Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 88013

March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK,
respondents.
Don P. Porcuincula for petitioner.
San Juan, Gonzalez, San Agustin & Sinense for private respondent.

CRUZ, J.:
We are concerned in this case with the question of damages, specifically
moral and exemplary damages. The negligence of the private respondent has
already been established. All we have to ascertain is whether the petitioner is
entitled to the said damages and, if so, in what amounts.
The parties agree on the basic facts. The petitioner is a private corporation
engaged in the exportation of food products. It buys these products from
various local suppliers and then sells them abroad, particularly in the United
States, Canada and the Middle East. Most of its exports are purchased by the
petitioner on credit.
The petitioner was a depositor of the respondent bank and maintained a
checking account in its branch at Romulo Avenue, Cubao, Quezon City. On
May 25, 1981, the petitioner deposited to its account in the said bank the
amount of P100,000.00, thus increasing its balance as of that date to
P190,380.74. 1 Subsequently, the petitioner issued several checks against its
deposit but was suprised to learn later that they had been dishonored for
insufficient funds.
The dishonored checks are the following:
1.
Check No. 215391 dated May 29, 1981, in favor of California
Manufacturing Company, Inc. for P16,480.00:
2.
Check No. 215426 dated May 28, 1981, in favor of the Bureau of
Internal Revenue in the amount of P3,386.73:
3.
Check No. 215451 dated June 4, 1981, in favor of Mr. Greg Pedreo in
the amount of P7,080.00;
1

4.
Check No. 215441 dated June 5, 1981, in favor of Malabon Longlife
Trading Corporation in the amount of P42,906.00:
5.
Check No. 215474 dated June 10, 1981, in favor of Malabon Longlife
Trading Corporation in the amount of P12,953.00:
6.
Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services,
Inc. in the amount of P27,024.45:
7.
Check No. 215412 dated June 10, 1981, in favor of Baguio Country
Club Corporation in the amount of P4,385.02: and
8.
Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in
the amount of P6,275.00. 2
As a consequence, the California Manufacturing Corporation sent on June 9,
1981, a letter of demand to the petitioner, threatening prosecution if the
dishonored check issued to it was not made good. It also withheld delivery of
the order made by the petitioner. Similar letters were sent to the petitioner by
the Malabon Long Life Trading, on June 15, 1981, and by the G. and U.
Enterprises, on June 10, 1981. Malabon also canceled the petitioner's credit
line and demanded that future payments be made by it in cash or certified
check. Meantime, action on the pending orders of the petitioner with the other
suppliers whose checks were dishonored was also deferred.
The petitioner complained to the respondent bank on June 10, 1981. 3
Investigation disclosed that the sum of P100,000.00 deposited by the
petitioner on May 25, 1981, had not been credited to it. The error was rectified
on June 17, 1981, and the dishonored checks were paid after they were redeposited. 4
In its letter dated June 20, 1981, the petitioner demanded reparation from the
respondent bank for its "gross and wanton negligence." This demand was not
met. The petitioner then filed a complaint in the then Court of First Instance of
Rizal claiming from the private respondent moral damages in the sum of
P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25%
attorney's fees, and costs.
After trial, Judge Johnico G. Serquinia rendered judgment holding that moral
and exemplary damages were not called for under the circumstances.
However, observing that the plaintiff's right had been violated, he ordered the
defendant to pay nominal damages in the amount of P20,000.00 plus
P5,000.00 attorney's fees and costs. 5 This decision was affirmed in toto by
the respondent court. 6
The respondent court found with the trial court that the private respondent
was guilty of negligence but agreed that the petitioner was nevertheless not
entitled to moral damages. It said:

The essential ingredient of moral damages is proof of bad faith (De Aparicio
vs. Parogurga, 150 SCRA 280). Indeed, there was the omission by the
defendant-appellee bank to credit appellant's deposit of P100,000.00 on May
25, 1981. But the bank rectified its records. It credited the said amount in
favor of plaintiff-appellant in less than a month. The dishonored checks were
eventually paid. These circumstances negate any imputation or insinuation of
malicious, fraudulent, wanton and gross bad faith and negligence on the part
of the defendant-appellant.
It is this ruling that is faulted in the petition now before us.
This Court has carefully examined the facts of this case and finds that it
cannot share some of the conclusions of the lower courts. It seems to us that
the negligence of the private respondent had been brushed off rather lightly
as if it were a minor infraction requiring no more than a slap on the wrist. We
feel it is not enough to say that the private respondent rectified its records and
credited the deposit in less than a month as if this were sufficient repentance.
The error should not have been committed in the first place. The respondent
bank has not even explained why it was committed at all. It is true that the
dishonored checks were, as the Court of Appeals put it, "eventually" paid.
However, this took almost a month when, properly, the checks should have
been paid immediately upon presentment.
As the Court sees it, the initial carelessness of the respondent bank,
aggravated by the lack of promptitude in repairing its error, justifies the grant
of moral damages. This rather lackadaisical attitude toward the complaining
depositor constituted the gross negligence, if not wanton bad faith, that the
respondent court said had not been established by the petitioner.
We also note that while stressing the rectification made by the respondent
bank, the decision practically ignored the prejudice suffered by the petitioner.
This was simply glossed over if not, indeed, disbelieved. The fact is that the
petitioner's credit line was canceled and its orders were not acted upon
pending receipt of actual payment by the suppliers. Its business declined. Its
reputation was tarnished. Its standing was reduced in the business
community. All this was due to the fault of the respondent bank which was
undeniably remiss in its duty to the petitioner.
Article 2205 of the Civil Code provides that actual or compensatory damages
may be received "(2) for injury to the plaintiff s business standing or
commercial credit." There is no question that the petitioner did sustain actual
injury as a result of the dishonored checks and that the existence of the loss
having been established "absolute certainty as to its amount is not required."
7 Such injury should bolster all the more the demand of the petitioner for
moral damages and justifies the examination by this Court of the validity and
reasonableness of the said claim.
We agree that moral damages are not awarded to penalize the defendant but
to compensate the plaintiff for the injuries he may have suffered. 8 In the case
at bar, the petitioner is seeking such damages for the prejudice sustained by it
3

as a result of the private respondent's fault. The respondent court said that the
claimed losses are purely speculative and are not supported by substantial
evidence, but if failed to consider that the amount of such losses need not be
established with exactitude precisely because of their nature. Moral damages
are not susceptible of pecuniary estimation. Article 2216 of the Civil Code
specifically provides that "no proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated." That is why the determination of the amount to be awarded
(except liquidated damages) is left to the sound discretion of the court,
according to "the circumstances of each case."
From every viewpoint except that of the petitioner's, its claim of moral
damages in the amount of P1,000,000.00 is nothing short of preposterous. Its
business certainly is not that big, or its name that prestigious, to sustain such
an extravagant pretense. Moreover, a corporation is not as a rule entitled to
moral damages because, not being a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish and moral shock. The only exception to this rule is where the
corporation has a good reputation that is debased, resulting in its social
humiliation. 9
We shall recognize that the petitioner did suffer injury because of the private
respondent's negligence that caused the dishonor of the checks issued by it.
The immediate consequence was that its prestige was impaired because of
the bouncing checks and confidence in it as a reliable debtor was diminished.
The private respondent makes much of the one instance when the petitioner
was sued in a collection case, but that did not prove that it did not have a
good reputation that could not be marred, more so since that case was
ultimately settled. 10 It does not appear that, as the private respondent would
portray it, the petitioner is an unsavory and disreputable entity that has no
good name to protect.
Considering all this, we feel that the award of nominal damages in the sum of
P20,000.00 was not the proper relief to which the petitioner was entitled.
Under Article 2221 of the Civil Code, "nominal damages are adjudicated in
order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him." As we have found that
the petitioner has indeed incurred loss through the fault of the private
respondent, the proper remedy is the award to it of moral damages, which we
impose, in our discretion, in the same amount of P20,000.00.
Now for the exemplary damages.
The pertinent provisions of the Civil Code are the following:
Art. 2229.
Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.

