BDO VS JAPRL

Under Sec. 40 of the General Banking Law, should such statements (financial) prove to be
false or incorrect in any material detail, the bank may terminate any loan or credit
accommodation granted on the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation.

Facts: Banco de Oro extended financial facilities to JAPRL Development Corporation

(JAPRL) amounting to P230,000,000 with co-respondents Rapid Forming Corporation (RFC)
and Jose Arollado acting as sureties. JAPRL defaulted in the payment of four trust receipts.
Petitioner bank subsequently found out that JAPRL altered and falsified its financial
statements to project itself as a viable investment. Because the demand for payment was
unheeded, petitioner bank sued JAPRL and the sureties for payment of the balance due on
the trust receipts in RTC Makati. Respondents then hastily filed a petition for rehabilitation
and stay order in Calamba of RTC which were granted. As a result, the complaint was
dismissed with respect to JAPRL and RFC. Arollado remained as defendant. Respondents
filed a petition for certiorari before the CA, contending that the trial court did not acquire
jurisdiction over them as the summons were served on a mere administrative assistant. CA
granted the petition and dismissed petitioner’s motion for reconsideration.

Issues: 1) Whether or not jurisdiction over the defendants was acquired

2) Whether or not JAPRL are liable to pay their obligations

Held:

1) Whether or not jurisdiction over the defendants was acquired

When respondents moved for the suspension of proceedings of the civil case before the
Makati RTC, on the basis of the stay order of the Calamba RTC, they waived whatever defect
there was in the service of summons and were deemed to have submitted themselves
voluntarily to the jurisdiction of the Makati RTC.

2) Whether or not JAPRL are liable to pay their obligations.

Considering the amount of petitioner’s exposure in JAPRL, justice and fairness dictate that
the Makati RTC hear whether or not respondents indeed committed fraud in securing the
credit accomodation. In this event, petitioner can use the finding of fraud to move for the
dismissal of the rehabilitation case in the Calamba RTC. Moreover, under Sec. 40 of the
General Banking Law, should such statements (financial) prove to be false or incorrect in any
material detail, the bank may terminate any loan or credit accommodation granted on the
basis of said statements and shall have the right to demand immediate repayment or
liquidation of the obligation.
BANAS VS ASIA PACIFIC

An investment company refers to any issuer which is or holds itself out as being engaged or
proposes to engage primarily in the business of investing, reinvesting or trading in
securities. As defined in Revised Securities Act, securities “shall include commercial papers
evidencing indebtedness of any person, financial or non-financial entity, irrespective of

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maturity, issued, endorsed, sold, transferred or in any manner conveyed to another with or
without recourse, such as promissory notes. Clearly, the transaction between petitioners
and respondent was one involving not a loan but purchase of receivables at a discount, well
within the purview of “investing, reinvesting or trading in securities” which an investment
company, like ASIA PACIFIC, is authorized to perform and does not constitute a violation of
the General Banking Act.

Facts: Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon Construction

whereby for value received he promised to pay to the order of C. G. Dizon Construction the
sum of P390,000.00 in installments of “P32,500.00 every 25th day of the month starting
from September 25, 1980 up to August 25, 1981.”Later, C. G. Dizon Construction endorsed
with recourse the Promissory Note to ASIA PACIFIC, and to secure payment thereof, C. G.
Dizon Construction, through its corporate officers, Cenen Dizon, President, and Juliette B.
Dizon, Vice President and Treasurer, executed a Deed of Chattel Mortgage covering three
heavy equipment units of Caterpillar Bulldozer Crawler Tractors Moreover, Cenen Dizon
executed a Continuing Undertaking wherein he bound himself to pay the obligation jointly
and severally with C. G. Dizon Construction.

In compliance thereof, C. G. Dizon Construction made three installment payments to ASIA

PACIFIC for a total of P130,000.00. Thereafter, however, C. G. Dizon Construction defaulted
in the payment of the remaining installments, prompting ASIA PACIFIC to send a Statement
of Account to Cenen Dizon for the unpaid balance of P267,737.50 inclusive of interests and
charges, and P66,909.38 representing attorney’s fees. As the demand was unheeded, ASIA
PACIFIC filed a complaint for a sum of money with prayer for a writ of replevin against
Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon. The trial court issued a writ of
replevin against defendant C. G. Dizon Construction for the surrender of the bulldozer
crawler tractors. Of the three bulldozer crawler tractors, only two were actually turned over
by defendants which units were subsequently foreclosed by ASIA PACIFIC to satisfy the
obligation. The two bulldozers were sold both to ASIA PACIFIC as the highest bidder.

