Banking laws

The General Banking Law of 2000 (R.A 8791)

Section 2. Declaration of Policy. - The State recognizes the vital role of banks providing an environment conducive to the
sustained development of the national economy and the fiduciary nature of banking that requires high standards of
integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking
and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. (n)

DILIGENCE REQUIRED FROM BANKS

To exercise greater care and prudence before entering into a mortgage contract

Being in the business of extending loans secured by real estate mortgage, banks are
presumed to be familiar with the rules on land registration. Since the banking business·
is impressed with public interest, they are expected to be more cautious, to exercise a
PNB vs Villa higher degree of diligence, care and prudence, than private individuals in their dealings,
even those involving registered lands. Banks may not simply rely on the face of the
certificate of title. Hence, they cannot assume that

Consequently, the highest degree of diligence is expected, and high standards of

PNB clearly failed to observe the required degree of caution in readily approving the
loan and accepting the collateral offered by the Spouses Comista without first
ascertaining the real ownership of the property. It should not have simply relied on the
face of title but went further to physically ascertain the actual condition of the
property.

It must be remembered that public interest is intimately carved into the banking
Westmont bank vs Dela Rosa industry because the primordial concern here is the trust and confidence of the public.
Ramos This fiduciary nature of every bank’s relationship with its clients/depositors impels it to
exercise the highest degree of care, definitely more than that of a reasonable man or a
good father of a family.22 It is, therefore, required to treat the accounts and deposits of
these individuals with meticulous care. The rationale behind this is well-expressed in
Sandejas v. Ignacio

"a bank’s liability as an obligor is not merely vicarious, but primary"26 since they are
expected to observe an equally high degree of diligence, not only in the selection, but
also in the supervision of its employees

Although R.A. 8791 took effect only in the year 2000, the Court had already imposed on
Equitable PCI bank vs Tan banks the same high standard of diligence required under R.A. 8791 at the time of the
untimely debiting of respondent's account by petitioner in May 1992.

The diligence required of banks, therefore, is more than that of a good father of a
family.[17] In every case, the depositor expects the bank to treat his account with the
utmost fidelity, whether such account consists only of a few hundred pesos or of
millions.

Proximate cause is that cause which, in a natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the result
would not have occurred
 The proximate cause is petitioner's own negligence in debiting the account of the
respondent prior to the date as appearing in the check, which resulted in the
subsequent dishonor of several checks issued by the respondent and the disconnection
by ASELCO and ANECO of his electric supply.

We hold that Solidbank is liable for breach of contract due to negligence, or culpa
contractual.
Consolidated Bank vs CA and
Diaz The law imposes on banks high standards in view of the fiduciary nature of banking.
Section 2 of Republic Act No. 8791 ("RA 8791"), 18 which took effect on 13 June 2000,
(solid bank failure to return the declares that the State recognizes the "fiduciary nature of banking that requires high
passbook to calapre as the only standards of integrity and performance." 19 This new provision in the general banking
authorize agent by L.C Diaz law, introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting
that made it possible for the with the 1990 case of Simex International v. Court of Appeals, 20 holding that "the bank
impostor to withdraw the is under obligation to treat the accounts of its depositors with meticulous care, always
300,00 pesos) having in mind the fiduciary nature of their relationship

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 Solidbank’s
employees.chanrob1es
The BANK is liable to Marcos for offsetting his time deposits with a fictitious promissory
note. The existence of Promissory Note No. 20-979-83 could have been easily proven
PNB vs CA had the BANK presented the original copies of the promissory note and its supporting
evidence. In lieu of the original copies, the BANK presented the "machine copies of the
(fictitious promisory note) duplicate" of the documents. These substitute documents have no evidentiary value.
The BANK’s failure to explain the absence of the original documents and to maintain a
record of the offsetting of this loan with the time deposits bring to fore the BANK’s
dismal failure to fulfill its fiduciary duty to Marcos.

