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04-Citystate Savings Bank v. Tobias
04-Citystate Savings Bank v. Tobias
DECISION
REYES, JR., J : p
Ruling of the CA
The matter was elevated to the CA. The CA in its Decision14 dated May
31, 2016, found the appeal meritorious and accordingly, reversed and set
aside the RTC's decision, in this wise:
WHEREFORE, the Appeal is hereby GRANTED. The Decision
Dated 12 February 2014 of the [RTC], Third Judicial Region, Malolos
City, Bulacan, Branch 83, in Civil Case No. 11-M-07, is MODIFIED in
that [petitioner] and [Robles] are JOINTLY and SOLIDARILY to pay
[respondents] the amounts set forth in the assailed Decisions as well
as attorney's fees in the amount of ONE HUNDRED THOUSAND
PESOS (P100,000.00).
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SO ORDERED. 15
The law expressly imposes upon the banks a fiduciary duty towards its
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clients 19 and to treat in this regard the accounts of its depositors with
meticulous care. 20
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan or mutuum, with the bank as the
debtor and the depositor as the creditor. 21
In light of these, banking institutions may be held liable for damages
for failure to exercise the diligence required of it resulting to contractual
breach or where the act or omission complained of constitutes an actionable
tort. 22
The nature of a bank's liability is illustrated in the consolidated cases of
Philippine Commercial International Bank v. CA, et al., Ford Philippines, Inc.
v. CA, et al. and Ford Philippines, Inc. v. Citibank, N.A., et al . 23 The original
actions a quo were instituted by Ford Philippines, Inc. (Ford) to recover the
value of several checks it issued payable to the Commissioner of Internal
Revenue (CIR) which were allegedly embezzled by an organized syndicate.
The first two of the three consolidated cases mentioned above involve
twin petitions for review assailing the decision and resolution of the CA
ordering the collecting bank, Philippine Commercial International Bank (PCIB)
to pay the amount of a crossed Citibank N.A. (Citibank) check (No. SN-
04867) drawn by Ford in favor of CIR as payment for its taxes.
The said check was deposited with PCIB and subsequently cleared by
the Central Bank. Upon presentment with Citibank, the proceeds of the
check were released to PCIB as the collecting/depository bank.
However, it was later discovered that the check was not paid to the
CIR. Ford was then forced to make another payment to the CIR.
Investigation revealed that the check was recalled by the General
Ledger Accountant of Ford on the pretext that there has been an error in the
computation of tax, he then directed PCIB to issue two manager's checks in
replacement thereof.
Both Citibank and PCIB deny liability, the former arguing that payment
was in due course as it merely relied on the latter's guarantee as to "all prior
indorsements and/or lack of indorsements." Thus, Citibank submits that the
proximate cause of the injury is the gross negligence of PCIB in indorsing the
check in question. The CA agreed and adjudged PCIB solely liable for the
amount of the check.
On the other hand, the last of the three consolidated cases, assails the
decision and resolution of the CA which held Citibank, the drawee bank,
solely liable for the amount of crossed check nos. SN-10597 and 16508 as
actual damages, the proceeds of which have been misappropriated by a
syndicate involving the employees of the drawer Ford, and the collecting
bank PCIB.
This Court in resolving the issue of liability in PCIB v. CA, considered
the degree of negligence of the parties.
While recognizing that the doctrine of imputed negligence makes a
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principal liable for the wrongful acts of its agents, this Court noted that the
liability of the principal would nonetheless depend on whether the act of its
agent is the proximate cause of the injury to the third person.
In the case of Ford, this Court ruled that its negligence, if any, cannot
be considered as the proximate cause, emphasizing in this regard the
absence of confirmation on the part of Ford to the request of its General
Ledger Accountant for replacement of the checks issued as payment to the
CIR. In absolving Ford from liability, this Court clarified that the mere fact
that the forgery was committed by the drawer/principal's employee or agent,
who by virtue of his position had unusual facilities for perpetrating the fraud
and imposing the forged paper upon the bank, does not automatically shift
the loss to such drawer-principal, in the absence of some circumstance
raising estoppel against the latter.
In contrast, this Court found PCIB liable for failing to exercise the
necessary care and prudence required under the circumstances. This Court
noted that the action of Ford's General Ledger Accountant in asking for the
replacement of the crossed Citibank check No. SN-04867, was not in the
ordinary course of business and thus should have prompted PCIB to validate
the same. Likewise, considering that the questioned crossed check was
deposited with PCIB in its capacity as collecting agent for the Bureau of
Internal Revenue, it has the responsibility to ensure that the check is
deposited in the payee's account only; and is bound to consult BIR, as its
principal, of unwarranted instructions given by the payor or its agent,
especially so as neither of the latter is its client. Having established PCIB's
negligence, this Court then held the latter solely liable for the proceeds of
Citibank check (No. SN-04867).