Art. 2232.
In contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
The banking system is an indispensable institution in the modern world and
plays a vital role in the economic life of every civilized nation. Whether as
mere passive entities for the safekeeping and saving of money or as active
instruments of business and commerce, banks have become an ubiquitous
presence among the people, who have come to regard them with respect and
even gratitude and, most of all, confidence. Thus, even the humble wageearner has not hesitated to entrust his life's savings to the bank of his choice,
knowing that they will be safe in its custody and will even earn some interest
for him. The ordinary person, with equal faith, usually maintains a modest
checking account for security and convenience in the settling of his monthly
bills and the payment of ordinary expenses. As for business entities like the
petitioner, the bank is a trusted and active associate that can help in the
running of their affairs, not only in the form of loans when needed but more
often in the conduct of their day-to-day transactions like the issuance or
encashment of checks.
In every case, the depositor expects the bank to treat his account with the
utmost fidelity, whether such account consists only of a few hundred pesos or
of millions. The bank must record every single transaction accurately, down to
the last centavo, and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of money the depositor can
dispose of as he sees fit, confident that the bank will deliver it as and to
whomever he directs. A blunder on the part of the bank, such as the dishonor
of a check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal
litigation.
The point is that as a business affected with public interest and because of
the nature of its functions, the bank is under obligation to treat the accounts of
its depositors with meticulous care, always having in mind the fiduciary nature
of their relationship. In the case at bar, it is obvious that the respondent bank
was remiss in that duty and violated that relationship. What is especially
deplorable is that, having been informed of its error in not crediting the deposit
in question to the petitioner, the respondent bank did not immediately correct
it but did so only one week later or twenty-three days after the deposit was
made. It bears repeating that the record does not contain any satisfactory
explanation of why the error was made in the first place and why it was not
corrected immediately after its discovery. Such ineptness comes under the
concept of the wanton manner contemplated in the Civil Code that calls for
the imposition of exemplary damages.
After deliberating on this particular matter, the Court, in the exercise of its
discretion, hereby imposes upon the respondent bank exemplary damages in
the amount of P50,000.00, "by way of example or correction for the public
good," in the words of the law. It is expected that this ruling will serve as a
warning and deterrent against the repetition of the ineptness and indefference
5

that has been displayed here, lest the confidence of the public in the banking
system be further impaired.
ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private
respondent is ordered to pay the petitioner, in lieu of nominal damages, moral
damages in the amount of P20,000.00, and exemplary damages in the
amount of P50,000.00 plus the original award of attorney's fees in the amount
of P5,000.00, and costs.
SO ORDERED.
Narvasa, Gancayco, Grino-Aquino and Medialdea, JJ., concur.

FIRST DIVISION
[G.R. No. 138569. September 11, 2003]
THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs.
COURT OF APPEALS and L.C. DIAZ and COMPANY, CPAs, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review of the Decision[1] of the Court of Appeals
dated 27 October 1998 and its Resolution dated 11 May 1999. The assailed
decision reversed the Decision[2] of the Regional Trial Court of Manila,
Branch 8, absolving petitioner Consolidated Bank and Trust Corporation, now
known as Solidbank Corporation (Solidbank), of any liability. The questioned
resolution of the appellate court denied the motion for reconsideration of
Solidbank but modified the decision by deleting the award of exemplary
damages, attorneys fees, expenses of litigation and cost of suit.
6

The Facts
Solidbank is a domestic banking corporation organized and existing under
Philippine laws. Private respondent L.C. Diaz and Company, CPAs (L.C.
Diaz), is a professional partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with
Solidbank, designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya
(Macaraya), filled up a savings (cash) deposit slip for P990 and a savings
(checks) deposit slip for P50. Macaraya instructed the messenger of L.C.
Diaz, Ismael Calapre (Calapre), to deposit the money with Solidbank.
Macaraya also gave Calapre the Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips
and the passbook. The teller acknowledged receipt of the deposit by returning
to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped
the deposit slips with the words DUPLICATE and SAVING TELLER 6
SOLIDBANK HEAD OFFICE. Since the transaction took time and Calapre
had to make another deposit for L.C. Diaz with Allied Bank, he left the
passbook with Solidbank. Calapre then went to Allied Bank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook.[3] Calapre went back to L.C. Diaz and reported
the incident to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a
check of P200,000. Macaraya, together with Calapre, went to Solidbank and
presented to Teller No. 6 the deposit slip and check. The teller stamped the
words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on
the duplicate copy of the deposit slip. When Macaraya asked for the
passbook, Teller No. 6 told Macaraya that someone got the passbook but she
could not remember to whom she gave the passbook. When Macaraya asked
Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone
shorter than Calapre got the passbook. Calapre was then standing beside
Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the
deposit of a check for P90,000 drawn on Philippine Banking Corporation
(PBC). This PBC check of L.C. Diaz was a check that it had long closed.[4]
PBC subsequently dishonored the check because of insufficient funds and
because the signature in the check differed from PBCs specimen signature.
Failing to get back the passbook, Macaraya went back to her office and
reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel
Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive
Officer, Luis C. Diaz (Diaz), called up Solidbank to stop any transaction using
the same passbook until L.C. Diaz could open a new account.[5] On the same
7

day, Diaz formally wrote Solidbank to make the same request. It was also on
the same day that L.C. Diaz learned of the unauthorized withdrawal the day
before, 14 August 1991, of P300,000 from its savings account. The withdrawal
slip for the P300,000 bore the signatures of the authorized signatories of L.C.
Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied
signing the withdrawal slip. A certain Noel Tamayo received the P300,000.
In an Information[6] dated 5 September 1991, L.C. Diaz charged its
messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa
through Falsification of Commercial Document. The Regional Trial Court of
Manila dismissed the criminal case after the City Prosecutor filed a Motion to
Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank
the return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint[7] for Recovery of a Sum of
Money against Solidbank with the Regional Trial Court of Manila, Branch 8.
After trial, the trial court rendered on 28 December 1994 a decision absolving
Solidbank and dismissing the complaint.
L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998, the
Court of Appeals issued its Decision reversing the decision of the trial court.
On 11 May 1999, the Court of Appeals issued its Resolution denying the
motion for reconsideration of Solidbank. The appellate court, however,
modified its decision by deleting the award of exemplary damages and
attorneys fees.
The Ruling of the Trial Court
In absolving Solidbank, the trial court applied the rules on savings account
written on the passbook. The rules state that possession of this book shall
raise the presumption of ownership and any payment or payments made by
the bank upon the production of the said book and entry therein of the
withdrawal shall have the same effect as if made to the depositor personally.
[9]
At the time of the withdrawal, a certain Noel Tamayo was not only in
possession of the passbook, he also presented a withdrawal slip with the
signatures of the authorized signatories of L.C. Diaz. The specimen
signatures of these persons were in the signature cards. The teller stamped
the withdrawal slip with the words Saving Teller No. 5. The teller then passed
on the withdrawal slip to Genere Manuel (Manuel) for authentication. Manuel
verified the signatures on the withdrawal slip. The withdrawal slip was then
given to another officer who compared the signatures on the withdrawal slip
with the specimen on the signature cards. The trial court concluded that
Solidbank acted with care and observed the rules on savings account when it
allowed the withdrawal of P300,000 from the savings account of L.C. Diaz.

The trial court pointed out that the burden of proof now shifted to L.C. Diaz to
prove that the signatures on the withdrawal slip were forged. The trial court
admonished L.C. Diaz for not offering in evidence the National Bureau of
Investigation (NBI) report on the authenticity of the signatures on the
withdrawal slip for P300,000. The trial court believed that L.C. Diaz did not
offer this evidence because it is derogatory to its action.
Another provision of the rules on savings account states that the depositor
must keep the passbook under lock and key.[10] When another person
presents the passbook for withdrawal prior to Solidbanks receipt of the notice
of loss of the passbook, that person is considered as the owner of the
passbook. The trial court ruled that the passbook presented during the
questioned transaction was now out of the lock and key and presumptively
ready for a business transaction.[11]
Solidbank did not have any participation in the custody and care of the
passbook. The trial court believed that Solidbanks act of allowing the
withdrawal of P300,000 was not the direct and proximate cause of the loss.
The trial court held that L.C. Diazs negligence caused the unauthorized
withdrawal. Three facts establish L.C. Diazs negligence: (1) the possession of
the passbook by a person other than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal receipt by an unauthorized person; and
(3) the possession by an unauthorized person of a PBC check long closed by
L.C. Diaz, which check was deposited on the day of the fraudulent withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did not follow
the precautionary procedures observed by the two parties whenever L.C. Diaz
withdrew significant amounts from its account. L.C. Diaz claimed that a letter
must accompany withdrawals of more than P20,000. The letter must request
Solidbank to allow the withdrawal and convert the amount to a managers
check. The bearer must also have a letter authorizing him to withdraw the
same amount. Another person driving a car must accompany the bearer so
that he would not walk from Solidbank to the office in making the withdrawal.
The trial court pointed out that L.C. Diaz disregarded these precautions in its
past withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554 without any
separate letter of authorization or any communication with Solidbank that the
money be converted into a managers check.
The trial court further justified the dismissal of the complaint by holding that
the case was a last ditch effort of L.C. Diaz to recover P300,000 after the
dismissal of the criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING
the complaint.
The Court further renders judgment in favor of defendant bank pursuant to its
counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorneys
fees.
9

With costs against plaintiff.

