Consolidated Bank Vs CA

SUPREME COURT REPORTS ANNOTATED VOLUME 410 29/07/2019, 3*33 PM
562 SUPREME COURT REPORTS ANNOTATED

Consolidated Bank and Trust Corporation vs. Court of
Appeals
*
G.R. No. 138569. September 11, 2003.
THE CONSOLIDATED BANK and TRUST

CORPORATION, petitioner, vs. COURT OF APPEALS and
L.C. DIAZ and COMPANY, CPAÊs, respondents.
Banks and Banking; Loans; The contract between a bank and

its depositor is governed by the provisions of the Civil Code on
simple loan.·The contract between the bank and its depositor is
governed by the provisions of the Civil Code on simple loan. Article
1980 of the Civil Code expressly provides that „x x x savings x x x
deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan.‰ There is a
debtor-creditor relationship between the bank and its depositor. The
bank is the debtor and the depositor is the creditor. The depositor
lends the bank money and the bank agrees to pay the depositor on
demand. The savings deposit agreement between the bank and the
depositor is the contract that determines the rights and obligations
of the parties.
Same; Same; General Banking Act of 2000 (R.A. No. 8791); The
new provision in the general banking law, that the State recognizes
the „fiduciary nature of banking that requires high standards of
integrity and performance,‰ introduced in 2000, is a statutory
affirmation of Supreme Court decisions, starting with the 1990 case
of Simex International v. Court of Appeals, 183 SCRA 360.·The
law imposes on banks high standards in view of the fiduciary
nature of banking. Section 2 of Republic Act No. 8791 („RA 8791‰),
which took effect on 13 June 2000, declares that the State
recognizes the „fiduciary nature of banking that requires high
standards of integrity and performance.‰ This new provision in the
http://www.central.com.ph/sfsreader/session/0000016c3ca2272fb5c78135003600fb002c009e/p/APE390/?username=Guest Page 1 of 27
general banking law, introduced in 2000, is a statutory affirmation

of Supreme Court decisions, starting with the 1990 case of Simex
International v. Court of Appeals, holding that „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.‰
Same; Same; Same; The fiduciary relationship means that the
bankÊs obligation to observe „high standards of integrity and
performance‰ is deemed written into every deposit agreement
between a bank and its depositor; Although RA 8791 took effect
almost nine years after the unauthorized withdrawal in the instant
case, jurisprudence at the time of the withdrawal already imposed
on banks the same high standard of diligence required under R.A.
8791.·This fiduciary relationship means that the bankÊs obligation
to observe „high standards of integrity and performance‰ is deemed
written into every deposit agreement between a bank and its
depositor.
_______________
* FIRST DIVISION.
563
VOL. 410, SEPTEMBER 11, 2003 563
Consolidated Bank and Trust Corporation vs. Court of Appeals
The fiduciary nature of banking requires banks to assume a degree

of diligence higher than that of a good father of a family. Article
1172 of the Civil Code states that the degree of diligence required of
an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a good father of a family. Section 2
of RA 8791 prescribes the statutory diligence required from banks·
that banks must observe „high standards of integrity and
performance‰ in servicing their depositors. Although RA 8791 took
effect almost nine years after the unauthorized withdrawal of the
P300,000 from L.C. DiazÊs savings account, jurisprudence at the
time of the withdrawal already imposed on banks the same high
standard of diligence required under RA No. 8791.

Same; Same; Same; The fiduciary nature of a bank-depositor
relationship does not convert the contract between the bank and its
depositors from a simple loan to a trust agreement, whether express
or implied·the law simply imposes on the bank a higher standard
of integrity and performance in complying with its obligations under
the contract of simple loan, beyond those required of non-bank
debtors under a similar contract of simple loan; The fiduciary
nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors
but to earn money for themselves.·The fiduciary nature of a bank-
depositor relationship does not convert the contract between the
bank and its depositors from a simple loan to a trust agreement,
whether express or implied. Failure by the bank to pay the
depositor is failure to pay a simple loan, and not a breach of trust.
The law simply imposes on the bank a higher standard of integrity
and performance in complying with its obligations under the
contract of simple loan, beyond those required of non-bank debtors
under a similar contract of simple loan. The fiduciary nature of
banking does not convert a simple loan into a trust agreement
because banks do not accept deposits to enrich depositors but to
earn money for themselves. The law allows banks to offer the lowest
possible interest rate to depositors while charging the highest
possible interest rate on their own borrowers. The interest spread
or differential belongs to the bank and not to the depositors who are
not cestui que trust of banks. If depositors are cestui que trust of
banks, then the interest spread or income belongs to the depositors,
a situation that Congress certainly did not intend in enacting
Section 2 of RA 8791.
Same; Negligence; Bank tellers must exercise a high degree of
diligence in insuring that they return the passbook only to the
depositor or to his authorized representative.·Likewise, SolidbankÊs
tellers must exercise a high degree of diligence in insuring that they
return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on
savings account provide that any person in possession of the
passbook is presumptively its owner. If the tellers give the passbook
to the wrong person, they would be clothing that person pre-
564
sumptive ownership of the passbook, facilitating unauthorized

