VOL.

326, FEBRUARY 29, 2000 641

Bank of the Philippine Islands vs. Court of Appeals
*

G.R. No. 112392. February 29, 2000.

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs.

COURT OF APPEALS and BENJAMIN C. NAPIZA,
respondents.

Negotiable Instruments Law; Warranties of a person

negotiating an instrument by delivery or by qualified
indorsement.—–Section 65, on the other hand, provides for
the following warranties of a person negotiating an
instrument by delivery or by qualified indorsement: (a) that
the instrument is genuine and in all respects what it
purports to be; (b) that he has a good title to it; and (c) that
all prior parties had capacity to contract.
Banks and Banking; Passbooks; The requirement of
presentation of the passbook when withdrawing an amount
cannot be given mere lip service even though the person
making the withdrawal is authorized by the depositor to do
so.—–The withdrawal slip contains a boxed warning that
states: “This receipt must be signed and pre-

_________________

* FIRST DIVISION.

642
642 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

sented with the corresponding foreign currency savings

passbook by the depositor in person. For withdrawals thru a
representative, depositor should accomplish the authority at
the back.” The requirement of presentation of the passbook
when withdrawing an amount cannot be given mere lip
service even though the person making the withdrawal is
authorized by the depositor to do so. This is clear from Rule
No. 6 set out by petitioner so that, for the protection of the
bank’s interest and as a reminder to the depositor, the
withdrawal shall be entered in the depositor’s passbook. The
fact that private respondent’s passbook was not presented
during the withdrawal is evidenced by the entries therein
showing that the last transaction that he made with the
bank was on September 3, 1984, the date he deposited the
controversial check in the amount of $2,500.00.
Same; Negotiable Instruments Law; Checks; A negotiable
instrument, such as a check, whether a manager’s check or
ordinary check, is not legal tender.—–As correctly held by the
Court of Appeals, in depositing the check in his name,
private respondent did not become the outright owner of the
amount stated therein. Under the above rule, by depositing
the check with petitioner, private respondent was, in a way,
merely designating petitioner as the collecting bank. This is
in consonance with the rule that a negotiable instrument,
such as a check, whether a manager’s check or ordinary
check, is not legal tender. As such, after receiving the
deposit, under its own rules, petitioner shall credit the
amount in private respondent’s account or infuse value
thereon only after the drawee bank shall have paid the
amount of the check or the check has been cleared for
deposit. Again, this is in accordance with ordinary banking
practices and with this Court’s pronouncement that “the
collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all
prior endorsements considering that the act of presenting the
check for payment to the drawee is an assertion that the
party making the presentment has done its duty to ascertain
the genuineness of the endorsements.” The rule finds more
meaning in this case where the check involved is drawn on a
foreign bank and therefore collection is more difficult than
when the drawee bank is a local one even though the check
in question is a manager’s check.

643

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Bank of the Philippine Islands vs. Court of Appeals

Same; Same; Same; Words and Phrases; “Manager’s

Check" Explained; A manager’s check is like a cashier’s check
which, in the commercial world, is regarded substantially to
be as good as the money it represents.—–A manager’s check is
like a cashier’s check which, in the commercial world, is
regarded substantially to be as good as the money it
represents (Tan v. Court of Appeals, G.R. No. 108555, 239
SCRA 310, 322 [1994]).
Same; Same; In dealing with its depositors, a bank
should exercise its functions not only with the diligence of a
good father of a family but it should do so with the highest
degree of care.—–Said ruling brings to light the fact that the
banking business is affected with public interest. By the
nature of its functions, a bank is under obligation to treat the
accounts of its depositors “with meticulous care, always
having in mind the fiduciary nature of their relationship.” As
such, in dealing with its depositors, a bank should exercise
its functions not only with the diligence of a good father of a
family but it should do so with the highest degree of care.
Same; Same; Same; Words and Phrases; “Negligence,”
Explained; Negligence is the omission to do something which
a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do,
or the doing of something which a prudent and reasonable
man would do.—–In the case at bar, petitioner, in allowing
the withdrawal of private respondent’s deposit, failed to
exercise the diligence of a good father of a family. In total
disregard of its own rules, petitioner’s personnel negligently
handled private respondent’s account to petitioner’s
detriment. As this Court once said on this matter:
“Negligence is the omission to do something which a
reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do,
or the doing of something which a prudent and reasonable
man would do. The seventy-eight (78)-year-old, yet still
relevant, case of Picart v. Smith, provides the test by which
to determine the existence of negligence in a particular case
which may be stated as follows: Did the defendant in doing
the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used
in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet pater
familias of the Roman law. The existence of negligence in a
given case is not determined by reference to the personal
judgment of the actor in the situation

