On February 11, 1989, Board Resolution No.

05, Series of 1989 was approved by [Petitioner] NSBCI [1)] authorizing the
company to x x x apply for or secure a commercial loan with the PNB in an aggregate amount of P8.0M, under such
terms agreed by the Bank and the NSBCI, using or mortgaging the real estate properties registered in the name of its
President and Chairman of the Board [Petitioner] Eduardo R. Dee as collateral; [and] 2) authorizing [petitioner-spouses]
to secure the loan and to sign any [and all] documents which may be required by [Respondent] PNB[,] and that
[petitioner-spouses] shall act as sureties or co-obligors who shall be jointly and severally liable with [Petitioner] NSBCI for
the payment of any [and all] obligations.

On August 15, 1989, Resolution No. 77 was approved by granting the request of [Respondent] PNB thru its Board NSBCI
for an P8 Million loan broken down into a revolving credit line of P7.7M and an unadvised line of P0.3M for additional
operating and working capital[7] to mobilize its various construction projects

The loan of [Petitioner] NSBCI was secured by a first mortgage The loan was further secured by the joint and several
signatures of [Petitioners] Eduardo Dee and Arcelita Marquez Dee, who signed as accommodation-mortgagors since all
the collaterals were owned by them and registered in their names.

Moreover [Petitioner] NSBCI executed the following documents, viz: a) promissory note dated June 29, 1989 in the
amount of P5,000,000.00 with due date on October 27, 1989; [b)] promissory note dated September 1, 1989 in the
amount of P2,700,000.00 with due date on December 30, 1989; and c) promissory note dated September 6, 1989 in the
amount of P300,000.00 with maturity date on January 4, 1990.

In addition, [petitioner] corporation also signed the Credit Agreement dated August 31, 1989 relating to the revolving
credit line of P7.7 Million x x x and the Credit Agreement dated September 5, 1989 to support the unadvised line
of P300,000.00.

On August 31, 1989, [petitioner-spouses] executed a Joint and Solidary Agreement (JSA) in favor of [Respondent] PNB
unconditionally and irrevocably binding themselves to be jointly and severally liable with the borrower for the payment of
all sums due and payable to the Bank under the Credit Document.

Later on, [Petitioner] NSBCI failed to comply with its obligations under the promissory notes.

On June 18, 1991, [Petitioner] Eduardo R. Dee on behalf of [Petitioner] NSBCI sent a letter to the Branch Manager of the
PNB Dagupan Branch requesting for a 90-day extension for the payment of interests and restructuring of its loan for
another term.

Subsequently, NSBCI tendered payment to [Respondent] PNB [of] three (3) checks aggregating P1,000,000.00, namely
1) check no. 316004 dated August 8, 1991 in the amount of P200,000.00; 2) check no. 03499997 dated August 8, 1991
in the amount of P650,000.00; and 3) check no. 03499998 dated August 15, 1991 in the amount of P150,000.00.[8]
In a meeting held on August 12, 1991, [Respondent] PNBs representative[,] Mr. Rolly Cruzabra, was informed by
[Petitioner] Eduardo Dee of his intention to remit to [Respondent] PNB post-dated checks covering interests, penalties
and part of the loan principals of his due account.

On August 22, 1991, [Respondent] banks Crispin Carcamo wrote [Petitioner] Eduardo Dee[,] informing him that
[Petitioner] NSBCIs proposal [was] acceptable[,] provided the total payment should be P4,128,968.29 that [would] cover
the amount of P1,019,231.33 as principal, P3,056,058.03 as interests and penalties[,] and P53,678.93 for insurance[,]
with the issuance of post-dated checks to be dated not later than November 29, 1991.

On September 6, 1991, [Petitioner] Eduardo Dee wrote the PNB Branch Manager reiterating his proposals for the
settlement of [Petitioner] NSBCIs past due loan account amounting to P7,019,231.33.

[Petitioner] Eduardo Dee later tendered four (4) post-dated Interbank checks aggregating P1,111,306.67 in favor of
[Respondent] PNB,

Upon presentment[,] however, x x x check nos. 03500087 and 03500088 dated September 29 and October 29, 1991
were dishonored by the drawee bank and returned due [to] a stop payment order from [petitioners].

