Case Summary (G.R. No. 160260)
Factual Background
Since 1986, respondent Myrna Dela Rosa-Ramos maintained a checking account with United Overseas Bank Philippines (formerly Associated Bank). She became acquainted with respondent Domingo Tan, a Signature Verifier of the Bank, who proposed a special arrangement beginning 1987: Tan would finance any overdrafts or checks exceeding the account balance for a fee, creating a financier-debtor relationship with Dela Rosa-Ramos. To secure repayment, she issued postdated checks to cover principal and interest. This arrangement continued until 1998.
Disputed Checks and Transactions
Four checks issued by Dela Rosa-Ramos to Tan were at the center of the dispute:
- Check No. 467322 (P200,000.00) originally dated August 28, 1987 but altered to May 8, 1988, which Tan deposited into William Co’s account without Dela Rosa-Ramos’s consent.
- Check No. 510290 (P232,500.00) dated June 10, 1988, issued as payment for cigarettes bought from Co; bounced and was replaced by a check and cash, but Tan redeposited the original bounced check into Co’s account.
- Check No. 613307 (P200,000.00), undated initially, later dated June 14, 1988 by Tan, dishonored for insufficient funds, but also redeposited into Co’s account without return to Dela Rosa-Ramos.
- Check No. 613306 (P290,595.00), undated and later dated July 4, 1988 by Tan. Although the account balance was insufficient at the time, a third-party check deposit allowed Tan to encash this check, but it was later found that the deposited check was unfunded.
Dela Rosa-Ramos denied authorizing the deposit of these checks into Co’s account and filed a complaint against Tan and the Bank, later including Co.
Procedural History and Decisions Below
The Regional Trial Court (RTC) rendered judgment on September 16, 1998, holding the Bank, Tan, and Co jointly and severally liable liable to pay P754,689.66, moral damages, exemplary damages, attorney’s fees, and costs. Co and the Bank appealed; Co’s appeal was dismissed for failure to file a brief. The Court of Appeals (CA) on February 14, 2003 affirmed the RTC decision with modifications: reducing liability to P521,989.00 and deleting awards for moral damages and attorney’s fees. The Bank’s motion for reconsideration was denied on October 2, 2003. The Bank then filed a Petition for Review before the Supreme Court.
Issues Raised by the Bank
The Bank contended that:
- The CA erred in holding the Bank, Tan, and Co jointly and severally liable without delineating respective obligations.
- There was no basis to hold the Bank liable for the altered Check No. 467322.
- The CA wrongly charged the Bank for Check No. 613307, which was dishonored and therefore should not have been debited.
- The Bank was improperly held liable for Check No. 613306 despite no manifest irregularity.
- The CA failed to rule on the Bank’s cross-claim against Tan.
Fiduciary Duty and Bank’s Liability
The Supreme Court reaffirmed the fiduciary relationship between banks and their depositors, emphasizing the Bank’s duty to exercise the highest degree of care and meticulousness in handling depositors’ accounts. Due to the fiduciary nature of this relationship, liability of the bank is primary and not merely vicarious, extending to the acts of its employees.
The Court noted that the irregular transactions resulting in Dela Rosa-Ramos’s losses were due to the Bank’s gross negligence or possible connivance of its employees, including Tan. The failure of multiple employees to detect or prevent these irregularities reflected the Bank’s laxity in hiring and supervising its officers and employees. The Court thus held that the Bank must be held liable for the losses.
Analysis of Specific Checks
Check No. 467322: The Court found the date was materially altered without the drawer’s countersignature, constituting an invalid alteration under the Negotiable Instruments Law. The Bank failed to reject this obviously altered check, showing negligence. The Bank’s liability for this check was upheld.
Check No. 613307: The Court agreed with the Bank that this check was dishonored due to insufficient funds and was never charged to Dela Rosa-Ramos’s account. Admission by Dela Rosa-Ramos that she had to issue a replacement check confirmed this. Therefore, the Bank cannot be held liable for this check.
Check No. 613306: The Court concurred with the CA that no manifest irregularity existed. The statement of accounts showed sufficient funds on the date processed considering the same-branch check deposit, which was considered as good as cash if properly funded. The Court found that Dela Rosa-Ramos failed to prove that the third-party depositor was fictitious or that the transaction was simulated. Thus, the Bank’s liability for this check was negated.
Apportionment of Liability and Contributory Negligence
Although the Bank failed in its duty, the Court recognized that Dela Rosa-Ramos was also guilty of contributory negligence by entering into a risky special arrangement with Tan. The doctrine applied is that where a bank and depositor are equally negligent, losses should be shared proportionately between them. Hence, the Bank
Case Syllabus (G.R. No. 160260)
Background and Procedural History
- The case is a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure, filed by Westmont Bank (now United Overseas Bank Philippines) against respondents Myrna Dela Rosa-Ramos, Domingo Tan, and William Co.
- It seeks partial review of the February 14, 2003 Decision and October 2, 2003 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 63983, which modified the decision of the Regional Trial Court (RTC), Branch 7, Manila, in Civil Case No. 89-47926.
- The RTC initially ruled in favor of Dela Rosa-Ramos, ordering the Bank, Tan, and Co to pay damages jointly and severally.
- On appeal, the CA affirmed the RTC decision but with modifications, including deletion of moral damages and attorney’s fees.
- Co failed to perfect his appeal and his case was dismissed.
- The Bank filed the petition with the Supreme Court challenging the CA ruling.
Factual Narrative and Relationship of Parties
Since 1986, Dela Rosa-Ramos maintained a checking/current account with the Bank at its Sto. Cristo Branch, Binondo, Manila.
Dela Rosa-Ramos developed a relationship with Domingo Tan, the Bank’s Signature Verifier, who offered a "special arrangement" to finance her overdrafts for a fee.
Tan agreed to inject funds into her account to prevent checks from bouncing, charging P50 per day for every P40,000 financed. This financier-debtor relationship lasted from 1987 to 1998.
To secure payment for the funds, Dela Rosa-Ramos issued postdated checks to Tan, covering principal and computed interest, as well as occasional cash payments.
Four specific checks were involved in the dispute:
Check No. 467322 for P200,000: Initially dated August 28, 1987, but altered to May 8, 1988. Tan deposited it into William Co’s account despite the alteration without Dela Rosa-Ramos’ consent.
Check No. 510290 for P232,500: Payment for cigarettes purchased from Co. The check bounced, was replaced by a "good customer" check and cash, but Tan redeposited the bounced check into Co’s account.
Check No. 613307 for P200,000: An undated guarantee check which Tan dated June 14, 1988. It was stopped for payment due to insufficient funds but was redeposited to Co’s account without return to Dela Rosa-Ramos.
Check No. 613306 for P290,595: Undated when given to Tan, later dated July 4, 1988 by him. Although her balance was insufficient, the deposit of an unconfirmed check from Lee See Bin for P170,000 was used to cover the amount, allowing Tan to encash and withdraw the entire amount.
Checks Nos. 510290 and 613307 were dishonored for insufficient funds.
Co admitted that the two dishonored checks were deposited to cover P432,500 in cash that Tan took from him.
Tan and Co coerced Dela Rosa-Ramos to issue a replacement check (No. 598648 for P432,500) to compensate for these dishonored checks under threat to expose her relationship with a married man.
Dela Rosa-Ramos filed a complaint against Tan and the Bank, later including Co, to recover P754,689.66 repres