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Petitioner, a private corporation engaged in the exportation of food

products, was a depositor maintaining a checking account with
respondent Traders Royal Bank. Petitioner deposited to its account
increasing its balance and subsequently, issued several checks but
was surprised to learn that it had been dishonored for insufficient
funds. As a consequence, petitioner received demand letters from
its suppliers for the dishonored checks. Investigation disclosed that
the deposit was not credited to it. The error was rectified and the
dishonored checks were consequently paid. Petitioner demanded
reparation from respondent bank for its gross and wanton
negligence but the later did not heed. Petitioner then filed before the
RTC which later held that respondent bank was guilty of negligence
but petitioner nonetheless was not entitled to moral damages. CA


Whether or not petitioner is entitled to damages due to respondent

bank’s negligence.

Ruling: YES.

As the Court sees it, the initial carelessness of the respondent bank,
aggravated by the lack of promptitude in repairing its error, justifies
the grant of moral damages. This rather lackadaisical attitude
toward the complaining depositor constituted the gross negligence,
if not wanton bad faith, that the respondent court said had not been
established by the petitioner. We shall recognize that the petitioner
did suffer injury because of the private respondent’s negligence that
caused the dishonor of the checks issued by it. The immediate
consequence was that its prestige was impaired because of the
bouncing checks and confidence in it as a reliable debtor was

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. In the case
at bar, it is obvious that the respondent bank was remiss in that duty
and violated that relationship. What is especially deplorable is that,
having been informed of its error in not crediting the deposit in
question to the petitioner, the respondent bank did not immediately
correct it but did so only one week later or twenty-three days after
the deposit was made. It bears repeating that the record does not
contain any satisfactory explanation of why the error was made in
the first place and why it was not corrected immediately after its
discovery. Such ineptness comes under the concept of the wanton
manner contemplated in the Civil Code that calls for the imposition
of exemplary damages.

PCIB v CA [G.R. No. 121413. January 29, 2001.] PHILIPPINE has clothed his agent with apparent authority to receive the
COMMERCIAL INTERNATIONAL BANK (formerly INSULAR proceeds of such check.

Ford Philippines drew and issued Citibank Check. No. SN 04867 on
October 19, 1977, Citibank Check No. SN 10597 on July 19, 1978
and Citibank Check No. SN-16508 on April 20, 1979, all in favor of
the Commissioner of Internal Revenue (CIR) for payment of its
percentage taxes. The checks were crossed and deposited with the
IBAA, now PCIB, BIR's authorized collecting bank. The first check
was cleared containing an indorsement that "all prior indorsements
and/or lack of indorsements guaranteed." The same, however, was
replaced with two (2) IBAA's managers' checks based on a call and
letter request made by Godofredo Rivera, Ford's General Ledger
Accountant, on an alleged error in the computation of the tax due
without IBAA verifying the authority of Rivera. These manager's
checks were later deposited in another bank and misappropriated
by the syndicate. The last two checks were cleared by the Citibank
but failed to discover that the clearing stamps do not bear any
initials. The proceeds of the checks were also illegally diverted or
switched by officers of PCIB — members of the syndicate, who
eventually encashed them. Ford, which was compelled to pay anew
the percentage taxes, sued in two actions for collection against the
two banks on January 20, 1983, barely six years from the date the
first check was returned to the drawer. The direct perpetrators of the
crime are now fugitives from justice.

Whether or not the bank acting as collecting agent is duty bound to
consult its principal regarding unwarranted instructions given by the
payor or its agent?


It was admitted that PCIBank is authorized to collect the payment of

taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty
bound to consult its principal regarding the unwarranted instructions
given by the payor or its agent. As aptly stated by the trial court, to

"xxx. Since the questioned crossed check was deposited

with IBAA [now PCIBank], which claimed to be a
depository/collecting bank of BIR, it has the responsibility
to make sure that the check in question is deposited in
Payee's account only.

xxx xxx xxx

As agent of the BIR (the payee of the check), defendant IBAA should
receive instructions only from its principal BIR and not from any
other person especially so when that person is not known to the
defendant. It is very imprudent on the part of the defendant IBAA to
just rely on the alleged telephone call of one (Godofredo Rivera and
in his signature to the authenticity of such signature considering that
the plaintiff is not a client of the defendant IBAA.