On November 12, 1991, PNBs Mr. Carcamo wrote [Petitioner] Eduardo Dee informing him that unless the dishonored
checks [were] made good, said PNB branch shall recall its recommendation to the Head Office for the restructuring of the
loan account and refer the matter to its legal counsel for legal action.[] [Petitioners] did not heed [respondents] warning
and as a result[,] the PNB Dagupan Branch sent demand letters to [Petitioner] NSBCI at its office address at 1611 ERDC
Building, E. Rodriguez Sr. Avenue, Quezon City[,] asking it to settle its past due loan account.

[Petitioners] nevertheless failed to pay their loan obligations within the [timeframe] given them and as a result,
[Respondent] PNB filed with the Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale under Act 3135, as
amended[,] and Presidential Decree No. 385 dated January 30, 1992.

The notice of extra-judicial sale of the mortgaged properties relating to said PNBs [P]etition for [S]ale was published in
the February 8, 15 and 22, 1992 issues of the Weekly Guardian, allegedly a newspaper of general circulation in the
Province of Pangasinan, including the cities of Dagupan and San Carlos. In addition[,] copies of the notice were posted in
three (3) public places[,] and copies thereof furnished [Petitioner] NSBCI at 1611 [ERDC Building,] E. Rodriguez Sr.
Avenue, Quezon City, [and at] 555 Shaw Blvd., Mandaluyong[, Metro Manila;] and [Petitioner] Sps. Eduardo and Arcelita
Dee at 213 Wilson St., San Juan, Metro Manila.

On February 26, 1992, the Provincial Deputy Sheriff Cresencio F. Ferrer of Lingayen, Pangasinan foreclosed the real
estate mortgage and sold at public auction the mortgaged properties of [petitioner-spouses,] with [Respondent] PNB
being declared the highest bidder for the amount of P10,334,000.00.
On March 2, 1992, copies of the Sheriffs Certificate of Sale were sent by registered mail to [petitioner] corporations
address at 1611 [ERDC Building,] E. Rodriguez Sr. Avenue, Quezon City and [petitioner-spouses] address at 213 Wilson
St., San Juan, Metro Manila.

On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to [petitioners] at their address at 1611 [ERDC
Building,] E. Rodriguez Sr. Avenue, Quezon City[,] informing them that the properties securing their loan account [had]
been sold at public auction, that the Sheriffs Certificate of Sale had been registered with the Registry of Deeds of
Pangasinan on March 13, 1992[,] and that a period of one (1) year therefrom [was] granted to them within which to
redeem their properties.

[Petitioners] failed to redeem their properties within the one-year redemption period[,] and so [Respondent] PNB
executed a [D]eed of [A]bsolute [S]ale consolidating title to the properties in its name. TCT Nos. 189935 to 189944 were
later issued to [Petitioner] PNB by the Registry of Deeds of Pangasinan.

On August 4, 1992, [Respondent] PNB informed [Petitioner] NSBCI that the proceeds of the sale conducted on February
26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43[,] and thus demanded from the latter
the deficiency of P2,172,476.43 plus interest and other charges[,] until the amount [was] fully paid.

[Petitioners] refused to pay the above deficiency claim which compelled [Respondent] PNB to institute the instant
[C]omplaint for the collection of its deficiency claim.

China Bank v. Lagon (G.R. No. 160843)

Facts:

Jao asked for a credit accommodation from petitioner bank to be secured by a parcel of land in the name of Maria Lago,
as authorized by a SPA. Jao obtained more various loans on the same line, all of which were secured by mortgage over
the lots of Maria Lago again allegedly through a SPA. The loans matured but were unpaid and petitioner bank moved for
the extra-judicial foreclosure of the said properties but were prevented by a TRO of the court. During the pendency of the
case, Jao and Maria Lagon died. The court then rendered a decision in favor of petitioner bank finding that the signatures
in the SPA were authentic. CA reversed the decision and declared the SPA and mortagages null and void.

