8. Greogorio Reyes et.al. vs.

Court of Appeals

Facts: Godofredo, Chief Cashier of the Philippine Racing Club (PCRI), went to respondent bank
to apply for a demand draft in the amount AU$1,610.00 payable to the order of the 20th Asian
Racing Conference Secretariat of Sydney, Australia. He was attended to by respondent bank’s
assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent bank
did not have an Australian dollar account in any bank in Sydney. Godofredo asked if there could
be a way for respondent bank to accommodate PRCI’s urgent need to remit Australian dollars to
Sydney. Yasis of respondent bank then informed Godofredo of a roundabout way of effecting the
requested remittance to Sydney thus: the respondent bank would draw a demand draft against
Westpac Bank in Sydney, Australia (Westpac-Sydney) and have the latter reimburse itself from the
U.S. dollar account of the respondent in Westpac Bank in New York, U.S.A. (Westpac-New York).

However, upon due presentment of the foreign exchange demand draft, the same was dishonored,
with the notice of dishonor stating that there is “No account held with Westpac.” Meanwhile,
Wespac-New York sent a cable to respondent bank informing the latter that its dollar account in
the sum of AU$ 1,610.00 was debited. In response to PRCI’s complaint about the dishonor of the
said foreign exchange demand draft, respondent bank informed Westpac-Sydney of the issuance of
the said demand draft, drawn against the Wespac-Sydney and informing the latter to be reimbursed
from the respondent bank’s dollar account in Westpac-New York. The respondent bank on the
same day likewise informed Wespac-New York requesting the latter to honor the reimbursement
claim of Wespac-Sydney. Upon its second presentment for payment, the demand draft was again
dishonored by Westpac-Sydney for the same reason, that is, that the respondent bank has no
deposit dollar account with the drawee Wespac-Sydney. Gregorio Reyes and Consuelo Puyat-
Reyes arrived in Sydney on a separate date and both were humiliated and embarrassed in the
presence of international audience after being denied registration of the conference secretariat
since the foreign exchange draft was dishonored. Petitioners were only able to attend the
conference after promising to pay in cash instead which they fulfilled.

Upon their arrival in the Philippines they instituted a case against the respondent bank. However,
it was dismissed by the RTC and on appeal the dismissal was affirmed with modifications.
The Spouses Reyes in their petition for review prays for the Court to re-examine the facts to cite
certain instances of negligence.

Issue:
WON there is a reversible error made by the CA.
WON the respondent bank is liable for damages?

Ruling:
None. Section 1 of Rule 45 of the Revised Rules of Court provides that "(T)he petition for review
shall raise only questions of law which must be distinctly set forth." Thus, the Court ruled that the
factual findings of the CA are conclusive on the parties and not reviewable by the SC. Moreover,
they carry more weight when the CA affirms the findings of the trial court.
No. The circumstances clearly shows that all efforts were made by the Respondent bank to avoid
such mistake. It was found that there were miscommunications of the Bank's SWIFT message.
There exists the erroneous decoding on the part of Westpac-Sydney. Hence, if there was a mistake
in decoding on the part of Westpac-Sydney which lead to the message being sent to the wrong
department, the mistake was Westpac's, not the Bank's.

The degree of diligence required of banks is more than that of a good father of a family where the
fiduciary nature of their relationship with their depositors is concerned. In other words, banks are
duty bound to treat the deposit accounts of their depositors with the highest degree of care. But the
said ruling only applies ro cases where banks act under ther fiduciary capacity, that is, the
depositary of the deposits if their depositors. Hence, the same higher degree of diligence is not
expected to be exerted by banks in commercial transactions that do not involve their fiduciary
relationship with their depositors. In this case, the latter is being applied being a commercial
transaction.

28. Central Bank vs. Citytrust Banking Corp.

Facts:
Rounceval Flores (Flores) was one of the authorized persons to sign checks and serve as drawers
and indorsers in behalf of the Citytrust Banking Corporation (Citytrust). Flores presented two
checks to the Central Bank’s Senior Teller Iluminada dela Cruz (Dela Cruz) and was subsequently
approved. Dela Cruz prepared the cash transfer slip where Flores should sign but instead he sign
as one Rosauro C. Cayabyab. This fact was missed by Dela Cruz, because the latter relied that
Flores made a number of transactions with her already. It was given to Cash Department and the
signatures were examined and later on paid Flores for the checks. After one year and nine months,
the Citytrust demanded that the checks be cancelled and the funds taken out be returned because
the check was stolen before. Central Bank did not heed such call. Citytrust filed a complaint to
collect the sum of money with damages against Central Bank to the Regional Trial Court (RTC).
RTC found both parties negligent and held them equally liable for the loss. Court of Appeals
affirmed the decision.

