SECOND DIVISION

PRUDENTIAL BANK
Petitioner,

G.R. No. 136371

Present:

- versus -

PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

CHONNEY LIM,
Respondent.
Promulgated:
November 11, 2005
x ---------------------------------------------------------------x
DECISION
Tinga, J.:
This treats of the petition for review on certiorari of the Decision [1] of the Court of Appeals, [2] dated 31 July 1998, which affirmed
with slight modification the Decision [3] of the Regional Trial Court (RTC), [4] granting the action filed by respondent for recovery of sum of
money and damages.
Chonney Lim (respondent), the owner of Rikes Boutique located at Session Road, Baguio City, maintained two (2) accounts with
Prudential Bank (the bank), namely: Savings Account No. 11264 and Checking Account No. 1262. He availed of the banks automatic
transfer system wherein the funds from his savings account could be transferred to his checking account in case the balance of the
latter account was insufficient to cover the checks he issued.
On 14 March 1988, respondent deposited the amount of P34,000.00 with his savings account. According to respondent, the
following day, 15 March 1988, he deposited an equal amount with the same savings account. The matter is the crux of contention
between the parties, as the bank has steadfastly denied having received the latter deposit from respondent.
On 24 May 1988, respondent issued a check against his current account in favor of the Paluwagan ng Bayan Savings Bank
(Paluwagan) in the sum of P2,830.00 in payment of his loan with the said bank. On 25 May 1988, respondent drew another check
against his checking account to the order of Teodulo Crisologo in the amount of P10,000.00 as payment for a business transaction with
the latter.
The bank, however, dishonored both checks, claiming that respondent did not have sufficient funds in his account with the bank.
Upon learning that the first check paid to Paluwagan had been dishonored, respondent wrote a letter [5] to the bank on 27 May 1988,
asking it to recheck its records. On 30 May 1988, the banks manager, Tolentino Opiniano (Opiniano), sent a reply letter,[6] offering, as
an excuse for the dishonor of said check, the inadvertent earlier posting to respondents account of a postdated check. [7] While
Opiniano apologized for respondents inconvenience, he made no commitment to honor this first check.[8]
When the second dishonored check came to respondents knowledge, he immediately wrote a letter [9] to the bank, protesting the
dishonor of the check. Opiniano sent a reply[10] stating that as per records, a deposit slip dated 15 March 1988 for P34,000.00 was
received for deposit to Savings Account No. 11264 on 14 March 1988.
Respondent denied having made only one deposit, insisting that he made two deposits of P34,000.00 each, one on 14 March
and the other on 15 March. As proof, respondent presented the two separate deposit slips covering the transactions, the first bearing
the date 14 March 1988 while the second, the date 15 March 1988.
After the bank had conducted a thorough investigation, on 10 June 1988, Opiniano informed respondent that two deposits were
made on 14 March 1988, one for P34,000.00 and the other for P1,000.00; and that two other deposits were made on 15 March 1988:
P4,900.00 and P2,900.00. He maintained that although the deposit slip bearing the amount of P34,000.00 is dated 15 March 1988, it
was actually received the day before or on 14 March 1988. Thus, the banks position is that only one deposit of P34,000.00 was made
by respondent on 14 and 15 March 1988.[11]
In view of the banks adamant refusal to alter its stand, respondent filed a Complaint [12] before the RTC, Baguio City for the
recovery of P34,000.00 representing his actual deposit and P300.00 as penalty charge, plus damages.

On 27 August 1991, the RTC rendered its Decision holding that respondent made two deposits of P34,000.00 apiece. Thus,
the RTC ordered the bank to pay the following amounts: P34,000, representing the unposted deposit, with legal interest; P600.00,
representing the service charges unjustifiably imposed on respondent, with legal interest; P50,000.00 as moral damages; P25,000.00
as exemplary damages; and P10,000.00 as attorneys fees, plus costs of suit.
On appeal, the Court of Appeals affirmed the decision of the trial court with modification as to the award of moral damages,
reducing it to P10,000.00. The testimony of the bank teller, coupled with the fact that the two deposit slips listed different
denominations of money totaling P34,000.00 per deposit slip, led the appellate court to conclude that there were indeed two deposits of
P34,000.00 each, one made on 14 March and the other on 15 March 1988.
Before this Court, the bank argues in the main that the award of damages by the appellate court is groundless that consequently,
the assailed decision is not in accord with law and jurisprudence.[13]
As a rule, the findings of fact of the trial court when affirmed by the Court of Appeals are final and conclusive on, and cannot be
reviewed on appeal by, this Court as long as they are borne out by the record or are based on substantial evidence. The Court is not a
trier of facts, its jurisdiction being limited to reviewing only errors of law that may have been committed by the lower courts. [14]
Essentially, as intimated earlier, the issue in the instant case boils down to whether respondent made a deposit of P34,000.00
on 15 March 1988, apart from the deposit of an equal amount the day before, a factual question which was resolved in the affirmative
by the RTC, which finding was categorically affirmed by the Court of Appeals. The factual issue is beyond the province of this Court to
review or disturb. It is not the function of the Court to analyze or weigh all over again the evidence or premises supportive of such
factual determination. The Court has consistently held that the findings of the Court of Appeals and other lower courts are, as a rule,
accorded great weight, if not binding upon it, save for the most compelling and cogent reasons.[15]
We find no justification to deviate from the factual findings of the trial court and the appellate court. The bank has utterly failed
to convince us that the assailed findings are devoid of basis or are not supported by substantial evidence.
As found by the RTC, respondent indeed made two deposits of P34,000.00 on 14 and 15 March 1988, viz:
On the pivotal issue of whether or not the plaintiff made only one (1) or two (2) deposits of P34,000.00the
first on March 14 and the second on March 15, 1988the Court holds that, from the evidence extant in the record,
particularly the admissions of teller Merlita Susan Caasi, the plaintiff has established his claim of having made two
(2) deposits of P34,000.00. Thus, Caasi admitted that she impressed her rubber stamp, Teller 2 and duplicate
on both the Exhibits B and C which are plaintiffs file copies of two separate and different deposit slips for
P34,000.00 each. Exhibit B is a deposit slip, dated March 14, 1988, for P34,000.00 consisting of 300 pieces of
P100 bills and 80 pieces of P50.00 bills; while Exhibit C is a deposit slip, dated March 15, 1988, also for
P34,000.00, but consisting of 340 pieces of P100 bills. It is only Exhibit C that appears to have been recorded by
the defendant bank (Exhibit 3). Since teller Caasi acknowledged to have stamped both deposit slips, logic and
reason dictates that she should be presumed to have received the amounts covered by them unless she could
satisfactorily demonstrate the contrary which she, however, miserably failed to do. The fact that only one (1) deposit
of P34,000.00 is recorded in the tellers validating machine and blotter, as well as in the ledger, passbook,
bookkeepers machine tape and blotter, can not help her any for the crux precisely of plaintiffs complaint is
defendants negligence in not recording his other deposit of P34,000.00.[16]
The appellate court similarly observed:
On the basis of the evidence adduced by the parties, We are convinced that indeed, appellee deposited
P34,000.00 on March 14 and another P34,000.00 on March 15, 1988. These two different transactions are
evidenced by two deposit slips marked as Exhibits B and C. The fact that appellant received the amount
represented by each deposit slip can be inferred from the testimony of Merlita Caasi, a bank teller:
ATTY. GAYO:
Q: And by stamping the duplicate copy of a depositor, in the case of Mr. Lim, who is in a practice of
always preparing a duplicate copy for his file, your mere stamping of the duplicate would
indicate that you received the money deposited?
A: Yes, your Honor.
which must be read in conjunction with her testimony on cross-examination, thus:

ATTY. GAYO:
Q:

I am showing you Exhibit C and tell the Honorable Court if that is the duplicate of Exhibit 3
which you also stamped with the stamp of the bank?

A:

I am not sure if that is the real deposit slip made at the same day because they have the
practice to get another duplicate if their personal copy was lost, your Honor. This is my stamp
but I am not sure if this is the same.

INTERPRETER:
Witness referring to Exhibit C.
ATTY. GAYO:
Q: But you are sure that this is your stamp as Teller No. 2 at that time?
A: It appears, it is.
Q: I am showing you now that which we reserved the last time, the original of Exhibit B, a copy
an original copy of a deposit slip dated March 14, 1988, stamped with the stamp of the Bank
Teller No. 2 and a duplicate. Now, can you now state to the Court that this was your stamp of
the bank stamp?
A: That is my stamp.
Q:
A:

Even this word duplicate stamped also in this Exhibit B, the original of Exhibit B, is your
stamp?
Yes, it is my stamp.

Appellee also presented in evidence the reverse side of the deposit slip dated March 14, 1988 he described
as follows:
Q: On the front side of Exhibit B, the amount of P34,000.00 cash appears. Is this explained by any
denomination of the same exhibit?
A: Yes, your Honor.
Q: You are referring to what part of the exhibit?
A: I am referring to Exhibit B-1, Your Honor.
Q:
A:

So that the P34,000.00 you deposited consisted of 300 pieces of P100.00 bills in the total
amount of P30,000.00; 80 pieces of P50.00 bills in the total amount of P4,000.00?
Yes. Your Honor.

In the same manner, appellee also presented the other side of the deposit slip dated March 15, 1988, thus:
Q: On March 15, 1988, do you remember having again deposited another amount of P34,000.00 to
your account with the defendant bank?
A: Yes. Your Honor.
Q: Do you have a copy? Do you have evidence to show?
A: Yes. Your Honor. I have here my deposit slip on March 15, 1988, for the amount of another
P34,000.00.
Q:
A:

Is the denomination of the total deposit of P34,000.00 you made on March 15 shown in this
deposit slip?
Yes, Your Honor. It is shown at the back of the deposit slip.

Q: As what?
A: At the back of the deposit slip, your Honor. It shows that the P100.00 bills I deposited is 340
pieces, amounting to P34,000.00.
Q: Do you have a xerox copy of that?
A: Yes, Your Honor.
Atty. Gayo:
May we show both the original and the xerox copy. The xerox copy reflects the front page
and the reverse side of the deposit slip dated March 15, 1988. May we ask for an observation.
Atty. Munoz:
The xerox copy of the deposit slip dated March 15, 1988 in the sum of P34,000.00, together
with the reverse side is a faithful reproduction of the duplicate original presented.
Atty. Gayo:
May we respectfully pray that the front page of that deposit slip be marked as Exhibit C and
the reverse side as Exhibit C-1.[17]

An examination of the deposit slips dated 14 March and 15 March 1988 reveals that while the slips each cover deposits in the
amount of P34,000.00, they list down different denominations however. Evidently, the slips were not prepared simultaneously or
concurrently. This fact militates against the banks claim that one deposit slip is simply the duplicate of the other. To sustain the banks
hypothesis, we would have to conclude that respondent, with all deliberate design, prepared two deposit slips and purposely wrote
different denominations in them to mislead the bank that the two deposit slips were separately executed on different occasions. There
is no evidence to support such a bizarre conclusion; thus, we are content to uphold the findings of the triers of fact on this point.