SO ORDERED.[12]
The RulingoftheCourtofAppeals
TheCourtofAppealsruledthatSolidbanksnegligencewastheproximatecauseof
theunauthorizedwithdrawalofP300,000fromthesavingsaccountofL.C.Diaz.The
appellatecourtreachedthisconclusionafterapplyingtheprovisionoftheCivilCode
onquasidelict,towit:
Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of this chapter.
The appellatecourtheldthatthethreeelementsofaquasidelictarepresentinthis
case,namely:(a)damagessufferedbytheplaintiff;(b)faultornegligenceofthe
defendant,orsomeotherpersonforwhoseactshemustrespond;and(c)the
connectionofcauseandeffectbetweenthefaultornegligenceofthe defendant and
the damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who received the
withdrawal slip for P300,000 allowed the withdrawal without making the
necessary inquiry. The appellate court stated that the teller, who was not
presented by Solidbank during trial, should have called up the depositor
because the money to be withdrawn was a significant amount. Had the teller
called up L.C. Diaz, Solidbank would have known that the withdrawal was
unauthorized. The teller did not even verify the identity of the impostor who
made the withdrawal. Thus, the appellate court found Solidbank liable for its
negligence in the selection and supervision of its employees.
The appellate court ruled that while L.C. Diaz was also negligent in entrusting
its deposits to its messenger and its messenger in leaving the passbook with
the teller, Solidbank could not escape liability because of the doctrine of last
clear chance. Solidbank could have averted the injury suffered by L.C. Diaz
had it called up L.C. Diaz to verify the withdrawal.
The appellate court ruled that the degree of diligence required from Solidbank
is more than that of a good father of a family. The business and functions of
banks are affected with public interest. Banks are obligated to treat the
accounts of their depositors with meticulous care, always having in mind the
fiduciary nature of their relationship with their clients. The Court of Appeals
found Solidbank remiss in its duty, violating its fiduciary relationship with L.C.
Diaz.
The dispositive portion of the decision of the Court of Appeals reads:

10

WHEREFORE, premises considered, the decision appealed from is hereby

REVERSED and a new one entered.
1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to
pay plaintiff-appellant the sum of Three Hundred Thousand Pesos
(P300,000.00), with interest thereon at the rate of 12% per annum fromthe
dateoffilingofthecomplaintuntilpaid,thesumofP20,000.00asexemplary
damages,andP20,000.00asattorneysfeesandexpensesoflitigationaswellasthe
costofsuit;and
2.Orderingthedismissalofdefendantappelleescounterclaimintheamountof
P30,000.00asattorneysfees.
SOORDERED.[13]
ActingonthemotionforreconsiderationofSolidbank,theappellatecourtaffirmedits
decisionbutmodifiedtheawardofdamages.Theappellatecourtdeletedtheawardof
exemplarydamagesandattorneysfees.InvokingArticle2231[14]oftheCivilCode,
theappellatecourtruledthatexemplarydamagescouldbegrantedifthedefendant
acted with gross negligence. Since Solidbank was guilty of simple negligence
only, the award of exemplary damages was not justified. Consequently, the
award of attorneys fees was also disallowed pursuant to Article 2208 of the
Civil Code. The expenses of litigation and cost of suit were also not imposed
on Solidbank.
The dispositive portion of the Resolution reads as follows:
WHEREFORE, foregoing considered, our decision dated October 27, 1998 is
affirmed with modification by deleting the award of exemplary damages and
attorneys fees, expenses of litigation and cost of suit.
SO ORDERED.[15]
Hence, this petition.
The Issues
Solidbank seeks the review of the decision and resolution of the Court of
Appeals on these grounds:
I. THECOURTOFAPPEALSERREDINHOLDINGTHATPETITIONERBANK
SHOULDSUFFERTHELOSSBECAUSEITSTELLERSHOULDHAVEFIRST
CALLEDPRIVATERESPONDENTBYTELEPHONEBEFOREITALLOWED
THEWITHDRAWALOFP300,000.00TORESPONDENTSMESSENGER
EMERANOILAGAN,SINCE THERE IS NO AGREEMENT BETWEEN THE
PARTIES IN THE OPERATION OF THE SAVINGS ACCOUNT, NOR IS
THERE ANY BANKING LAW, WHICH MANDATES THATABANKTELLER
SHOULDFIRSTCALLUPTHEDEPOSITORBEFOREALLOWINGA
WITHDRAWALOFABIGAMOUNTINASAVINGSACCOUNT.
11

II.THECOURTOFAPPEALSERREDINAPPLYINGTHEDOCTRINEOF
LASTCLEARCHANCEANDINHOLDINGTHATPETITIONERBANKS
TELLERHADTHELASTOPPORTUNITYTOWITHHOLDTHE
WITHDRAWALWHENITISUNDISPUTEDTHATTHETWOSIGNATURES
OFRESPONDENTONTHEWITHDRAWALSLIPAREGENUINEAND
PRIVATERESPONDENTSPASSBOOKWASDULYPRESENTED,AND
CONTRARIWISERESPONDENTWASNEGLIGENTINTHESELECTIONAND
SUPERVISIONOFITSMESSENGEREMERANOILAGAN,ANDINTHE
SAFEKEEPINGOFITSCHECKSANDOTHERFINANCIALDOCUMENTS.
III.THECOURTOFAPPEALSERREDINNOTFINDINGTHATTHEINSTANT
CASEISALASTDITCHEFFORTOFPRIVATERESPONDENTTORECOVER
ITSP300,000.00AFTERFAILINGINITSEFFORTSTORECOVERTHESAME
FROMITSEMPLOYEEEMERANOILAGAN.
IV.THECOURTOFAPPEALSERREDINNOTMITIGATINGTHEDAMAGES
AWARDEDAGAINSTPETITIONERUNDERARTICLE2197OFTHECIVIL
CODE,NOTWITHSTANDINGITSFINDINGTHATPETITIONERBANKS
NEGLIGENCEWASONLYCONTRIBUTORY.[16]
TheRulingoftheCourt
Thepetitionispartlymeritorious.
SolidbanksFiduciaryDutyundertheLaw
TherulingsofthetrialcourtandtheCourtofAppealsconflictontheapplicationof
thelaw.ThetrialcourtpinnedtheliabilityonL.C.Diazbasedontheprovisionsofthe
rulesonsavingsaccount,arecognitionofthecontractualrelationshipbetween
SolidbankandL.C.Diaz,thelatterbeingadepositor of the former. On the other
hand, the Court of Appeals applied the law on quasi-delict to determine
who between the two parties was ultimately negligent. The law on quasi-delict
or culpa aquiliana is generally applicable when there is no pre-existing
contractual relationship between the parties.
We hold that Solidbank is liable for breach of contract due to negligence, or
culpa contractual.
The contract between the bank and its depositor is governed by the provisions
of the Civil Code on simple loan.[17] Article 1980 of the Civil Code expressly
provides that x x x savings x x x deposits of money in banks and similar
institutions shall be governed by the provisions concerning 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.

12

The law imposes on banks high standards in view of the fiduciary nature of
banking. Section 2 of Republic Act No. 8791 (RA 8791),[18] 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.[19] This
new provision in the general banking law, introduced in 2000, is a statutory
affirmation of Supreme Court decisions, starting with the 1990 case of Simex
International v. Court of Appeals,[20] holding that the bank is under obligation
to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.[21]
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.[22]
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. Although RA 8791 took effect almost nine years
after the unauthorized withdrawal of the P300,000 from L.C. Diazs savings
account, jurisprudence[23] at the time of the withdrawal already imposed on
banks the same high standard of diligence required under RA No. 8791.
However, the fiduciary nature of a bank-depositor relationship does not
convert the contract between the bank and its depositors from a simple loan
to a trust agreement, whether express or implied. Failure by the bank to pay
the depositor is failure to pay a simple loan, and not a breach of trust.[24] The
law simply imposes on the bank a higher standard of integrity and
performance in complying with its obligations under the contract of simple
loan, beyond those required of non-bank debtors under a similar contract of
simple loan.
The fiduciary nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors but to
earn money for themselves. The law allows banks to offer the lowest possible
interest rate to depositors while charging the highest possible interest rate on
their own borrowers. The interest spread or differential belongs to the bank
and not to the depositors who are not cestui que trust of banks. If depositors
are cestui que trust of banks, then the interest spread or income belongs to
the depositors, a situation that Congress certainly did not intend in enacting
Section 2 of RA 8791.
Solidbanks Breach of its Contractual Obligation
Article 1172 of the Civil Code provides that responsibility arising from
negligence in the performance of every kind of obligation is demandable. For
breach of the savings deposit agreement due to negligence, or culpa
contractual, the bank is liable to its depositor.

