court ,rave$1 a5used its discretion when it awarded da+a,es to the p$aintiff, even in the face of $ac0 of evidence to prove such da+a,es, as found 51 the tria$ court. 8irstl(, petitioner Auestions the award of +ora$ da+a,es. It c$ai+s that private respondent did not suffer an1 da+a,e upon the dishonor of the chec0. Petitioner avers it acted in ,ood faith. It was an honest +ista0e on its part, accordin, to petitioner, when +ispostin, of private respondentMs deposit on Cune ", "433, happened. ;urther, petitioner contends that private respondent +a1 not Hc$ai+H da+a,es 5ecause the petitionerMs +ana,er and other e+p$o1ees had profuse$1 apo$o,iEed to private respondent for the error. -he1 offered to +a0e restitution and apo$o,1 to the pa1ee of

the chec0, >e,aspi, as we$$ as the a$$e,ed endorsee, >hui$$ier. Re,retta5$1, it was private respondent who dec$ined the offer and a$$e,ed$1 said, that there was nothin, +ore to it, and that the +atter had 5een put to rest. ( #d+itted$1, as found 51 5oth the respondent appe$$ate court and the tria$ court, petitioner 5an0 had co++itted a +ista0e.1wphi1.n?t It +isposted private respondentMs chec0 deposit to another account and de$a1ed the postin, of the sa+e to the proper account of the private respondent. -he +ista0e resu$ted to the dishonor of the private respondentMs chec0. -he tria$ court found Hthat the +ispostin, of p$aintiffMs chec0 deposit to another account and the de$a1ed postin, of the sa+e to the account of the p$aintiff is a c$ear proof of $ac0 of supervision on the part of the defendant 5an0.H ) Si+i$ar$1, the appe$$ate court a$so found that Hwhi$e it +a1 5e true that the 5an0Ms ne,$i,ence in dishonorin, the proper$1 funded chec0 of appe$$ant +i,ht not have 5een attended with +a$ice and 5ad faith, as appe$$ee P5an0Q su5+its, neverthe$ess, it is the resu$t of $ac0 of due care and caution e8pected of an e+p$o1ee of a fir+ en,a,ed in so sensitive and accurate$1 de+andin, tas0 as 5an0in,.H* In &i'e) "nternational 5:anila6, "nc. vs. !ourt of Appeals, "33 SCR# 3) , 3)* ."44 /, and Bank of *hilippine "slands vs. "A!, et al., ! ) SCR# 2 3, 2"!%2"3 ."44!/, this Court had occasion to stress the fiduciar1 nature of the re$ationship 5etween a 5an0 and its depositors and the e8tent of di$i,ence e8pected of the for+er in hand$in, the accounts entrusted to its care, thus= In ever1 case, the depositor e8pects the 5an0 to treat his account with the ut+ost fide$it1, whether such account consists on$1 of a few hundred pesos or of +i$$ions. -he 5an0 +ust record ever1 sin,$e transaction accurate$1, down to the $ast centavo, and as pro+pt$1 as possi5$e. -his has to 5e done if the account is to ref$ect at an1 ,iven ti+e the a+ount of +one1 the depositor can dispose of as he sees fit, confident that the 5an0 wi$$ de$iver it as and to who+ever he directs. # 5$under on the part of 5an0, such as the dishonor of a chec0 without ,ood reason, can cause the depositor not a $itt$e e+5arrass+ent if not a$so financia$ $oss and perhaps even civi$ and cri+ina$ $iti,ation. -he paint is that as a 5usiness affected with pu5$ic interest and 5ecause of the nature of its functions, the 5an0 is under o5$i,ation to treat the accounts of its depositors with +eticu$ous care, a$wa1s havin, in +ind the fiduciar1 nature of their re$ationship. . . . In the recent case of *hilippine +ational Bank vs. !ourt of Appeals,3 we he$d that Ha 5an0 is under o5$i,ation to treat the accounts of its depositors with +eticu$ous care whether such account consists on$1 of a few hundred pesos or of +i$$ions of pesos. Responsi5i$it1 arisin, fro+ ne,$i,ence in the perfor+ance of ever1 0ind of o5$i,ation is de+anda5$e. Fhi$e petitionerMs ne,$i,ence in this case +a1 not have 5een attended with +a$ice and 5ad faith, neverthe$ess, it caused serious an8iet1, e+5arrass+ent and hu+i$iationH. 9ence we ru$ed that the offended part1 in said case was entit$ed to recover reasona5$e +ora$ da+a,es. Even if +a$ice or 5ad faith was not sufficient$1 proved in the instant case, the fact re+ains that petitioner has co++itted a serious +ista0e. It dishonored the chec0 issued 51 the private respondent who turned out to have sufficient funds with petitioner. -he 5an0Ms ne,$i,ence was the resu$t of $ac0 of due care and caution reAuired of +ana,ers and e+p$o1ees of a fir+ en,a,ed in so sensitive and de+andin, 5usiness as 5an0in,. #ccordin,$1, the award of +ora$ da+a,es 51 the respondent Court of #ppea$s cou$d not 5e said to 5e in error nor in ,rave a5use of its discretion. -here is no hard%and%fast ru$e in the deter+ination of what wou$d 5e a fair a+ount of +ora$ da+a,es since each case +ust 5e ,overned 51 its own pecu$iar facts. -he 1ardstic0 shou$d 5e that it is not pa$pa5$1 and scanda$ous$1 e8cessive. In our view, the award of P" , . is reasona5$e, considerin, the reputation and socia$ standin, of private respondent >eticia -. 'a$enEue$a.4 -he $aw a$$ows the ,rant of e8e+p$ar1 da+a,es 51 wa1 of e8a+p$e for the pu5$ic ,ood. " -he pu5$ic re$ies on the 5an0sM sworn profession of di$i,ence and +eticu$ousness in ,ivin, irreproacha5$e service. -he $eve$ of +eticu$ousness +ust 5e +aintained at a$$ ti+es 51 the 5an0in, sector. 9ence, the Court of #ppea$s did not err in awardin, e8e+p$ar1 da+a,es. In our view, however, the reduced a+ount of P! , . is +ore appropriate.

-he award of attorne1Ms fees is a$so proper when e8e+p$ar1 da+a,es are awarded and since private respondent was co+pe$$ed to en,a,e the services of a $aw1er and incurred e8penses to protect her interest. "" -he standards in fi8in, attorne1Ms fees are= ."/ the a+ount and the character of the services rendered@ .!/ $a5or, ti+e and trou5$e invo$ved@ .3/ the nature and i+portance of the $iti,ation and 5usiness in which the services were rendered@ .2/ the responsi5i$it1 i+posed@ .(/ the a+ount of +one1 and the va$ue of the propert1 affected 51 the controvers1 or invo$ved in the e+p$o1+ent@ .)/ the s0i$$ and the e8perience ca$$ed for in the perfor+ance of the services@ .*/ the professiona$ character and the socia$ standin, of the attorne1@ .3/ the resu$ts secured, it 5ein, a reco,niEed ru$e that an attorne1 +a1 proper$1 char,e a +uch $ar,er fee when it is contin,ent than when it is not. "! In this case, a$$ the afore+entioned wei,hed, and considerin, that the a+ount invo$ved in the controvers1 is on$1 P3),** .2", the tota$ deposit of private respondent which was +isposted 51 the 5an0, we find the award of respondent court of P( , . for attorne1Ms fees, e8cessive and reduce the sa+e to P3 , . . F9ERE;ORE, the assai$ed DECISION of the Court of #ppea$s is here51 #;;IRMED, with MODI;IC#-ION. -he petitioner is ordered to pa1 P" , . 51 wa1 of +ora$ da+a,es in favor of private respondent >eticia -. 'a$enEue$a. It is further ordered to pa1 her e8e+p$ar1 da+a,es in the a+ount of P! , . and P3 , . , attorne1Ms fees. Costs a,ainst petitioner.

G.R. No. 14)4$4

"&/ 28, 2004

BAN O! T,E P,ILIPPINE ISLANDS, petitioner, vs. CASA "ONTESSORI INTERNATIONALE LEONARDO T. -ABUT, respondents. 8 %%%%%%%%%%%%%%%%%%%%%%%%%%%%% 8 G.R. No. 14)$07 "&/ 28, 2004

CASA "ONTESSORI INTERNATIONALE, petitioner, vs. BAN O! T,E P,ILIPPINE ISLANDS, respondent. DECISION PANGANIBAN, J.: B1 the nature of its functions, a 5an0 is reAuired to ta0e +eticu$ous care of the deposits of its c$ients, who have the ri,ht to e8pect hi,h standards of inte,rit1 and perfor+ance fro+ it. #+on, its o5$i,ations in furtherance thereof is 0nowin, the si,natures of its c$ients. Depositors are not estopped fro+ Auestionin, wron,fu$ withdrawa$s, even if the1 have fai$ed to Auestion those errors in the state+ents sent 51 the 5an0 to the+ for verification. T(e C&9e Before us are two Petitions for Review" under Ru$e 2( of the Ru$es of Court, assai$in, the March !3, ! " Decision ! and the #u,ust "*, ! " Reso$ution3 of the Court of #ppea$s .C#/ in C#%&R C' No. )3()". -he decreta$ portion of the assai$ed Decision reads as fo$$ows= HF9ERE;ORE, upon the pre+ises, the decision appea$ed fro+ is A!!IR"ED with the +odification that defendant 5an0 PBan0 of the Phi$ippine Is$ands .BPI/Q is he$d $ia5$e on$1 for one%ha$f of the va$ue of the for,ed chec0s in the a+ount of P(2*,""(. after deductions su5<ect to REIMB6RSEMEN- fro+ third part1 defendant ?a5ut who is $i0ewise ORDERED to pa1 the other ha$f to p$aintiff corporation PCasa Montessori Internationa$e .C#S#/Q.H2 -he assai$ed Reso$ution denied a$$ the parties: Motions for Reconsideration. T(e !&'<9 -he facts of the case are narrated 51 the C# as fo$$ows= HOn Nove+5er 3, "43!, p$aintiff C#S# Montessori Internationa$ ( opened Current #ccount No. !4"% 3"% " with defendant BPIP,Q with C#S#:s President Ms. Ma. Carina C. >e5ron as one of its authoriEed si,natories. HIn "44", after conductin, an investi,ation, p$aintiff discovered that nine .4/ of its chec0s had 5een encashed 51 a certain Sonn1 D. Santos since "44 in the tota$ a+ount of P*3!, . , on the fo$$owin, dates and a+ounts=

=C(e'3 No. ". 334* !. 3342(4 3. 334) 4 2. 334(24 (. 334()4 ). *!4"24 *. *!4"!4 3. 334)32 4. *!4 32

D&<e #pri$ !2, "44 Nov. !, "44 Oct. "*, "44 #pri$ *, "44 Sept. !3, "44 Mar. !!, "44 Mar. "), "44 Dec. ", "44 Mar. !, "44

Amo8*< P 23,2 "" ,( 2*,*!3. 4 ,* . . .

(!,!**. "23, (", "(. "2 , 43,43(. P *3!,) .

)

-ota$ %%

HIt turned out that RSonn1 D. Santos: with account at BPI:s &reen5e$t Branch PwasQ a fictitious na+e used 51 third part1 defendant >eonardo -. ?a5ut who wor0ed as e8terna$ auditor of C#S#. -hird part1 defendant vo$untari$1 ad+itted that he for,ed the si,nature of Ms. >e5ron and encashed the chec0s. H-he PNP Cri+e >a5orator1 conducted an e8a+ination of the nine .4/ chec0s and conc$uded that the handwritin,s thereon co+pared to the standard si,nature of Ms. >e5ron were not written 51 the $atter. HOn March 2, "44", p$aintiff fi$ed the herein Co+p$aint for Co$$ection with Da+a,es a,ainst defendant 5an0 pra1in, that the $atter 5e ordered to reinstate the a+ount of P*3!,( . * in the current and savin,s accounts of the p$aintiff with interest at )O per annu+. HOn ;e5ruar1 "), "444, the R-C rendered the appea$ed decision in favor of the p$aintiff.H 3 Ru$in, of the Court of #ppea$s Modif1in, the Decision of the Re,iona$ -ria$ Court .R-C/, the C# apportioned the $oss 5etween BPI and C#S#. -he appe$$ate court too0 into account C#S#:s contri5utor1 ne,$i,ence that resu$ted in the undetected for,er1. It then ordered >eonardo -. ?a5ut to rei+5urse BPI ha$f the tota$ a+ount c$ai+ed@ and C#S#, the other ha$f. It a$so disa$$owed attorne1:s fees and +ora$ and e8e+p$ar1 da+a,es. 9ence, these Petitions.4 I998e9 In &R No. "242(2, Petitioner BPI su5+its the fo$$owin, issues for our consideration= HI. -he 9onora5$e Court of #ppea$s erred in decidin, this case NOT 2* &''or+ >2<( <(e &??12'&b1e +e'292o*9 o@ <(29 ,o*or&b1e Co8r< to the effect that for,er1 cannot 5e presu+ed@ that it +ust 5e proved 51 c$ear, positive and convincin, evidence@ and that the 5urden of proof $ies on the part1 a$$e,in, the for,er1. HII. -he 9onora5$e Court of #ppea$s erred in decidin, this case *o< 2* &''or+ >2<( &??12'&b1e 1&>9, in particu$ar the Ne,otia5$e Instru+ents >aw .NI>/ which prec$udes C#S#, on account of its own ne,$i,ence, fro+ assertin, its for,er1 c$ai+ a,ainst BPI, specia$$1 ta0in, into account the a5sence of an1 ne,$i,ence on the part of BPI.H"

In &R No. "24( *, Petitioner C#S# su5+its the fo$$owin, issues= H". -he 9onora5$e Court of #ppea$s erred when it ru$ed that Rthere is no showin, that PBPIQ, a$thou,h ne,$i,ent, acted in 5ad faith 8 8 8: thus den1in, the pra1er for the award of attorne1:s fees, +ora$ da+a,es and e8e+p$ar1 da+a,es to PC#S#Q. -he 9onora5$e Court a$so erred when it did not order PBPIQ to pa1 interest on the a+ounts due to PC#S#Q. H!. -he 9onora5$e Court of #ppea$s erred when it dec$ared that PC#S#Q was $i0ewise ne,$i,ent in the case at 5ar, thus warrantin, its conc$usion that the $oss in the a+ount of P(2*,""(. 5e Rapportioned 5etween PC#S#Q and PBPIQ 8 8 8.:H"" -hese issues can 5e narrowed down to three. 8irst, was there for,er1 under the Ne,otia5$e Instru+ents >aw .NI>/K &econd, were an1 of the parties ne,$i,ent and therefore prec$uded fro+ settin, up for,er1 as a defenseK #hird, shou$d +ora$ and e8e+p$ar1 da+a,es, attorne1:s fees, and interest 5e awardedK -he Court:s Ru$in, -he Petition in &R No. "242(2 has no +erit, whi$e that in &R No. "24( * is part$1 +eritorious. !2r9< I998eA Forged Signature Wholly Inoperative &ection /4 of the +"; provides0 HSection !3. 8orged signature@ effect of. %% Fhen a si,nature is for,ed or +ade without the authorit1 of the person whose si,nature it purports to 5e, it is who$$1 inoperative, and no ri,ht 8 8 8 to enforce pa1+ent thereof a,ainst an1 part1 thereto, can 5e acAuired throu,h or under such si,nature, un$ess the part1 a,ainst who+ it is sou,ht to enforce such ri,ht is prec$uded fro+ settin, up the for,er1 or want of authorit1.H "! 6nder this provision, a for,ed si,nature is a rea$"3 or a5so$ute defense,"2 and a person whose si,nature on a ne,otia5$e instru+ent is for,ed is dee+ed to have never 5eco+e a part1 thereto and to have never consented to the contract that a$$e,ed$1 ,ave rise to it."( -he counterfeitin, of an1 writin,, consistin, in the si,nin, of another:s na+e with intent to defraud, is for,er1. ") In the present case, we ho$d that there was for,er1 of the drawer:s si,nature on the chec0. 8irst, 5oth the C#"* and the R-C"3 found that Respondent ?a5ut hi+se$f had vo$untari$1 ad+itted, throu,h an #ffidavit, that he had for,ed the drawer:s si,nature and encashed the chec0s. "4 9e never refuted these findin,s.! -hat he had 5een coerced into ad+ission was not corro5orated 51 an1 evidence on record. !" &econd, the appe$$ate and the tria$ courts a$so ru$ed that the PNP Cri+e >a5orator1, after its e8a+ination of the said chec0s,!! had conc$uded that the handwritin,s thereon %% co+pared to the standard si,nature of the drawer %% were not hers.!3 -his conc$usion was the sa+e as that in the Report!2 that the PNP Cri+e >a5orator1 had ear$ier issued to BPI %% the drawee 5an0 %% upon the $atter:s reAuest. Indeed, we respect and affir+ the R-C:s factua$ findin,s, especia$$1 when affir+ed 51 the C#, since these are supported 51 su5stantia$ evidence on record.!( Voluntary Admission Not Violative of Constitutional Rights

-he vo$untar1 ad+ission of ?a5ut did not vio$ate his constitutiona$ ri,hts ."/ on custodia$ investi,ation, and .!/ a,ainst se$f%incri+ination. In the first p$ace, he was not under custodia$ investi,ation. !) 9is #ffidavit was e8ecuted in private and 5efore private individua$s.!* -he +ant$e of protection under Section "! of #rtic$e III of the "43* Constitution !3 covers on$1 the period Hfro+ the ti+e a person is ta0en into custod1 for investi,ation of his possi5$e participation in the co++ission of a cri+e or fro+ the ti+e he is sin,$ed out as a suspect in the co++ission of a cri+e a$thou,h not 1et in custod1.H !4 -herefore, to fa$$ within the a+5it of Section "!, Auoted a5ove, there +ust 5e an arrest or a deprivation of freedo+, with HAuestions propounded on hi+ 51 the po$ice authorities for the purpose of e$icitin, ad+issions, confessions, or an1 infor+ation.H3 -he said constitutiona$ provision does Hnot app$1 to spontaneous state+ents +ade in a vo$untar1 +annerH3" where51 an individua$ ora$$1 ad+its to authorship of a cri+e. 3! HFhat the Constitution proscri5es is the co+pu$sor1 or coercive disc$osure of incri+inatin, facts.H 33 Moreover, the ri,ht a,ainst se$f%incri+ination32 under Section "* of #rtic$e III3( of the Constitution, which is ordinari$1 avai$a5$e on$1 in cri+ina$ prosecutions, e8tends to a$$ other ,overn+ent proceedin,s %% inc$udin, civi$ actions, $e,is$ative investi,ations,3) and ad+inistrative proceedin,s that possess a cri+ina$ or pena$ aspect 3* %% 5ut not to private investi,ations done 51 private individua$s. Even in such ,overn+ent proceedin,s, this ri,ht +a1 5e waived, 33 provided the waiver is certain@ uneAuivoca$@ and inte$$i,ent$1, understandin,$1 and wi$$in,$1 +ade. 34 If in these ,overn+ent proceedin,s waiver is a$$owed, a$$ the +ore is it so in private investi,ations. It is of no +o+ent that no cri+ina$ case has 1et 5een fi$ed a,ainst ?a5ut. -he fi$in, thereof is entire$1 up to the appropriate authorities or to the private individua$s upon who+ da+a,e has 5een caused. #s we sha$$ a$so e8p$ain $ater, it is not +andator1 for C#S# %% the p$aintiff 5e$ow %% to i+p$ead ?a5ut in the civi$ case 5efore the $ower court. 6nder these two constitutiona$ provisions, HPtQhe Bi$$ of Ri,hts 2 does not concern itse$f with the re$ation 5etween a private individua$ and another individua$. It ,overns the re$ationship 5etween the individua$ and the State.H 2" Moreover, the Bi$$ of Ri,hts His a charter of $i5erties for the individua$ and a $i+itation upon the power of the PSQtate.H 2! -hese ri,hts23 are ,uaranteed to prec$ude the s$i,htest coercion 51 the State that +a1 $ead the accused Hto ad+it so+ethin, fa$se, not prevent hi+ fro+ free$1 and vo$untari$1 te$$in, the truth.H 22 ?a5ut is not an accused here. Besides, his +ere invocation of the aforesaid ri,hts Hdoes not auto+atica$$1 entit$e hi+ to the constitutiona$ protection.H2( Fhen he free$1 and vo$untari$1 e8ecuted2) his #ffidavit, the State was not even invo$ved. Such #ffidavit +a1 therefore 5e ad+itted without vio$atin, his constitutiona$ ri,hts whi$e under custodia$ investi,ation and a,ainst se$f%incri+ination. Clear !ositive and Convin"ing #$amination and #viden"e -he e8a+ination 51 the PNP, thou,h inconc$usive, was neverthe$ess c$ear, positive and convincin,. ;or,er1 Hcannot 5e presu+ed.H2* It +ust 5e esta5$ished 51 c$ear, positive and convincin, evidence. 23 6nder the 5est evidence ru$e as app$ied to docu+entar1 evidence $i0e the chec0s in Auestion, no secondar1 or su5stitutionar1 evidence +a1 inceptive$1 5e introduced, as the ori,ina$ writin, itse$f +ust 5e produced in court. 24 But when, without 5ad faith on the part of the offeror, the ori,ina$ chec0s have a$read1 5een destro1ed or cannot 5e produced in court, secondar1 evidence +a1 5e produced.( Fithout 5ad faith on its part, C#S# proved the $oss or destruction of the ori,ina$ chec0s throu,h the #ffidavit of the one person who 0new of that fact (" %% ?a5ut. 9e c$ear$1 ad+itted to discardin, the paid chec0s to cover up his +isdeed.(! In such a situation, secondar1 evidence $i0e +icrofi$+ copies +a1 5e introduced in court. -he drawer:s si,natures on the +icrofi$+ copies were co+pared with the standard si,nature. PNP Docu+ent E8a+iner II Cosefina de $a CruE testified on cross%e8a+ination that two different persons had written the+. (3 #$thou,h no conc$usive report cou$d 5e issued in the a5sence of the ori,ina$ chec0s, (2 she affir+ed that her findin,s were 4 percent conc$usive.(( #ccordin, to her, even if the +icrofi$+ copies were the on$1 5asis of co+parison, the differences were evident.() Besides, the R-C e8p$ained that a$thou,h the Report was inconc$usive, no conc$usive report cou$d