The bank insists that the court misappreciated the import of the letter of Opiniano dated 10 June 1988. As we have earlier
intimated, appreciation of evidence is the domain of the lower courts. The testimonies of the witnesses presented by the bank deserve
scant consideration in the face of the overwhelming documentary evidence of respondent, i.e., the duplicate originals of the deposit
slips bearing the amount of P34,000.00 dated 14 and 15 March 1988, respectively. Indeed, the bank failed to rebut the inexorable
probative impact of the deposit slips.
Article 1172 of the Civil Code ordains that responsibility arising from negligence in the performance of an obligation is
demandable. The failure of the banks employees to credit the amount of P34,000.00 to respondents savings account, resulting as it
did in the dishonor of respondents checks, constitutes actionable negligence in law.
From another perspective, the negligence of the bank constitutes a breach of duty to its client. It is worthy of note that the
banking industry is impressed with public interest. As such, it must observe a high degree of diligence and observe lofty standards of
integrity and performance. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with
meticulous care and always to have in mind the fiduciary nature of its relationship with them.[18]
With the attending factual milieu, the imposition of damages on the errant bank is in order. Presaging this course of action is
the ruling in Simex International v. Court of Appeals,[19] where this Court rendered a telling discourse on the fiduciary responsibility of
depository banks, thus:
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
wage-earner 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 action for damages hinges on the resolution of whether respondent has sufficient funds in his account when the checks were
dishonored. Both the trial and appellate courts ruled that had the bank credited the P34,000.00 deposit made by respondent on 15
March 1988, the checks would not have been dishonored. Likewise, both courts found that moral damages were in order.
The concept of moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. Although incapable of pecuniary computation, moral damages
may be recovered if they are the proximate result of the defendant's wrongful act or omission.[20]
Needless to say, the banks wrongful act caused injury to respondent. Credit is very important to businessmen, and its loss or
impairment needs to be recognized and compensated. [21] This Court in Leopoldo Araneta v. Bank of America [22] highlights the
importance of good credit in the business community:
The financial credit of a businessman is a prized and valuable asset, it being a significant part of the
foundation of his business. Any adverse reflection thereon constitutes some material loss to him. As stated in the case
Atlanta National Bank vs. Davis, supra, citing 2 Morse Banks, Sec. 458, "it can hardly be possible that a customer's
check can be wrongfully refused payment without some impeachment of his credit, which must in fact be an actual
injury, though he cannot, from the nature of the case, furnish independent, distinct proof thereof."
Under the circumstances of this case, we find that the award of moral damages is proper but the amount must be reverted back to
P50,000.00 as ordered by the RTC, said court being in a better position to assess the amount of damages to be imposed on the
negligent bank.
Furthermore, we sustain the award of exemplary damages. Such damages are imposed by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages. [23] The business of a bank is affected with public
interest; thus, it makes a sworn profession of diligence and meticulousness in giving irreproachable service. For this reason, the bank
should guard against injury attributable to negligence or bad faith on its part. The banking sector must at all times maintain a high level
of meticulousness.[24] In view of the banks negligence to record the deposit, the grant of exemplary damages is thus justified.

The bank raises another issue, that concerning the postdated check which it had prematurely posted [25] and which it initially
assumed, when it first wrote the respondent on 30 May 1988, to be the cause of the dishonor of respondents check payable to
Paluwagan.[26] The bank argues that the fact it prematurely honored such postdated check did not give rise to damages. [27] This
argument is irrelevant. The act or omission of the bank that gives rise to damages in favor of respondent is not the premature posting
of the postdated check, but the fact that the bank did not credit respondents second deposit of P34,000.00. Besides, this is the first
time that said issue was presented. As a rule, no issue may be raised on appeal unless it has been brought before the lower tribunal
for its consideration. Higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the
proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal.[28]
WHEREFORE, the petition is denied. The Decision of the RTC dated 27 August 1991 in Civil Case No. 1467-R is AFFIRMED IN
FULL. Costs against petitioner.
SO ORDERED.
DANTE O. TINGA

Associate Justice

WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairman

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

(On Leave)
MINITA V. CHICO-NAZARIO
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Acting Chief Justice

PHILIPPINE JURISPRUDENCE - FULL TEXT

The Lawphil Project - Arellano Law Foundation
G.R. No. 149454 & G.R. No. 149507
May 28, 2004
BANK OF THE PHILIPPINE ISLAND vs. CASA MONTESSORI INTERNATIONALE
CASA MONTESSORI INTERNATIONALE vs. BANK OF THE PHILIPPINE ISLAND

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 149454

May 28, 2004

BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs.
CASA MONTESSORI INTERNATIONALE LEONARDO T. YABUT, respondents.

x ----------------------------- x
G.R. No. 149507

May 28, 2004

CASA MONTESSORI INTERNATIONALE, petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS, respondent.
DECISION
PANGANIBAN, J.:
By the nature of its functions, a bank is required to take meticulous care of the deposits of its clients, who have the right to
expect high standards of integrity and performance from it.
Among its obligations in furtherance thereof is knowing the signatures of its clients. Depositors are not estopped from
questioning wrongful withdrawals, even if they have failed to question those errors in the statements sent by the bank to
them for verification.
The Case
Before us are two Petitions for Review1 under Rule 45 of the Rules of Court, assailing the March 23, 2001 Decision2 and
the August 17, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 63561. The decretal portion of the
assailed Decision reads as follows:
"WHEREFORE, upon the premises, the decision appealed from is AFFIRMED with the modification that
defendant bank [Bank of the Philippine Islands (BPI)] is held liable only for one-half of the value of the forged
checks in the amount of P547,115.00 after deductions subject to REIMBURSEMENT from third party defendant
Yabut who is likewise ORDERED to pay the other half to plaintiff corporation [Casa Montessori Internationale
(CASA)]."4
The assailed Resolution denied all the parties Motions for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
"On November 8, 1982, plaintiff CASA Montessori International5 opened Current Account No. 0291-0081-01 with
defendant BPI[,] with CASAs President Ms. Ma. Carina C. Lebron as one of its authorized signatories.
"In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its checks had been encashed by a
certain Sonny D. Santos since 1990 in the total amount of P782,000.00, on the following dates and amounts:
Check No.

Date

1. 839700

April 24, 1990

P 43,400.00

2. 839459

Nov. 2, 1990

110,500.00

3. 839609

Oct. 17, 1990

47,723.00

4. 839549

April 7, 1990

90,700.00

5. 839569

Sept. 23,
1990

52,277.00

6. 729149

Mar. 22, 1990

148,000.00

7. 729129

Mar. 16, 1990

51,015.00

8. 839684

Dec. 1, 1990

140,000.00

9. 729034

Mar. 2, 1990

98,985.00

Total --

Amount

P 782,600.006

"It turned out that Sonny D. Santos with account at BPIs Greenbelt Branch [was] a fictitious name used by third
party defendant Leonardo T. Yabut who worked as external auditor of CASA. Third party defendant voluntarily
admitted that he forged the signature of Ms. Lebron and encashed the checks. "The PNP Crime Laboratory
conducted an examination of the nine (9) checks and concluded that the handwritings thereon compared to the
standard signature of Ms. Lebron were not written by the latter.
"On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages against defendant bank
praying that the latter be ordered to reinstate the amount of P782,500.007 in the current and savings accounts of
the plaintiff with interest at 6% per annum.

"On February 16, 1999, the RTC rendered the appealed decision in favor of the plaintiff."8
Ruling of the Court of Appeals
Modifying the Decision of the Regional Trial Court (RTC), the CA apportioned the loss between BPI and CASA. The
appellate court took into account CASAs contributory negligence that resulted in the undetected forgery. It then ordered
Leonardo T. Yabut to reimburse BPI half the total amount claimed; and CASA, the other half. It also disallowed attorneys
fees and moral and exemplary damages.
Hence, these Petitions.9
Issues
In GR No. 149454, Petitioner BPI submits the following issues for our consideration:
"I. The Honorable Court of Appeals erred in deciding this case NOT in accord with the applicable decisions of this
Honorable Court to the effect that forgery cannot be presumed; that it must be proved by clear, positive and
convincing evidence; and that the burden of proof lies on the party alleging the forgery.
"II. The Honorable Court of Appeals erred in deciding this case not in accord with applicable laws, in particular the
Negotiable Instruments Law (NIL) which precludes CASA, on account of its own negligence, from asserting its
forgery claim against BPI, specially taking into account the absence of any negligence on the part of BPI."10
In GR No. 149507, Petitioner CASA submits the following issues:
"1. The Honorable Court of Appeals erred when it ruled that there is no showing that [BPI], although negligent,
acted in bad faith x x x thus denying the prayer for the award of attorneys fees, moral damages and exemplary
damages to [CASA]. The Honorable Court also erred when it did not order [BPI] to pay interest on the amounts
due to [CASA].
"2. The Honorable Court of Appeals erred when it declared that [CASA] was likewise negligent in the case at bar,
thus warranting its conclusion that the loss in the amount of P547,115.00 be apportioned between [CASA] and
[BPI] x x x."11
These issues can be narrowed down to three. First, was there forgery under the Negotiable Instruments Law (NIL)?
Second, were any of the parties negligent and therefore precluded from setting up forgery as a defense? Third, should
moral and exemplary damages, attorneys fees, and interest be awarded?
The Courts Ruling
The Petition in GR No. 149454 has no merit, while that in GR No. 149507 is partly meritorious.
First Issue:
Forged Signature Wholly Inoperative
Section 23 of the NIL provides:
"Section 23. Forged signature; effect of. -- When a signature is forged or made without the authority of the person
whose signature it purports to be, it is wholly inoperative, and no right x x x to enforce payment thereof against
any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to
enforce such right is precluded from setting up the forgery or want of authority." 12
Under this provision, a forged signature is a real13 or absolute defense,14 and a person whose signature on a negotiable
instrument is forged is deemed to have never become a party thereto and to have never consented to the contract that
allegedly gave rise to it.15
The counterfeiting of any writing, consisting in the signing of anothers name with intent to defraud, is forgery.16
In the present case, we hold that there was forgery of the drawers signature on the check.
First, both the CA17 and the RTC18 found that Respondent Yabut himself had voluntarily admitted, through an Affidavit, that
he had forged the drawers signature and encashed the checks.19 He never refuted these findings.20 That he had been
coerced into admission was not corroborated by any evidence on record.21
Second, the appellate and the trial courts also ruled that the PNP Crime Laboratory, after its examination of the said
checks,22 had concluded that the handwritings thereon -- compared to the standard signature of the drawer -- were not
hers.23 This conclusion was the same as that in the Report24 that the PNP Crime Laboratory had earlier issued to BPI -- the
drawee bank -- upon the latters request.
Indeed, we respect and affirm the RTCs factual findings, especially when affirmed by the CA, since these are supported
by substantial evidence on record.25

Voluntary Admission Not Violative of Constitutional Rights

The voluntary admission of Yabut did not violate his constitutional rights (1) on custodial investigation, and (2) against selfincrimination.
In the first place, he was not under custodial investigation.26 His Affidavit was executed in private and before private
individuals.27 The mantle of protection under Section 12 of Article III of the 1987 Constitution28 covers only the period "from
the time a person is taken into custody for investigation of his possible participation in the commission of a crime or from
the time he is singled out as a suspect in the commission of a crime although not yet in custody." 29
Therefore, to fall within the ambit of Section 12, quoted above, there must be an arrest or a deprivation of freedom, with
"questions propounded on him by the police authorities for the purpose of eliciting admissions, confessions, or any
information."30 The said constitutional provision does "not apply to spontaneous statements made in a voluntary manner"31
whereby an individual orally admits to authorship of a crime.32 "What the Constitution proscribes is the compulsory or
coercive disclosure of incriminating facts."33
Moreover, the right against self-incrimination34 under Section 17 of Article III35 of the Constitution, which is ordinarily
available only in criminal prosecutions, extends to all other government proceedings -- including civil actions, legislative
investigations,36 and administrative proceedings that possess a criminal or penal aspect37 -- but not to private
investigations done by private individuals. Even in such government proceedings, this right may be waived, 38 provided the
waiver is certain; unequivocal; and intelligently, understandingly and willingly made.39
If in these government proceedings waiver is allowed, all the more is it so in private investigations. It is of no moment that
no criminal case has yet been filed against Yabut. The filing thereof is entirely up to the appropriate authorities or to the
private individuals upon whom damage has been caused. As we shall also explain later, it is not mandatory for CASA -- the
plaintiff below -- to implead Yabut in the civil case before the lower court.
Under these two constitutional provisions, "[t]he Bill of Rights40 does not concern itself with the relation between a private
individual and another individual. It governs the relationship between the individual and the State."41 Moreover, the Bill of
Rights "is a charter of liberties for the individual and a limitation upon the power of the [S]tate." 42 These rights43 are
guaranteed to preclude the slightest coercion by the State that may lead the accused "to admit something false, not
prevent him from freely and voluntarily telling the truth."44
Yabut is not an accused here. Besides, his mere invocation of the aforesaid rights "does not automatically entitle him to the
constitutional protection."45 When he freely and voluntarily executed46 his Affidavit, the State was not even involved. Such
Affidavit may therefore be admitted without violating his constitutional rights while under custodial investigation and against
self-incrimination.
Clear, Positive and Convincing Examination and Evidence
The examination by the PNP, though inconclusive, was nevertheless clear, positive and convincing.
Forgery "cannot be presumed."47 It must be established by clear, positive and convincing evidence.48 Under the best
evidence rule as applied to documentary evidence like the checks in question, no secondary or substitutionary evidence
may inceptively be introduced, as the original writing itself must be produced in court.49 But when, without bad faith on the
part of the offeror, the original checks have already been destroyed or cannot be produced in court, secondary evidence
may be produced.50 Without bad faith on its part, CASA proved the loss or destruction of the original checks through the
Affidavit of the one person who knew of that fact51 -- Yabut. He clearly admitted to discarding the paid checks to cover up
his misdeed.52 In such a situation, secondary evidence like microfilm copies may be introduced in court.
The drawers signatures on the microfilm copies were compared with the standard signature. PNP Document Examiner II
Josefina de la Cruz testified on cross-examination that two different persons had written them.53 Although no conclusive
report could be issued in the absence of the original checks,54 she affirmed that her findings were 90 percent conclusive.55
According to her, even if the microfilm copies were the only basis of comparison, the differences were evident. 56 Besides,
the RTC explained that although the Report was inconclusive, no conclusive report could have been given by the PNP,
anyway, in the absence of the original checks.57 This explanation is valid; otherwise, no such report can ever be relied
upon in court.
Even with respect to documentary evidence, the best evidence rule applies only when the contents of a document -- such
as the drawers signature on a check -- is the subject of inquiry.58 As to whether the document has been actually executed,
this rule does not apply; and testimonial as well as any other secondary evidence is admissible.59 Carina Lebron herself,
the drawers authorized signatory, testified many times that she had never signed those checks. Her testimonial evidence
is admissible; the checks have not been actually executed. The genuineness of her handwriting is proved, not only through
the courts comparison of the questioned handwritings and admittedly genuine specimens thereof,60 but above all by her.
The failure of CASA to produce the original checks neither gives rise to the presumption of suppression of evidence61 nor
creates an unfavorable inference against it.62 Such failure merely authorizes the introduction of secondary evidence63 in
the form of microfilm copies. Of no consequence is the fact that CASA did not present the signature card containing the
signatures with which those on the checks were compared.64 Specimens of standard signatures are not limited to such a
card. Considering that it was not produced in evidence, other documents that bear the drawers authentic signature may
be resorted to.65 Besides, that card was in the possession of BPI -- the adverse party.
We have held that without the original document containing the allegedly forged signature, one cannot make a definitive
comparison that would establish forgery;66 and that a comparison based on a mere reproduction of the document under
controversy cannot produce reliable results.67 We have also said, however, that a judge cannot merely rely on a
handwriting experts testimony,68 but should also exercise independent judgment in evaluating the authenticity of a
signature under scrutiny.69 In the present case, both the RTC and the CA conducted independent examinations of the

