SECOND DIVISION

[G.R. No. 202532. October 21, 2015.]

CHINA BANKING CORPORATION, petitioner, vs. DOLORES

PADILLA (DECEASED), ASSISTED BY HER SPOUSE, ROBERT
PADILLA; AND LOIDA BIRUNG, ASSISTED BY HER SPOUSE,
ARSENIO BIRUNG, respondents.

NOTICE

Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution
dated 21 October 2015 which reads as follows:
"G.R. No. 202532 — China Banking Corporation v. Dolores
Padilla (deceased), assisted by her Spouse, Robert Padilla; and
Loida Birung, assisted by her Spouse, Arsenio Birung.
This is a petition for review on certiorari seeking to reverse and set aside
the December 2, 2011 Decision 1 and the June 29, 2012 Resolution 2 of the
Court of Appeals (CA).
Respondents Dolores Padilla (Dolores) and Loida Birung (Loida) were
depositors of petitioner China Banking Corporation (CBC). They maintained a
joint account, with account number 164-011201-4 (CBC account), with CBC
Tuguegarao Branch.
Sometime in March 1997, Dolores and Loida issued a CBC check in the
amount of Seven Hundred Pesos (P700.00) in favor of Marivic Samonte
(Marivic). Curiously, the numerical figures were written as P700,000.00 for
some unknown reason. Taking advantage of the error, Marivic deposited the
check in her CBC account. The check was dishonored for the reason "drawn
against insufficient funds" because at the time of presentation, the CBC
account's outstanding balance was only P5,147.10.
Due to the check's dishonor, Marivic filed a criminal case for Estafa and
Violation of Batas Pambansa Bilang 22 against the respondents. They were
eventually dismissed.
On July 28, 1997, the respondents filed a complaint for damages against
CBC. They alleged that CBC failed to exercise the diligence required of banking
institutions which caused the filing of criminal charges against them. 3 Loida
testified that she and Dolores purchased imported canned goods and fruits
from Marivic. They issued a check, dated March 27, 1997, as payment. The
amount in numerical figures was for P700,000.00 but the amount written in
words was for P700.00 only. Dolores corroborated Loida's testimony and
further narrated that, at the time of her arrest, she immediately called CBC's
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 cashier Michael Yu (Yu), and inquired why she was being arrested inspite of
sufficient funds to cover for the check. After she posted bail for her arrest, Yu
readily admitted his mistake in posting the amount. 4
Winston Apalisoc, an Instructor at the St. Louis University and former
bank employee and officer of Rizal Commercial Banking Corporation, also took
the witness stand for the respondents. He testified that when there were
discrepancies in the checks presented to them, the procedure was to call up
the particular drawer to inform him or her about such discrepancy and
thereafter require his or her appearance in the bank to correct the same by
affixing his or her signature therein. 5
CBC, on the other hand, countered that it was never negligent in
dishonoring the check. Yu called Dolores to verify the amount of the check and
it was Dolores herself who confirmed that the amount was for P700,000.00,
and not P700.00. CBC's Vice-President, Atty. Roberto Uyquiengco, testified
that Yu underwent the necessary tests before he was hired and that, at the
time of the filing of the complaint, he was already terminated from office for
violation of bank policies. CBC's Operations Head, Rogie Tamayo, narrated that
he was the clearing assistant of CBC in March 1997. During that time, Yu
brought to his attention a check issued by the respondents which had a
discrepancy between the words and figures written therein. Yu relayed to him
the confirmation of Dolores through telephone as to the correct amount of the
check. CAIHTE

Yu executed an affidavit admitting that he caused the dishonor of the

check after calling Dolores to confirm the amount involved. He, however, was
never presented as witness for CBC as he already passed away. Neither was
Marivic called to the witness stand to clarify the true amount owed to her by
the respondents.
Ruling of the Regional Trial Court 6

