1.

BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs. COURT OF
G.R. No. 112392.
February 29, 2000

2. BANK OF THE PHILIPPINE ISLANDS

vs.
HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIM
G.R. No. 104612
May 10, 1994

3. CITYTRUST BANKING CORPORATION

vs.
THE INTERMEDIATE APPELLATE COURT
G.R. No. 84281
May 27, 1994

4. BPI FAMILY SAVINGS BANK, INCvs.

FIRST METRO INVESTMENT CORPORATION
G.R. No. 132390
May 21, 2004

5. JOSEPH E. ESTRADA
vs.
HON. ANIANO A. DESIERTO

G.R. No. 156160

December 9, 2004

. SECURITY BANK AND TRUST COMPANY, Inc., vs. RODOLFO M. CUENCA. SECURITY BANK
AND TRUST COMPANY, Inc., vs. RODOLFO M. CUENCAVVZVZVzVzvv
 BANK OF THE PHILIPPINE ISLANDS
vs.
HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIM
G.R. No. 104612
May 10, 1994

FACTS:
Private respondents Eastern Plywood Corporation (Eastern) and Benigno D. Lim (Lim), an officer and
stockholder of Eastern, held at least one joint bank account with the Commercial Bank and Trust Co.
(CBTC), the predecessor-in-interest of petitioner Bank of the Philippine Islands (BPI). Sometime in March
1975, a joint checking account with Lim in the amount of P120,000.00 was opened by Mariano Velasco
with funds withdrawn from the account of Eastern and/or Lim. Various amounts were later deposited or
withdrawn from the joint account of Velasco and Lim.

Velasco died on 7 April 1977. At the time of his death, the outstanding balance of the account stood at
P662,522.87. On 5 May 1977, by virtue of an Indemnity Undertaking executed by Lim for himself and as
President and General Manager of Eastern, one-half of this amount was provisionally released and
transferred to one of the bank accounts of Eastern with CBTC.

Thereafter, on 18 August 1978, Eastern obtained a loan of P73,000.00 from CBTC as "Additional Working
Capital," evidenced by the "Disclosure Statement on Loan/Credit Transaction" (Disclosure Statement)
signed by CBTC through its branch manager. . The loan was payable on demand with interest at 14% per
annum.

For this loan, Eastern issued on the same day a negotiable promissory note for P73,000.00 payable on
demand to the order of CBTC with interest at 14% per annum. In the Disclosure Statement, the box with
the printed word "UNSECURED" was marked with "X" — meaning unsecured, while the line with the
words "this loan is wholly/partly secured by" is followed by the typewritten words "Hold-Out on a 1:1 on
C/A No. 2310-001-42," which refers to the joint account of Velasco and Lim with a balance of
P331,261.44.

Eastern and Lim, and CBTC signed another document entitled "Holdout Agreement," dated 18 August
1978, wherein it was stated that "as security for the Loan have offered [CBTC] and the latter accepts a
holdout on said [Current Account No. 2310-011-42 in the joint names of Lim and Velasco] to the full
extent of their alleged interests therein as these may appear as a result of final and definitive judicial
action or a settlement between and among the contesting parties thereto."
Sometime in 1980, CBTC was merged with BPI. On December 2, 1987, BPI filed with the RTC of Manila
a complaint against Lim and Eastern demanding payment of the promissory note for P73,000.00.
Defendants Lim and Eastern, in turn, filed a counterclaim against BPI for the return of the balance in the
disputed account subject of the Holdout Agreement and the interests thereon after deducting the
amount due on the promissory note.
the trial court ruled that "the promissory note in question is subject to the 'hold-out' agreement," and
that based on this agreement, "it was the duty of plaintiff Bank [BPI] to debit the account of the
defendants under the promissory note to set off the loan even though the same has no fixed maturity."
As to the defendants' counterclaim, the trial court, recognizing the fact that the entire amount in
question had been withdrawn by Velasco's heirs pursuant to the order of the intestate court in denied it
because the "said claim cannot be awarded without disturbing the resolution" of the intestate court.