have 5een ,iven 51 the PNP, an1wa1, in the a5sence of the ori,ina$ chec0s. (* -his e8p$anation is va$id@ otherwise, no such report can ever 5e re$ied upon in court. Even with respect to docu+entar1 evidence, the 5est evidence ru$e app$ies on$1 when the contents of a docu+ent %% such as the drawer:s si,nature on a chec0 %% is the su5<ect of inAuir1. (3 #s to whether the docu+ent has 5een actua$$1 e8ecuted, this ru$e does not app$1@ and testi+onia$ as we$$ as an1 other secondar1 evidence is ad+issi5$e. (4 Carina >e5ron herse$f, the drawer:s authoriEed si,nator1, testified +an1 ti+es that she had never si,ned those chec0s. 9er testi+onia$ evidence is ad+issi5$e@ the chec0s have not 5een actua$$1 e8ecuted. -he ,enuineness of her handwritin, is proved, not on$1 throu,h the court:s co+parison of the Auestioned handwritin,s and ad+itted$1 ,enuine speci+ens thereof,) 5ut a5ove a$$ 51 her. -he fai$ure of C#S# to produce the ori,ina$ chec0s neither ,ives rise to the presu+ption of suppression of evidence )" nor creates an unfavora5$e inference a,ainst it. )! Such fai$ure +ere$1 authoriEes the introduction of secondar1 evidence)3 in the for+ of +icrofi$+ copies. Of no conseAuence is the fact that C#S# did not present the si,nature card containin, the si,natures with which those on the chec0s were co+pared. )2 Speci+ens of standard si,natures are not $i+ited to such a card. Considerin, that it was not produced in evidence, other docu+ents that 5ear the drawer:s authentic si,nature +a1 5e resorted to.)( Besides, that card was in the possession of BPI %% the adverse part1. Fe have he$d that without the ori,ina$ docu+ent containin, the a$$e,ed$1 for,ed si,nature, one cannot +a0e a definitive co+parison that wou$d esta5$ish for,er1@)) and that a co+parison 5ased on a +ere reproduction of the docu+ent under controvers1 cannot produce re$ia5$e resu$ts. )* Fe have a$so said, however, that a <ud,e cannot +ere$1 re$1 on a handwritin, e8pert:s testi+on1,)3 5ut shou$d a$so e8ercise independent <ud,+ent in eva$uatin, the authenticit1 of a si,nature under scrutin1.)4 In the present case, 5oth the R-C and the C# conducted independent e8a+inations of the evidence presented and arrived at reasona5$e and si+i$ar conc$usions. Not on$1 did the1 ad+it secondar1 evidence@ the1 a$so apposite$1 considered testi+onia$ and other docu+entar1 evidence in the for+ of the #ffidavit. -he 5est evidence ru$e ad+its of e8ceptions and, as we have discussed ear$ier, the first of these has 5een +et. * -he resu$t of e8a+inin, a Auestioned handwritin,, even with the aid of e8perts and scientific instru+ents, +a1 5e inconc$usive@*" 5ut it is a non se9uitur to sa1 that such resu$t is not c$ear, positive and convincin,. -he preponderance of evidence reAuired in this case has 5een satisfied.*! Se'o*+ I998eA Negligen"e Attri%uta%le to &!I Alone 9avin, esta5$ished the for,er1 of the drawer:s si,nature, BPI %% the drawee %% erred in +a0in, pa1+ents 51 virtue thereof. -he for,ed si,natures are who$$1 inoperative, and C#S# %% the drawer whose authoriEed si,natures do not appear on the ne,otia5$e instru+ents %% cannot 5e he$d $ia5$e thereon. Neither is the $atter prec$uded fro+ settin, up for,er1 as a rea$ defense. Clear Negligen"e in Allo'ing !ayment (nder a Forged Signature Fe have repeated$1 e+phasiEed that, since the 5an0in, 5usiness is i+pressed with pu5$ic interest, of para+ount i+portance thereto is the trust and confidence of the pu5$ic in ,enera$. ConseAuent$1, the hi,hest de,ree of di$i,ence *3 is e8pected,*2 and hi,h standards of inte,rit1 and perfor+ance are even reAuired, of it. *( B1 the nature of its functions, a 5an0 is Hunder o5$i,ation to treat the accounts of its depositors with +eticu$ous care, *) a$wa1s havin, in +ind the fiduciar1 nature of their re$ationship.H** BPI contends that it has a si,nature verification procedure, in which chec0s are honored on$1 when the si,natures therein are verified to 5e the sa+e with or si+i$ar to the speci+en si,natures on the si,nature cards. Nonethe$ess, it sti$$ fai$ed to detect the ei,ht instances of for,er1. Its ne,$i,ence consisted in the o+ission of that de,ree of di$i,ence reAuired*3 of a 5an0. It cannot now fei,n i,norance, for ver1 ear$1 on we have a$read1 ru$ed that a 5an0 is H5ound to 0now the si,natures of its custo+ers@ and if it pa1s a for,ed chec0, it +ust 5e considered as +a0in, the pa1+ent out of

its own funds, and cannot ordinari$1 char,e the a+ount so paid to the account of the depositor whose na+e was for,ed.H*4 In fact, BPI was the sa+e 5an0 invo$ved when we issued this ru$in, sevent1 1ears a,o. Neither Waiver nor #stoppel Results from Failure to Report #rror in &an) Statement -he +onth$1 state+ents issued 51 BPI to its c$ients contain a notice worded as fo$$ows= HIf no error is reported in ten ." / da1s, account wi$$ 5e correct.H3 Such notice cannot 5e considered a waiver, even if C#S# fai$ed to report the error. Neither is it estopped fro+ Auestionin, the +ista0e after the $apse of the ten%da1 period. -his notice is a si+p$e confir+ation3" or Hcircu$ariEationH %% in accountin, par$ance %% that reAuests c$ient%depositors to affir+ the accurac1 of ite+s recorded 51 the 5an0s.3! Its purpose is to o5tain fro+ the depositors a direct corro5oration of the correctness of their account 5a$ances with their respective 5an0s. 33 Interna$ or e8terna$ auditors of a 5an0 use it as a 5asic audit procedure32 %% the resu$ts of which its c$ient%depositors are neither interested in nor priv1 to %% to test the detai$s of transactions and 5a$ances in the 5an0:s records. 3( Evidentia$ +atter o5tained fro+ independent sources outside a 5an0 on$1 serves to provide ,reater assurance of re$ia5i$it1 3) than that o5tained so$e$1 within it for purposes of an audit of its own financia$ state+ents, not those of its c$ient%depositors. ;urther+ore, there is a$wa1s the audit ris0 that errors wou$d not 5e detected 3* for various reasons. <ne, +ateria$it1 is a consideration in audit p$annin,@33 and two, the infor+ation o5tained fro+ such a su5stantive test is +ere$1 presu+ptive and cannot 5e the 5asis of a va$id waiver.34 BPI has no ri,ht to i+pose a condition uni$atera$$1 and thereafter consider fai$ure to +eet such condition a waiver. Neither +a1 C#S# renounce a ri,ht 4 it has never possessed.4" Ever1 ri,ht has su5<ects %% active and passive. Fhi$e the active su5<ect is entit$ed to de+and its enforce+ent, the passive one is dut1%5ound to suffer such enforce+ent. 4! On the one hand, BPI cou$d not have 5een an active su5<ect, 5ecause it cou$d not have de+anded fro+ C#S# a response to its notice. Besides, the notice was a +eas$1 reAuest worded as fo$$ows= HP$ease e8a+ine 8 8 8 and report 8 8 8.H43 C#S#, on the other hand, cou$d not have 5een a passive su5<ect, either, 5ecause it had no o5$i,ation to respond. It cou$d %% as it did %% choose not to respond. Estoppe$ prec$udes individua$s fro+ den1in, or assertin,, 51 their own deed or representation, an1thin, contrar1 to that esta5$ished as the truth, in $e,a$ conte+p$ation.42 Our ru$es on evidence even +a0e a Auris et de Aure presu+ption4( that whenever one has, 51 one:s own act or o+ission, intentiona$$1 and de$i5erate$1 $ed another to 5e$ieve a particu$ar thin, to 5e true and to act upon that 5e$ief, one cannot %% in an1 $iti,ation arisin, fro+ such act or o+ission %% 5e per+itted to fa$sif1 that supposed truth.4) In the instant case, C#S# never +ade an1 deed or representation that +is$ed BPI. -he for+er:s o+ission, if an1, +a1 on$1 5e dee+ed an innocent +ista0e o5$ivious to the procedures and conseAuences of periodic audits. Since its conduct was due to such i,norance founded upon an innocent +ista0e, estoppe$ wi$$ not arise. 4* # person who has no 0now$ed,e of or consent to a transaction +a1 not 5e estopped 51 it. 43 HEstoppe$ cannot 5e sustained 51 +ere ar,u+ent or dou5tfu$ inference 8 8 8.H44 C#S# is not 5arred fro+ Auestionin, BPI:s error even after the $apse of the period ,iven in the notice. *oss &orne %y !ro$imate Sour"e of Negligen"e ;or a$$owin, pa1+ent" on the chec0s to a wron,fu$ and fictitious pa1ee, BPI %% the drawee 5an0 %% 5eco+es $ia5$e to its depositor%drawer. Since the encashin, 5an0 is one of its 5ranches, " " BPI can easi$1 ,o after it and ho$d it $ia5$e for rei+5urse+ent." ! It H+a1 not de5it the drawer:s account" 3 and is not entit$ed to inde+nification fro+ the drawer.H " 2 In 5oth $aw and eAuit1, when one of two innocent persons H+ust suffer 51 the wron,fu$ act of a third person, the $oss +ust 5e 5orne 51 the one whose ne,$i,ence was the pro8i+ate cause of the $oss or who put it into the power of the third person to perpetrate the wron,.H" (

Pro8i+ate cause is deter+ined 51 the facts of the case. " ) HIt is that cause which, in natura$ and continuous seAuence, un5ro0en 51 an1 efficient intervenin, cause, produces the in<ur1, and without which the resu$t wou$d not have occurred.H" * Pursuant to its pri+e dut1 to ascertain we$$ the ,enuineness of the si,natures of its c$ient%depositors on chec0s 5ein, encashed, BPI is He8pected to use reasona5$e 5usiness prudence.H " 3 In the perfor+ance of that o5$i,ation, it is 5ound 51 its interna$ 5an0in, ru$es and re,u$ations that for+ part of the contract it enters into with its depositors. " 4 6nfortunate$1, it fai$ed in that re,ard. 8irst, ?a5ut was a5$e to open a 5an0 account in one of its 5ranches without privit1@"" that is, without the proper verification of his correspondin, identification papers. &econd, BPI was una5$e to discover ear$1 on not on$1 this irre,u$arit1, 5ut a$so the +ar0ed differences in the si,natures on the chec0s and those on the si,nature card. #hird, despite the e8a+ination procedures it conducted, the Centra$ 'erification 6nit """ of the 5an0 even passed off these evident$1 different si,natures as ,enuine. Fithout e8ercisin, the reAuired prudence on its part, BPI accepted and encashed the ei,ht chec0s presented to it. #s a resu$t, it pro8i+ate$1 contri5uted to the fraud and shou$d 5e he$d pri+ari$1 $ia5$e""! for the Hne,$i,ence of its officers or a,ents when actin, within the course and scope of their e+p$o1+ent.H""3 It +ust 5ear the $oss. CASA Not Negligent in Its Finan"ial Affairs In this <urisdiction, the ne,$i,ence of the part1 invo0in, for,er1 is reco,niEed as an e8ception ""2 to the ,enera$ ru$e that a for,ed si,nature is who$$1 inoperative.""( Contrar1 to BPI:s c$ai+, however, we do not find C#S# ne,$i,ent in hand$in, its financia$ affairs. C#S#, we stress, is not prec$uded fro+ settin, up for,er1 as a rea$ defense. Role of Independent Auditor -he +a<or purpose of an independent audit is to investi,ate and deter+ine o5<ective$1 if the financia$ state+ents su5+itted for audit 51 a corporation have 5een prepared in accordance with the appropriate financia$ reportin, practices"") of private entities. -he re$ationship that arises therefro+ is 5oth $e,a$ and +ora$. ""* It 5e,ins with the e8ecution of the en,a,e+ent $etter""3 that e+5odies the ter+s and conditions of the audit and ends with the fu$fi$$ed e8pectation of the auditor:s ethica$""4 and co+petent perfor+ance in a$$ aspects of the audit. "! -he financia$ state+ents are representations of the c$ient@ 5ut it is the auditor who has the responsi5i$it1 for the accurac1 in the recordin, of data that under$ies their preparation, their for+ of presentation, and the opinion "!" e8pressed therein."!! -he auditor does not assu+e the ro$e of e+p$o1ee or of +ana,e+ent in the c$ient:s conduct of operations"!3 and is never under the contro$ or supervision"!2 of the c$ient. ?a5ut was an independent auditor"!( hired 51 C#S#. 9e hand$ed its +onth$1 5an0 reconci$iations and had access to a$$ re$evant docu+ents and chec05oo0s."!) In hi+ was reposed the c$ient:s"!* trust and confidence"!3 that he wou$d perfor+ precise$1 those functions and app$1 the appropriate procedures in accordance with ,enera$$1 accepted auditin, standards."!4 ?et he did not +eet these e8pectations. Nothin, cou$d 5e +ore horri5$e to a c$ient than to discover $ater on that the person tas0ed to detect fraud was the sa+e one who perpetrated it. Cash &alan"es +pen to ,anipulation It is a non se9uitur to sa1 that the person who receives the +onth$1 5an0 state+ents, to,ether with the cance$$ed chec0s and other de5itGcredit +e+oranda, sha$$ e8a+ine the contents and ,ive notice of an1 discrepancies within a reasona5$e ti+e. #wareness is not eAuipo$$ent with discern+ent. Besides, in the interna$ accountin, contro$ s1ste+ prudent$1 insta$$ed 51 C#S#, "3 it was ?a5ut who shou$d e8a+ine those docu+ents in order to prepare the 5an0 reconci$iations. "3" 9e owned his wor0in, papers,"3! and his output consisted of his opinion as we$$ as the c$ient:s financia$ state+ents and acco+pan1in, notes thereto. C#S# had ever1 ri,ht to re$1 so$e$1 upon his output %% 5ased on the ter+s of the audit en,a,e+ent %% and cou$d thus 5e unwittin,$1

duped into 5e$ievin, that ever1thin, was in order. Besides, HP,Qood faith is a$wa1s presu+ed and it is the 5urden of the part1 c$ai+in, otherwise to adduce c$ear and convincin, evidence to the contrar1.H "33 Moreover, there was a ti+e ,ap 5etween the period covered 51 the 5an0 state+ent and the date of its actua$ receipt. >e5ron persona$$1 received the Dece+5er "44 5an0 state+ent on$1 in Canuar1 "44" "32 %% when she was a$so infor+ed of the for,er1 for the first ti+e, after which she i++ediate$1 reAuested a Hstop pa1+ent order.H She cannot 5e fau$ted for the $ate detection of the for,ed Dece+5er chec0. #fter a$$, the 5an0 account with BPI was not persona$ 5ut corporate, and she cou$d not 5e e8pected to +onitor c$ose$1 a$$ its finances. # preschoo$ teacher char,ed with +o$din, the +inds of the 1outh cannot 5e 5urdened with the intricacies or co+p$e8ities of corporate e8istence. -here is a$so a cutoff period such that chec0s issued durin, a ,iven +onth, 5ut not presented for pa1+ent within that period, wi$$ not 5e ref$ected therein."3( #n e8perienced auditor with intent to defraud can easi$1 concea$ an1 devious sche+e fro+ a c$ient unwar1 of the accountin, processes invo$ved 51 +anipu$atin, the cash 5a$ances on record %% especia$$1 when 5an0 transactions are nu+erous, $ar,e and freAuent. C#S# cou$d on$1 5e 5$a+ed, if at a$$, for its uninte$$i,ent choice in the se$ection and appoint+ent of an auditor %% a fau$t that is not tanta+ount to ne,$i,ence. Ne,$i,ence is not presu+ed, 5ut proven 51 whoever a$$e,es it. "3) Its +ere e8istence His not sufficient without proof that it, and no other cause,H"3* has ,iven rise to da+a,es."33 In addition, this fau$t is co++on to, if not preva$ent a+on,, s+a$$ and +ediu+%siEed 5usiness entities, thus $eadin, the Professiona$ Re,u$ation Co++ission .PRC/, throu,h the Board of #ccountanc1 .BO#/, to reAuire toda1 not on$1 accreditation for the practice of pu5$ic accountanc1, "34 5ut a$so the re,istration of fir+s in the practice thereof. In fact, a+on, the attach+ents now reAuired upon re,istration are the code of ,ood ,overnance"2 and a sworn state+ent on adeAuate and effective trainin,. "2" -he +issin, chec0s were certain$1 reported 51 the 5oo00eeper"2! to the accountant"23 %% her i++ediate supervisor %% and 51 the $atter to the auditor. 9owever, 5oth the accountant and the auditor, for reasons 0nown on$1 to the+, assured the 5oo00eeper that there were no irre,u$arities. -he 5oo00eeper"22 who had e8c$usive custod1 of the chec05oo0s"2( did not have to ,o direct$1 to C#S#:s president or to BPI. #$thou,h she ri,htfu$$1 reported the +atter, neither an investi,ation was conducted nor a reso$ution of it was arrived at, precise$1 5ecause the person at the top of the he$+ was the cu$prit. -he vouchers, invoices and chec0 stu5s in support of a$$ chec0 dis5urse+ents cou$d 5e concea$ed or fa5ricated %% even in co$$usion %% and +ana,e+ent wou$d sti$$ have no wa1 to verif1 its cash accounta5i$ities. C$ear$1 then, ?a5ut was a5$e to perpetrate the wron,fu$ act throu,h no fau$t of C#S#. If auditors +a1 5e he$d $ia5$e for 5reach of contract and ne,$i,ence,"2) with a$$ the +ore reason +a1 the1 5e char,ed with the perpetration of fraud upon an unsuspectin, c$ient. C#S# had the discretion to pursue BPI a$one under the NI>, 51 reason of e8pedienc1 or +unificence or 5oth. Mone1 paid under a +ista0e +a1 ri,htfu$$1 5e recovered, "2* and under such ter+s as the in<ured part1 +a1 choose. T(2r+ I998eA A'ard of ,onetary Claims ,oral -amages -enied Fe den1 C#S#:s c$ai+ for +ora$ da+a,es. In the a5sence of a wron,fu$ act or o+ission,"23 or of fraud or 5ad faith,"24 +ora$ da+a,es cannot 5e awarded."( -he adverse resu$t of an action does not per se +a0e the action wron,fu$, or the part1 $ia5$e for it. One +a1 err, 5ut error a$one is not a ,round for ,rantin, such da+a,es."(" Fhi$e no proof of pecuniar1 $oss is necessar1 therefor %% with the a+ount to 5e awarded $eft to the court:s discretion "(! %% the c$ai+ant +ust nonethe$ess satisfactori$1 prove the e8istence of its factua$ 5asis"(3 and causa$ re$ation"(2 to the c$ai+ant:s act or o+ission."((