It is a well-settled rule that the relationship between the payee or

holder of commercial paper and the bank to which it is sent for
collection is, in the absence of an agreement to the contrary, that of
principal and agent.22 A bank which receives such paper for
collection is the agent of the payee or holder.

Even considering arguendo, that the diversion of the amount of a

check payable to the collecting bank in behalf of the designated
payee may be allowed, still such diversion must be properly
authorized by the payor. Otherwise stated, the diversion can be
justified only by proof of authority from the drawer, or that the drawer

CA-Agro Industrial Devt Corp vs CA 219 SCRA 426 negligence, delay or contravention of the tenor of the agreement,
and in the absence of any stipulation prescribing the degree of
Facts: diligence required, that of a good father of a family is to be observed.
On July 3, 1979, petitioner (through its President- Sergio Aguirre) Corollary, any stipulation exempting the depositary from any liability
and the Spouses Ramon and Paula Pugao entered into an arising from the loss of the thing deposited on account of fraud,
agreement whereby the former purchase two parcel of lands from negligence or delay would be void for being contrary to law and
the latter. It was paid of downpayment while the balance was public policy.
covered by there postdated checks. Among the terms and Furthermore, it is not correct to assert that the Bank has neither the
conditions embodied in the agreement were the titles shall be possession nor control of the contents of the box since in fact; the
transferred to the petitioner upon full payment of the price and the safety deposit box itself is located in its premises and is under its
owner's copies of the certificate of titles shall be deposited in a absolute control. Moreover, the Bank keeps the guard key to the
safety deposit box of any bank. Petitioner and the Pugaos then said box and renters cannot open their respective boxes unless the
rented Safety Deposit box of private respondent Security Bank and Bank cooperates by presenting and using this guard key. Clearly
Trust Company. then, to the extent above stated, conditions 13 and 14 in the contract
in question are void and ineffective.
Thereafter, a certain Margarita Ramos offered to buy from the
petitioner. Mrs Ramos demand the execution of a deed of sale which
necessarily entailed the production of the certificate of titles. In view
thereof, Aguirre, accompanied by the Pugaos, then proceed to the
respondent Bank to open the safety deposit box and get the
certificate of titles. However, when opened in the presence of the
Bank's representative, the box yielded no such certificate. Because
of the delay in the reconstitution of the title, Mrs Ramos withdrew
her earlier offer to purchase.

Hence this petition.

Whether or not the contract of rent between a commercial bank and
another party for the use of safety deposit box can be considered
alike to a lessor-lessee relationship.?

Ruling: NO

The petitioner is correct in making the contention that the contract

for the rent of the deposit box is not a ordinary contract of lease as
defined in Article 1643 of the Civil Code. However, the Court do not
really subscribe to its view that the same is a contract of deposit that
is to be strictly governed by the provisions in Civil Code on Deposit;
the contract in the case at bar is a special kind of deposit. It cannot
be characterized as an ordinary contract of lease under Article 1643
because the full and absolute possession and control of the safety
deposit box was not given to the joint renters- the petitioner and the
Pugaos. The guard key of the box remained with the respondent
bank; without this key, neither of the renters could open the box.

On the other hand, the respondent bank could not likewise op The
prevailing rule in American Jurisprudence is that the relation
between a bank renting out safe-deposit boxes and its customer
with respect to the contents of the box is that of a bailor and bailee,
the bailment being for hire and mutual benefit. While, in the context
of our laws, particularly Section 72(a) of the General Banking Act
(now Section 52) which authorizes banking institutions to rent out
safety deposit boxes, it is clear that the prevailing rule in the United
States has been adopted.
Sec. 72. In addition to the operations specifically authorized
elsewhere in this Act, banking institutions other than building and
loan associations may perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and
rent safety deposit boxes for the safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections
(a), (b) and (c) of this section as depositories or as agents. . . .

Nevertheless, the primary function is still found within the

parameters of a contract of deposit, and, in relation to Article 1306
of the Civil Code, the parties thereto may establish such stipulations,
clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public
order or public policy. Thus, the depositary's responsibility for the
safekeeping of the objects deposited in this case is governed by
Title I, Book IV of the Civil Code. Accordingly, the depositary would
be liable if, in performing its obligation, it is found guilty of fraud,