On 23 January 1991, the Court of Appeals rendered a decision affirming the decision of the trial court. it
ruled that the settlement of Velasco's estate had nothing to do with the claim of the defendants for the
return of the balance of their account with CBTC/BPI as they were not privy to that case, and that the
defendants, as depositors of CBTC/BPI, are the latter's creditors; hence, CBTC/BPI should have protected
the defendants' interest in Sp. Proc. No. 8959 when the said account was claimed by Velasco's estate. It
then ordered BPI "to pay defendants the amount of P331,261.44 representing the outstanding balance
in the bank account of defendants."
On 22 April 1992, BPI filed the instant petition alleging therein that the Holdout Agreement in question
was subject to a suspensive condition the "P331,261.44 shall become a security for respondent Lim's
promissory note only if respondents' Lim and Eastern Plywood Corporation's interests to that amount
are established as a result of a final and definitive judicial action or a settlement between and among the
contesting parties thereto.
Issues:
can BPI demand payment of the loan of P73,000.00 despite the existence of the Holdout Agreement and
is BPI still liable to the private respondents on the account subject of the Holdout Agreement after its
withdrawal by the heirs of Velasco.
Decision:

Yes The collection suit of BPI is based on the promissory note for P73,000.00. On its face, the note is an
unconditional promise to pay the said amount, and as stated by the respondent Court of Appeals,
further correctly ruled that BPI was not a holder in due course because the note was not indorsed to BPI
by the payee, CBTC. Only a negotiation by indorsement could have operated as a valid transfer to make
BPI a holder in due course. It acquired the note from CBTC by the contract of merger or sale between the
two banks. BPI, therefore, took the note subject to the Holdout Agreement.

It is clear from paragraph 02 thereof that CBTC, or BPI as its successor-in-interest, had every right to
demand that Eastern and Lim settle their liability under the promissory note. It cannot be compelled to
retain and apply the deposit in Lim and Velasco's joint account to the payment of the note. What the
agreement conferred on CBTC was a power, not a duty. Generally, a bank is under no duty or obligation
to make the application. To apply the deposit to the payment of a loan is a privilege, a right of set-off
which the bank has the option to exercise.
Also, paragraph 05 of the Holdout Agreement itself states that notwithstanding the agreement, CBTC
was not in any way precluded from demanding payment from Eastern and from instituting an action to
recover payment of the loan. What it provides is an alternative, not an exclusive, method of enforcing its
claim on the note. When it demanded payment of the debt directly from Eastern and Lim, BPI had opted
not to exercise its right to apply part of the deposit subject of the Holdout Agreement to the payment of
the promissory note for P73,000.00.

Yes. The account was proved and established to belong to Eastern even if it was deposited in the names
of Lim and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or to demand
payment thereof. BPI cannot be relieved of its duty to pay Eastern simply because it already allowed the
heirs of Velasco to withdraw the whole balance of the account.
As early as 12 May 1979, CBTC was notified by the Corporate Secretary of Eastern that the deposit in the
joint account of Velasco and Lim was being claimed by them and that one-half was being claimed by the
heirs of Velasco. 23

Moreover, the order of the court in Sp. Proc. No. 8959 merely authorized the heirs of Velasco to
withdraw the account. BPI was not specifically ordered to release the account to the said heirs; hence, it
was under no judicial compulsion to do so. The authorization given to the heirs of Velasco cannot be
construed as a final determination or adjudication that the account belonged to Velasco.
 CITYTRUST BANKING CORPORATION, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and EMME HERRERO, respondents.
G.R. No. 84281
May 27, 1994

FACTS:
Emme Herrero In her complaintmade regular deposits, starting September of 1979, with petitioner
Citytrust Banking Corporation at its Burgos branch in Calamba, Laguna. On 15 May 1980, she deposited
with petitioner the amount of Thirty One Thousand Five Hundred Pesos (P31,500.00), in cash, in order to
amply cover six (6) postdated checks.
When presented for encashment upon maturity, all the checks were dishonored due to "insufficient
funds." The last check No. 007400, however, was personally redeemed by private respondent in cash
before it could be redeposited.

Petitioner asserted that it was due to private respondent's fault that her checks were dishonored. It
averred that instead of stating her correct account number, i.e., 29000823, in her deposit slip, she
inaccurately wrote 2900823.

The Regional Trial Court is rendered in favor of the defendant and against the plaintiff.

Petitioner bank concedes that it is its obligation to honor checks issued by private respondent which are
sufficiently funded, but, it contends, private respondent has also the duty to use her account in
accordance with the rules of petitioner bank to which she has contractually acceded. Among such rules,
contained in its "brochures" governing current account deposits.
ISSUE:
IS CITY TRUST BANKING CORPORATION LIABLE FOR DAMAGES?