Re,retta5$1, in this case C#S# was una5$e to identif1 the particu$ar instance %% enu+erated in the Civi$ Code %% upon which its c$ai+ for +ora$ da+a,es is predicated."() Neither 5ad faith nor ne,$i,ence so ,ross that it a+ounts to +a$ice"(* can 5e i+puted to BPI. Bad faith, under the $aw, Hdoes not si+p$1 connote 5ad <ud,+ent or ne,$i,ence@ "(3 it i+ports a dishonest purpose or so+e +ora$ o5$iAuit1 and conscious doin, of a wron,, a 5reach of a 0nown dut1 throu,h so+e +otive or interest or i$$ wi$$ that parta0es of the nature of fraud.H "(4 #s a ,enera$ ru$e, a corporation %% 5ein, an artificia$ person without fee$in,s, e+otions and senses, and havin, e8istence on$1 in $e,a$ conte+p$ation %% is not entit$ed to +ora$ da+a,es, ") 5ecause it cannot e8perience ph1sica$ sufferin, and +enta$ an,uish.")" 9owever, for 5reach of the fiduciar1 dut1 reAuired of a 5an0, a corporate c$ient +a1 c$ai+ such da+a,es when its ,ood reputation is 5es+irched 51 such 5reach, and socia$ hu+i$iation resu$ts therefro+.")! C#S# was una5$e to prove that BPI had de5ased the ,ood reputation of, ")3 and conseAuent$1 caused inca$cu$a5$e e+5arrass+ent to, the for+er. C#S#:s +ere a$$e,ation or supposition thereof, without an1 sufficient evidence on record,")2 is not enou,h. #$emplary -amages Also -enied Fe a$so den1 C#S#:s c$ai+ for e8e+p$ar1 da+a,es. I+posed 51 wa1 of correction")( for the pu5$ic ,ood,")) e8e+p$ar1 da+a,es cannot 5e recovered as a +atter of ri,ht. ")* #s we have said ear$ier, there is no 5ad faith on the part of BPI for pa1in, the chec0s of C#S# upon for,ed si,natures. -herefore, the for+er cannot 5e said to have acted in a wanton, fraudu$ent, rec0$ess, oppressive or +a$evo$ent +anner.")3 -he $atter, havin, no ri,ht to +ora$ da+a,es, cannot de+and e8e+p$ar1 da+a,es. ")4 Attorney.s Fees /ranted #$thou,h it is a sound po$ic1 not to set a pre+iu+ on the ri,ht to $iti,ate, "* we find that C#S# is entit$ed to reasona5$e attorne1:s fees 5ased on Hfactua$, $e,a$, and eAuita5$e <ustification.H "*" Fhen the act or o+ission of the defendant has co+pe$$ed the p$aintiff to incur e8penses to protect the $atter:s interest,"*! or where the court dee+s it <ust and eAuita5$e,"*3 attorne1:s fees +a1 5e recovered. In the present case, BPI persistent$1 denied the c$ai+ of C#S# under the NI> to recredit the $atter:s account for the va$ue of the for,ed chec0s. -his denia$ constrained C#S# to incur e8penses and e8ert effort for +ore than ten 1ears in order to protect its corporate interest in its 5an0 account. Besides, we have a$read1 cautioned BPI on a si+i$ar act of ne,$i,ence it had co++itted sevent1 1ears a,o, 5ut it has re+ained unre$entin,. -herefore, the Court dee+s it <ust and eAuita5$e to ,rant ten percent ." O/"*2 of the tota$ va$ue ad<ud,ed to C#S# as attorne1:s fees. Interest Allo'ed ;or the fai$ure of BPI to pa1 C#S# upon de+and and for co+pe$$in, the $atter to resort to the courts to o5tain pa1+ent, $e,a$ interest +a1 5e ad<udicated at the discretion of the Court, the sa+e to run fro+ the fi$in, "*( of the Co+p$aint."*) Since a court <ud,+ent is not a $oan or a for5earance of recover1, the $e,a$ interest sha$$ 5e at si8 percent .)O/ per annu'."** HIf the o5$i,ation consists in the pa1+ent of a su+ of +one1, and the de5tor incurs in de$a1, the inde+nit1 for da+a,es, there 5ein, no stipu$ation to the contrar1, sha$$ 5e the pa1+ent of 8 8 8 $e,a$ interest, which is si8 percent per annu'.H"*3 -he actua$ 5ase for its co+putation sha$$ 5e Hon the a+ount fina$$1 ad<ud,ed,H "*4 co+pounded"3 annua$$1 to +a0e up for the cost of +one1"3" a$read1 $ost to C#S#. Moreover, the fai$ure of the C# to award interest does not prevent us fro+ ,rantin, it upon da+a,es awarded for 5reach of contract."3! Because BPI evident$1 5reached its contract of deposit with C#S#, we award interest in addition to the tota$ a+ount ad<ud,ed. 6nder Section "4) of the NI>, an1 case not provided for sha$$ 5e H,overned 51 the provisions of e8istin, $e,is$ation or, in defau$t thereof, 51 the ru$es of the $aw +erchant.H "33 Da+a,es are not provided for in the NI>. -hus, we resort to the Code of Co++erce and the Civi$ Code. 6nder #rtic$e ! of the Code of Co++erce, acts of co++erce sha$$ 5e ,overned 51 its provisions and, Hin their a5sence, 51 the usa,es of co++erce ,enera$$1 o5served in each p$ace@ and in the a5sence of 5oth ru$es, 51 those of the civi$ $aw.H "32 -his $aw 5ein, si$ent, we $oo0 at #rtic$e "3 of the Civi$ Code, which states= HIn +atters which are ,overned 51 the Code of Co++erce and specia$ $aws,

their deficienc1 sha$$ 5e supp$iedH 51 its provisions. # perusa$ of these three statutes un+ista0a5$1 shows that the award of interest under our civi$ $aw is <ustified. F9ERE;ORE, the Petition in &R No. "242(2 is here51 -#NI#- and that in &R No. "24( * !AR0*1 /RAN0#-. -he assai$ed Decision of the Court of #ppea$s is AFFIR,#- with +odification= BPI is he$d $ia5$e for P(2*,""(, the tota$ va$ue of the for,ed chec0s $ess the a+ount a$read1 recovered 51 C#S# fro+ >eonardo -. ?a5ut, p$us interest at the $e,a$ rate of si8 percent .)O/ per annu' %% co+pounded annua$$1, fro+ the fi$in, of the co+p$aint unti$ paid in fu$$@ and attorne1:s fees of ten percent ." O/ thereof, su5<ect to rei+5urse+ent fro+ Respondent ?a5ut for the entire a+ount, e8ceptin, attorne1:s fees. >et a cop1 of this Decision 5e furnished the Board of #ccountanc1 of the Professiona$ Re,u$ation Co++ission for such action as it +a1 dee+ appropriate a,ainst Respondent ?a5ut. No costs. SO ORDERED. G.R. No. 121413 #&*8&r/ 2), 2001

P,ILIPPINE CO""ERCIAL INTERNATIONAL BAN 0@ormer1/ INSULAR BAN O! ASIA AND A"ERICA4, petitioner, vs. COURT O! APPEALS &*+ !ORD P,ILIPPINES, INC. &*+ CITIBAN , N.A., respondents.

G.R. No. 12147)

#&*8&r/ 2), 2001

!ORD P,ILIPPINES, INC., petitioner%p$aintiff, vs. COURT O! APPEALS &*+ CITIBAN , N.A. &*+ P,ILIPPINE CO""ERCIAL INTERNATIONAL BAN , respondents.

G.R. No. 128%04

#&*8&r/ 2), 2001

!ORD P,ILIPPINES, INC., petitioner, vs. CITIBAN , N.A., P,ILIPPINE CO""ERCIAL INTERNATIONAL BAN ;UISU"BING, J.A

&*+ COURT O! APPEALS, respondents.

-hese conso$idated petitions invo$ve severa$ fraudu$ent$1 ne,otiated chec0s. -he ori,ina$ actions a 9uo were instituted 51 ;ord Phi$ippines to recover fro+ the drawee 5an0, CI-IB#NI, N.#. .Citi5an0/ and co$$ectin, 5an0, Phi$ippine Co++ercia$ Internationa$ Ban0 .PCIBan0/ Pfor+er$1 Insu$ar Ban0 of #sia and #+ericaQ, the va$ue of severa$ chec0s pa1a5$e to the Co++issioner of Interna$ Revenue, which were e+5eEE$ed a$$e,ed$1 51 an or,aniEed s1ndicate.1wphi1.n?t &.R. Nos. "!"2"3 and "!"2*4 are twin petitions for review of the March !*, "44( Decision " of the Court of #ppea$s in C#%&.R. C' No. !( "*, entit$ed H;ord Phi$ippines, Inc. vs. Citi5an0, N.#. and Insu$ar Ban0 of #sia and #+erica .now Phi$ipppine Co++ercia$ Internationa$ Ban0/, and the #u,ust 3, "44( Reso$ution, ! orderin, the co$$ectin, 5an0, Phi$ippine Co++ercia$ Internationa$ Ban0, to pa1 the a+ount of Citi5an0 Chec0 No. SN% 23)*. In &.R. No. "!3) 2, petitioner ;ord Phi$ippines assai$s the Octo5er "(, "44) Decision 3 of the Court of #ppea$s and its March (, "44* Reso$ution2 in C#%&.R. No. !323 entit$ed H;ord Phi$ippines, Inc. vs. Citi5an0, N.#. and Phi$ippine Co++ercia$ Internationa$ Ban0,H affir+in, in toto the <ud,+ent of the tria$ court ho$din, the defendant drawee 5an0,

Citi5an0, N.#., so$e$1 $ia5$e to pa1 the a+ount of P"!,")3,!43." as da+a,es for the +isapp$ied proceeds of the p$aintiffMs Citi5an$ Chec0 Nu+5ers SN%" (4* and ")( 3. I. G.R. No9. 121413 &*+ 12147) -he stipu$ated facts su5+itted 51 the parties as accepted 51 the Court of #ppea$s are as fo$$ows= HOn Octo5er "4, "4**, the p$aintiff ;ord drew and issued its Citi5an0 Chec0 No. SN% 23)* in the a+ount of P2,*2),""2.2", in favor of the Co++issioner of Interna$ Revenue as pa1+ent of p$aintiff@s percenta,e or +anufacturerMs sa$es ta8es for the third Auarter of "4**. -he aforesaid chec0 was deposited with the de,endant IB## .now PCIBan0/ and was su5seAuent$1 c$eared at the Centra$ Ban0. 6pon present+ent with the defendant Citi5an0, the proceeds of the chec0 was paid to IB## as co$$ectin, or depositor1 5an0. -he proceeds of the sa+e Citi5an0 chec0 of the p$aintiff was never paid to or received 51 the pa1ee thereof, the Co++issioner of Interna$ Revenue. #s a conseAuence, upon de+and of the Bureau andGor Co++issioner of Interna$ Revenue, the p$aintiff was co+pe$$ed to +a0e a second pa1+ent to the Bureau of Interna$ Revenue of its percenta,eG+anufacturersM sa$es ta8es for the third Auarter of "4** and that said second pa1+ent of p$aintiff in the a+ount of P2,*2),""2.2" was du$1 received 51 the Bureau of Interna$ Revenue. It is further ad+itted 51 defendant Citi5an0 that durin, the ti+e of the transactions in Auestion, p$aintiff had 5een +aintainin, a chec0in, account with defendant Citi5an0@ that Citi5an0 Chec0 No. SN% 23)* which was drawn and issued 51 the p$aintiff in favor of the Co++issioner of Interna$ Revenue was a crossed chec0 in that, on its face were two para$$e$ $ines and written in 5etween said $ines was the phrase HPa1eeMs #ccount On$1H@ and that defendant Citi5an0 paid the fu$$ face va$ue of the chec0 in the a+ount of P2,*2),""2.2" to the defendant IB##. It has 5een du$1 esta5$ished that for the pa1+ent of p$aintiffMs percenta,e ta8 for the $ast Auarter of "4**, the Bureau of Interna$ Revenue issued Revenue -a8 Receipt No. "3*2* !, dated Octo5er ! , "4**, desi,natin, therein in Muntin$upa, Metro Mani$a, as the authoriEed a,ent 5an0 of Metro5an$, #$a5an, 5ranch to receive the ta8 pa1+ent of the p$aintiff. On Dece+5er "4, "4**, p$aintiffMs Citi5an0 Chec0 No. SN% 23)*, to,ether with the Revenue -a8 Receipt No. "3*2* !, was deposited with defendant IB##, throu,h its Er+ita Branch. -he $atter accepted the chec0 and sent it to the Centra$ C$earin, 9ouse for c$earin, on the sa+d da1, with the indorse+ent at the 5ac0 Ha$$ prior indorse+ents andGor $ac0 of indorse+ents ,uaranteed.H -hereafter, defendant IB## presented the chec0 for pa1+ent to defendant Citi5an0 on sa+e date, Dece+5er "4, "4**, and the $atter paid the face va$ue of the chec0 in the a+ount of P2,*2),""2.2". ConseAuent$1, the a+ount of P2,*2),""2.2" was de5ited in p$aintiffMs account with the defendant Citi5an0 and the chec0 was returned to the p$aintiff. 6pon verification, p$aintiff discovered that its Citi5an0 Chec0 No. SN% 23)* in the a+ount of P2,*2),""2.2" was not paid to the Co++issioner of Interna$ Revenue. 9ence, in separate $etters dated Octo5er !), "4*4, addressed to the defendants, the p$aintiff notified the $atter that in case it wi$$ 5e re%assessed 51 the BIR for the pa1+ent of the ta8es covered 51 the said chec0s, then p$aintiff sha$$ ho$d the defendants $ia5$e for rei+5urse+ent of the face va$ue of the sa+e. Both defendants denied $ia5i$it1 and refused to pa1. In a $etter dated ;e5ruar1 !3, "43 51 the #ctin, Co++issioner of Interna$ Revenue addressed to the p$aintiff % supposed to 5e E8hi5it HDH, the $atter was officia$$1 infor+ed, a+on, others, that its chec0 in the a+ount of P2, *2),""2.2" was not paid to the ,overn+ent or its authoriEed a,ent and instead encashed 51 unauthoriEed persons, hence, p$aintiff has to pa1 the said a+ount within fifteen da1s fro+ receipt of the $etter. 6pon advice

of the p$aintiffMs $aw1ers, p$aintiff on March "", "43!, paid to the Bureau of Interna$ Revenue, the a+ount of P2,*2),""2.2", representin, pa1+ent of p$aintiffMs percenta,e ta8 for the third Auarter of "4**. #s a conseAuence of defendantMs refusa$ to rei+5urse p$aintiff of the pa1+ent it had +ade for the second ti+e to the BIR of its percenta,e ta8es, p$aintiff fi$ed on Canuar1 ! , "433 its ori,ina$ co+p$aint 5efore this Court. On Dece+5er !2, "43(, defendant IB## was +er,ed with the Phi$ippine Co++ercia$ Internationa$ Ban0 .PCI Ban0/ with the $atter as the survivin, entit1. Defendant Citi5an0 +aintains that@ the pa1+ent it +ade of p$aintiffMs Citi5an0 Chec0 No. SN% 23)* in the a+ount of P2,*2),""2.2" Hwas in due courseH@ it +ere$1 re$ied on the c$earin, sta+p of the depositor1Gco$$ectin, 5an0, the defendant IB## that Ha$$ prior indorse+ents andGor $ac0 of indorse+ents ,uaranteedH@ and the pro8i+ate cause of p$aintiffMs in<ur1 is the ,ross ne,$i,ence of defendant IB## in indorsin, the p$aintiffMs Citi5an0 chec0 in Auestion. It is ad+itted that on Dece+5er "4, "4** when the proceeds of p$aintiffMs Citi5an0 Chec0 No. SN% 233)* was paid to defendant IB## as co$$ectin, 5an0, p$aintiff was +aintainin, a chec0in, account with defendant Citi5an0.H( #$thou,h it was not a+on, the stipu$ated facts, an investi,ation 51 the Nationa$ Bureau of Investi,ation .NBI/ revea$ed that Citi5an0 Chec0 No. SN% 23)* was reca$$ed 51 &odofredo Rivera, the &enera$ >ed,er #ccountant of ;ord. 9e purported$1 needed to ho$d 5ac0 the chec0 5ecause there was an error in the co+putation of the ta8 due to the Bureau of Interna$ Revenue .BIR/. Fith RiveraMs instruction, PCIBan0 rep$aced the chec0 with two of its own Mana,erMs Chec0s .MCs/. #$$e,ed +e+5ers of a s1ndicate $ater deposited the two MCs with the Pacific Ban0in, Corporation. ;ord, with $eave of court, fi$ed a third%part1 co+p$aint 5efore the tria$ court i+p$eadin, Pacific Ban0in, Corporation .PBC/ and &odofredo Rivera, as third part1 defendants. But the court dis+issed the co+p$aint a,ainst PBC for $ac0 of cause of action. -he course $i0ewise dis+issed the third%part1 co+p$aint a,ainst &odofredo Rivera 5ecause he cou$d not 5e served with su++ons as the NBI dec$ared hi+ as a Hfu,itive fro+ <usticeH. On Cune "(, "434, the tria$ court rendered its decision, as fo$$ows= HPre+ises considered, <ud,+ent is here51 rendered as fo$$ows= H". Orderin, the defendants Citi5an0 and IB## .now PCI Ban0/, <oint$1 and severa$$1, to pa1 the p$aintiff the a+ount of P2,*2),""2.2" representin, the face va$ue of p$aintiffMs Citi5an0 Chec0 No. SN% 23)*, with interest thereon at the $e,a$ rate startin, Canuar1 ! , "433, the date when the ori,ina$ co+p$aint was fi$ed unti$ the a+ount is fu$$1 paid, p$us costs@ H!. On defendant Citi5an0Ms cross%c$ai+= orderin, the cross%defendant IB## .now PCI Ban0/ to rei+5urse defendant Citi5an0 for whatever a+ount the $atter has paid or +a1 pa1 to the p$aintiff in accordance with ne8t precedin, para,raph@ H3. -he counterc$ai+s asserted 51 the defendants a,ainst the p$aintiff, as we$$ as that asserted 51 the cross%defendant a,ainst the cross%c$ai+ant are dis+issed, for $ac0 of +erits@ and H2. Fith costs a,ainst the defendants. SO ORDERED.H) Not satisfied with the said decision, 5oth defendants, Citi5an0 and PCIBan0, e$evated their respective petitions for review on certiorari to the Courts of #ppea$s. On March !*, "44(, the appe$$ate court issued its <ud,+ent as fo$$ows=

HF9ERE;ORE, in view of the fore,oin,, the court #;;IRMS the appea$ed decision with +odifications. -he court here51 renderes <ud,+ent= ". D29m2992*B the co+p$aint in Civi$ Case No. 24!3* insofar as defendant Citi5an0 N.#. is concerned@ !. Or+er2*B the defendant IB## now PCI Ban0 to pa1 the p$aintiff the a+ount of P2,*2),""2.2" representin, the face va$ue of p$aintiffMs Citi5an0 Chec0 No. SN% 23)*, with interest thereon at the $e,a$ rate startin, Canuar1 ! , "433, the date when the ori,ina$ co+p$aint was fi$ed unti$ the a+ount is fu$$1 paid@ 3. Dis+issin, the counterc$ai+s asserted 51 the defendants a,ainst the p$aintiff as we$$ as that asserted 51 the cross%defendant a,ainst the cross%c$ai+ant, for $ac0 of +erits. Costs a,ainst the defendant IB## .now PCI Ban0/. I- IS SO ORDERED.H* PCI Ban0 +oved to reconsider the a5ove%Auoted decision of the Court of #ppea$s, whi$e ;ord fi$ed a HMotion for Partia$ Reconsideration.H Both +otions were denied for $ac0 of +erit. Separate$1, PCIBan0 and ;ord fi$ed 5efore this Court, petitions for review 51 certiorari under Ru$e 2(. In &.R. No. "!"2"3, PCIBan0 see0s the reversa$ of the decision and reso$ution of the -we$fth Division of the Court of #ppea$s contendin, that it +ere$1 acted on the instruction of ;ord and such casue of action had a$read1 prescri5ed. PCIBan0 sets forth the fo$$owin, issues for consideration= I. Did the respondent court err when, after findin, that the petitioner acted on the chec0 drawn 51 respondent ;ord on the said respondentMs instructions, it neverthe$ess found the petitioner $ia5$e to the said respondent for the fu$$ a+ount of the said chec0. II. Did the respondent court err when it did not find prescription in favor of the petitioner. 3 In a counter +ove, ;ord fi$ed its petition doc0eted as &.R. No. "!"2*4, Auestionin, the sa+e decision and reso$ution of the Court of #ppea$s, and pra1in, for the reinstate+ent in toto of the decision of the tria$ court which found 5oth PCIBan0 and Citi5an0 <oint$1 and severa$$1 $ia5$e for the $oss. In &.R. No. "!"2*4, appe$$ant ;ord presents the fo$$owin, propositions for consideration= I. Respondent Citi5an0 is $ia5$e to petitioner ;ord considerin, that= ". #s drawee 5an0, respondent Citi5an0 owes to petitioner ;ord, as the drawer of the su5<ect chec0 and a depositor of respondent Citi5an0, an a5so$ute and contractua$ dut1 to pa1 the proceeds of the su5<ect chec0 on$1 to the pa1ee thereof, the Co++issioner of Interna$ Revenue. !. Respondent Citi5an0 fai$ed to o5serve its dut1 as 5an0er with respect to the su5<ect chec0, which was crossed and pa1a5$e to HPa1eeMs #ccount On$1.H 3. Respondent Citi5an0 raises an issue for the first ti+e on appea$@ thus the sa+e shou$d not 5e considered 51 the 9onora5$e Court.

2. #s correct$1 he$d 51 the tria$ court, there is no evidence of ,ross ne,$i,ence on the part of petitioner ;ord.4 II. PCI Ban0 is $ia5$e to petitioner ;ord considerin, that= ". -here were no instructions fro+ petitioner ;ord to de$iver the proceeds of the su5<ect chec0 to a person other than the pa1ee na+ed therein, the Co++issioner of the Bureau of Interna$ Revenue@ thus, PCIBan0Ms on$1 o5$i,ation is to de$iver the proceeds to the Co++issioner of the Bureau of Interna$ Revenue." !. PCIBan0 which affi8ed its indorse+ent on the su5<ect chec0 .H#$$ prior indorse+ent andGor $ac0 of indorse+ent ,uaranteedH/, is $ia5$e as co$$ectin, 5an0."" 3. PCIBan0 is 5arred fro+ raisin, issues of fact in the instant proceedin,s. "! 2. Petitioner ;ordMs cause of action had not prescri5ed. "3 II. G.R. No. 128%04 -he sa+e s1sndicate apparent$1 e+5eEE$ed the proceeds of chec0s intended, this ti+e, to sett$e ;ordMs percenta,e ta8es appertainin, to the second Auarter of "4*3 and the first Auarter of "4*4. -he facts as narrated 51 the Court of #ppea$s are as fo$$ows= ;ord drew Citi5an0 Chec0 No. SN%" (4* on Cu$1 "4, "4*3 in the a+ount of P(,3(",* ).3* representin, the percenta,e ta8 due for the second Auarter of "4*3 pa1a5$e to the Co++issioner of Interna$ Revenue. # BIR Revenue -a8 Receipt No. !3)2(33( was issued for the said purpose. On #pri$ ! , "4*4, ;ord drew another Citi5an0 Chec0 No. SN%")( 3 in the a+ount of P),3"",(4".*3, representin, the pa1+ent of percenta,e ta8 for the first Auarter of "4*4 and pa1a5$e to the Co++issioner of Interna$ Revenue. #,ain a BIR Revenue -a8 Receipt No. #%")4*") was issued for the said purpose. Both chec0s were Hcrossed chec0sH and contain two dia,ona$ $ines on its upper corner 5etween, which were written the words Hpa1a5$e to the pa1eeMs account on$1.H -he chec0s never reached the pa1ee, CIR. -hus, in a $etter dated ;e5ruar1 !3, "43 , the BIR, Re,ion 2%B, de+anded for the said ta8 pa1+ents the correspondin, periods a5ove%+entioned. #s far as the BIR is concernced, the said two BIR Revenue -a8 Receipts were considered Hfa0e and spuriousH. -his ano+a$1 was confir+ed 51 the NBI upon the initiative of the BIR. -he findin,s forced ;ord to pa1 the BIR a new, whi$e an action was fi$ed a,ainst Citi5an0 and PCIBan0 for the recover1 of the a+ount of Citi5an0 Chec0 Nu+5ers SN%" (4* and ")( 3. -he Re,iona$ -ria$ Court of Ma0ati, Branch (*, which tried the case, +ade its findin,s on the 'odus operandi of the s1ndicate, as fo$$ows= H# certain Mr. &odofredo Rivera was e+p$o1ed 51 the p$aintiff ;ORD as its &enera$ >ed,er #ccountant. #s such, he prepared the p$aintiffMs chec0 +ar0ed E8. M#M PCiti5an0 Chec0 No. Sn%" (4*Q for pa1+ent to the BIR. Instead, however, fo de$iverin, the sa+e of the pa1ee, he passed on the chec0 to a co%conspirator na+ed Re+5erto Castro who was a pro%+ana,er of the San #ndres Branch of PCIB.S In connivance with one Finston Du$a1, Castro hi+se$f su5seAuent$1 opened a Chec0in, #ccount in the na+e of a fictitious person deno+inated as MRe1na$do re1esM in the Mera$co Branch of PCIBan0 where Du$a1 wor0s as #ssistant Mana,er.