evidence presented and arrived at reasonable and similar conclusions. Not only did they admit secondary evidence; they
also appositely considered testimonial and other documentary evidence in the form of the Affidavit.
The best evidence rule admits of exceptions and, as we have discussed earlier, the first of these has been met.70 The
result of examining a questioned handwriting, even with the aid of experts and scientific instruments, may be
inconclusive;71 but it is a non sequitur to say that such result is not clear, positive and convincing. The preponderance of
evidence required in this case has been satisfied.72
Second Issue:
Negligence Attributable to BPI Alone
Having established the forgery of the drawers signature, BPI -- the drawee -- erred in making payments by virtue thereof.
The forged signatures are wholly inoperative, and CASA -- the drawer whose authorized signatures do not appear on the
negotiable instruments -- cannot be held liable thereon. Neither is the latter precluded from setting up forgery as a real
defense.
Clear Negligence in Allowing Payment Under a Forged Signature
We have repeatedly emphasized that, since the banking business is impressed with public interest, of paramount
importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence73 is
expected,74 and high standards of integrity and performance are even required, of it.75 By the nature of its functions, a bank
is "under obligation to treat the accounts of its depositors with meticulous care,76 always having in mind the fiduciary nature
of their relationship."77
BPI contends that it has a signature verification procedure, in which checks are honored only when the signatures therein
are verified to be the same with or similar to the specimen signatures on the signature cards. Nonetheless, it still failed to
detect the eight instances of forgery. Its negligence consisted in the omission of that degree of diligence required78 of a
bank. It cannot now feign ignorance, for very early on we have already ruled that a bank is "bound to know the signatures
of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and
cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged."79 In fact, BPI was
the same bank involved when we issued this ruling seventy years ago.
Neither Waiver nor Estoppel Results from Failure to Report Error in Bank Statement
The monthly statements issued by BPI to its clients contain a notice worded as follows: "If no error is reported in ten (10)
days, account will be correct."80 Such notice cannot be considered a waiver, even if CASA failed to report the error. Neither
is it estopped from questioning the mistake after the lapse of the ten-day period.
This notice is a simple confirmation81 or "circularization" -- in accounting parlance -- that requests client-depositors to affirm
the accuracy of items recorded by the banks.82 Its purpose is to obtain from the depositors a direct corroboration of the
correctness of their account balances with their respective banks.83 Internal or external auditors of a bank use it as a basic
audit procedure84 -- the results of which its client-depositors are neither interested in nor privy to -- to test the details of
transactions and balances in the banks records.85 Evidential matter obtained from independent sources outside a bank
only serves to provide greater assurance of reliability86 than that obtained solely within it for purposes of an audit of its own
financial statements, not those of its client-depositors.
Furthermore, there is always the audit risk that errors would not be detected87 for various reasons. One, materiality is a
consideration in audit planning;88 and two, the information obtained from such a substantive test is merely presumptive and
cannot be the basis of a valid waiver.89 BPI has no right to impose a condition unilaterally and thereafter consider failure to
meet such condition a waiver. Neither may CASA renounce a right90 it has never possessed.91
Every right has subjects -- active and passive. While the active subject is entitled to demand its enforcement, the passive
one is duty-bound to suffer such enforcement.92
On the one hand, BPI could not have been an active subject, because it could not have demanded from CASA a response
to its notice. Besides, the notice was a measly request worded as follows: "Please examine x x x and report x x x."93
CASA, on the other hand, could not have been a passive subject, either, because it had no obligation to respond. It could
-- as it did -- choose not to respond.
Estoppel precludes individuals from denying or asserting, by their own deed or representation, anything contrary to that
established as the truth, in legal contemplation.94 Our rules on evidence even make a juris et de jure presumption95 that
whenever one has, by ones own act or omission, intentionally and deliberately led another to believe a particular thing to
be true and to act upon that belief, one cannot -- in any litigation arising from such act or omission -- be permitted to falsify
that supposed truth.96
In the instant case, CASA never made any deed or representation that misled BPI. The formers omission, if any, may only
be deemed an innocent mistake oblivious to the procedures and consequences of periodic audits. Since its conduct was
due to such ignorance founded upon an innocent mistake, estoppel will not arise.97 A person who has no knowledge of or
consent to a transaction may not be estopped by it.98 "Estoppel cannot be sustained by mere argument or doubtful
inference x x x."99 CASA is not barred from questioning BPIs error even after the lapse of the period given in the notice.
Loss Borne by Proximate Source of Negligence
For allowing payment100 on the checks to a wrongful and fictitious payee, BPI -- the drawee bank -- becomes liable to its
depositor-drawer. Since the encashing bank is one of its branches,101 BPI can easily go after it and hold it liable for
reimbursement.102 It "may not debit the drawers account103 and is not entitled to indemnification from the drawer."104 In both

SECOND DIVISION
PHILIPPINE NATIONAL BANK,

G.R. No. 157845

P e t i t i o n e r,
Present:
PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

- versus

Promulgated:
September 20, 2005

NORMAN Y. PIKE,
R e s p o n d e n t.
x----------------------------------------x

DECISION

CHICO-NAZARIO, J.:

This petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeks to reverse the
Decision[1] dated 19 December 2002, and the Resolution[2] dated 02 April 2003, both of the Court of Appeals, in CA-G.R. CV No. 59389,
which affirmed with modification the Decision[3] rendered by the Regional Trial Court (RTC), Branch 07 of Manila, dated 10 January
1997, in Civil Case No. 94-68821 in favor of herein respondent Norman Pike (Pike).

The case stemmed from a complaint[4] filed by herein respondent Pike for damages[5] against Philippine National Bank (PNB)
on 04 January 1994.

Complainant Pike often traveled to and from Japan as a gay entertainer in said country. Sometime in 1991, he opened U.S.
Dollar Savings Account No. 0265-704591-0 with herein petitioner PNB Buendia branch for which he was issued a corresponding
passbook. The complaint alleged in substance that before complainant Pike left for Japan on 18 March 1993, he kept the
aforementioned passbook inside a cabinet under lock and key, in his home; that on 19 April 1993, a few hours after he arrived from
Japan, he discovered that some of his valuables were missing including the passbook; that he immediately reported the incident to the
police which led to the arrest and prosecution of a certain Mr. Joy Manuel Davasol; that complainant Pike also discovered that Davasol
made two (2) unauthorized withdrawals from his U.S. Dollar Savings Account No. 0265-704591-0, both times at the PNB Buendia
branch on the following dates:

DATE
31 March 1993
05 April 1993
TOTAL

AMOUNT
$3,500.00
4,000.00
$7,500.00

that on several occasions, complainant Pike went to defendant PNBs Buendia branch and verbally protested the unauthorized
withdrawals and likewise demanded the return of the total withdrawn amount of U.S. $7,500.00, on the ground that he never authorized

anybody to withdraw from his account as the signatures appearing on the subject withdrawal slips were clearly forgeries; that defendant
PNB refused to credit said amount back to complainants U.S. Dollar Savings Account without justifiable reason, and instead, defendant
bank wrote him that it exercised due diligence in the handling of said account; and that on 06 May 1993, complainant Pike wrote
defendant PNB simply to request that the hold-account be lifted so that he may withdraw the remaining balance left in his U.S.$
Savings Account and nothing else.

On the other hand, defendant PNB alleged, in its Motion to Dismiss [6] of 18 April 1994, a counterstatement of facts. Its factual
allegations read:

. . . On March 15, 1993 at PNB Buendia Branch, Mr. Norman Y. Pike, together with a certain Joy Davasol
went to see PNB AVP Mr. Lorenzo T. Val (sic), Jr. purposely to withdraw the amount of $2,000.00. Mr. Pike also
informed AVP Val that he is leaving for abroad (Japan) and made verbal instruction to honor all withdrawals to be
transmitted by his Talent Manager and Choreographer, Joy Davasol who shall present pre-signed withdrawal slips
bearing his (Pikes) signature. . .
On April 19, 1993, a certain Josephine Balmaceda, who claimed to be plaintiffs sister executed an
affidavit . . . . stating therein that they discovered today (April 19, 1993) the lost (sic) of her brothers passbook issued
by PNB on account of robbery, committed in the residence/office of her brother, promptly reporting the matter to the
police authorities and her brother cannot report the matter to the Bank because he was currently in Japan and
therefore requesting the Bank to issue a hold-order on her brothers passbook.
But a copy of an alarm (Police) Report dated April 19, 1993. . . stated that plaintiff (who was the one who
reported the matter) after one month in Japan, he (complainant) arrived yesterday. . .
On April 26, 1993, Atty. Nathaniel Ifurung who claims to be plaintiffs counsel sent a demand letter to VP
Violeta T. Suquila (then VP and Manager of PNB Buendia Branch) demanding the bank to credit back the amount of
US$7,500.00 which were withdrawn on March 31, 1993 and April 5, 1993, because his clients signatures were forged
and the withdrawal made thereon were unauthorized. . .
On May 5, 1993, Mr. Norman Y. Pike executed an affidavit of loss (sic) Dollar Account Passbook and
requested the PNB to replace the same and allow him to make withdrawals thereon. He stated that his passbook was
stolen together with other valuables which he discovered only in the early morning of April 19, 1993. . .
On May 6, 1993, plaintiff Norman Y. Pike wrote a letter. . . addressed to the Manager of PNB, Buendia
Branch the full contents of said letter hereto quoted as follows:
May 6, 1993
The Manager
Philippine National Bank
Buendia Branch
Paseo de Roxas cor. Gil Puyat Street
Makati, Metro Manila
Sir:
In connection with the request of my sister, Mrs. Josephine P. Balmaceda for the hold-order
on my dollar savings passbook No. 265-704591-0, I am now requesting your good office to lift the
same so I can withdraw the remaining balance of my passbook which was reported lost sometime
in March of this year.
I also promise not to hold responsible the bank and its officers for the withdrawal made on
my dollar savings passbook on March 19 and April 5, 1993 respectively as a result of the lost (sic)
of my passbook.

