Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 141835               February 4, 2009

CENTRAL BANK OF THE PHILIPPINES, Petitioner,

DECISION

CARPIO MORALES, J.:

Pursuant to Republic Act No. 625, the old Central Bank Law, respondent Citytrust Banking
Corporation (Citytrust), formerly Feati Bank, maintained a demand deposit account with petitioner
Central Bank of the Philippines, now Bangko Sentral ng Pilipinas.

As required, Citytrust furnished petitioner with the names and corresponding signatures of five of its
officers authorized to sign checks and serve as drawers and indorsers for its account. And it
provided petitioner with the list and corresponding signatures of its roving tellers authorized to
withdraw, sign receipts and perform other transactions on its behalf. Petitioner later issued security
identification cards to the roving tellers one of whom was "Rounceval Flores" (Flores).

On July 15, 1977, Flores presented for payment to petitioner’s Senior Teller Iluminada dela Cruz
(Iluminada) two Citytrust checks of even date, payable to Citytrust, one in the amount of ₱850,000
and the other in the amount of ₱900,000, both of which were signed and indorsed by Citytrust’s
authorized signatory-drawers.

After the checks were certified by petitioner’s Accounting Department, Iluminada verified them,
prepared the cash transfer slip on which she affixed her signature, stamped the checks with the
notation "Received Payment" and asked Flores to, as he did, sign on the space above such notation.
Instead of signing his name, however, Flores signed as "Rosauro C. Cayabyab" – a fact Iluminada
failed to notice.
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Iluminada thereupon sent the cash transfer slip and checks to petitioner’s Cash Department where
an officer verified and compared the drawers’ signatures on the checks against their specimen
signatures provided by Citytrust, and finding the same in order, approved the cash transfer slip and
paid the corresponding amounts to Flores. Petitioner then debited the amount of the checks totaling
₱1,750,000 from Citytrust’s demand deposit account.

More than a year and nine months later, Citytrust, by letter dated April 23, 1979, alleging that the
checks were already cancelled because they were stolen, demanded petitioner to restore the
amounts covered thereby to its demand deposit account. Petitioner did not heed the demand,
however.

Citytrust later filed a complaint for estafa, with reservation on the filing of a separate civil action,
against Flores. Flores was convicted.
Citytrust thereafter filed before the Regional Trial Court (RTC) of Manila a complaint for recovery of
sum of money with damages against petitioner which it alleged erred in encashing the checks and in
charging the proceeds thereof to its account, despite the lack of authority of "Rosauro C. Cayabyab."

By Decision1 of November 13, 1991, Branch 32 of the RTC of Manila found both Citytrust and
petitioner negligent and accordingly held them equally liable for the loss. Both parties appealed to
the Court of Appeals which, by Decision 2 dated July 16, 1999, affirmed the trial court’s decision, it
holding that both parties contributed equally to the fraudulent encashment of the checks, hence, they
should equally share the loss in consonance with Article 2179 3 vis a vis Article 11724 of the Civil
Code.

In arriving at its Decision, the appellate court noted that while "Citytrust failed to take adequate
precautionary measures to prevent the fraudulent encashment of its checks," petitioner was not
entirely blame-free in light of its failure to verify the signature of Citytrust’s agent authorized to
receive payment.

Brushing aside petitioner’s contention that it cannot be sued, the appellate court held that petitioner’s
Charter specifically clothes it with the power to sue and be sued.

Also brushing aside petitioner’s assertion that Citytrust’s reservation of the filing of a separate civil
action against Flores precluded Citytrust from filing the civil action against it, the appellate court held
that the "action for the recovery of sum of money is separate and distinct and is grounded on a
separate cause of action from that of the criminal case for estafa."

Hence, the present appeal, petitioner maintaining that Flores having been an authorized roving
teller, Citytrust is bound by his acts. Also maintaining that it was not negligent in releasing the
proceeds of the checks to Flores, the failure of its teller to properly verify his signature
notwithstanding, petitioner contends that verification could be dispensed with, Flores having been
known to be an authorized roving teller of Citytrust who had had numerous transactions with it
(petitioner) on its (Citytrust’s) behalf for five years prior to the questioned transaction.

Attributing negligence solely to Citytrust, petitioner harps on Citytrust’s allowing Flores to steal the
checks and failing to timely cancel them; allowing Flores to wear the issued identification card issued
by it (petitioner); failing to report Flores’ absence from work on the day of the incident; and failing to
explain the circumstances surrounding the supposed theft and cancellation of the checks.

Drawing attention to Citytrust’s considerable delay in demanding the restoration of the proceeds of
the checks, petitioners argue that, assuming arguendo that its teller was negligent, Citytrust’s
negligence, which preceded that committed by the teller, was the proximate cause of the loss or
fraud.

The petition is bereft of merit.

Petitioner’s teller Iluminada did not verify Flores’ signature on the flimsy excuse that Flores had had
previous transactions with it for a number of years. That circumstance did not excuse the teller from
focusing attention to or at least glancing at Flores as he was signing, and to satisfy herself that the
signature he had just affixed matched that of his specimen signature. Had she done that, she would
have readily been put on notice that Flores was affixing, not his but a fictitious signature.
Given that petitioner is the government body mandated to supervise and regulate banking and other
financial institutions, this Court’s ruling in Consolidated Bank and Trust Corporation v. Court of
Appeals5 illumines:

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.

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 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."

This fiduciary relationship means that the bank’s 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 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
₱300,000 from L.C. Diaz’s savings account, jurisprudence at the time of the withdrawal already
imposed on banks the same high standard of diligence required under RA No. 8791. (Emphasis
supplied)

Citytrust’s failure to timely examine its account, cancel the checks and notify petitioner of their
alleged loss/theft should mitigate petitioner’s liability, in accordance with Article 2179 of the Civil
Code which provides that if the plaintiff’s negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded. For had Citytrust timely
discovered the loss/theft and/or subsequent encashment, their proceeds or part thereof could have
been recovered.

In line with the ruling in Consolidated Bank, the Court deems it proper to allocate the loss between
petitioner and Citytrust on a 60-40 ratio.

WHEREFORE, the assailed Court of Appeals Decision of July 16, 1999 is hereby AFFIRMED with
MODIFICATION, in that petitioner and Citytrust should bear the loss on a 60-40 ratio.

SO ORDERED.