Petitioners insist that ASIA PACIFIC was organized as an investment house which could not
engage in the lending of funds obtained from the public through receipt of deposits. The
disputed Promissory Note, Deed of Chattel Mortgage and Continuing Undertaking were not
intended to be valid and binding on the parties as they were merely devices to conceal their
real intention which was to enter into a contract of loan in violation of banking laws. The
Regional Trial Court ruled in favor of ASIA PACIFIC holding the defendants jointly and
severally liable for the unpaid balance of the obligation under the Promissory Note. The
Court of Appeals affirmed the decision of the trial court

Issues: Whether the disputed transaction between ASIA PACIFIC was engaged in banking
activities.

Held: An investment company refers to any issuer which is or holds itself out as being
engaged or proposes to engage primarily in the business of investing, reinvesting or trading
in securities. As defined in Revised Securities Act, securities “shall include commercial
papers evidencing indebtedness of any person, financial or non-financial entity, irrespective
of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another with
or without recourse, such as promissory notes” Clearly, the transaction between petitioners
and respondent was one involving not a loan but purchase of receivables at a discount, well

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within the purview of “investing, reinvesting or trading in securities” which an investment
company, like ASIA PACIFIC, is authorized to perform and does not constitute a violation of
the General Banking Act.

What is prohibited by law is for investment companies to lend funds obtained from the
public through receipts of deposit, which is a function of banking institutions. But here, the
funds supposedly “lent” to petitioners have not been shown to have been obtained from
the public by way of deposits, hence, the inapplicability of banking laws. Wherefore, the
assailed decision of the Court of Appeals was affirmed.

BPI vs CA

BPI vs. Court of Appeals and Napiza

G.R. No. 112392. February 29, 2000, 326 scra 641
*accommodation party
**liability of general indorser

FACTS:
A certain Henry Chan owned a Continental Bank Manager’s Check payable to "cash" in the
amount of Two Thousand Five Hundred Dollars ($2,500.00). Chan went to the office of
Benjamin Napiza and requested him to deposit the check in his dollar account by way of
accommodation and for the purpose of clearing the same. Private respondent acceded, and
agreed to deliver to Chan a signed blank withdrawal slip, with the understanding that as
soon as the check is cleared, both of them would go to the bank to withdraw the amount of
the check upon private respondent’s presentation to the bank of his passbook. Napiza thus
endorsed the check and deposited it in a Foreign Currency Deposit Unit (FCDU) Savings
Account he maintained with BPI. Using the blank withdrawal slip given by private
respondent to Chan, one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67
from Napiza's FCDU account. It turned out that said check deposited by private respondent
was a counterfeit check.

*When BPI demanded the return of $2,500.00, private respondent claimed that he
deposited the check "for clearing purposes" only to accommodate Chan.

**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 provision
of the Negotiable Instruments Law on the liability of a general indorser (Sec. 66).

ISSUE:*
Whether private respondent is obliged to return the money paid out by BPI on a counterfeit
check even if he deposited the check "for clearing purposes" only to accommodate Chan.

ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a general indorser.

RULING:
Ordinarily private respondent may be held liable as an indorser of the check or even as an
accommodation party. However, petitioner BPI, in allowing the withdrawal of private
respondent’s deposit, failed to exercise the diligence of a good father of a family. BPI

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violated its own rules by allowing the withdrawal of an amount that is definitely over and
above the aggregate amount of private respondent’s dollar deposits that had yet to be
cleared. The proximate cause of the eventual loss of the amount of $2,500.00 on BPI's part
was its personnel’s negligence in allowing such withdrawal in disregard of its own rules and
the clearing requirement in the banking system. In so doing, BPI assumed the risk of
incurring a loss on account of a forged or counterfeit foreign check and hence, it should
suffer the resulting damage.

PS BANK VS CHOWKING

The General Banking Law 2000 imposes to all banks to observe meticulous care in treating
the accounts of their depositors. The bank’s negligence contributed to the fraud committed
by Manzano as it is primarily liable for the negligence of its officers and agents who are
acting within the scope of their employment.

For estoppel to occur the following requisites should be met: (a) conduct amounting to
false representation or concealment of material facts or at least calculated to convey the
impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (b) intent, or at least expectation that this conduct shall be
acted upon, or at least influenced by the other party; and (c) knowledge, actual or
constructive of the actual facts.