Sgd. NORMAN Y. PIKE

Depositor
Philippine Passport
No. H918022
Issued at Manila on
Sept. 6, 1990
Place of Issuance
On the same day May 6, 1993 Plaintiff Norman Y. Pike was allowed by defendant bank to withdraw the
remaining balance from his passbook .
A letter dated May 18, 1993 was sent to Plaintiffs counsel by PNB stating that the Bank regrets that it
cannot accede to such request inasmuch as the Bank exercised due diligence of a good father to his family in the
handling of transactions covering the deposit account of Mr. Pike .
On July 2, 1993, Plaintiffs counsel sent a letter to PNB Vice Pres. Suquila denying that his client made any
such promise not to hold responsible the bank and its officers for the withdrawal made .
A letter dated July 29, 1993 was sent to Plaintiffs counsel by VP Suquila stating that plaintiffs withdrawal
of the remaining balance of his account with the Bank effectively estops him from claiming on the alleged
unauthorized withdrawals.

The trial court, in its decision dated 10 January 1997, made the following findings of fact:

. . . [T]hat the bank is responsible for such unauthorized withdrawals. The court is not impressed with the
defense put up by the bank. Its contention that the withdrawals were authorized by the plaintiff because there was an
arrangement between the bank represented by its Asst. Vice President Lorenzo Bal, Jr. and the depositor Norman Y.
Pike to the effect that pre-signed withdrawal slips, that is, withdrawal slip signed by the depositor in the presence of
Mr. Bal whereby it would be made to appear that it was the depositor himself who presented the same to the bank
despite the fact that it was another person who presented the same should be honored by the bank cannot be
sanctioned by the court. Firstly, the court is not satisfied that there was indeed such an arrangement. . . It is Mr. Bals
contention that such an arrangement although not ordinarily entered into is still a legal procedure of the bank and is
resorted to accommodate the depositors specially honored and valued depositor at that.
...
The court compared the signatures in the questioned withdrawal slips with the known signatures of the
depositor and is convinced that the signatures in the unauthorized withdrawal slips do not correspond to the true
signatures of the depositor.
From the evidence that it received, the court is convinced that the bank was negligent in the performance of
its duties such that unauthorized withdrawals were made in the deposit of plaintiff Norman Y. Pike.[7]

The dispositive portion of the trial courts decision reads:

WHEREFORE and considering the foregoing, judgment is hereby rendered in favor of the plaintiff and
against the defendant and ordering the defendant to pay the following:
1.

US$7,500.00 plus interest thereon at the rate of 12% per annum until the full amount is paid;

2.

P25,000.00 for and as attorneys fees;

3.

P50,000.00 as moral damages and P50,000.00 as exemplary damages; and

4.

Plus the costs of suit.[8]

Defendant PNBs motion for reconsideration was subsequently denied by the court a quo.[9]

On appeal, the Court of Appeals issued the assailed decision dated 19 December 2002, affirming the findings of the RTC that
indeed defendant-appellant PNB was negligent in exercising the diligence required of a business imbued with public interest such as
that of the banking industry, however, it modified the rate of interest and award for damages, to wit:
WHEREFORE, premises considered, the Decision dated January 10, 1997 issued by the Regional Trial Court of Manila,
Branch 7, in Civil Case No. 94-68821, is hereby AFFIRMED with MODIFICATION, as follows:

1.

Ordering appellant, the Philippine National Bank, Buendia Branch, to refund appellee the amount of
$7,500.00 plus interest of 6% per annum to be computed from the date of the filing of the complaint
which interest rate shall become 12% per annum from the time the judgment in this case becomes
final and executory until its satisfaction;

2.

The award for moral damages is reduced to P20,000.00; and

3.

The award for exemplary damages is likewise reduced to P20,000.00.

Costs against appellant.[10]

The appellate court held that:
Appellant claims that appellee personally talked to its officers to allow Joy Manuel Davasol to make
withdrawals. Appellee even left pre-signed withdrawal slips before he went to Japan. However, appellant could have
told appellee to authorize the withdrawal by a representative by indicating the same at the space provided at the back
portion of the withdrawal slip. This operational flaw was observed by the trial court, when it ruled:
The court cannot also understand why the bank did not require the correct, proper and the
usual procedure of requiring a depositor who is withdrawing the money through a representative to
fill up the back portion of the withdrawal slips, which form was issued by the bank itself.
A perusal of the records discloses that appellee had previously authorized withdrawals by a representative.
However, these withdrawals were properly accompanied by a withdrawal by a representative form aside from a
handwritten request by appellee to allow such withdrawals by his representative, or a typewritten letter-request for
withdrawal by a representative. Certainly, appellant lacked the due care and caution required of managers and
employees of a firm engaged in so sensitive and demanding business as banking.
In its desire to be exonerated from liability, appellant advances the argument that, granting negligence on its
part, appellee condoned this negligence as shown in his letter dated May 6, 1993, wherein appellee purportedly
undertook, not to hold the bank and its officers responsible for the unauthorized withdrawals from his account.
We do not agree. It should be emphasized that while the appellee admitted signing the letter dated May 6,
1993, he, however, denied having undertook (sic) to exonerate the appellant from liability for the unauthorized
withdrawals. Appellee questioned the second paragraph of the said letter as being superimposed so that his
signature overlapped the text of the second paragraph of said letter. A waiver of right, in order to be valid, should be
in a language that clearly manifests his desire to do so. In the instant case, appellees filing of the instant action is
inconsistent with appellants contention that he had waived his right to question appellants negligent act of allowing
the unauthorized withdrawals from his account.[11]

Defendant-appellant PNB filed a motion for reconsideration. In a Resolution dated 02 April 2003, the Court of Appeals denied
said motion.

Hence, this petition.

Petitioner PNB now seeks the review of the aforequoted decision and resolution of the Court of Appeals predicated on the
following issues:

I.
WHETHER OR NOT THE PRINCIPLE OF ESTOPPEL WAS NOT PROPERLY APPLIED IN THIS CASE;

II.
WHETHER OR NOT RESPONDENT HAVE SUBSTANTIALLY PROVEN THAT THE SIGNATURES APPEARING ON
THE TWO (2) QUESTIONED PRE-SIGNED WITHDRAWAL SLIP FORMS ARE ALL FORGERIES IN ACCORDANCE
WITH SECTION 22, RULE 132 OF THE REVISED RULES OF COURT; and
III.
WHETHER OR NOT MORAL AND EXEMPLARY DAMAGES CAN BE AWARDED AGAINST A PARTY IN GOOD
FAITH.

Petitioner PNB contends that due to the verbal instructions[12] of respondent Pike, a valued depositor, it allowed the withdrawal by
another person. Plus, the fact that said respondent withdrew the remaining balance in his US Savings Account and executed a
waiver releasing petitioner PNB from any liability due to the loss of the funds should rightly negate a finding of negligence on its
part. Accordingly, petitioner PNB claims that the appellate court, as well as the trial court erred in holding that the withdrawals in
question were unauthorized as the signatures appearing on the subject withdrawal slips were forgeries. Petitioner PNB, therefore,
argues that it should not be held liable for the amount withdrawn from the account of respondent Pike in the sum of $7,500.00, as
well as for moral and exemplary damages.

A priori, it is quite evident that the petition is anchored on a plea to review or re-examine the factual conclusions reached by the trial
court and affirmed by the Court of Appeals, and for this Court to hold otherwise. Whether:

1) respondent Pikes signatures appearing on the pertinent withdrawal slips used by Joy Manuel Davasol [13] to
withdraw the amount of $7,500.00, were forgeries, as found by the trial court and affirmed by the Court of Appeals, or
were authentic as claimed by petitioner bank; and
2) respondent Pike in fact executed a waiver absolving petitioner bank from any legal responsibility due to the
unauthorized withdrawals, as maintained by petitioner bank, or the paragraph containing said waiver was intercalated
by some other person, thus, amounting no waiver at all, as held by the courts a quo.

are questions of fact and not of law. Inexorably, these issues call for an inquiry into the facts and evidence on record. This, as we have
so often held, we cannot do.

Elementary is the rule that this Court is not the appropriate venue to consider anew the factual issues as it is not a trier of
facts, and, it generally does not weigh anew the evidence already passed upon by the Court of Appeals. [14] When this Court is tasked to
go over once more the evidence presented by both parties, and analyze, assess and weigh them to ascertain if the trial court and the
appellate court were correct in according superior credit to this or that piece of evidence of one party or the other, the Court cannot and
will not do the same.[15] Such task is foreclosed by the rule enunciated under Section 1 of Rule 45[16] of the Rules of Court:

SECTION 1. Filing of petition with Supreme Court. - . . . The petition shall raise only questions of law[17] which must be
distinctly set forth.

We have oft ruled that factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court
and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court, [18] and in the absence of any
showing that the findings complained of are totally devoid of support in the evidence on record, or that they are so glaringly erroneous
as to constitute serious abuse of discretion, such findings must stand. The courts a quo are in a much better position to evaluate
properly the evidence.

Finding no other alternative but to affirm their finding that petitioner PNB negligently allowed the unauthorized withdrawals
subject of the case at bar, the instant petition for review must necessarily fail.

At this juncture, it bears emphasizing that negligence of banking institutions should never be countenanced. The negligence
here lies in the lackadaisical attitude exhibited by employees of petitioner PNB in their treatment of respondent Pikes US Dollar
Savings Account that resulted in the unauthorized withdrawal of $7,500.00. Nevertheless, though its employees may be the ones
negligent, a banks liability as an obligor is not merely vicarious but primary, as banks are expected to exercise the highest degree of
diligence in the selection and supervision of their employees, [19] and having such obligation, this Court cannot ignore the circumstances
surrounding the case at bar how the employees of petitioner PNB turned their heads, nay, closed their eyes to the suspicious
circumstances enfolding the two withdrawals subject of the case at bar. It may even be said that they went out of their ways to disregard
standard operating procedures formulated to ensure the security of each and every account that they are handling. Petitioner PNB does
not deny that the withdrawal slips used were in breach of standard operating procedures of banks in the ordinary and usual course of
banking operations as testified to by one of its witnesses, Mr. Lorenzo T. Bal, Assistant Vice President of Petitioner PNBs Buendia
branch, on cross-examination[20] he stated thus:
Q:

Mr. Witness, when the original of Exhibit B[21] was presented to you for approval, how many signatures of
depositor appears thereon?

A:

Two (2) signatures appears (sic) on the face of the withdrawal slip.

Q:

When it (sic) was (sic) presented to you immediately?

A:

Yes, sir.

Q:

Are you sure of that?

A:

Yes, sir. Because it was pre signed withdrawal slip.

Q:

What does the signature appear, the word recipient means?

A:

Received.

Q:

So, what you are saying is that, the depositor here signed this even before receiving the amount?

A:

Because before the withdrawal was made, Mr. Pike, the depositor came to the bank when he withdrew the
$2,000.00 and instructed me or requested us even the supervisor to honor all withdrawal slip.

Q:

And this is a regular procedure?

A:

Yes, sir.

Q:

Are you sure of that?

A:

Yes, sir.

Q:

Do you have written manual on this particular procedure, Mr. Witness?

A:

Of course, that includes in the Rules and regulations of the bank.

Q:

Are you are (sic) are very sure of that?

A:

And banking is a fast transaction between the depositor and the bank.

Q:

And then, is the use of the back portion of the withdrawal slip with a heading of authorization?

A:

Normally, a depositor and the bank agrees on certain terms that if you allow withdrawal from his account, his or
her account, its enough that the signature of the depositor appears on both spaces in the front side of the
withdrawal slip. Even if you do not have the back portion of the withdrawal slip.

Q:

You are very sure of that?

A:

Yes, sir.

Q:

And that has been done with the other withdrawal slip of Norman Pike as stated or as shown in the Statement
of Account?

A:

Yes, sir.

Q:

That withdrawal made by representative?

A:

Yes, sir.