By the very nature of its business, the BANK should have had in its possession the
original copies of the disputed promissory note and the records and ledgers evidencing
the offsetting of the loan with the time deposits of Marcos. The BANK inexplicably failed
to produce the original copies of these documents. Clearly, the BANK failed to treat the
account of Marcos with meticulous care.
PNB vs Pike
From the evidence that it received, the court is convinced that the bank was negligent
(stolen passbook from Pike in the performance of its duties such that unauthorized withdrawals were made in the
who is a gay entertainer in deposit of plaintiff Norman Y. Pike
japan and the PNB allowed the
2 withdrawals on the same From the foregoing, the evidence clearly showed that the petitioner bank did not
bank) exercise the degree of diligence that it ought to have exercised in dealing with their
clients
BPI vs Lifetime Marketing Notably, BPI's managers admitted in several correspondences with LMC that the
deposit transactions were cancelled without LMC's knowledge and consent and based
(Alice Laurel as one of the only upon the request of Alice Laurel and her husband.
agents of LMC made check
deposits with the named BPI BPI cannot escape liability because of LMC's failure to scrutinize the monthly
branches and, after the check statements sent to it by the bank. This omission does not change the fact that were it
deposit slips were machine- not for the wanton and reckless negligence of BPI's tellers in failing to require the
validated, requested the teller surrender of the machine-validated deposit slips before reversing the deposit
to reverse the transactions, transactions, the loss would not have occurred. BPI's negligence is undoubtedly the
Alice Laurel presented the proximate cause of the loss. Proximate cause is that cause which, in a natural and
machine-validated deposit slips continuous sequence, unbroken by any efficient intervening cause, produces the injury,
to LMC which, on the strength and without which the result would not have occurred
thereof, considered her
account paid)

The forged signatures are wholly inoperative, and CASA -- the drawer whose authorized
signatures do not appear on the negotiable instruments -- cannot be held liable
BPI vs Casa Montessori thereon. Neither is the latter precluded from setting up forgery as a real defense.

(forgery made by Leonardo T. BPI contends that it has a signature verification procedure, in which checks are honored
Yabut who worked as External only when the signatures therein are verified to be the same with or similar to the
Auditor of CASA that caused specimen signatures on the signature cards. Nonetheless, it still failed to detect the
him to encash 9 checks under eight instances of forgery. Its negligence consisted in the omission of that degree of
the name of Ms Lebron) 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."

Proximate cause "It 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."

Central Bank vs City Trust bank This fiduciary relationship means that the bank's obligation to observe "high standards
of integrity and performance" is deemed written into every deposit agreement
(agent of city trust Flores who between a bank and its depositor. The fiduciary nature of banking requires banks to
signed the checks as Rosauro C. assume a degree of diligence higher than that of a good father of a family.
Cayabyab not his signature but
a fictitious name and the teller Citytrust's failure to timely examine its account, cancel the checks and notify petitioner
of Central bank Iluminada did of their alleged loss/theft should mitigate petitioner's liability, in accordance with
not notice it that what is Article 2179 of the Civil Code which provides that if the plaintiff's negligence was only
indicated is Rosauro Cayabyab, contributory, the immediate and proximate cause of the injury being the defendant's
Petitioner then debited the lack of due care, the plaintiff may recover damages, but the courts shall mitigate the
amount of the checks totaling damages to be awarded. For had Citytrust timely discovered the loss/theft and/or
P1,750,000 from Citytrust's subsequent encashment, their proceeds or part thereof could have been recovered.
demand deposit account.)

if the foregoing allegations were true, the same were imputable to its branch manager
China banking corporation vs Emelina T. Quitan, who, in violation of the petitioner's Code of Ethics and Operations
Padilla Procedure and Policy Manual, exceeded her authority in the performance of her duties
as branch manager.
(Branch manager of china bank
Emelina Quitan exceeded her petitioner filed with the trial court a motion for leave of court to file a third-party
authority in violation of code of complaint against Quitan
ethics, china bank filed 3rd
party comply but failed to Contents and filing of petition; effect of non-compliance with requirements
comply with procedural The failure of the petitioner to comply with any of the foregoing requirements shall be
requirements that cause the sufficient ground for the dismissal of the petition.
case to be dismissed.)