13

Calapre left the passbook with Solidbank because the transaction took time
and he had to go to Allied Bank for another transaction. The passbook was
still in the hands of the employees of Solidbank for the processing of the
deposit when Calapre left Solidbank. Solidbanks rules on savings account
require that the deposit book should be carefully guarded by the depositor
and kept under lock and key, if possible. When the passbook is in the
possession of Solidbanks tellers during withdrawals, the law imposes on
Solidbank and its tellers an even higher degree of diligence in safeguarding
the passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on savings
account provide that any person in possession of the passbook is
presumptively its owner. If the tellers give the passbook to the wrong person,
they would be clothing that person presumptive ownership of the passbook,
facilitating unauthorized withdrawals by that person. For failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank
and Teller No. 6 presumptively failed to observe such high degree of diligence
in safeguarding the passbook, and in insuring its return to the party authorized
to receive the same.
In culpa contractual, once the plaintiff proves a breach of contract, there is a
presumption that the defendant was at fault or negligent. The burden is on the
defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was
negligent. In the present case, L.C. Diaz has established that Solidbank
breached its contractual obligation to return the passbook only to the
authorized representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning the
passbook to Calapre. The burden was on Solidbank to prove that there was
no negligence on its part or its employees.
Solidbank failed to discharge its burden. Solidbank did not present to the trial
court Teller No. 6, the teller with whom Calapre left the passbook and who
was supposed to return the passbook to him. The record does not indicate
that Teller No. 6 verified the identity of the person who retrieved the passbook.
Solidbank also failed to adduce in evidence its standard procedure in verifying
the identity of the person retrieving the passbook, if there is such a procedure,
and that Teller No. 6 implemented this procedure in the present case.
Solidbank is bound by the negligence of its employees under the principle of
respondeat superior or command responsibility. The defense of exercising the
required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana.[25]
The bank must not only exercise high standards of integrity and performance,
it must also insure that its employees do likewise because this is the only way
to insure that the bank will comply with its fiduciary duty. Solidbank failed to
present the teller who had the duty to return to Calapre the passbook, and
14

thus failed to prove that this teller exercised the high standards of integrity and
performance required of Solidbanks employees.
Proximate Cause of the Unauthorized Withdrawal
Another point of disagreement between the trial and appellate courts is the
proximate cause of the unauthorized withdrawal. The trial court believed that
L.C. Diazs negligence in not securing its passbook under lock and key was
the proximate cause that allowed the impostor to withdraw the P300,000. For
the appellate court, the proximate cause was the tellers negligence in
processing the withdrawal without first verifying with L.C. Diaz. We do not
agree with either court.
Proximate cause is that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred.[26] Proximate cause is
determined by the facts of each case upon mixed considerations of logic,
common sense, policy and precedent.[27]
L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor. Solidbank was in possession of the passbook while it was
processing the deposit. After completion of the transaction, Solidbank had the
contractual obligation to return the passbook only to Calapre, the authorized
representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation
because it gave the passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible the
withdrawal of the P300,000 by the impostor who took possession of the
passbook. Under Solidbanks rules on savings account, mere possession of
the passbook raises the presumption of ownership. It was the negligent act of
Solidbanks Teller No. 6 that gave the impostor presumptive ownership of the
passbook. Had the passbook not fallen into the hands of the impostor, the
loss of P300,000 would not have happened. Thus, the proximate cause of the
unauthorized withdrawal was Solidbanks negligence in not returning the
passbook to Calapre.
We do not subscribe to the appellate courts theory that the proximate cause
of the unauthorized withdrawal was the tellers failure to call up L.C. Diaz to
verify the withdrawal. Solidbank did not have the duty to call up L.C. Diaz to
confirm the withdrawal. There is no arrangement between Solidbank and L.C.
Diaz to this effect. Even the agreement between Solidbank and L.C. Diaz
pertaining to measures that the parties must observe whenever withdrawals of
large amounts are made does not direct Solidbank to call up L.C. Diaz.
There is no law mandating banks to call up their clients whenever their
representatives withdraw significant amounts from their accounts. L.C. Diaz
therefore had the burden to prove that it is the usual practice of Solidbank to
call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz
failed to do so.

15

Teller No. 5 who processed the withdrawal could not have been put on guard
to verify the withdrawal. Prior to the withdrawal of P300,000, the impostor
deposited with Teller No. 6 the P90,000 PBC check, which later bounced. The
impostor apparently deposited a large amount of money to deflect suspicion
from the withdrawal of a much bigger amount of money. The appellate court
thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to
confirm the withdrawal when no law requires this from banks and when the
teller had no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the withdrawal.
Solidbank claims that since Ilagan was also a messenger of L.C. Diaz, he was
familiar with its teller so that there was no more need for the teller to verify the
withdrawal. Solidbank relies on the following statements in the Booking and
Information Sheet of Emerano Ilagan:
xxx Ilagan also had with him (before the withdrawal) a forged check of PBC
and indicated the amount of P90,000 which he deposited in favor of L.C. Diaz
and Company. After successfully withdrawing this large sum of money,
accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan
then hired a taxicab in the amount of P1,000 to transport him (Ilagan) to his
home province at Bauan, Batangas. Ilagan extravagantly and lavishly spent
his money but a big part of his loot was wasted in cockfight and horse racing.
Ilagan was apprehended and meekly admitted his guilt.[28] (Emphasis
supplied.)
L.C. Diaz refutes Solidbanks contention by pointing out that the person who
withdrew the P300,000wasacertainNoelTamayo.Boththetrialandappellate
courtsstatedthatthisNoelTamayopresentedthepassbookwiththewithdrawalslip.
WeupholdthefindingofthetrialandappellatecourtsthatacertainNoelTamayo
withdrewtheP300,000.TheCourtisnotatrieroffacts.Wefindnojustifiablereason
toreversethefactualfindingofthetrialcourtandtheCourtofAppeals.Thetellers
whoprocessedthedepositoftheP90,000checkandthewithdrawaloftheP300,000
werenotpresentedduringtrialtosubstantiateSolidbanksclaimthatIlagandeposited
thecheckandmadethequestionedwithdrawal.Moreover,theentry quoted by
Solidbank does not categorically state that Ilagan presented the withdrawal
slip and the passbook.
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both parties are negligent
but the negligent act of one is appreciably later than that of the other, or where
it is impossible to determine whose fault or negligence caused the loss, the
one who had the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss.[29] Stated differently, the antecedent negligence of
the plaintiff does not preclude him from recovering damages caused by the
supervening negligence of the defendant, who had the last fair chance to
prevent the impending harm by the exercise of due diligence.[30]

16

We do not apply the doctrine of last clear chance to the present case.
Solidbank is liable for breach of contract due to negligence in the
performance of its contractual obligation to L.C. Diaz. This is a case of culpa
contractual, where neither the contributory negligence of the plaintiff nor his
last clear chance to avoid the loss, would exonerate the defendant from
liability.[31] Such contributory negligence or last clear chance by the plaintiff
merely serves to reduce the recovery of damages by the plaintiff but does not
exculpate the defendant from his breach of contract.[32]
Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by the
courts, according to the circumstances. This means that if the defendant
exercised the proper diligence in the selection and supervision of its
employee, or if the plaintiff was guilty of contributory negligence, then the
courts may reduce the award of damages. In this case, L.C. Diaz was guilty of
contributory negligence in allowing a withdrawal slip signed by its authorized
signatories to fall into the hands of an impostor. Thus, the liability of Solidbank
should be reduced.
In Philippine Bank of Commerce v. Court of Appeals,[33] where the Court held
the depositor guilty of contributory negligence, we allocated the damages
between the depositor and the bank on a 40-60 ratio. Applying the same
ruling to this case, we hold that L.C. Diaz must shoulder 40% of the actual
damages awarded by the appellate court. Solidbank must pay the other 60%
of the actual damages.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner Solidbank Corporation shall pay private
respondent L.C. Diaz and Company, CPAs only 60% of the actual damages
awarded by the Court of Appeals. The remaining 40% of the actual damages
shall be borne by private respondent L.C. Diaz and Company, CPAs.
Proportionate costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, and Ynares-Santiago, JJ., concur.
Azcuna, J., on official leave.

