CENTRAL BANK OF THE PHILIPPINES vs. CITYTRUST BANKING CORPORATION (G.R. No.

141835 February 4, 2009)

DOCTRINE:
Commercial Law: The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. There is a debtorcreditor relationship between the bank and its depositor. The law imposes on banks high standards in view of the fiduciary nature of banking. This
fiduciary relationship means that the banks obligation to observe "high standards of integrity and performance" is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good
father of a family.
FACTS:
Pursuant to the old Central Bank Law, respondent Citytrust maintained a demand deposit account with petitioner Central Bank of the Philippines, now
Bangko Sentral ng Pilipinas.
As required, Citytrust furnished petitioner with the names and corresponding signatures of five of its officers authorized to sign checks and serve as
drawers and indorsers for its account. And it provided petitioner with the list and corresponding signatures of its roving tellers authorized to withdraw,
sign receipts and perform other transactions on its behalf. Petitioner later issued security identification cards to the roving tellers one of whom was
Flores.
Flores presented for payment to petitioners Senior Teller Iluminada two Citytrust checks of even date, payable to Citytrust, both of which were signed
and indorsed by Citytrusts authorized signatory-drawers. After the checks were certified by petitioners Accounting Department, Iluminada verified them,
prepared the cash transfer slip on which she affixed her signature, stamped the checks with the notation "Received Payment" and asked Flores to, as he
did, sign on the space above such notation. Instead of signing his name, however, Flores signed as "Rosauro C. Cayabyab" a fact Iluminada failed to
notice.
Iluminada thereupon sent the cash transfer slip and checks to petitioners Cash Department where an officer verified and compared the drawers
signatures on the checks against their specimen signatures provided by Citytrust, and finding the same in order, approved the cash transfer slip and paid
the corresponding amounts to Flores. Petitioner then debited the amount of the checks from Citytrusts demand deposit account.
More than a year and nine months later, Citytrust, alleging that the checks were already cancelled because they were stolen, demanded petitioner to
restore the amounts covered thereby to its demand deposit account. Petitioner did not heed the demand, however.
Citytrust later filed a complaint for estafa, with reservation on the filing of a separate civil action, against Flores. Flores was convicted.
Citytrust thereafter filed before the RTC a complaint for recovery of sum of money with damages against petitioner which it alleged erred in encashing
the checks and in charging the proceeds thereof to its account, despite the lack of authority of "Rosauro C. Cayabyab."
The RTC found both Citytrust and petitioner negligent and accordingly held them equally liable for the loss. The CA affirmed said decision noting that
while "Citytrust failed to take adequate precautionary measures to prevent the fraudulent encashment of its checks," petitioner was not entirely blamefree in light of its failure to verify the signature of Citytrusts agent authorized to receive payment.
ISSUE:
Whether or not both parties were negligent and thus should equally bear the loss.
HELD:
Yes. Petitioners teller Iluminada did not verify Flores signature on the flimsy excuse that Flores had had previous transactions with it for a number of
years. That circumstance did not excuse the teller from focusing attention to or at least glancing at Flores as he was signing, and to satisfy herself that
the signature he had just affixed matched that of his specimen signature. Had she done that, she would have readily been put on notice that Flores was
affixing, not his but a fictitious signature.
Given that petitioner is the government body mandated to supervise and regulate banking and other financial institutions, this Courts ruling in
Consolidated Bank and Trust Corporation v. Court of Appeals5 illumines:
The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. There is a debtor-creditor
relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money
and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that
determines the rights and obligations of the parties.
The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 ("RA 8791"), which took effect
on 13 June 2000, declares that the State recognizes the "fiduciary nature of banking that requires high standards of integrity and performance."
This fiduciary relationship means that the banks obligation to observe "high standards of integrity and performance" is deemed written into
every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence
higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed

by law or contract, and absent such stipulation then the diligence of a good father of a family. Section 2 of RA 8791 prescribes the statutory diligence
required from banks that banks must observe "high standards of integrity and performance" in servicing their depositors.
Citytrusts failure to timely examine its account, cancel the checks and notify petitioner of their alleged loss/theft should mitigate petitioners liability, in
accordance with Article 2179 of the Civil Code which provides that if the plaintiffs negligence was only contributory, the immediate and proximate cause
of the injury being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. For had
Citytrust timely discovered the loss/theft and/or subsequent encashment, their proceeds or part thereof could have been recovered.
In line with the ruling in Consolidated Bank, the Court deems it proper to allocate the loss between petitioner and Citytrust on a 60-40 ratio.