Decision:
We cannot uphold the position of defendant. For, even if it be true that there was error on the part of
the plaintiff in omitting a "zero" in her account number, yet, it is a fact that her name, "Emme E.
Herrero", is clearly written on said deposit slip This is controlling in determining in whose account the
deposit is made or should be posted. This is so because it is not likely to commit an error in one's name
than merely relying on numbers which are difficult to remember, especially a number with eight (8)
digits as the account numbers of defendant's depositors. We view the use of numbers as simply for the
convenience of the bank but was never intended to disregard the real name of its depositors. The bank is
engaged in business impressed with public interest, and it is its duty to protect in return its many clients
and depositors who transact business with it
We are not persuaded that defendant bank was not free from blame for the fiasco. In the first place, the
teller should not have accepted plaintiff's deposit without correcting the account number on the deposit
slip which, obviously, was erroneous because, as pointed out by defendant, it contained only seven (7)
digits instead of eight (8). Second, the complete name of plaintiff depositor appears in bold letters on the
deposit slip (Exh. "B"). There could be no mistaking in her name, and that the deposit was made in her
name, "Emma E. Herrero On the other hand, the depositors are not concerned with banking procedure.
That is the responsibility of the bank and its employees. Depositors are only concerned with the facility
of depositing their money, earning interest thereon, if any, and withdrawing therefrom, particularly
businessmen, like plaintiff, who are supposed to be always "on-the-go". Plaintiff's account is a "current
account" which should immediately be posted. After all, it does not earn interest. At least, the
forbearance should be commensurated with prompt, efficient and satisfactory service.

The point is that as a business affected with public interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.
 BPI FAMILY SAVINGS BANK, INC., petitioner,
vs.
FIRST METRO INVESTMENT CORPORATION, respondent.

G.R. No. 132390

May 21, 2004

FACTS:

On August 25, 1989, FMIC, through its Executive Vice President Antonio Ong, opened current account
and deposited METROBANK check no. 898679 of P100 million with BPI Family Bank (BPI FB) . Ong made
the deposit upon request of his friend, Ador de Asis, a close acquaintance of Jaime Sebastian, then
Branch Manager of BPI FB San Francisco del Monte Branch. Sebastian’s aim was to increase the deposit
level in his Branch.

BPI FB, through Sebastian, guaranteed the payment of P14,667,687.01 representing 17% per annum
interest of P100 million deposited by FMIC. The latter, in turn, assured BPI FB that it will maintain its
deposit of P100 million for a period of one year on condition that the interest of 17% per annum is paid
in advance.

This agreement between the parties was reached through their communications in writing.

Subsequently, BPI FB paid FMIC 17% interest or P14,667,687.01 upon clearance of the latter’s check
deposit.

However, on August 29, 1989, on the basis of an Authority to Debit signed by Ong and Ma. Theresa
David, Senior Manager of FMIC, BPI FB transferred P80 million from FMIC’s current account to the
savings account of Tevesteco Arrastre – Stevedoring, Inc.

FMIC denied having authorized the transfer of its funds to Tevesteco, claiming that the signatures of Ong
and David were falsified. Thereupon, to recover immediately its deposit, FMIC, on September 12, 1989,
issued BPI FB check no. 129077 for P86,057,646.72 payable to itself and drawn on its deposit with BPI FB
SFDM branch. But upon presentation for payment on September 13, 1989, BPI FB dishonored the check
as it was "drawn against insufficient funds

Consequently, FMIC filed A COMPLAINT against BPI FB. FMIC FILED an Information for estafa against
Ong, de Asis, Sebastian and four others. However, the Information was dismissed on the basis of a
demurrer to evidence filed by the accused.
Issue:
1. Was THE TRANSACTION BETWEEN FMIC AND BPI FB A TIME DEPOSIT or an
INTEREST-BEARING CURRENT ACCOUNT WHICH, UNDER THE EXISTING BANK
REGULATIONS, WAS AN ILLEGAL TRANSACTION?

2. Is the bank liable for the unauthorized transfer of respondent’s funds to Tevesteco?

Decision:
1. We hold that the parties did not intend the deposit to be treated as a demand deposit but rather
as an interest-earning time deposit not withdrawable any time.
When respondent FMIC invested its money with petitioner BPI FB, they intended the P100 million as a
time deposit, to earn 17% per annum interest and to remain intact until its maturity date one year
thereafter.

Ordinarily, a time deposit is defined as "one the payment of which cannot legally be required within such
a specified number of days.

In contrast, demand deposits are "all those liabilities of the Bangko Sentral and of other banks which are
denominated in Philippine currency and are subject to payment in legal tender upon demand by the
presentation of (depositor’s) checks.

While it may be true that barely one month and seven days from the date of deposit, respondent FMIC
demanded the withdrawal of P86,057,646.72 through the issuance of a check payable to itself, the same
was made as a result of the fraudulent and unauthorized transfer by petitioner BPI FB of its P80 million
deposit to Tevesteco’s savings account. Certainly, such was a normal reaction of respondent as a
depositor to petitioner’s failure in its fiduciary duty to treat its account with the highest degree of care.