644

644 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

before him. The law considers what would be reckless,

blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.”
Same; Same; Same; Even after the lapse of the 35-day
period, the amount of a deposited check cannot be withdrawn
in the absence of a clearance thereon.—–From these facts on
record, it is at once apparent that petitioner’s personnel
allowed the withdrawal of an amount bigger than the
original deposit of $750.00 and the value of the check
deposited in the amount of $2,500.00 although they had not
yet received notice from the clearing bank in the United
States on whether or not the check was funded. Reyes’
contention that after the lapse of the 35-day period the
amount of a deposited check could be withdrawn even in the
absence of a clearance thereon, otherwise it could take a long
time before a depositor could make a withdrawal, is
untenable. Said practice amounts to a disregard of the
clearance requirement of the banking system.
Same; Same; Negligence; Words and Phrases; “Proximate
Cause,” Explained; Proximate cause, which is determined by
a mixed consideration of logic, common sense, policy and
precedent, 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.”—–While it is true that private respondent’s
having signed a blank withdrawal slip set in motion the
events that resulted in the withdrawal and encashment of
the counterfeit check, the negligence of petitioner’s personnel
was the proximate cause of the loss that petitioner sustained.
Proximate cause, which is determined by a mixed
consideration of logic, common sense, policy and precedent, 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.” The proximate cause of the withdrawal and
eventual loss of the amount of $2,500.00 on petitioner’s part
was its personnel’s negligence in allowing such withdrawal in
disregard of its own rules and the clearing requirement in
the banking system. In so doing, petitioner assumed the risk
of incurring a loss on account of a forged or counterfeit
foreign check and hence, it should suffer the resulting
damage.

PETITION for review on certiorari of a decision of the

Court of Appeals.

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Bank of the Philippine Islands vs. Court of Appeals
The facts are stated in the opinion of the Court.
Benedicto, Tale & Versoza and Leonen, Ramirez
& Associates for petitioner.
Renato M. Coronado for private respondent.

YNARES-SANTIAGO, J.:

This is 1 a petition for review on certiorari of the

Decision of the Court of Appeals in CA-G.R. CV No.
37392 affirming in toto 2that of the Regional Trial Court
of Makati, Branch 139, which dismissed the complaint
filed by petitioner Bank of the Philippine Islands
against private respondent Benjamin C. Napiza for
sum of money.
On September 3, 1987, private respondent deposited
in Foreign Currency Deposit
3 Unit (FCDU) Savings
Account No. 028-187 which he maintained in
petitioner bank’s Buendia Avenue Extension Branch,4
Continental Bank Manager’s Check No. 00014757
dated August 17, 1984, payable to “cash” in the
amount of Two Thousand Five Hundred Dollars
($2,500.00) and duly
5 endorsed by private respondent
on its dorsal side. It appears that the check belonged
to a certain Henry Chan who went to the office of
private respondent and requested him to deposit the
check in his dollar account by way of accommodation
and for the purpose of clearing the same. Private
respondent acceded, and agreed to deliver to Chan a
signed blank withdrawal slip, with the understanding
that as soon as the check is cleared, both of them
would go to

_______________

1 Penned by Associate Justice Jainal D. Rasul and concurred in by

Associate Justices Gloria C. Paras and Ramon Mabutas, Jr.
2 The decision of the RTC was penned by Assisting Judge Jose R.
Bautista per Administrative Order No. 109-91 dated October 3, 1991.
3 Exh. B.
4 Exh. C.
5 Exh. C-1.
 646