From the foregoing, petitioner PNBs witness was utterly remiss in protecting the banks client, as well as the bank itself, when
he allowed an account holder to make it appear as if he was the one actually withdrawing from an account and actually receiving the
withdrawn amount. Ordinarily, banks allow withdrawal by someone who is not the account holder so long as the account holder
authorizes his representative to withdraw and receive from his account by signing on the space provided particularly for such
transactions, usually found at the back of withdrawal slips. As fittingly found by the courts a quo, if indeed, respondent Pike signed the
withdrawal slips in the presence of Mr. Lorenzo Bal, petitioner PNBs AVP at its Buendia branch, why did he not call respondent Pikes
attention and refer him to the space provided for authorizing representatives to withdraw from and receive the proceeds of such
withdrawal? Or, at the very least, sign or initial the same so that he could identify the pre-signed withdrawal slips made by Mr. Pike?

Q:

You are also saying that on March 15, 1993, you likewise met Joy Manuel Dabasol?

A:

Yes, sir.

Q:

And you (sic) also saying on March 15, 1993, you also met Norman Pike, the depositor,

A:

Yes, sir.

Q:

And when did you first met (sic) Norman Pike?

A:

March 15 when he withdrew $2,000.00.

Q:

That was the first time?

A:

First time, yes.

Q:

And Mr. Norman Pike was already transacting with you long before that day, is this correct? For how long was
he transacting with you?

A:

That was my first time.

Q:

That was the first time. What I mean is, that he was transacting with the PNB, Buendia Branch long before you
met him?

A:

Maybe.

Q:

And the withdrawal made on April 5, 1993 which you approved, you did not look at Exhibit C, the Savings
Signature Card Individual?

A:

We do not look at that, that is kept in the vault.

Q:

Yes or no?

A:

No, sir.

Q:

And Mr. witness, Exhibit C-1[22] which is being kept at your vault, also contains a picture?

A:

Yes, sir.

Q:

And the picture of the depositor?

A:

Yes, sir.

Q:

And are you familiar with the identity of the depositor Norman Pike?

A:

What particular identity?

Q:

His appearance?

A:

He is gay looking fellow.

COURT:
A:

Answer. You are familiar with his physical appearance?

Not so much. Because there are so much depositor (sic) in the bank.[23] [Emphasis ours.]

By his own testimony, the witness negated the very reason for the banks bizarre accommodation of the alleged verbal
request of respondent Pike that he was a valued client. From the aforequoted, it appears that the witness, Lorenzo Bal, was not
even reasonably familiar with respondent Pike, yet, he was ready, willing and able to accommodate the verbal request of said
depositor. Worse still, the witness still approved the withdrawal transaction without asking for any proof of identification for the reason
that: 1) Davasol was in possession of a pre-signed withdrawal slip; and 2) the witness recognized the signature of respondent Pike
even after admitting that he did not bother to counter check the signature on the slip with the specimen signature card of respondent
Pike and that he met respondent Pike just once so that he cannot seem to recall what the latter looks like. The ensuing quoted
testimony of the same witness will justify a finding of negligence amounting to bad faith, to wit:

Q:

And you also met Joy Manuel Dabasol on March 15?

A:

Yes, sir.

Q:

And can you describe Joy Manuel Dabasol?

A:

I cannot recall his face but then he is a Talent manager, because there are so many depositors in the bank.
...

Q:

Mr. witness, you are saying that Mr. Pike, the depositor gave you verbal authority to honor withdrawal by Joy
Manuel Dabasol?

A:

Yes, sir.

Q:

Why did you not require then that Mr. Pike instead sign the authorization portion and that the name of Joy
Manuel Dabasol appear thereon with his signature?
...

A:

I required Mr. Norman Pike to sign the withdrawal slip on the face of the withdrawal slip.

Q:

But not the authorization portion of the said withdrawal slip?

...

A:

No, because that is sufficient already.

Q:

And is this your normal procedure, Mr. witness? This particular procedure that you conducted?

A:

I dont think so.

Q:

Mr. witness, when on April 5, 1993, when Joy Dabasol came to the office and according to you, you do not
remember him, is that correct?

A:

I cannot recall his face.

...

Q:

And he just showed you a withdrawal slip, is this correct?

A:

Yes, on April 5.

Q:

Did you require him to produce any Identification Card, yes or no?

A:

No.

Q:

And how did you know then that it was Joy Dabasol who was making the withdrawal on April 5?

A:

Because the presigned withdrawal slip was presented to me.

Q:

Is that all your basis?

A:

Yes, sir. Because his signature appears.

...

Q:

Mr. witness, this alleged authority given to you by Norman Pike to honor withdrawal by Joy Manuel Dabasol,
was that in writing?

A:

It was verbally requested.

Q:

And that is SPO (sic) of PNB, Buendia Branch to accept verbal authorities?

A:

Yes.

Q:

Is that Standard Operating Procedure?

A:

It is not SPO, but when you knew the client, Your Honor, you have to honor also the trust and confidence. Let
us say if you

Q:

According to you, you met Norman Pike only on March 15, 1993 and immediately you allowed him to withdraw
through pre-signed withdrawal slip?

A:

Yes, Your Honor. Because a depositor requested you to honor his signature, you have to do that or else will
and besides the request is for purpose of expediency, Your Honor. Because most often than that, he is out of
the country, in Japan. And his Talent Manager is the one managing the recruiting agency. The money will be
used in the operating expenses.
...

Q:

You did not even bother to look at the Savings Signature Card Individual, yes or no?

A:

No, sir.[24] [Emphases supplied.]

Having admitted that pre-signed withdrawal slips do not constitute the normal procedure with respect to withdrawals by
representatives should have already put petitioner PNBs employees on guard. Rather than readily validating and permitting said
withdrawals, they should have proceeded more cautiously. Clearly, petitioner banks employee, Lorenzo T. Bal, an Assistant Vice
President at that, was exceedingly careless in his treatment of respondent Pikes savings account.

From the foregoing, the evidence clearly showed that the petitioner bank did not exercise the degree of diligence that it ought
to have exercised in dealing with their clients.

With banks, the degree of diligence required, contrary to the position of petitioner PNB, is more than that of a good father of a
family considering that the business of banking is imbued with public interest due to the nature of their functions. The stability of
banks largely depends on the confidence of the people in the honesty and efficiency of banks. Thus, the law imposes on banks a
high degree of obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of
banking. Section 2 of Republic Act No. 8791,[25] which took effect on 13 June 2000, makes a categorical declaration that the State
recognizes the fiduciary nature of banking that requires high standards of integrity and performance.[26]

Though passed long after the unauthorized withdrawals in this case, the aforequoted provision is a statutory affirmation of
Supreme Court decisions already in esse at the time of such withdrawals. We elucidated in the 1990 case of Simex International,
Inc. v. Court of Appeals,[27] 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.[28]

Likewise, in the case of The Consolidated Bank and Trust Corporation v. Court of Appeals,[29] we clarified that said fiduciary
relationship means that the banks obligation to observe highest 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 New Civil Code states that the degree of diligence
required of an obligor[30] is that prescribed by law or contract, and absent such stipulation then the diligence of a family. In every
case, the depositor expects the bank to treat his account with the utmost fidelity, whether such accounts consist only of a few
hundred pesos or of millions of pesos.[31]

Anent the issue of the propriety of the award of damages in this case, petitioner PNB asseverates that there was no evidence
to prove that respondent Pike suffered anguish, embarrassment and mental sufferings [32] due to its acts in allowing the alleged
unauthorized withdrawals. And, having relied on the instructions of a valued depositor, petitioner PNB likewise avers that its actions
were made in good faith, for this reason, there is no factual basis for said award.

Petitioner PNBs assertions fail to impress us.

The award of moral and exemplary damages is left to the sound discretion of the court, and if such discretion is well exercised,
as in this case, it will not be disturbed on appeal.[33] In the case of Philippine Telegraph & Telephone Corporation v. Court of Appeals, [34]
we had the occasion to reiterate the conditions to be met in order that moral damages may be recovered. In said case we stated:

An award of moral damages would require, firstly, evidence of besmirched reputation, or physical, mental or
psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly,
proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the
claimant; and fourthly, that the case is predicated on any of the instances expressed or envisioned by Articles 2219 [35]
and 2220[36] of the Civil Code.

Specifically, in culpa contractual or breach of contract, as here, moral damages are recoverable only if the defendant has
acted fraudulently or in bad faith,[37] or is found guilty of gross negligence amounting to bad faith,[38] or in wanton disregard of his
contractual obligations.[39] Verily, the breach must be wanton, reckless, malicious, or in bad faith, oppressive or abusive.[40]

There is no reason to disturb the trial courts finding of petitioner banks employees negligence in their treatment of respondent
Pikes account. In the case on hand, the Court of Appeals sustained, and rightly so, that an award of moral damages is warranted. For,
as found by said appellate court, citing the case of Prudential Bank v. Court of Appeals, [41] the banks negligence is a result of lack of
due care and caution required of managers and employees of a firm engaged in so sensitive and demanding business, as banking,
hence, the award of P20,000.00 as moral damages, is proper.

The award of exemplary damages is also proper as a warning to petitioner PNB and all concerned not to recklessly disregard
their obligation to exercise the highest and strictest diligence in serving their depositors.

Finally, the aforestated grant of exemplary damages entitles respondent Pike the award of attorney's fees in the amount of
P20,000.00 and the award of P10,000.00 for litigation expenses.[42]

WHEREFORE, the instant petition is DENIED. The assailed Decision dated 19 December 2002, and the Resolution dated 02
April 2003, both of the Court of Appeals, in CA-G.R. CV No. 59389, which affirmed with modification the Decision rendered by the
Regional Trial Court (RTC), Branch 07 of Manila, dated 10 January 1997, in Civil Case No. 94-68821, are hereby AFFIRMED with the
modification that petitioner PNB is directed to pay respondent Pike additional 1) P20,000.00 representing attorneys fees; and 2)
P10,000.00 representing expenses of litigation. Costs against petitioner PNB.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairman

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

DANTE O. TINGA
Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairman, Second Division

C E R T I F I C AT I O N
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.

HILARIO G. DAVIDE, JR.

Chief Justice

FIRST DIVISION
[G.R. No. 127469. January 15, 2004]
PHILIPPINE BANKING CORPORATION, petitioner, vs. COURT OF APPEALS and LEONILO MARCOS, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review of the Decision i[1] of the Court of Appeals in CA-G.R. CV No. 34382 dated 10 December 1996
modifying the Decisionii[2] of the Regional Trial Court, Fourth Judicial Region, Assisting Court, Bian, Laguna in Civil Case No. B-3148
entitled Leonilo Marcos v. Philippine Banking Corporation.
The Antecedent Facts
On 30 August 1989, Leonilo Marcos (Marcos) filed with the trial court a Complaint for Sum of Money with Damages iii[3] against
petitioner Philippine Banking Corporation (BANK).iv[4]
Marcos alleged that sometime in 1982, the BANK through Florencio B. Pagsaligan (Pagsaligan), one of the officials of the BANK
and a close friend of Marcos, persuaded him to deposit money with the BANK. Marcos yielded to Pagsaligans persuasion and claimed
he made a time deposit with the BANK on two occasions. The first was on 11 March 1982 for P664,897.67. The BANK issued Receipt
No. 635734 for this time deposit. On 12 March 1982, Marcos claimed he again made a time deposit with the BANK for P764,897.67.
The BANK did not issue an official receipt for this time deposit but it acknowledged a deposit of this amount through a letter-certification
Pagsaligan issued. The time deposits earned interest at 17% per annum and had a maturity period of 90 days.
Marcos alleged that Pagsaligan kept the various time deposit certificates on the assurance that the BANK would take care of the
certificates, interests and renewals. Marcos claimed that from the time of the deposit, he had not received the principal amount or its
interest.