RICARDO B. BANGAYAN vs. RIZAL COMMERCIAL BANKING CORPORATION AND PHILIP SARIA
G.R. No. 149193 April 4, 2011
FACTS: Petitioner Bangayan had a savings account and a current account with one of the branches of respondent Rizal Commercial Banking
Corporation (RCBC). Bangayan purportedly signed a Comprehensive Surety Agreement with respondent RCBC in favor of nine corporations. Under the
Surety Agreement, the funds in petitioner Bangayans accounts with RCBC would be used as security to guarantee any existing and future loan
obligations, advances, credits/increases and other obligations, including any and all expenses that these corporations may incur with respondent bank.
Bangayan contests the veracity and due authenticity of the Agreement on the ground that his signature thereon was not genuine, and that the
agreement was not notarized. Respondent RCBC refutes this claim.
Then occurred different transactions between RCBC with other entities in relation to the Surety Agreement. RCBC issued commercial letters of credit in
favor of different corporations. Mr. Lao, of RCBC, claimed that the bank would not have extended the letters of credit in favor of the three corporations
without petitioner Bangayan acting as surety. After all the transactions in relation to the letters of credit issued by RCBC in relation to the Surety
Agreement, Bangayans account was depleted.
Two of the seven checks that were drawn against petitioner Bangayans Current Account were presented for payment to respondent RCBC were
returned by respondent RCBC with the notation "REFER TO DRAWER. Five other checks of petitioner Bangayan were presented for payment to
respondent RCBC. These five checks were dishonored by respondent RCBC on the ground that they had been drawn against insufficient funds ("DAIF")
and were likewise returned.
Thus, Bangayan, demanded that respondent bank restore all the funds to his account and indemnify him for damages. Bangayan filed a complaint for
damages against respondent RCBC. In its defense, RCBC claims that Bangayan signed a Surety Agreement in favor of several companies that
defaulted in their payment of customs duties that resulted in the imposition of a lien over the accounts. Also, it funded a letter of credit of Lotec Marketing
with the account of petitioner Bangayan, who agreed to guarantee Lotec Marketings obligations under the Surety Agreement; and, that the bank applied
Bangayans deposits to satisfy part of Lotec Marketings obligation which resulted in the depletion of the bank accounts.
ISSUE: Whether respondent RCBC was justified in dishonoring the checks, and, consequently, whether petitioner Bangayan is entitled to damages
arising from the dishonor.
HELD: Yes. RCBC was justified in dishonoring the checks. Bangayan is not entitled to damages.
Whatever damage to petitioner Bangayans interest or reputation from the dishonor of the seven checks was a consequence of his agreement to act as
surety for the corporations and their failure to pay their loan obligations, advances and other expenses.
First, there was no malice or bad faith on the part of respondent RCBC in the dishonor of the checks, since its actions were justified by petitioner
Bangayans obligations under the Surety Agreement. Both the trial and the appellate courts gave credence to the Surety Agreement, which categorically
guaranteed the four corporations obligations to respondent RCBC under the letters of credit. As petitioner failed to discharge his burden of
demonstrating that his signature was forged, there being no positive and convincing evidence to prove such fact, there is no reason to overturn the
factual findings of the lower courts with respect to the genuineness and due execution of the Surety Agreement. Second, the mere absence of
notarization does not necessarily render the Surety Agreement invalid. Third, that the annex of the Surety Agreement does not bear petitioner
Bangayans signature is not a sufficient ground to invalidate the main agreement altogether. Fourth, petitioner Bangayan never contested the existence
of the Surety Agreement prior to the filing of the Complaint. It must be also be emphasized that petitioner Bangayan did not complain against the four
corporations which had benefitted from his bank account.
With respect to the first two dishonored checks, respondent RCBC had already put on hold petitioner Bangayans account to answer for the customs
duties being demanded from the bank by the BOC. On the other hand, the five other checks were subsequently dishonored because petitioner
Bangayans account was by that time already depleted due to the partial payment of Lotec Marketings loan obligation.
Under Articles 2199 and 2200 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of or in recompense for loss or
injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done.