The RTC ruled in favor of the respondents. It cited Section 17 (a) of the
Negotiable Instruments Law which provides:
Where the sum payable is expressed in words and also in figures
and there is a discrepancy between the two, the sum denoted by the
words is the sum payable, but if the words are ambiguous or uncertain,
reference maybe had to the figures to fix the amount.
The RTC was of the view that confirmation through telephone was not
enough considering the situation, not to mention the huge amount involved.
The degree of diligence required was more than that of a good father of a
family because the banking business was imbued with public interest. The law
imposed on banks a higher degree of obligation to treat the account of its
depositors with meticulous care, always bearing in mind the banking's
fiduciary nature. CBC could not evade responsibility for the negligence in the
check's dishonor, notwithstanding the series of tests and training conducted
by it. It could not evade responsibility for the negligence in the dishonor of the
check. 7 Thus, it disposed:
WHEREFORE, in view of the above considerations, judgment is
hereby rendered ordering the defendants to pay the following:
1. THREE HUNDRED THOUSAND (P300,000.00) PESOS to plaintiff
Dolores Padilla, through her heirs Roberto, Sr., Janice and
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 Dolores Padilla, through her heirs Roberto, Sr., Janice and
Roberto, Jr., all surnamed Padilla, as moral damages.
2. THREE HUNDRED THOUSAND (P300,000.00) PESOS to plaintiff
Loida Birung, as moral damages.
3. TWO HUNDRED THOUSAND (P200,000.00) PESOS to plaintiff
Loida Birung; and
4. ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS to
plaintiffs as attorney's fees.
SO ORDERED. 8

Aggrieved, CBC appealed before the CA arguing that Yu's act in calling
Dolores was the best way to ascertain the true amount of the check.
Considering that the check was intended as payment for jewelry, it was
highly probable that it could cost P700,000.00 and not P700.00. By ordinary
experience, the sum of P700.00 should have been paid in cash. There was no
basis for the civil liability because CBC exercised due diligence in the selection
and supervision of its employees. 9
Ruling of the Court of Appeals
The CA affirmed the RTC decision with modification.
The CA reasoned that CBC could not escape liability from Yu's negligent
act committed by Yu. Considering that its business was imbued with public
interest and that the relationship between it and its depositors is fiduciary in
nature, the diligence required is more than that of a good father of a family. 10
The CA disposed as follows:
WHEREFORE, in view of the foregoing, the assailed decision dated
January 6, 2009 in Civil Case No. 5179 of the Regional Trial Court,
Branch 4, Tuguegarao City, Cagayan, is hereby AFFIRMED with
MODIFICATION in that the award of moral damages is hereby REDUCED
to P50,000.00 each, while the award of exemplary damages is hereby
reduced to P30,000.00 each. The rest of the decision STAYS.
SO ORDERED. 11

Hence, this petition.

ISSUE
(1) Whether the CA misconstrued the provisions of Section 17 of the
Negotiable Instruments Law.
(2) Whether the CA misapplied the provisions of Article 2180 in relation
to Article 2176 of the New Civil Code.
CBC argues that Section 17 of the NIL is not absolute. It does not
prohibit the drawee bank, if it so chooses, to make a direct personal
confirmation with the drawer on the true and correct amount written in the
disputed check. While the drawee bank has the option to return the check to
the payee by reason of such discrepancy, no law exists, however, which
prevents the drawee from completing the transaction upon confirmation by
the drawer of the amount intended in the check. 12 The drawer need not be
required to appear before the drawee bank to countersign the erroneous
amount. Such procedure would necessarily destroy the very purpose for which
checks are used. They are deemed as convenient substitutes for money. 13 DETACa