#fter an initia$ deposit of P" . to va$idate the account, Castro deposited a worth$ess Ban0 of #+erica Chec0 in e8act$1 the sa+e a+ount as the first ;ORD chec0 .E8h. H#H, P(,3(",* ).3*/ whi$e this worth$ess chec0 was coursed throu,h PCIBMs +ain office enroute to the Centra$ Ban0 for c$earin,, rep$aced this worth$ess chec0 with ;ORDMs E8hi5it M#M and accordin,$1 ta+pered the acco+pan1in, docu+ents to cover the rep$ace+ent. #s a resu$t, E8hi5it M#M was c$eared 51 defendant CI-IB#NI, and the fictitious deposit account of MRe1na$do Re1esM was credited at the PCIB Mera$co Branch with the tota$ a+ount of the ;ORD chec0 E8hi5it M#M. -he sa+e +ethod was a,ain uti$iEed 51 the s1ndicate in profitin, fro+ E8h. MBM PCiti5an0 Chec0 No. SN% ")( 3Q which was su5seAuent$1 pi$fered 51 #$e8is Marindo, RiveraMs #ssistant at ;ORD. ;ro+ this MRe1na$do Re1esM account, Castro drew various chec0s distri5utin, the sahres of the other participatin, conspirators na+e$1 ."/ CRIS#N-O BERN#BE, the +aster+ind who for+u$ated the +ethod for the e+5eEE$e+ent@ .!/ RODO>;O R. DE >EON a custo+s 5ro0er who ne,otiated the initia$ contact 5etween Berna5e, ;ORDMs &odofredo Rivera and PCIBMs Re+5erto Castro@ .3/ C6#N '#S-I>>O who assisted de >eon in the initia$ arran,e+ents@ .2/ &ODO;REDO RI'ER#, ;ORDMs accountant who passed on the first chec0 .E8hi5it H#H/ to Castro@ .(/ REMER-O C#S-RO, PCIBMs pro%+ana,er at San #ndres who perfor+ed the switchin, of chec0s in the c$earin, process and opened the fictitious Re1na$do Re1es account at the PCIB Mera$co Branch@ .)/ FINS-ON D6>#?, PCIBMs #ssistant Mana,er at its Mera$co Branch, who assisted Castro in switchin, the chec0s in the c$earin, process and faci$itated the openin, of the fictitious Re1na$do Re1esM 5an0 account@ .*/ #>EJIS M#RINDO, RiveraMs #ssistant at ;ORD, who ,ave the second chec0 .E8h. HBH/ to Castro@ .3/ E>E6-ERIO CIMENE7, BIR Co$$ection #,ent who provided the fa0e and spurious revenue ta8 receipts to +a0e it appear that the BIR had received ;ORDMs ta8 pa1+ents. Severa$ other persons and entities were uti$iEed 51 the s1ndicate as conduits in the dis5urse+ents of the proceeds of the two chec0s, 5ut $i0e the afore+entioned participants in the conspirac1, have not 5een i+p$eaded in the present case. -he +anner 51 which the said funds were distri5uted a+on, the+ are tracea5$e fro+ the record of chec0s drawn a,ainst the ori,ina$ HRe1na$do Re1esH account and indu5ita5$1 identif1 the parties who i$$e,a$$1 5enefited therefro+ and readi$1 indicate in what a+ounts the1 did so.H "2 On Dece+5er 4, "433, Re,iona$ -ria$ Court of Ma0ati, Branch (*, he$d drawee%5an0, Citi5an0, $ia5$e for the va$ue of the two chec0s whi$e adso$vin, PCIBan0 fro+ an1 $ia5i$it1, disposin, as fo$$ows= HF9ERE;ORE, <ud,+ent is here51 rendered sentencin, defendant CI-IB#NI to rei+5urse p$aintiff ;ORD the tota$ a+ount of P"!,")3,!43." pra1ed for in its co+p$aint, with )O interest thereon fro+ date of first written de+and unti$ fu$$ pa1+ent, p$us P3 , . attorne1Ms fees and e8penses $iti,ation, and to pa1 the defendant, PCIB .on its counterc$ai+ to crossc$ai+/ the su+ of P3 , . as attorne1Ms fees and costs of $iti,ation, and pa1 the costs. SO ORDERED.H"( Both ;ord and Citi5an0 appea$ed to the Court of #ppea$s which affir+ed, in toto, the decision of the tria$ court. 9ence, this petition. Petitioner ;ord pra1s that <ud,+ent 5e rendered settin, aside the portion of the Court of #ppea$s decision and its reso$ution dated March (, "44*, with respect to the dis+issa$ of the co+p$aint a,ainst PCIBan0 and ho$din, Citi5an0 so$e$1 responsi5$e for the proceeds of Citi5an0 Chec0 Nu+5ers SN%" (4* and ")( 3 for P(,3(",* ).*3 and P),3"",(4".*3 respective$1. ;ord avers that the Court of #ppea$s erred in dis+issin, the co+p$aint a,ainst defendant PCIBan0 considerin, that= I. Defendant PCIBan0 was c$ear$1 ne,$i,ent when it fai$ed to e8ercise the di$i,ence reAuired to 5e e8ercised 51 it as a 5an0in, insitution. II. Defendant PCIBan0 c$ear$1 fai$ed to o5serve the di$i,ence reAuired in the se$ection and supervision of its officers and e+p$o1ees.

III. Defendant PCIBan0 was, due to its ne,$i,ence, c$ear$1 $ia5$e for the $oss or da+a,e resu$tin, to the p$aintiff ;ord as a conseAuence of the su5stitution of the chec0 consistent with Section ( of Centra$ Ban0 Circu$ar No. (3 series of "4**. I'. #ssu+in, arguedo that defedant PCIBan0 did not accept, endorse or ne,otiate in due course the su5<ect chec0s, it is $ia5$e, under #rtic$e !"(2 of the Civi$ Code, to return the +one1 which it ad+its havin, received, and which was credited to it its Centra$ 5an0 account.") -he +ain issue presented for our consideration 51 these petitions cou$d 5e si+p$ified as fo$$ows= 9as petitioner ;ord the ri,ht to recover fro+ the co$$ectin, 5an0 .PCIBan0/ and the drawee 5an0 .Citi5an0/ the va$ue of the chec0s intended as pa1+ent to the Co++issioner of Interna$ RevenueK Or has ;ordMs cause of action a$read1 prescri5edK Note that in these cases, the chec0s were drawn a,ainst the drawee 5an0, 5ut the tit$e of the person ne,otiatin, the sa+e was a$$e,ed$1 defective 5ecause the instru+ent was o5tained 51 fraud and un$awfu$ +eans, and the proceeds of the chec0s were not re+itted to the pa1ee. It was esta5$ished that instead of pa1in, the chec0s to the CIR, for the sett$e+ent of the approprite Auarter$1 percenta,e ta8es of ;ord, the chec0s were diverted and encashed for the eventua$ distri5ution a+on, the ++5ers of the s1ndicate. #s to the un$awfu$ ne,otiation of the chec0 the app$ica5$e $aw is Section (( of the Ne,otia5$e Instru+ents >aw .NI>/, which provides= HFhen tit$e defective %% -he tit$e of a person who ne,otiates an instru+ent is defective within the +eanin, of this #ct when he o5tained the instru+ent, or an1 si,nature thereto, 51 fraud, duress, or fore and fear, or other un$awfu$ +eans, or for an i$$e,a$ consideration, or when he ne,otiates it in 5reach of faith or under such circu+stances as a+ount to a fraud.H Pursuant to this provision, it is vita$ to show that the ne,otiation is +ade 51 the perpetator in 5reach of faith a+ountin, to fraud. -he person ne,otiatin, the chec0s +ust have ,one 5e1ond the authorit1 ,iven 51 his principa$. If the principa$ cou$d prove that there was no ne,$i,ence in the perfor+ance of his duties, he +a1 set up the persona$ defense to escape $ia5i$it1 and recover fro+ other parties who. -hou,h their own ne,$i,ence, a$owed the co++ission of the cri+e. In this case, we note that the direct perpetrators of the offense, na+e$1 the e+5eEE$ers 5e$on,in, to a s1ndicate, are now fu,itives fro+ <ustice. -he1 have, even if te+porari$1, escaped $ia5i$it1 for the e+5eEE$e+ent of +i$$ions of pesos. Fe are thus $eft on$1 with the tas0 of deter+inin, who of the present parties 5efore us +ust 5ear the 5urden of $oss of these +i$$ions. It a$$ 5oi$s down to theAuestion of $ia5i$it1 5ased on the de,ree of ne,$i,ence a+on, the parties concerned. ;ore+ost, we +ust reso$ve whether the in<ured part1, ;ord, is ,ui$t1 of the Hi+puted contri5utor1 ne,$i,enceH that wou$d defeat its c$ai+ for rei+5urse+ent, 5earin, in, +ind that its e+p$o1ees, &odofredo Rivera and #$e8is Marindo, were a+on, the +e+5ers of the s1ndicate. Citi5an0 points out that ;ord a$$owed its ver1 own e+p$o1ee, &odofredo Rivera, to ne,otiate the chec0s to his co% conspirators, instead of de$iverin, the+ to the desi,nated authoriEed co$$ectin, 5an0 .Metro5an0%#$a5an,/ of the pa1ee, CIR. Citi5an0 5ewai$s the fact that ;ord was re+iss in the supervision and contro$ of its own e+p$o1ees, inas+uch as it on$1 discovered the s1ndicateMs activities throu,h the infor+ation ,iven 51 the pa1ee of the chec0s after an unreasona5$e period of ti+e. PCIBan0 a$so 5$a+es ;ord of ne,$i,ence when it a$$e,ed$1 authoriEed &odofredo Rivera to divert the proceeds of Citi5an0 Chec0 No. SN% 23)*, instead of usin, it to pa1 the BIR. #s to the su5seAuent run%around of unds of Citi5an0 Chec0 Nos. SN%" (4* and ")( 3, PCIBan0 c$ai+s that the pro8i+ate cause of the da+,e to ;ord $ies in its own officers and e+p$o1ees who carried out the fradu$ent sche+es and the transactions. -hese circu+stances were not chec0ed 51 other officers of the co+pan1 inc$udin, its co+ptro$$er or interna$ auditor. PCIBan0 contends that the inaction of ;ord despite the enor+it1 of the a+ount invo$ved was a sheer ne,$i,ence and stated that, as 5etween two innocent persons, one of who+ +ust suffer the conseAuences of a 5reach of trust, the one who +ade it possi5$e, 51 his act of ne,$i,ence, +ust 5ear the $oss.

;or its part, ;ord denies an1 ne,$i,ence in the perfor+ance of its duties. It avers that there was no evidence presented 5efore the tria$ court showin, $ac0 of di$i,ence on the part of ;ord. #nd, citin, the case of Ge'pesaw vs. !ourt of Appeals,"* ;ord ar,ues that even if there was a findin, therein that the drawer was ne,$i,ent, the drawee 5an0 was sti$$ ordered to pa1 da+a,es. ;urther+ore, ;ord contends the &odofredo rivera was not authoriEed to +a0e an1 representation in its 5eha$f, specifica$$1, to divert the proceeds of the chec0s. It adds that Citi5an0 raised the issue of i+puted ne,$i,ence a,ainst ;ord for the first ti+e on appea$. -hus, it shou$d not 5e considered 51 this Court. On this point, <urisprudence re,ardin, the i+puted ne,$i,ence of e+p$o1er in a +aster%servant re$ationship is instructive. Since a +aster +a1 5e he$d for his servantMs wron,fu$ act, the $aw i+putes to the +aster the act of the servant, and if that act is ne,$i,ent or wron,fu$ and pro8i+ate$1 resu$ts in in<ur1 to a third person, the ne,$i,ence or wron,fu$ conduct is the ne,$i,ence or wron,fu$ conduct of the +aster, for which he is $ia5$e. "3 -he ,enera$ ru$e is that if the +aster is in<ured 51 the ne,$i,ence of a third person and 51 the concurin, contri5utor1 ne,$i,ence of his own servant or a,ent, the $atterMs ne,$i,ence is i+puted to his superior and wi$$ defeat the superiorMs action a,ainst the third person, asu+in,, of course that the contri5utor1 ne,$i,ence was the ?roC2m&<e '&89e of the in<ur1 of which co+p$aint is +ade."4 #ccordin,$1, we need to deter+ine whether or not the action of &odofredo Rivera, ;ordMs &enera$ >ed,er #ccountant, andGor #$e8is Marindo, his assistant, was the pro8i+ate cause of the $oss or da+a,e. #S defined, pro8i+ate cause is that which, in the natura$ and continuous seAuence, un5ro0en 51 an1 efficient, intervenin, cause produces the in<ur1 and without the resu$t wou$d not have occurred.! It appears that a$thou,h the e+p$o1ees of ;ord initiated the transactions attri5uta5$e to an or,aniEed s1ndicate, in our view, their actions were not the pro8i+ate cause of encashin, the chec0s pa1a5$e to the CIR. -he de,ree of ;ordMs ne,$i,ence, if an1, cou$d not 5e characteriEed as the pro8i+ate cause of the in<ur1 to the parties. -he Board of Directors of ;ord, we note, did not confir+ the reAuest of &odofredo Rivera to reca$$ Citi5an0 Chec0 No. SN% 23)*. RiveraMs instruction to rep$ace the said chec0 with PCIBan0Ms Mana,erMs Chec0 was not in theordinar1 course of 5usiness which cou$d have pro+pted PCIBan0 to va$idate the sa+e. #s to the preparation of Citi5an0 Chec0s Nos. SN%" (4* and ")( 3, it was esta5$ished that these chec0s were +ade pa1a5$e to the CIR. Both were crossed chec0s. -hese chec0s were apparent$1 turned around 51 ;ordMs e+p$oees, who were actin, on their own persona$ capacit1. &iven these circu+stances, the +ere fact that the for,er1 was co++itted 51 a drawer%pa1orMs confidentia$ e+p$o1ee or a,ent, who 51 virtue of his position had unusua$ faci$ities for perpertratin, the fraud and i+posin, the for,ed paper upon the 5an0, does notentit$e the 5an0 toshift the $oss to the drawer%pa1or, in the a5sence of so+e circu+stance raisin, estoppe$ a,ainst the drawer.!" -his ru$e $i0ewise app$ies to the chec0s fraudu$ent$1 ne,otiated or diverted 51 the confidentia$ e+p$o1ees who ho$d the+ in their possession. Fith respect to the ne,$i,ence of PCIBan0 in the pa1+ent of the three chec0s invo$ved, separate$1, the tria$ courts found variations 5etween the ne,otiation of Citi5an0 Chec0 No. SN% 23)* and the +isapp$ication of tota$ proceeds of Chec0s SN%" (4* and ")( 3. -herefore, we have to scrutiniEe, separate$1, PCIBan0Ms share of ne,$i,ence when the s1ndicate achieved its u$ti+ate a,enda of stea$in, the proceeds of these chec0s. G.R. No9. 121413 &*+ 12147) Citi5an0 Chec0 No. SN% 23)* was deposited at PCIBan0 throu,h its Er+ita Branch. It was coursed throu,h the ordinar1 5an0in, transaction, sent to Centra$ C$earin, with the indorse+ent at the 5ac0 Ha$$ prior indorse+ents andGor $ac0 of indorse+ents ,uaranteed,H and was presented to Citi5an0 for pa1+ent. -hereafter PCIBan0, instead of re+ittin, the proceeds to the CIR, prepared two of its Mana,erMs chec0s and ena5$ed the s1ndicate to encash the sa+e.

On record, PCIBan0 fai$ed to verif1 the authorit1 of Mr. Rivera to ne,otiate the chec0s. -he ne,$ect of PCIBan0 e+p$o1ees to verif1 whether his $etter reAuestin, for the rep$ace+ent of the Citi5an0 Chec0 No. SN% 23)* was du$1 authoriEed, showed $ac0 of care and prudence reAuired in the circu+stances. ;urther+ore, it was ad+itted that PCIBan0 is authoriEed to co$$ect the pa1+ent of ta8pa1ers in 5eha$f of the BIR. #s an a,ent of BIR, PCIBan0 is dut1 5ound to consu$t its principa$ re,ardin, the unwarranted instructions ,iven 51 the pa1or or its a,ent. #s apt$1 stated 51 the tria$ court, to wit= H888. Since the Auestioned crossed chec0 was deposited with IB## Pnow PCIBan0Q, which c$ai+ed to 5e a depositor1Gco$$ectin, 5an0 of BIR, it has the responsi5i$it1 to +a0e sure that the chec0 in Auestion is deposited in Pa1eeMs account on$1. 888 888 888

#s a,ent of the BIR .the pa1ee of the chec0/, defendant IB## shou$d receive instructions on$1 fro+ its principa$ BIR and not fro+ an1 other person especia$$1 so when that person is not 0nown to the defendant. It is ver1 i+prudent on the part of the defendant IB## to <ust re$1 on the a$$e,ed te$ephone ca$$ of the one &odofredo Rivera and in his si,nature considerin, that the p$aintiff is not a c$ient of the defendant IB##.H It is a we$$%sett$ed ru$e that the re$ationship 5etween the pa1ee or ho$der of co++ercia$ paper and the 5an0 to which it is sent for co$$ection is, in the a5sence of an ar,ree+ent to the contrar1, that of principa$ and a,ent. !! # 5an0 which receives such paper for co$$ection is the a,ent of the pa1ee or ho$der. !3 Even considerin, arguendo, that the diversion of the a+ount of a chec0 pa1a5$e to the co$$ectin, 5an0 in 5eha$f of the desi,nated pa1ee +a1 5e a$$owed, sti$$ such diversion +ust 5e proper$1 authoriEed 51 the pa1or. Otherwise stated, the diversion can 5e <ustified on$1 51 proof of authorit1 fro+ the drawer, or that the drawer has c$othed his a,ent with apparent authorit1 to receive the proceeds of such chec0. Citi5an0 further ar,ues that PCI Ban0Ms c$earin, sta+p appearin, at the 5ac0 of the Auestioned chec0s statin, that #>> PRIOR INDORSEMEN-S #NDGOR >#CI O; INDORSEMEN-S &6R#N-EED shou$d render PCIBan0 $ia5$e 5ecause it +ade it pass throu,h the c$earin, house and therefore Citi5an0 had no other option 5ut to pa1 it. -hus, Citi5an0 had no other option 5ut to pa1 it. -hus, Citi5an0 assets that the pro8i+ate cause of ;ordMs in<ur1 is the ,ross ne,$i,ence of PCIBan0. Since the Auestione dcrossed chec0 was deposited with PCIBan0, which c$ai+ed to 5e a depositor1Gco$$ectin, 5an0 of the BIR, it had the responsi5i$it1 to +a0e sure that the chec0 in Auestions is deposited in Pa1eeMs account on$1. Indeed, the crossin, of the chec0 with the phrase HPa1eeMs #ccount On$1,H is a warnin, that the chec0 shou$d 5e deposited on$1 in the account of the CIR. -hus, it is the dut1 of the co$$ectin, 5an0 PCIBan0 to ascertain that the chec0 5e deposited in pa1eeMs account on$1. -herefore, it is the co$$ectin, 5an0 .PCIBan0/ which is 5ound to scruniniEe the chec0 and to 0now its depositors 5efore it cou$d +a0e the c$earin, indorse+ent Ha$$ prior indorse+ents andGor $ac0 of indorse+ent ,uaranteedH. In Banco de <ro &avings and :ortgage Bank vs. B9uitable Banking !orporation, /. we ru$ed= H#nent petitionerMs $ia5i$it1 on said instru+ents, this court is in fu$$ accord with the ru$in, of the PC9CMs Board of Directors that= MIn presentin, the chec0s for c$earin, and for pa1+ent, the defendant +ade an e8press ,uarantee on the va$idit1 of Ha$$ prior endorse+ents.H -hus, sta+ped at the 5ac0 of the chec0s are the defedantMs c$ear warrant1= #>> PRIOR ENDORSEMEN-S #NDGOR >#CI O; ENDORSEMEN-S &6#R#N-EED. Fithout such warrant1, p$aintiff wou$d not have paid on the chec0s.M