646 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

the bank to withdraw the amount of the check upon

private respondent’s presentation to the bank of his
passbook.
Using the blank withdrawal slip given by private
respondent to Chan, on October 23, 1984, one Ruben
Gayon, Jr. was able to withdraw the amount of
$2,541.67 from FCDU Savings Account No. 028-187.
Notably, the withdrawal slip shows that the amount
was payable to Ramon A. de Guzman and Agnes C. de
Guzman and was duly initialed 6 by the branch
assistant manager, Teresita Lindo.
On November 20, 1984, petitioner received
communication from the Wells Fargo Bank
International of New York that the said check
deposited
7 by private respondent was a counterfeit
check because it was “not of the type or style of checks8
issued by Continental Bank International.”
Consequently, Mr. Ariel Reyes, the manager of
petitioner’s Buendia Avenue Extension Branch,
instructed one of its employees, Benjamin D. Napiza
IV, who is private respondent’s 9 son, to inform his
father that the check bounced. Reyes himself sent a
telegram to private respondent regarding the dishonor
of the check. In turn, private respondent’s son wrote to
Reyes stating that the check had been assigned “for
encashment” to Ramon A. de Guzman and/or Agnes C.
de Guzman after it shall have been cleared upon
instruction of Chan. He also said that upon learning of
the dishonor of the check, his father immediately
10 tried
to contact Chan but the latter was out of town.
Private respondent’s son undertook to return the
amount of $2,500.00 to petitioner bank. On December
18, 1984, Reyes reminded private respondent of his
son’s promise and warned that should he fail to return
that amount within seven (7) days, the matter would
be referred to the bank’s lawyers
11 for appropriate action
to protect the bank’s interest. This was

_________________

6 TSN, September 14, 1989, p. 16.

7 Exh. E.
8 Exh. E-1.
9 Exh. F.
10 Ibid.
11 Exh. H.

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Bank of the Philippine Islands vs. Court of Appeals

followed by a letter of the bank’s lawyer dated

12 April 8,
1985 demanding the return of the $2,500.00.
In reply, private respondent
13 wrote petitioner’s
counsel on April 20, 1985 stating that he deposited
the check “for clearing purposes” only to accommodate
Chan. He added:

“Further, please take notice that said check was deposited on

September 3, 1984 and withdrawn on October 23, 1984, or a
total period of fifty (50) days had elapsed at the time of
withdrawal. Also, it may not be amiss to mention here that I
merely signed an authority to withdraw said deposit subject
to its clearing, the reason why the transaction is not reflected
in the passbook of the account. Besides, I did not receive its
proceeds as may be gleaned from the withdrawal slip under
the captioned signature of recipient. If at all, my obligation
on the transaction is moral in nature, which (sic) I have been
and is (sic) still exerting utmost and maximum efforts to
collect from Mr. Henry Chan who is directly liable under the
circumstances.
xxx xxx x x x.”
On August 12, 1986, petitioner filed a complaint
against private respondent, praying for the return of
the amount of $2,500.00 or the prevailing peso
equivalent plus legal interest from date of demand to
date of full payment, a sum equivalent to 20% of the
total amount due as attorney’s fees, and litigation
and/or costs of suit.
Private respondent filed his answer, admitting that
he indeed signed a “blank” withdrawal slip with the
understanding that the amount deposited would be
withdrawn only after the check in question has been
cleared. He likewise alleged that he instructed the
party to whom he issued the signed blank withdrawal
slip to return it to him after the bank draft’s clearance
so that he could lend that party his passbook for the
purpose of withdrawing the amount of $2,500.00.
However, without his knowledge, said party was able
to withdraw the amount of $2,541.67 from his dollar
savings account through