Issue:

Whether or not petitioner bank exercised due diligence in extending the loan to Jao.

Ruling: NO.

Moreover, petitioner could not be considered a mortgagee in good faith. It had knowledge that respondent was in the
United States at the time the SPAs were allegedly executed, yet, it did not question their due execution. Though
petitioner is not expected to conduct an exhaustive investigation on the history of the mortgagor’s title, it cannot be
excused from the duty of exercising the due diligence required of a banking institution. Banks are expected to exercise
more care and prudence than private individuals in their dealings, even those that involve registered lands, for their
business is affected with public interest.

G.R. No. 177803, August 03, 2015

SPOUSES EMILIANO L. JALBAY, SR. AND MAMERTA C. JALBAY, Petitioners, v. PHILIPPINE NATIONAL BANK, Respondent.
The facts of the case are as follows:LawlibraryofCRAlaw

The subject property is a 257-square-meter lot at Del-Nacia Ville No. 4, Sauyo Road, Novaliches, Quezon City registered
under the names of the Spouses Jalbay. On June 11, 1988, the Transfer Certificate of Title (TCT) covering said property
was destroyed when the Office of the Quezon City Register of Deeds was gutted by fire. Upon reconstitution, the title
was issued in the name of “Emiliano Jalbay, married to Mamerta C. Jalbay,” and because the Spouses Jalbay were then
working and residing abroad, the title was released to their daughter, Virginia Agus.

Sometime in 1993, Virginia and her husband, Danilo Agus (the Spouses Agus), applied for a loan with PNB, Ermita
Branch, in order to acquire additional funds for their garments business operating under the name of VJA Garments. As a
security, the Spouses Agus constituted a real estate mortgage over the subject lot, which they represented as being
owned by siblings Emiliano Jalbay, Jr., and Teresita Jalbay-Cinco. The aforesaid borrowers, however, failed to settle their
loan obligation. As a result, PNB foreclosed the mortgage over the property. It likewise emerged as the highest bidder at
the public auction.

Subsequently, during a short vacation in the country, the Spouses Jalbay learned about the mortgage and foreclosure of
their property. Contending that the real estate mortgage and the proceedings for its foreclosure were invalid for lack of
consent of the real registered owners, the Spouses Jalbay filed a complaint against PNB before the Quezon City RTC

True, banks, in handling real estate transactions, are required to exert a higher degree of diligence, care, and prudence than
individuals. Unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those
involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage
contract.5 Indeed, there is a situation where, despite the fact that the mortgagor is not the owner of the mortgaged property,
his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public
policy. This is the doctrine of "the mortgagee in good faith," wherein buyers or mortgagees dealing with property covered by
a Torrens Certificate of Title are no longer required to go beyond what appears on the face of the title.6 However, the rule
that persons dealing with registered lands can rely solely on the certificate of title is not applicable to banks. Thus, before
approving a loan application, it is a standard operating practice for these institutions to conduct an ocular inspection of the
property offered for mortgage and to verify the veracity of the title to determine its real owners. An ocular inspection is
necessary to protect the true owner of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title.7redarclaw

Here, the Court finds that PNB has complied with the required degree of diligence, prudence, and care in dealing with the
mortgagor. There was also no sign or circumstance which could have possibly triggered suspicion on the bank’s part. Aside
from the fact that the certificate of title to the subject lot is authentic and issued in the name of Emiliano Jalbay, he also
appeared to have been the one occupying said property. Hence, there is no compelling reason to depart from the assailed
rulings of the appellate court.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals dated November 29, 2006
and its Resolution dated April 27, 2007 in CA-G.R. CV No. 80896 are AFFIRMED.