withdrawals by that person. For failing to return the passbook to
Calapre, the authorized representative of L.C. Diaz, Solidbank and
Teller No. 6 presumptively failed to observe such high degree of
diligence in safeguarding the passbook, and in insuring its return to
the party authorized to receive the same.
Same; Same; Culpa Contractual; Culpa Aquiliana; While in
culpa contractual, once the plaintiff proves a breach of contract,
there is a presumption that the defendant was at fault or negligent
and the burden is on the defendant to prove that he was not at fault
or negligent, in culpa aquiliana the plaintiff has the burden of
proving that the defendant was negligent.·In culpa contractual,
once the plaintiff proves a breach of contract, there is a
presumption that the defendant was at fault or negligent. The
burden is on the defendant to prove that he was not at fault or
negligent. In contrast, in culpa aquiliana the plaintiff has the
burden of proving that the defendant was negligent. In the present
case, L.C. Diaz has established that Solidbank breached its
contractual obligation to return the passbook only to the authorized
representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning
the passbook to Calapre. The burden was on Solidbank to prove
that there was no negligence on its part or its employees.
Same; Same; Same; Same; The defense of exercising the
required diligence in the selection and supervision of employees is
not a complete defense in culpa contractual, unlike in culpa
aquiliana.·Solidbank is bound by the negligence of its employees
under the principle of respondeat superior or command
responsibility. The defense of exercising the required diligence in
the selection and supervision of employees is not a complete defense
in culpa contractual, unlike in culpa aquiliana. The bank must not
only exercise „high standards of integrity and performance,‰ it must
also insure that its employees do likewise because this is the only
way to insure that the bank will comply with its fiduciary duty.
Solidbank failed to present the teller who had the duty to return to
Calapre the passbook, and thus failed to prove that this teller
exercised the „high standards of integrity and performance‰
required of SolidbankÊs employees.

Same; Same; Words and Phrases; „Proximate Cause,‰
Explained.·Proximate cause 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. Proximate cause is determined by the facts of each case
upon mixed considerations of logic, common sense, policy and
precedent.
Same; Same; There is no law mandating banks to call up their
clients whenever their representatives withdraw significant amounts
from their
565
VOL. 410, SEPTEMBER 11, 2003 565
accounts.·There is no law mandating banks to call up their clients

whenever their representatives withdraw significant amounts from
their accounts. L.C. Diaz therefore had the burden to prove that it
is the usual practice of Solidbank to call up its clients to verify a
withdrawal of a large amount of money. L.C. Diaz failed to do so.
Same; Same; Words and Phrases; „Doctrine of Last Clear
Chance,‰ Explained.·The doctrine of last clear chance states that
where both parties are negligent but the negligent act of one is
appreciably later than that of the other, or where it is impossible to
determine whose fault or negligence caused the loss, the one who
had the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss. Stated differently, the antecedent
negligence of the plaintiff does not preclude him from recovering
damages caused by the supervening negligence of the defendant,
who had the last fair chance to prevent the impending harm by the
exercise of due diligence.
Same; Same; Doctrine of last clear chance not applicable in a
case of culpa contractual.·We do not apply the doctrine of last clear
chance to the present case. Solidbank is liable for breach of contract
due to negligence in the performance of its contractual obligation to
L.C. Diaz. This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last clear chance to

avoid the loss, would exonerate the defendant from liability. Such
contributory negligence or last clear chance by the plaintiff merely
serves to reduce the recovery of damages by the plaintiff but does
not exculpate the defendant from his breach of contract.
Same; Same; Damages; Pursuant to Article 1172 of the Civil
Code, if the defendant bank exercised the proper diligence in the
selection and supervision of its employee, or if the plaintiff depositor
was guilty of contributory negligence, the courts may reduce the
award of damages; Where the depositor is guilty of contributory
negligence, damages may be allocated between the depositor and the
bank on a 40-60 ratio.·Under Article 1172, „liability (for culpa
contractual) may be regulated by the courts, according to the
circumstances.‰ This means that if the defendant exercised the
proper diligence in the selection and supervision of its employee, or
if the plaintiff was guilty of contributory negligence, then the courts
may reduce the award of damages. In this case, L.C. Diaz was
guilty of contributory negligence in allowing a withdrawal slip
signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced. In
Philippine Bank of Commerce v. Court of Appeals, where the Court
held the depositor guilty of contributory negligence, we allocated
the damages between the depositor and the bank on a 40-60 ratio.
Applying the same ruling to this case, we hold that L.C. Diaz must
shoulder 40% of the actual damages awarded by the appellate court.
Solidbank must pay the other 60% of the actual damages.
566

Appeals
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.

Delos Reyes, Banaga, Briones & Associates for
petitioner.
R.P. Cinco & R.R. Nacorda for private respondent.
CARPIO, J.:
The Case
1
Before us is a petition for review of the Decision of the
Court of Appeals dated 27 October 1998 and its Resolution
dated 112 May 1999. The assailed decision reversed the
Decision of the Regional Trial Court of Manila, Branch 8,
absolving petitioner Consolidated Bank and Trust
Corporation, now known as Solidbank Corporation
(„Solidbank‰), of any liability. The questioned resolution of
the appellate court denied the motion for reconsideration of
Solidbank but modified the decision by deleting the award
of exemplary damages, attorneyÊs fees, expenses of
litigation and cost of suit.
The Facts
Solidbank is a domestic banking corporation organized and

existing under Philippine laws. Private respondent L.C.
Diaz and Company, CPAÊs („L.C. Diaz‰), is a professional
partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings
account with Solidbank, designated as Savings Account No.
S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier,
Mercedes Macaraya („Macaraya‰), filled up a savings (cash)
deposit slip for P990 and a savings (checks) deposit slip for
P50. Macaraya instructed the messenger of L.C. Diaz,
Ismael Calapre („Calapre‰), to
_______________
1 Penned by Associate Justice Eugenio S. Labitoria with Associate

Justices Jesus M. Elbinias, Marina L. Buzon, Godardo A. Jacinto and
Candido V. Rivera, concurring, Fourth Division (Special Division of Five
Justices).
2 Penned by Judge Felixberto T. Olalia, Jr.
567
VOL. 410, SEPTEMBER 11, 2003 567