_______________

12 Exh. I
13 Exh. 3.

648

648 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

collusion with one of petitioner’s employees. Private

respondent added that he had “given the Plaintiff fifty
one (51) days with which to clear the bank draft in
question.” Petitioner should have disallowed the
withdrawal because his passbook was not presented.
He claimed that petitioner had no one to blame except
itself “for being grossly negligent”; in fact, it had
allegedly admitted having paid the amount in the
check “by mistake” x x x “if not altogether due to
collusion and/or bad faith on the part of (its)
employees.” Charging petitioner with “apparent
ignorance of routine bank procedures,” by way of
counterclaim, private respondent prayed for moral
damages of P100,000.00, exemplary damages of
P50,000.00 and attorney’s fees of 30% of whatever
amount that would be awarded to him plus an
honorarium of P500.00 per appearance in court.
Private respondent also filed a motion for admission
of a third party complaint against Chan. He alleged
that “thru strategem and/or manipulation,” Chan was
able to withdraw the amount of $2,500.00 even without
private respondent’s passbook. Thus, private
respondent prayed that third party defendant Chan be
made to refund to him the amount withdrawn and to
pay attorney’s fees of P5,000.00 plus P300.00
honorarium per appearance.
Petitioner filed a comment on the motion for leave of
court to admit the third party complaint, wherein it
asserted that per paragraph 2 of the Rules and
Regulations governing BPI savings accounts, private
respondent alone was liable “for the value of the credit
given on account of the draft or check deposited.” It
contended that private respondent was estopped from
disclaiming liability because he himself authorized the
withdrawal of the amount by signing the withdrawal
slip. Petitioner prayed for the denial of the said motion
so as hot to unduly delay the disposition of the main
case asserting that private respondent’s claim could be
ventilated in another case.
Private respondent replied that for the parties to
obtain complete relief and to avoid multiplicity of suits,
the motion to admit third party complaint should be
granted. Meanwhile, the trial court issued orders on
August 25, 1987 and October
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Bank of the Philippine Islands vs. Court of Appeals
28, 1987 directing private respondent to actively
participate in locating Chan. After private respondent
failed to comply, the trial court, on May 18, 1988,
dismissed the third party complaint without prejudice.
On November 4, 1991, a decision was rendered
dismissing the complaint. The lower court held that
petitioner could not hold private respondent liable
based on the check’s face value alone. To so hold him
liable “would render inutile the requirement of
‘clearance’ from the drawee bank before the value of a
particular foreign check or draft can be credited to the
account of a depositor making such deposit.” The lower
court further held that “it was incumbent upon the
petitioner to credit the value of the check in question to
the account of the private respondent only upon receipt
of the notice of final payment and should not have
authorized the withdrawal from the latter’s account of
the value or proceeds of the check.” Having admitted
that it committed a “mistake” in not waiting for the
clearance of the check before authorizing the
withdrawal of its value or proceeds, petitioner should
suffer the resultant loss.
On appeal, the Court of Appeals affirmed the lower
court’s decision. The appellate court held that
petitioner committed “clear gross negligence” in
allowing Ruben Gayon, Jr. to withdraw the money
without presenting private respondent’s passbook and,
before the check was cleared and in crediting the
amount indicated therein in private respondent’s
account. It stressed that the mere deposit of a check in
private respondent’s account did not mean that the
check was already private respondent’s property. The
check still had to be cleared and its proceeds can only
be withdrawn upon presentation of a passbook in
accordance with the bank’s rules and regulations.
Furthermore, petitioner’s contention that private
respondent warranted the check’s genuineness by
endorsing it is untenable for it would render useless
the clearance requirement. Likewise, the requirement
of presentation of a passbook to ascertain the propriety
of the accounting reflected would be a meaningless
exercise. After all, these require-
650

650 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

ments are designed to protect the bank from deception

or fraud.
The Court of Appeals cited the case 14 of Roman
Catholic Bishop of Malolos, Inc. v. IAC, where this
Court stated that a personal check is not legal tender
or money, and held that the check deposited in this
case must be cleared before its value could be properly
transferred to private respondent’s account.
Without filing a motion for the reconsideration of
the Court of Appeals’ Decision, petitioner filed this
petition for review on certiorari, raising the following
issues:

1. WHETHER OR NOT RESPONDENT NAPIZA

IS LIABLE UNDER HIS WARRANTIES AS A
GENERAL INDORSER.
2 . WHETHER OR NOT A CONTRACT OF
AGENCY WAS CREATED BETWEEN
RESPONDENT NAPIZA AND RUBEN
GAYON.
3. WHETHER OR NOT PETITIONER WAS
GROSSLY NEGLIGENT IN ALLOWING THE
WITHDRAWAL.

Petitioner claims that private respondent, having

affixed his signature at the dorsal side of the check,
should be liable for the amount stated therein in
accordance with the following provision of the
Negotiable Instruments Law (Act No. 2031):

“SEC. 66. Liability of general indorser.—–Every indorser who

indorses without qualification, warrants to all subsequent
holders in due course—–

(a) The matters and things mentioned in subdivisions

(a), (6), and (c) of the next preceding section; and
(b) That the instrument is at the time of his
indorsement, valid and subsisting.

And, in addition, he engages that on due presentment, it

shall be accepted or paid, or both, as the case may be,
according to its tenor, and that if it be dishonored, and the
necessary proceedings on

________________

14 G.R. No. 72110, 191 SCRA 411 (1990).

651

VOL. 326, FEBRUARY 29, 2000 651

Bank of the Philippine Islands vs. Court of Appeals

dishonor be duly taken, he will pay the amount thereof to the

holder, or to any subsequent indorser who may be compelled
to pay it.”