No a+ount of $e,a$ <ar,on can reverse the c$ear +eanin, of defendantMs warrant1. #s the warrant1 has proven to 5e fa$se and inaccurate, the defendant is $ia5$e for an1 da+a,e arisin, out of the fa$sit1 of its representation.H!( >ast$1, 5an0in, 5usiness reAuires that the one who first cashes and ne,otiates the chec0 +ust ta0e so+e percautions to $earn whether or not it is ,enuine. #nd if the one cashin, the chec0 throu,h indifference or othe circu+stance assists the for,er in co++ittin, the fraud, he shou$d not 5e per+itted to retain the proceeds of the chec0 fro+ the drawee whose so$e fau$t was that it did not discover the for,er1 or the defect in the tit$e of the person ne,otiatin, the instru+ent 5efore pa1in, the chec0. ;or this reason, a 5an0 which cashes a chec0 drawn upon another 5an0, without reAuirin, proof as to the identit1 of persons presentin, it, or +a0in, inAuiries with re,ard to the+, cannot ho$d the proceeds a,ainst the drawee when the proceeds of the chec0s were afterwards diverted to the hands of a third part1. In such cases the drawee 5an0 has a ri,ht to 5e$ieve that the cashin, 5an0 .or the co$$ectin, 5an0/ had, 51 the usua$ proper investi,ation, satisfied itse$f of the authenticit1 of the ne,otiation of the chec0s. -hus, one who encashed a chec0 which had 5een for,ed or diverted and in turn received pa1+ent thereon fro+ the drawee, is ,ui$t1 of ne,$i,ence which pro8i+ate$1 contri5uted to the success of the fraud practiced on the drawee 5an0. -he $atter +a1 recover fro+ the ho$der the +one1 paid on the chec0.!) 9avin, esta5$ished that the co$$ectin, 5an0Ms ne,$i,ence is the pro8i+ate cause of the $oss, we conc$ude that PCIBan0 is $ia5$e in the a+ount correspondin, to the proceeds of Citi5an0 Chec0 No. SN% 23)*. G.R. No. 128%04 -he tria$ court and the Court of #ppea$s found that PCIBan0 had no officia$ act in the ordinar1 course of 5usiness that wou$d attri5ute to it the case of the e+5eEE$e+ent of Citi5an0 Chec0 Nu+5ers SN%" (4* and ")( 3, 5ecause PCIBan0 did not actua$$1 receive nor ho$d the two ;ord chec0s at a$$. -he tria$ court he$d, thus= HNeither is there an1 proof that defendant PCIBan0 contri5uted an1 officia$ or conscious participation in the process of the e+5eEE$e+ent. -his Court is convinced that the switchin, operation .invo$vin, the chec0s whi$e in transit for Hc$earin,H/ were the c$andestine or hidden actuations perfor+ed 51 the +e+5ers of the s1ndicate in their own person$, covert and private capacit1 and done without the 0now$ed,e of the defendant PCIBan0TH!* In this case, there was no evidence presented confir+in, the conscious particiapation of PCIBan0 in the e+5eEE$e+ent. #s a ,enera$ ru$e, however, a 5an0in, corporation is $ia5$e for the wron,fu$ or tortuous acts and dec$arations of its officers or a,ents within the course and scope of their e+p$o1+ent. !3 # 5an0 wi$$ 5e he$d $ia5$e for the ne,$i,ence of its officers or a,ents when actin, within the course and scope of their e+p$o1+ent. It +a1 5e $ia5$e for the tortuous acts of its officers even as re,ards that species of tort of which +a$ice is an essentia$ e$e+ent. In this case, we find a situation where the PCIBan0 appears a$so to 5e the victi+ of the sche+e hatched 51 a s1ndicate in which its own +ana,e+ent e+p$o1ees had particiapted. -he pro%+ana,er of San #ndres Branch of PCIBan0, Re+5erto Castro, received Citi5an0 Chec0 Nu+5ers SN%" (4* and ")( 3. 9e passed the chec0s to a co%conspirator, an #ssistant Mana,er of PCIBan0Ms Mera$co Branch, who he$ped Castro open a Chec0in, account of a fictitious person na+ed HRe1na$do Re1es.H Castro deposited a worth$ess Ban0 of #+erica Chec0 in e8act$1 the sa+e a+ount of ;ord chec0s. -he s1ndicate ta+pered with the chec0s and succeeded in rep$acin, the worth$ess chec0s and the eventua$ encash+ent of Citi5an0 Chec0 Nos. SN " (4* and ")( 3. -he PCIBan0 Ptro%+ana,er, Castro, and his co%conspirator #ssistant Mana,er apparent$1 perfor+ed their activities usin, faci$ities in their officia$ capacit1 or authorit1 5ut for their persona$ and private ,ain or 5enefit. # 5an0 ho$din, out its officers and a,ents as worth1 of confidence wi$$ not 5e per+itted to profit 51 the frauds these officers or a,ents were ena5$ed to perpetrate in the apparent course of their e+p$o1+ent@ nor wi$$ t 5e per+itted to shir0 its responsi5i$it1 for such frauds, even thou,h no 5enefit +a1 accrue to the 5an0 therefro+. ;or the ,enera$ ru$e is that a 5an0 is $ia5$e for the fraudu$ent acts or representations of an officer or a,ent actin, within the course and apparent scope of his e+p$o1+ent or authorit1.!4 #nd if an officer or e+p$o1ee of a 5an0, in his officia$ capacit1,

receives +one1 to satisf1 an evidence of inde5etedness $od,ed with his 5an0 for co$$ection, the 5an0 is $ia5$e for his +isappropriation of such su+.3 Moreover, as correct$1 pointed out 51 ;ord, Section ( 3" of Centra$ Ban0 Circu$ar No. (3 , Series of "4** provides that an1 theft affectin, ite+s in transit for c$earin,, sha$$ 5e for the account of sendin, 5an0, which in this case is PCIBan0. But in this case, responsi5i$it1 for ne,$i,ence does not $ie on PCIBan0Ms shou$ders a$one. -he evidence on record shows that Citi5an0 as drawee 5an0 was $i0ewise ne,$i,ent in the perfor+ance of its duties. Citi5an0 fai$ed to esta5$ish that its pa1+ent of ;ordMs chec<s were +ade in due course and $e,a$$1 in order. In its defense, Citi5an0 c$ai+s the ,enuineness and due e8ecution of said chec0s, considerin, that Citi5an0 ."/ has no 0now$ed,e of an1 infor+it1 in the issuance of the chec0s in Auestion .!/ coup$ed 51 the fact that said chec0s were sufficient$1 funded and .3/ the endorse+ent of the Pa1ee or $ac0 thereof was ,uaranteed 51 PCI Ban0 .for+er$1 IB##/, thus, it has the o5$i,ation to honor and pa1 the sa+e. ;or its part, ;ord contends that Citi5an0 as the drawee 5an0 owes to ;ord an a5so$ute and contractua$ dut1 to pa1 the proceeds of the su5<ect chec0 on$1 to the pa1ee thereof, the CIR. Citin, Section )! 3! of the Ne,otia5$e Instru+ents >aw, ;ord ar,ues that 51 acceptin, the instru+ent, the acceptro which is Citi5an0 en,a,es that it wi$$ pa1 accordin, to the tenor of its acceptance, and that it wi$$ pa1 on$1 to the pa1ee, .the CIR/, considerin, the fact that here the chec0 was crossed with annotation HPa1ees #ccount On$1.H #s ru$ed 51 the Court of #ppea$s, Citi5an0 +ust $i0ewise answer for the da+a,es incurred 51 ;ord on Citi5an0 Chec0s Nu+5ers SN " (4* and ")( 3, 5ecause of the contractua$ re$ationship e8istin, 5etween the two. Citi5an0, as the drawee 5an0 5reached its contractua$ o5$i,ation with ;ord and such de,ree of cu$pa5i$it1 contri5uted to the da+a,e caused to the $atter. On this score, we a,ree with the respondent courtMs ru$in,. Citi5an0 shou$d have scrutiniEed Citi5an0 Chec0 Nu+5ers SN " (4* and ")( 3 5efore pa1in, the a+ount of the proceeds thereof to the co$$ectin, 5an0 of the BIR. One thin, is c$ear fro+ the record= the c$earin, sta+ps at the 5ac0 of Citi5an0 Chec0 Nos. SN " (4* and ")( 3 do not 5ear an1 initia$s. Citi5an0 fai$ed to notice and verif1 the a5sence of the c$earin, sta+ps. 9ad this 5een du$1 e8a+ined, the switchin, of the worth$ess chec0s to Citi5an0 Chec0 Nos. " (4* and ")( 3 wou$d have 5een discovered in ti+e. ;or this reason, Citi5an0 had indeed fai$ed to perfor+ what was incu+5ent upon it, which is to ensure that the a+ount of the chec0s shou$d 5e paid on$1 to its desi,nated pa1ee. -he fact that the drawee 5an0 did not discover the irre,u$arit1 seasona5$1, in our view, consitutes ne,$i,ence in carr1in, out the 5an0Ms dut1 to its depositors. -he point is that as a 5usiness affected with pu5$ic interest and 5ecause of the nature of its functions, the 5an0 is under o5$i,ation to treat the accounts of its depositors with +eticu$ous care, a$wa1s havin, in +ind the fiduciar1 nature of their re$ationship. 33 -hus, invo0in, the doctrine of co+parative ne,$i,ence, we are of the view that 5oth PCIBan0 and Citi5an0 fai$ed in their respective o5$i,ations and 5oth were ne,$i,ent in the se$ection and supervision of their e+p$o1ees resu$tin, in the encash+ent of Citi5an0 Chec0 Nos. SN " (4* #ND ")( 3. -hus, we are constrained to ho$d the+ eAua$$1 $ia5$e for the $oss of the proceeds of said chec0s issued 51 ;ord in favor of the CIR. -i+e and a,ain, we have stressed that 5an0in, 5usiness is so i+pressed with pu5$ic interest where the trust and confidence of the pu5$ic in ,enera$ is of para+ount u+portance such that the appropriate standard of di$i,ence +ust 5e ver1 hi,h, if not the hi,hest, de,ree of di$i,ence. 32 # 5an0Ms $ia5i$it1 as o5$i,or is not +ere$1 vicarious 5ut pri+ar1, wherein the defense of e8ercise of due di$i,ence in the se$ection and supervision of its e+p$o1ees is of no +o+ent. 3( Ban0s hand$e dai$1 transactions invo$vin, +i$$ions of pesos. 3) B1 the ver1 nature of their wor0 the de,ree of responsi5i$it1, care and trustworthiness e8pected of their e+p$o1ees and officia$s is far ,reater than those of ordinar1 c$er0s and e+p$o1ees.3* Ban0s are e8pected to e8ercise the hi,hest de,ree of di$i,ence in the se$ection and supervision of their e+p$o1ees.33

On the issue of prescription, PCIBan0 c$ai+s that the action of ;ord had prescri5ed 5ecause of its ina5i$it1 to see0 <udicia$ re$ief seasona5$1, considerin, that the a$$e,ed ne,$i,ent act too0 p$ace prior to Dece+5er "4, "4** 5ut the re$ief was sou,ht on$1 in "433, or seven 1ears thereafter. -he statute of $i+itations 5e,ins to run when the 5an0 ,ives the depositor notice of the pa1+ent, which is ordinari$1 when the chec0 is returned to the a$$e,ed drawer as a voucher with a state+ent of his account, 34 and an action upon a chec0 is ordinari$1 ,overned 51 the statutor1 period app$ica5$e to instru+ents in writin,. 2 Our $aws on the +atter provide that the action upon a written contract +ust 5e 5rou,ht within ten 1ear fro+ the ti+e the ri,ht of action accrues.2" hence, the rec0onin, ti+e for the prescriptive period 5e,ins when the instru+ent was issued and the correspondin, chec0 was returned 51 the 5an0 to its depositor .nor+a$$1 a +onth thereafter/. #pp$1in, the sa+e ru$e, the cause of action for the recover1 of the proceeds of Citi5an0 Chec0 No. SN 23)* wou$d nor+a$$1 5e a +onth after Dece+5er "4, "4**, when Citi5an0 paid the face va$ue of the chec0 in the a+ount of P2,*2),""2.2". Since the ori,ina$ co+p$aint for the cause of action was fi$ed on Canuar1 ! , "432, 5are$1 si8 1ears had $apsed. -hus, we conc$ude that ;ordMs cause of action to recover the a+ount of Citi5an0 Chec0 No. SN 23)* was seasona5$1 fi$ed within the period provided 51 $aw. ;ina$$1, we a$so find thet ;ord is not co+p$ete$1 5$a+e$ess in its fai$ure to detect the fraud. ;ai$ure on the part of the depositor to e8a+ine its pass5oo0, state+ents of account, and cance$$ed chec0s and to ,ive notice within a reasona5$e ti+e .or as reAuired 51 statute/ of an1 discrepanc1 which it +a1 in the e8ercise of due care and di$i,ence find therein, serves to +iti,ate the 5an0sM $ia5i$it1 51 reducin, the award of interest fro+ twe$ve percent ."!O/ to si8 percent .)O/ per annu+. #s provided in #rtic$e ""*! of the Civi$ Code of the Phi$ippines, respondi5i$it1 arisin, fro+ ne,$i,ence in the perfor+ance of ever1 0ind of o5$i,ation is a$so de+anda5$e, 5ut such $ia5i$it1 +a1 5e re,u$ated 51 the courts, accordin, to the circu+stances. In Auasi%de$icts, the contri5utor1 ne,$i,ence of the p$aintiff sha$$ reduce the da+a,es that he +a1 recover.2! D,ERE!ORE, the assai$ed Decision and Reso$ution of the Court of #ppea$s in C#%&.R. C' No. !( "* are A!!IR"ED. PCIBan0, 0now for+er$1 as Insu$ar Ban0 of #sia and #+erica, id dec$ared so$e$1 responsi5$e for the $oss of the proceeds of Citi5an0 Chec0 No SN 23)* in the a+ount P2,*2),""2.2", which sha$$ 5e paid to,ether with si8 percent .)O/ interest thereon to ;ord Phi$ippines Inc. fro+ the date when the ori,ina$ co+p$aint was fi$ed unti$ said a+ount is fu$$1 paid. 9owever, the Decision and Reso$ution of the Court of #ppea$s in C#%&.R. No. !323 are "ODI!IED as fo$$ows= PCIBan0 and Citi5an0 are ad<ud,ed $ia5$e for and +ust share the $oss, .concernin, the proceeds of Citi5an0 Chec0 Nu+5ers SN " (4* and ")( 3 tota$$in, P"!,")3,!43." / on a fift1%fift1 ratio, and each 5an0 is ORDERED to pa1 ;ord Phi$ippines Inc. P), 3",)24. (, with si8 percent .)O/ interest thereon, fro+ the date the co+p$aint was fi$ed unti$ fu$$ pa1+ent of said a+ount.1wphi1.n?t Costs a,ainst Phi$ippine Co++ercia$ Internationa$ Ban0 and Citi5an0 N.#. SO ORDERED.

G.R. No. 17032$

Se?<ember 2%, 2008

P,ILIPPINE NATIONAL BAN , Petitioner, vs. ERLANDO T. RODRIGUE6 &*+ NOR"A RODRIGUE6, Respondents. DECISION RE-ES, R.T., J.: F9EN the pa1ee of the chec0 is not intended to 5e the true recipient of its proceeds, is it pa1a5$e to order or 5earerK Fhat is the fictitious%pa1ee ru$e and who is $ia5$e under itK Is there an1 e8ceptionK -hese Auestions see0 answers in this petition for review on certiorari of the #+ended Decision " of the Court of #ppea$s .C#/ which affir+ed with +odification that of the Re,iona$ -ria$ Court .R-C/. ! -he ;acts -he facts as 5orne 51 the records are as fo$$ows= Respondents%Spouses Er$ando and Nor+a Rodri,ueE were c$ients of petitioner Phi$ippine Nationa$ Ban0 .PNB/, #+e$ia #venue Branch, Ce5u Cit1. -he1 +aintained savin,s and de+andGchec0in, accounts, na+e$1, PNBi, De+and Deposits .Chec0in,GCurrent #ccount No. 3" )!2%) under the account na+e Er$ando andGor Nor+a Rodri,ueE/, and PNBi, De+and Deposit .Chec0in,GCurrent #ccount No. 3" 23 %2 under the account na+e Er$ando -. Rodri,ueE/. -he spouses were en,a,ed in the infor+a$ $endin, 5usiness. In $ine with their 5usiness, the1 had a discountin, 3 arran,e+ent with the Phi$na5an0 E+p$o1ees Savin,s and >oan #ssociation .PEMS>#/, an association of PNB e+p$o1ees. Natura$$1, PEMS># was $i0ewise a c$ient of PNB #+e$ia #venue Branch. -he association +aintained current and savin,s accounts with petitioner 5an0. PEMS># re,u$ar$1 ,ranted $oans to its +e+5ers. Spouses Rodri,ueE wou$d rediscount the postdated chec0s issued to +e+5ers whenever the association was short of funds. #s was custo+ar1, the spouses wou$d rep$ace the postdated chec0s with their own chec0s issued in the na+e of the +e+5ers. It was PEMS>#:s po$ic1 not to approve app$ications for $oans of +e+5ers with outstandin, de5ts. -o su5vert this po$ic1, so+e PEMS># officers devised a sche+e to o5tain additiona$ $oans despite their outstandin, $oan accounts. -he1 too0 out $oans in the na+es of un0nowin, +e+5ers, without the 0now$ed,e or consent of the $atter. -he PEMS># chec0s issued for these $oans were then ,iven to the spouses for rediscountin,. -he officers carried this out 51 for,in, the indorse+ent of the na+ed pa1ees in the chec0s. In return, the spouses issued their persona$ chec0s .Rodri,ueE chec0s/ in the na+e of the +e+5ers and de$ivered the chec0s to an officer of PEMS>#. -he PEMS># chec0s, on the other hand, were deposited 51 the spouses to their account. Meanwhi$e, the Rodri,ueE chec0s were deposited direct$1 51 PEMS># to its savin,s account without an1 indorse+ent fro+ the na+ed pa1ees. -his was an irre,u$ar procedure +ade possi5$e throu,h the faci$itation of Ed+undo Pa$er+o, Cr., treasurer of PEMS># and 5an0 te$$er in the PNB Branch. It appears that this 5eca+e the usua$ practice for the parties.

;or the period Nove+5er "443 to ;e5ruar1 "444, the spouses issued si8t1 nine .)4/ chec0s, in the tota$ a+ount of P!,32(,3 2. . -hese were pa1a5$e to fort1 seven .2*/ individua$ pa1ees who were a$$ +e+5ers of PEMS>#. 2 Petitioner PNB eventua$$1 found out a5out these fraudu$ent acts. -o put a stop to this sche+e, PNB c$osed the current account of PEMS>#. #s a resu$t, the PEMS># chec0s deposited 51 the spouses were returned or dishonored for the reason H#ccount C$osed.H -he correspondin, Rodri,ueE chec0s, however, were deposited as usua$ to the PEMS># savin,s account. -he a+ounts were du$1 de5ited fro+ the Rodri,ueE account. -hus, 5ecause the PEMS># chec0s ,iven as pa1+ent were returned, spouses Rodri,ueE incurred $osses fro+ the rediscountin, transactions. R-C Disposition #$ar+ed over the une8pected turn of events, the spouses Rodri,ueE fi$ed a civi$ co+p$aint for da+a,es a,ainst PEMS>#, the Mu$ti%Purpose Cooperative of Phi$na5an0ers .MCP/, and petitioner PNB. -he1 sou,ht to recover the va$ue of their chec0s that were deposited to the PEMS># savin,s account a+ountin, to P!,32(,3 2. . -he spouses contended that 5ecause PNB credited the chec0s to the PEMS># account even without indorse+ents, PNB vio$ated its contractua$ o5$i,ation to the+ as depositors. PNB paid the wron, pa1ees, hence, it shou$d 5ear the $oss. PNB +oved to dis+iss the co+p$aint on the ,round of $ac0 of cause of action. PNB ar,ued that the c$ai+ for da+a,es shou$d co+e fro+ the pa1ees of the chec0s, and not fro+ spouses Rodri,ueE. Since there was no de+and fro+ the said pa1ees, the o5$i,ation shou$d 5e considered as dischar,ed. In an Order dated Canuar1 "!, ! , the R-C denied PNB:s +otion to dis+iss.

