Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

PHILIPPINE NATIONAL BANK, G.R. No. 173259

Petitioner,

Present:

CORONA, C.J., Chairperson,

- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

F.F. CRUZ and CO., INC. Promulgated:

Respondent. July 25, 2011
x-----------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

As between a bank and its depositor, where the banks negligence is the proximate cause of
the loss and the depositor is guilty of contributory negligence, the greater proportion of the loss
shall be borne by the bank.

This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeals
[1]
January 31, 2006 Decision in CA-G.R. CV No. 81349, which modified the January 30, 2004
[2]
Decision of the Regional Trial Court of Manila City, Branch 46 in Civil Case No. 97-84010, and
 [3]
the June 26, 2006 Resolution denying petitioners motion for reconsideration.

Factual Antecedents

The antecedents are aptly summarized by the appellate court:

In its complaint, it is alleged that [respondent F.F. Cruz & Co., Inc.] (hereinafter FFCCI)
opened savings/current or so-called combo account No. 0219-830-146 and dollar savings account No.
0219-0502-458-6 with [petitioner Philippine National Bank] (hereinafter PNB) at its Timog Avenue
Branch. Its President Felipe Cruz (or Felipe) and Secretary-Treasurer Angelita A. Cruz (or Angelita)
were the named signatories for the said accounts.

The said signatories on separate but coeval dates left for and returned from the Unites States of
America, Felipe on March 18, 1995 until June 10, 1995 while Angelita followed him on March 29,
1995 and returned ahead on May 9, 1995.

While they were thus out of the country, applications for cashiers and managers [checks]
bearing Felipes [signature] were presented to and both approved by the PNB. The first was on March
27, 1995 for P9,950,000.00 payable to a certain Gene B. Sangalang and the other one was on April 24,
1995 for P3,260,500.31 payable to one Paul Bautista. The amounts of these checks were then debited
by the PNB against the combo account of [FFCCI].

When Angelita returned to the country, she had occasion to examine the PNB statements of
account of [FFCCI] for the months of February to August 1995 and she noticed the deductions of
P9,950,000.00 and P3,260,500.31. Claiming that these were unauthorized and fraudulently made,
[FFCCI] requested PNB to credit back and restore to its account the value of the checks. PNB refused,
and thus constrained [FFCCI] filed the instant suit for damages against the PNB and its own
accountant Aurea Caparas (or Caparas).

In its traverse, PNB averred lack of cause of action. It alleged that it exercised due diligence in
handling the account of [FFCCI]. The applications for managers check have passed through the
standard bank procedures and it was only after finding no infirmity that these were given due course. In
fact, it was no less than Caparas, the accountant of [FFCCI], who confirmed the regularity of the
transaction. The delay of [FFCCI] in picking up and going over the bank statements was the proximate
cause of its self-proclaimed injury. Had [FFCCI] been conscientious in this regard, the alleged
chicanery would have been detected early on and Caparas effectively prevented from absconding with
[4]
its millions. It prayed for the dismissal of the complaint.

Regional Trial Courts Ruling

The trial court ruled that F.F. Cruz and Company, Inc. ( FFCCI) was guilty of negligence in
clothing Aurea Caparas (Caparas) with authority to make decisions on and dispositions of its
account which paved the way for the fraudulent transactions perpetrated by Caparas; that, in
practice, FFCCI waived the two-signature requirement in transactions involving the subject combo
account so much so that Philippine National Bank (PNB) could not be faulted for honoring the
applications for managers check even if only the signature of Felipe Cruz appeared thereon; and
that FFCCI was negligent in not immediately informing PNB of the fraud.

On the other hand, the trial court found that PNB was, likewise, negligent in not calling or
personally verifying from the authorized signatories the legitimacy of the subject withdrawals
considering that they were in huge amounts. For this reason, PNB had the last clear chance to
prevent the unauthorized debits from FFCCIs combo account. Thus, PNB should bear the whole
loss

WHEREFORE, judgment is hereby rendered ordering defendant [PNB] to pay plaintiff

[FFCCI] P13,210,500.31 representing the amounts debited against plaintiffs account, with interest at
the legal rate computed from the filing of the complaint plus costs of suit.