Appeals
deposit the money with Solidbank. Macaraya also gave

Calapre the Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6
the two deposit slips and the passbook. The teller
acknowledged receipt of the deposit by returning to
Calapre the duplicate copies of the two deposit slips. Teller
No. 6 stamped the deposit slips with the words
„DUPLICATE‰ and „SAVING TELLER 6 SOLIDBANK
HEAD OFFICE.‰ Since the transaction took time and
Calapre had to make another deposit for L.C. Diaz with
Allied Bank, he left the passbook with Solidbank. Calapre
then went to Allied Bank. When Calapre returned to
Solidbank to retrieve the passbook, Teller
3
No. 6 informed
him that „somebody got the passbook.‰ Calapre went back
to L.C. Diaz and reported the incident to Macaraya.
Macaraya immediately prepared a deposit slip in
duplicate copies with a check of P200,000. Macaraya,
together with Calapre, went to Solidbank and presented to
Teller No. 6 the deposit slip and check. The teller stamped
the words „DUPLICATE‰ and „SAVING TELLER 6
SOLIDBANK HEAD OFFICE‰ on the duplicate copy of the
deposit slip. When Macaraya asked for the passbook, Teller
No. 6 told Macaraya that someone got the passbook but she
could not remember to whom she gave the passbook. When
Macaraya asked Teller No. 6 if Calapre got the passbook,
Teller No. 6 answered that someone shorter than Calapre
got the passbook. Calapre was then standing beside
Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14
August 1991 for the deposit of a check for P90,000 drawn
on Philippine Banking Corporation („PBC‰). This PBC4
check of L.C. Diaz was a check that it had „long closed.‰
PBC subsequently dishonored the check because of
insufficient funds and because the signature in the check
differed from PBCÊs specimen signature. Failing to get back
the passbook, Macaraya went back to her office and
reported the matter to the Personnel Manager of L.C. Diaz,
Emmanuel Alvarez.
The following day, 15 August 1991, L.C. Diaz through its
Chief Executive Officer, Luis C. Diaz („Diaz‰), called up

Solidbank to stop any transaction using the same passbook
until L.C. Diaz could
_______________
3 Rollo, p. 119.
4 Ibid., p. 229. The account must have been long dormant.
568

Appeals
5
open a new account. On the same day, Diaz formally wrote
Solidbank to make the same request. It was also on the
same day that L.C. Diaz learned of the unauthorized
withdrawal the day before, 14 August 1991, of P300,000
from its savings account. The withdrawal slip for the
P300,000 bore the signatures of the authorized signatories
of L.C. Diaz, namely Diaz and Rustico L. Murillo. The
signatories, however, denied signing the withdrawal slip. A
certain Noel Tamayo received
6
the P300,000.
In an Information dated 5 September 1991, L.C. Diaz
charged its messenger, Emerano Ilagan („Ilagan‰) and one
Roscon Verdazola with Estafa through Falsification of
Commercial Document. The Regional Trial Court of Manila
dismissed the criminal case after the City Prosecutor filed
a Motion to Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel
demanded from Solidbank the return of its money.
Solidbank 7refused. On 25 August 1992, L.C. Diaz filed a
Complaint for Recovery of a Sum of Money against
Solidbank with the Regional Trial Court of Manila, Branch
8. After trial, the trial court rendered on 28 December 1994
a decision absolving Solidbank and dismissing the
complaint. 8
L.C. Diaz then appealed to the Court of Appeals. On 27
October 1998, the Court of Appeals issued its Decision
reversing the decision of the trial court.
On 11 May 1999, the Court of Appeals issued its
Resolution denying the motion for reconsideration of

Solidbank. The appellate court, however, modified its
decision by deleting the award of exemplary damages and
attorneyÊs fees.
The Ruling of the Trial Court
In absolving Solidbank, the trial court applied the rules on

savings account written on the passbook. The rules state
that „possession of this book shall raise the presumption of
ownership and any payment or payments made by the
bank upon the production of the
_______________
5 Records, p. 9.
6 Ibid., p. 34.
7 Docketed as Civil Case No. 92-62384.
8 Docketed as CA-G.R. CV No. 49243.
569
VOL. 410, SEPTEMBER 11, 2003 569

Appeals
said book and entry therein of the withdrawal shall 9have

the same effect as if made to the depositor personally.‰
At the time of the withdrawal, a certain Noel Tamayo
was not only in possession of the passbook, he also
presented a withdrawal slip with the signatures of the
authorized signatories of L.C. Diaz. The specimen
signatures of these persons were in the signature cards.
The teller stamped the withdrawal slip with the words
„Saving Teller No. 5.‰ The teller then passed on the
withdrawal slip to Genere Manuel („Manuel‰) for
authentication. Manuel verified the signatures on the
withdrawal slip. The withdrawal slip was then given to
another officer who compared the signatures on the
withdrawal slip with the specimen on the signature cards.
The trial court concluded that Solidbank acted with care
and observed the rules on savings account when it allowed

the withdrawal of P300,000 from the savings account of
L.C. Diaz.
The trial court pointed out that the burden of proof now
shifted to L.C. Diaz to prove that the signatures on the
withdrawal slip were forged. The trial court admonished
L.C. Diaz for not offering in evidence the National Bureau
of Investigation („NBI‰) report on the authenticity of the
signatures on the withdrawal slip for P300,000. The trial
court believed that L.C. Diaz did not offer this evidence
because it is derogatory to its action.
Another provision of the rules on savings account states
that 10
the depositor must keep the passbook „under lock and
key.‰ When another person presents the passbook for
withdrawal prior to SolidbankÊs receipt of the notice of loss
of the passbook, that person is considered as the owner of
the passbook. The trial court ruled that the passbook
presented during the questioned transaction was „now out
of the lock and
11
key and presumptively ready for a business
transaction.‰
Solidbank did not have any participation in the custody
and care of the passbook. The trial court believed that
SolidbankÊs act of allowing the withdrawal of P300,000 was
not the direct and proximate cause of the loss. The trial
court held that L.C. DiazÊs negligence caused the
unauthorized withdrawal. Three facts establish L.C. DiazÊs
negligence: (1) the possession of the passbook by a per-
_______________
9 Rollo, p. 231.
10 Ibid., p. 233.
11 Ibid., p. 60.
570