In its #nswer,( PNB c$ai+ed it is not $ia5$e for the chec0s which it paid to the PEMS># account without an1 indorse+ent fro+ the pa1ees. -he 5an0 contended that spouses Rodri,ueE, the +a0ers, actua$$1 did not intend for the na+ed pa1ees to receive the proceeds of the chec0s. ConseAuent$1, the pa1ees were considered as Hfictitious pa1eesH as defined under the Ne,otia5$e Instru+ents >aw .NI>/. Bein, chec0s +ade to fictitious pa1ees which are 5earer instru+ents, the chec0s were ne,otia5$e 51 +ere de$iver1. PNB:s #nswer inc$uded its cross%c$ai+ a,ainst its co% defendants PEMS># and the MCP, pra1in, that in the event that <ud,+ent is rendered a,ainst the 5an0, the cross% defendants shou$d 5e ordered to rei+5urse PNB the a+ount it sha$$ pa1. #fter tria$, the R-C rendered <ud,+ent in favor of spouses Rodri,ueE .p$aintiffs/. It ru$ed that PNB .defendant/ is $ia5$e to return the va$ue of the chec0s. #$$ counterc$ai+s and cross%c$ai+s were dis+issed. -he dispositive portion of the R-C decision reads= F9ERE;ORE, in view of the fore,oin,, the Court here51 renders <ud,+ent, as fo$$ows= ". Defendant is here51 ordered to pa1 the p$aintiffs the tota$ a+ount of P!,32(,3 2. or reinstate or restore the a+ount of P**(,33*. in the PNBi, De+and Deposit Chec0in,GCurrent #ccount No. 3" 23 %2 of Er$ando -. Rodri,ueE, and the a+ount of P",(* ,2)*. in the PNBi, De+and Deposit, Chec0in,GCurrent #ccount No. 3" )!2%) of Er$ando -. Rodri,ueE andGor Nor+a Rodri,ueE, p$us $e,a$ rate of interest thereon to 5e co+puted fro+ the fi$in, of this co+p$aint unti$ fu$$1 paid@ !. -he defendant PNB is here51 ordered to pa1 the p$aintiffs the fo$$owin, reasona5$e a+ount of da+a,es suffered 51 the+ ta0in, into consideration the standin, of the p$aintiffs 5ein, su,arcane p$anters, rea$tors, residentia$ su5division owners, and other 5usinesses= .a/ ConseAuentia$ da+a,es, unearned inco+e in the a+ount of P2, , . , as a resu$t of their havin, incurred ,reat dificu$t1 .sic/ especia$$1 in the residentia$ su5division 5usiness, which was not pushed throu,h and the contractor even threatened to fi$e a case a,ainst the p$aintiffs@ .5/ Mora$ da+a,es in the a+ount of P", , . @

.c/ E8e+p$ar1 da+a,es in the a+ount of P( .d/ #ttorne1:s fees in the a+ount of P"( , co+p$icated issues@ and for the .e/ Costs of suit. .

considerin, that this case does not invo$ve ver1

3. Other c$ai+s and counterc$ai+s are here51 dis+issed.) C# Disposition PNB appea$ed the decision of the tria$ court to the C# on the principa$ ,round that the disputed chec0s shou$d 5e considered as pa1a5$e to 5earer and not to order. In a Decision* dated Cu$1 !!, ! 2, the C# reversed and set aside the R-C disposition. -he C# conc$uded that the chec0s were o5vious$1 +eant 51 the spouses to 5e rea$$1 paid to PEMS>#. -he court a Auo dec$ared= Fe are not swa1ed 51 the contention of the p$aintiffs%appe$$ees .Spouses Rodri,ueE/ that their cause of action arose fro+ the a$$e,ed 5reach of contract 51 the defendant%appe$$ant .PNB/ when it paid the va$ue of the chec0s to PEMS># despite the chec0s 5ein, pa1a5$e to order. Rather, we are +ore convinced 51 the stron, and credi5$e evidence for the defendant%appe$$ant with re,ard to the p$aintiffs%appe$$ees: and PEMS>#:s 5usiness arran,e+ent U that the va$ue of the rediscounted chec0s of the p$aintiffs%appe$$ees wou$d 5e deposited in PEMS>#:s account for pa1+ent of the $oans it has approved in e8chan,e for PEMS>#:s chec0s with the fu$$ va$ue of the said $oans. -his is the on$1 o5vious e8p$anation as to wh1 a$$ the disputed si8t1%nine .)4/ chec0s were in the possession of PEMS>#:s errand 5o1 for present+ent to the defendant%appe$$ant that $ed to this present controvers1. It a$so appears that the te$$er who accepted the said chec0s was PEMS>#:s officer, and that such was a re,u$ar practice 51 the parties unti$ the defendant% appe$$ant discovered the sca+. -he $o,ica$ conc$usion, therefore, is that the chec0s were never +eant to 5e paid to order, 5ut instead, to PEMS>#. Fe thus find no 5reach of contract on the part of the defendant%appe$$ant. #ccordin, to p$aintiff%appe$$ee Er$ando Rodri,ueE: testi+on1, PEMS># a$$e,ed$1 issued post%dated chec0s to its Aua$ified +e+5ers who had app$ied for $oans. 9owever, 5ecause of PEMS>#:s insufficienc1 of funds, PEMS># approached the p$aintiffs%appe$$ees for the $atter to issue rediscounted chec0s in favor of said app$icant +e+5ers. Based on the investi,ation of the defendant%appe$$ant, +eanwhi$e, this arran,e+ent a$$owed the p$aintiffs%appe$$ees to +a0e a profit 51 issuin, rediscounted chec0s, whi$e the officers of PEMS># and other +e+5ers wou$d 5e a5$e to c$ai+ their $oans, despite the fact that the1 were disAua$ified for one reason or another. -he1 were a5$e to achieve this conspirac1 51 usin, other +e+5ers who had $oaned $esser a+ounts of +one1 or had not app$ied at a$$. 8 8 8. 3 .E+phasis added/ -he C# found that the chec0s were 5earer instru+ents, thus the1 do not reAuire indorse+ent for ne,otiation@ and that spouses Rodri,ueE and PEMS># conspired with each other to acco+p$ish this +one1%+a0in, sche+e. -he pa1ees in the chec0s were Hfictitious pa1eesH 5ecause the1 were not the intended pa1ees at a$$. -he spouses Rodri,ueE +oved for reconsideration. -he1 ar,ued, inter a$ia, that the chec0s on their faces were unAuestiona5$1 pa1a5$e to order@ and that PNB co++itted a 5reach of contract when it paid the va$ue of the chec0s to PEMS># without indorse+ent fro+ the pa1ees. -he1 a$so ar,ued that their cause of action is not on$1 a,ainst PEMS># 5ut a$so a,ainst PNB to recover the va$ue of the chec0s. On Octo5er "", ! (, the C# reversed itse$f via an #+ended Decision, the $ast para,raph and fa$$o of which read=

In su+, we ru$e that the defendant%appe$$ant PNB is $ia5$e to the p$aintiffs%appe$$ees Sps. Rodri,ueE for the fo$$owin,= ". #ctua$ da+a,es in the a+ount of P!,32(,3 2 with interest at )O per annu+ fro+ "2 Ma1 "444 unti$ fu$$1 paid@

!. Mora$ da+a,es in the a+ount of P! 3. #ttorne1:s fees in the a+ount of P" 2. Costs of suit. ,

@ @ and

F9ERE;ORE, in view of the fore,oin, pre+ises, <ud,+ent is here51 rendered 51 6s #;;IRMIN& FI-9 MODI;IC#-ION the assai$ed decision rendered in Civi$ Case No. 44%" 34!, as set forth in the i++ediate$1 ne8t precedin, para,raph hereof, and SE--IN& #SIDE Our ori,ina$ decision pro+u$,ated in this case on !! Cu$1 ! 2. SO ORDERED.4 -he C# ru$ed that the chec0s were pa1a5$e to order. #ccordin, to the appe$$ate court, PNB fai$ed to present sufficient proof to defeat the c$ai+ of the spouses Rodri,ueE that the1 rea$$1 intended the chec0s to 5e received 51 the specified pa1ees. -hus, PNB is $ia5$e for the va$ue of the chec0s which it paid to PEMS># without indorse+ents fro+ the na+ed pa1ees. -he award for da+a,es was dee+ed appropriate in view of the fai$ure of PNB to treat the Rodri,ueE account with the hi,hest de,ree of care considerin, the fiduciar1 nature of their re$ationship, which constrained respondents to see0 $e,a$ action. 9ence, the present recourse under Ru$e 2(. Issues -he issues +a1 5e co+pressed to whether the su5<ect chec0s are pa1a5$e to order or to 5earer and who 5ears the $ossK PNB ar,ues anew that when the spouses Rodri,ueE issued the disputed chec0s, the1 did not intend for the na+ed pa1ees to receive the proceeds. -hus, the1 are 5earer instru+ents that cou$d 5e va$id$1 ne,otiated 51 +ere de$iver1. ;urther, testi+onia$ and docu+entar1 evidence presented durin, tria$ a+p$1 proved that spouses Rodri,ueE and the officers of PEMS># conspired with each other to defraud the 5an0. Our Ru$in, Prefatori$1, a+end+ent of decisions is +ore accepta5$e than an erroneous <ud,+ent attainin, fina$it1 to the pre<udice of innocent parties. # court discoverin, an erroneous <ud,+ent 5efore it 5eco+es fina$ +a1, +otu proprio or upon +otion of the parties, correct its <ud,+ent with the sin,u$ar o5<ective of achievin, <ustice for the $iti,ants. " 9owever, a word of caution to $ower courts, the C# in Ce5u in this particu$ar case, is in order. -he Court does not sanction care$ess disposition of cases 51 courts of <ustice. -he hi,hest de,ree of di$i,ence +ust ,o into the stud1 of ever1 controvers1 su5+itted for decision 51 $iti,ants. Ever1 issue and factua$ detai$ +ust 5e c$ose$1 scrutiniEed and ana$1Eed, and a$$ the app$ica5$e $aws <udicious$1 studied, 5efore the pro+u$,ation of ever1 <ud,+ent 51 the court. On$1 in this +anner wi$$ errors in <ud,+ents 5e avoided. Now to the core of the petition. #s a ru$e, when the pa1ee is fictitious or not intended to 5e the true recipient of the proceeds, the chec0 is considered as a 5earer instru+ent. # chec0 is Ha 5i$$ of e8chan,e drawn on a 5an0 pa1a5$e on de+and.H "" It is either an order or a 5earer instru+ent. Sections 3 and 4 of the NI> states= SEC. 3. Fhen pa1a5$e to order. U -he instru+ent is pa1a5$e to order where it is drawn pa1a5$e to the order of a specified person or to hi+ or his order. It +a1 5e drawn pa1a5$e to the order of U

.a/ # pa1ee who is not +a0er, drawer, or drawee@ or .5/ -he drawer or +a0er@ or .c/ -he drawee@ or .d/ -wo or +ore pa1ees <oint$1@ or .e/ One or so+e of severa$ pa1ees@ or .f/ -he ho$der of an office for the ti+e 5ein,. Fhere the instru+ent is pa1a5$e to order, the pa1ee +ust 5e na+ed or otherwise indicated therein with reasona5$e certaint1. SEC. 4. Fhen pa1a5$e to 5earer. U -he instru+ent is pa1a5$e to 5earer U .a/ Fhen it is e8pressed to 5e so pa1a5$e@ or .5/ Fhen it is pa1a5$e to a person na+ed therein or 5earer@ or .c/ Fhen it is pa1a5$e to the order of a fictitious or non%e8istin, person, and such fact is 0nown to the person +a0in, it so pa1a5$e@ or .d/ Fhen the na+e of the pa1ee does not purport to 5e the na+e of an1 person@ or .e/ Fhere the on$1 or $ast indorse+ent is an indorse+ent in 5$an0. "! .6nderscorin, supp$ied/ -he distinction 5etween 5earer and order instru+ents $ies in their +anner of ne,otiation. 6nder Section 3 of the NI>, an order instru+ent reAuires an indorse+ent fro+ the pa1ee or ho$der 5efore it +a1 5e va$id$1 ne,otiated. # 5earer instru+ent, on the other hand, does not reAuire an indorse+ent to 5e va$id$1 ne,otiated. It is ne,otia5$e 51 +ere de$iver1. -he provision reads= SEC. 3 . Fhat constitutes ne,otiation. U #n instru+ent is ne,otiated when it is transferred fro+ one person to another in such +anner as to constitute the transferee the ho$der thereof. If pa1a5$e to 5earer, it is ne,otiated 51 de$iver1@ if pa1a5$e to order, it is ne,otiated 51 the indorse+ent of the ho$der co+p$eted 51 de$iver1. # chec0 that is pa1a5$e to a specified pa1ee is an order instru+ent. 9owever, under Section 4.c/ of the NI>, a chec0 pa1a5$e to a specified pa1ee +a1 neverthe$ess 5e considered as a 5earer instru+ent if it is pa1a5$e to the order of a fictitious or non%e8istin, person, and such fact is 0nown to the person +a0in, it so pa1a5$e. -hus, chec0s issued to HPrinsipe #5anteH or HSi Ma$a0as at si Ma,anda,H who are we$$%0nown characters in Phi$ippine +1tho$o,1, are 5earer instru+ents 5ecause the na+ed pa1ees are fictitious and non%e8istent. Fe have 1et to discuss a 5roader +eanin, of the ter+ HfictitiousH as used in the NI>. It is for this reason that Fe $oo0 e$sewhere for ,uidance. Court ru$in,s in the 6nited States are a $o,ica$ startin, point since our $aw on ne,otia5$e instru+ents was direct$1 $ifted fro+ the 6nifor+ Ne,otia5$e Instru+ents >aw of the 6nited States. "3 # review of 6S <urisprudence 1ie$ds that an actua$, e8istin,, and $ivin, pa1ee +a1 a$so 5e HfictitiousH if the +a0er of the chec0 did not intend for the pa1ee to in fact receive the proceeds of the chec0. -his usua$$1 occurs when the +a0er p$aces a na+e of an e8istin, pa1ee on the chec0 for convenience or to cover up an i$$e,a$ activit1. "2 -hus, a chec0 +ade e8press$1 pa1a5$e to a non%fictitious and e8istin, person is not necessari$1 an order instru+ent. If the pa1ee is

not the intended recipient of the proceeds of the chec0, the pa1ee is considered a HfictitiousH pa1ee and the chec0 is a 5earer instru+ent. In a fictitious%pa1ee situation, the drawee 5an0 is a5so$ved fro+ $ia5i$it1 and the drawer 5ears the $oss. Fhen faced with a chec0 pa1a5$e to a fictitious pa1ee, it is treated as a 5earer instru+ent that can 5e ne,otiated 51 de$iver1. -he under$1in, theor1 is that one cannot e8pect a fictitious pa1ee to ne,otiate the chec0 51 p$acin, his indorse+ent thereon. #nd since the +a0er 0new this $i+itation, he +ust have intended for the instru+ent to 5e ne,otiated 51 +ere de$iver1. -hus, in case of controvers1, the drawer of the chec0 wi$$ 5ear the $oss. -his ru$e is <ustified for otherwise, it wi$$ 5e +ost convenient for the +a0er who desires to escape pa1+ent of the chec0 to a$wa1s den1 the va$idit1 of the indorse+ent. -his despite the fact that the fictitious pa1ee was purpose$1 na+ed without an1 intention that the pa1ee shou$d receive the proceeds of the chec0."( -he fictitious%pa1ee ru$e is 5est i$$ustrated in Mue$$er V Martin v. >i5ert1 Insurance Ban0. ") In the said case, the corporation Mue$$er V Martin was defrauded 51 &eor,e >. Martin, one of its authoriEed si,natories. Martin drew seven chec0s pa1a5$e to the &er+an Savin,s ;und Co+pan1 Bui$din, #ssociation .&S;CB#/ a+ountin, to N!,4*!.( a,ainst the account of the corporation without authorit1 fro+ the $atter. Martin was a$so an officer of the &S;CB# 5ut did not have si,nin, authorit1. #t the 5ac0 of the chec0s, Martin p$aced the ru55er sta+p of the &S;CB# and si,ned his own na+e as indorse+ent. 9e then successfu$$1 drew the funds fro+ >i5ert1 Insurance Ban0 for his own persona$ profit. Fhen the corporation fi$ed an action a,ainst the 5an0 to recover the a+ount of the chec0s, the c$ai+ was denied. -he 6S Supre+e Court he$d in Mue$$er that when the person +a0in, the chec0 so pa1a5$e did not intend for the specified pa1ee to have an1 part in the transactions, the pa1ee is considered as a fictitious pa1ee. -he chec0 is then considered as a 5earer instru+ent to 5e va$id$1 ne,otiated 51 +ere de$iver1. -hus, the 6S Supre+e Court he$d that >i5ert1 Insurance Ban0, as drawee, was authoriEed to +a0e pa1+ent to the 5earer of the chec0, re,ard$ess of whether prior indorse+ents were ,enuine or not."* -he +ore recent &ett1 Petro$eu+ Corp. v. #+erican E8press -rave$ Re$ated Services Co+pan1, Inc. "3 uphe$d the fictitious%pa1ee ru$e. -he ru$e protects the depositar1 5an0 and assi,ns the $oss to the drawer of the chec0 who was in a 5etter position to prevent the $oss in the first p$ace. Due care is not even reAuired fro+ the drawee or depositar1 5an0 in acceptin, and pa1in, the chec0s. -he effect is that a showin, of ne,$i,ence on the part of the depositar1 5an0 wi$$ not defeat the protection that is derived fro+ this ru$e. 9owever, there is a co++ercia$ 5ad faith e8ception to the fictitious%pa1ee ru$e. # showin, of co++ercia$ 5ad faith on the part of the drawee 5an0, or an1 transferee of the chec0 for that +atter, wi$$ wor0 to strip it of this defense. -he e8ception wi$$ cause it to 5ear the $oss. Co++ercia$ 5ad faith is present if the transferee of the chec0 acts dishonest$1, and is a part1 to the fraudu$ent sche+e. Said the 6S Supre+e Court in &ett1= ConseAuent$1, a transferee:s $apse of war1 vi,i$ance, disre,ard of suspicious circu+stances which +i,ht have we$$ induced a prudent 5an0er to investi,ate and other per+utations of ne,$i,ence are not re$evant considerations under Section 3%2 ( 8 8 8. Rather, there is a Hco++ercia$ 5ad faithH e8ception to 6CC 3%2 (, app$ica5$e when the transferee Hacts dishonest$1 U where it has actua$ 0now$ed,e of facts and circu+stances that a+ount to 5ad faith, thus itse$f 5eco+in, a participant in a fraudu$ent sche+e. 8 8 8 Such a test finds support in the te8t of the Code, which o+its a standard of care reAuire+ent fro+ 6CC 3%2 ( 5ut i+poses on a$$ parties an o5$i,ation to act with Hhonest1 in fact.H 8 8 8"4 .E+phasis added/ &ett1 a$so $aid the princip$e that the fictitious%pa1ee ru$e e8tends protection even to non%5an0 transferees of the chec0s. In the case under review, the Rodri,ueE chec0s were pa1a5$e to specified pa1ees. It is unrefuted that the )4 chec0s were pa1a5$e to specific persons. >i0ewise, it is uncontroverted that the pa1ees were actua$, e8istin,, and $ivin, persons who were +e+5ers of PEMS># that had a rediscountin, arran,e+ent with spouses Rodri,ueE. Fhat re+ains to 5e deter+ined is if the pa1ees, thou,h e8istin, persons, were HfictitiousH in its 5roader conte8t.

;or the fictitious%pa1ee ru$e to 5e avai$a5$e as a defense, PNB +ust show that the +a0ers did not intend for the na+ed pa1ees to 5e part of the transaction invo$vin, the chec0s. #t +ost, the 5an0:s thesis shows that the pa1ees did not have 0now$ed,e of the e8istence of the chec0s. -his $ac0 of 0now$ed,e on the part of the pa1ees, however, was not tanta+ount to a $ac0 of intention on the part of respondents%spouses that the pa1ees wou$d not receive the chec0s: proceeds. Considerin, that respondents%spouses were transactin, with PEMS># and not the individua$ pa1ees, it is understanda5$e that the1 re$ied on the infor+ation ,iven 51 the officers of PEMS># that the pa1ees wou$d 5e receivin, the chec0s. 'eri$1, the su5<ect chec0s are presu+ed order instru+ents. -his is 5ecause, as found 51 5oth $ower courts, PNB fai$ed to present sufficient evidence to defeat the c$ai+ of respondents%spouses that the na+ed pa1ees were the intended recipients of the chec0s: proceeds. -he 5an0 fai$ed to satisf1 a reAuisite condition of a fictitious%pa1ee situation U that the +a0er of the chec0 intended for the pa1ee to have no interest in the transaction. Because of a fai$ure to show that the pa1ees were HfictitiousH in its 5roader sense, the fictitious%pa1ee ru$e does not app$1. -hus, the chec0s are to 5e dee+ed pa1a5$e to order. ConseAuent$1, the drawee 5an0 5ears the $oss. ! PNB was re+iss in its dut1 as the drawee 5an0. It does not dispute the fact that its te$$er or te$$ers accepted the )4 chec0s for deposit to the PEMS># account even without an1 indorse+ent fro+ the na+ed pa1ees. It 5ears stressin, that order instru+ents can on$1 5e ne,otiated with a va$id indorse+ent. # 5an0 that re,u$ar$1 processes chec0s that are neither pa1a5$e to the custo+er nor du$1 indorsed 51 the pa1ee is apparent$1 ,ross$1 ne,$i,ent in its operations.!" -his Court has reco,niEed the uniAue pu5$ic interest possessed 51 the 5an0in, industr1 and the need for the peop$e to have fu$$ trust and confidence in their 5an0s. !! ;or this reason, 5an0s are +inded to treat their custo+er:s accounts with ut+ost care, confidence, and honest1. !3 In a chec0in, transaction, the drawee 5an0 has the dut1 to verif1 the ,enuineness of the si,nature of the drawer and to pa1 the chec0 strict$1 in accordance with the drawer:s instructions, i.e., to the na+ed pa1ee in the chec0. It shou$d char,e to the drawer:s accounts on$1 the pa1a5$es authoriEed 51 the $atter. Otherwise, the drawee wi$$ 5e vio$atin, the instructions of the drawer and it sha$$ 5e $ia5$e for the a+ount char,ed to the drawer:s account. !2 In the case at 5ar, respondents%spouses were the 5an0:s depositors. -he chec0s were drawn a,ainst respondents% spouses: accounts. PNB, as the drawee 5an0, had the responsi5i$it1 to ascertain the re,u$arit1 of the indorse+ents, and the ,enuineness of the si,natures on the chec0s 5efore acceptin, the+ for deposit. >ast$1, PNB was o5$i,ated to pa1 the chec0s in strict accordance with the instructions of the drawers. Petitioner +isera5$1 fai$ed to dischar,e this 5urden. -he chec0s were presented to PNB for deposit 51 a representative of PEMS># a5sent an1 t1pe of indorse+ent, for,ed or otherwise. -he facts c$ear$1 show that the 5an0 did not pa1 the chec0s in strict accordance with the instructions of the drawers, respondents%spouses. Instead, it paid the va$ues of the chec0s not to the na+ed pa1ees or their order, 5ut to PEMS>#, a third part1 to the transaction 5etween the drawers and the pa1ees. alf>"#! Moreover, PNB was ne,$i,ent in the se$ection and supervision of its e+p$o1ees. -he trustworthiness of 5an0 e+p$o1ees is indispensa5$e to +aintain the sta5i$it1 of the 5an0in, industr1. -hus, 5an0s are en<oined to 5e e8tra vi,i$ant in the +ana,e+ent and supervision of their e+p$o1ees. In Ban0 of the Phi$ippine Is$ands v. Court of #ppea$s, !( this Court cautioned thus= Ban0s hand$e dai$1 transactions invo$vin, +i$$ions of pesos. B1 the ver1 nature of their wor0 the de,ree of responsi5i$it1, care and trustworthiness e8pected of their e+p$o1ees and officia$s is far ,reater than those of ordinar1 c$er0s and e+p$o1ees. ;or o5vious reasons, the 5an0s are e8pected to e8ercise the hi,hest de,ree of di$i,ence in the se$ection and supervision of their e+p$o1ees.!) PNB:s te$$ers and officers, in vio$ation of 5an0in, ru$es of procedure, per+itted the inva$id deposits of chec0s to the PEMS># account. Indeed, when it is the ,ross ne,$i,ence of the 5an0 e+p$o1ees that caused the $oss, the 5an0 shou$d 5e he$d $ia5$e.!*

PNB:s ar,u+ent that there is no $oss to co+pensate since no de+and for pa1+ent has 5een +ade 51 the pa1ees +ust a$so fai$. Da+a,e was caused to respondents%spouses when the PEMS># chec0s the1 deposited were returned for the reason H#ccount C$osed.H -hese PEMS># chec0s were the correspondin, pa1+ents to the Rodri,ueE chec0s. Since the1 cou$d not encash the PEMS># chec0s, respondents%spouses were una5$e to co$$ect pa1+ents for the a+ounts the1 had advanced. # 5an0 that has 5een re+iss in its dut1 +ust suffer the conseAuences of its ne,$i,ence. Bein, issued to na+ed pa1ees, PNB was dut1%5ound 51 $aw and 51 5an0in, ru$es and procedure to reAuire that the chec0s 5e proper$1 indorsed 5efore acceptin, the+ for deposit and pa1+ent. In fine, PNB shou$d 5e he$d $ia5$e for the a+ounts of the chec0s. One >ast Note Fe note that the R-C fai$ed to thresh out the +erits of PNB:s cross%c$ai+ a,ainst its co%defendants PEMS># and MPC. -he records are 5ereft of an1 p$eadin, fi$ed 51 these two defendants in answer to the co+p$aint of respondents% spouses and cross%c$ai+ of PNB. -he Ru$es e8press$1 provide that fai$ure to fi$e an answer is a ,round for a dec$aration that defendant is in defau$t.!3 ?et, the R-C fai$ed to sanction the fai$ure of 5oth PEMS># and MPC to fi$e responsive p$eadin,s. 'eri$1, the R-C dis+issa$ of PNB:s cross%c$ai+ has no 5asis. -hus, this <ud,+ent sha$$ 5e without pre<udice to whatever action the 5an0 +i,ht ta0e a,ainst its co%defendants in the tria$ court. -o PNB:s credit, it 5eca+e invo$ved in the controversia$ transaction not of its own vo$ition 5ut due to the actions of so+e of its e+p$o1ees. Considerin, that +ora$ da+a,es +ust 5e understood to 5e in concept of ,rants, not punitive or corrective in nature, Fe reso$ve to reduce the award of +ora$ da+a,es to P( , . .!4 F9ERE;ORE, the appea$ed #+ended Decision is #;;IRMED with the MODI;IC#-ION that the award for +ora$ da+a,es is reduced to P( , . , and that this is without pre<udice to whatever civi$, cri+ina$, or ad+inistrative action PNB +i,ht ta0e a,ainst PEMS>#, MPC, and the e+p$o1ees invo$ved. SO ORDERED.