In all seven dishonored checks, respondent RCBC properly exercised its right as a creditor under the Surety Agreement to apply the petitioner
Bangayans funds in his accounts as security for the obligations of the four corporations under the letters of credit. Thus, petitioner Bangayan cannot
attribute any wrong or misconduct to respondent RCBC since there was no malice or bad faith on the part of respondent in dishonoring the checks. Any
damage to petitioner arising from the dishonor of those checks was brought about, not by the banks actions, but by the corporations that defaulted on
their obligations that petitioner had guaranteed to pay. The trial and the appellate courts, therefore, committed no reversible error in disallowing the
award of damages to petitioner.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. ANTONIO B. BALMACEDA and ROLANDO N. RAMOS (G.R. No. 158143 September 21,
2011)
FACTS:
PCIB filed an action for recovery of sum of money with damages before the RTC against Antonio Balmaceda, the Branch Manager of its Sta. Cruz,
Manila branch. In its complaint, PCIB alleged that between 1991 and 1993, Balmaceda, by taking advantage of his position as branch manager,
fraudulently obtained and encashed 31 Managers checks. PCIB then moved to be allowed to file an amended complaint to implead Rolando Ramos as
one of the recipients of a portion of the proceeds from Balmacedas alleged fraud. PCIB also increased the number of fraudulently obtained and
encashed Managers checks to 34 in which the RTC granted.
Since Balmaceda did not file an Answer, he was declared in default. On the other hand, Ramos filed an Answer denying any knowledge of Balmacedas
scheme. The RTC then issued a decision in favor of PCIB, where the RTC found that Balmaceda, took undue advantage of his position and authority as
branch manager and Ramos acted in collusion with Balmaceda. On appeal, the CA dismissed the complaint against Ramos, holding that no sufficient
evidence existed to prove that Ramos colluded with Balmaceda in the latters fraudulent manipulations and thus CA SET ASIDE the Decision of the trial
court insofar as Ramos is concerned. Hence this petition for review on certiorari, filed by the Philippine Commercial International Bank.
ISSUE:
Whether or not Ramos who received a portion of the money that Balmaceda took from PCIB, should also be held liable for the return of this money to
the Bank.
RULING:
No, Ramos is not liable. The Supreme Court PARTIALLY GRANTED the petition and AFFIRMED the decision of the Court of Appeals dated with
the MODIFICATION that the award of moral and exemplary damages in favor of Rolando N. Ramos is DELETED.
PCIB, as plaintiff, had to prove, by preponderance of evidence, its positive assertion that Ramos conspired with Balmaceda in perpetrating the latters
scheme to defraud the Bank. All that PCIBs evidence proves is that Balmaceda used Ramos name as a payee when he filled up the application forms
for the Managers checks. But, as the CA correctly observed, the mere fact that Balmaceda made Ramos the payee on some of the Managers checks is
not enough basis to conclude that Ramos was complicit in Balmacedas fraud; a number of other people were made payees on the other Managers
checks yet PCIB never alleged them to be liable, nor did the Bank adduce any other evidence pointing to Ramos participation that would justify his
separate treatment from the others. Also, while Ramos is Balmacedas brother-in-law, their relationship is not sufficient, by itself, to render Ramos liable,
absent concrete proof of his actual participation in the fraudulent scheme.
The party carrying the burden of proof must establish his case by a preponderance of evidence, or evidence which, to the court, is more worthy of
belief than the evidence offered in opposition. In Encinas v. National Bookstore, Inc., defined "preponderance of evidence" in the following manner:
"Preponderance of evidence" is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with
the term "greater weight of the evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the last analysis,
means probability of the truth. It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.
Ramos participation in Balmacedas scheme was not proven by PCIB by preponderance of evidence. Given that PCIB failed to establish Ramos
participation in Balmacedas scheme, it was not even necessary for Ramos to provide an explanation for the money he received from Balmaceda. Even
if the evidence adduced by the plaintiff appears stronger than that presented by the defendant, a judgment cannot be entered in the plaintiffs favor if his
evidence still does not suffice to sustain his cause of action;25 to reiterate, a preponderance of evidence as defined must be established to achieve this
result.
LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR., represented by their Attorney-In-Fact, ALFREDO M. PEREZ,
Petitioners, vs. ALLIED BANKING CORPORATION, Respondent.
G.R. No. 171460
July 24, 2007
Facts: Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian) over several pieces of real
property registered under her name, authorizing the latter to perform the following acts: 1. To act in my behalf, to sell, alienate, mortgage, lease and deal
otherwise over the different parcels of land described hereinafter x x x 2. To sign for and in my behalf any act of strict dominion or ownership any sale,
disposition, mortgage, lease or any other transactions including quit-claims, waiver and relinquishment of rights x x x 3. To exercise any or all acts of
strict dominion or ownership over the above-mentioned properties, rights and interest therein.