Insofar as Citibank check Nos. SN-10597 and 16508, this Court affirmed
the findings of the CA and the trial court that PCIB cannot be faulted for the
embezzlement as it did not actually receive nor held the subject checks.
Adopting the conclusion of the trial court, this Court advanced that the act of
misappropriation was in fact "the clandestine or hidden actuations
performed by the members of the syndicate in their own personal, covert
and private capacity and done without the knowledge of the defendant
PCIB." 24
While this Court admitted that there was no evidence confirming the
conscious participation of PCIB in the embezzlement, it nonetheless found
the latter liable pursuant to the doctrine of imputed negligence, as it was
established that its employees performed the acts causing the loss in their
official capacity or authority albeit for their personal and private gain or
benefit.
Yet, finding that the drawee, Citibank was remiss of its contractual
duty to pay the proceeds of the crossed checks only to its designated payee,
this Court ruled that Citibank should also bear liability for the loss incurred
by Ford. It ratiocinated:
Citibank should have scrutinized Citibank Check Numbers SN 10597
and 16508 before paying the amount of the proceeds thereof to the
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collecting bank of the BIR. One thing is clear from the record: the
clearing stamps at the back of Citibank Check Nos. SN 10597 and
16508 do not bear any initials. Citibank failed to notice and verify the
absence of the clearing stamps. Had this been duly examined, the
switching of the worthless checks to Citibank Check Nos. 10597 and
16508 would have been discovered in time. For this reason, Citibank
had indeed failed to perform what was incumbent upon it, which is to
ensure that the amount of the checks should be paid only to its
designated payee. The fact that the drawee bank did not discover the
irregularity seasonably, in our view, constitutes negligence in
carrying out the bank's duty to its depositors. The point is that as a
business affected with public interest and because of the nature of its
functions, 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. 25
Then, applying the doctrine of comparative negligence, this Court
adjudged PCIB and Citibank equally liable for the proceeds of Citibank Check
Nos. SN 10597 and 16508.
It is without question that when the action against the bank is
premised on breach of contractual obligations, a bank's liability as debtor is
not merely vicarious but primary, in that the defense of exercise of due
diligence in the selection and supervision of its employees is not available. 26
Liability of banks is also primary and sole when the loss or damage to its
depositors is directly attributable to its acts, finding that the proximate cause
of the loss was due to the bank's negligence or breach. 27
The bank, in its capacity as principal, may also be adjudged liable
under the doctrine of apparent authority. The principal's liability in this case
however, is solidary with that of his employee. 28
The doctrine of apparent authority or what is sometimes referred to as
the "holding out" theory, or the doctrine of ostensible agency, imposes
liability, not "as the result of the reality of a contractual relationship, but
rather because of the actions of a principal or an employer in somehow
misleading the public into believing that the relationship or the authority
exists." 29 It is defined as:
[T]he power to affect the legal relations of another person by
transactions with third persons arising from the other's
manifestations to such third person such that the liability of the
principal for the acts and contracts of his agent extends to those
which are within the apparent scope of the authority conferred on
him, although no actual authority to do such acts or to make such
contracts has been conferred. 30 (Citations omitted)
Succinctly stating the foregoing principles, the liability of a bank to
third persons for acts done by its agents or employees is limited to the
consequences of the latter's acts which it has ratified, or those that resulted
in performance of acts within the scope of actual or apparent authority it has
vested.
In PCIB v. CA, 31 however, it is evident and striking that for purposes of
holding the principal/banks liable, no distinction has been made whether the
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act resulting to injury to third persons was performed by the agent/employee
was pursuant to, or outside the scope of an apparent or actual official
authority. It must be noted nonetheless that this is because of the peculiar
circumstance attendant in that case, that is, the direct perpetrators of the
offense therein are fugitives from justice. Thus, this Court is left to determine
who of the parties must bear the burden for the loss incurred by Ford.
In the case at bar, petitioner does not deny the validity of respondents'
accounts, in fact it suggests that transactions with it have all been
accounted for as it is based on official documents containing authentic
signatures of Tobias. The point is well-taken. In fine, respondents' claim for
damages is not predicated on breach of their contractual relationship with
petitioner, but rather on Robles' act of misappropriation.
