BPI V CA

BANK OF THE PHILIPPINE ISLANDS, Petitioner,
v.
COURT OF APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO,

Respondents
G.R. No. 136202. January 25, 2007
AZCUNA, J.:
FACTS:
Salazar had in her possession three crossed checks with an aggregate amount of P267,
692.50. These checks were payable to the order of JRT Construction and Trading which was
the name of Templonuevo’s business. Despite lack of knowledge and endorsement of
Templonuevo, Salazar was able to deposit the checks in her personal savings account with
BPI and encash the same. The three checks were deposited on three different occasions over
the span of eight months. A year after the last encashment, Templonuevo protested the
purportedly unauthorized encashment and demanded from BPI the aggregate amount of the
checks. BPI complied with Templonuevo’s demand. Since the money could no longer be
debited from the account of Salazar where she deposited the checks, they froze her other
account with them. Later on, BPI issued a cashier’s check in favor of Templonuevo for the
aggregate amount and debited P267, 707.70 from Salazar’s account representing the
aggregate amount and the bank charges for the cashier’s check. Salazar filed a complaint
against BPI. Trial court ruled in favor of her which was affirmed by CA. Hence, this petition.
The RTC rendered a decision in favor of the respondent (Salazar) and ordering the petitioner
(BPI) to pay as follows:
1. The amount of P267,707.70 with 12% interest thereon from September 16, 1991 until the
said amount is fully paid;
2. The amount of P30,000.00 as and for actual damages;
3. The amount of P50,000.00 as and for moral damages;
4. The amount of P50,000.00 as and for exemplary damages;
5. The amount of P30,000.00 as and for attorney’s fees; and
6. Costs of suit.
Further, the RTC dismissed the counter claim for lack of factual basis. Also, that the third-
party complaint filed by the petitioner is likewise ordered dismissed for lack of merit and the
third-party defendant’s counterclaim is also dismissed for lack of factual basis.
The Court of Appeals (CA) affirmed the decision of the RTC and held that respondent Salazar
was entitled to the proceeds of the three (3) checks notwithstanding the lack of endorsement
thereon by the payee. The CA concluded that Salazar and Templonuevo had previously agreed
that the checks payable to JRT Construction and Trading 5 actually belonged to Salazar and
would be deposited to her account, with petitioner acquiescing to the arrangement.
ISSUE/S:
1. Whether or not a collecting bank, over the objections of its depositor, have the
authority to withdraw unilaterally from such depositor’s account the amount it had
previously paid upon certain unendorsed order instrument deposited by the depositor
to another account that she later closed.
2. Whether or not BPI act judiciously in debiting Salazar’s account?
RULING:
1. YES. In the present case, the records do not support the finding made by the CA and
the trial court that a prior arrangement existed between Salazar and Templonuevo
regarding the transfer of ownership of the checks. This fact is crucial as Salazar’s
entitlement to the value of the instruments is based on the assumption that she is a
transferee within the contemplation of Section 49 of the Negotiable Instruments Law.
Transferees in this situation do not enjoy the presumption of ownership in favor of
holders since they are neither payees nor indorsees of such instruments. The weight
of authority is that the mere possession of a negotiable instrument does not in itself
conclusively establish either the right of the possessor to receive payment, or of the
right of one who has made payment to be discharged from liability. Thus, something
more than mere possession is necessary to authorize payment to such possessor.
The one year delay of Templonuevo in asserting ownership over the checks is not
enough to prove that there has been a valid transfer of ownership that has taken place.
Salazar failed to discharge the burden of presumption of ownership in Templonuevo’s
favour as the designated payee.
Consequently, petitioner, as the collecting bank, had the right to debit Salazar’s
account for the value of the checks it previously credited in her favour.
It is immaterial that the account debited by BPI was different from original account to
which the proceeds of the check were credited because both belonged to Salazar
anyway.
2. NO As businesses affected with public interest, and because of the nature of their
functions, banks are under obligation to treat the accounts of their depositors with
meticulous care, always having in mind the fiduciary nature of their relationship. In
this regard, petitioner was clearly remiss in its duty to private respondent Salazar as
its depositor.
To begin with, the irregularity appeared plainly on the face of the checks. Despite the
obvious lack of indorsement thereon, petitioner permitted the encashment of these
checks three times on three separate occasions
It must be emphasized that the law imposes a duty of diligence on the collecting bank
to scrutinize checks deposited with it, for the purpose of determining their genuineness
and regularity. The collecting bank, being primarily engaged in banking, holds itself
out to the public as the expert on this field, and the law thus holds it to a high standard
of conduct.The taking and collection of a check without the proper indorsement amount
to a conversion of the check by the bank.
More importantly, however, solely upon the prompting of Templonuevo, and with full
knowledge of the brewing dispute between Salazar and Templonuevo, petitioner
debited the account held in the name of the sole proprietorship of Salazar without even
serving due notice upon her. Consequently, this caused damage to Salazar, such as
having checks she issued dishonored because she was not given prior notice of the
deduction from her account.
Salazar has the right to recover reasonable moral damages even if the bank’s
negligence may not have been attended with malice and bad faith, if the former
suffered mental anguish, serious anxiety, embarrassment and humiliation
WHEREFORE, the petition is partially GRANTED. The assailed Decision dated April 3, 1998 and
Resolution dated April 3, 1998 rendered by the Court of Appeals in CA-G.R. CV No. 42241 are
MODIFIED insofar as it ordered petitioner Bank of the Philippine Islands to return the amount
of Two Hundred Sixty-seven Thousand Seven Hundred and Seven and 70/100 Pesos
(P267,707.70) to respondent Annabelle A. Salazar, which portion is REVERSED and SET
ASIDE. In all other respects, the same are AFFIRMED.

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BANK OF THE PHILIPPINE ISLANDS, Petitioner,

COURT OF APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO,

G.R. No. 136202. January 25, 2007

2. The amount of P30,000.00 as and for actual damages;

3. The amount of P50,000.00 as and for moral damages;

4. The amount of P50,000.00 as and for exemplary damages;

5. The amount of P30,000.00 as and for attorney’s fees; and

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