Appeals
son other than the depositor L.C. Diaz; (2) the presentation
of a signed withdrawal receipt by an unauthorized person;
and (3) the possession by an unauthorized person of a PBC

check „long closed‰ by L.C. Diaz, which check was deposited
on the day of the fraudulent withdrawal.
The trial court debunked L.C. DiazÊs contention that
Solidbank did not follow the precautionary procedures
observed by the two parties whenever L.C. Diaz withdrew
significant amounts from its account. L.C. Diaz claimed
that a letter must accompany withdrawals of more than
P20,000. The letter must request Solidbank to allow the
withdrawal and convert the amount to a managerÊs check.
The bearer must also have a letter-authorizing him to
withdraw the same amount. Another person driving a car
must accompany the bearer so that he would not walk from
Solidbank to the office in making the withdrawal. The trial
court pointed out that L.C. Diaz disregarded these
precautions in its past withdrawal. On 16 July 1991, L.C.
Diaz withdrew P82,554 without any separate letter of
authorization or any communication with Solidbank that
the money be converted into a managerÊs check.
The trial court further justified the dismissal of the
complaint by holding that the case was a last ditch effort of
L.C. Diaz to recover P300,000 after the dismissal of the
criminal case against Ilagan.
The dispositive portion of the decision of the trial court
reads:
„IN VIEW OF THE FOREGOING, judgment is hereby rendered

DISMISSING the complaint.
The Court further renders judgment in favor of defendant bank
pursuant to its counterclaim the amount of Thirty Thousand Pesos
(P30,000.00) as attorneyÊs fees.
With costs against plaintiff.
12
SO ORDERED.‰
The Ruling of the Court of Appeals
The Court of Appeals ruled that SolidbankÊs negligence was

the proximate cause of the unauthorized withdrawal of
P300,000 from the savings account of L.C. Diaz. The
appellate court reached this
_______________
12 Ibid., p. 66.
571
VOL. 410, SEPTEMBER 11, 2003 571

Appeals
conclusion after applying the provision of the Civil Code on

quasidelict, to wit:
Article 2176. Whoever by act or omission causes damage to another,

there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this chapter.
The appellate court held that the three elements of a quasi-

delict are present in this case, namely: (a) damages
suffered by the plaintiff; (b) fault or negligence of the
defendant, or some other person for whose acts he must
respond; and (c) the connection of cause and effect between
the fault or negligence of the defendant and the damage
incurred by the plaintiff.
The Court of Appeals pointed out that the teller of
Solidbank who received the withdrawal slip for P300,000
allowed the withdrawal without making the necessary
inquiry. The appellate court stated that the teller, who was
not presented by Solidbank during trial, should have called
up the depositor because the money to be withdrawn was a
significant amount. Had the teller called up L.C. Diaz,
Solidbank would have known that the withdrawal was
unauthorized. The teller did not even verify the identity of
the impostor who made the withdrawal. Thus, the
appellate court found Solidbank liable for its negligence in
the selection and supervision of its employees.
The appellate court ruled that while L.C. Diaz was also
negligent in entrusting its deposits to its messenger and its
messenger in leaving the passbook with the teller,
Solidbank could not escape liability because of the doctrine
of „last clear chance.‰ Solidbank could have averted the
injury suffered by L.C. Diaz had it called up L.C. Diaz to

verify the withdrawal.
The appellate court ruled that the degree of diligence
required from Solidbank is more than that of a good father
of a family. The business and functions of banks are
affected with public interest. Banks are obligated to treat
the accounts of their depositors with meticulous care,
always having in mind the fiduciary nature of their
relationship with their clients. The Court of Appeals found
Solidbank remiss in its duty, violating its fiduciary
relationship with L.C. Diaz.
572

Appeals
The dispositive portion of the decision of the Court of

Appeals reads:
„WHEREFORE, premises considered, the decision appealed from is

hereby REVERSED and a new one entered.
1. Ordering defendant-appellee Consolidated Bank and Trust

Corporation to pay plaintiff-appellant the sum of Three
Hundred Thousand Pesos (P300,000.00), with interest
thereon at the rate of 12% per annum from the date of filing
of the complaint until paid, the sum of P20,000.00 as
exemplary damages, and P20,000.00 as attorneyÊs fees and
expenses of litigation as well as the cost of suit; and
2. Ordering the dismissal of defendant-appelleeÊs counterclaim
in the amount of P30,000.00 as attorneyÊs fees.
13
SO ORDERED.‰
Acting on the motion for reconsideration of Solidbank, the

appellate court affirmed its decision but modified the
award of damages. The appellate court deleted the award
of exemplary
14
damages and attorneyÊs fees. Invoking Article
2231 of the Civil Code, the appellate court ruled that
exemplary damages could be granted if the defendant acted
with gross negligence. Since Solidbank was guilty of simple

negligence only, the award of exemplary damages was not
justified. Consequently, the award of attorneyÊs fees was
also disallowed pursuant to Article 2208 of the Civil Code.
The expenses of litigation and cost of suit were also not
imposed on Solidbank.
The dispositive portion of the Resolution reads as
follows:
„WHEREFORE, foregoing considered, our decision dated October

27, 1998 is affirmed with modification by deleting the award of
exemplary damages and attorneyÊs fees, expenses of litigation and
cost of suit.
15
SO ORDERED.‰
Hence, this petition.
_______________
13 Rollo, pp. 49-50.