At any rate, it cannot be said that the petitioner is guilty of breach of
contract so as to warrant the imposition of liability solely upon it. 32
Records show that respondents entered into two types of transactions
with the petitioner, the first involving savings accounts, and the other loan
agreements. Both of these transactions were entered into outside the
petitioner bank's premises, through Robles.
In the first, the respondents, as the depositors, acts as the creditor,
and the petitioner, as the debtor. 33 In these agreements, the petitioner, by
receiving the deposit impliedly agrees to pay upon demand and only upon
the depositor's order. 34 Failure by the bank to comply with these obligations
would be considered as breach of contract.
The second transaction which involves three loan agreements, are the
subject of contention. These loans were obtained by respondents, secured
by their deposits with the petitioner, and executed with corresponding
authorization letters allowing the latter to debit from their account in case of
default. Respondents do not contest the genuineness of their signature in
the relevant documents; rather they submit that they were merely lured by
Robles into signing the same without knowing their import. The loans were
approved and released by the petitioner, but instead of reinvesting the
same, the proceeds were misappropriated by Robles, as a result,
respondents' accounts were debited and applied as payment for the loan.
Under the premises, the petitioner had the authority to debit from the
respondents' accounts having been appointed as their attorney-in-fact in a
duly signed authentic document. 35 Furthermore, there is nothing irregular
or striking that transpired which should have impelled petitioner into further
inquiry as to the authenticity of the attendant transactions. Suffice it is to
state that the questioned withdrawal was not the first time in which Robles
has acted as the authorized representative of the petitioner or as
intermediary between the petitioner and the respondents, who is also not
merely an employee but petitioner's branch manager.
Moreover, that the respondents have been lured by Robles into signing
the said documents without knowing the implications thereof does not prove
complicity or knowledge on the part of the petitioner of Robles' inappropriate
acts.
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Nonetheless, while it is clear that the proximate cause of respondents'
loss is the misappropriation of Robles, petitioner is still liable under Article
1911 of the Civil Code, to wit:
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers.
The case of Prudential Bank v. CA 36 lends support to this conclusion.
There, this Court first laid down the doctrine of apparent authority, with
specific reference to banks, viz.:
Conformably, we have declared in countless decisions that the
principal is liable for obligations contracted by the agent. The agent's
apparent representation yields to the principal's true representation
and the contract is considered as entered into between the principal
and the third person.
A bank is liable for wrongful acts of its officers done in the
interests of the bank or in the course of dealings of the officers in
their representative capacity but not for acts outside the scope of
their authority. A bank holding out its officers and agent as worthy of
confidence will not be permitted to profit by the frauds they may thus
be enabled to perpetuate in the apparent scope of their employment;
nor will it be permitted to shirk its responsibility for such frauds, even
though no benefit may accrue to the bank therefrom. Accordingly, a
banking corporation is liable to innocent third persons where
the representation is made in the course of its business by an
agent acting within the general scope of his authority even
though, in the particular case, the agent is secretly abusing
his authority and attempting to perpetrate a fraud upon his
principal or some other person, for his own ultimate benefit.
Application of these principles in especially necessary because
banks have a fiduciary relationship with the public and their stability
depends on the confidence of the people in their honesty and
efficiency. Such faith will be eroded where banks do not exercise
strict care in the selection and supervision of its employees, resulting
in prejudice to their depositors. 37 (Citations omitted, and emphasis
and underscoring Ours)
Petitioner, in support of its position, cites Banate v. Philippine
Countryside Rural Bank (Liloan, Cebu), Inc. , 38 this Court finds however that
the case presents a different factual milieu and is not applicable in the case
at bar.
In Banate, this Court ruled that the doctrine of apparent authority does
not apply and absolved the bank from liability resulting from the alteration
by its branch manager of the terms of a mortgage contract which secures a
loan obtained from the bank. In so ruling, this Court found "[n]o proof of the
course of business, usages and practices of the bank about, or knowledge
that the board had or is presumed to have of its responsible officers' acts
regarding the branch manager's apparent authority" 39 to cause such
alteration. Further, "[n]either was there any allegation, much less proof" 40
that the bank ratified its manager's acts or is estopped to make a contrary
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claim.
In contrast, in this controversy, the evidence on record sufficiently
established that Robles as branch manager was 'clothed' or 'held out' as
having the power to enter into the subject agreements with the respondents.