SO ORDERED.cralawlawlibrary

VICENTE GO, - versus -METROPOLITAN BANK AND

TRUST CO., G.R. No. 168842 August 11, 2010

Petitioner filed two separate cases before the Regional Trial Court (RTC) of Cebu. Civil Case No. CEB-9713 was filed by
petitioner against Ma. Teresa Chua (Chua) and Glyndah Tabaag (Tabaag) for a sum of money with preliminary
attachment. Civil Case No. CEB-9866 was filed by petitioner for a sum of money with damages against herein respondent
Metropolitan Bank and Trust Company (Metrobank) and Chua.[3]
In both cases, petitioner alleged that he was doing business under the name Hope Pharmacy which sells medicine and
other pharmaceutical products in the City of Cebu. Petitioner had in his employ Chua as his pharmacist and trustee or
caretaker of the business; Tabaag, on the other hand, took care of the receipts and invoices and assisted Chua in making
deposits for petitioners accounts in the business operations of Hope Pharmacy.[4]

In CEB-9713, petitioner claimed that there were unauthorized deposits and encashments made by Chua and Tabaag in
the total amount of One Hundred Nine Thousand Four Hundred Thirty-three Pesos and Thirty Centavos
(P109,433.30). He questioned particularly the following:

(1) FEBTC Check No. 251111 dated April 29, 1990 in the amount of P22,635.00 which was issued by plaintiffs
[petitioners] customer Loy Libron in payment of the stocks purchased was deposited under Metrobank Savings Account
No. 420-920-6 belonging to the defendant Ma. Teresa Chua;

(2) RCBC Checks Nos. 330958 and 294515, which were in blank but pre-signed by him (plaintiff [petitioner] Vicente Go)
for convenience and intended for payment to plaintiffs [petitioners] suppliers, were filled up and dated September 22,
1990 and September 7, 1990 in the amount of P30,000.00 and P50,000.00 respectively, and were deposited with
defendant Chuas aforestated account with Metrobank;

(3) PBC Check No. 005874, drawn by Elizabeth Enriquez payable to the Hope Pharmacy in the amount of P6,798.30 was
encashed by the defendant Glyndah Tabaag;

(4) There were unauthorized deposits and encashments in the total sum of P109,433.30;[5]

In CEB-9866, petitioner averred that there were thirty-two (32) checks with Hope Pharmacy as payee, for varying sums,
amounting to One Million Four Hundred Ninety-Two Thousand Five Hundred Ninety-Five Pesos and Six Centavos
(P1,492,595.06), that were not endorsed by him but were deposited under the personal account of Chua with respondent
bank,

Petitioner claimed that the said checks were crossed checks payable to Hope Pharmacy only; and that without the
participation and connivance of respondent bank, the checks could not have been accepted for deposit to any other
account, except petitioners account.[8]

Thus, in CEB-9866, petitioner prayed that Chua and respondent bank be ordered, jointly and severally, to pay the
principal amount of P1,492,595.06, plus interest at 12% from the dates of the checks, until the obligation shall have been
fully paid; moral damages of Five Hundred Thousand Pesos (P500,000.00); exemplary damages of P500,000.00; and
attorneys fees and costs in the amount of P500,000.00.[

The Issue

Petitioner presented this sole issue for resolution:

The Court of Appeals Erred In Not Holding Metrobank Liable For Allowing The Deposit, Of Crossed Checks Which Were
Issued In Favor Of And Payable To Petitioner And Without Being Indorsed By The Petitioner, To The Account Of Maria
Teresa Chua.[16]

Negligence was committed by respondent bank in accepting for deposit the crossed checks without indorsement
and in not verifying the authenticity of the negotiation of the checks. The law imposes a duty of extraordinary diligence
on the collecting bank to scrutinize checks deposited with it, for the purpose of determining their genuineness and
regularity.[25] As a business affected with public interest and because of the nature of its functions, the banks are under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of the
relationship.[26] The fact that this arrangement had been practiced for three years without Mr. Go/Hope Pharmacy
raising any objection does not detract from the duty of the bank to exercise extraordinary diligence. Thus, the Decision of
the RTC, as affirmed by the CA, holding respondent bank liable for moral damages is sufficient to remind it of its
responsibility to exercise extraordinary diligence in the course of its business which is imbued with public interest.

G.R. No. 121413 January 29, 2001

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA),petitioner,
vs.
COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A., respondents.