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 On September 24, 2012, the Court issued a Resolution 14 (September 24
Resolution) requiring the respondents to file their comment. Atty. Ephraim Z.
Lasam (Atty. Lasam), counsel for respondents, however, failed to submit the
same. On April 3, 2013, another Resolution 15 (Show Cause Resolution) was
issued requiring Atty. Lasam to show cause why he should not be held in
contempt and also to submit the respondents' comment. Still, Atty. Lasam
failed to comply with the Show Cause Resolution. Hence, in the October 16,
2013 Resolution 16 (October 16 Resolution), the Third Division imposed a fine
of P1,000.00 upon him. He was again required to comply with the September
24 Resolution but to no avail. The registry return receipts corresponding to the
three notices of Resolution showed that said notices were delivered to Atty.
Lasam on March 18, 2013, June 14, 2013 and March 7, 2014, respectively.
On February 4, 2015, another Resolution 17 was issued, imposing an
additional fine of P1,000.00 and again requiring Atty. Lasam to comply with
the September 24, 2012 Resolution. To date, the respondents have not filed
their comment.
In view of the respondents' refusal to submit their comment, the Court
deems it proper to consider the petition as submitted for resolution.
The Court's Ruling
In its declaration of policy, the General Banking Law of 2000 requires of
banks the highest standards of integrity and performance. Needless to say, a
bank is under obligation to treat the accounts of its depositors with
meticulous care. 18
Time and again, the Court has stressed that banking business is so
impressed with public interest, where the trust and confidence of the public in
general is of paramount importance, such that the appropriate standard of
diligence must be very high, if not the highest degree of diligence. A bank's
liability as obligor is not merely vicarious but primary, wherein the defense of
exercise of due diligence in the selection and supervision of its employees is
unavailing. By the very nature of their duties, the degree of responsibility,
care and trustworthiness expected of their employees and officials are far
greater than those of ordinary clerks and employees. Banks are expected to
exercise the highest degree of diligence in the selection and supervision of
their employees. 19
Considering that banks can only act through their officers and
employees, the fiduciary obligation laid down for these institutions necessarily
extends to their employees. Thus, banks must ensure that their employees
observe the same high level of integrity and performance for it is only through
this that banks may meet and comply with their own fiduciary duty. Thus,
even if it is their employees who are negligent, the bank's responsibility to its
client remains paramount-making its liability to the same to be a direct one. 20
CBC insists that there is no better way to ascertain the true amount of
the check than the personal confirmation of the drawer, Dolores. 21 Although it
may be initially argued that Section 17 of the Negotiable Instruments Law
applies to this case, it is not absolute. CBC argues that if the drawer would
still be required to appear in the drawee bank simply to countersign the
erroneous amount of the check, such procedure would destroy the very
purpose for which checks are deemed as convenient substitutes for money. 22
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 CBC's arguments runs afoul with a bank's duty to exercise the highest
degree of diligence. Considering the amount involved in the check, it would
have been more prudent for CBC to call Dolores and require her to countersign
the check. Convenience cannot defeat the bank's paramount fiduciary
responsibility to its clients.
CBC failed to show convincing evidence that it had exercised the
diligence required by law. To stress, CBC merely presented Yu's affidavit which
stated that he called Dolores to verify the amount of the check. Further, it
appears that Yu was subsequently terminated in 1998 due to his unsound
banking practices. His infractions consisted of private lending and approving
encashment of unfunded checks. Worse, he failed to return unfunded in-
clearing checks in the amount of P700,000.00 despite availability of the
special clearing facility. 23
Neither was Marivic presented as a witness. As the payee and creditor,
she was in the best position to state the real amount of the check. Given the
fiduciary nature of its relation with the respondents, CBC should have exerted
more effort to safeguard and protect the integrity of its depositor's accounts
and transactions.
Thus, the Court finds no reason to disturb the factual findings of the RTC
and the CA. For Yu's failure to exercise the requisite diligence, CBC was
correspondingly negligent in the selection and supervision of its employees.
WHEREFORE, the petition is DENIED. (Carpio, J., on official leave;
Brion, J., designated Acting Chairperson, per Special Order No. 2222, and
Peralta, J., designated Acting Member, per Special Order No. 2223, both
dated September 29, 2015; Del Castillo, J., on official leave; Leonardo-de
Castro, designated Acting Member, per Special Order No. 2250, dated October
14, 2015)
SO ORDERED." aDSIHc

Very truly yours,

(SGD.) MA. LOURDES C. PERFECTO

Division Clerk of Court
Footnotes
1. Rollo pp. 10-40, penned by Associate Justice Remedios A. Salazar-Fernando with
Associate Justice Sesinando E. Villon and Associate Justice Amy Lazaro C.
Javier, concurring.

2. Id. at 157-158.
3. Id. at 161.

4. Id. at 163.
5. Id. at 164.
6. Id. at 161-170.

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 7. Id. at 169.
8. Id. at 170.

9. Id. at 180-185.
10. Id. at 150-152.

11. Id. at 154.

12. Id. at 58-59.
13. Id. at 61.

14. Id. at 195.

15. Id. at 200.

16. Id. at 215.
17. Id. at 230.
18. Philippine Savings Bank v. Chowking Food Corporation, 579 Phil. 589, 600
(2008).
19. Far East Bank and Trust Company v. Tentmakers Group , G.R. No. 171050, July
4, 2012, 675 SCRA 546, 556.
20. Westmont Bank v. Dela Rosa-Ramos, G.R. No. 160260, October 24, 2012, 684
SCRA 429, 437, 438.
21. Rollo, p. 59.
22. Id. at 61.

23. Id. at 142-143.

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