Citybank N.A. vs.

Cabamongan
488 SCRA 517 Digest
Citybank v. Cabamongan
488 SCRA 517
G.R. No. 146918 May 2, 2006
Ponente: Austria-Martinez, J.:
Bank negligent
Facts:
1. The Cabamongan spouses Luis and Carmelita are both based in California, USA.
The spouses opened a foreign currency time deposit account for their children with
petitioner CityBank with a 180-day term. An impostor who claimed to be Carmelita
(wife) succeeded to preterminate the time deposit after presenting passport, credit
card and other identification.
2. The bank personnel who attended to the transaction ignored several red flags which
could have alerted the bank as to the real identity of the person claiming to be
'Carmelita'. For one, she failed to present the certificate of time deposit, there was also
a discrepancy in her signature with that in the signature cards of the bank. Finally, the
photo in the bank's file did not look like this person claiming to be Carmelita. Despite
all these irregularities, the bank went through with the transaction, which only took 40
minutes. The document waiver which the impostor signed was also not notarized, as
required under bank's procedures.
3. To the aghast of the spouses, they only came to learn of the incident through a
daughter-in-law who called them up in the US. Apparently, a break-in occurred
previously in their US residence and several important documents were lost to the
thief. The spouses demanded payment from the bank who refused. Hence the filing of
the suit against petitioner bank.
4. The spouses presented a PNP Document Examiner expert who analysed the
signature and concluded that the signature was forged, hence the discrepancy between
the signature of the impostor and the one written in the signature cards held by the
bank.
4. The trial court ruled in favor of the spouses Cabamongan, held the bank negligent
and awarded actual, moral and exemplary damages. The bank appealed to the CA
which affirmed the lower court's decision. Both parties filed a petition for review on
certiorari before the SC where the petitioner insisted that it Carmela who

preterminated the TD despite claims to the contrary, while the Cabamongan spouses
contended that Citybank's negligence was established by evidence.
Issue: Whether or not the bank is negligent and therefor should be held liable
when it allowed the pretermination of the TD in favor of the impostor
HELD:
YES. The bank was indeed negligent as it failed to exercise the highest degree of care
and diligence required of it. The banking business is impressed with public interest
and of paramount importance thereto is the trust and confidence of the public in
general. The Court has held that the bank "is bound to know the signatures of its
customers; and if it pays a forged check, it must be considered as making payment out
of its own funds, and cannot ordinarily charge the amount so paid to the account of
the depositor whose name was forged."(San Carlos Milling Ltd. vs. BPI)
It has been sufficiently shown that the signatures of Carmelita in the pretermination
were forged. The petitioner, even with its signature verification procedure failed to
detect the forgeries. Citybank cannot label its negligence as mere error. For not
exercising the degree of diligence required of banking institutions, it is liable for
damages.