Facts: Rino Manzano, acting accounting manager of Chowking, endorsed and encashed from
the petitioner 5 checks amounting to a total of P556,981.86. The checks were encashed
without the signatures of the other authorized officials of Chowking but was accepted and
honored by Santos. Manzano misappropriated the amount and when Chowking found out it
demanded reimbursement from the bank. The bank refused thus the respondent filed a
complaint for the sum of money with damages. It impleaded the bank president, Antonio
Abacan and the bank branch manager, Santos who in turn filed a cross claim and third party
complaint against Manzano.

The bank maintained it exercised due diligence in the supervision of its employees while
Santos denied to be negligent on her job. Abacan invokes that the respondent does not
have any cause of action against him because he has no involvement to the transaction.
Santos and Abacan both contend that Chowking is estopped from claiming reimbursement
and damages because of its negligence for allowing Manzano to take hold, endorse and
encash its checks.

Issue:

1) Whether or not Chowking is estopped from its claim against for the wrongful encashment
of the checks

2) whether Chowking should bear the loss from its own negligence.

Ruling:

1) Whether or not Chowking is estopped from its claim against for the wrongful encashment
of the checks

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No. For estoppel to occur the following requisites should be met: (a) conduct amounting to
false representation or concealment of material facts or at least calculated to convey the
impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (b) intent, or at least expectation that this conduct shall be
acted upon, or at least influenced by the other party; and (c) knowledge, actual or
constructive of the actual facts.

Chowking did not in any way show misrepresentation on the material facts on the
encashment of checks. They do not allow the encashment of checks without the signature
of all its authorized signatories. This the bank knows this as the customary practice of
Chowking. However, the bank failed to provide evidence to show they observe due diligence
required from banks by the law.

2) whether Chowking should bear the loss from its own negligence.

No. The General Banking Law 2000 imposes to all banks to observe meticulous care in
treating the accounts of their depositors. The bank’s negligence contributed to the fraud
committed by Manzano as it is primarily liable for the negligence of its officers and agents
who are acting within the scope of their employment. Petition was denied.

BPI vs. Casa Montessori Internationale, et. al., G.R. No. 149454. May 28, 2004
Full Text

Facts: Plaintiff CASA Montessori International opened a current account with BPI. In 1991,
plaintiff discovered that nine (9) of its checks had been encashed by a certain Sonny D.
Santos since 1990 in the total amount of P782,000.00. It turned out that Sonny D. Santos
with account at BPIs Greenbelt Branch was a fictitious name used by third party defendant
Leonardo T. Yabut who worked as external auditor of CASA. A Third party defendant
voluntarily admitted that he forged the signature of Ms. Lebron and encashed the checks.

On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages against
defendant bank praying that the latter be ordered to reinstate the amount of P782,500.00
in the current and savings accounts of the plaintiff with interest at 6% per annum.

RTC rendered decision in favor of CASA. CA modified decision holding CASA as contributory
negligent hence ordered Yabut to reimburse BPI half the total amount claimed and CASA,
the other half. It also disallowed attorney’s fees and moral and exemplary damages.

Issues: WON there was forgery under the Negotiable Instruments Law (NIL)?

Ruling:

The Court first discussed that forgery is a defense.

“Section 23 of the NIL Section 23. Forged signature; effect of. — When a signature is forged
or made without the authority of the person whose signature it purports to be, it is wholly
inoperative, and no right x x x to enforce payment thereof against any party thereto, can be
acquired through or under such signature, unless the party against whom it is sought to
enforce such right is precluded from setting up the forgery or want of authority. “

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Under this provision, a forged signature is a real or absolute defense, and a person whose
signature on a negotiable instrument is forged is deemed to have never become a party
thereto and to have never consented to the contract that allegedly gave rise to it. The
counterfeiting of any writing, consisting in the signing of anothers name with intent to
defraud, is forgery. In the present case, we hold that there was forgery of the drawers
signature on the check.

Negligence is attributable to BPI alone. A banking business is impressed with public interest,
of paramount importance thereto is the trust and confidence of the public in general.
Consequently, the highest degree of diligence is expected, and high standards of integrity
and performance are even required, of it. BPI, despite claims of following its signature
verification procedure, still failed to detect the eight instances of forgery. Its negligence
consisted in the omission of that degree of diligence required of a bank. It cannot now feign
ignorance, for very early on we have already ruled that a bank is bound to know the
signatures of its customers. and if it pays a forged check, it must be considered as making
the payment out of its own funds, and cannot ordinarily charge the amount so paid to the
account of the depositor whose name was forged.