14 Art. 2231. In quasi-delicts, exemplary damages may be granted if
the defendant acted with gross negligence.
15 Rollo, p. 43.
573
VOL. 410, SEPTEMBER 11, 2003 573

Appeals
The Issues
Solidbank seeks the review of the decision and resolution of

the Court of Appeals on these grounds:
I. THE COURT OF APPEALS ERRED IN HOLDING

THAT PETITIONER BANK SHOULD SUFFER
THE LOSS BECAUSE ITS TELLER SHOULD
HAVE FIRST CALLED PRIVATE RESPONDENT
BY TELEPHONE BEFORE IT ALLOWED THE
WITHDRAWAL OF P300,000.00 TO
RESPONDENTÊS MESSENGER EMERANO

ILAGAN, SINCE THERE IS NO AGREEMENT
BETWEEN THE PARTIES IN THE OPERATION
OF THE SAVINGS ACCOUNT, NOR IS THERE
ANY BANKING LAW, WHICH MANDATES THAT
A BANK TELLER SHOULD FIRST CALL UP THE
DEPOSITOR BEFORE ALLOWING A
WITHDRAWAL OF A BIG AMOUNT IN A
SAVINGS ACCOUNT.
II. THE COURT OF APPEALS ERRED IN APPLYING
THE DOCTRINE OF LAST CLEAR CHANCE AND
IN HOLDING THAT PETITIONER BANKÊS
TELLER HAD THE LAST OPPORTUNITY TO
WITHHOLD THE WITHDRAWAL WHEN IT IS
UNDISPUTED THAT THE TWO SIGNATURES
OF RESPONDENT ON THE WITHDRAWAL SLIP
ARE GENUINE AND PRIVATE RESPONDENTÊS
PASSBOOK WAS DULY PRESENTED, AND
CONTRARIWISE RESPONDENT WAS
NEGLIGENT IN THE SELECTION AND
SUPERVISION OF ITS MESSENGER EMERANO
ILAGAN, AND IN THE SAFEKEEPING OF ITS
CHECKS AND OTHER FINANCIAL
DOCUMENTS.
III. THE COURT OF APPEALS ERRED IN NOT
FINDING THAT THE INSTANT CASE IS A LAST
DITCH EFFORT OF PRIVATE RESPONDENT TO
RECOVER ITS P300,000.00 AFTER FAILING IN
ITS EFFORTS TO RECOVER THE SAME FROM
ITS EMPLOYEE EMERANO ILAGAN.
IV. THE COURT OF APPEALS ERRED IN NOT
MITIGATING THE DAMAGES AWARDED
AGAINST PETITIONER UNDER ARTICLE 2197
OF THE CIVIL CODE, NOTWITHSTANDING ITS
FINDING THAT PETITIONER BANKÊS
16
NEGLIGENCE WAS ONLY CONTRIBUTORY.
The Ruling of the Court
The petition is partly meritorious.
_______________
16 Ibid., pp. 33-34.
574

Appeals
SolidbankÊs Fiduciary Duty under the Law
The rulings of the trial court and the Court of Appeals

conflict on the application of the law. The trial court pinned
the liability on L.C. Diaz based on the provisions of the
rules on savings account, a recognition of the contractual
relationship between Solidbank and L.C. Diaz, the latter
being a depositor of the former. On the other hand, the
Court of Appeals applied the law on quasi-delict to
determine who between the two parties was ultimately
negligent. The law on quasi-delict or culpa aquiliana is
generally applicable when there is no pre-existing
contractual relationship between the parties.
We hold that Solidbank is liable for breach of contract
due to negligence, or culpa contractual.
The contract between the bank and its depositor is
governed
17
by the provisions of the Civil Code on simple
loan. Article 1980 of the Civil Code expressly provides
that „x x x savings x x x deposits of money in banks and
similar institutions shall be governed by the provisions
concerning simple loan.‰ There is a debtor-creditor
relationship between the bank and its depositor. The bank
is the debtor and the depositor is the creditor. The
depositor lends the bank money and the bank agrees to pay
the depositor on demand. The savings deposit agreement
between the bank and the depositor is the contract that
determines the rights and obligations of the parties.
The law imposes on banks high standards in view of the
fiduciary nature of18banking. Section 2 of Republic Act No.
8791 („RA 8791‰), which took effect on 13 June 2000,
declares that the State recognizes the „fiduciary nature of
banking that 19requires high standards of integrity and

performance.‰ This new provision in
_______________
17 Article 1953 of the Civil Code provides: „A person who receives a

loan of money or any other fungible thing acquires the ownership thereof,
and is bound to pay the creditor an equal amount of the same kind and
quality.‰
18 The General Banking Law of 2000.
19 In the United States, the prevailing rule, as enunciated by the U.S.
Supreme Court in Bank of Marin v. England, 385 U.S. 99 (1966), is that
the bank-depositor relationship is governed by contract, and the
bankruptcy of the depositor does not alter the relationship unless the
bank receives notice of the bankruptcy. However, the Supreme Court of
some
575
VOL. 410, SEPTEMBER 11, 2003 575