FIRST DIVISION
[G.R. No. 138569. September 11, 2003]
THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs.
COURT OF APPEALS and L.C. DIAZ and COMPANY, CPAs, respondents.
17

DECISION
CARPIO, J.:
The Case
Before us is a petition for review of the Decision[1] of the Court of Appeals
dated 27 October 1998 and its Resolution dated 11 May 1999. The assailed
decision reversed the Decision[2] of the Regional Trial Court of Manila,
Branch 8, absolving petitioner Consolidated Bank and Trust Corporation, now
known as Solidbank Corporation (Solidbank), of any liability. The questioned
resolution of the appellate court denied the motion for reconsideration of
Solidbank but modified the decision by deleting the award of exemplary
damages, attorneys fees, expenses of litigation and cost of suit.
The Facts
Solidbank is a domestic banking corporation organized and existing under
Philippine laws. Private respondent L.C. Diaz and Company, CPAs (L.C.
Diaz), is a professional partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with
Solidbank, designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya
(Macaraya), filled up a savings (cash) deposit slip for P990 and a savings
(checks) deposit slip for P50. Macaraya instructed the messenger of L.C.
Diaz, Ismael Calapre (Calapre), to deposit the money with Solidbank.
Macaraya also gave Calapre the Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips
and the passbook. The teller acknowledged receipt of the deposit by returning
to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped
the deposit slips with the words DUPLICATE and SAVING TELLER 6
SOLIDBANK HEAD OFFICE. Since the transaction took time and Calapre
had to make another deposit for L.C. Diaz with Allied Bank, he left the
passbook with Solidbank. Calapre then went to Allied Bank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that
somebody got the passbook.[3] Calapre went back to L.C. Diaz and reported
the incident to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a
check of P200,000. Macaraya, together with Calapre, went to Solidbank and
presented to Teller No. 6 the deposit slip and check. The teller stamped the
words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on
the duplicate copy of the deposit slip. When Macaraya asked for the
passbook, Teller No. 6 told Macaraya that someone got the passbook but she
could not remember to whom she gave the passbook. When Macaraya asked
Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone
shorter than Calapre got the passbook. Calapre was then standing beside
Macaraya.
18

Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the
deposit of a check for P90,000 drawn on Philippine Banking Corporation
(PBC). This PBC check of L.C. Diaz was a check that it had long closed.[4]
PBC subsequently dishonored the check because of insufficient funds and
because the signature in the check differed from PBCs specimen signature.
Failing to get back the passbook, Macaraya went back to her office and
reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel
Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive
Officer, Luis C. Diaz (Diaz), called up Solidbank to stop any transaction using
the same passbook until L.C. Diaz could open a new account.[5] On the same
day, Diaz formally wrote Solidbank to make the same request. It was also on
the same day that L.C. Diaz learned of the unauthorized withdrawal the day
before, 14 August 1991, of P300,000 from its savings account. The withdrawal
slip for the P300,000 bore the signatures of the authorized signatories of L.C.
Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied
signing the withdrawal slip. A certain Noel Tamayo received the P300,000.
In an Information[6] dated 5 September 1991, L.C. Diaz charged its
messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa
through Falsification of Commercial Document. The Regional Trial Court of
Manila dismissed the criminal case after the City Prosecutor filed a Motion to
Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank
the return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint[7] for Recovery of a Sum of
Money against Solidbank with the Regional Trial Court of Manila, Branch 8.
After trial, the trial court rendered on 28 December 1994 a decision absolving
Solidbank and dismissing the complaint.
L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998, the
Court of Appeals issued its Decision reversing the decision of the trial court.
On 11 May 1999, the Court of Appeals issued its Resolution denying the
motion for reconsideration of Solidbank. The appellate court, however,
modified its decision by deleting the award of exemplary damages and
attorneys fees.
The Ruling of the Trial Court
In absolving Solidbank, the trial court applied the rules on savings account
written on the passbook. The rules state that possession of this book shall
raise the presumption of ownership and any payment or payments made by
the bank upon the production of the said book and entry therein of the
withdrawal shall have the same effect as if made to the depositor personally.
[9]
19

At the time of the withdrawal, a certain Noel Tamayo was not only in
possession of the passbook, he also presented a withdrawal slip with the
signatures of the authorized signatories of L.C. Diaz. The specimen
signatures of these persons were in the signature cards. The teller stamped
the withdrawal slip with the words Saving Teller No. 5. The teller then passed
on the withdrawal slip to Genere Manuel (Manuel) for authentication. Manuel
verified the signatures on the withdrawal slip. The withdrawal slip was then
given to another officer who compared the signatures on the withdrawal slip
with the specimen on the signature cards. The trial court concluded that
Solidbank acted with care and observed the rules on savings account when it
allowed the withdrawal of P300,000 from the savings account of L.C. Diaz.
The trial court pointed out that the burden of proof now shifted to L.C. Diaz to
prove that the signatures on the withdrawal slip were forged. The trial court
admonished L.C. Diaz for not offering in evidence the National Bureau of
Investigation (NBI) report on the authenticity of the signatures on the
withdrawal slip for P300,000. The trial court believed that L.C. Diaz did not
offer this evidence because it is derogatory to its action.
Another provision of the rules on savings account states that the depositor
must keep the passbook under lock and key.[10] When another person
presents the passbook for withdrawal prior to Solidbanks receipt of the notice
of loss of the passbook, that person is considered as the owner of the
passbook. The trial court ruled that the passbook presented during the
questioned transaction was now out of the lock and key and presumptively
ready for a business transaction.[11]
Solidbank did not have any participation in the custody and care of the
passbook. The trial court believed that Solidbanks act of allowing the
withdrawal of P300,000 was not the direct and proximate cause of the loss.
The trial court held that L.C. Diazs negligence caused the unauthorized
withdrawal. Three facts establish L.C. Diazs negligence: (1) the possession of
the passbook by a person other than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal receipt by an unauthorized person; and
(3) the possession by an unauthorized person of a PBC check long closed by
L.C. Diaz, which check was deposited on the day of the fraudulent withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did not follow
the precautionary procedures observed by the two parties whenever L.C. Diaz
withdrew significant amounts from its account. L.C. Diaz claimed that a letter
must accompany withdrawals of more than P20,000. The letter must request
Solidbank to allow the withdrawal and convert the amount to a managers
check. The bearer must also have a letter authorizing him to withdraw the
same amount. Another person driving a car must accompany the bearer so
that he would not walk from Solidbank to the office in making the withdrawal.
The trial court pointed out that L.C. Diaz disregarded these precautions in its
past withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554 without any
separate letter of authorization or any communication with Solidbank that the
money be converted into a managers check.
20

The trial court further justified the dismissal of the complaint by holding that
the case was a last ditch effort of L.C. Diaz to recover P300,000 after the
dismissal of the criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING
the complaint.
The Court further renders judgment in favor of defendant bank pursuant to its
counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorneys
fees.
With costs against plaintiff.
SO ORDERED.[12]
The RulingoftheCourtofAppeals
TheCourtofAppealsruledthatSolidbanksnegligencewastheproximatecauseof
theunauthorizedwithdrawalofP300,000fromthesavingsaccountofL.C.Diaz.The
appellatecourtreachedthisconclusionafterapplyingtheprovisionoftheCivilCode
onquasidelict,towit:
Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of this chapter.
The appellatecourtheldthatthethreeelementsofaquasidelictarepresentinthis
case,namely:(a)damagessufferedbytheplaintiff;(b)faultornegligenceofthe
defendant,orsomeotherpersonforwhoseactshemustrespond;and(c)the
connectionofcauseandeffectbetweenthefaultornegligenceofthe defendant and
the damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who received the
withdrawal slip for P300,000 allowed the withdrawal without making the
necessary inquiry. The appellate court stated that the teller, who was not
presented by Solidbank during trial, should have called up the depositor
because the money to be withdrawn was a significant amount. Had the teller
called up L.C. Diaz, Solidbank would have known that the withdrawal was
unauthorized. The teller did not even verify the identity of the impostor who
made the withdrawal. Thus, the appellate court found Solidbank liable for its
negligence in the selection and supervision of its employees.
The appellate court ruled that while L.C. Diaz was also negligent in entrusting
its deposits to its messenger and its messenger in leaving the passbook with
the teller, Solidbank could not escape liability because of the doctrine of last

21

clear chance. Solidbank could have averted the injury suffered by L.C. Diaz
had it called up L.C. Diaz to verify the withdrawal.
The appellate court ruled that the degree of diligence required from Solidbank
is more than that of a good father of a family. The business and functions of
banks are affected with public interest. Banks are obligated to treat the
accounts of their depositors with meticulous care, always having in mind the
fiduciary nature of their relationship with their clients. The Court of Appeals
found Solidbank remiss in its duty, violating its fiduciary relationship with L.C.
Diaz.
The dispositive portion of the decision of the Court of Appeals reads:
WHEREFORE, premises considered, the decision appealed from is hereby
REVERSED and a new one entered.
1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to
pay plaintiff-appellant the sum of Three Hundred Thousand Pesos
(P300,000.00), with interest thereon at the rate of 12% per annum fromthe
dateoffilingofthecomplaintuntilpaid,thesumofP20,000.00asexemplary
damages,andP20,000.00asattorneysfeesandexpensesoflitigationaswellasthe
costofsuit;and
2.Orderingthedismissalofdefendantappelleescounterclaimintheamountof
P30,000.00asattorneysfees.
SOORDERED.[13]
ActingonthemotionforreconsiderationofSolidbank,theappellatecourtaffirmedits
decisionbutmodifiedtheawardofdamages.Theappellatecourtdeletedtheawardof
exemplarydamagesandattorneysfees.InvokingArticle2231[14]oftheCivilCode,
theappellatecourtruledthatexemplarydamagescouldbegrantedifthedefendant
acted with gross negligence. Since Solidbank was guilty of simple negligence
only, the award of exemplary damages was not justified. Consequently, the
award of attorneys fees was also disallowed pursuant to Article 2208 of the
Civil Code. The expenses of litigation and cost of suit were also not imposed
on Solidbank.
The dispositive portion of the Resolution reads as follows:
WHEREFORE, foregoing considered, our decision dated October 27, 1998 is
affirmed with modification by deleting the award of exemplary damages and
attorneys fees, expenses of litigation and cost of suit.
SO ORDERED.[15]
Hence, this petition.
The Issues