[5]
IT IS SO ORDERED.

Court of Appeals Ruling

On January 31, 2006, the CA rendered the assailed Decision affirming with modification the
Decision of the trial court, viz:

WHEREFORE, the appealed Decision is AFFIRMED with the MODIFICATION that [PNB] shall
pay [FFCCI] only 60% of the actual damages awarded by the trial court while the remaining 40% shall
be borne by [FFCCI].

[6]
SO ORDERED.

The appellate court ruled that PNB was negligent in not properly verifying the genuineness of the
signatures appearing on the two applications for managers check as evidenced by the lack of the
signature of the bank verifier thereon. Had this procedure been followed, the forgery would have
been detected.
 Nonetheless, the appellate court found FFCCI guilty of contributory negligence because it
clothed its accountant/bookkeeper Caparas with apparent authority to transact business with PNB.
In addition, FFCCI failed to timely examine its monthly statement of account and report the
discrepancy to PNB within a reasonable period of time to prevent or recover the loss. FFCCIs
contributory negligence, thus, mitigated the banks liability. Pursuant to the rulings in Philippine
[7]
Bank of Commerce v. Court of Appeals and The Consolidated Bank & Trust Corporation v.
[8]
Court of Appeals, the appellate court allocated the damages on a 60-40 ratio with the bigger
share to be borne by PNB.

From this decision, both FFCCI and PNB sought review before this Court.

On August 17, 2006, FFCCI filed its petition for review on certiorari which was docketed as G.R.
[9] [10]
No. 173278. On March 7, 2007, the Court issued a Resolution denying said petition. On
[11]
June 13, 2007, the Court issued another Resolution denying FFCCIs motion for
reconsideration. In denying the aforesaid petition, the Court ruled that FFCCI essentially raises
questions of fact which are, as a rule, not reviewable under a Rule 45 petition; that FFCCI failed to
show that its case fell within the established exceptions to this rule; and that FFCCI was guilty of
contributory negligence. Thus, the appellate court correctly mitigated PNBs liability.

On July 13, 2006, PNB filed its petition for review on certiorari which is the subject matter
of this case.

Issue

[12]
Whether the Court of Appeals seriously erred when it found PNB guilty of negligence.

Our Ruling

We affirm the ruling of the CA.

PNB is guilty of negligence.

[13]
Preliminarily, in G.R. No. 173278, we resolved with finality that FFCCI is guilty of
contributory negligence, thus, making it partly liable for the loss (i.e., as to 40% thereof) arising
from the unauthorized withdrawal of P13,210,500.31 from its combo account. The case before us
is, thus, limited to PNBs alleged negligence in the subject transactions which the appellate court
found to be the proximate cause of the loss, thus, making it liable for the greater part of the loss
(i.e., as to 60% thereof) pursuant to our rulings in Philippine Bank of Commerce v. Court of
[14] [15]
Appeals and The Consolidated Bank & Trust Corporation v. Court of Appeals.

PNB contends that it was not negligent in verifying the genuineness of the signatures
appearing on the subject applications for managers check. It claims that it followed the standard
operating procedure in the verification process and that four bank officers examined the signatures
and found the same to be similar with those found in the signature cards of FFCCIs authorized
signatories on file with the bank.

PNB raises factual issues which are generally not proper for review under a Rule 45
petition. While there are exceptions to this rule, we find none applicable to the present case. As
correctly found by the appellate court, PNB failed to make the proper verification because the
applications for the managers check do not bear the signature of the bank verifier. PNB concedes
[16]
the absence of the subject signature but argues that the same was the result of inadvertence. It
posits that the testimonies of Geronimo Gallego (Gallego), then the branch manager of PNB
Timog Branch, and Stella San Diego (San Diego), then branch cashier, suffice to establish that the
signature verification process was duly followed.

We are not persuaded.