Under this circumstance, the withdrawal of deposit by respondent FMIC before the one-year maturity
date did not change the nature of its time deposit to one of demand deposit.

We have held that if a corporation knowingly permits its officer, or any other agent, to perform acts
within the scope of an apparent authority, holding him out to the public as possessing power to do those
acts, the corporation will, as against any person who has dealt in good faith with the corporation through
such agent, be estopped from denying such authority.
Petitioner maintains that respondent should have first inquired whether the deposit of P100 Million and
the fixing of the interest rate were pursuant to its (petitioner’s) internal procedures. Petitioner’s stance is
a futile attempt to evade an obligation clearly established by the intent of the parties. What transpires in
the corporate board room is entirely an internal matter. Hence, petitioner may not impute negligence on
the part of respondent’s representative in failing to find out the scope of authority of petitioner’s Branch
Manager. Indeed, the public has the right to rely on the trustworthiness of bank managers and their acts.
Obviously, confidence in the banking system, which necessarily includes reliance on bank managers, is
vital in the economic life of our society

Significantly, the transaction was actually acknowledged and ratified by petitioner when it paid
respondent in advance the interest for one year. Thus, petitioner is estopped from denying that it
authorized its Branch Manager to enter into an agreement with respondent’s Executive Vice President
concerning the deposit with the corresponding 17% interest per annum.

2. Yes. We uphold the finding of both lower courts that petitioner failed to exercise that degree of
diligence required by the nature of its obligations to its depositors. A bank is under obligation to
treat the accounts of its depositors with meticulous care, whether such account consists only of
a few hundred pesos or of million of pesos.10 Here, petitioner cannot claim it exercised such a
degree of care required of it and must, therefore, bear the consequence.
 JOSEPH E. ESTRADA, petitioner,
vs.
HON. ANIANO A. DESIERTO

G.R. No. 156160

December 9, 2004

Facts:

On 23 January 2001, the Bureau of Internal Revenue (BIR) placed petitioner's foreign currency deposit
account at Citibank Greenhills Branch under constructive distraint;

Contending that the BIR action was unlawful, petitioner filed on 31 January 2001 a complaint against
respondent BIR before the Office of the Ombudsman for allegedly violating (a) Section 8 of the Foreign
Currency Deposits Act (Republic Act No. 6426); (b) Article 177 of the Revised Penal Code; and (c) Section
3(e) of the Anti-Graft and Corrupt Practices Act (Rep. Act No. 3019);

On 17 September 2001, the Evaluation and Preliminary Investigation Bureau (EPIB) of the Office of the
Ombudsman issued a Resolution recommending the dismissal of the aforesaid complaint for want of
probable cause to indict respondent bank and BIR officials;
On 19 November 2001, Paul Elmer Clemente, Legal Counsel, Acting Director–Office of the Chief Legal
Counsel (OCLC), issued a Memorandum approving EPIB's recommendation, a copy of which was received
by petitioner on 01 February 2002;
On 15 February 2002, petitioner filed a Motion for Reconsideration of said Resolution, upon the ground
that errors of fact and law were committed prejudicial to the interest of petitioner;

On 26 February 2002, respondents EPIB officers issued an order, approved by respondent Desierto,
denying petitioner's Motion for Reconsideration, a copy of which was received by petitioner on 06 June
2002;On 12 July 2002, petitioner filed a petition for certiorari under Rule 654 before the Court of
Appeals;

On 29 July 2002, the Court of Appeals promulgated the assailed resolution dismissing the petition on the
ground that it did not fall under its jurisdiction pursuant to Rep. Act No. 6770. The Court of Appeals held
–
Issue:

Did BIR violated Section 8 of the Foreign Currency Deposits Act (Republic Act No. 6426)?
Decision:
 this office in its previous Order dated 20 February 2001, ruled that the absolute confidentiality of
foreign currency deposit account provided for under R.A. 6426 does not apply to the foreign currency
deposit accounts of herein complainant, since the protection under the said law is intended only for
depositors who are non residents and are not engaged in trade and business in the Philippines. In
coming out with such ruling, this office has as its basis one of the Whereas clauses of P.D. 1246 which
amended Sec. 8 of R.A. 6426. For emphasis, the pertinent provision of the said law is hereby quoted:

WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit
System and offshore Banking System in the Philippines, certain incentives were provided for under the
two systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on the
interest of the income of depositors who are nonresidents and are not engaged in trade or business in
the Philippines.