Sometime in March 1983, Marcos wanted to withdraw from the BANK his time deposits and the accumulated interests to buy
materials for his construction business. However, the BANK through Pagsaligan convinced Marcos to keep his time deposits intact and
instead to open several domestic letters of credit. The BANK required Marcos to give a marginal deposit of 30% of the total amount of
the letters of credit. The time deposits of Marcos would secure 70% of the letters of credit. Since Marcos trusted the BANK and
Pagsaligan, he signed blank printed forms of the application for the domestic letters of credit, trust receipt agreements and promissory
notes.
Marcos executed three Trust Receipt Agreements totalling P851,250, broken down as follows: (1) Trust Receipt No. CD 83.7
dated 8 March 1983 for P300,000; (2) Trust Receipt No. CD 83.9 dated 15 March 1983 for P300,000; and (3) Trust Receipt No. CD
83.10 dated 15 March 1983 for P251,250. Marcos deposited the required 30% marginal deposit for the trust receipt agreements.
Marcos claimed that his obligation to the BANK was therefore only P595,875 representing 70% of the letters of credit.
Marcos believed that he and the BANK became creditors and debtors of each other. Marcos expected the BANK to offset
automatically a portion of his time deposits and the accumulated interest with the amount covered by the three trust receipts totalling
P851,250 less the 30% marginal deposit that he had paid. Marcos argued that if only the BANK applied his time deposits and the
accumulated interest to his remaining obligation, which is 70% of the total amount of the letters of credit, he would have paid completely
his debt. Marcos further pointed out that since he did not apply for a renewal of the trust receipt agreements, the BANK had no right to
renew the same.
Marcos accused the BANK of unjustly demanding payment for the total amount of the trust receipt agreements without deducting
the 30% marginal deposit that he had already made. He decried the BANKs unlawful charging of accumulated interest because he
claimed there was no agreement as to the payment of interest. The interest arose from numerous alleged extensions and penalties.
Marcos reiterated that there was no agreement to this effect because his time deposits served as the collateral for his remaining
obligation.
Marcos also denied that he obtained another loan from the BANK for P500,000 with interest at 25% per annum supposedly
covered by Promissory Note No. 20-979-83 dated 24 October 1983. Marcos bewailed the BANKs belated claim that his time deposits
were applied to this void promissory note on 12 March 1985.
In sum, Marcos claimed that:
(1) his time deposit with the BANK in the total sum of P1,428,795.34 v[5] has earned accumulated interest since March 1982 up to
the present in the total amount of P1,727,305.45 at the rate of 17% per annum so his total money with defendant (the BANK) is
P3,156,100.79 less the amount of P595,875 representing the 70% balance of the marginal deposit and/or balance of the trust
agreements; and
(2) his indebtedness was only P851,250 less the 30% paid as marginal deposit or a balance of P595,875, which the BANK should
have automatically deducted from his time deposits and accumulated interest, leaving the BANKs indebtedness to him at
P2,560,025.79.
Marcos prayed the trial court to declare Promissory Note No. 20-979-83 void and to order the BANK to pay the amount of his time
deposits with interest. He also sought the award of moral and exemplary damages as well as attorneys fees for P200,000 plus 25% of
the amount due.
On 18 September 1989, summons and a copy of the complaint were served on the BANK.vi[6]
On 9 October 1989, the BANK filed its Answer with Counterclaim. The BANK denied the allegations in the complaint. The BANK
believed that the suit was Marcos desperate attempt to avoid liability under several trust receipt agreements that were the subject of a
criminal complaint.
The BANK alleged that as of 12 March 1982, the total amount of the various time deposits of Marcos was only P764,897.67 and
not P1,428,795.35vii[7] as alleged in the complaint. The P764,897.67 included the P664,897.67 that Marcos deposited on 11 March
1982.
The BANK pointed out that Marcos delivered to the BANK the time deposit certificates by virtue of the Deed of Assignment dated
2 June 1989. Marcos executed the Deed of Assignment to secure his various loan obligations. The BANK claimed that these loans are
covered by Promissory Note No. 20-756-82 dated 2 June 1982 for P420,000 and Promissory Note No. 20-979-83 dated 24 October
1983 for P500,000. The BANK stressed that these obligations are separate and distinct from the trust receipt agreements.
When Marcos defaulted in the payment of Promissory Note No. 20-979-83, the BANK debited his time deposits and applied the
same to the obligation that is now considered fully paid. viii[8] The BANK insisted that the Deed of Assignment authorized it to apply the
time deposits in payment of Promissory Note No. 20-979-83.
In March 1982, the wife of Marcos, Consolacion Marcos, sought the advice of Pagsaligan. Consolacion informed Pagsaligan that
she and her husband needed to finance the purchase of construction materials for their business, L.A. Marcos Construction Company.
Pagsaligan suggested the opening of the letters of credit and the execution of trust receipts, whereby the BANK would agree to
purchase the goods needed by the client through the letters of credit. The BANK would then entrust the goods to the client, as
entrustee, who would undertake to deliver the proceeds of the sale or the goods themselves to the entrustor within a specified time.
The BANK claimed that Marcos freely entered into the trust receipt agreements. When Marcos failed to account for the goods
delivered or for the proceeds of the sale, the BANK filed a complaint for violation of Presidential Decree No. 115 or the Trust Receipts
Law. Instead of initiating negotiations for the settlement of the account, Marcos filed this suit.
The BANK denied falsifying Promissory Note No. 20-979-83. The BANK claimed that the promissory note is supported by
documentary evidence such as Marcos application for this loan and the microfilm of the cashiers check issued for the loan. The BANK
insisted that Marcos could not deny the agreement for the payment of interest and penalties under the trust receipt agreements. The
BANK prayed for the dismissal of the complaint, payment of damages, attorneys fees and cost of suit.
On 15 December 1989, the trial court on motion of Marcos counsel issued an order declaring the BANK in default for filing its
answer five days after the 15-day period to file the answer had lapsed. ix[9] The trial court also held that the answer is a mere scrap of
paper because a copy was not furnished to Marcos. In the same order, the trial court allowed Marcos to present his evidence ex parte
on 18 December 1989. On that date, Marcos testified and presented documentary evidence. The case was then submitted for
decision.
On 19 December 1989, Marcos received a copy of the BANKs Answer with Compulsory Counterclaim.
On 29 December 1989, the BANK filed an opposition to Marcos motion to declare the BANK in default. On 9 January 1990, the
BANK filed a motion to lift the order of default claiming that it had only then learned of the order of default. The BANK explained that its
delayed filing of the Answer with Counterclaim and failure to serve a copy of the answer on Marcos was due to excusable negligence.

The BANK asked the trial court to set aside the order of default because it had a valid and meritorious defense.
On 7 February 1990, the trial court issued an order setting aside the default order and admitting the BANKs Answer with
Compulsory Counterclaim. The trial court ordered the BANK to present its evidence on 12 March 1990.
On 5 March 1990, the BANK filed a motion praying to cross-examine Marcos who had testified during the ex-parte hearing of 18
December 1989. On 12 March 1990, the trial court denied the BANKs motion and directed the BANK to present its evidence. Trial
then ensued.
The BANK presented two witnesses, Rodolfo Sales, the Branch Manager of the BANKs Cubao Branch since 1987, and
Pagsaligan, the Branch Manager of the same branch from 1982 to 1986.
On 24 April 1990, the counsel of Marcos cross-examined Pagsaligan. Due to lack of material time, the trial court reset the
continuation of the cross-examination and presentation of other evidence. The succeeding hearings were postponed, specifically on 24,
27 and 28 of August 1990, because of the BANKs failure to produce its witness, Pagsaligan. The BANK on these scheduled hearings
also failed to present other evidence.
On 7 September 1990, the BANK moved to postpone the hearing on the ground that Pagsaligan could not attend the hearing
because of illness. The trial court denied the motion to postpone and on motion of Marcos counsel ruled that the BANK had waived its
right to present further evidence. The trial court considered the case submitted for decision. The BANK moved for reconsideration,
which the trial court denied.
On 8 October 1990, the trial court rendered its decision in favor of Marcos. Aggrieved, the BANK appealed to the Court of
Appeals.
On 10 December 1996, the Court of Appeals modified the decision of the trial court by reducing the amount of actual damages
and deleting the attorneys fees awarded to Marcos.

The Ruling of the Trial Court

The trial court ruled that the total amount of time deposits of Marcos was P1,429,795.34 and not only P764,897.67 as claimed by
the BANK. The trial court found that Marcos made a time deposit on two occasions. The first time deposit was made on 11 March
1982 for P664,897.67 as shown by Receipt No. 635743. On 12 March 1982, Marcos again made a time deposit for P764,897.67 as
acknowledged by Pagsaligan in a letter of certification. The two time deposits thus amounted to P1,429,795.34.
The trial court pointed out that no receipt was issued for the 12 March 1982 time deposit because the letter of certification was
sufficient. The trial court made a finding that the certification letter did not include the time deposit made on 11 March 1982. The 12
March 1982 deposit was in cash while the 11 March 1982 deposit was in checks which still had to clear. The checks were not included
in the certification letter since the BANK could not credit the amounts of the checks prior to clearing. The trial court declared that even
the Deed of Assignment acknowledged that Marcos made several time deposits as the Deed stated that the assigment was charged
against various time deposits.
The trial court recognized the existence of the Deed of Assignment and the two loans that Marcos supposedly obtained from the
BANK on 28 May 1982 for P340,000 and on 2 June 1982 for P420,000. The two loans amounted to P760,000. On 2 June 1982, the
same day that he secured the second loan, Marcos executed a Deed of Assignment assigning to the BANK P760,000 of his time
deposits. The trial court concluded that obviously the two loans were immediately paid by virtue of the Deed of Assignment.
The trial court found it strange that Marcos borrowed money from the BANK at a higher rate of interest instead of just withdrawing
his time deposits. The trial court saw no rhyme or reason why Marcos had to secure the loans from the BANK. The trial court was
convinced that Marcos did not know that what he had signed were loan applications and a Deed of Assignment in payment for his
loans. Nonetheless, the trial court recognized the said loan of P760,000 and its corresponding payment by virtue of the Deed of
Assignment for the equal sum.x[10]
If the BANKs claim is true that the time deposits of Marcos amounted only to P764,897.67 and he had already assigned P760,000
of this amount, the trial court pointed out that what would be left as of 3 June 1982 would only be P4,867.67. xi[11] Yet, after the time
deposits had matured, the BANK allowed Marcos to open letters of credit three times. The three letters of credit were all secured by the
time deposits of Marcos after he had paid the 30% marginal deposit. The trial court opined that if Marcos time deposit was only
P764,897.67, then the letters of credit totalling P595,875 (less 30% marginal deposit) was guaranteed by only P4,867.67, xii[12] the
remaining time deposits after Marcos had executed the Deed of Assignment for P760,000.
According to the trial court, a security of only P4,867.67 xiii[13] for a loan worth P595,875 (less 30% marginal deposit) is not only
preposterous, it is also comical. Worse, aside from allowing Marcos to have unsecured trust receipts, the BANK still claimed to have
granted Marcos another loan for P500,000 on 25 October 1983 covered by Promissory Note No. 20-979-83. The BANK is a
commercial bank engaged in the business of lending money. Allowing a loan of more than a million pesos without collateral is in the
words of the trial court, an impossibility and a gross violation of Central Bank Rules and Regulations, which no Bank Manager has
such authority to grant.xiv[14] Thus, the trial court held that the BANK could not have granted Marcos the loan covered by Promissory
Note No. 20-979-83 because it was unsecured by any collateral.
The trial court required the BANK to produce the original copies of the loan application and Promissory Note No. 20-979-83 so
that it could determine who applied for this loan. However, the BANK presented to the trial court only the machine copies of the
duplicate of these documents.
Based on the machine copies of the duplicate of the two documents, the trial court noticed the following discrepancies: (1)
Marcos signature on the two documents are merely initials unlike in the other documents submitted by the BANK; (2) it is highly
unnatural for the BANK to only have duplicate copies of the two documents in its custody; (3) the address of Marcos in the documents
is different from the place of residence as stated by Marcos in the other documents annexed by the BANK in its Answer; (4) Pagsaligan
made it appear that a check for the loan proceeds of P470,588 less bank charges was issued to Marcos but the checks payee was one
ATTY. LEONILO MARCOS and, as the trial court noted, Marcos is not a lawyer; and (5) Pagsaligan was not sure what branch of the
BANK issued the check for the loan proceeds. The trial court was convinced that Marcos did not execute the questionable documents
covering the P500,000 loan and Pagsaligan used these documents as a means to justify his inability to explain and account for the time
deposits of Marcos.
The trial court noted the BANKs defective documentation of its transaction with Marcos. First, the BANK was not in possession
of the original copies of the documents like the loan applications. Second, the BANK did not have a ledger of the accounts of Marcos
or of his various transactions with the BANK. Last, the BANK did not issue a certificate of time deposit to Marcos. Again, the trial court