Section 65, on the other hand, provides for the

following warranties of a person negotiating an
instrument by delivery or by qualified indorsement: (a)
that the instrument is genuine and in all respects what
it purports to be; (b) that he has a good title to it; 15and
(c) that all prior parties
16 had capacity to contract. In
People v. Maniego, this Court described the liabilities
of an indorser as follows:

“Appellant’s contention that as mere indorser, she may not

be made liable on account of the dishonor of the checks
indorsed by her, is likewise untenable. Under the law, the
holder or last indorsee of a negotiable instrument has the
right ‘to enforce payment of the instrument for the full
amount thereof against all parties liable thereon.’ Among the
‘parties liable thereon’ is an indorser of the instrument, i.e.,
‘a person placing his signature upon an instrument otherwise
than as a maker, drawer or acceptor * * unless he clearly
indicated by appropriate words his intention to be bound in
some other capacity.’ Such an indorser ‘who indorses without
qualification,’ inter alia ‘engages that on due presentment, *
* (the instrument) shall be accepted or paid, or both, as the
case may be, according to its tenor, and that if it be
dishonored, and the necessary proceedings on dishonor be
duly taken, he will pay the amount thereof to the holder, or
any subsequent indorser who may be compelled to pay it.’
Maniego may also be deemed an ‘accommodation party’ in
the light of the facts, i.e., a person ‘who has signed the
instrument as maker, drawer, acceptor, or indorser, without
receiving value therefor, and for the purpose of lending his
name to some other person.’ As such, she is under the law
‘liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the
instrument knew * * (her) to be only an accommodation
party,’ although she has the right, after paying the holder, to
obtain reimbursement from the party accommodated, ‘since
the relation between them is in effect that of principal and
surety, the accommodation party being the surety.”

________________

15 Sec. 65, Negotiable Instruments Law.

16 L-30910, 148 SCRA 30, 35 (1987).

652

652 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

It is thus clear that ordinarily private respondent may

be held liable as an indorser
17 of the check or even as an
accommodation party, However, to hold private
respondent liable for the amount of the check he
deposited by the strict application of the law and
without considering the attending circumstances in the
case would result in an injustice and in the erosion of
the public trust in the banking system. The interest of
justice thus demands looking into the events that led
to the encashment of the check.
Petitioner asserts that by signing the withdrawal
slip, private respondent “presented the opportunity for
the withdrawal of the amount in question.” Petitioner
relied “on the genuine signature on the withdrawal
slip, the personality of private respondent’s son and
the lapse of more than fifty (50) days from date of
deposit of the Continental18 Bank draft, without the
same being returned yet.” We hold, however, that the
propriety of the withdrawal should be gauged by
compliance with the rules thereon that both petitioner
bank and its depositors are duty-bound to observe.
In the passbook that petitioner issued to private
respondent, the following rules on withdrawal of
deposits appear:

“4. Withdrawals must be made by the depositor personally

but in some exceptional circumstances, the Bank may allow
withdrawal by another upon the depositor’s written authority
duly authenticated; and neither a deposit nor a withdrawal
will be permitted except upon the presentation of the
depositor’s savings passbook, in which the amount deposited
withdrawn shall be entered only by the Bank.

_______________

17 In Town Savings and Loan Bank, Inc. v. Court of Appeals, G.R.

No. 106011, 223 SCRA 459 (1993), the Court held that the
accommodation parties to a promissory note are liable for the
amount of the loan notwithstanding that they were not the actual
beneficiaries of such loan as they merely signed the promissory note
in order that the party accommodated could be granted the full
amount of the loan.
18 Petition, p. 7.

653

VOL. 326, FEBRUARY 29, 2000 653

 Bank of the Philippine Islands vs. Court of Appeals

5. Withdrawals may be made by draft, mail or telegraphic

transfer in currency of the account at the request of the
depositor in writing on the withdrawal slip or by
authenticated cable. Such request must indicate the name of
the payee/s, amount and the place where the funds are to be
paid. Any stamp, transmission and other charges related to
such withdrawals shall be for the account of the depositor
and shall be paid by him/her upon demand. Withdrawals
may also be made in the form of travellers checks and in
pesos. Withdrawals in the form of notes/bills are allowed
subject however, to their (availability).
6. Deposits shall not be subject to withdrawal by check,
and may be withdrawn only in the manner above provided,
upon presentation of the depositor’s savings passbook and
with the19 withdrawal form supplied by the Bank at the
counter.”