On the strength of the aforesaid SPA, Julian obtained a loan from the respondent. Still using the subject property as security, Julian obtained
an additional loan from the respondent.
It appears, however, that there was no property identified in the SPA and registered with the Registry of Deeds. What was identified in the SPA instead
was the property different from the one used as security for loan.
Julian defaulted on the payment of his loan obligations. Thus, respondent initiated extra-judicial foreclosure proceedings over the subject
property which was subsequently sold at public auction wherein the respondent was declared as the highest bidder. Petitioners initiated an action for the
annulment of REM constituted over the subject property on the ground that the same was not covered by the SPA and that the said SPA, at the time the
loan obligations were contracted, no longer had force and effect since it was previously revoked by Perla. In the absence of authority to do so, the REM
constituted by Julian over the subject property was null and void; thus, petitioners likewise prayed that the subsequent extra-judicial foreclosure
proceedings and the auction sale of the subject property be also nullified.
Issues: (1) Whether or not there was a valid mortgage constituted over subject property.

(2) Whether or not there was a valid revovation of SPA.

(3) Construction of powers of attorney.
Rulings: (1) In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with the mortgage of the
subject property. The property mortgaged was owned by his wife, Perla, considered a third party to the loan obligations between Julian and respondent.
It was, thus, a situation recognized by the last paragraph of Article 2085 of the Civil Code that third persons who are not parties to the principal obligation
may secure the latter by pledging or mortgaging their own property. There is no question therefore that Julian was vested with the power to mortgage the
pieces of property identified in the SPA, however, the subject property was not among those enumerated therein. Julian was not conferred by Perla with
the authority to mortgage the subject property under the terms of the SPA, the real estate mortgages Julian executed over the said property are
therefore unenforceable.
(2) The said SPA was revoked by virtue of a public instrument executed by Perla. To address respondents assertion that the said revocation
was unenforceable against it as a third party to the SPA and as one who relied on the same in good faith, the rule is that an agency is extinguished,
among others, by its revocation (Article 1999, New Civil Code of the Philippines). The principal may revoke the agency at will, and compel the agent to
return the document evidencing the agency. Such revocation may be express or implied (Article 1920, supra).
(3) Rule of strict construction- where the terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence
to ascertain the true intent of the parties, is not countenanced. The law is that if the terms of a contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulation shall control. The clear terms of the contract should never be the subject matter of
interpretation. Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to grant only those
powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney. Where powers and duties are specified
and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and
duties are excluded.
Qualification of the rule- this is but in accord with the disinclination of courts to enlarge the authority granted beyond the powers expressly given and
those which incidentally flow or derive therefrom as being usual and reasonably necessary and proper for the performance of such express powers.
CITIBANK vs SPOUSES CABAMONGAN G.R. No. 146918, May 2, 2006
A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of
its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. [45]Such principle
equally applies here. The time deposit subject matter of herein petition is a simple loan.The provisions of the New Civil Code on simple loan
govern the contract between a bank and its depositor. Specifically, Article 1980 thereof categorically provides that . . . savings . . . deposits
of money in banks and similar institutions shall be governed by the provisions concerning simple loan. Thus, the relationship between a
bank and its depositor is that of a debtor-creditor, the depositor being the creditor as it lends the bank money, and the bank is the debtor
which agrees to pay the depositor on demand.
Facts: Souses Cabamongan opened a joint and/or foreign currency time deposit in favor of their two children with Citibank. On When she left with
the money, she left an identification card. The account officer then called up the address. The spouses and their family knew of the
incident. They were presently residing in the US and there was a prior incident wherein they got robbed in their house, with jewelry box, a the bank
certificate and cards stolen. Subsequently, a person who claimed to be Carmelita sought the pre-termination of the account. She presented
identification cards to ascertain her identity to the then account officer. The the person withdrew all the proceeds from the dollar account.
Spouses made several demands for the return of the amount but Citibank refused to do so. Subsequently, Citibank, thru a new counsel, contended that
assuming that it was negligent, the Cabamongan spouses were guilty of contributory negligence since they failed to notify Citibank that they had
migrated to the United States and were residents thereat and after having been victims of a burglary, they should have immediately assessed their loss
and informed Citibank of the disappearance of the bank certificate, their passports and other identification cards, then the fraud would not have been
perpetuated and the losses avoided.It further argues that since the Cabamongan spouses are guilty of contributory negligence, the doctrine of last clear
chance is inapplicable.