PCIB V. CA
350 SCRA 446

FACTS:
Ford Philippines filed actions to recover from the drawee bank Citibank and collecting bank
PCIB the value of several checks payable to the Commissioner of Internal Revenue
which were embezzled allegedly by an organized syndicate. What prompted this action
was the drawing of a check by Ford, which it deposited to PCIB as payment and was
debited from their Citibank account. It later on found out that the payment wasn’t received
by the Commissioner. Meanwhile, according to the NBI report, one of the checks
issued by petitioner was withdrawn from PCIB for alleged mistake in the amount to be paid.
This was replaced with manager’s check by PCIB, which were allegedly stolen by the
syndicate and deposited in their own account.

The trial court decided in favor of Ford.

ISSUE:
Has Ford the right to recover the value of the checks intended as payment to CIR?

HELD:
The checks were drawn against the drawee bank but the title of the person negotiating the
same was allegedly defective because the instrument was obtained by fraud and unlawful
means, and the proceeds of the checks were not remitted to the payee. It was
established that instead paying the
Commissioner, the checks were diverted and encashed for the eventual distribution
among members of the syndicate.

Pursuant to this, it is vital to show that the negotiation is made by the perpetrator in
breach of faith amounting to fraud. The person negotiating the checks must have gone
beyond the authority given by his principal. If the principal could prove that there was no
negligence in the performance of his duties, he may set up the personal defense to

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escape liability and recover from other parties who, through their own negligence, allowed
the commission of the crime.

It should be resolved if Ford is guilty of the imputed contributory negligence that

would defeat its claim for reimbursement, bearing in mind that its employees were among
the members of the syndicate. It appears although the employees of Ford initiated the
transactions attributable to the organized syndicate, their actions were not the
proximate cause of encashing the checks payable to CIR. The degree of Ford’s
negligence couldn’t be characterized as the proximate cause of the injury to parties.
The mere fact that the forgery was committed by a drawer-payor’s confidential
employee or agent, who by virtue of his position had unusual facilities for perpetrating the
fraud and imposing the forged paper upon the bank, doesn’t entitle the bank to shift the
loss to the drawer-payor, in the absence of some circumstance raising estoppel against the
drawer.

Note: not only PCIB but also Citibank is responsible for negligence. Citibank was
negligent in the performance of its duties as a drawee bank. It failed to establish its
payments of Ford’s checks were made in due course and legally in order.

PRUDENTIAL BANK VS CA

FACTS: Private respondent Leticia Tupasi-Valenzuela opened anaccount in the Petitioner Prudential
bank. On June 1, 1988, herein private respondent deposited P35,271.60 drawn against the Philippine
Commercial International Bank (PCIB). Thereafter, private respondent issued Prudential Bank check
in the amount of P11,500 post-dated June 20, 1988 in favor of one Belen Legaspi. Legaspi, who was
in jewelry trade, endorsed the check to Philip Lhuiller, a businessman in the same field. When the
check was deposited with the PCIB, it was dishonored for being drawn against insufficient funds.
Private respondent asked why her check was dishonored where there was sufficient funds. The bank
officer told her there was no need to review the passbook because the bank ledger was the best
proof that she did not have sufficient funds. Then he abruptly faced his typewriter and started
typing. Later, it was found out that the bank misposted private respondent’s check deposit to
another accountand delayed the posting of the same to the proper account. The bank admitted that
it was at fault. But since it is not the first time that private respondent experienced this scenario, she
commenced a suit for damages.

ISSUE: Can damages be awarded to private respondent on accountof the bank’s negligence ?

HELD: Yes. The trial court found “that the misposting is a clear proof of lack of supervision on the
part of the defendant bank”. The appellatecourt also found out that “while it may be true that the
bank’s negligence in dishonoring the properly funded check might not have been attended with
malice and bad faith, as appellee submits, nevertheless, it is the result of lack of due care and
caution expected of an employee of a firm engaged in so sensitive and accurately demanding task as
banking”.

In Simex International vs. CA, 183 SCRA 360,367 (1990), and BPI vs. IAC, 206 SCRA 408, this court had
occasion to stress the fiduciary nature of the relationship between a bank and its depositors and the
extent ofdiligence expected from the former in handling the accounts entrusted to its care.

In the case of PNB vs. CA, we held that “a bank is under obligation to treat the accounts of its
depositors with meticulous care whether suchaccount consists only of a few hundred pesos or
millions of pesos. Responsibility arising from negligence in the performance of every kind of

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obligation is demandable. While petitioner’s negligence in this case may not have been attended
with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and humiliation”.