The existence of apparent or implied authority is measured by previous
acts that have been ratified or approved or where the accruing benefits have
been accepted by the principal. It may also be established by proof of the
course of business, usages and practices of the bank; or knowledge that the
bank or its officials have, or is presumed to have of its responsible officers'
acts regarding bank branch affairs. 41
As aptly pointed by the CA, petitioner's evidence bolsters the case
against it, as they support the finding that Robles as branch manager, has
been vested with the apparent or implied authority to act for the petitioner
in offering and facilitating banking transactions.
The testimonies of the witnesses presented by petitioner establish that
there was nothing irregular in the manner in which Robles transacted with
the respondents. 42 In fact, petitioner's witnesses admitted that while the
bank's general policy requires that transactions be completed inside the
bank premises, exceptions are made in favor of valued clients, such as the
respondents. In which case, banking transactions are allowed to be done in
the residence or place of business of the depositor, since the same are
verified subsequently by the bank cashier. 43
Moreover, petitioner admitted that for valued clients, the branch
manager has the authority to transact outside of the bank premises. 44 In
fact, Robles previously transacted business on behalf of the petitioner as
when it sought and facilitated the opening of respondents' accounts.
Petitioner acknowledged Robles' authority and it honored the accounts so
opened outside the bank premises.
To recall, prior to the alleged back-to-back scheme entered into by the
respondents, Robles has consistently held himself out as representative of
the petitioner in seeking and signing respondents as depositors to various
accounts. 45 It bears to stress that in the course of the said investment, the
practice has been for Tobias to surrender the passbook to Robles' for
updating. 46 All of which accounts have been in order until after the
respondents was lured into entering the back-to-back scheme.
In this light, respondents cannot be blamed for believing that Robles
has the authority to transact for and on behalf of the petitioner 47 and for
relying upon the representations made by him. After all, Robles as branch
manager is recognized "within his field and as to third persons as the general
agent and is in general charge of the corporation, with apparent authority
commensurate with the ordinary business entrusted him and the usual
course and conduct thereof." 48
Consequently, petitioner is estopped from denying Robles' authority. 49
As the employer of Robles, petitioner is solidarily liable to the respondents
for damages caused by the acts of the former, pursuant to Article 1911 of
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the Civil Code. 50
Separate Opinions
CAGUIOA, J.:
Footnotes
* Designated as Acting Chief Justice per Special Order No. 2539 dated February 28,
2018.
3. Id. at 60-61.
4. Id. at 11-12.
5. Id. at 48.
6. Id.
7. Id.
8. Id.
9. Id. at 49.
10. Id. at 193-206.
19. Republic Act No. 8791, or the General Banking Law, Section 2.
20. Simex International (Manila), Inc. v. Court of Appeals, 262 Phil. 387, 396
(1990).
22. Far East Bank and Trust Company v. CA, 311 Phil. 783, 793 (1995).
26. Far East Bank and Trust Co. (now Bank of the Philippine Islands) v. Tentmakers
Group, Inc., et al., 690 Phil. 134, 144 (2012).
27. PCIB v. CA, supra note 23.
32. Far East Bank and Trust Co. (now Bank of the Philippine Islands) v. Tentmakers
Group, Inc., et al., supra note 26.
33. CIVIL CODE OF THE PHILIPPINES, Article 1980.
34. The Metropolitan Bank and Trust Co. v. Rosales, et al., 724 Phil. 66, 68 (2014).
40. Id.
41. Id. at 45-46.
44. Id.
47. Rural Bank of Milaor (Camarines Sur) v. Ocfemia, et al., 381 Phil. 911 (2000).
48. Banate v. Philippine Countryside Rural Bank (Liloan, Cebu), Inc., supra note 38,
at 48.
50. Art. 1191. Even when the agent exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the latter to act as
though he had full powers.
51. Supra note 23.
2. Id.
3. Id.
4. Id.
5. Id. 68.
6. Id. at 67-69.
7. Id. at 54.
8. Id. at 48.
By the contract of loan, one of the parties delivers to another, either
something not consumable so that the latter may use the same for a certain
time and return it, in which case the contract is called a commodatum; or
money or other consumable thing, upon the condition that the same amount
of the same kind and quality shall be paid, in which case the contract is
simply called a loan or mutuum.
13. See generally Philippine National Bank v. Pike, 507 Phil. 322 (2005). [Second
Division, Per J. Chico-Nazario]
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14. Republic Act No. 8791, An Act Providing for the Regulation of the Organization
and Operations of Banks, Quasi-Banks, Trust Entities and for Other Purposes
[THE GENERAL BANKING LAW OF 2000], May 23, 2000 in relation to Section
X149, Appendix 48 of the Bangko Sentral ng Pilipinas Manual of Regulation
for Banks, October 31, 2015.