I. G.R. Nos. 121413 and 121479

The stipulated facts submitted by the parties as accepted by the Court of Appeals are as follows:

"On October 19, 1977, the plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of
P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment of plaintiff;s percentage or manufacturer's
sales taxes for the third quarter of 1977.

The aforesaid check was deposited with the degendant IBAA (now PCIBank) and was subsequently cleared at the Central
Bank. Upon presentment with the defendant Citibank, the proceeds of the check was paid to IBAA as collecting or
depository bank.

The proceeds of the same Citibank check of the plaintiff was never paid to or received by the payee thereof, the
Commissioner of Internal Revenue.

As a consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, the plaintiff was compelled to
make a second payment to the Bureau of Internal Revenue of its percentage/manufacturers' sales taxes for the third
quarter of 1977 and that said second payment of plaintiff in the amount of P4,746,114.41 was duly received by the
Bureau of Internal Revenue.

It is further admitted by defendant Citibank that during the time of the transactions in question, plaintiff had been
maintaining a checking account with defendant Citibank; that Citibank Check No. SN-04867 which was drawn and issued
by the plaintiff in favor of the Commissioner of Internal Revenue was a crossed check in that, on its face were two
parallel lines and written in between said lines was the phrase "Payee's Account Only"; and that defendant Citibank paid
the full face value of the check in the amount of P4,746,114.41 to the defendant IBAA.

It has been duly established that for the payment of plaintiff's percentage tax for the last quarter of 1977, the Bureau of
Internal Revenue issued Revenue Tax Receipt No. 18747002, dated October 20, 1977, designating therein in Muntinlupa,
Metro Manila, as the authorized agent bank of Metrobanl, Alabang branch to receive the tax payment of the plaintiff.

On December 19, 1977, plaintiff's Citibank Check No. SN-04867, together with the Revenue Tax Receipt No. 18747002,
was deposited with defendant IBAA, through its Ermita Branch. The latter accepted the check and sent it to the Central
Clearing House for clearing on the samd day, with the indorsement at the back "all prior indorsements and/or lack of
indorsements guaranteed." Thereafter, defendant IBAA presented the check for payment to defendant Citibank on same
date, December 19, 1977, and the latter paid the face value of the check in the amount of P4,746,114.41. Consequently,
the amount of P4,746,114.41 was debited in plaintiff's account with the defendant Citibank and the check was returned to
the plaintiff.

Upon verification, plaintiff discovered that its Citibank Check No. SN-04867 in the amount of P4,746,114.41 was not paid
to the Commissioner of Internal Revenue. Hence, in separate letters dated October 26, 1979, addressed to the
defendants, the plaintiff notified the latter that in case it will be re-assessed by the BIR for the payment of the taxes
covered by the said checks, then plaintiff shall hold the defendants liable for reimbursement of the face value of the
same. Both defendants denied liability and refused to pay.

In a letter dated February 28, 1980 by the Acting Commissioner of Internal Revenue addressed to the plaintiff - supposed
to be Exhibit "D", the latter was officially informed, among others, that its check in the amount of P4, 746,114.41 was not
paid to the government or its authorized agent and instead encashed by unauthorized persons, hence, plaintiff has to pay
the said amount within fifteen days from receipt of the letter. Upon advice of the plaintiff's lawyers, plaintiff on March 11,
1982, paid to the Bureau of Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiff's
percentage tax for the third quarter of 1977.

As a consequence of defendant's refusal to reimburse plaintiff of the payment it had made for the second time to the BIR
of its percentage taxes, plaintiff filed on January 20, 1983 its original complaint before this Court.

On December 24, 1985, defendant IBAA was merged with the Philippine Commercial International Bank (PCI Bank) with
the latter as the surviving entity.

Defendant Citibank maintains that; the payment it made of plaintiff's Citibank Check No. SN-04867 in the amount of
P4,746,114.41 "was in due course"; it merely relied on the clearing stamp of the depository/collecting bank, the
defendant IBAA that "all prior indorsements and/or lack of indorsements guaranteed"; and the proximate cause of
plaintiff's injury is the gross negligence of defendant IBAA in indorsing the plaintiff's Citibank check in question.