Appeals
the general banking law, introduced in 2000, is a statutory

affirmation of Supreme Court decisions, starting with the 20
1990 case of Simex International v. Court of Appeals,
holding that „the bank is under obligation to treat the
accounts of its depositors with meticulous care, always 21
having in mind the fiduciary nature of their relationship.‰
This fiduciary relationship means that the bankÊs
obligation to observe „high standards of integrity and
performance‰ is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary
nature of banking requires banks to assume a degree of
diligence higher than that of a good father of a family.
Article 1172 of the Civil Code states that the degree of
diligence required of an obligor is that prescribed by law or
contract, and absent such22 stipulation then the diligence of
a good father of a family. Section 2 of RA 8791 prescribes
the statutory diligence required from banks·that banks
must observe „high standards of integrity and
performance‰ in servicing their depositors. Although RA
8791 took effect almost nine years after the unauthorized

withdrawal of the P300,000
23
from L.C. DiazÊs savings
account, jurisprudence at the time of the withdrawal
already imposed on banks the same high standard of
diligence required under RA No. 8791.
_______________
states, like Arizona, have held that banks have more than a
contractual duty to depositors, and that a special relationship may create
a fiduciary obligation on banks outside of their contract with depositors.
See Stewart v. Phoenix National Bank, 49 Ariz. 34, 64 P. 2d 101 (1937);
Klein v. First Edina National Bank, 293 Minn. 418, 196 N.W. 2d 619
(1972).
20 G.R. No. 88013, 19 March 1990, 183 SCRA 360.
21 The ruling in Simex International was followed in the following
cases: Bank of the Philippine Islands v. Intermediate Appellate Court,
G.R. No. 69162, 21 February 1992, 206 SCRA 408; Citytrust Banking
Corporation v. Intermediate Appellate Court, G.R. No. 84281, 27 May
1994, 232 SCRA 559; Tan v. Court of Appeals, G.R. No. 108555, 20
December 1994, 239 SCRA 310; Metropolitan Bank & Trust Co. v. Court
of Appeals, G.R. No. 112576, 26 October 1994, 237 SCRA 761; Philippine
Bank of Commerce v. Court of Appeals, 336 Phil. 667; 269 SCRA 695
(1997); Firestone v. Court of Appeals, G.R. No. 113236, 5 March 2001, 353
SCRA 601.
22 The second paragraph of Article 1172 of the Civil Code provides: „If
the law or contract does not state the diligence which is to be observed in
the performance, that which is expected of a good father of a family shall
be required.‰
23 See notes 20 and 21.
576

Appeals
However, the fiduciary nature of a bank-depositor

relationship does not convert the contract between the
bank and its depositors from a simple loan to a trust
agreement, whether express or implied. Failure by the
bank to pay the depositor is failure to pay a simple loan,
24
and not a breach of trust. The law simply imposes on the
bank a higher standard of integrity and performance in
complying with its obligations under the contract of simple
loan, beyond those required of non-bank debtors under a
similar contract of simple loan.
The fiduciary nature of banking does not convert a
simple loan into a trust agreement because banks do not
accept deposits to enrich depositors but to earn money for
themselves. The law allows banks to offer the lowest
possible interest rate to depositors while charging the
highest possible interest rate on their own borrowers. The
interest spread or differential belongs to the bank and not
to the depositors who are not cestui que trust of banks. If
depositors are cestui que trust of banks, then the interest
spread or income belongs to the depositors, a situation that
Congress certainly did not intend in enacting Section 2 of
RA 8791.
SolidbankÊs Breach of its Contractual Obligation
Article 1172 of the Civil Code provides that „responsibility

arising from negligence in the performance of every kind of
obligation is demandable.‰ For breach of the savings
deposit agreement due to negligence, or culpa contractual,
the bank is liable to its depositor.
Calapre left the passbook with Solidbank because the
„transaction took time‰ and he had to go to Allied Bank for
another transaction. The passbook was still in the hands of
the employees of Solidbank for the processing of the deposit
when Calapre left Solidbank. SolidbankÊs rules on savings
account require that the „deposit book should be carefully
guarded by the depositor and kept under lock and key, if
possible.‰ When the passbook is in the possession of
SolidbankÊs tellers during withdrawals, the law imposes on
Solidbank and its tellers an even higher degree of diligence
in safeguarding the passbook.
_______________
24 Serrano v. Central Bank, G.R. L-30511, 14 February 1980, 96 SCRA

96.
577
VOL. 410, SEPTEMBER 11, 2003 577

Appeals
Likewise, SolidbankÊs tellers must exercise a high degree of

diligence in insuring that they return the passbook only to
the depositor or his authorized representative. The tellers
know, or should know, that the rules on savings account
provide that any person in possession of the passbook is
presumptively its owner. If the tellers give the passbook to
the wrong person, they would be clothing that person
presumptive ownership of the passbook, facilitating
unauthorized withdrawals by that person. For failing to
return the passbook to Calapre, the authorized
representative of L.C. Diaz, Solidbank and Teller No. 6
presumptively failed to observe such high degree of
diligence in safeguarding the passbook, and in insuring its
return to the party authorized to receive the same.
In culpa contractual, once the plaintiff proves a breach
of contract, there is a presumption that the defendant was
at fault or negligent. The burden is on the defendant to
prove that he was not at fault or negligent. In contrast, in
culpa aquiliana the plaintiff has the burden of proving that
the defendant was negligent. In the present case, L.C. Diaz
has established that Solidbank breached its contractual
obligation to return the passbook only to the authorized
representative of L.C. Diaz. There is thus a presumption
that Solidbank was at fault and its teller was negligent in
not returning the passbook to Calapre. The burden was on
Solidbank to prove that there was no negligence on its part
or its employees.
Solidbank failed to discharge its burden. Solidbank did
not present to the trial court Teller No. 6, the teller with
whom Calapre left the passbook and who was supposed to
return the passbook to him. The record does not indicate
that Teller No. 6 verified the identity of the person who
retrieved the passbook. Solidbank also failed to adduce in
evidence its standard procedure in verifying the identity of
the person retrieving the passbook, if there is such a
procedure, and that Teller No. 6 implemented this

procedure in the present case.
Solidbank is bound by the negligence of its employees
under the principle of respondeat superior or command
responsibility. The defense of exercising the required
diligence in the selection and supervision of employees is
not a complete
25
defense in culpa contractual, unlike in culpa
aquiliana.
_______________
25 Cangco v. Manila Railroad Co., 38 Phil. 769 (1918); De Guia v.