attributed the BANKs lapses to Pagsaligans scheme to defraud Marcos of his time deposits.
The trial court also took note of Pagsaligans demeanor on the witness stand. Pagsaligan evaded the questions by giving
unresponsive or inconsistent answers compelling the trial court to admonish him. When the trial court ordered Pagsaligan to produce
the documents, he conveniently became sickxv[15] and thus failed to attend the hearings without presenting proof of his physical
condition.
The trial court disregarded the BANKs assertion that the time deposits were converted into a savings account at 14% or 10% per
annum upon maturity. The BANK never informed Marcos that his time deposits had already matured and these were converted into a
savings account. As to the interest due on the trust receipts, the trial court ruled that there is no basis for such a charge because the
documents do not stipulate any interest.
In computing the amount due to Marcos, the trial court took into account the marginal deposit that Marcos had already paid which
is equivalent to 30% of the total amount of the three trust receipts. The three trust receipts totalling P851,250 would then have a
balance of P595,875. The balance became due in March 1987 and on the same date, Marcos time deposits of P669,932.30 had
already earned interest from 1983 to 1987 totalling P569,323.21 at 17% per annum. Thus, the trial court ruled that the time deposits in
1987 totalled P1,239,115. From this amount, the trial court deducted P595,875, the amount of the trust receipts, leaving a balance on
the time deposits of P643,240 as of March 1987. However, since the BANK failed to return the time deposits of Marcos, which again
matured in March 1990, the time deposits with interest, less the amount of trust receipts paid in 1987, amounted to P971,292.49 as of
March 1990.
In the alternative, the trial court ruled that even if Marcos had only one time deposit of P764,897.67 as claimed by the BANK, the
time deposit would have still earned interest at the rate of 17% per annum. The time deposit of P650,163 would have increased to
P1,415,060 in 1987 after earning interest. Deducting the amount of the three trust receipts, Marcos time deposits still totalled
P1,236,969.30 plus interest.
The dispositive portion of the decision of the trial court reads:
WHEREFORE, under the foregoing circumstances, judgment is hereby rendered in favor of Plaintiff, directing
Defendant Bank as follows:
1)
2)
3)

to return to Plaintiff his time deposit in the sum of P971,292.49 with interest thereon at the legal rate, until fully
restituted;
to pay attorneys fees of P200,000.00; [and]
[to pay the] cost of these proceedings.

IT IS SO ORDERED.xvi[16]

The Ruling of the Court of Appeals

The Court of Appeals addressed the procedural and substantive issues that the BANK raised.
The appellate court ruled that the trial court committed a reversible error when it denied the BANKs motion to cross-examine
Marcos. The appellate court ruled that the right to cross-examine is a fundamental right that the BANK did not waive because the
BANK vigorously asserted this right. The BANKs failure to serve a notice of the motion to Marcos is not a valid ground to deny the
motion to cross-examine. The appellate court held that the motion to cross-examine is one of those non-litigated motions that do not
require the movant to provide a notice of hearing to the other party.
The Court of Appeals pointed out that when the trial court lifted the order of default, it had the duty to afford the BANK its right to
cross-examine Marcos. This duty assumed greater importance because the only evidence supporting the complaint is Marcos ex-parte
testimony. The trial court should have tested the veracity of Marcos testimony through the distilling process of cross-examination. The
Court of Appeals, however, believed that the case should not be remanded to the trial court because Marcos testimony on the time
deposits is supported by evidence on record from which the appellate court could make an intelligent judgment.
On the second procedural issue, the Court of Appeals held that the trial court did not err when it declared that the BANK had
waived its right to present its evidence and had submitted the case for decision. The appellate court agreed with the grounds relied
upon by the trial court in its Order dated 7 September 1990.
The Court of Appeals, however, differed with the finding of the trial court as to the total amount of the time deposits. The appellate
court ruled that the total amount of the time deposits of Marcos is only P764,897.67 and not P1,429,795.34 as found by the trial court.
The certification letter issued by Pagsaligan showed that Marcos made a time deposit on 12 March 1982 for P764,897.67. The
certification letter shows that the amount mentioned in the letter was the aggregate or total amount of the time deposits of Marcos as of
that date. Therefore, the P764,897.67 already included the P664,897.67 time deposit made by Marcos on 11 March 1982.
The Court of Appeals further explained:
Besides, the Official Receipt (Exh. B, p. 32, Records) dated March 11, 1982 covering the sum of P664,987.67 time
deposit did not provide for a maturity date implying clearly that the amount covered by said receipt forms part of the total
sum shown in the letter-certification which contained a maturity date. Moreover, it taxes ones credulity to believe that
appellee would make a time deposit on March 12, 1982 in the sum of P764,897.67 which except for the additional sum of
P100,000.00 is practically identical (see underlined figures) to the sum of P664,897.67 deposited the day before March 11,
1982.
Additionally, We agree with the contention of the appellant that the lower court wrongly appreciated the testimony of Mr.
Pagsaligan. Our finding is strengthened when we consider the alleged application for loan by the appellee with the appellant
in the sum of P500,000.00 dated October 24, 1983. (Exh. J, p. 40, Records), wherein it was stated that the loan is for
additional working capital versus the various time deposit amounting to P760,000.00.xvii[17] (Emphasis supplied)
The Court of Appeals sustained the factual findings of the trial court in ruling that Promissory Note No. 20-979-83 is void. There is
no evidence of a bank ledger or computation of interest of the loan. The appellate court blamed the BANK for failing to comply with the
orders of the trial court to produce the documents on the loan. The BANK also made inconsistent statements. In its Answer to the
Complaint, the BANK alleged that the loan was fully paid when it debited the time deposits of Marcos with the loan. However, in its
discussion of the assigned errors, the BANK claimed that Marcos had yet to pay the loan.
The appellate court deleted the award of attorneys fees. It noted that the trial court failed to justify the award of attorneys fees in

the text of its decision. The dispositive portion of the decision of the Court of Appeals reads:
WHEREFORE, premises considered, the appealed decision is SET ASIDE. A new judgment is hereby rendered
ordering the appellant bank to return to the appellee his time deposit in the sum of P764,897.67 with 17% interest within 90
days from March 11, 1982 in accordance with the letter-certification and with legal interest thereafter until fully paid. Costs
against the appellant.
SO ORDERED.xviii[18] (Emphasis supplied)

The Issues
The BANK anchors this petition on the following issues:
1)
WHETHER OR NOT THE PETITIONER [sic] ABLE TO PROVE THE PRIVATE RESPONDENTS
OUTSTANDING OBLIGATIONS SECURED BY THE ASSIGNMENT OF TIME DEPOSITS?
1.1)
COROLLARILY, WHETHER OR NOT THE PROVISIONS OF SECTION 8 RULE 10 OF [sic]
THEN REVISED RULES OF COURT BE APPLIED [sic] SO AS TO CREATE A JUDICIAL ADMISSION ON THE
GENUINENESS AND DUE EXECUTION OF THE ACTIONABLE DOCUMENTS APPENDED TO THE
PETITIONERS ANSWER?
2)
WHETHER OR NOT PETITIONER [sic] DEPRIVED OF DUE PROCESS WHEN THE LOWER COURT HAS
[sic] DECLARED PETITIONER TO HAVE WAIVED PRESENTATION OF FURTHER EVIDENCE AND CONSIDERED THE
CASE SUBMITTED FOR RESOLUTION?xix[19]

The Ruling of the Court

The petition is without merit.

Procedural Issues
There was no violation of the BANKs right to procedural due process when the trial court denied the BANKs motion to crossexamine Marcos. Prior to the denial of the motion, the trial court had properly declared the BANK in default. Since the BANK was in
default, Marcos was able to present his evidence ex-parte including his own testimony. When the trial court lifted the order of default,
the BANK was restored to its standing and rights in the action. However, as a rule, the proceedings already taken should not be
disturbed.xx[20] Nevertheless, it is within the trial courts discretion to reopen the evidence submitted by the plaintiff and allow the
defendant to challenge the same, by cross-examining the plaintiffs witnesses or introducing countervailing evidence. xxi[21] The 1964
Rules of Court, the rules then in effect at the time of the hearing of this case, recognized the trial courts exercise of this discretion. The
1997 Rules of Court retained this discretion.xxii[22] Section 3, Rule 18 of the 1964 Rules of Court reads:
Sec. 3.Relief from order of default. A party declared in default may any time after discovery thereof and before
judgment file a motion under oath to set aside the order of default upon proper showing that his failure to answer was due to
fraud, accident, mistake or excusable neglect and that he has a meritorious defense. In such case the order of default may
be set aside on such terms and conditions as the judge may impose in the interest of justice. (Emphasis supplied)
The records show that the BANK did not ask the trial court to restore its right to cross-examine Marcos when it sought the lifting of
the default order on 9 January 1990. Thus, the order dated 7 February 1990 setting aside the order of default did not confer on the
BANK the right to cross-examine Marcos. It was only on 2 March 1990 that the BANK filed the motion to cross-examine Marcos.
During the 12 March 1990 hearing, the trial court denied the BANKs oral manifestation to grant its motion to cross-examine Marcos
because there was no proof of service on Marcos. The BANKs counsel pleaded for reconsideration but the trial court denied the plea
and ordered the BANK to present its evidence. Instead of presenting its evidence, the BANK moved for the resetting of the hearing and
when the trial court denied the same, the BANK informed the trial court that it was elevating the denial to the upper court.xxiii[23]
To repeat, the trial court had previously declared the BANK in default. The trial court therefore had the right to decide whether or
not to disturb the testimony of Marcos that had already been terminated even before the trial court lifted the order of default.
We do not agree with the appellate courts ruling that a motion to cross-examine is a non-litigated motion and that the trial court
gravely abused its discretion when it denied the motion to cross-examine. A motion to cross-examine is adversarial. The adverse party
in this case had the right to resist the motion to cross-examine because the movant had previously forfeited its right to cross-examine
the witness. The purpose of a notice of a motion is to avoid surprises on the opposite party and to give him time to study and meet the
arguments.xxiv[24] In a motion to cross-examine, the adverse party has the right not only to prepare a meaningful opposition to the motion
but also to be informed that his witness is being recalled for cross-examination. The proof of service was therefore indispensable and
the trial court was correct in denying the oral manifestation to grant the motion for cross-examination.
We find no justifiable reason to relax the application of the rule on notice of motions xxv[25] to this case. The BANK could have easily
re-filed the motion to cross-examine with the requisite notice to Marcos. It did not do so. The BANK did not make good its threat to
elevate the denial to a higher court. The BANK waited until the trial court rendered a judgment on the merits before questioning the
interlocutory order of denial.
While the right to cross-examine is a vital element of procedural due process, the right does not necessarily require an actual
cross-examination, but merely an opportunity to exercise this right if desired by the party entitled to it. xxvi[26] Clearly, the BANKs failure to
cross-examine is imputable to the BANK when it lost this right xxvii[27] as it was in default and failed thereafter to exhaust the remedies to
secure the exercise of this right at the earliest opportunity.
The two other procedural lapses that the BANK attributes to the appellate and trial courts deserve scant consideration.
The BANK raises for the very first time the issue of judicial admission on the part of Marcos. The BANK even has the audacity to
fault the Court of Appeals for not ruling on this issue when it never raised this matter before the appellate court or before the trial court.