Under these rules, to be able to withdraw from the

savings account deposit under the Philippine foreign
currency deposit system, two requisites must be
presented to petitioner bank by the person
withdrawing an amount: (a) a duly filled-up
withdrawal slip, and (b) the depositor’s passbook.
Private respondent admits that he signed a blank
withdrawal slip ostensibly in violation of Rule No. 6
requiring that the request for withdrawal must name
the payee, the amount to be withdrawn and the place
where such withdrawal should be made. That the
withdrawal slip was in fact a blank one with only
private respondent’s two signatures affixed on the
proper spaces is buttressed by petitioner’s allegation in
the instant petition that had private respondent
indicated therein the person authorized to receive the
money, then Ruben Gayon, Jr. could not have
withdrawn any amount. Petitioner contends that “(i)n
failing to do so (i.e., naming his authorized agent), he
practically authorized any possessor20 thereof to write
any amount and to collect the same.”
 Such contention would have been valid if not for the
fact that the withdrawal slip itself indicates a special
instruction that the amount is payable to “Ramon A. de
Guzman &/or

________________

19 Exh. G or 1.
20 Petition, p. 6.

654

654 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

Agnes C. de Guzman.” Such being the case, petitioner’s

personnel should have been duly warned that Gayon,
who was also employed
21 in petitioner’s Buendia Ave.
Extension branch, was not the proper payee of the
proceeds of the check. Otherwise, either Ramon or
Agnes de Guzman should have issued another
authority to Gayon for such withdrawal. Of course, at
the dorsal side of the withdrawal slip is an “authority
to withdraw” naming Gayon the person who can
withdraw the amount indicated in the check. Private
respondent does not deny having signed such
authority. However, considering petitioner’s clear
admission that the withdrawal slip was a blank one
except for private respondent’s signature, the
unavoidable conclusion is that the typewritten name of
“Ruben C. Gayon, Jr.” was intercalated and thereafter
it was signed by Gayon or whoever was allowed by
petitioner to withdraw the amount. Under these facts,
there could not have been a principal-agent
relationship between private respondent and Gayon so
as to render the former liable for the amount
withdrawn.
Moreover, the withdrawal slip contains a boxed
warning that states: “This receipt must be signed and
presented with the corresponding foreign currency
savings passbook by the depositor in person. For
withdrawals thru a representative, depositor should
accomplish the authority at the back.” The
requirement of presentation of the passbook when
withdrawing an amount cannot be given mere lip
service even though the person making the withdrawal
is authorized by the depositor to do so. This is clear
from Rule No. 6 set out by petitioner so that, for the
protection of the bank’s interest and as a reminder to
the depositor, the withdrawal shall be entered in the
depositor’s passbook. The fact that private
respondent’s passbook was not presented during the
withdrawal is evidenced by the entries therein showing
that the last transaction that he made with the bank
was on September 3, 1984,

______________

21 TSN, September 5, 1989, p. 20.

655

VOL. 326, FEBRUARY 29, 2000 655

Bank of the Philippine Islands vs. Court of Appeals

the date he deposited22 the controversial check in the

amount of $2,500.00.
In allowing the withdrawal, petitioner likewise
overlooked another rule that is printed in the
passbook. Thus:

“2. All deposits will be received as current funds and will be

repaid in the same manner; provided, however, that deposits
of drafts, checks, money orders, etc. will be accepted as subject
to collection only and credited to the account only upon receipt
of the notice of final payment. Collection charges by the
Bank’s foreign correspondent in effecting such collection
shall be for the account of the depositor. If the account has
sufficient balance, the collection shall be debited by the Bank
against the account. If, for any reason, the proceeds of the
deposited checks, drafts, money orders, etc., cannot be
collected or if the Bank is required to return such proceeds,
the provisional entry therefor made by the Bank in the
savings passbook and its records shall be deemed
automatically cancelled regardless of the time that has
elapsed, and whether or not the defective items can be
returned to the depositor; and the Bank is hereby authorized
to execute immediately the necessary corrections,
amendments or changes in its record, as well as on the
savings passbook at the first opportunity to reflect such
cancellation.” (Italics and underlining supplied.)

As correctly held by the Court of Appeals, in depositing

the check in his name, private respondent did not
become the outright owner of the amount stated
therein. Under the above rule, by depositing the check
with petitioner, private respondent was, in a way,
merely designating petitioner as the collecting bank.
This is in consonance with the rule that a negotiable
instrument, such as a check, whether a 23manager’s
check or ordinary check, is not legal tender. As such,
after receiving the deposit, under its own rules,
petitioner shall credit the amount in private
respondent’s account or infuse

_______________

22 Exh. 2-a.
23 Philippine Airlines, Inc. v. Court of Appeals, L-49188, 181
SCRA 557, 568 (1990) citing Sec. 189 of the Negotiable Instruments
Law; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7
Phil. 255; Tan Sunco v. Santos, 9 Phil. 44 and 21 R.C.L. 60, 61.