[17]
First, oral testimony is not as reliable as documentary evidence. Second, PNBs own
witness, San Diego, testified that in the verification process, the principal duty to determine the
[18]
genuineness of the signature devolved upon the account analyst. However, PNB did not
present the account analyst to explain his or her failure to sign the box for signature and balance
verification of the subject applications for managers check, thus, casting doubt as to whether he or
she did indeed verify the signatures thereon. Third, we cannot fault the appellate court for not
giving weight to the testimonies of Gallego and San Diego considering that the latter are naturally
interested in exculpating themselves from any liability arising from the failure to detect the
forgeries in the subject transactions. Fourth, Gallego admitted that PNBs employees received
[19]
training on detecting forgeries from the National Bureau of Investigation. However, Emmanuel
Guzman, then NBI senior document examiner, testified, as an expert witness, that the forged
signatures in the subject applications for managers check contained noticeable and significant
differences from the genuine signatures of FFCCIs authorized signatories and that the forgeries
[20]
should have been detected or observed by a trained signature verifier of any bank.

Given the foregoing, we find no reversible error in the findings of the appellate court that
PNB was negligent in the handling of FFCCIs combo account, specifically, with respect to PNBs
failure to detect the forgeries in the subject applications for managers check which could have
[21]
prevented the loss. As we have often ruled, the banking business is impressed with public trust.
A higher degree of diligence is imposed on banks relative to the handling of their affairs than that
[22]
of an ordinary business enterprise. Thus, the degree of responsibility, care and trustworthiness
expected of their officials and employees is far greater than those of ordinary officers and
[23]
employees in other enterprises. In the case at bar, PNB failed to meet the high standard of
diligence required by the circumstances to prevent the fraud. In Philippine Bank of Commerce v.
[24] [25]
Court of Appeals and The Consolidated Bank & Trust Corporation v. Court of Appeals,
where the banks negligence is the proximate cause of the loss and the depositor is guilty of
contributory negligence, we allocated the damages between the bank and the depositor on a 60-40
ratio. We apply the same ruling in this case considering that, as shown above, PNBs negligence is
the proximate cause of the loss while the issue as to FFCCIs contributory negligence has been
settled with finality in G.R. No. 173278. Thus, the appellate court properly adjudged PNB to bear
the greater part of the loss consistent with these rulings.
 WHEREFORE, the petition is DENIED. The January 31, 2006 Decision and June 26,
2006 Resolution of the Court of Appeals in CA-G.R. CV No. 81349 are AFFIRMED.
Costs against petitioner.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

C E R TI FI C ATI O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

[1]
Rollo (G.R. No. 173259), pp. 46-54; penned by Associate Justice Roberto A. Barrios and concurred in by Associate Justices Mario
L. Guaria III and Santiago Javier Ranada.
[2]
Id. at 57-70; penned by Judge Artemio S. Tipon.
[3]
Id. at 55-56.
[4]
Id. at 46-48.
[5]
Id. at 69.
[6]
Id. at 53.
[7]
336 Phil. 667 (1997).
[8]
457 Phil. 688 (2003).
[9]
Rollo (G.R. No. 173278), pp. 9-46.
[10]
Id. at 119-123.
[11]
Id. at 154.
[12]
Rollo (G.R. No. 173259) p. 164.
[13]
The March 7, 2007 Resolution became final and executory on August 29, 2007 as per entry of judgment [id. at 158 (G.R. No.
173278)].
[14]
Supra note 7.
[15]
Supra note 8.
[16]
TSN, November 27, 2001, p. 40.
[17]
Abella v. Court of Appeals, 327 Phil. 270, 276 (1996).
[18]
TSN, June 20, 2002, pp. 14-15, 18-19.
[19]
TSN, November 27, 2001, p. 62.
[20]
TSN, November 19, 1999, p. 5.
[21]
United Coconut Planters Bank v. Basco, 480 Phil. 803, 819 (2004).
[22]
Id.
[23]
Id.
[24]
Supra note 7 at 683.
[25]
Supra note 8 at 712-713.