It is admitted that on December 19, 1977 when the proceeds of plaintiff's Citibank Check No. SN-048867 was paid to
defendant IBAA as collecting bank, plaintiff was maintaining a checking account with defendant Citibank."5

Although it was not among the stipulated facts, an investigation by the National Bureau of Investigation (NBI) revealed
that Citibank Check No. SN-04867 was recalled by Godofredo Rivera, the General Ledger Accountant of Ford. He
purportedly needed to hold back the check because there was an error in the computation of the tax due to the Bureau of
Internal Revenue (BIR). With Rivera's instruction, PCIBank replaced the check with two of its own Manager's Checks
(MCs). Alleged members of a syndicate later deposited the two MCs with the Pacific Banking Corporation.

Ford, with leave of court, filed a third-party complaint before the trial court impleading Pacific Banking Corporation (PBC)
and Godofredo Rivera, as third party defendants. But the court dismissed the complaint against PBC for lack of cause of
action. The course likewise dismissed the third-party complaint against Godofredo Rivera because he could not be served
with summons as the NBI declared him as a "fugitive from justice".

On June 15, 1989, the trial court rendered its decision, as follows:

"Premises considered, judgment is hereby rendered as follows:

"1. Ordering the defendants Citibank and IBAA (now PCI Bank), jointly and severally, to pay the plaintiff the amount of
P4,746,114.41 representing the face value of plaintiff's Citibank Check No. SN-04867, with interest thereon at the legal
rate starting January 20, 1983, the date when the original complaint was filed until the amount is fully paid, plus costs;

"2. On defendant Citibank's cross-claim: ordering the cross-defendant IBAA (now PCI Bank) to reimburse defendant
Citibank for whatever amount the latter has paid or may pay to the plaintiff in accordance with next preceding paragraph;

"3. The counterclaims asserted by the defendants against the plaintiff, as well as that asserted by the cross-defendant
against the cross-claimant are dismissed, for lack of merits; and
"4. With costs against the defendants.

SO ORDERED."6

Not satisfied with the said decision, both defendants, Citibank and PCIBank, elevated their respective petitions for review
on certiorari to the Courts of Appeals. On March 27, 1995, the appellate court issued its judgment as follows:

"WHEREFORE, in view of the foregoing, the court AFFIRMS the appealed decision with modifications.

The court hereby renderes judgment:

1. Dismissing the complaint in Civil Case No. 49287 insofar as defendant Citibank N.A. is concerned;

2. Ordering the defendant IBAA now PCI Bank to pay the plaintiff the amount of P4,746,114.41 representing the face
value of plaintiff's Citibank Check No. SN-04867, with interest thereon at the legal rate starting January 20, 1983, the
date when the original complaint was filed until the amount is fully paid;

3. Dismissing the counterclaims asserted by the defendants against the plaintiff as well as that asserted by the cross-
defendant against the cross-claimant, for lack of merits.

Costs against the defendant IBAA (now PCI Bank).

IT IS SO ORDERED."7

PCI Bank moved to reconsider the above-quoted decision of the Court of Appeals, while Ford filed a "Motion for Partial
Reconsideration." Both motions were denied for lack of merit.

Separately, PCIBank and Ford filed before this Court, petitions for review by certiorari under Rule 45.

In G.R. No. 121413, PCIBank seeks the reversal of the decision and resolution of the Twelfth Division of the Court of
Appeals contending that it merely acted on the instruction of Ford and such casue of action had already prescribed.

PCIBank sets forth the following issues for consideration:

I. Did the respondent court err when, after finding that the petitioner acted on the check drawn by respondent Ford on
the said respondent's instructions, it nevertheless found the petitioner liable to the said respondent for the full amount of
the said check.

II. Did the respondent court err when it did not find prescription in favor of the petitioner.8

In a counter move, Ford filed its petition docketed as G.R. No. 121479, questioning the same decision and resolution of
the Court of Appeals, and praying for the reinstatement in toto of the decision of the trial court which found both PCIBank
and Citibank jointly and severally liable for the loss.