Meralco, 40 Phil. 706 (1920).
578

Appeals
The bank must not only exercise „high standards of

integrity and performance,‰ it must also insure that its
employees do likewise because this is the only way to
insure that the bank will comply with its fiduciary duty.
Solidbank failed to present the teller who had the duty to
return to Calapre the passbook, and thus failed to prove
that this teller exercised the „high standards of integrity
and performance‰ required of SolidbankÊs employees.
Proximate Cause of the Unauthorized Withdrawal
Another point of disagreement between the trial and

appellate courts is the proximate cause of the unauthorized
withdrawal. The trial court believed that L.C. DiazÊs
negligence in not securing its passbook under lock and key
was the proximate cause that allowed the impostor to
withdraw the P300,000. For the appellate court, the
proximate cause was the tellerÊs negligence in processing
the withdrawal without first verifying with L.C. Diaz. We
do not agree with either court.
Proximate cause is that cause which, in natural and
continuous sequence, unbroken by any efficient intervening

cause, produces the injury 26
and without which the result
would not have occurred. Proximate cause is determined
by the facts of each case upon mixed 27considerations of logic,
common sense, policy and precedent.
L.C. Diaz was not at fault that the passbook landed in
the hands of the impostor. Solidbank was in possession of
the passbook while it was processing the deposit. After
completion of the transaction, Solidbank had the
contractual obligation to return the passbook only to
Calapre, the authorized representative of L.C. Diaz.
Solidbank failed to fulfill its contractual obligation because
it gave the passbook to another person.
SolidbankÊs failure to return the passbook to Calapre
made possible the withdrawal of the P300,000 by the
impostor who took possession of the passbook. Under
SolidbankÊs rules on savings account, mere possession of
the passbook raises the presumption of ownership. It was
the negligent act of SolidbankÊs Teller No. 6 that gave the
impostor presumptive ownership of the passbook. Had the
_______________
26 Philippine Bank of Commerce v. Court of Appeals, supra note 21,

citing Vda. de Bataclan v. Medina, 102 Phil. 181 (1957).
27 Ibid.
579
VOL. 410, SEPTEMBER 11, 2003 579

Appeals
passbook not fallen into the hands of the impostor, the loss
of P300,000 would not have happened. Thus, the proximate
cause of the unauthorized withdrawal was SolidbankÊs
negligence in not returning the passbook to Calapre.
We do not subscribe to the appellate courtÊs theory that
the proximate cause of the unauthorized withdrawal was
the tellerÊs failure to call up L.C. Diaz to verify the
withdrawal. Solidbank did not have the duty to call up L.C.
Diaz to confirm the withdrawal. There is no arrangement
between Solidbank and L.C. Diaz to this effect. Even the

agreement between Solidbank and L.C. Diaz pertaining to
measures that the parties must observe whenever
withdrawals of large amounts are made does not direct
Solidbank to call up L.C. Diaz.
There is no law mandating banks to call up their clients
whenever their representatives withdraw significant
amounts from their accounts. L.C. Diaz therefore had the
burden to prove that it is the usual practice of Solidbank to
call up its clients to verify a withdrawal of a large amount
of money. L.C. Diaz failed to do so.
Teller No. 5 who processed the withdrawal could not
have been put on guard to verify the withdrawal. Prior to
the withdrawal of P300,000, the impostor deposited with
Teller No. 6 the P90,000 PBC check, which later bounced.
The impostor apparently deposited a large amount of
money to deflect suspicion from the withdrawal of a much
bigger amount of money. The appellate court thus erred
when it imposed on Solidbank the duty to call up L.C. Diaz
to confirm the withdrawal when no law requires this from
banks and when the teller had no reason to be suspicious of
the transaction.
Solidbank continues to foist the defense that Ilagan
made the withdrawal. Solidbank claims that since Ilagan
was also a messenger of L.C. Diaz, he was familiar with its
teller so that there was no more need for the teller to verify
the withdrawal. Solidbank relies on the following
statements in the Booking and Information Sheet of
Emerano Ilagan:
x x x Ilagan also had with him (before the withdrawal) a forged

check of PBC and indicated the amount of P90,000 which he
deposited in favor of L.C. Diaz and Company. After successfully
withdrawing this large sum of money, accused Ilagan gave alias Rey
(Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in
the amount of P1,000 to transport him (Ilagan) to his home province
at Bauan, Batangas. Ilagan extrava-
580

gantly and lavishly spent his money but a big part of his loot was
wasted in cockfight and horse racing. Ilagan was apprehended and
28
meekly admitted his guilt. (Emphasis supplied.)
L.C. Diaz refutes SolidbankÊs contention by pointing out

that the person who withdrew the P300,000 was a certain
Noel Tamayo. Both the trial and appellate courts stated
that this Noel Tamayo presented the passbook with the
withdrawal slip.
We uphold the finding of the trial and appellate courts
that a certain Noel Tamayo withdrew the P300,000. The
Court is not a trier of facts. We find no justifiable reason to
reverse the factual finding of the trial court and the Court
of Appeals. The tellers who processed the deposit of the
P90,000 check and the withdrawal of the P300,000 were
not presented during trial to substantiate SolidbankÊs claim
that Ilagan deposited the check and made the questioned
withdrawal. Moreover, the entry quoted by Solidbank does
not categorically state that Ilagan presented the
withdrawal slip and the passbook.
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both

parties are negligent but the negligent act of one is
appreciably later than that of the other, or where it is
impossible to determine whose fault or negligence caused
the loss, the one who had the last clear opportunity to avoid
29
the loss but failed to do so, is chargeable with the loss.
Stated differently, the antecedent negligence of the plaintiff
does not preclude him from recovering damages caused by
the supervening negligence of the defendant, who had the
last fair chance to prevent30
the impending harm by the
exercise of due diligence.
We do not apply the doctrine of last clear chance to the
present case. Solidbank is liable for breach of contract due
to negligence in the performance of its contractual
obligation to L.C. Diaz. This is a case of culpa contractual,
where neither the contributory negligence of the plaintiff
nor his last clear chance to avoid the loss,
_______________
28 Rollo, p. 35.
29 Philippine Bank of Commerce v. Court of Appeals, supra note 21.
30 Ibid.
581
VOL. 410, SEPTEMBER 11, 2003 581