656

656 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

value thereon only after the drawee bank shall have

paid the amount of the check or the check has been
cleared for deposit. Again, this is in accordance with
ordinary banking practices and with this Court’s
pronouncement that “the collecting bank or last
endorser generally suffers the loss because it has the
duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting
the check for payment to the drawee is an assertion
that the party making the presentment has done its
duty to ascertain
24 the genuineness of the
endorsements.” The rule finds more meaning in this
case where the check involved is drawn on a foreign
bank and therefore collection is more difficult than
when the drawee bank is a local one even25 though the
check in question is a manager’s check. 26

In Banco Atlantico v. Auditor General, Banco

Atlantico, a commercial bank in Madrid, Spain, paid
the amounts represented in three (3) checks to Virginia
Boncan, the finance officer of the Philippine Embassy
in Madrid. The bank did so without previously clearing
the checks with the drawee bank, the Philippine
National Bank in New York, on account of the “special
treatment” that Boncan received from the personnel of
Banco Atlantico’s foreign department. The Court held
that the encashment of the checks without prior
clearance is “contrary to normal or ordinary banking
practice specially so where the drawee bank is a
foreign bank and the amounts involved were large.”
Accordingly, the Court approved the Auditor General’s
denial of Banco Atlantico’s claim for pay-

________________

24 Associated Bank v. Court of Appeals, 322 Phil. 677, 699-700

citing Bank of the Philippine Islands v. Court of Appeals, G.R. No.
102383, 216 SCRA 51, 63 (1992), Banco de Oro v. Equitable Banking
Corporation, G.R. No. 74917, 157 SCRA 188 (1988) and Great
Eastern Life Insurance Co. v. Hongkong and Shanghai Banking
Corporation, 43 Phil. 678.
25 A manager’s check is like a cashier’s check which, in the
commercial world, is regarded substantially to be as good as the
money it represents (Tan v. Court of Appeals, G.R. No. 108555, 239
SCRA 310, 322 [1994]).
26 L-33549, 81 SCRA 335 (1978).

657

VOL. 326, FEBRUARY 29, 2000 657

Bank of the Philippine Islands vs. Court of Appeals

ment of the value of the checks that was withdrawn by

Boncan.
Said ruling brings to light the fact that the banking
business is affected with public interest. By the nature
of its functions, a bank is under obligation to treat the
accounts of its depositors “with meticulous care,
always having 27 in mind the fiduciary nature of their

relationship.” As such, in dealing with its depositors,

a bank should exercise its functions not only with the
diligence of a good father of a family
28 but it should do so
with the highest degree of care.
In the case at bar, petitioner, in allowing the
withdrawal of private respondent’s deposit, failed to
exercise the diligence of a good father of a family. In
total disregard of its own rules, petitioner’s personnel
negligently handled private respondent’s account to
petitioner’s detriment. As this Court once said on this
matter:

“Negligence is the omission to do something which a

reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do,
or the doing of something which a prudent and reasonable
man would do. The seventy-eight (78)-year-old, yet still
relevant, case of Picart v. Smith, provides the test by which
to determine the existence of negligence in a particular case
which may be stated as follows: Did the defendant in doing
the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used
in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet pater
familias of the Roman law. The existence of negligence in a
given case is not determined by reference to the personal

__________________

27 Citytrust Banking Corporation v. Intermediate Appellate Court, G.R.

No. 84281, 232 SCRA 559, 564 (1994) citing Simex International (Manila),
Inc. v. Court of Appeals, G.R. No. 88013, 183 SCRA 360 (1990).
28 Philippine Bank of Commerce v. Court of Appeals, 336 Phil. 667, 681;
269 SCRA 695, 708-709 (1997) citing Metropolitan Bank and Trust Company
v. Court of Appeals, G.R. No. 112576, 237 SCRA 761, 767 (1994) and Bank of
the Philippine Islands v. Court of Appeals, G.R. No. 102383, 216 SCRA 51
(1992).

658

658 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands vs. Court of Appeals

judgment of the actor in the situation before him. The law

considers what would be reckless, blameworthy, or negligent
in the man of ordinary intelligence
29 and prudence and
determines liability by that.”