In G.R. No. 121479, appellant Ford presents the following propositions for consideration:

I. Respondent Citibank is liable to petitioner Ford considering that:

1. As drawee bank, respondent Citibank owes to petitioner Ford, as the drawer of the subject check and a depositor of
respondent Citibank, an absolute and contractual duty to pay the proceeds of the subject check only to the payee thereof,
the Commissioner of Internal Revenue.

2. Respondent Citibank failed to observe its duty as banker with respect to the subject check, which was crossed and
payable to "Payee's Account Only."

3. Respondent Citibank raises an issue for the first time on appeal; thus the same should not be considered by the
Honorable Court.
4. As correctly held by the trial court, there is no evidence of gross negligence on the part of petitioner Ford.9

II. PCI Bank is liable to petitioner Ford considering that:

1. There were no instructions from petitioner Ford to deliver the proceeds of the subject check to a person other than the
payee named therein, the Commissioner of the Bureau of Internal Revenue; thus, PCIBank's only obligation is to deliver
the proceeds to the Commissioner of the Bureau of Internal Revenue.10

2. PCIBank which affixed its indorsement on the subject check ("All prior indorsement and/or lack of indorsement
guaranteed"), is liable as collecting bank.11

3. PCIBank is barred from raising issues of fact in the instant proceedings.12

4. Petitioner Ford's cause of action had not prescribed.13

G.R. No. 173134, September 02, 2015

BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. TARCILA FERNANDEZ, Respondent.; DALMIRO SIAN, THIRD
PARTY, Respondent.

DECISION

BRION, J.:

We resolve the Petition for Review on Certiorari filed by the petitioner Bank of the Philippine Islands (BPI) under Rule 45
of the Rules of Court, assailing the Court of Appeals (CA) July 14, 2005 Decision1 and the June 14, 2006 Resolution2 in
CA-G.R. CV No. 61764.

The Factual Antecedents

The present case arose from respondent Tarcila "Baby" Fernandez's (Tarcila) claim to her proportionate share in the
proceeds of four joint AND/OR accounts that the petitioner BPI released to her estranged husband Manuel G. Fernandez
(Manuel) without the presentation of the requisite certificates of deposit. The facts leading to this dispute are outlined
below.

In 1991, Tarcila together with her husband, Manuel and their children Monique Fernandez and Marco Fernandez, opened
the following AND/OR deposit accounts with the petitioner BPI, Shaw Blvd. Branch:chanRoblesvirtualLawlibrary

1) Peso Time Certificate of Deposit No. 2425545 issued on June 27, 1991 in the name(s) of Manuel G. Fernandez
Sr. or Baby Fernandez or Monique Fernandez in the amount of P1,684,661.40, with a term of 90 days and a
corresponding interest at 17.5% per annum;3

2) Peso Time Certificate of Deposit No. 2425556 issued on July 1, 1991 in the name(s) of Manuel G. Fernandez
Sr. or Marco Fernandez or Tarcila Fernandez, in the amount of P1,534,335.10, with a term of 92 days and interest
at 17.5% per annum;4

3) FCDU Time Certificate of Deposit No. 449059 issued on August 27, 1991 in the name(s) of Manuel or Tarcila
Fernandez in the amount of US$36,219.53, with a term of 30 days and interest at 5.3125% per annum;

4) Deposit under SA No. 3301-0145-61 issued on September 10, 1991 in the name(s) of Manuel Fernandez or Baby
Fernandez or Monique Fernandez in the amount of P11,369,800.78 with interest at 5% per annum.5

The deposits were subject to the following conditions:

"x x x
Pre-termination of deposits prior to maturity shall be subject to discretion of [BPI] and if pre-termination is allowed, it is
subject to an interest penalty to be determined on the date of pre-termination;ChanRoblesVirtualawlibrary

Endorsement and presentation of the Certificate of Deposit is necessary for the renewal or termination of the deposit"

On September 24, 1991, Tarcila went to the BPI Shaw Blvd. Branch to pre-terminate these joint AND/OR accounts. She
brought with her the certificates of time deposit and the passbook, and presented them to the bank. BPI, however,
refused the requested pre-termination despite Tarcila's presentation of the covering certificates. Instead, BPI, through its
branch manager, Mrs. Elma San Pedro Capistrano (Capistrano), insisted on contacting Manuel, alleging in this regard that
this is an integral part of its standard operating procedure.6