Issue: Whether or not City Bank is negligent in letting the person withdraw all the funds from the dollar account.
Held: Citibank was negligent. First, the depositor didnt present the Certificate of Deposit. Second, from the internal memorandum issued by the
Account Officer, he admitted to the fact that the specimen signature was different from the one who misrepresented herself as Carmelita. Third,
the bank kept in its records pictures of its depositors. It is inconceivable how the bank was duped by an impostor. As to the second ground,
Citibank argues that the Cabamongan spouses are not entitled to moral damages since moral damages can be awarded only in cases of breach of
contract where the bank has acted willfully, fraudulently or in bad faith. It submits that it has not been shown in this case that Citibank acted willfully,
fraudulently or in bad faith and mere negligence, even if the Cabamongan spouses suffered mental anguish or serious anxiety on account thereof, is not
a ground for awarding moral damages.
In this case, it has been sufficiently shown that the signatures of Carmelita in the forms forpretermination of deposits are forgeries.Citibank, with its
signature verification procedure, failed to detect the forgery.Its negligence consisted in the omission of that degree of diligence required of banks. The
Court has held that a bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment
out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. Such principle equally
applies here. The time deposit subject matter of herein petition is a simple loan.The provisions of the New Civil Code on simple loan govern the contract
between a bank and its depositor. Specifically, Article 1980 thereof categorically provides that . . . savings . . . deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan. Thus, the relationship between a bank and its depositor is that of a debtorcreditor, the depositor being the creditor as it lends the bank money, and the bank is the debtor which agrees to pay the depositor on demand. As to
moral damages, in culpa contractual or breach of contract, as in the case before the Court, moral damages are recoverable only if the defendant has
acted fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. The
act of Citibanks employee in allowing the pretermination of Cabamonganspouses account despite the noted discrepancies in Carmelitas signature and
photograph, the absence of the original certificate of time deposit and the lack of notarized waiver dormant, constitutes gross negligence amounting to
bad faith under Article 2220 of the Civil Code.
OR

Facts:
1. The Cabamongan spouses Luis and Carmelita are both based in California, USA. The spouses opened a foreign currency time deposit account for
their children with petitioner CityBank with a 180-day term. An impostor who claimed to be Carmelita (wife) succeeded to preterminate the time deposit
after presenting passport, credit card and other identification.
2. The bank personnel who attended to the transaction ignored several red flags which could have alerted the bank as to the real identity of the person
claiming to be 'Carmelita'. For one, she failed to present the certificate of time deposit, there was also a discrepancy in her signature with that in the
signature cards of the bank. Finally, the photo in the bank's file did not look like this person claiming to be Carmelita. Despite all these irregularities, the
bank went through with the transaction, which only took 40 minutes. The document waiver which the impostor signed was also not notarized, as required
under bank's procedures.
3. To the aghast of the spouses, they only came to learn of the incident through a daughter-in-law who called them up in the US. Apparently, a break-in
occurred previously in their US residence and several important documents were lost to the thief. The spouses demanded payment from the bank who
refused. Hence the filing of the suit against petitioner bank.
4. The spouses presented a PNP Document Examiner expert who analysed the signature and concluded that the signature was forged, hence the
discrepancy between the signature of the impostor and the one written in the signature cards held by the bank.
4. The trial court ruled in favor of the spouses Cabamongan, held the bank negligent and awarded actual, moral and exemplary damages. The bank
appealed to the CA which affirmed the lower court's decision. Both parties filed a petition for review on certiorari before the SC where the petitioner
insisted that it Carmela who preterminated the TD despite claims to the contrary, while the Cabamongan spouses contended that Citybank's negligence
was established by evidence.
Issue: Whether or not the bank is negligent and therefor should be held liable when it allowed the pretermination of the TD in favor of the
impostor
HELD:
YES. The bank was indeed negligent as it failed to exercise the highest degree of care and diligence required of it. The banking business is impressed
with public interest and of paramount importance thereto is the trust and confidence of the public in general. The Court has held that the bank "is bound
to know the signatures of its customers; and if it pays a forged check, it must be considered as making payment out of its own funds, and cannot
ordinarily charge the amount so paid to the account of the depositor whose name was forged."(San Carlos Milling Ltd. vs. BPI)
It has been sufficiently shown that the signatures of Carmelita in the pretermination were forged. The petitioner, even with its signature verification
procedure failed to detect the forgeries. Citybank cannot label its negligence as mere error. For not exercising the degree of diligence required of
banking institutions, it is liable for damages.