Obviously, this issue is only an afterthought. An issue raised for the first time on appeal and not raised timely in the proceedings in the
lower court is barred by estoppel.1
The BANK cannot claim that Marcos had admitted the due execution of the documents attached to its answer because the BANK
filed its answer late and even failed to serve it on Marcos. The BANKs answer, including the actionable documents it pleaded and
attached to its answer, was a mere scrap of paper. There was nothing that Marcos could specifically deny under oath. Marcos had
already completed the presentation of his evidence when the trial court lifted the order of default and admitted the BANKs answer. The
provision of the Rules of Court governing admission of actionable documents was not enacted to reward a party in default. We will not
allow a party to gain an advantage from its disregard of the rules.
As to the issue of its right to present additional evidence, we agree with the Court of Appeals that the trial court correctly ruled that
the BANK had waived this right. The BANK cannot now claim that it was deprived of its right to conduct a re-direct examination of
Pagsaligan. The BANK postponed the hearings three timesxxviii[29] because of its inability to secure Pagsaligans presence during the
hearings. The BANK could have presented another witness or its other evidence but it obstinately insisted on the resetting of the
hearing because of Pagsaligans absence allegedly due to illness.
The BANKs propensity for postponements had long delayed the case. Its motion for postponement based on Pagsaligans illness
was not even supported by documentary evidence such as a medical certificate. Documentary evidence of the illness is necessary
before the trial court could rule that there is a sufficient basis to grant the postponement.xxix[30]

The BANKs Fiduciary Duty to its Depositor

The BANK is liable to Marcos for offsetting his time deposits with a fictitious promissory note. The existence of Promissory Note
No. 20-979-83 could have been easily proven had the BANK presented the original copies of the promissory note and its supporting
evidence. In lieu of the original copies, the BANK presented the machine copies of the duplicate of the documents. These substitute
documents have no evidentiary value. The BANKs failure to explain the absence of the original documents and to maintain a record of
the offsetting of this loan with the time deposits bring to fore the BANKs dismal failure to fulfill its fiduciary duty to Marcos.
Section 2 of Republic Act No. 8791 (General Banking Law of 2000) expressly imposes this fiduciary duty on banks when it
declares that the State recognizes the fiduciary nature of banking that requires high standards of integrity and performance. This
statutory declaration merely echoes the earlier pronouncement of the Supreme Court in Simex International (Manila) Inc. v. Court of
Appealsxxx[31] requiring banks to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of
their relationship.xxxi[32] The Court reiterated this fiduciary duty of banks in subsequent cases.xxxii[33]
Although RA No. 8791 took effect only in the year 2000,xxxiii[34] at the time that the BANK transacted with Marcos, jurisprudence had
already imposed on banks the same high standard of diligence required under RA No. 8791.xxxiv[35] 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.
Thus, the BANKs fiduciary duty imposes upon it a higher level of accountability than that expected of Marcos, a businessman, who
negligently signed blank forms and entrusted his certificates of time deposits to Pagsaligan without retaining copies of the certificates.
The business of banking is imbued with public interest. The stability of banks largely depends on the confidence of the people in
the honesty and efficiency of banks. In Simex International (Manila) Inc. v. Court of Appeals xxxv[36] we pointed out the depositors
reasonable expectations from a bank and the banks corresponding duty to its depositor, as follows:
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.
As the BANKs depositor, Marcos had the right to expect that the BANK was accurately recording his transactions with it. Upon
the maturity of his time deposits, Marcos also had the right to withdraw the amount due him after the BANK had correctly debited his
outstanding obligations from his time deposits.
By the very nature of its business, the BANK should have had in its possession the original copies of the disputed promissory note
and the records and ledgers evidencing the offsetting of the loan with the time deposits of Marcos. The BANK inexplicably failed to
produce the original copies of these documents. Clearly, the BANK failed to treat the account of Marcos with meticulous care.
The BANK claims that it is a reputable banking institution and that it has no reason to forge Promissory Note No. 20-979-83. The
trial court and appellate court did not rule that it was the bank that forged the promissory note. It was Pagsaligan, the BANKs branch
manager and a close friend of Marcos, whom the trial court categorically blamed for the fictitious loan agreements. The trial court held
that Pagsaligan made up the loan agreement to cover up his inability to account for the time deposits of Marcos.
Whether it was the BANKs negligence and inefficiency or Pagsaligans misdeed that deprived Marcos of the amount due him will
not excuse the BANK from its obligation to return to Marcos the correct amount of his time deposits with interest. The duty to observe
high standards of integrity and performance imposes on the BANK that obligation. The BANK cannot also unjustly enrich itself by
keeping Marcos money.
Assuming Pagsaligan was behind the spurious promissory note, the BANK would still be accountable to Marcos. We have held
that a bank is liable for the wrongful acts of its officers done in the interest of the bank or in their dealings as bank representatives but
not for acts outside the scope of their authority.xxxvi[37] Thus, we held:
A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus
be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such
frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation
is liable to innocent third persons where the representation is made in the course of its business by an agent acting within
the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit.xxxvii[38]

The Existence of Promissory Note No. 20-979-83 was not Proven

The BANK failed to produce the best evidence the original copies of the loan application and promissory note. The Best
Evidence Rule provides that the court shall not receive any evidence that is merely substitutionary in its nature, such as photocopies,
as long as the original evidence can be had. xxxviii[39] Absent a clear showing that the original writing has been lost, destroyed or cannot be
produced in court, the photocopy must be disregarded, being unworthy of any probative value and being an inadmissible piece of
evidence.xxxix[40]
What the BANK presented were merely the machine copies of the duplicate of the loan application and promissory note. No
explanation was ever offered by the BANK for its inability to produce the original copies of the documentary evidence. The BANK also
did not comply with the orders of the trial court to submit the originals.
The purpose of the rule requiring the production of the best evidence is the prevention of fraud. xl[41] If a party is in possession of
evidence and withholds it, and seeks to substitute inferior evidence in its place, the presumption naturally arises that the better
evidence is withheld for fraudulent purposes, which its production would expose and defeat.xli[42]
The absence of the original of the documentary evidence casts suspicion on the existence of Promissory Note No. 20-979-83
considering the BANKs fiduciary duty to keep efficiently a record of its transactions with its depositors. Moreover, the circumstances
enumerated by the trial court bolster the conclusion that Promissory Note No. 20-979-83 is bogus. The BANK has only itself to blame
for the dearth of competent proof to establish the existence of Promissory Note No. 20-979-83.

Total Amount Due to Marcos

The BANK and Marcos do not now dispute the ruling of the Court of Appeals that the total amount of time deposits that Marcos placed
with the BANK is only P764,897.67 and not P1,429,795.34 as found by the trial court. The BANK has always argued that Marcos time
deposits only totalled P764,897.67.xlii[43] What the BANK insists on in this petition is the trial courts violation of its right to procedural due
process and the absence of any obligation to pay or return anything to Marcos. Marcos, on the other hand, merely prays for the
affirmation of either the trial court or appellate court decision.xliii[44] We uphold the finding of the Court of Appeals as to the amount of the
time deposits as such finding is in accord with the evidence on record.
Marcos claimed that the certificates of time deposit were with Pagsaligan for safekeeping. Marcos was only able to present the
receipt dated 11 March 1982 and the letter-certification dated 12 March 1982 to prove the total amount of his time deposits with the
BANK. The letter-certification issued by Pagsaligan reads:
March 12, 1982
Dear Mr. Marcos:
This is to certify that we are taking care in your behalf various Time Deposit Certificates with an aggregate value of
PESOS: SEVEN HUNDRED SIXTY FOUR THOUSAND EIGHT HUNDRED NINETY SEVEN AND 67/100 (P764,897.67)
ONLY, issued today for 90 days at 17% p.a. with the interest payable at maturity on June 10, 1982.
Thank you.
Sgd. FLORENCIO B. PAGSALIGAN
Branch Managerxliv[45]
The foregoing certification is clear. The total amount of time deposits of Marcos as of 12 March 1982 is P764,897.67, inclusive of
the sum of P664,987.67 that Marcos placed on time deposit on 11 March 1982. This is plainly seen from the use of the word
aggregate.
We are not swayed by Marcos testimony that the certification is actually for the first time deposit that he placed on 11 March 1982.
The letter-certification speaks of various Time Deposits Certificates with an aggregate value of P764,897.67. If the amount stated in
the letter-certification is for a single time deposit only, and did not include the 11 March 1982 time deposit, then Marcos should have
demanded a new letter of certification from Pagsaligan. Marcos is a businessman. While he already made an error in judgment in
entrusting to Pagsaligan the certificates of time deposits, Marcos should have known the importance of making the letter-certification
reflect the true nature of the transaction. Marcos is bound by the letter-certification since he was the one who prodded Pagsaligan to
issue it.
We modify the amount that the Court of Appeals ordered the BANK to return to Marcos. The appellate court did not offset
Marcos outstanding debt with the BANK covered by the three trust receipt agreements even though Marcos admits his obligation under
the three trust receipt agreements. The total amount of the trust receipts is P851,250 less the 30% marginal deposit of P255,375 that
Marcos had already paid the BANK. This reduced Marcos total debt with the BANK to P595,875 under the trust receipts.
The trial and appellate courts found that the parties did not agree on the imposition of interest on the loan covered by the trust
receipts and thus no interest is due on this loan. However, the records show that the three trust receipt agreements contained
stipulations for the payment of interest but the parties failed to fill up the blank spaces on the rate of interest. Put differently, the BANK
and Marcos expressly agreed in writing on the payment of interest xlv[46] without, however, specifying the rate of interest. We, therefore,
impose the legal interest of 12% per annum, the legal interest for the forbearance of money,xlvi[47] on each of the three trust receipts.
Based on Marcos testimonyxlvii[48] and the BANKs letter of demand, xlviii[49] the trust receipt agreements became due in March 1987.
The records do not show exactly when in March 1987 the obligation became due. In accordance with Article 2212 of the Civil Code, in
such a case the court shall fix the period of the duration of the obligation. xlix[50] The BANKs letter of demand is dated 6 March 1989. We
hold that the trust receipts became due on 6 March 1987.
Marcos payment of the marginal deposit of P255,375 for the trust receipts resulted in the proportionate reduction of the three trust
receipts. The reduced value of the trust receipts and their respective interest as of 6 March 1987 are as follows:
1.
Trust Receipt No. CD 83.7 issued on 8 March 1983 originally for P300,000 was reduced to P210,618.75 with
interest of P101,027.76.l[51]
2.

Trust Receipt No. CD 83.9 issued on 15 March 1983 originally for P300,000 was reduced to P210,618.75 with

interest of P100,543.04.li[52]
3.
Trust Receipt No. CD 83.10 issued on 15 March 1983 originally for P251,250 was reduced to P174,637.5 with
interest of P83,366.68. lii[53]
When the trust receipts became due on 6 March 1987, Marcos owed the BANK P880,812.48. This amount included P595,875, the
principal value of the three trust receipts after payment of the marginal deposit, and P284,937.48, the interest then due on the three
trust receipts.
Upon maturity of the three trust receipts, the BANK should have automatically deducted, by way of offsetting, Marcos outstanding
debt to the BANK from his time deposits and its accumulated interest. Marcos time deposits of P764,897.67 had already earned
interestliii[54] of P616,318.92 as of 6 March 1987. liv[55] Thus, Marcos total funds with the BANK amounted to P1,381,216.59 as of the
maturity of the trust receipts. After deducting P880,812.48, the amount Marcos owed the BANK, from Marcos funds with the BANK of
P1,381,216.59, Marcos remaining time deposits as of 6 March 1987 is only P500,404.11. The accumulated interest on this
P500,404.11 as of 30 August 1989, the date of filing of Marcos complaint with the trial court, is P211,622.96. lv[56] From 30 August 1989,
the interest due on the accumulated interest of P211,622.96 should earn legal interest at 12% per annum pursuant to Article 2212lvi[57] of
the Civil Code.
The BANKs dismal failure to account for Marcos money justifies the award of moral lvii[58] and exemplary damages.lviii[59] Certainly,
the BANK, as employer, is liable for the negligence or the misdeed of its branch manager which caused Marcos mental anguish and
serious anxiety.lix[60] Moral damages of P100,000 is reasonable and is in accord with our rulings in similar cases involving banks
negligence with regard to the accounts of their depositors.lx[61]
We also award P20,000 to Marcos as exemplary damages. The law allows the grant of exemplary damages by way of example
for the public good.lxi[62] The public relies on the banks fiduciary duty to observe the highest degree of diligence. The banking sector is
expected to maintain at all times this high level of meticulousness.lxii[63]
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Philippine Banking Corporation
is ordered to return to private respondent Leonilo Marcos P500,404.11, the remaining principal amount of his time deposits, with
interest at 17% per annum from 30 August 1989 until full payment. Petitioner Philippine Banking Corporation is also ordered to pay to
private respondent Leonilo Marcos P211,622.96, the accumulated interest as of 30 August 1989, plus 12% legal interest per annum
from 30 August 1989 until full payment. Petitioner Philippine Banking Corporation is further ordered to pay P100,000 by way of moral
damages and P20,000 as exemplary damages to private respondent Leonilo Marcos.
Costs against petitioner.
SO ODERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., Concur

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