Appeals
31
would exonerate the defendant from liability. Such
contributory negligence or last clear chance by the plaintiff
merely serves to reduce the recovery of damages by the
plaintiff but does 32not exculpate the defendant from his
breach of contract.
Mitigated Damages
Under Article 1172, „liability (for culpa contractual) may be

regulated by the courts, according to the circumstances.‰
This means that if the defendant exercised the proper
diligence in the selection and supervision of its employee,
or if the plaintiff was guilty of contributory negligence,
then the courts may reduce the award of damages. In this
case, L.C. Diaz was guilty of contributory negligence in
allowing a withdrawal slip signed by its authorized
signatories to fall into the hands of an impostor. Thus, the
liability of Solidbank should be reduced. 33
In Philippine Bank of Commerce v. Court of Appeals,
where the Court held the depositor guilty of contributory
negligence, we allocated the damages between the
depositor and the bank on a 40-60 ratio. Applying the same
ruling to this case, we hold that L.C. Diaz must shoulder
40% of the actual damages awarded by the appellate court.
Solidbank must pay the other 60% of the actual damages.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with MODIFICATION. Petitioner Solidbank
Corporation shall pay private respondent L.C. Diaz and
Company, CPAÊs only 60% of the actual damages awarded
by the Court of Appeals. The remaining 40% of the actual
damages shall be borne by private respondent L.C. Diaz
and Company, CPAÊs. Proportionate costs.

SO ORDERED.
Davide, Jr. (C.J., Chairman), Vitug and Ynares-

Santiago, JJ., concur.
Azcuna, J., On Official Leave.
Judgment affirmed with modification.
_______________
31 See note 23.

32 Del Prado v. Manila Electric Co., 52 Phil. 900 (1928-1929).
33 See Note 21.
582

Garcia vs. People
Notes.·There is no contractual relation created

between a drawee bank and the payee as a result of the
payment by the former of the amount of the check.
(Security Bank & Trust Company vs. Court of Appeals, 291
SCRA 33 [1998])
The publication of the list of unclaimed balances is
intended to safeguard the right of the depositors, their
heirs and successors to due process. (Republic vs. Court of
Appeals, 345 SCRA 63 [2000])
··o0o··
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SUPREME COURT REPORTS ANNOTATED VOLUME 410 29/07/2019, 3*33 PM

562 SUPREME COURT REPORTS ANNOTATED

THE CONSOLIDATED BANK and TRUST

Banks and Banking; Loans; The contract between a bank and

general banking law, introduced in 2000, is a statutory affirmation

VOL. 410, SEPTEMBER 11, 2003 563

Consolidated Bank and Trust Corporation vs. Court of Appeals

The fiduciary nature of banking requires banks to assume a degree

standard of diligence required under RA No. 8791.

564 SUPREME COURT REPORTS ANNOTATED

Consolidated Bank and Trust Corporation vs. Court of Appeals

sumptive ownership of the passbook, facilitating unauthorized

required of SolidbankÊs employees.

VOL. 410, SEPTEMBER 11, 2003 565

Consolidated Bank and Trust Corporation vs. Court of Appeals

accounts.·There is no law mandating banks to call up their clients

contributory negligence of the plaintiff nor his last clear chance to

566 SUPREME COURT REPORTS ANNOTATED

PETITION for review on certiorari of the decision and

The facts are stated in the opinion of the Court.

Solidbank is a domestic banking corporation organized and

1 Penned by Associate Justice Eugenio S. Labitoria with Associate

VOL. 410, SEPTEMBER 11, 2003 567

Consolidated Bank and Trust Corporation vs. Court of

deposit the money with Solidbank. Macaraya also gave

Chief Executive Officer, Luis C. Diaz („Diaz‰), called up

568 SUPREME COURT REPORTS ANNOTATED

Resolution denying the motion for reconsideration of

The Ruling of the Trial Court

In absolving Solidbank, the trial court applied the rules on

VOL. 410, SEPTEMBER 11, 2003 569

said book and entry therein of the withdrawal shall 9have

and observed the rules on savings account when it allowed

570 SUPREME COURT REPORTS ANNOTATED

and (3) the possession by an unauthorized person of a PBC

„IN VIEW OF THE FOREGOING, judgment is hereby rendered

The Ruling of the Court of Appeals

The Court of Appeals ruled that SolidbankÊs negligence was

VOL. 410, SEPTEMBER 11, 2003 571

conclusion after applying the provision of the Civil Code on

Article 2176. Whoever by act or omission causes damage to another,

The appellate court held that the three elements of a quasi-

injury suffered by L.C. Diaz had it called up L.C. Diaz to

572 SUPREME COURT REPORTS ANNOTATED

The dispositive portion of the decision of the Court of

„WHEREFORE, premises considered, the decision appealed from is

1. Ordering defendant-appellee Consolidated Bank and Trust

Acting on the motion for reconsideration of Solidbank, the

with gross negligence. Since Solidbank was guilty of simple

„WHEREFORE, foregoing considered, our decision dated October

Hence, this petition.

13 Rollo, pp. 49-50.

VOL. 410, SEPTEMBER 11, 2003 573

Solidbank seeks the review of the decision and resolution of

I. THE COURT OF APPEALS ERRED IN HOLDING

RESPONDENTÊS MESSENGER EMERANO

The Ruling of the Court

The petition is partly meritorious.

16 Ibid., pp. 33-34.