Issue:
Whether or not Citytrust can collect sum of money as damages from the Central Bank.
Whether or not Citytrust produced a contributory negligence resulting to diminution of possible
claims, if there is, against the Central Bank.

RULING: Both yes to the two issues.

Citytrust may collect damages against the Central Bank, however the amount of the claims is
mitigated because of the contributory negligence of the Citytrust.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of
Republic Act No. 8791 (R.A. 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 bank’s obligation to observe “high standards of integrity
and performance” is deemed written into every deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher
than that of a good father of a family. Furthermore, Section 2 of R.A. 8791 prescribes the statutory
diligence required from banks – that banks must observe “high standards of integrity and
performance” in servicing their depositors.

In addition, Citytrust’s failure to timely examine its account, cancel the checks and notify
petitioner of their alleged loss/theft should mitigate petitioner’s liability, in accordance with
Article 2179 of the Civil Code which provides that if the plaintiff’s negligence was only
contributory, the immediate and proximate cause of the injury being the defendant’s lack of due
care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.
Hence the damages should be borne by Central Bank and Citytrust in a 60/40 percentage,
respectively.

48. Ursal vs. CA

Facts:
Spouses Moneset are registered owners of a parcel of land and they executed on it a Contract to
Sell in favor of petitioner Ursal. Petitioner paid the monthly installments but stopped due to the
spouses’ failure to deliver the TCT. The land was subject of an absolute deed of sale in favor of Dr.
Canora, Jr. and was sold again with pacto de retro with one Restituto Bundalo. Furthermore, the
land was mortgaged with respondent Rural Bank of Larena and corresponding annotations to the
title were made. The spouses failed to pay the loan, therefore, the bank served a notice of extra-
judicial foreclosure. Petitioner moved for the declaration of the non-effectivity of the mortgage
and the payment of damages alleging that there was fraud/bad faith in the part of the spouses and
with the bank for granting the real estate mortgage in spite knowing that the property was in
possession of petitioner. RTC ruled in favor of petitioner but maintained that the property be
foreclosed. CA affirmed in toto.

Issue:
Whether or not respondent bank was able to make a thorough investigation as prescribed by the
laws.
Whether or not Ursal is the owner of the disputed land.

Ruling: NO, in both issues.

Banks cannot merely rely on certificates of title in ascertaining the status of mortgaged properties;
as their business is impressed with public interest, they are expected to exercise more care and
prudence in their dealings than private individuals. Indeed, the rule that persons dealing with
registered lands can rely solely on the certificate of title does not apply to banks.
In this case, the respondent is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike
private individuals, it is expected to exercise greater care and prudence in its dealings, including
those involving registered lands. A banking institution is expected to exercise due diligence before
entering into a mortgage contract. The ascertainment of the status or condition of a property
offered to it as security for a loan must be a standard and indispensable part of its operations.

Even so, it must be clearly noted that what Ursal and Moneset entered into was a contract to sell
wherein ownership is reserved to the vendor until full payment of the purchase price. Moreover,
under their conditions a separate contract upon full payment will be further issued and that is the
Deed of Sale which presumes that the ownership is now vested to the vendee upon execution
thereof.

68. Allied Banking Corp vs CA

Facts:
Two crossed checks drawn against Allied in favour of Meszellen were deposited with the
ComTrust. The checks were cleared through the Philippine Clearing House Corporation (PCHC)
and then the proceeds thereof were paid by Allied to ComTrust. Allied was later sued by
Meszellen who alleged that payment had been made by somebody else. Almost ten years later,
Allied filed a third party complaint against BPI, successor-in-interest of ComTrust, for
reimbursement in the event that it would be judged liable in the main case to pay Mezellen.

Issue:
Whether or not the trial court had authority to admit a third party complaint filed by one bank
against another involving a check cleared through PCHC.

Held:
Trial court had no such authority. PCHC rules and regulations hold that “disputes between
two or more clearing participants involving items cleared through PCHC should be submitted to
the Arbitration Committee” without prejudice to recourse to the courts in case of an adverse
decision. A bank’s participation in the clearing operations of PCHC is deemed its written and
subscribed consent to the binding effect of the arbitration agreement.
The doctrine that a trial court that has jurisdiction over the main action also had jurisdiction
over the third party complaint, even if said court would have none of that jurisdiction had the third
party complaint been filed as an independent actions admits of an exception in the case of banks
that have given written and subscribed consent to arbitration under PCHC. Third party complaint
is merely a procedural device allowed when the court so permits.