ARMANDO V.

ALANO [Deceased], Substituted by Elena Alano-Torres,* - versus-PLANTERS DEVELOPMENT

BANK, as Successor-in-Interest of MAUNLADSAVINGS and LOAN ASSOCIATION, INC.,⃰ ⃰ ⃰ G.R. No. 171628 June
13, 2011

FACTS:Petitioner Armando V. Alano and his brother, the late Agapito V. Alano, Jr., inherited from their father a parcel of land
located at Gov. Forbes St., Sampaloc, Manila. On June 30, 1988, petitioner executed a SPA[5] authorizing his brother to sell their
property in Manila. From the proceeds of the sale, the brothers purchased a residential house located at No. 60 Encarnacion St., BF
Homes, Quezon City.[6] The title of the Quezon City property, however, was not immediately transferred to them because the duplicate
and original copies of the title were destroyed by a fire that gutted the Quezon City Hall Building.[7]

On June 27, 1990, Agapito V. Alano, Jr. died leaving behind his wife, Lydia J. Alano (Lydia), and four legitimate children, who
adjudicated to themselves the property in Quezon City.[8] Consequently, title to the said property was reconstituted as (TCT) No.
18990 and registered solely in the names of Lydia and her four children.[9] This prompted petitioner to execute an Affidavit of Adverse
Claim[10] which was annotated on TCT No. 18990.[11] But because of the assurance of his nieces that they would put things right,
petitioner agreed to delay the filing of a case in court.[12]

Meanwhile, Lydia filed with the Register of Deeds of Quezon City an Affidavit of Cancellation of Adverse Claim,[13] which
caused the cancellation of the adverse claim annotated on TCT No. 18990.[14] Thereafter, by virtue of a Deed of Absolute
Sale[15] allegedly executed by her children in her favor, TCT No. 18990 was cancelled and a new one, TCT No. 90388, was issued
solely in her name.[16]

On February 8, 1994, Slumberworld, Inc., represented by its President, Melecio A. Javier, and Treasurer, Lydia, obtained
from Maunlad Savings and Loan Association, Inc. a loan of P2.3 million, secured by a Real Estate Mortgage[17] over the property
covered by TCT No. 90388.
RTC rendered its Decision[23] declaring petitioner the owner of one-half of the subject property since an implied trust
exists between him and the heirs of his brother.[24] The RTC, however, sustained the validity of the real estate
mortgage.[25] According to the RTC, Maunlad Savings and Loan Association, Inc. had the right to rely on the Torrens title as
there was no reason for it to doubt the mortgagors ownership over the subject property. Petitioner appealed[30] to the CA but to
no avail. The CA found Maunlad Savings and Loan Association, Inc. to be a mortgagee in good faith since it took the necessary
precautions to ascertain the status of the property sought to be mortgaged as well as the identity of the mortgagor by
conducting an ocular inspection of the property and requiring the submission of documents, such as the latest tax receipts and
tax clearance.

ISSUE: WHETHER DEFENDANT MAUNLAD SAVINGS AND LOAN ASSOCIATION, INC. WAS AN INNOCENT
MORTGAGEE IN GOOD FAITH.

HELD: The general rule that a mortgagee need not look beyond the title does not apply to banks and other financial
institutions as greater care and due diligence is required of them.[48] Imbued with public interest, they are expected to be more cautious
than ordinary individuals.[49] Thus, before approving a loan, the standard practice for banks and other financial institutions is to conduct
an ocular inspection of the property offered to be mortgaged and verify the genuineness of the title to determine the real owner or
owners thereof.[50] Failure to do so makes them mortgagees in bad faith.

In this case, petitioner contends that Maunlad Savings and Loan Association, Inc. failed to exercise due diligence
in inspecting and ascertaining the status of the mortgaged property because during the ocular inspection, the credit investigator failed
to ascertain the actual occupants of the subject property and to discover petitioners apartment at the back portion of the subject
property.
Clearly, while the credit investigator conducted an ocular inspection of the property as well as a neighborhood checking and
found the subject property occupied by the mortgagor Lydia and her children,[53] he, however, failed to ascertain whether the
property was occupied by persons other than the mortgagor. Had he done so, he would have discovered that the subject
property is co-owned by petitioner and the heirs of his brother. Since Maunlad Savings and Loan Association, Inc. was remiss in
its duty in ascertaining the status of the property to be mortgaged and verifying the ownership thereof, it is deemed a mortgagee
in bad faith. Consequently, the real estate mortgage executed in its favor is valid only insofar as the share of the
mortgagor Lydia in the subject property.
BPI FAMILY SAVINGS BANK, INC., petitioner, vs. FIRST METRO INVESTMENT CORPORATION, respondent. [G.R.
No. 132390. May 21, 2004]

FACTS: First Metro Investment Corporation (FMIC), respondent, is an investment house organized under Philippine
laws. Petitioner, Bank of Philippine Islands Family Savings Bank, Inc. is a banking corporation also organized under
Philippine laws.
On August 25, 1989, FMIC, through its Executive Vice President Antonio Ong, opened current account no. 8401-
07473-0 and deposited METROBANK check no. 898679 of P100 million with BPI Family Bank * (BPI FB) San Francisco
del Monte Branch (Quezon City). 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. Sebastians 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 latters 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 FMICs current account to the savings account of Tevesteco
Arrastre Stevedoring, Inc. (Tevesteco).
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 (DAIF).
ISSUE: WHETHER THE transaction MADE BY its Branch Manager, Jaime Sebastian VALID OR NOT AS IT clearly
overstepped his authority in entering into such an agreement with respondents Executive Vice President.

HELD: VALID. Petitioners 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 respondents representative in failing to find out the scope of authority of petitioners 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 respondents Executive Vice President concerning the deposit with the corresponding 17% interest per
annum.
hus, 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 millions of pesos.[10] Here, petitioner cannot claim
it exercised such a degree of care required of it and must, therefore, bear the consequence.
FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, petitioner, vs., COURT OF APPEALS and LUZON
DEVELOPMENT BANK, respondents. G.R. No. 113236. March 5, 2001

FACTS: [D]efendant is a banking corporation. It operates under a certificate of authority issued by the Central Bank of the
Philippines, and among its activities, accepts savings and time deposits. Said defendant had as one of its client-
depositors the Fojas-Arca Enterprises Company (Fojas-Arca for brevity). Fojas-Arca maintaining a special savings
account with the defendant, the latter authorized and allowed withdrawals of funds therefrom through the medium of
special withdrawal slips. These are supplied by the defendant to Fojas-Arca.

In January 1978, plaintiff and Fojas-Arca entered into a Franchised Dealership Agreement (Exh. B) whereby Fojas-Arca
has the privilege to purchase on credit and sell plaintiffs products.

On January 14, 1978 up to May 15, 1978. Pursuant to the aforesaid Agreement, Fojas-Arca purchased on credit Firestone
products from plaintiff with a total amount of P4,896,000.00. In payment of these purchases, Fojas-Arca delivered to
plaintiff six (6) special withdrawal slips drawn upon the defendant. In turn, these were deposited by the plaintiff with its
current account with the Citibank. All of them were honored and paid by the defendant. This singular circumstance made
plaintiff believe [sic] and relied [sic] on the fact that the succeeding special withdrawal slips drawn upon the defendant
would be equally sufficiently funded. Relying on such confidence and belief and as a direct consequence thereof, plaintiff
extended to Fojas-Arca other purchases on credit of its products.

The initial transaction in this case was between petitioner and Fojas-Arca, whereby the latter purchased tires from
the former with special withdrawal slips drawn upon Fojas-Arcas special savings account with respondent bank. Petitioner
in turn deposited these withdrawal slips with Citibank. The latter credited the same to petitioners current account, then
presented the slips for payment to respondent bank. It was at this point that the bone of contention arose.
On December 14, 1978, Citibank informed petitioner that special withdrawal slips Nos. 42127 and 42129 dated June
15, 1978 and August 15, 1978, respectively, were refused payment by respondent bank due to insufficiency of Fojas-
Arcas funds on deposit. That information came about six months from the time Fojas-Arca purchased tires from petitioner
using the subject withdrawal slips. Citibank then debited the amount of these withdrawal slips from petitioners account,
causing the alleged pecuniary damage subject of petitioners cause of action.

ISSUE: whether or not respondent bank should be held liable for damages suffered by petitioner, due to its allegedly
belated notice of non-payment of the subject withdrawal slips.
HELD: In the case at bar, it appears that Citibank, with the knowledge that respondent Luzon Development Bank,
had honored and paid the previous withdrawal slips, automatically credited petitioners current account with the amount of
the subject withdrawal slips, then merely waited for the same to be honored and paid by respondent bank. It presumed
that the withdrawal slips were good.
It bears stressing that Citibank could not have missed the non-negotiable nature of the withdrawal slips. The essence
of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a
substitute for money.[12] The withdrawal slips in question lacked this character.
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 millions of pesos.[13] The fact that the other withdrawal slips were honored and paid by
respondent bank was no license for Citibank to presume that subsequent slips would be honored and paid
immediately. By doing so, it failed in its fiduciary duty to treat the accounts of its clients with the highest degree of care. [14]
In the ordinary and usual course of banking operations, current account deposits are accepted by the bank on the
basis of deposit slips prepared and signed by the depositor, or the latters agent or representative, who indicates therein
the current account number to which the deposit is to be credited, the name of the depositor or current account holder, the
date of the deposit, and the amount of the deposit either in cash or in check.[15]
The withdrawal slips deposited with petitioners current account with Citibank were not checks, as petitioner
admits. Citibank was not bound to accept the withdrawal slips as a valid mode of deposit. But having erroneously
accepted them as such, Citibank and petitioner as account-holder must bear the risks attendant to the acceptance of
these instruments. Petitioner and Citibank could not now shift the risk and hold private respondent liable for their admitted
mistake.
Citibank, N.A - versus -Spouses Luis and Carmelita Cabamongan and their sons Luis Cabamongan, Jr. And
Lito Cabamongan, G.R. No. 146918 May 2, 2006

FACTS: On August 16, 1993, spouses Luis and Carmelita Cabamongan opened a joint and/or foreign currency time
deposit in trust for their sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch, with Reference No. 60-22214372, in
the amount of $55,216.69 for a term of 182 days or until February 14, 1994, at 2.5625 per cent interest per
annum.[3] Prior to maturity, or on November 10, 1993, a person claiming to be Carmelita went to the Makati branch and
pre-terminated the said foreign currency time deposit by presenting a passport, a Bank of America Versatele Card, an
ATM card and a Mabuhay Credit Card.[4] She filled up the necessary forms for pre-termination of deposits with the
assistance of Account Officer Yeye San Pedro. While the transaction was being processed, she was casually interviewed
by San Pedro about her personal circumstances and investment plans.[5] Since the said person failed to surrender the
original Certificate of Deposit, she had to execute a notarized release and waiver document in favor of Citibank, pursuant
to Citibanks internal procedure, before the money was released to her.[6] The release and waiver document[7] was not
notarized on that same day but the money was nonetheless given to the person withdrawing.[8] The transaction lasted for
about 40 minutes.[9] Respondent spouses learned of the incident and informed petitioner bank that Carmelita could not
have pre-terminated the account since she was in the US at that time. The spouses made a formal demand of payment of
the deposit and consequently, filed a complaint when petitioner refused to pay. Petitioner bank insists that it was not
negligent of its duties since the deposit was released upon proper identification and verification. RTC ruled in favor of the
spouses. CA affirmed.

ISSUE: Whether or not petitioner bank was negligent in its duties as to be liable for damages

HELD:YES. The Court has 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
diligence[40] is expected,[41] and high standards of integrity and performance are even required, of it. [42] By the nature of its
functions, a bank is under obligation to treat the accounts of its depositors with meticulous care, [43] always having in mind
the fiduciary nature of their relationship.[44]

In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for pretermination of
deposits are forgeries. Citibank, with its signature verification procedure, failed to detect the forgery. Its negligence
consisted in the omission of that degree of diligence required of banks. The Court has held that a bank is bound to know
the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own
funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. [45] Such
principle equally applies here.

Citibank cannot label its negligence as mere mistake or human error. Banks handle daily transactions involving
millions of pesos.[46] By the very nature of their works the degree of responsibility, care and trustworthiness expected of
their employees and officials is far greater than those of ordinary clerks and employees. [47] Banks are expected to
exercise the highest degree of diligence in the selection and supervision of their employees. [48]