22

Solidbank seeks the review of the decision and resolution of the Court of
Appeals on these grounds:
I. THECOURTOFAPPEALSERREDINHOLDINGTHATPETITIONERBANK
SHOULDSUFFERTHELOSSBECAUSEITSTELLERSHOULDHAVEFIRST
CALLEDPRIVATERESPONDENTBYTELEPHONEBEFOREITALLOWED
THEWITHDRAWALOFP300,000.00TORESPONDENTSMESSENGER
EMERANOILAGAN,SINCE THERE IS NO AGREEMENT BETWEEN THE
PARTIES IN THE OPERATION OF THE SAVINGS ACCOUNT, NOR IS
THERE ANY BANKING LAW, WHICH MANDATES THATABANKTELLER
SHOULDFIRSTCALLUPTHEDEPOSITORBEFOREALLOWINGA
WITHDRAWALOFABIGAMOUNTINASAVINGSACCOUNT.
II.THECOURTOFAPPEALSERREDINAPPLYINGTHEDOCTRINEOF
LASTCLEARCHANCEANDINHOLDINGTHATPETITIONERBANKS
TELLERHADTHELASTOPPORTUNITYTOWITHHOLDTHE
WITHDRAWALWHENITISUNDISPUTEDTHATTHETWOSIGNATURES
OFRESPONDENTONTHEWITHDRAWALSLIPAREGENUINEAND
PRIVATERESPONDENTSPASSBOOKWASDULYPRESENTED,AND
CONTRARIWISERESPONDENTWASNEGLIGENTINTHESELECTIONAND
SUPERVISIONOFITSMESSENGEREMERANOILAGAN,ANDINTHE
SAFEKEEPINGOFITSCHECKSANDOTHERFINANCIALDOCUMENTS.
III.THECOURTOFAPPEALSERREDINNOTFINDINGTHATTHEINSTANT
CASEISALASTDITCHEFFORTOFPRIVATERESPONDENTTORECOVER
ITSP300,000.00AFTERFAILINGINITSEFFORTSTORECOVERTHESAME
FROMITSEMPLOYEEEMERANOILAGAN.
IV.THECOURTOFAPPEALSERREDINNOTMITIGATINGTHEDAMAGES
AWARDEDAGAINSTPETITIONERUNDERARTICLE2197OFTHECIVIL
CODE,NOTWITHSTANDINGITSFINDINGTHATPETITIONERBANKS
NEGLIGENCEWASONLYCONTRIBUTORY.[16]
TheRulingoftheCourt
Thepetitionispartlymeritorious.
SolidbanksFiduciaryDutyundertheLaw
TherulingsofthetrialcourtandtheCourtofAppealsconflictontheapplicationof
thelaw.ThetrialcourtpinnedtheliabilityonL.C.Diazbasedontheprovisionsofthe
rulesonsavingsaccount,arecognitionofthecontractualrelationshipbetween
SolidbankandL.C.Diaz,thelatterbeingadepositor of the former. On the other
hand, the Court of Appeals applied the law on quasi-delict to determine
who between the two parties was ultimately negligent. The law on quasi-delict
or culpa aquiliana is generally applicable when there is no pre-existing
contractual relationship between the parties.

23

We hold that Solidbank is liable for breach of contract due to negligence, or

culpa contractual.
The contract between the bank and its depositor is governed by the provisions
of the Civil Code on simple loan.[17] Article 1980 of the Civil Code expressly
provides that x x x savings x x x deposits of money in banks and similar
institutions shall be governed by the provisions concerning 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),[18] 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.[19] This
new provision in the general banking law, introduced in 2000, is a statutory
affirmation of Supreme Court decisions, starting with the 1990 case of Simex
International v. Court of Appeals,[20] holding that the bank is under obligation
to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.[21]
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.[22]
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. Although RA 8791 took effect almost nine years
after the unauthorized withdrawal of the P300,000 from L.C. Diazs savings
account, jurisprudence[23] at the time of the withdrawal already imposed on
banks the same high standard of diligence required under RA No. 8791.
However, the fiduciary nature of a bank-depositor relationship does not
convert the contract between the bank and its depositors from a simple loan
to a trust agreement, whether express or implied. Failure by the bank to pay
the depositor is failure to pay a simple loan, and not a breach of trust.[24] The
law simply imposes on the bank a higher standard of integrity and
performance in complying with its obligations under the contract of simple
loan, beyond those required of non-bank debtors under a similar contract of
simple loan.
The fiduciary nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors but to
earn money for themselves. The law allows banks to offer the lowest possible
24

interest rate to depositors while charging the highest possible interest rate on
their own borrowers. The interest spread or differential belongs to the bank
and not to the depositors who are not cestui que trust of banks. If depositors
are cestui que trust of banks, then the interest spread or income belongs to
the depositors, a situation that Congress certainly did not intend in enacting
Section 2 of RA 8791.
Solidbanks Breach of its Contractual Obligation
Article 1172 of the Civil Code provides that responsibility arising from
negligence in the performance of every kind of obligation is demandable. For
breach of the savings deposit agreement due to negligence, or culpa
contractual, the bank is liable to its depositor.
Calapre left the passbook with Solidbank because the transaction took time
and he had to go to Allied Bank for another transaction. The passbook was
still in the hands of the employees of Solidbank for the processing of the
deposit when Calapre left Solidbank. Solidbanks rules on savings account
require that the deposit book should be carefully guarded by the depositor
and kept under lock and key, if possible. When the passbook is in the
possession of Solidbanks tellers during withdrawals, the law imposes on
Solidbank and its tellers an even higher degree of diligence in safeguarding
the passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on savings
account provide that any person in possession of the passbook is
presumptively its owner. If the tellers give the passbook to the wrong person,
they would be clothing that person presumptive ownership of the passbook,
facilitating unauthorized withdrawals by that person. For failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank
and Teller No. 6 presumptively failed to observe such high degree of diligence
in safeguarding the passbook, and in insuring its return to the party authorized
to receive the same.
In culpa contractual, once the plaintiff proves a breach of contract, there is a
presumption that the defendant was at fault or negligent. The burden is on the
defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was
negligent. In the present case, L.C. Diaz has established that Solidbank
breached its contractual obligation to return the passbook only to the
authorized representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning the
passbook to Calapre. The burden was on Solidbank to prove that there was
no negligence on its part or its employees.
Solidbank failed to discharge its burden. Solidbank did not present to the trial
court Teller No. 6, the teller with whom Calapre left the passbook and who
was supposed to return the passbook to him. The record does not indicate
25

that Teller No. 6 verified the identity of the person who retrieved the passbook.
Solidbank also failed to adduce in evidence its standard procedure in verifying
the identity of the person retrieving the passbook, if there is such a procedure,
and that Teller No. 6 implemented this procedure in the present case.
Solidbank is bound by the negligence of its employees under the principle of
respondeat superior or command responsibility. The defense of exercising the
required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana.[25]
The bank must not only exercise high standards of integrity and performance,
it must also insure that its employees do likewise because this is the only way
to insure that the bank will comply with its fiduciary duty. Solidbank failed to
present the teller who had the duty to return to Calapre the passbook, and
thus failed to prove that this teller exercised the high standards of integrity and
performance required of Solidbanks employees.
Proximate Cause of the Unauthorized Withdrawal
Another point of disagreement between the trial and appellate courts is the
proximate cause of the unauthorized withdrawal. The trial court believed that
L.C. Diazs negligence in not securing its passbook under lock and key was
the proximate cause that allowed the impostor to withdraw the P300,000. For
the appellate court, the proximate cause was the tellers negligence in
processing the withdrawal without first verifying with L.C. Diaz. We do not
agree with either court.
Proximate cause is that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred.[26] Proximate cause is
determined by the facts of each case upon mixed considerations of logic,
common sense, policy and precedent.[27]
L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor. Solidbank was in possession of the passbook while it was
processing the deposit. After completion of the transaction, Solidbank had the
contractual obligation to return the passbook only to Calapre, the authorized
representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation
because it gave the passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible the
withdrawal of the P300,000 by the impostor who took possession of the
passbook. Under Solidbanks rules on savings account, mere possession of
the passbook raises the presumption of ownership. It was the negligent act of
Solidbanks Teller No. 6 that gave the impostor presumptive ownership of the
passbook. Had the passbook not fallen into the hands of the impostor, the
loss of P300,000 would not have happened. Thus, the proximate cause of the
unauthorized withdrawal was Solidbanks negligence in not returning the
passbook to Calapre.