Petitioner violated its own rules by allowing the

withdrawal of an amount that is definitely over and
above the aggregate amount of private respondent’s
dollar deposits that had yet to be cleared. The bank’s
ledger on private respondent’s account shows that
before he deposited $2,500.00,
30 private respondent had
a balance of only $750.00. Upon private respondent’s
deposit of $2,500.00 on September 3, 1984, that
amount was credited in his ledger as a deposit
resulting 31in the corresponding total balance of
$3,250.00. On September 10, 1984, the amount of
$600.00 and the additional charges of $10.00 were
indicated therein as withdrawn thereby leaving a
balance of $2,640.00. On September 30, 1984, an
interest of $11.59 was reflected in the ledger and on
October 23, 1984, the amount of $2,541.67 was entered
32

as withdrawn with a balance of $109.92. On

November 19, 1984 the33word “hold” was written beside
the balance of $109.92. That must have been the time
when Reyes, petitioner’s branch manager, was
informed unofficially of the fact that the check
deposited was a counterfeit, but petitioner’s Buendia
Ave. Extension Branch received a copy of the
communication thereon from Wells Fargo Bank
International in New 34 York the following day,
November 20, 1984. According to Reyes, Wells Fargo
Bank International handled the clearing of checks
drawn against
35 U.S. banks that were deposited with
petitioner.
From these facts on record, it is at once apparent
that petitioner’s personnel allowed the withdrawal of
an amount big-

_________________

29 Ibid., at p. 676.
30 Exh. A.
31 Exh. A-1.
32 Exh. A-2.
33 Exh. A-3.
34 Exh: E.
35 Affidavit of Reyes, p. 3; Record, p. 111.

659

VOL. 326, FEBRUARY 29, 2000 659

Bank of the Philippine Islands vs. Court of Appeals

ger than the original deposit of $750.00 and the value

of the check deposited in the amount of $2,500.00
although they had not yet received notice from the
clearing bank in the United States on whether or not
the check was funded. Reyes’ contention that after the
lapse of the 35-day period the amount of a deposited
check could be withdrawn even in the absence of a
clearance thereon, otherwise it could take a long 36
time
before a depositor could make a withdrawal, is
untenable. Said practice amounts to a disregard of the
clearance requirement of the banking system.
While it is true that private respondent’s having
signed a blank withdrawal slip set in motion the
events that resulted in the withdrawal and
encashment of the counterfeit check, the negligence of
petitioner’s personnel was the proximate cause of the
loss that petitioner sustained. Proximate cause, which
is determined by a mixed consideration of logic,
common sense, policy and precedent, is “that cause,
which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury,
and without37 which the result would not have
occurred.” The proximate cause of the withdrawal and
eventual loss of the amount of $2,500.00 on petitioner’s
part was its personnel’s negligence in allowing such
withdrawal in disregard of its own rules and the
clearing requirement in the banking system. In so
doing, petitioner assumed the risk of incurring a loss
on account of a forged or counterfeit foreign check and
hence, it should suffer the resulting damage.
WHEREFORE, the petition for review on certiorari
is DENIED. The Decision of the Court of Appeals in
CA-G.R. CV No. 37392 is AFFIRMED.
SO ORDERED.

Davide, Jr. (C.J., Chairman), Puno, Kapunan

and Pardo, JJ., concur.

_______________

36 TSN, September 21, 1989, p. 21.

37 Philippine Bank of Commerce v. Court of Appeals, supra, at p.
679.

660

660 SUPREME COURT REPORTS ANNOTATED

 People vs. Gamer

Petition denied, judgment affirmed.

Notes.—–A bank, being greatly affected with public

interest, should exercise even a higher degree of
diligence in the handling of its affairs than that
expected of an ordinary business firm. (Lim Sio Bio vs.
Court of Appeals, 221 SCRA 307 [1993])
A cashier’s check is a primary obligation of the
issuing bank and accepted in advance by its mere
issuance, and, by its peculiar character and general
use in the commercial world is regarded substantially
to be as good as the money which it represents. (Tan
vs. Court of Appeals, 239 SCRA 310 [1994])
A bank’s act of issuing manager’s checks and
corresponding receipt before payment thereof is
completely reckless and grossly negligent, an appalling
breach of bank procedures. (Philippine National Bank
vs. Court of Appeals, 256 SCRA 309 [1996])

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