G.R. No. 7147) O'<ober 18, 1))0 "ELLON BAN , N.A., petitioner, vs. ,ON. CELSO L. "AGSINO, 2* (29 '&?&'2</ &9 Pre92+2*B #8+Be o@ Br&*'( CLIE o@ <(e ReB2o*&1 Tr2&1 Co8r< &< P&92BF "ELC,OR #A5IER, #R., 5ICTORIA #A5IERF ,EIRS O! ,ONORIO POBLADOR, #R., *&me1/A E19& A18*&* Pob1&+or, ,o*or2o Pob1&+or III, R&@&e1 Pob1&+or, "&*8e1 Pob1&+or, "&. ReB2*& Pob1&+or, "&. Co*'e?'2o* Pob1&+or G "&. Do1ore9 Pob1&+orF !.C. ,AGEDORN G CO., INC.F DO"INGO #,OCSON, #R.F #OSE "AR;UE6F ROBERTO GARINOF ELNOR IN5EST"ENT CO., INC.F PARA"OUNT !INANCE CORPORATIONF RA!AEL CABALLEROF &*+ TRI.ARC IN5EST"ENT &*+ "ANAGE"ENT CO., INC. respondents. $o'ulo, :abanta, Buenaventura, &a(oc & -e los Angeles for petitioner. =ose Buendia for respondent =ose :ar9uez. $aul ;. !ornea & Associates for =hocson and Garino. =esus ;. &antos and !onrado Calera for #ri>Arc "nvest'ent, etc. Bernardo -. !alderon for respondent B;+<$ and $afael !aballero. +azareno, Azada, &abado & -izon for :ovants. Balgos & *erez for *ara'ount 8inance !orporation. :eer, :eer & :eer for ,agedorn. Alberto Cillareza for 8.!. ,agedorn & !o.

!ERNAN, C.J.: -he issue in the instant specia$ civi$ action of certiorari is whether or not, 51 virtue of the princip$e of e$ection of re+edies, an action fi$ed in Ca$ifornia, 6.S.#., to recover rea$ propert1 $ocated therein and to constitute a constructive trust on said propert1 prec$udes the fi$in, in our <urisdiction of an action to recover the purchase price of said rea$ propert1. On Ma1 !*, "4**, Do$ores 'entosa reAuested the transfer of N", fro+ the ;irst Nationa$ Ban0 of Moundsvi$$e, Fest 'ir,inia, 6.S.#. to 'ictoria Cavier in Mani$a throu,h the Prudentia$ Ban0. #ccordin,$1, the ;irst Nationa$ Ban0 reAuested the petitioner, Me$$on Ban0, to effect the transfer. 6nfortunate$1 the wire sent 51 Me$$on Ban0 to Manufacturers 9anover Ban0, a correspondent of Prudentia$ Ban0, indicated the a+ount transferred as H6SN", , . H instead of 6SN", . . 9ence Manufacturers 9anover Ban0 transferred one +i$$ion do$$ars $ess 5an0 char,es of N).3 to the Prudentia$ Ban0 for the account of 'ictoria Cavier. On Cune 3, "4**, Cavier opened a new do$$ar account .No. 323/ in the Prudentia$ Ban0 and deposited N444,423.* . I++ediate$1 their, 'ictoria Cavier and her hus5and, Me$chor Cavier, Cr., +ade withdrawa$s fro+ the account, deposited the+ in severa$ 5an0s on$1 to withdraw the+ $ater in an apparent p$an to concea$, H$aunderH and dissipate the erroneous$1 sent a+ount.

On Cune "2, "4**, Cavier withdrew N2*(, fro+ account No. 323 and converted it into ei,ht cashierMs chec0s +ade out to the fo$$owin,= .a/ ;.C. 9a,edorn V Co., Inc., two chee0s for the tota$ a+ount of P", , @ .5/ E$nor Invest+ent Co., Inc., two chec0s for P", , @ .c/ Para+ount ;inance Corporation, two chec0s for P", , @ and .d/ M. Cavier, Cr., two chec0s for P24), . -he first si8 chec0s were de$ivered to Cose MarAueE and 9onorio Po5$ador, Cr. It appears that Me$chor Cavier, Cr. had reAuested Cose MarAueE, a rea$tor, to $oo0 for properties for sa$e in the 6nited States. MarAueE offered a ") %acre $ot in the Mo<ave desert in Ca$ifornia Cit1 which was owned 51 9onorio Po5$ador, Cr. Cavier, without havin, seen the propert1, a,reed to 5u1 it for P3,!3),3 .6SN23*,2 (/ a$thou,h it was actua$$1 appraised at around N33,( . ConseAuent$1, as Po5$adorMs a,ent, MarAueE e8ecuted in Ma0ati a deed of a5so$ute sa$e in favor of the Caviers and had the docu+ent notariEed in Mani$a 5efore an associate of Po5$ador. MarAueE e8ecuted another deed of sa$e indicatin, receipt of the purchase price and sent the deed to the Iern Count1 Re,istrar in Ca$ifornia for re,istration. Inas+uch as Po5$ador had reAuested that the purchase price shou$d not 5e paid direct$1 to hi+, the pa1+ent of P3, , was coursed throu,h E$nor Invest+ent Co., Inc., a$$e,ed$1 Po5$adorMs persona$ ho$din, co+pan1@ Para+ount ;inance, a$$e,ed$1 headed 51 Po5$adorMs 5rother, and ;.C. 9a,edorn, a$$e,ed$1 a stoc0 5ro0era,e with e8tensive dea$in,s with Po5$ador. -he pa1+ent was +ade throu,h the afore+entioned si8 cashierMs chec0s whi$e the 5a$ance of P!3), was paid in cash 51 Cavier who did not even as0 for a receipt. -he two chec0s tota$$in, P", , was de$ivered 51 Po5$ador to ;.C. 9a,edorn with specific instructions to purchase #t$as, SMC and Phi$e8 shares. -he four chec0s for P!, , with E$nor Invest+ent and Para+ount ;inance as pa1ees were de$ivered to the $atter to purchase H5earerH notes. Meanwhi$e, in Cu$1, "4**, Me$$on Ban0 fi$ed a co+p$aint doc0eted as No. "23 () in the Superior Court of Ca$ifornia, Count1 of Iern, a,ainst Me$chor Cavier, Cane Doe Cavier, 9onorio Po5$ador, Crn, and Does I throu,h '. In its first a+ended co+p$aint to i+pose constructive trust dated Cu$1 "2, "4**, 1 Me$$on Ban0 a$$e,ed that it had +ista0en$1 and inadvertent$1 cause the transfer of the su+ of N444, . to Cane Doe Cavier@ that it 5e$ieves that the defendants had withdrawn said funds@ that Hthe defendants and each of the+ have used a portion of said funds to purchase rea$ propert1 $ocated in Iern Count1, Ca$iforniaH@ and that 5ecause of defendantsM 0now$ed,e of Me$$on Ban0Ms +ista0e and inadvertence and their use of the funds to purchase the propert1, the1 and Heach of the+ are invo$untar1 or constructive trustees of the rea$ propert1 and of an1 profits therefro+, with a dut1 to conve1 the sa+e to p$aintiff forthwith.H It pra1ed that the defendants and each of the+ 5e dec$ared as ho$ders of the propert1 in trust for the p$aintiff@ that defendants 5e co+pe$$ed to transfer $e,a$ tit$e and possession of the propert1 to the p$aintiff@ that defendants 5e +ade to pa1 the costs of the suit, and that other re$iefs 5e ,ranted the+. On Cu$1 !4, "4**, Me$$on Ban0 a$so fi$ed in the Court of ;irst Instance of RiEa$, Branch J, a co+p$aint a,ainst the Cavier spouses, 9onorio Po5$ador, Cr., Do+in,o >. Chocson, Cr., Cose MarAueE, Ro5erto &ariBo, E$nor Invest+ent Co., Inc., ;.C. 9a,edorn V Co., Inc. and Para+ount ;inance Corporation. #fter its a+end+ent, Rafae$ Ca5a$$ero and -ri% #rc Invest+ent V Mana,e+ent Co+pan1, Inc. were a$so na+ed defendants. 2 -he a+ended and supp$e+enta$ co+p$aint a$$e,ed the facts set forth a5ove and added that Ro5erto &ariBo, chief accountant of Prudentia$ Ban0, and who was the reference of Mrs. 'entosaMs do$$ar re+ittances to 'ictoria Cavier, i++ediate$1 infor+ed the Caviers of the receipt of 6SN", , . @ that 0nowin, the financia$ circu+stances of Mrs. 'entosa and the fact that a +ista0e had 5een co++itted, the Caviers, with undue haste, too0 un$awfu$ advanta,e of the +ista0e, withdrew the who$e a+ount and transferred the sa+e to a H323 do$$ar accountH@ that, aided and a5etted 51 Po5$ador and Do+in,o >. Chocson, the Caviers Hco+pounded and co+p$eted the conversionH of the funds 51 withdrawin, fro+ the account do$$ars or pesos eAuiva$ent to 6S N4*(, @ that 51 force of $aw, the Caviers had 5een constituted trustees of an i+p$ied trust for the 5enefit of Me$$on Ban0 with a c$ear dut1 to return to said 5an0 the +one1s +ista0en$1 paid to the+@ that, upon reAuest of Me$$on Ban0 and Manufacturers 9anover Ban0, Prudentia$ Ban0 infor+ed the Caviers of the erroneous trans+itta$ of one +i$$ion do$$ars first ora$$1 and $ater 51 $etter%de+and@ that conferences 5etween the representatives of the Caviers, $ed 51 Chocson and Po5$ador, in the $atterMs capacit1 as $e,a$ and financia$ counse$, and representatives of Me$$on Ban0, proved futi$e as the Caviers c$ai+ed that +ost of the +one1s had 5een irretrieva5$1 spent@ that the Caviers cou$d on$1 return the a+ount if the Me$$on Ban0 shou$d a,ree to +a0e an a5so$ute Auitc$ai+ and waiver of future ri,hts a,ainst the+, and that in a sche+e to concea$ and dissipate the funds, throu,h the active participation of Cose MarAueE, the Caviers 5ou,ht the Ca$ifornia propert1 of Po5$ador.

It further a$$e,ed that trust fund +one1s tota$$in, P3, , . were +ade pa1a5$e to 9a,edorn Para+ount and E$nor@ that 9a,edorn on instructions of Po5$ador, purchased shares of stoc0 at a stoc0 e8chan,e for P", , . 5ut $ater, it hasti$1 so$d said shares at a $oss of appro8i+ate$1 P"( , . to the pre<udice of the p$aintiff@ that proceeds of the sa$e were deposited 51 9a,edorn in the na+e of Po5$ador andGor the $aw office of Po5$ador, NaEareno, #Eada, -o+acruE and Paredes@ that dividends dec$ared on the shares were de$ivered 51 9a,edorn to Ca5a$$ero after the co+p$aint had 5een fi$ed and thereafter, Ca5a$$ero deposited the dividends in his persona$ account@ that after receivin, the P", , . trust +one1, Para+ount issued pro+issor1 notes upon +aturit1 of which Para+ount re$eased the a+ount to un0nown persons@ that E$nor a$so invested P", , . in Para+ount for which the $atter a$so issued pro+issor1 notes@ that after the fi$in, of the co+p$aint, counse$ for p$aintiff reAuested Para+ount not to re$ease the a+ount after +aturit1@ that in evident 5ad faith, E$nor transferred the non%ne,otia5$e Para+ount pro+issor1 notes to -ri%#rc. that when the notes +atured, Para+ount de$ivered the proceeds of P", , . to -ri%#rc@ that Po5$ador 0new or shou$d have 0nown that the attorne1Ms fees he received fro+ the Caviers ca+e fro+ the trust funds@ and that despite for+a$ de+ands even after the fi$in, of the co+p$aint, the defendants refused to return the trust funds which the1 continued concea$in, and dissipatin,. It pra1ed that= .a/ the Caviers, Po5$ador, E$nor, Chocson and &ariBo 5e ordered to account for and pa1 <oint$1 and severa$$1 unto the p$aintiff 6SN444, . p$us incre+ents, additions, fruits and interests earned 51 the funds fro+ receipt thereof unti$ fu$$1 paid@ .5/ the other defendants 5e ordered to account for and pa1 unto the p$aintiff <oint$1 and severa$$1 with the Caviers to the e8tent of the a+ounts which each of the+ +a1 have received direct$1 or indirect$1 fro+ the 6SN444, . p$us incre+ents, additions, fruits and interests@ .c/ MarAueE 5e he$d <oint$1 and severa$$1 $ia5$e with Po5$ador for the a+ount received 51 the $atter for the sa$e of the ") %acre $ot in Ca$ifornia Cit1@ and .d/ defendants 5e $i0ewise he$d $ia5$e <oint$1 and severa$$1 for atto+e1Ms fees and $iti,ation e8penses p$us e8e+p$ar1 da+a,es. In due course, the defendants fi$ed their answers and hearin, of the case ensued. In his testi+on1, Cose MarAueE stated that Prudentia$ Ban0 and -rust Co+pan1 chec0s Nos. !(3 and !(3" in the respective a+ounts of P" , and P4 , pa1a5$e to ;. C. 9a,edorn were de$ivered to hi+ 51 Me$chor Cavier, Cr. as partia$ consideration for the sa$e of Po5$adorMs propert1 in Ca$ifornia. #fter receivin, the chec0s, 9a,edorn purchased shares of #t$as Minin,, Phi$e8, Marcopper and San Mi,ue$ Corporation for #ccount No. 3 , which, accordin, to ;red 9a,edorn 5e$on,ed to the $aw office of Po5$ador. 3 ;.C. 9a,edorn V Co., Inc. then so$d the shares for P3*2,24 .*( as evidenced 51 9SBC chec0 No. 334*3) for P2 , and 9SBC chec0 No. 334*3* for P2*2,24 .*( pa1a5$e to HcashH. Me$$on Ban0 traced these chec0s to #ccount !3!(%" of the Phi$ippine 'eterans Ban0 in the na+e of Cipriano #Eada, Po5$adorMs $aw partner and counse$ to the Caviers. 4 #n e+p$o1ee of the Phi$ippine 'eterans Ban0 thereafter introduced the speci+en si,nature cards for #ccount No. !3!(%" there51 confir+in, #EadaMs ownership of the account. Defendants o5<ected to this testi+on1 on the ,rounds of #EadaMs a5sence, the confidentia$it1 of the 5an0 account, and the 5est evidence ru$e. -he court overru$ed the o5<ection. #nother e+p$o1ee of the Phi$ippine 'eterans Ban0 then presented the $ed,er card for #ccount No. !3!(%", a chec0 deposit s$ip and a dai$1 report of returned ite+s. -he defendants o5<ected 5ut the1 were a,ain overru$ed 51 the court. Me$$on Ban0 then su5poenaed Er$inda Ba1$osis of the Phi$ippine 'eterans Ban0 to show that #Eada deposited 9SBC chec0s No. 334*3) and 334*3* a+ountin, to P3*2,24 .*( in his persona$ current account with said 5an0. It a$so su5poenaed Pi$o$o,o Red, Cr. of 9on,0on, V Shan,hai Ban0in, Corporation to prove that said a+ount was returned 51 #Eada to 9a,edorn. -he testi+onies of these witnesses were o5<ected to 51 the defense on the ,rounds of res inter alios acta, i++ateria$it1, irre$evanc1 and confidentia$it1. -o reso$ve the +atter, the court ordered the parties to su5+it +e+oranda. -he defendantsM o5<ections were a$so discussed at the hearin, on Cu$1 "3, "43!. ;or the first ti+e, Po5$adorMs counse$ raised the +atter of He$ection of re+edies.H $ #t the Cu$1 ! , "43! hearin,, the $ower court, then presided 51 Cud,e Eficio #costa, conditiona$$1 a$$owed the testi+onies of Ba1$osis and Red. Ba1$osis afffir+ed that #Eada deposited chec0s Nos. 334*3) and 334*3* in the tota$ a+ount of P3*2,24 .*( in his persona$ account with the Phi$ippine 'eterans Ban0 5ut a$+ost si+u$taneous$1, #Eada