26

We do not subscribe to the appellate courts theory that the proximate cause
of the unauthorized withdrawal was the tellers failure to call up L.C. Diaz to
verify the withdrawal. Solidbank did not have the duty to call up L.C. Diaz to
confirm the withdrawal. There is no arrangement between Solidbank and L.C.
Diaz to this effect. Even the agreement between Solidbank and L.C. Diaz
pertaining to measures that the parties must observe whenever withdrawals of
large amounts are made does not direct Solidbank to call up L.C. Diaz.
There is no law mandating banks to call up their clients whenever their
representatives withdraw significant amounts from their accounts. L.C. Diaz
therefore had the burden to prove that it is the usual practice of Solidbank to
call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz
failed to do so.
Teller No. 5 who processed the withdrawal could not have been put on guard
to verify the withdrawal. Prior to the withdrawal of P300,000, the impostor
deposited with Teller No. 6 the P90,000 PBC check, which later bounced. The
impostor apparently deposited a large amount of money to deflect suspicion
from the withdrawal of a much bigger amount of money. The appellate court
thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to
confirm the withdrawal when no law requires this from banks and when the
teller had no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the withdrawal.
Solidbank claims that since Ilagan was also a messenger of L.C. Diaz, he was
familiar with its teller so that there was no more need for the teller to verify the
withdrawal. Solidbank relies on the following statements in the Booking and
Information Sheet of Emerano Ilagan:
xxx Ilagan also had with him (before the withdrawal) a forged check of PBC
and indicated the amount of P90,000 which he deposited in favor of L.C. Diaz
and Company. After successfully withdrawing this large sum of money,
accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan
then hired a taxicab in the amount of P1,000 to transport him (Ilagan) to his
home province at Bauan, Batangas. Ilagan extravagantly and lavishly spent
his money but a big part of his loot was wasted in cockfight and horse racing.
Ilagan was apprehended and meekly admitted his guilt.[28] (Emphasis
supplied.)
L.C. Diaz refutes Solidbanks contention by pointing out that the person who
withdrew the P300,000wasacertainNoelTamayo.Boththetrialandappellate
courtsstatedthatthisNoelTamayopresentedthepassbookwiththewithdrawalslip.
WeupholdthefindingofthetrialandappellatecourtsthatacertainNoelTamayo
withdrewtheP300,000.TheCourtisnotatrieroffacts.Wefindnojustifiablereason
toreversethefactualfindingofthetrialcourtandtheCourtofAppeals.Thetellers
whoprocessedthedepositoftheP90,000checkandthewithdrawaloftheP300,000
werenotpresentedduringtrialtosubstantiateSolidbanksclaimthatIlagandeposited
thecheckandmadethequestionedwithdrawal.Moreover,theentry quoted by

27

Solidbank does not categorically state that Ilagan presented the withdrawal
slip and the passbook.
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both parties are negligent
but the negligent act of one is appreciably later than that of the other, or where
it is impossible to determine whose fault or negligence caused the loss, the
one who had the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss.[29] Stated differently, the antecedent negligence of
the plaintiff does not preclude him from recovering damages caused by the
supervening negligence of the defendant, who had the last fair chance to
prevent the impending harm by the exercise of due diligence.[30]
We do not apply the doctrine of last clear chance to the present case.
Solidbank is liable for breach of contract due to negligence in the
performance of its contractual obligation to L.C. Diaz. This is a case of culpa
contractual, where neither the contributory negligence of the plaintiff nor his
last clear chance to avoid the loss, would exonerate the defendant from
liability.[31] Such contributory negligence or last clear chance by the plaintiff
merely serves to reduce the recovery of damages by the plaintiff but does not
exculpate the defendant from his breach of contract.[32]
Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by the
courts, according to the circumstances. This means that if the defendant
exercised the proper diligence in the selection and supervision of its
employee, or if the plaintiff was guilty of contributory negligence, then the
courts may reduce the award of damages. In this case, L.C. Diaz was guilty of
contributory negligence in allowing a withdrawal slip signed by its authorized
signatories to fall into the hands of an impostor. Thus, the liability of Solidbank
should be reduced.
In Philippine Bank of Commerce v. Court of Appeals,[33] where the Court held
the depositor guilty of contributory negligence, we allocated the damages
between the depositor and the bank on a 40-60 ratio. Applying the same
ruling to this case, we hold that L.C. Diaz must shoulder 40% of the actual
damages awarded by the appellate court. Solidbank must pay the other 60%
of the actual damages.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner Solidbank Corporation shall pay private
respondent L.C. Diaz and Company, CPAs only 60% of the actual damages
awarded by the Court of Appeals. The remaining 40% of the actual damages
shall be borne by private respondent L.C. Diaz and Company, CPAs.
Proportionate costs.
SO ORDERED.

28

Davide, Jr., C.J., (Chairman), Vitug, and Ynares-Santiago, JJ., concur.

Azcuna, J., on official leave.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30511

February 14, 1980

MANUEL M. SERRANO, petitioner,

vs.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS BANK OF MANILA;
EMERITO M. RAMOS, SUSANA B. RAMOS, EMERITO B. RAMOS, JR.,
JOSEFA RAMOS DELA RAMA, HORACIO DELA RAMA, ANTONIO B.
RAMOS, FILOMENA RAMOS LEDESMA, RODOLFO LEDESMA,
VICTORIA RAMOS TANJUATCO, and TEOFILO TANJUATCO,
respondents.
Rene Diokno for petitioner.
F.E. Evangelista & Glecerio T. Orsolino for respondent Central Bank of the
Philippines.
Feliciano C. Tumale, Pacifico T. Torres and Antonio B. Periquet for
respondent Overseas Bank of Manila.
Josefina G. Salonga for all other respondents.

CONCEPCION, JR., J.:

Petition for mandamus and prohibition, with preliminary injunction, that seeks
the establishment of joint and solidary liability to the amount of Three Hundred
Fifty Thousand Pesos, with interest, against respondent Central Bank of the
Philippines and Overseas Bank of Manila and its stockholders, on the alleged
failure of the Overseas Bank of Manila to return the time deposits made by
petitioner and assigned to him, on the ground that respondent Central Bank
failed in its duty to exercise strict supervision over respondent Overseas Bank
of Manila to protect depositors and the general public. 1 Petitioner also prays
that both respondent banks be ordered to execute the proper and necessary
documents to constitute all properties fisted in Annex "7" of the Answer of
29

respondent Central Bank of the Philippines in G.R. No. L-29352, entitled

"Emerita M. Ramos, et al vs. Central Bank of the Philippines," into a trust fund
in favor of petitioner and all other depositors of respondent Overseas Bank of
Manila. It is also prayed that the respondents be prohibited permanently from
honoring, implementing, or doing any act predicated upon the validity or
efficacy of the deeds of mortgage, assignment. and/or conveyance or transfer
of whatever nature of the properties listed in Annex "7" of the Answer of
respondent Central Bank in G.R. No. 29352. 2
A sought for ex-parte preliminary injunction against both respondent banks
was not given by this Court.
Undisputed pertinent facts are:
On October 13, 1966 and December 12, 1966, petitioner made a time deposit,
for one year with 6% interest, of One Hundred Fifty Thousand Pesos
(P150,000.00) with the respondent Overseas Bank of Manila. 3 Concepcion
Maneja also made a time deposit, for one year with 6-% interest, on March
6, 1967, of Two Hundred Thousand Pesos (P200,000.00) with the same
respondent Overseas Bank of Manila. 4
On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano,
assigned and conveyed to petitioner Manuel M. Serrano, her time deposit of
P200,000.00 with respondent Overseas Bank of Manila. 5
Notwithstanding series of demands for encashment of the aforementioned
time deposits from the respondent Overseas Bank of Manila, dating from
December 6, 1967 up to March 4, 1968, not a single one of the time deposit
certificates was honored by respondent Overseas Bank of Manila. 6
Respondent Central Bank admits that it is charged with the duty of
administering the banking system of the Republic and it exercises supervision
over all doing business in the Philippines, but denies the petitioner's allegation
that the Central Bank has the duty to exercise a most rigid and stringent
supervision of banks, implying that respondent Central Bank has to watch
every move or activity of all banks, including respondent Overseas Bank of
Manila. Respondent Central Bank claims that as of March 12, 1965, the
Overseas Bank of Manila, while operating, was only on a limited degree of
banking operations since the Monetary Board decided in its Resolution No.
322, dated March 12, 1965, to prohibit the Overseas Bank of Manila from
making new loans and investments in view of its chronic reserve deficiencies
against its deposit liabilities. This limited operation of respondent Overseas
Bank of Manila continued up to 1968. 7
Respondent Central Bank also denied that it is guarantor of the permanent
solvency of any banking institution as claimed by petitioner. It claims that
neither the law nor sound banking supervision requires respondent Central
Bank to advertise or represent to the public any remedial measures it may
impose upon chronic delinquent banks as such action may inevitably result to