Shortly after Tarcila left the branch, Manuel arrived and likewise requested the pre-termination of the joint AND/OR
accounts.7 Manuel claimed that he had lost the same certificates of deposit that Tarcila had earlier brought with
her.8 BPI, through Capistrano, this time acceded to the pre-termination requests, blindly believed Manuel's claim,9 and
requested him to accomplish BPI's pro-forma affidavit of loss.10

Two days after, Manuel returned to BPI, Shaw Blvd. Branch to pre-terminate the joint AND/OR accounts. He was
accompanied by Atty. Hector Rodriguez, the respondent Dalmiro Sian (Sian), and two (2) alleged National Bureau of
Investigation (NBI) agents.

In place of the actual certificates of deposit, Manuel submitted BPI's pro-forma affidavit of loss that he previously
accomplished and an Indemnity Agreement that he and Sian executed on the same day. The Indemnity Agreement
discharged BPI from any liability in connection with the pre-termination.11Notably, none of the co-depositors were
contacted in carrying out these transactions.

On the same day, the proceeds released to Manuel were funneled to Sian's newly opened account with BPI. Immediately
thereafter, Capistrano requested Sian to sign blank withdrawal slips, which Manuel used to withdraw the funds from
Sian's newly opened account.12Sian's account, after its use, was closed on the same day.13

A few days after these transactions, Tarcila filed a petition for "Declaration of Nullity of Marriage, etc." against Manuel,
with the Regional Trial Court (RTC) of Pasig, docketed as JRDC No. 2098.14 Based on the records, this civil case has been
archived.15

Tarcila never received her proportionate share of the pre-terminated deposits,16 prompting her to demand from BPI the
amounts due her as a co-depositor in the joint AND/OR accounts. When her demands remained unheeded, Tarcila
initiated a complaint for damages with the Regional Trial Court (RTQ of Makati City, Branch 59, docketed as Civil Case No.
95-671.

In her complaint, Tarcila alleged that BPI's payments to Manuel of the pre-terminated deposits were invalid with respect
to her share.17She argued that BPI was in bad faith for allowing the pre-termination of the time deposits based on
Manuel's affidavit of loss when the bank had actual knowledge that the certificates of deposit were in her possession.18

In its answer, BPI alleged that the accounts contained conjugal funds that Manuel exclusively funded.19BPI further
argued that Tarcila could not ask for her share of the pre-terminated deposits because her share in the conjugal property
is considered inchoate until its dissolution.20 BPI further denied refusing Tarcila's request for pre-termination as it
processed her request but she left the branch before BPI could even contact Manuel.

BPI likewise filed a third-party complaint against Sian and Manuel on the basis of the Indemnity Agreement they had
previously executed. As summons against Manuel remained unserved,21 only BPI's complaint against Sian proceeded to
trial.

During the pre-trial, the parties admitted, among others, the conjugal nature of the funds deposited with BPI.
After trial on the merits, the RTC of Makati, Branch 59, ruled in favor of Tarcila and awarded her the following amounts:
1.) 1/2 of US$36,379.87; 2.) 1/3 of P11,3369,800.78; 3.) 1/3 of Php1,684,661.40; and 1/3 of P1,534,335.10. The RTC
likewise ordered BPI to pay Tarcila the amount of P50,000.00 representing exemplary damages and P500,000.00 as
attorney's fees.

In its decision,22 the RTC opined that the AND/OR nature of the accounts indicate an active solidarity that thus entitled
any of the account holders to demand from BPI payment of their proceeds. Since Tarcila made the first demand upon
BPI, payments should have been made to her23 under Article 1214 of the Civil Code, which provides:

"Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been
made by one of them, payment should be made to him."

The RTC did not find merit either in BPI's third-party complaint against Sian on the ground that he was merely coerced
into signing the Indemnity Agreement.24 BPI appealed the RTC ruling with the CA.