issued his P'B chec0 for the sa+e a+ount in favor of 9a,edorn ConseAuent$1, #EadaMs chec0 initia$$1 5ounced. ;or his part, Red testified that #EadaMs chec0 for P3*2,24 .*( was received 51 the 9on,0on, V Shan,hai Ban0in, Corporation and credited to the account of 9a,edorn . -he defendants then +oved to stri0e off the testi+onies of Ba1$osis and Red fro+ the record. Defendant Para+ount ;inance Corporation, which is not a part1 to the Ca$ifornia case, thereafter fi$ed its +e+orandu+ raisin, the +atter of He$ection of re+ediesH. It averred that inas+uch as the Me$$on Ban0 had fi$ed in Ca$ifornia an action to i+pose constructive trust on the Ca$ifornia propert1 and to recover the sa+e, Me$$on Ban0 can no $on,er tr1 to re,ain the purchase price of the sa+e propert1 throu,h Civi$ Case No. !)344. -he other defendants adopted Para+ountMs stand. #fter Me$$on Ban0 fi$ed its rep$1 to the +e+orandu+ of Para+ount, on Septe+5er " , "43!, Cud,e #costa issued a reso$ution orderin, that the testi+onies of Ba1$osis and Red and the docu+ents the1 testified on, which were conditiona$$1 a$$owed, 5e stric0en fro+ the records. % Cud,e #costa e8p$ained= #fter a <udicious eva$uation of the ar,u+ents of the parties the Court is of the view that in cases where +one1 he$d in trust was diverted 51 the trustee, under the Hru$e of trust pursuitH the 5eneficiar1 H+a1 e$ect whether to accept the trust estate in its new for+ or ho$d the trustee responsi5$e for it in its ori,ina$ conditionH .>athrop vs. 9a+pton, 3" Ca$. "*@ 7odos vs. Marefa$os 23 Idaho !4"@ Bah$e vs. 9asse$5rach )2 NF EA. 332, (" Sections ( 3%*) #+ Cur. !d p. 2*(/, and that Han e$ection to pursue one re+ed1 waives and 5ars pursuit of an1 inconsistent re+ed1H.*) #+ Cur. !d S!(3/. -he instant co+p$aint a+on, others is for the recover1 of the purchase price of the Iern propert1 as he$d in trust for the p$aintiff whi$e in the Ca$ifornia case the p$aintiff +aintains that the Iern propert1 is he$d in trust for the p$aintiff, which positions are inconsistent with each other. Neither can the p$aintiff now a5andon his co+p$aint for the recover1 of the Iern propert1 and pursue his co+p$aint for the recover1 of the purchase price of said propert1 for Hif he has first sou,ht to fo$$ow the res, the p$aintiff cannot thereafter ho$d the trustee persona$$1 responsi5$eH and Hwhen once there has 5een an e$ection to do one of two thin,s, 1ou cannot retract it and do the other thin,. -he e$ection once +ade is fina$$1 +ade.H .;ow$er vs. Bowver1 Savin,s Ban0 ""3 N.?. 2( , !" N.E. "*!, 2 >R# "2(, " #+. S.R. 2*4. ! Si$v. !3 , !3, #55. N. Cos. "33 )( C. C. p. 43 Note 3!/. -he fact that the Ca$ifornia case has 5een sta1ed pendin, deter+ination of the instant case on$1 +eans that shou$d this case 5e dis+issed, the Ca$ifornia case can proceed to its fina$ deter+ination. ;urther+ore, when the p$aintiff fi$ed the Ca$ifornia case for the transfer of $e,a$ tit$e and possession of the Iern propert1 to the p$aintiff it in effect ratified the transaction for H51 ta0in, the proceeds or product of a wron,fu$ transfer of trust propert1 or funds, the 5eneficiar1 ratifies the transactionH .Board of Co++issioner vs. Strawn PC#) OhioQ "(* ;. 24, *) #+ Cur. !d Section !(3/. ConseAuent$1 the purchase price of the Ca$ifornia propert1 received 51 defendant Po5$ador fro+ Cavier is no $on,er the proper su5<ect +atter of $iti,ation and the +ove+ent and disposition of the purchase price is therefore within the scope of the a5so$ute$1 confidentia$ nature of 5an0 deposits as provided 51 Sec. !, R.#. "2 ( as a+ended 51 PD No. "*4!. Me$$on Ban0 +oved for reconsideration, a$$e,in, that said order prevented the presentation of evidence on the purchase price of the Ca$ifornia propert1@ that the Ca$ifornia case cannot 5e considered a waiver of the pursuit of the purchase price as even if said case was fi$ed fifteen da1s prior to the fi$in, of the ori,ina$ co+p$aint in this case, e8cept for the Caviers, no other defendants raised in their answers the affir+ative defense of the fi$in, of the Ca$ifornia case@ that after the a+end+ent of the co+p$aint, none of the defendants raised the +atter of He$ection of re+ediesH in their answers@ that rea$iEin, this procedura$ error, Para+ount sou,ht the a+end+ent of its answer to ref$ect the HdefenceH of He$ection of re+ediesH@ that, disre,ardin, its previous orders a$$owin, evidence and testi+onies on #ccount No. !3!(%", the court +ade a turna5out and ru$ed that the testi+onies on said account were irre$evant and confidentia$ under Repu5$ic #ct No. "2 (@ that Phi$ippine $aw and <urisprudence does not reAuire the e$ection of re+edies for the1 favor avai$+ent of a$$ re+edies@ that even 6nited States <urisprudence frowns upon e$ection of re+edies if it wi$$ $ead to an ineAuita5$e resu$t@ that, as he$d 51 this Court in $adiowealth vs. =avier, 7 there can 5e no 5indin, e$ection of re+edies 5efore the decision on the +erits is had@ that unti$ Me$$on Ban0 ,ets fu$$ recover1 of the trust +one1s, an1 contention of

e$ection of re+ed1 is pre+ature, and that, the purchase price 5ein, the su5<ect of $iti,ation, inAuirin, into its +ove+ent, inc$udin, its deposit in 5an0s, is a$$owed under Repu5$ic #ct No. "2 (. Defendants fi$ed their respective co++ents and oppositions to the +otion for reconsideration. In its rep$1, the Me$$on Ban0 presented proof to the effect that in the Ca$ifornia case, defendants fi$ed +otions to sta0e out the cross%co+p$aint of Me$$on Ban0, for su++ar1 <ud,+ent and to sta1 or dis+iss the action on the ,round of inconvenient foru+ 5ut the first two +otions and the +otion to dis+iss were denied Hwithout pre<udice to renew upon deter+ination of the Phi$ippine action.H -he +otion to sta1 proceedin,s was H,ranted unti$ deter+ination of the Phi$ippine action.H 8 On Octo5er !3, "433, the $ower court, throu,h Cud,e #costa, denied the +otion for reconsideration and ordered the continuation of the hearin, .Ro$$o, p. "3!/. -he p$aintiff fi$ed a +otion for the reconsideration of 5oth the Septe+5er " , "43! and Octo5er !3, "433 orders. #fter the parties had fi$ed co++ents, opposition and rep$1, the court, throu,h Cud,e Ce$so >. Ma,sino, denied Me$$on Ban0Ms second +otion for reconsideration on the ,round that it was Hprescri5ed 51 the "433 Interi+ Ru$es of CourtH in an order dated Cu$1 4, "43(. ) -he court ru$ed that the deter+ination of the re$evanc1 of the testi+onies of Ba1$osis and Red was Hpre+ised direct$1 and principa$$1H on whether or not Me$$on Ban0 cou$d sti$$ recover the purchase price of the Ca$ifornia propert1 notwithstandin, the fi$in, of the case in Ca$ifornia to recover tit$e and possession of the said propert1. #fter Auotin, the reso$ution of Septe+5er " , "43!, the Court ru$ed that it was a Hfina$ order or a definitive <ud,+ent with respect to the c$ai+ of p$aintiff for the recover1H of the purchase price of the Ca$ifornia propert1. It stated= -he ad<udication in the Order of Septe+5er " , "43! and the Order of Octo5er !3, "433, which has the effect of dec$arin, that p$aintiff has no cause of action a,ainst the defendants for the recover1 of the proceeds of the sa$e of Iern propert1 in the a+ount of -hree Mi$$ion -hree 9undred ;ift1 -housand Pesos .P3,( , . PsicQ/ for havin, fi$ed a co+p$aint for the recover1 of the Iern propert1 in the Superior Court of Ca$ifornia, Count1 of Iern is a final and definitive disposition of the c$ai+ of the p$aintiff to recover in the instant action the proceeds of sa$e of said propert1 a,ainst the defendants. -he issue of He$ection of re+ed1H 51 the p$aintiff was $en,thi$1 and thorou,h$1 discussed and ar,ued 51 the parties 5efore the rendition of the reso$ution of Septe+5er " , "43!, and in the +otion for reconsideration and oppositions thereto 5efore its reso$ution in the Order of Octo5er !3, "433. &uch issue is a substantive one as it refers to the e)istence of plaintiffs cause of action to recover the proceeds of the sale of the Dern propert( in this action, and that issue was presented to the !ourt as if a 'otion to dis'iss or a preli'inar( hearing of an affir'ative defense on the ground that plaintiff has no cause of action, and was resolved against plaintiff in the <rder of &epte'ber 11, 1EF/, after a full hearing of all the parties. Said Order of Septe+5er " , "43! has the effect of puttin, an end to the controvers1 5etween the parties as to the ri,ht of p$aintiff to c$ai+ or recover the proceeds of the sa$e of the Iern propert1 fro+ the defendants. It is therefore an ad<udication upon the +erits. 10 9ence, Me$$on Ban0 fi$ed the instant petition for certiorari c$ai+in, that the reso$ution of Septe+5er " , "43! and the orders of Octo5er !3, "433 and Cu$1 4, "43( are void for 5ein, un$awfu$ and oppressive e8ercises of $e,a$ authorit1, su5versive of the fair ad+inistration of <ustice, and in e8cess of <urisdiction. -he petition is founded on its a$$e,ations that= .a/ the reso$ution of Septe+5er " , "43! is inter$ocutor1 as it does not dispose of Civi$ Case No. !)344 co+p$ete$1= .5/ the evidence stric0en fro+ the records is re$evant on the 5asis of the a$$e,ations of the a+ended and supp$e+enta$ co+p$aint, and .c/ the doctrine of e$ection of re+edies, which has $on, 5een dec$ared o5so$ete in the 6nited States, is not app$ica5$e in this case. Fith the e8ception of the Caviers, a$$ the respondents fi$ed their respective co++ents on the petition. 9avin, fai$ed to fi$e said co++ent, the CaviersM counse$ of record, #Eada, -o+acruE V Cacanindin, 11 was reAuired to show cause wh1 discip$inar1 action shou$d not 5e ta0en a,ainst it. #nd, havin, a$so fai$ed to show cause, it was fined P3 . In his +otion for reconsideration of the reso$ution i+posin, said fine, Cipriano #Eada a$$e,ed that in Civi$ Case No. !)344, the Caviers were indeed represented 51 the $aw fir+ of Po5$ador, #Eada, -o+acruE V Cacanindin 5ut he was never the $aw1er of the CaviersM in his persona$ capacit1@ that after the death of 9onorio Po5$ador, Cr., he had withdrawn

fro+ the partnership@ that he is the counse$ of the #d+inistratri8 of the Estate of 9onorio Po5$ador, Cr. for which he had fi$ed a co++ent, and that shou$d the Court sti$$ reAuire hi+ to fi$e co++ent for the Caviers despite the $ac0 of c$ient% $aw1er re$ationship, he wou$d adopt the co++ent he had fi$ed for the said #d+inistratri8. 12 In its effort to $ocate the Caviers so that their side cou$d 5e heard, we reAuired the petitioner to furnish us with the CaviersM address as we$$ as the na+e and address of their counse$. 13 In co+p$iance therewith, counse$ for petitioner +anifested that the Caviers had two 0nown addresses in San Cuan, Metro Mani$a and in Sa+pa$oc, Mani$a@ that since their conviction in Cri+. Case No. CCC%'II !3)4%P.C. of the Pasi, Re,iona$ -ria$ Court, the Caviers had ,one into hidin, and warrants for their arrest sti$$ re+ain unserved@ 14 that the CaviersM counse$ of record in Civi$ Case No. !)344 is #tt1. Cipriano #Eada@ that the sa+e counse$ appeared for the Caviers in Cri+ina$ Case No. 343(" of the Pasi, Re,iona$ -ria$ Court which is a ta8 evasion case fi$ed 51 the Repu5$ic of the Phi$ippines, and that durin, the hearin,s of the civi$ and ta8 evasion cases a,ainst the Caviers, #tt1. Cipriano #Eada, Cr. represented the+. 1$ Inas+uch as copies of the reso$ution reAuirin, co++ent on the petition and the petition itse$f addressed to Me$chor Cavier were returned with the notations H+ovedH and HdeceasedH, the Court reAuired that said copies 5e sent to Mrs. Cavier herse$f and that petitioner shou$d infor+ the Court of the veracit1 of CavierMs death. 1% # cop1 of the reso$ution addressed to Mrs. Cavier was returned a$so with the notation Hdeceased.H 17 Counse$ for petitioner accordin,$1 infor+ed the Court that he $earned that the Caviers had f$ed the countr1 and that he had no wa1 of verif1in, whether Me$chor Cavier had indeed died. 18 In view of these circu+stances, the CaviersM co++ent on the petition sha$$ 5e dispensed with as the Court dee+s the p$eadin,s fi$ed 51 the parties sufficient 5ases for reso$vin, this case. -he Caviers sha$$ 5e served copies of this decision in accordance with Section ), Ru$e "3 of the Ru$es of Court 51 de$iverin, said copies to the c$er0 of court of the $ower court, with proof of fai$ure of 5oth persona$ service and service 51 +ai$. Fe ho$d that the $ower court ,rave$1 a5used its discretion in ru$in, that the reso$ution of Septe+5er " , "43! is a Hfina$ and definitive dispositionH of petitionerMs c$ai+ for the purchase price of the Iern propert1. -he reso$ution is inter$ocutor1 and +eans no +ore than what it states in its dispositive portion%the testi+onies of Ba1$osis and Red and the docu+ents the1 testified on, shou$d 5e stric0en fro+ the record. -hat the reso$ution discusses the co++on%$aw princip$e of e$ection of re+edies, a su5<ect +atter which sha$$ 5e dea$t with $ater, is 5eside the point. It is inter$ocutor1 5ecause the issue reso$ved therein is +ere$1 the ad+issi5i$it1 of the p$aintiffMs evidence. 1) #s such, it does not dispose of the case co+p$ete$1 5ut $eaves so+ethin, +ore to 5e done upon its +erits. 20 -here are thin,s $eft undone in Civi$ Case No. !)344 after the issuance of the Septe+5er " , "43! reso$ution not on$1 5ecause of its e8p$icit dispositive portion 5ut a$so due to the fact that even unti$ now, the case is sti$$ pendin, and 5ein, heard. 21 ;urther+ore, the $ower courtMs ho$din, in its Cu$1 4, "43( order that petitionerMs second +otion for reconsideration is proscri5ed 51 the "433 Interi+ Ru$es of Court which disa$$ows such +otion on a final order or <ud,+ent, shou$d 5e rectified. #s e8p$ained a5ove, the reso$ution of Septe+5er " , "43! is not a fina$ one. It a$so contains conc$usions on procedura$ +atters which, if $eft unchec0ed, wou$d pre<udice petitionerMs su5stantive ri,hts. In effect, therefore, the Cu$1 4, "43( order is a shortcut disposition of Civi$ Case No. !)344 in tota$ disre,ard of petitionerMs ri,ht to a thorou,h venti$ation of its c$ai+s. B1 puttin, a pre+iu+ on procedura$ technica$ities over the reso$ution of the +erits of the case, the $ower court rode rou,hshod over the 5asic <udicia$ tenet that $iti,ations shou$d, as +uch as possi5$e, 5e decided on their +erits and not on technica$ities. 22 -he tria$ courtMs patent ,rave a5use of discretion therefore forces us to e8ercise supervisor1 authorit1 to correct its errors notwithstandin, the fact that ordinari$1, this Court wou$d not entertain a petition for certiorari Auestionin, the $e,a$it1 and va$idit1 of an inter$ocutor1 order. 23 RespondentsM principa$ o5<ection to the testi+onies of Ba1$osis and Red is their a$$e,ed irre$evance to the issues raised in Civi$ Case No. !)344. -he fa$$ac1 of this o5<ection co+es to fore upon a scrutin1 of the co+p$aint. PetitionerMs theor1 therein is that after the Caviers had +a$icious$1 appropriated unto the+se$ves N444, , the other private respondents

conspired and participated in the concea$+ent and dissipation of said a+ount. -he testi+onies of Ba1$osis and Red are therefore needed to esta5$ish the sche+e to hide the erroneous$1 sent a+ount. Private respondentsM protestations that to a$$ow the Auestioned testi+onies to re+ain on record wou$d 5e in vio$ation of the provisions of Repu5$ic #ct No. "2 ( on the secrec1 of 5an0 deposits, is unfounded. Section ! of said $aw a$$ows the disc$osure of 5an0 deposits in cases where the +one1 deposited is the su5<ect +atter of the $iti,ation. 24 Inas+uch as Civi$ Case No. !)344 is ai+ed at recoverin, the a+ount converted 51 the Caviers for their own 5enefit, necessari$1, an inAuir1 into the wherea5outs of the i$$e,a$$1 acAuired a+ount e8tends to whatever is concea$ed 51 5ein, he$d or recorded in the na+e of persons other than the one responsi5$e for the i$$e,a$ acAuisition. 2$ Fe view respondentsM re$iance on the procedura$ princip$e of e$ection of re+edies as part of their p$o1 to ter+inate Civi$ Case No. !)344 pre+ature$1. Fith the e8ception of the Caviers, respondents fai$ed to raise it as a defense in their answers and therefore, 51 virtue of Section !, Ru$e 4 of the Ru$es of Court, such defense is dee+ed waived. 2% Notwithstandin, its $en,th1 and thorou,h discussion durin, the hearin, and in p$eadin,s su5seAuent to the answers, the issue of e$ection of re+edies has not, contrar1 to the $ower courtMs assertion, 5een e$evated to a Hsu5stantive one.H 9avin, 5een waived as a defense, it cannot 5e treated as if it has 5een raised in a +otion to dis+iss 5ased on the none8istence of a cause of action. Moreover, ,rantin, that the defense was proper$1 raised, it is inapp$ica5$e in this case. In its 5road sense, e$ection of re+edies refers to the choice 51 a part1 to an action of one of two or +ore coe8istin, re+edia$ ri,hts, where severa$ such ri,hts arise out of the sa+e facts, 5ut the ter+ has 5een ,enera$$1 $i+ited to a choice 51 a part1 5etween inconsistent re+edia$ ri,hts, the assertion of one 5ein, necessari$1 repu,nant to, or a repudiation of, the other. In its technica$ and +ore restricted sense, e$ection of re+edies is the adoption of one of two or +ore coe8istin, re+edies, with the effect of prec$udin, a resort to the others. 27 #s a technica$ ru$e of procedure, the purpose of the doctrine of e$ection of re+edies is not to prevent recourse to an1 re+ed1, 5ut to prevent dou5$e redress for a sin,$e wron,. 28 It is re,arded as an app$ication of the $aw of estoppe$, upon the theor1 that a part1 cannot, in the assertion of his ri,ht occup1 inconsistent positions which for+ the 5asis of his respective re+edies. 9owever, when a certain state of facts under the $aw entit$es a part1 to a$ternative re+edies, 5oth founded upon the Identica$ state of facts, these re+edies are not considered inconsistent re+edies. In such case, the invocation of one re+ed1 is not an e$ection which wi$$ 5ar the other, un$ess the suit upon the re+ed1 first invo0ed sha$$ reach the sta,e of fina$ ad<udication or un$ess 51 the invocation of the re+ed1 first sou,ht to 5e enforced, the p$aintiff sha$$ have ,ained an advanta,e there51 or caused detri+ent or chan,e of situation to the other. 2) It +ust 5e pointed out that ordinari$1, e$ection of re+edies is not +ade unti$ the <udicia$ proceedin,s has ,one to <ud,+ent on the +erits. 30 Consonant with these ru$in,s, this Court, throu,h Custice C.B.>. Re1es, opined that whi$e so+e #+erican authorities ho$d that the +ere initiation of proceedin,s constitutes a 5indin, choice of re+edies that prec$udes pursuit of a$ternative courses, the 5etter ru$e is that no 5indin, e$ection occurs 5efore a decision on the +erits is had or a detri+ent to the other part1 supervenes. 31 -his is 5ecause the princip$e of e$ection of re+edies is discordant with the +odern procedura$ concepts e+5odied in the Code of Civi$ Procedure which Per+its a part1 to see0 inconsistent re+edies in his c$ai+ for re$ief without 5ein, reAuired to e$ect 5etween the+ at the p$eadin, sta,e of the $iti,ation. 32 It shou$d 5e noted that the re+edies pursued in the Ca$ifornia case and in Civi$ Case No. !)344 are not e8act$1 repu,nant or inconsistent with each other. If ever, the1 are +ere$1 a$ternative in view of the inc$usion of parties in the $atter case who are not na+ed defendants in the for+er. -he causes of action, a$thou,h the1 a$$ ste+ fro+ the erroneous trans+itta$ of do$$ars, are distinct as shown 51 the co+p$aints $en,thi$1 set out a5ove. -he 5ar of an e$ection of re+edies does not app$1 to the assertion of distinct causes of action a,ainst different persons arisin, out of independent transactions. 33 #s correct$1 pointed out 51 the petitioner, the doctrine of e$ection of re+edies is not favored in the 6nited States for 5ein, harsh. 34 Its app$ication with re,ard to two cases fi$ed in two different <urisdictions is a$so circu+scri5ed 51 <urisprudence on a5ate+ent of suits. -hus, in Brooks Brection !o. v. 7illia' $. :ontgo'er( & Associates, "nc ., 3$ it is he$d=

-he pendenc1 of an action in the courts of one state or countr1 is not a 5ar to the institution of another action 5etween the sa+e parties and for the sa+e cause of action in a court of another state or countr1, nor is it the dut1 of the court in which the $atter action is 5rou,ht to sta1 the sa+e pendin, a deter+ination of the ear$ier action, even thou,h the court in which the ear$ier action is 5rou,ht has <urisdiction sufficient to dispose of the entire controvers1. Neverthe$ess, so+eti+es stated as a +atter of co+it1 not of ri,ht, it is usua$ for the court in which the $ater action is 5rou,ht to sta1 proceedin,s under such circu+stances unti$ the ear$ier action is deter+ined. 9owever, in view of the fact that the Ca$ifornia court wherein the case for recover1 of the Iern propert1 was first fi$ed a,ainst the Caviers had sta1ed proceedin,s therein unti$ after the ter+ination of Civi$ Case No. !)344, the court 5e$ow can do no $ess than e8pedite the disposition of said case. Fe cannot dispose of this case without conde+nin, in the stron,est ter+s possi5$e the acts of chicaner1 so apparent fro+ the records. -he respective $ia5i$ities of the respondents are sti$$ 5ein, deter+ined 51 the court 5e$ow. Fe +ust warn, however, a,ainst the use of technica$ities and o5structive tactics to de$a1 a <ust sett$e+ent of this case. -he ta0in, advanta,e of the petitionerMs +ista0e to ,ain sudden and undeserved wea$th is +ar0ed 51 circu+stances so 5raEen and shoc0in, that an1 further de$a1 wi$$ ref$ect poor$1 on the 0ind of <ustice our courts dispense. -he possi5$e invo$ve+ent of $aw1ers in this sorr1 sche+e sta+ps a 5$ac0 +ar0 on the $e,a$ profession. -he Inte,rated Bar of the Phi$ippines .IBP/ +ust 5e +ade aware of the ostensi5$e participation, if not insti,ation, in the spiritin, awa1 of the +issin, funds. -he IBP +ust ta0e the proper action at the appropriate ti+e a,ainst a$$ $aw1ers invo$ved in an1 +isdeeds arisin, fro+ this case. F9ERE;ORE, the reso$ution of Septe+5er " , "43! and the orders of Octo5er !3, "43! and Cu$1 4, "43( are here51 annu$$ed. -he $ower court is ordered to proceed with dispatch in the disposition of Civi$ case No. !)344, considerin, that thirteen ."3/ 1ears have ,one 51 since the ori,ina$ erroneous re+ittance. Service of this decision on the Cavier spouses sha$$ 5e in accordance with Section ), Ru$e "3 of the Ru$es of Court. # cop1 of this decision sha$$ 5e served on the Inte,rated Bar of the Phi$ippines. -he decision is i++ediate$1 e8ecutor1. Costs a,ainst private respondents. SO ORDERED.