30

panic or bank "runs". In the years 1966-1967, there were no findings to

declare the respondent Overseas Bank of Manila as insolvent. 8
Respondent Central Bank likewise denied that a constructive trust was
created in favor of petitioner and his predecessor in interest Concepcion
Maneja when their time deposits were made in 1966 and 1967 with the
respondent Overseas Bank of Manila as during that time the latter was not an
insolvent bank and its operation as a banking institution was being salvaged
by the respondent Central Bank. 9
Respondent Central Bank avers no knowledge of petitioner's claim that the
properties given by respondent Overseas Bank of Manila as additional
collaterals to respondent Central Bank of the Philippines for the former's
overdrafts and emergency loans were acquired through the use of depositors'
money, including that of the petitioner and Concepcion Maneja. 10
In G.R. No. L-29362, entitled "Emerita M. Ramos, et al. vs. Central Bank of
the Philippines," a case was filed by the petitioner Ramos, wherein
respondent Overseas Bank of Manila sought to prevent respondent Central
Bank from closing, declaring the former insolvent, and liquidating its assets.
Petitioner Manuel Serrano in this case, filed on September 6, 1968, a motion
to intervene in G.R. No. L-29352, on the ground that Serrano had a real and
legal interest as depositor of the Overseas Bank of Manila in the matter in
litigation in that case. Respondent Central Bank in G.R. No. L-29352 opposed
petitioner Manuel Serrano's motion to intervene in that case, on the ground
that his claim as depositor of the Overseas Bank of Manila should properly be
ventilated in the Court of First Instance, and if this Court were to allow
Serrano to intervene as depositor in G.R. No. L-29352, thousands of other
depositors would follow and thus cause an avalanche of cases in this Court.
In the resolution dated October 4, 1968, this Court denied Serrano's, motion
to intervene. The contents of said motion to intervene are substantially the
same as those of the present petition. 11
This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which
became final and executory on March 3, 1972, favorable to the respondent
Overseas Bank of Manila, with the dispositive portion to wit:
WHEREFORE, the writs prayed for in the petition are hereby granted and
respondent Central Bank's resolution Nos. 1263, 1290 and 1333 (that prohibit
the Overseas Bank of Manila to participate in clearing, direct the suspension
of its operation, and ordering the liquidation of said bank) are hereby annulled
and set aside; and said respondent Central Bank of the Philippines is directed
to comply with its obligations under the Voting Trust Agreement, and to desist
from taking action in violation therefor. Costs against respondent Central Bank
of the Philippines. 12
Because of the above decision, petitioner in this case filed a motion for
judgment in this case, praying for a decision on the merits, adjudging
respondent Central Bank jointly and severally liable with respondent Overseas
Bank of Manila to the petitioner for the P350,000 time deposit made with the
31

latter bank, with all interests due therein; and declaring all assets assigned or
mortgaged by the respondents Overseas Bank of Manila and the Ramos
groups in favor of the Central Bank as trust funds for the benefit of petitioner
and other depositors. 13
By the very nature of the claims and causes of action against respondents,
they in reality are recovery of time deposits plus interest from respondent
Overseas Bank of Manila, and recovery of damages against respondent
Central Bank for its alleged failure to strictly supervise the acts of the other
respondent Bank and protect the interests of its depositors by virtue of the
constructive trust created when respondent Central Bank required the other
respondent to increase its collaterals for its overdrafts said emergency loans,
said collaterals allegedly acquired through the use of depositors money.
These claims shoud be ventilated in the Court of First Instance of proper
jurisdiction as We already pointed out when this Court denied petitioner's
motion to intervene in G.R. No. L-29352. Claims of these nature are not
proper in actions for mandamus and prohibition as there is no shown clear
abuse of discretion by the Central Bank in its exercise of supervision over the
other respondent Overseas Bank of Manila, and if there was, petitioner here is
not the proper party to raise that question, but rather the Overseas Bank of
Manila, as it did in G.R. No. L-29352. Neither is there anything to prohibit in
this case, since the questioned acts of the respondent Central Bank (the acts
of dissolving and liquidating the Overseas Bank of Manila), which petitioner
here intends to use as his basis for claims of damages against respondent
Central Bank, had been accomplished a long time ago.
Furthermore, both parties overlooked one fundamental principle in the nature
of bank deposits when the petitioner claimed that there should be created a
constructive trust in his favor when the respondent Overseas Bank of Manila
increased its collaterals in favor of respondent Central Bank for the former's
overdrafts and emergency loans, since these collaterals were acquired by the
use of depositors' money.
Bank deposits are in the nature of irregular deposits. They are really loans
because they earn interest. All kinds of bank deposits, whether fixed, savings,
or current are to be treated as loans and are to be covered by the law on
loans. 14 Current and savings deposit are loans to a bank because it can use
the same. The petitioner here in making time deposits that earn interests with
respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a
debtor of petitioner. Failure of he respondent Bank to honor the time deposit is
failure to pay s obligation as a debtor and not a breach of trust arising from
depositary's failure to return the subject matter of the deposit
WHEREFORE, the petition is dismissed for lack of merit, with costs against
petitioner.
SO ORDERED.
Antonio, Abad Santos, JJ., concur.
32

Barredo (Chairman) J., concur in the judgment on the of the concurring

opinion of Justice Aquino.

Separate Opinions

AQUINO, J., concurring:

The petitioner prayed that the Central Bank be ordered to pay his time
deposits of P350,000, plus interests, which he could not recover from the
distressed Overseas Bank of Manila, and to declare all the assets assigned or
mortgaged by that bank and the Ramos group to the Central Bank as trust
properties for the benefit of the petitioner and other depositors.
The petitioner has no causes of action agianst the Central Bank to obtain
those reliefs. They cannot be granted in petitioner's instant original actions in
this Court for mandamus and prohibition. It is not the Central Bank's
ministerial duty to pay petitioner's time deposits or to hold the mortgaged
properties in trust for the depositors of the Overseas Bank of Manila. The
petitioner has no cause of action for prohibition, a remedy usually available
against any tribunal, board, corporation or person exercising judicial or
ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the
Superintendent of Banks was ordered to take over its assets preparatory to its
liquidation under section 29 of Republic Act No. 265 (p. 197, Rollo,
Manifestation of September 19, 1973), petitioner's remedy is to file his claim in
the liquidating proceeding (Central Bank vs. Morfe, L-38427, March 12, 1975,
63 SCRA 114; Hernandez vs. Rural Bank of Lucena, Inc., L-29791, January
10, 1978, 81 SCRA 75).

Separate Opinions
AQUINO, J., concurring:
The petitioner prayed that the Central Bank be ordered to pay his time
deposits of P350,000, plus interests, which he could not recover from the
distressed Overseas Bank of Manila, and to declare all the assets assigned or
33

mortgaged by that bank and the Ramos group to the Central Bank as trust
properties for the benefit of the petitioner and other depositors.
The petitioner has no causes of action agianst the Central Bank to obtain
those reliefs. They cannot be granted in petitioner's instant original actions in
this Court for mandamus and prohibition. It is not the Central Bank's
ministerial duty to pay petitioner's time deposits or to hold the mortgaged
properties in trust for the depositors of the Overseas Bank of Manila. The
petitioner has no cause of action for prohibition, a remedy usually available
against any tribunal, board, corporation or person exercising judicial or
ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the
Superintendent of Banks was ordered to take over its assets preparatory to its
liquidation under section 29 of Republic Act No. 265 (p. 197, Rollo,
Manifestation of September 19, 1973), petitioner's remedy is to file his claim in
the liquidating proceeding (Central Bank vs. Morfe, L-38427, March 12, 1975,
63 SCRA 114; Hernandez vs. Rural Bank of Lucena, Inc., L-29791, January
10, 1978, 81 SCRA 75).
Footnotes

34