, public respondents relied on the "whereas" clause of P.D. No. 1246 which amended Rep. Act No. 6426
and on the Salvacion case to conclude that only non-residents who are not engaged in trade and
business are under the mantle of protection of Section 8 of Rep. Act. No. 6426. Assuming that such
reliance is erroneous as contended by petitioner, this Court, on petition for certiorari, cannot correct the
same as the error is not of a degree that would amount to a clear case of abuse of discretion of the grave
and malevolent kind. It is axiomatic that not every erroneous conclusion of law or fact is abuse of
discretion. As adverted to earlier, this Court will interfere in the Ombudsman's findings of fact and
conclusions of law only in clear cases of grave abuse of discretion.
 BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and BENJAMIN C. NAPIZA,
respondents.
G.R. No. 112392.
February 29, 2000

Facts:
On September 3, 1987, private respondent deposited in Foreign Currency Deposit Unit (FCDU) Savings
Account No. 028-187[3] which he maintained in petitioner bank’s Buendia Avenue Extension Branch,
Continental Bank Manager’s Check No. 00014757[4] dated August 17, 1984, payable to "cash" in the
amount of Two Thousand Five Hundred Dollars ($2,500.00) and duly endorsed by private respondent on
its dorsal side . It appears that the check belonged to a certain Henry Chan who went to the office of
private respondent and requested him to deposit the check in his dollar account by way of
accommodation and for the purpose of clearing the same. Private respondent acceded, and agreed to
deliver to Chan a signed blank withdrawal slip, with the understanding that as soon as the check is
cleared, both of them would go to the bank to withdraw the amount of the check upon private
respondent’s presentation to the bank of his passbook.

Using the blank withdrawal slip given by private respondent to Chan, on October 23, 1984, one Ruben
Gayon, Jr. was able to withdraw the amount of $2,541.67 from FCDU Savings Account .Notably, the
withdrawal slip shows that the amount was payable to Ramon A. de Guzman and Agnes C. de Guzman
and was duly initialed by the branch assistant manager, Teresita Lindo

On November 20, 1984, petitioner received communication from the Wells Fargo Bank International of
New York that the said check deposited by private respondent was a counterfeit check. Consequently,
Mr. Ariel Reyes, the manager of petitioner’s Buendia Avenue Extension Branch, instructed one of its
employees, Benjamin D. Napiza IV, who is private respondent’s son, to inform his father that the check
bounced Reyes himself sent a telegram to private respondent regarding the dishonor of the check. In
turn, private respondent’s son wrote to Reyes stating that the check had been assigned "for
encashment" to Ramon A. de Guzman and/or Agnes C. de Guzman after it shall have been cleared upon
instruction of Chan. He also said that upon learning of the dishonor of the check, his father immediately
tried to contact Chan but the latter was out of town

Private respondent’s son undertook to return the amount of $2,500.00 to petitioner bank. On December
18, 1984, Reyes reminded private respondent of his son’s promise and warned that should he fail to
return that amount within seven (7) days, the matter would be referred to the bank’s lawyers for
appropriate action to protect the bank’s interest.

ISSUE:
WAS PETITIONER GROSSLY NEGLIGENT IN ALLOWING THE WITHDRAWAL?

Decision:
Yes. In Banco Atlantico v. Auditor General The Court held that the encashment of the checks without
prior clearance is "contrary to normal or ordinary banking practice specially so where the drawee bank is
a foreign bank and the amounts involved were large." Accordingly, the Court approved the Auditor
General’s denial of Banco Atlantico’s claim for payment of the value of the checks that was withdrawn by
Boncan.

In the case at bar, petitioner, in allowing the withdrawal of private respondent’s deposit, failed to
exercise the diligence of a good father of a family.

Petitioner violated its own rules by allowing the withdrawal of an amount that is definitely over and
above the aggregate amount of private respondent’s dollar deposits that had yet to be cleared. The
bank’s ledger on private respondent’s account shows that before he deposited $2,500.00, private
respondent had a balance of only $750.00

From these facts on record, it is at once apparent that petitioner’s personnel allowed the withdrawal of
an amount bigger than the original deposit of $750.00 and the value of the check deposited in the
amount of $2,500.00 although they had not yet received notice from the clearing bank in the United
States on whether or not the check was funded.

While it is true that private respondent’s having signed a blank withdrawal slip set in motion the events
that resulted in the withdrawal and encashment of the counterfeit check, the negligence of petitioner’s
personnel was the proximate cause of the loss that petitioner sustained. Proximate cause, which is
determined by a mixed consideration of logic, common sense, policy and precedent, is "that cause,
which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred.