G.R. No.

104612 May 10, 1994 BANK OF THE PHILIPPINE ISLANDS (successor-in- interest of COMMERCIAL AND TRUST CO.), petitioner, vs. HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIM, respondents. Leonen, Ramirez & Associates for petitioner. Constante A. Ancheta for private respondents. DAVIDE, JR., J.: The petitioner urges us to review and set aside the amended Decision 1 of 6 March 1992 of respondent Court of Appeals in CA- G.R. CV No. 25739 which modified the Decision of 15 November 1990 of Branch 19 of the Regional Trial Court (RTC) of Manila in Civil Case No. 87-42967, entitled Bank of the Philippine Islands (successorin-interest of Commercial Bank and Trust Company) versus Eastern Plywood Corporation and Benigno D. Lim. The Court of Appeals had affirmed the dismissal of the complaint but had granted the defendants' counterclaim for P331,261.44 which represents the outstanding balance of their account with the plaintiff. As culled from the records and the pleadings of the parties, the following facts were duly established: 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-ininterest 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in March 1975, a joint checking account with Lim in the amount of P120,000.00 was opened by Mariano Velasco with funds withdrawn from the account of Eastern and/or Lim. Various amounts were later deposited or withdrawn from the joint account of Velasco and Lim. The money therein was placed in the money market. 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, onehalf 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, Ceferino Jimenez, and Eastern, through Lim, as its President and General 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. The note was signed by Lim both in his own capacity and as President and General Manager of Eastern. No reference to any security for the loan appears on the note. 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. In addition, Eastern and Lim, and CBTC signed another document entitled "Holdout Agreement," also dated 18 August 1978, wherein it was stated that "as security for the Loan [Lim and Eastern] 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." Paragraph 02 of the Agreement provides as follows: Eastply [Eastern] and Mr. Lim hereby confer upon Comtrust [CBTC], when and if their alleged interests in the Account Balance shall have been established with finality, ample and sufficient power as shall be necessary to retain said Account Balance and enable Comtrust to apply the Account Balance for the purpose of liquidating the Loan in respect of principal and/or accrued interest. And paragraph 05 thereof reads: The acceptance of this holdout shall not impair the right of Comtrust to declare the loan payable on demand at any time, nor shall the existence hereof and the nonresolution of the dispute between the contending parties in respect of entitlement to the Account Balance, preclude Comtrust from instituting an action for recovery against Eastply and/or Mr. Lim in the event the Loan is declared due and payable and Eastply and/or Mr. Lim shall default in payment of all obligations and liabilities thereunder. In the meantime, a case for the settlement of Velasco's estate was filed with Branch 152 of the RTC of Pasig, entitled "In re Intestate Estate of Mariano Velasco," and docketed as Sp. Proc. No. 8959. In the said case, the whole balance of P331,261.44 in the aforesaid joint account of Velasco and Lim was being claimed as part of Velasco's estate. On 9 September 1986, the intestate court granted the urgent motion of the heirs of Velasco to withdraw the deposit under the joint account of Lim and Velasco and authorized the heirs to divide among themselves the amount withdrawn. Sometime in 1980, CBTC was merged with BPI. On 2 December 1987, BPI filed with the RTC of Manila a complaint against Lim and Eastern demanding payment of the promissory note for P73,000.00. The complaint was docketed as Civil Case No. 8742967 and was raffled to Branch 19 of the said court, then presided over by Judge Wenceslao M. Polo. 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.

After due proceedings, the trial court rendered its decision on 15 November 1990 dismissing the complaint because BPI failed to make out its case. Furthermore, it 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 Sp. Proc. No. 8959, denied it because the "said claim cannot be awarded without disturbing the resolution" of the intestate court. 12 Both parties appealed from the said decision to the Court of Appeals. Their appeal was docketed as CA-G.R. CV No. 25739. On 23 January 1991, the Court of Appeals rendered a decision affirming the decision of the trial court. It, however, failed to rule on the defendants' (private respondents') partial appeal from the trial court's denial of their counterclaim. Upon their motion for reconsideration, the Court of Appeals promulgated on 6 March 1992 an Amended Decision 13 wherein 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." 14 On 22 April 1992, BPI filed the instant petition alleging therein that the Holdout Agreement in question was subject to a suspensive condition stated therein, viz., that 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." 15 Hence, BPI asserts, the Court of Appeals erred in affirming the trial court's decision dismissing the complaint on the ground that it was the duty of CBTC to debit the account of the defendants to set off the amount of P73,000.00 covered by the promissory note. Private respondents Eastern and Lim dispute the "suspensive condition" argument of the petitioner. They interpret the findings of both the trial and appellate courts that the money deposited in the joint account of Velasco and Lim came from Eastern and Lim's own account as a finding that the money deposited in the joint account of Lim and Velasco "rightfully belong[ed] to Eastern Plywood Corporation and/or Benigno Lim." And because the latter are the rightful owners of the money in question, the suspensive condition does not find any application in this case and the bank had the duty to set off this deposit with the loan. They add that the ruling of the lower court that they own the disputed amount is the final and definitive judicial action required by the Holdout Agreement; hence, the petitioner can only hold the amount of P73,000.00 representing the security required for the note and must return the rest. 16

The petitioner filed a Reply to the aforesaid Comment. The private respondents filed a Rejoinder thereto. We gave due course to the petition and required the parties to submit simultaneously their memoranda. issues 1. can BPI demand payment of the loan of P73,000.00 despite the existence of the Holdout Agreement and 2. is BPI still liable to the private respondents on the account subject of the Holdout Agreement after its withdrawal by the heirs of Velasco. 1. 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, "[t]here is no question that the promissory note is a negotiable instrument. It 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. Its suit for the enforcement of the note was then in order and it was error for the trial court to dismiss it on the theory that it was set off by an equivalent portion in C/A No. 2310-001-42 which BPI should have debited. The Court of Appeals also erred in affirming such dismissal. The "suspensive condition" theory of the petitioner is, therefore, untenable. The Court of Appeals correctly decided on the counterclaim. The counterclaim of Eastern and Lim for the return of the P331,261.44 20 was equivalent to a demand that they be allowed to withdraw their deposit with the bank. Article 1980 of the Civil Code expressly provides that "[f]ixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan." In Serrano vs. Central Bank of the Philippines, 21 we held that bank deposits are in the nature of irregular deposits; they are really loans because they earn interest. The relationship then between a depositor and a bank is one of creditor and

debtor. The deposit under the questioned account was an ordinary bank deposit; hence, it was payable on demand of the depositor. 22 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. The petitioner should not have allowed such withdrawal because it had admitted in the Holdout Agreement the questioned ownership of the money deposited in 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. We have ruled that when the ownership of a particular property is disputed, the determination by a probate court of whether that property is included in the estate of a deceased is merely provisional in character and cannot be the subject of execution. 24 Because the ownership of the deposit remained undetermined, BPI, as the debtor with respect thereto, had no right to pay to persons other than those in whose favor the obligation was constituted or whose right or authority to receive payment is indisputable. The payment of the money deposited with BPI that will extinguish its obligation to the creditor-depositor is payment to the person of the creditor or to one authorized by him or by the law to receive it. 25 Payment made by the debtor to the wrong party does not extinguish the obligation as to the creditor who is without fault or negligence, even if the debtor acted in utmost good faith and by mistake as to the person of the creditor, or through error induced by fraud of a third person. 26 The payment then by BPI to the heirs of Velasco, even if done in good faith, did not extinguish its obligation to the true depositor, Eastern. In the light of the above findings, the dismissal of the petitioner's complaint is reversed and set aside. The award on the counterclaim is sustained subject to a modification of the interest. WHEREFORE, the instant petition is partly GRANTED. The challenged amended decision in CA-G.R. CV No. 25735 is hereby MODIFIED. As modified: (1) Private respondents are ordered to pay the petitioner the promissory note for P73,000.00 with interest at: (a) 14% per annum on the principal, computed from 18 August 1978 until payment;

(b) 12% per annum on the interest which had accrued up to the date of the filing of the complaint, computed from that date until payment pursuant to Article 2212 of the Civil Code. (2) The award of P331,264.44 in favor of the private respondents shall bear interest at the rate of 12% per annum computed from the filing of the counterclaim. No pronouncement as to costs. SO ORDERED. Cruz, Bellosillo, Quiason and Kapunan, JJ., concur

G.R. No. 84281

May 27, 1994

CITYTRUST BANKING CORPORATION, petitioner, vs. THE INTERMEDIATE APPELLATE COURT and EMME HERRERO, respondents. Agcaoili and Associates for petitioner. David B. Agoncillo for private respondent. Humberto B. Basco, collaborating counsel for private respondent.

VITUG, J.: This case emanated from a complaint filed by private respondent Emme Herrero for damages against petitioner Citytrust Banking Corporation. In her complaint, private respondent averred that she, a businesswoman, made 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 she issued, viz:

Check No. 007383 007384 007387 007387 007492 007400

Amount P1,507.00 1,262.00 4,299.00 2,204.00 6,281.00 4,716.00

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, in its answer, 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 (Branch XXXIV) of Calamba, Laguna, on 27 February 1984, dismissed the complaint for lack of merit; thus: WHEREFORE, judgment is hereby rendered in favor of the defendant and against the plaintiff, DISMISSING the complaint for lack of merit, plaintiff is hereby adjudged to pay the defendant reasonable attorney's fee in the amount of FIVE THOUSAND PESOS (P5,000.00) plus cost of suit. Private respondent went to the Court of Appeals, which found the appeal meritorious. Hence, it rendered judgment, on 15 July 1988, reversing the trial court's decision. The appellate court ruled: WHEREFORE, the judgment appealed from is REVERSED and a new one entered thereby ordering defendant to pay plaintiff nominal damages of P2,000.00, temperate and moderate damages of P5,000.00, and attorney's fees of P4,000.00. The counterclaim of defendant is dismissed for lack of merit, with costs against him. Petitioner Citytrust Banking Corporation is now before us in this petition for review on certiorari. 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, is the following printed provision: In making a deposit . . . kindly insure accuracy in filing said deposit slip forms as we hold ourselves free of any liability for loss due to an incorrect account number indicated in the deposit slip although the name of the depositor is correctly written.

Exactly the same issue was addressed by the appellate court, which, after its deliberations, made the following findings and conclusions: 1 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 (Exh. "B"). 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. It should not be a matter of the bank alone receiving deposits, lending out money and collecting interests. It is also its obligation to see to it that all funds invested with it are properly accounted for and duly posted in its ledgers. In the case before Us, 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." In fact, defendant's teller should not have fed her deposit slip to the computer knowing that her account number written thereon was wrong as it contained only seven (7) digits. As it happened, according to defendant, plaintiff's deposit had to be consigned to the suspense accounts pending verification. This, indeed, could have been avoided at the first instance had the teller of defendant bank performed her duties efficiently and well. For then she could have readily detected that the account number in the name of "Emma E. Herrero" was erroneous and would be rejected by the computer. That is, or should be, part of the training and standard operating procedure of the bank's employees. 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. Bank clients are supposed to rely on the services extended by the bank, including the assurance that their deposits will be duly credited them as soon as they are made. For, any delay in crediting their account can be embarrassing to them as in the case of plaintiff. We agree with plaintiff that

. . . even in computerized systems of accounts, ways and means are available whereby deposits with erroneous account numbers are properly credited depositor's correct account numbers. They add that failure on the part of the defendant to do so is negligence for which they are liable. As proof thereof plaintiff alludes to five particular incidents where plaintiff admittedly wrongly indicated her account number in her deposit slips (Exhs. "J", "L", "N", "O" and "P"), but were nevertheless properly credited her deposit (pp. 4-5, Decision). We have already ruled in Mundin v. Far East Bank & Trust Co., AC-G.R. CV No. 03639, prom. Nov. 2, 1985, quoting the court a quo in an almost identical set of facts, that Having accepted a deposit in the course of its business transactions, it behooved upon defendant bank to see to it and without recklessness that the depositor was accurately credited therefor. To post a deposit in somebody else's name despite the name of the depositor clearly written on the deposit slip is indeed sheer negligence which could have easily been avoided if defendant bank exercised due diligence and circumspection in the acceptance and posting of plaintiff's deposit. We subscribe to the above disquisitions of the appellate court. In Simex International (Manila), Inc. vs. Court of Appeals, 183 SCRA 360, reiterated in Bank of Philippine Islands vs. Intermediate Appellate Court, 206 SCRA 408, we similarly said, in cautioning depository banks on their fiduciary responsibility, that In every case, the depositor expects the bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank, such as the dishonor of a check without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. We agree with petitioner, however, that it is wrong to award, along with nominal damages, temperate or moderate damages. The two awards are incompatible and cannot be granted concurrently. Nominal damages are given in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him (Art. 2221, New Civil Code; Manila Banking Corp. vs. Intermediate Appellate Court, 131 SCRA 271). Temperate or moderate damages, which are more than nominal but less than compensatory damages, on the other hand, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with reasonable certainty (Art. 2224, New Civil Code).

In the instant case, we also find need for vindicating the wrong done on private respondent, and we accordingly agree with the Court of Appeals in granting to her nominal damages but not in similarly awarding temperate or moderate damages. WHEREFORE, the appealed decision is MODIFIED by deleting the award of temperate or moderate damages. In all other respects, the appellate court's decision is AFFIRMED. No costs in this instance. SO ORDERED. Feliciano, Bidin, Romero and Melo, JJ., concur.

G.R. No. 132390

May 21, 2004

BPI FAMILY SAVINGS BANK, INC., petitioner, vs. FIRST METRO INVESTMENT CORPORATION, respondent. DECISION SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 dated July 4, 1997 and Resolution2 dated January 28, 1998 of the Court of Appeals in CA-G.R. CV No. 44986, "First Metro Investment Corporation vs. BPI Family Bank." The facts as found by the trial court and affirmed by the Court of Appeals are as follows: 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). Consequently, FMIC filed with the Regional Trial Court, Branch 146, Makati City Civil Case No. 89-5280 against BPI FB. FMIC likewise caused the filing by the Office of the State Prosecutors of 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.

On October 1, 1993, the trial court rendered its Decision in Civil Case No. 89-5280, the dispositive portion of which reads: "Premises considered, judgment is rendered in favor of plaintiff, ordering defendant to pay: a. the amount of P80 million with interest at the legal rate from the time this complaint was filed less P14,667,678.01; b. the amount of P100,000.00 as reasonable attorneys fees; and c. the cost. SO ORDERED." On appeal by both parties, the Court of Appeals rendered a Decision affirming the assailed Decision with modification, thus: "WHEREFORE, considering all the foregoing, this Court hereby modifies the decision of the trial court and adjudges BPI Family Bank liable to First Metro Investment Corporation for the amount of P65,332,321.99 plus interest at 17% per annum from August 29, 1989 until fully restored. Further, this 17% interest shall itself earn interest at 12% from October 4, 1989 until fully paid. SO ORDERED." BPI FB then filed a motion for reconsideration but was denied by the Court of Appeals. In the instant petition, BPI FB ascribes to the Appellate Court the following assignments of error: "A. IN VALIDATING A CLEARLY ILLEGAL AND VOID AGREEMENT BETWEEN FMIC AND AN OVERSTEPPING BRANCH MANAGER OF BPI FB, THE COURT OF APPEALS DECIDED THE APPEALED CASE IN A MANNER NOT IN ACCORDANCE WITH LAW OR THE APPLICAPLE DECISIONS OF THE HONORABLE COURT. B. THE COURT OF APPEALS TOTALLY IGNORED THE JUDICIAL ADMISSIONS MADE BY FMIC WHEN IT CHARACTERIZED THE TRANSACTION BETWEEN FMIC AND BPI FB AS A TIME DEPOSIT WHEN IN FACT IT WAS AN INTEREST-BEARING CURRENT ACCOUNT WHICH, UNDER THE EXISTING BANK REGULATIONS, WAS AN ILLEGAL TRANSACTION. C. THE COURT OF APPEALS COMMITTED AN EGREGIOUS ERROR IN RULING THAT BPI FB CLOTHED ITS BRANCH MANAGER WITH APPARENT AUTHORITY TO ENTER INTO SUCH A PATENTLY ILLEGAL ARRANGEMENT. D. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT REFUSED TO CONSIDER THE NEGLIGENT ACTS COMMITTED BY FMIC ITSELF WHICH LED TO THE TRANSFER OF THE P80 MILLION FROM THE FMIC ACCOUNT TO THE TEVESTECO ACCOUNT.

E. THE COURT OF APPEALS DID NOT ADHERE TO SETTLED JURISPRUDENCE WHEN IT ADJUDGED BPI FB LIABLE TO FMIC FOR AN AMOUNT WHICH WAS MORE THAN WHAT WAS CONTEMPLATED OR PRAYED FOR IN FMICS COMPLAINT, MOTION FOR RECONSIDERATION OF THE TRIAL COURTS DECISION AND APPEAL BRIEF. F. IN SUPPORT OF ITS ALTERNATIVE PRAYER, PETITIONER SUBMITS THAT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT ORDERING THE CONSOLIDATION OF THE INSTANT CASE WITH THE TEVESTECO CASE WHICH IS STILL PENDING BEFORE THE MAKATI REGIONAL TRIAL COURT." Petitioner BPI FB contends that the Court of Appeals erred in awarding the 17% per annum interest corresponding to the amount deposited by respondent FMIC. Petitioner insists that respondents deposit is not a special savings account similar to a time deposit, but actually a demand deposit, withdrawable upon demand, proscribed from earning interest under Central Bank Circular 777. Petitioner further contends that the transaction is not valid as its Branch Manager, Jaime Sebastian, clearly overstepped his authority in entering into such an agreement with respondents Executive Vice President. 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. This is quite obvious from the communications between Jaime Sebastian, petitioners Branch Manager, and Antonio Ong, respondents Executive Vice President. Both agreed that the deposit of P100 million was non-withdrawable for one year upon payment in advance of the 17% per annum interest. Respondents time deposit of P100 million was accepted by petitioner as shown by a deposit slip prepared and signed by Ong himself who indicated therein the account number to which the deposit is to be credited, the name of FMIC as depositor or account holder, the date of deposit, and the amount of P100 million as deposit in check. Clearly, 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 (depositors) 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 Tevestecos savings account. Certainly, such was a normal reaction of respondent as a depositor to petitioners 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. On another tack, petitioners argument that Central Bank regulations prohibit demand deposit from earning interest is bereft of merit. Under Central Bank Circular No. 22, Series of 1994, "demand deposits shall not be subject to any interest rate ceiling." This, in effect, is an open authority to pay interest on demand deposits, such interest not being subject to any rate ceiling. Likewise, time deposits are not subject to interest rate ceiling. In fact, the rate ceiling was abolished and even allowed to float depending on the market conditions. Sections 1244 and 1244.1 of the Manual of Regulations of the Central Bank of the Philippines provide: "Sec. 1244. Interest on time deposit. Time deposits shall not be subject to any interest rate ceiling. Sec. 1244.1. Time of payment. Interest on time deposit may be paid at maturity or upon withdrawal or in advance. Provided, however, That interest paid in advance shall not exceed the interest for one year." Thus, even assuming that respondents account with petitioner is a demand deposit, still it would earn interest. Going back to the unauthorized transfer of respondents funds to Tevesteco, in its attempt to evade any liability therefor, petitioner now impugns the validity of the subject agreement on the ground that its Branch Manager, Jaime Sebastian, overstepped the limits of his authority in accepting respondents deposit with 17% interest per annum. 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.5 We reiterated this doctrine in Prudential Bank vs. Court of Appeals,6 thus: "A bank holding out its officers and agent 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. 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 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." In Francisco vs. Government Service Insurance System,7 we ruled:

"Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it presents itself to the third party with whom the contract is made. Naturally he can have little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the external manifestations of corporate consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law; and we would be sorry to announce a doctrine which would permit the property of a man in the city of Paris to be whisked out of his hands and carried into a remote quarter of the earth without recourse against the corporation whose name and authority had been used in the manner disclosed in this case. As already observed, it is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, be estopped from denying his authority; and where it is said if the corporation permits, this means the same as if the thing is permitted by the directing power of the corporation." 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 (petitioners) internal procedures. 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 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 (petitioners) internal procedures. 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. 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.

Anent the award of interest, petitioner contends that such award is not in order as it had not been prayed for by respondent in its complaint nor was it an issue agreed upon by the parties during the pre-trial of the case. Nonetheless, the rule is well settled that when the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing, as in this case. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.8 Besides, the matter of how much interest respondent is entitled to falls squarely within the issues framed by the parties in their respective pleadings filed with the court a quo. At any rate, courts may indeed grant the relief warranted by the allegations and proof even if no such specific relief is prayed for if only to conclude a complete and thorough resolution of the issues involved.9 Finally, petitioner faults the Court of Appeals in not ordering the consolidation of Civil Case No. 89-4996 (filed by petitioner against Tevesteco) with Civil Case No. 89-5280 (the instant case). According to petitioner, had there been consolidation of these two cases, it would have been shown that the P80 Million transferred to Tevestecos account were proceeds of a loan extended by respondent FMIC to Tevesteco. Suffice it to state that as found by both the trial court and the Appellate Court, petitioners transfer of respondents P80M to Tevesteco was unauthorized and tainted with fraud. At this point, we must emphasize that this Court is not a trier of facts. Thus, 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. WHEREFORE, the petition is DENIED. The assailed Decision dated July 4, 1997 and the Resolution dated January 28, 1998 of the Court of Appeals in CA-G.R. CV No. 44986 are hereby AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. 156160

December 9, 2004

JOSEPH E. ESTRADA, petitioner, vs. HON. ANIANO A. DESIERTO, in his capacity as Ombudsman, PAUL ELMER CLEMENTE, JENNIFER A. AGUSTIN-SE, PELAGIO S. APOSTOL and ROBERTO E. KALLOS, in their capacities as EPIB officers, LILIAN B. HEFTI, PACITA M. EQUILLOS, ARCHANGEL A. ALBIENTO, ANICETO T. DAGDAG, JR., RIZA P. DEL ROSARIO, VICTOR Q. LIM and CATHERINE WEIR. respondents. DECISION CHICO-NAZARIO, J.: Before Us is an Appeal by Certiorari filed by former President Joseph Ejercito Estrada on 20 December 2002 from the 20 November 2002 resolution of the Court of Appeals1 dismissing his motion for reconsideration of the resolution of the appellate court dated 29 July 2002,2 which in turn, dismissed for lack of jurisdiction his petition for certiorari. The petition with the Court of Appeals questioned the Office of the Ombudsman's dismissal of petitioner's criminal complaint against the private respondents herein. Culled from the respective pleadings of the parties herein, the following antecedent facts are undisputed:3 1. On 23 January 2001, the Bureau of Internal Revenue (BIR) placed petitioner's foreign currency deposit account at Citibank Greenhills Branch under constructive distraint;

2. Contending that the BIR action was unlawful, petitioner filed on 31 January 2001 a complaint against respondent BIR officials (Deputy Commissioner Lilian Hefti, Revenue Officer I Archangel A. Albiento and Revenue Officer II Aniceto T. Dagdag, Jr.) and respondent Citibank officers (Riza P. Del Rosario, Victor Q. Lim and Catherine Weir) 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); 3. 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; 4. On 19 November 2001, Paul Elmer Clemente, Legal Counsel, Acting DirectorOffice 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; 5. 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; 6. 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; 7. On 12 July 2002, petitioner filed a petition for certiorari under Rule 654 before the Court of Appeals; 8. 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 -Considering the allegations of the petition for certiorari, the Court Resolved to DISMISS the same in the light of Our view that the petition does not fall under any law as coming within the jurisdiction of the Court of Appeals. ... Under the Fabian versus Desierto case (295 SCRA 470), there is the remedy of appeal from the Office of the Ombudsman in administrative disciplinary cases, in line with the regulatory philosophy adopted in appeals from quasi-judicial agencies in Rule 43 of the 1997 Rules of Civil Procedure. Stated in another way, the Court of Appeals is now vested with exclusive appellate jurisdiction involving a review of decisions or orders of the Office of the Ombudsman in administrative disciplinary cases only. ... Since jurisdiction must exist as a matter of law, and there is no law whatsoever expressly extending the remedy of this so-called special civil action of certiorari from

the Office of the Ombudsman to the Court of Appeals, petitioner in this case could not invoke this remedy of certiorari. By the passage of Republic Act No. 6770, this Court is expressly divested of any jurisdiction over the subject matter of these controversies.5 9. On 15 August 2002, petitioner moved for the reconsideration of the Court of Appeals resolution; 10. On 20 November 2002, the Court of Appeals dismissed the motion for reconsideration reiterating its earlier ruling on the ground that petitioner's arguments were not substantial enough to warrant the reversal of the earlier resolution; 11. On 11 December 2002, petitioner filed with this Court a Motion for Extension of Time of fifteen (15) days to file Petition for Review which was granted on 14 January 2003; and 12. The instant petition for review on certiorari was filed on 20 December 2002 praying that the Court of Appeals take cognizance of the petition for certiorari under Rule 65 filed therein by petitioner. On 06 May 2003, after the parties filed their respective comments6 and after petitioner filed his reply7 thereto, this Court gave due course to the petition and required the parties to submit their respective memoranda.8 Petitioner postulates that the Court of Appeals has concurrent jurisdiction with this Court in original actions for certiorari concerning dispositions made by the Office of the Ombudsman of criminal cases that underwent preliminary investigation. In support thereof, petitioner argues that Section 14 of Rep. Act No. 6770 (The Ombudsman Act of 1989), which was made the basis by the Court of Appeals in dismissing his petition, is unconstitutional as it allegedly provides for direct appeal to this Court in contravention of Section 5(2), Article VIII of the Constitution which contains an exclusive list of cases falling under the appellate jurisdiction of the Supreme Court. Following the ruling in Fabian v. Desierto,9 petitioner concludes that Section 14 has effectively increased the appellate jurisdiction of this Court without its advice and concurrence in violation of Section 30, Article VI of the Constitution. Petitioner then went on to state that the proper recourse from an adverse decision of the Ombudsman in criminal cases is a petition for certiorari under Rule 65 before the Court of Appeals pursuant to Tirol, Jr. v. Del Rosario10 where we declared that a party aggrieved by a resolution of the Ombudsman in criminal cases may avail himself of such remedy. Petitioner contends that as the doctrine of hierarchy of courts precludes the immediate invocation of this Court's power of review, he correctly filed his petition for certiorari with the Court of Appeals. The threshold legal issue to be resolved in the instant petition, therefore, is whether or not the Court of Appeals has jurisdiction to entertain original petitions for certiorari from decisions of the Office of the Ombudsman in criminal cases. In Tirol, Jr. v. Del Rosario,11 we had occasion to rule that Rep. Act No. 6770 does not provide for the remedy of appeal from decisions of the Ombudsman in criminal or

non-administrative cases. The aggrieved party may instead avail himself of the original petition for certiorari when the circumstances would warrant the use thereof: . . . As we ruled in Fabian, the aggrieved party is given the right to appeal to the Court of Appeals. Such right of appeal is not granted to parties aggrieved by orders and decisions of the Ombudsman in criminal cases, like finding probable cause to indict accused persons. However, an aggrieved party is not without recourse where the finding of the Ombudsman as to the existence of probable cause is tainted with grave abuse of discretion, amounting to lack or excess of jurisdiction. An aggrieved party may file a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. (Emphasis supplied) But in which court should this special civil action be filed? Petitioner contends that certiorari under Rule 65 should first be filed with the Court of Appeals as the doctrine of hierarchy of courts precludes the immediate invocation of this Court's jurisdiction. Unfortunately for petitioner, he is flogging a dead horse as this argument has already been shot down in Kuizon v. Ombudsman12 where we decreed In dismissing petitioners' petition for lack of jurisdiction, the Court of Appeals cited the case of Fabian vs. Desierto. The appellate court correctly ruled that its jurisdiction extends only to decisions of the Office of the Ombudsman in administrative cases. In the Fabian case, we ruled that appeals from decisions of the Office of the Ombudsman in administrative disciplinary cases should be taken to the Court of Appeals under Rule 43 of the 1997 Rules of Civil Procedure. It bears stressing that when we declared Section 27 of Republic Act. No. 6770 as unconstitutional, we categorically stated that said provision is involved only whenever an appeal by certiorari under Rule 45 is taken from a decision in an administrative disciplinary action. It cannot be taken into account where an original action for certiorari under Rule 65 is resorted to as a remedy for judicial review, such as from an incident in a criminal action. In fine, we hold that the present petition should have been filed with this Court.13 Kuizon and the subsequent case of Mendoza-Arce v. Office of the Ombudsman (Visayas)14 drove home the point that the remedy of aggrieved parties from resolutions of the Office of the Ombudsman finding probable cause in criminal cases or non-administrative cases, when tainted with grave abuse of discretion, is to file an original action for certiorari with this Court and not with the Court of Appeals.15 In cases when the aggrieved party is questioning the Office of the Ombudsman's finding of lack of probable cause, as in this case, there is likewise the remedy of certiorari under Rule 65 to be filed with this Court and not with the Court of Appeals following our ruling in Perez v. Office of the Ombudsman.16 As this Court had already resolved said issue of jurisdiction in the above-cited cases, it is a salutary and necessary judicial practice to apply the rulings therein to the subject petition. Stare decisis et non quieta movere. Stand by the decisions and disturb not what is settled.17 Undaunted, petitioner now harps on the validity of

Section 14 of Rep. Act No. 6770 claiming it to be unconstitutional. The Court of Appeals, it must be recalled, relied quite heavily on Section 14 of Rep. Act No. 6770 in relation to Fabian v. Desierto18 in ruling that it had no jurisdiction to entertain the petition filed thereat. Section 14 of Rep. Act No. 6770 states Sec. 14. Restrictions. - . . . No court shall hear any appeal or application for remedy against the decision or findings of the Ombudsman, except the Supreme Court, on pure question of law. Basic is the principle that a constitutional issue may only be passed upon if essential to the decision of a case or controversy.19 Even if all the requisites for judicial review are present, this Court will not entertain a constitutional question unless it is the very lis mota of the case or if the case can be disposed of on some other grounds, such as the application of a statute or general law.20 Thus, in Sotto v. Commission on Elections,21 we held . . . It is a well-established rule that a court should not pass upon a constitutional question and decide a law to be unconstitutional or invalid, unless such question is raised by the parties, and that when it is raised, if the record also presents some other ground upon which the court may rest its judgment, that course will be adopted and the constitutional question will be left for consideration until a case arises in which a decision upon such question will be unavoidable. (Emphasis supplied) In herein case, the question of who has jurisdiction to entertain petitions for certiorari questioning the Ombudsman's orders or resolutions in criminal cases can be answered by resorting to the aforecited cases of Kuizon v. Ombudsman,22 MendozaArce v. Office of the Ombudsman23 and Perez v. Office of the Ombudsman.24 Consequently, there is no need to delve into the constitutionality of Section 14 of Rep. Act No. 6770 as case law already supplies the key. Applying the foregoing, the Court of Appeals did not err in dismissing petitioner's original action for certiorari for lack of jurisdiction. Petitioner should have filed the same directly with this Court. Even if the petition for certiorari had been correctly filed in this Court, we would have dismissed it just the same25 as we do not perceive any clear case of abuse of discretion on the part of the public respondents when they issued the Resolution dated 17 September 2001 and the Order dated 19 September 2001 recommending the approval of the 17 September 2001 resolution dismissing, for lack of probable cause, petitioner's complaint for Usurpation of Official Function under Article 177 of the Revised Penal Code, for violation of Section 3(e) of Rep. Act No. 3019, and for violation of Section 8 of Rep. Act No. 6426. The same holds true for the Order dated 26 February 2002 which denied petitioner's motion for reconsideration of the 19 September 2001 resolution. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment which is equivalent to an excess or lack of jurisdiction. The abuse of

discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.26 In dismissing petitioner's complaint for Usurpation of Official Function against private respondents, public respondents reasoned27 -Under Art. 177 of the Revised Penal Code, in order for one to be held liable for Usurpation of Official Function, there must be a clear showing that the person being charged had performed an act pertaining to any person in authority or public officer of the Philippine government or any agency thereof, under pretense of official position, and without being lawfully entitled to do so. In this instant case, respondent Hefti was the one specifically charged with Usurpation of Official Function, in view of her act of issuing the notice of constructive distraint against the foreign currency deposit of complainant with the Citibank. The rest of the public respondents and all the private respondents were merely charged in conspiracy with the said respondent. Hence, the issue that must be resolved is whether or not respondent Hefti being the Deputy Commissioner of BIR had indeed usurped the duty of the BIR Commissioner when she issued the notice of distraint. While it is true that under Sec. 206 of the NIRC as amended, the Commissioner of the BIR and not any Officer of the BIR was the one granted with the power to issue a notice of distraint, it bears to stress, however, that when respondent Hefti exercised such function of the BIR Commissioner, she was then designated Officer-In-Charge of the BIR by President Gloria Macapagal-Arroyo, as evidenced by a photocopy of her Memorandum of Appointment dated January 23, 2001. By virtue of her appointment as Officer-In-Charge of BIR, it necessary follows that respondent Hefti can now legally exercise the duties and functions pertaining to the BIR Commissioner, including the issuance of a constructive distraint. Whether the issuance of the notice of distraint is valid or not, such issue is no longer within the power of this Office to decide inasmuch as the power to review the decision of the BIR Commissioner on matters of distraint lies within the jurisdiction of the Court of Tax Appeals. Suffice it to say that when respondent Hefti issued the notice of distraint, she was clothed with authority to issue the same in view of her appointment as the then Officer-In-Charge of the BIR. Hence, the charge for Usurpation of Official Function does not apply to said respondent. With the establishment of respondent Hefti's authority in the issuance of the constructive distraint, the subsequent act of respondent Dagdag in serving the said distraint to the Citibank, as well as the act of respondents Equillos and Albiento in witnessing the service of the same to the said bank, can not be construed as act in agreement to commit the crime of Usurpation of Authority in the light of the foregoing discussion. The same thing holds true to the bank officers who were made respondents in this case, considering that their act in informing complainant regarding the existence of the constructive distraint as well as in implementing the said distraint against the latter's account with the said bank, [were] merely in compliance to an order issued by a competent authority.

And:28 As the officer-in-charge of the BIR duly-designated by the President, respondent Hefti was the incumbent head of BIR. By operation of law, she was the possessor of the office of the Commissioner by virtue of her lawful designation and was thus legally authorized to discharge the duties of such office (cf. Black's Law Dictionary, 6th Ed., at 768). In other words, she was authorized to temporarily act as the head of the said bureau until the appointment of the regular Commissioner. Her official acts as the duly-designated head of the BIR are deemed as acts of the bureau's Commissioner, and enjoy the presumptions of legality, validity and regularity. With respect to the alleged violation of Sec. 3(e) of Rep. Act No. 3019, the resolution29 of public respondents states in part: Under Sec. 3(e) of R.A. 3019, the concurrence of the following elements are essential for the commission of the said offense. 1. The respondent is a public officer discharging administrative, judicial or official functions, or any private individual in conspiracy with the public officer; 2. The respondent must have acted with manifest partiality, evident bad faith, or gross inexcusable negligence; and 3. The respondent's action has caused any undue injury to any party including the government, or has given any party unwarranted benefits, advantage or preference in the discharge of his functions. In this present case, public respondents are public officers within the contemplation of the law, and private respondents are charged in conspiracy with public respondents. Thus, the first element for the commission of the said offense is present. Be it emphasized, however, that the issuance of the notice of distraint by respondent Hefti was done in accordance with her function as the then Officer-In-Charge of the BIR. In issuing the said distraint, it appears that said respondent was guided not by her own unilateral and whimsical act as what the complainant is trying to impress to this Office, but on her observation regarding the huge disparity of complainant's income as declared by him in his Annual Income Tax Return, and the amount of his income as established in the impeachment trial, which is said to be concealed under fictitious name. In addition thereto, there are various news reports about the plan of complainant to flee the country bringing with him the money he amassed during his presidency. Clearly, the foregoing circumstance are matters that this Office can not simply ignore for this are informations already known to the public, and the cognizance of it by respondent Hefti which led to the issuance of the subject distraint is just a prudent act expected from somebody tasked to protect the coffers of the government, and such can not be considered as an act tainted with manifest partiality, evident bad faith, and gross inexcusable negligence.

Furthermore, complainant failed to show the alleged undue injury he suffered because of the said distraint. There is nowhere in the records of this case to show that he was deprived by the Citibank Greenhills branch to withdraw any amount from his own foreign currency account deposit, nor was there a record of his attempt to withdraw from his foreign currency deposit with the said bank. The failure of the complainant to establish the actual injury he suffered by virtue of the subject distraint will necessarily give rise to a reasonable conclusion that the injury he claimed to have suffered is merely illusory and imaginary. Hence, the charge for violation of Sec. 3(e) under R.A. 3019 can not prosper for failure to establish the actual damage or injury suffered by the complainant. Finally, with respect to the complaint for violation of Section 8 of Rep. Act No. 6426 (Foreign Currency Deposits Act of the Philippines), public respondents ratiocinated30 -At this point, it is worth stressing, that 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. Considering the previous Order of this Office, it necessarily follows that the accusation for violation of Sec. 8 of R.A. 6426 against herein respondents has no leg to stand on, thus, the dismissal of the charge for violation of Sec. 8 of R.A. 6426 is therefore in order. And: In Salvacion v. Central Bank and China Bank, 278 SCRA 27 (1997), the Highest Tribunal adopted the opinion of the Office of the Solicitor General (OSG) that only foreign currency deposits of foreign lenders and investors are given protection and incentives by the law, and further ruled that the Foreign Currency Deposits Act cannot be utilized to perpetuate injustice.32 Following such pronouncements, it is respectfully submitted that foreign currency deposits of Filipino depositors, including herein complainant, are not covered by the Foreign Currency Deposits Act, and are thus not exempt from the processes duly-issued by the BIR. We do not perceive any grave abuse of discretion on the part of the public respondents when they issued the aforecited rulings. We, thus, defer to the policy of non-interference in the conduct of preliminary investigations. We have invariably

stated that it is not sound practice to depart from the policy of non-interference in the Ombudsman's exercise of discretion to determine whether or not to file information against an accused. The rule is based not only upon respect for the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman but upon practicality as well.33 Otherwise, the functions of the courts will be grievously hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, in much the same way that the courts would be absolutely swamped if they could be compelled to review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decided to file an information in court or dismissed a complaint by a private complainant.34 Thus, in the absence of a clear case of abuse of discretion, this Court will not interfere with the discretion of the Ombudsman, who, depending on his own findings and considered evaluation of the case, either dismisses a complaint or proceeds with it.35 A cautionary word. A declaration by this Court that the public respondents did not gravely abuse their discretion in issuing the resolutions dismissing petitioner's complaint does not necessarily translate to a declaration of assent in the findings of fact and conclusions of law contained therein. With respect specifically to the resolution for violation of Section 8 of Rep. Act. No. 6426, 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,36 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.37 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. WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit and the resolutions of the Court of Appeals in CA-G.R. SP No. 71722 dated 29 July 2002 and 20 November 2002 are hereby AFFIRMED. Costs against petitioner. SO ORDERED. Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, and Garcia, JJ., concur. Corona, J., on leave.

[G.R. No. 112392. February 29, 2000] BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R. CV No. 37392 affirming in toto that of the Regional Trial Court of Makati, Branch 139,[2] which dismissed the complaint filed by petitioner Bank of the Philippine Islands against private respondent Benjamin C. Napiza for sum of money. Sdaad On September 3, 1987, private respondent deposited in Foreign Currency Deposit Unit (FCDU) Savings Account No. 028-187[3] which he maintained in petitioner banks Buendia Avenue Extension Branch, Continental Bank Managers 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.[5] 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 respondents 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 No. 028-187. 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.[6] 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[7] because it was "not of the type or style of checks issued by Continental Bank International."[8] Consequently, Mr. Ariel Reyes, the manager of petitioners Buendia Avenue Extension Branch, instructed one of its employees, Benjamin D. Napiza IV, who is private respondents son, to inform his father that the check bounced.[9] Reyes himself sent a telegram to private respondent regarding the dishonor of the check. In turn, private respondents 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.[10] Private respondents son undertook to return the amount of $2,500.00 to petitioner bank. On December 18, 1984, Reyes reminded private respondent of his sons promise and warned that should he fail to return that amount within seven (7) days, the matter would be referred to the banks lawyers for appropriate action to protect the banks interest.[11] This was followed by a letter of the banks lawyer dated April 8, 1985 demanding the return of the $2,500.00.[12] In reply, private respondent wrote petitioners counsel on April 20, 1985[13] stating that he deposited the check "for clearing purposes" only to accommodate Chan. He added: "Further, please take notice that said check was deposited on September 3, 1984 and withdrawn on October 23, 1984, or a total period of fifty (50) days had elapsed at the time of withdrawal. Also, it may not be amiss to mention here that I merely signed an authority to withdraw said deposit subject to its clearing, the reason why the transaction is not reflected in the passbook of the account. Besides, I did not receive its proceeds as may be gleaned from the withdrawal slip under the captioned signature of recipient. If at all, my obligation on the transaction is moral in nature, which (sic) I have been and is (sic) still exerting utmost and maximum efforts to collect from Mr. Henry Chan who is directly liable under the circumstances. Scsdaad xxx......xxx......xxx." On August 12, 1986, petitioner filed a complaint against private respondent, praying for the return of the amount of $2,500.00 or the prevailing peso equivalent plus legal interest from date of demand to date of full payment, a sum equivalent to 20% of the total amount due as attorney's fees, and litigation and/or costs of suit. Private respondent filed his answer, admitting that he indeed signed a "blank" withdrawal slip with the understanding that the amount deposited would be withdrawn only after the check in question has been cleared. He likewise alleged that he instructed the party to whom he issued the signed blank withdrawal slip to return it to him after the bank drafts clearance so that he could lend that party his passbook for the purpose of withdrawing the amount of $2,500.00. However, without his knowledge, said party was able to withdraw the amount of $2,541.67 from his dollar savings account through collusion with one of petitioners employees. Private respondent added that he had "given the Plaintiff fifty one (51) days with which to clear the bank draft in question." Petitioner should have disallowed the withdrawal because his passbook was not presented. He claimed that petitioner had no one to blame except itself "for being grossly negligent;" in fact, it had allegedly admitted having paid the amount in the check "by mistake" x x x "if not altogether due to collusion and/or bad faith on the part of (its) employees." Charging petitioner with "apparent ignorance of routine bank procedures," by way of counterclaim, private

respondent prayed for moral damages of P100,000.00, exemplary damages of P50,000.00 and attorneys fees of 30% of whatever amount that would be awarded to him plus an honorarium of P500.00 per appearance in court. Private respondent also filed a motion for admission of a third party complaint against Chan. He alleged that "thru strategem and/or manipulation," Chan was able to withdraw the amount of $2,500.00 even without private respondents passbook. Thus, private respondent prayed that third party defendant Chan be made to refund to him the amount withdrawn and to pay attorneys fees of P5,000.00 plus P300.00 honorarium per appearance. Petitioner filed a comment on the motion for leave of court to admit the third party complaint, wherein it asserted that per paragraph 2 of the Rules and Regulations governing BPI savings accounts, private respondent alone was liable "for the value of the credit given on account of the draft or check deposited." It contended that private respondent was estopped from disclaiming liability because he himself authorized the withdrawal of the amount by signing the withdrawal slip. Petitioner prayed for the denial of the said motion so as not to unduly delay the disposition of the main case asserting that private respondents claim could be ventilated in another case. Private respondent replied that for the parties to obtain complete relief and to avoid multiplicity of suits, the motion to admit third party complaint should be granted. Meanwhile, the trial court issued orders on August 25, 1987 and October 28, 1987 directing private respondent to actively participate in locating Chan. After private respondent failed to comply, the trial court, on May 18, 1988, dismissed the third party complaint without prejudice. On November 4, 1991, a decision was rendered dismissing the complaint. The lower court held that petitioner could not hold private respondent liable based on the checks face value alone. To so hold him liable "would render inutile the requirement of clearance from the drawee bank before the value of a particular foreign check or draft can be credited to the account of a depositor making such deposit." The lower court further held that "it was incumbent upon the petitioner to credit the value of the check in question to the account of the private respondent only upon receipt of the notice of final payment and should not have authorized the withdrawal from the latters account of the value or proceeds of the check." Having admitted that it committed a "mistake" in not waiting for the clearance of the check before authorizing the withdrawal of its value or proceeds, petitioner should suffer the resultant loss. Supremax On appeal, the Court of Appeals affirmed the lower courts decision. The appellate court held that petitioner committed "clear gross negligence" in allowing Ruben Gayon, Jr. to withdraw the money without presenting private respondents passbook and, before the check was cleared and in crediting the amount indicated therein in private respondents account. It stressed that the mere deposit of a check in private respondents account did not mean that the check was already private respondents property. The check still had to be cleared and its proceeds can only be withdrawn upon presentation of a passbook in accordance with the banks rules and regulations. Furthermore, petitioners contention that private respondent warranted the checks genuineness by endorsing it is untenable for it would render useless the clearance

requirement. Likewise, the requirement of presentation of a passbook to ascertain the propriety of the accounting reflected would be a meaningless exercise. After all, these requirements are designed to protect the bank from deception or fraud. The Court of Appeals cited the case of Roman Catholic Bishop of Malolos, Inc. v. IAC, [14] where this Court stated that a personal check is not legal tender or money, and held that the check deposited in this case must be cleared before its value could be properly transferred to private respondent's account. Without filing a motion for the reconsideration of the Court of Appeals Decision, petitioner filed this petition for review on certiorari, raising the following issues: 1.......WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A GENERAL INDORSER. 2.......WHETHER OR NOT A CONTRACT OF AGENCY WAS CREATED BETWEEN RESPONDENT NAPIZA AND RUBEN GAYON. 3.......WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT IN ALLOWING THE WITHDRAWAL. Petitioner claims that private respondent, having affixed his signature at the dorsal side of the check, should be liable for the amount stated therein in accordance with the following provision of the Negotiable Instruments Law (Act No. 2031): "SEC. 66. Liability of general indorser. Every indorser who indorses without qualification, warrants to all subsequent holders in due course (a)......The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and (b)......That the instrument is at the time of his indorsement, valid and subsisting. And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it." Section 65, on the other hand, provides for the following warranties of a person negotiating an instrument by delivery or by qualified indorsement: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it, and (c) that all prior parties had capacity to contract.[15] In People v. Maniego,[16] this Court described the liabilities of an indorser as follows: Juris "Appellants contention that as mere indorser, she may not be liable on account of the dishonor of the checks indorsed by her, is likewise untenable. Under the law, the holder or last indorsee of a negotiable instrument has the right to enforce payment of the instrument for the full amount thereof against all parties liable thereon. Among the parties liable thereon is an indorser of the instrument, i.e., a person placing his signature upon an instrument otherwise than as a maker, drawer or acceptor * *

unless he clearly indicated by appropriate words his intention to be bound in some other capacity. Such an indorser who indorses without qualification, inter alia engages that on due presentment, * * (the instrument) shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or any subsequent indorser who may be compelled to pay it. Maniego may also be deemed an accommodation party in the light of the facts, i.e., a person who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. As such, she is under the law liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew * * (her) to be only an accommodation party, although she has the right, after paying the holder, to obtain reimbursement from the party accommodated, since the relation between them is in effect that of principal and surety, the accommodation party being the surety." 1. No. It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party.[17] However, to hold private respondent liable for the amount of the check he deposited by the strict application of the law and without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the banking system. The interest of justice thus demands looking into the events that led to the encashment of the check. Petitioner asserts that by signing the withdrawal slip, private respondent "presented the opportunity for the withdrawal of the amount in question." Petitioner relied "on the genuine signature on the withdrawal slip, the personality of private respondents son and the lapse of more than fifty (50) days from date of deposit of the Continental Bank draft, without the same being returned yet."[18] We hold, however, that the propriety of the withdrawal should be gauged by compliance with the rules thereon that both petitioner bank and its depositors are duty-bound to observe. In the passbook that petitioner issued to private respondent, the following rules on withdrawal of deposits appear: "4.......Withdrawals must be made by the depositor personally but in some exceptional circumstances, the Bank may allow withdrawal by another upon the depositors written authority duly authenticated; and neither a deposit nor a withdrawal will be permitted except upon the presentation of the depositors savings passbook, in which the amount deposited withdrawn shall be entered only by the Bank. 5.......Withdrawals may be made by draft, mail or telegraphic transfer in currency of the account at the request of the depositor in writing on the withdrawal slip or by authenticated cable. Such request must indicate the name of the payee/s, amount and the place where the funds are to be paid. Any stamp, transmission and other charges related to such withdrawals shall be for the account of the depositor and shall be paid by him/her upon demand. Withdrawals may also be made in the form of travellers checks and in pesos. Withdrawals in the form of notes/bills are allowed subject however, to their (availability).

6.......Deposits shall not be subject to withdrawal by check, and may be withdrawn only in the manner above provided, upon presentation of the depositors savings passbook and with the withdrawal form supplied by the Bank at the counter."[19] Scjuris Under these rules, to be able to withdraw from the savings account deposit under the Philippine foreign currency deposit system, two requisites must be presented to petitioner bank by the person withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b) the depositors passbook. Private respondent admits that he signed a blank withdrawal slip ostensibly in violation of Rule No. 6 requiring that the request for withdrawal must name the payee, the amount to be withdrawn and the place where such withdrawal should be made. That the withdrawal slip was in fact a blank one with only private respondents two signatures affixed on the proper spaces is buttressed by petitioners allegation in the instant petition that had private respondent indicated therein the person authorized to receive the money, then Ruben Gayon, Jr. could not have withdrawn any amount. Petitioner contends that "(i)n failing to do so (i.e., naming his authorized agent), he practically authorized any possessor thereof to write any amount and to collect the same."[20] Such contention would have been valid if not for the fact that the withdrawal slip itself indicates a special instruction that the amount is payable to "Ramon A. de Guzman &/or Agnes C. de Guzman." Such being the case, petitioners personnel should have been duly warned that Gayon, who was also employed in petitioners Buendia Ave. Extension branch,[21] was not the proper payee of the proceeds of the check. Otherwise, either Ramon or Agnes de Guzman should have issued another authority to Gayon for such withdrawal. Of course, at the dorsal side of the withdrawal slip is an "authority to withdraw" naming Gayon the person who can withdraw the amount indicated in the check. Private respondent does not deny having signed such authority. However, considering petitioners clear admission that the withdrawal slip was a blank one except for private respondents signature, the unavoidable conclusion is that the typewritten name of "Ruben C. Gayon, Jr." was intercalated and thereafter it was signed by Gayon or whoever was allowed by petitioner to withdraw the amount. Under these facts, there could not have been a principal-agent relationship between private respondent and Gayon so as to render the former liable for the amount withdrawn. Moreover, the withdrawal slip contains a boxed warning that states: "This receipt must be signed and presented with the corresponding foreign currency savings passbook by the depositor in person. For withdrawals thru a representative, depositor should accomplish the authority at the back." The requirement of presentation of the passbook when withdrawing an amount cannot be given mere lip service even though the person making the withdrawal is authorized by the depositor to do so. This is clear from Rule No. 6 set out by petitioner so that, for the protection of the banks interest and as a reminder to the depositor, the withdrawal shall be entered in the depositors passbook. The fact that private respondents passbook was not presented during the withdrawal is evidenced by the entries therein showing that the last transaction that he made with the bank was on September 3, 1984, the date he deposited the controversial check in the amount of $2,500.00.[22]

In allowing the withdrawal, petitioner likewise overlooked another rule that is printed in the passbook. Thus: "2.......All deposits will be received as current funds and will be repaid in the same manner; provided, however, that deposits of drafts, checks, money orders, etc. will be accepted as subject to collection only and credited to the account only upon receipt of the notice of final payment. Collection charges by the Banks foreign correspondent in effecting such collection shall be for the account of the depositor. If the account has sufficient balance, the collection shall be debited by the Bank against the account. If, for any reason, the proceeds of the deposited checks, drafts, money orders, etc., cannot be collected or if the Bank is required to return such proceeds, the provisional entry therefor made by the Bank in the savings passbook and its records shall be deemed automatically cancelled regardless of the time that has elapsed, and whether or not the defective items can be returned to the depositor; and the Bank is hereby authorized to execute immediately the necessary corrections, amendments or changes in its record, as well as on the savings passbook at the first opportunity to reflect such cancellation." (Italics and underlining supplied.) Jurissc As correctly held by the Court of Appeals, in depositing the check in his name, private respondent did not become the outright owner of the amount stated therein. Under the above rule, by depositing the check with petitioner, private respondent was, in a way, merely designating petitioner as the collecting bank. This is in consonance with the rule that a negotiable instrument, such as a check, whether a managers check or ordinary check, is not legal tender.[23] As such, after receiving the deposit, under its own rules, petitioner shall credit the amount in private respondents account or infuse value thereon only after the drawee bank shall have paid the amount of the check or the check has been cleared for deposit. Again, this is in accordance with ordinary banking practices and with this Courts pronouncement that "the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements."[24] The rule finds more meaning in this case where the check involved is drawn on a foreign bank and therefore collection is more difficult than when the drawee bank is a local one even though the check in question is a managers check.[25] Misjuris 2. Yes. In Banco Atlantico v. Auditor General,[26] Banco Atlantico, a commercial bank in Madrid, Spain, paid the amounts represented in three (3) checks to Virginia Boncan, the finance officer of the Philippine Embassy in Madrid. The bank did so without previously clearing the checks with the drawee bank, the Philippine National Bank in New York, on account of the "special treatment" that Boncan received from the personnel of Banco Atlanticos foreign department. 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 Generals denial of Banco Atlanticos claim for payment of the value of the checks that was withdrawn by Boncan.

Said ruling brings to light the fact that the banking business is affected with public interest. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors "with meticulous care, always having in mind the fiduciary nature of their relationship."[27] As such, in dealing with its depositors, a bank should exercise its functions not only with the diligence of a good father of a family but it should do so with the highest degree of care.[28] In the case at bar, petitioner, in allowing the withdrawal of private respondents deposit, failed to exercise the diligence of a good father of a family. In total disregard of its own rules, petitioners personnel negligently handled private respondents account to petitioners detriment. As this Court once said on this matter: "Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do. The seventy-eight (78)-year-old, yet still relevant, case of Picart v. Smith, provides the test by which to determine the existence of negligence in a particular case which may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet pater-familias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that."[29] Petitioner violated its own rules by allowing the withdrawal of an amount that is definitely over and above the aggregate amount of private respondents dollar deposits that had yet to be cleared. The banks ledger on private respondents account shows that before he deposited $2,500.00, private respondent had a balance of only $750.00.[30] Upon private respondents deposit of $2,500.00 on September 3, 1984, that amount was credited in his ledger as a deposit resulting in the corresponding total balance of $3,250.00.[31] On September 10, 1984, the amount of $600.00 and the additional charges of $10.00 were indicated therein as withdrawn thereby leaving a balance of $2,640.00. On September 30, 1984, an interest of $11.59 was reflected in the ledger and on October 23, 1984, the amount of $2,541.67 was entered as withdrawn with a balance of $109.92.[32] On November 19, 1984 the word "hold" was written beside the balance of $109.92.[33] That must have been the time when Reyes, petitioners branch manager, was informed unofficially of the fact that the check deposited was a counterfeit, but petitioners Buendia Ave. Extension Branch received a copy of the communication thereon from Wells Fargo Bank International in New York the following day, November 20, 1984.[34] According to Reyes, Wells Fargo Bank International handled the clearing of checks drawn against U.S. banks that were deposited with petitioner.[35] Jjlex From these facts on record, it is at once apparent that petitioners 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. Reyes contention that after the lapse of the 35-day period the amount of a deposited check could be withdrawn even in the absence of a clearance thereon, otherwise it could take a long time before a depositor could make a withdrawal,[36] is untenable. Said practice amounts to a disregard of the clearance requirement of the banking system. While it is true that private respondents 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 petitioners 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."[37] The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on petitioners part was its personnels negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in the banking system. In so doing, petitioner assumed the risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage. WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 37392 is AFFIRMED. SO ORDERED. Newmiso Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.