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CONSOLIDATED BANK v. CA

FACTS:

L.C. Diaz, a professional partnership engaged in accounting, opened a savings account with Solidbank in March 1976. On August 14, 1991, L.C. Diaz's cashier deposited cash and checks with Solidbank through their messenger. When the messenger went back to retrieve the passbook, he was informed that it had already been taken by someone else. The cashier then prepared another deposit slip and went to Solidbank with the messenger. Teller No. 6 acknowledged the deposit but provided a deposit slip for a closed check. L.C. Diaz discovered the unauthorized withdrawal of P300,000 the following day and filed charges against their messenger and another person. L.C. Diaz demanded the return of their money from Solidbank, which refused. L.C. Diaz filed a complaint for recovery of a sum of money against Solidbank, but the trial court absolved Solidbank of any liability. The Court of Appeals reversed the trial court's decision, deleting the award of exemplary damages and attorney's fees. The Court of Appeals found Solidbank liable for the damages incurred by L.C. Diaz due to its negligence in the selection and supervision of its employees and its violation of its fiduciary duty to L.C. Diaz.

ISSUES:

  1. Whether Solidbank should be held liable for allowing the withdrawal of P300,000 from L.C. Diaz's savings account without first calling the depositor.

  2. Whether the doctrine of last clear chance should be applicable in determining the liability of Solidbank.

  3. Whether the case is a last-ditch effort of L.C. Diaz to recover the P300,000.

  4. Whether the damages awarded against Solidbank should be mitigated under Article 2197 of the Civil Code.

  5. Whether the relationship between a bank and its depositor is a loan or a trust agreement

  6. Whether the bank is liable for breach of its contractual obligation to return the passbook only to the authorized representative of the depositor

  7. Whether L.C. Diaz's negligence or the bank teller's negligence was the proximate cause of the unauthorized withdrawal

  8. Whether Solidbank's failure to return the passbook to Calapre was the proximate cause of the unauthorized withdrawal.

  9. Whether Solidbank had the duty to call up L.C. Diaz to confirm the withdrawal.

  10. Whether Solidbank's reliance on the statements of Emerano Ilagan is sufficient to attribute the withdrawal to him.

  11. Whether the doctrine of last clear chance applies in this case.

  12. Whether the depositor is guilty of contributory negligence.

  13. Whether the damages should be allocated between the depositor and the bank.

RULING:

  1. Solidbank is liable for breach of contract due to negligence. The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. The law imposes on banks high standards of integrity and performance due to the fiduciary nature of banking. In this case, Solidbank failed to observe the required diligence in servicing its depositor, thus breaching its contractual obligation. The absence of an agreement or banking law mandating a call to the depositor before allowing a withdrawal does not absolve Solidbank from its fiduciary duty.

  2. The doctrine of last clear chance is not applicable in this case. The Court of Appeals erred in applying this doctrine. The genuine signatures of L.C. Diaz on the withdrawal slip and the presentation of the passbook establish that Solidbank did not have the last opportunity to withhold the withdrawal. It was L.C. Diaz's negligence in the selection and supervision of its messenger, as well as in the safekeeping of its financial documents, that contributed to the loss.

  3. The case is not a last-ditch effort of L.C. Diaz to recover the P300,000. The Court of Appeals erred in not finding this as such. It is within L.C. Diaz's right to seek recovery from Solidbank as it was the bank's negligence that led to the unauthorized withdrawal.

  4. The damages awarded against Solidbank need not be mitigated under Article 2197 of the Civil Code. The Court affirmed the findings of the Court of Appeals that Solidbank's negligence was only contributory and not gross. Therefore, Article 2197, which refers to cases of contributory negligence, does not apply.

  5. The relationship between a bank and its depositor is a loan, not a trust agreement. The failure of the bank to pay the depositor is a failure to pay a simple loan, not a breach of trust. A higher standard of integrity and performance is imposed on banks in complying with their obligations under the contract of a simple loan.

  6. The bank is liable for breach of its contractual obligation to return the passbook only to the authorized representative of the depositor. Solidbank failed to exercise a high degree of diligence in safeguarding the passbook and ensuring its return to the authorized party. The bank's negligence in not returning the passbook to the depositor or his authorized representative constitutes a breach of the savings deposit agreement.

  7. Neither L.C. Diaz's negligence nor the bank teller's negligence was the proximate cause of the unauthorized withdrawal. L.C. Diaz was not at fault for the passbook landing in the hands of the impostor. Solidbank, as the possessor of the passbook during the processing of the deposit, had the contractual obligation to return it only to the authorized representative. The proximate cause of the unauthorized withdrawal cannot be attributed to either L.C. Diaz or the bank teller.

  8. Solidbank's failure to return the passbook to Calapre was the proximate cause of the unauthorized withdrawal. Solidbank's negligence in not returning the passbook to Calapre allowed an impostor to withdraw the funds through the presumption of ownership raised by the possession of the passbook.

  9. Solidbank did not have the duty to call up L.C. Diaz to confirm the withdrawal. There was no arrangement between Solidbank and L.C. Diaz that required such verification. L.C. Diaz had the burden to prove that it was the usual practice of Solidbank to call up its clients for verification, which it failed to do. Thus, Solidbank was not negligent in this regard.

  10. The trial and appellate courts found that a certain Noel Tamayo withdrew the funds, and there is no justifiable reason to reverse this factual finding. Solidbank's reliance on the statements of Emerano Ilagan does not conclusively establish that he made the withdrawal, as the entry quoted does not categorically state that Ilagan presented the withdrawal slip and the passbook.

  11. The doctrine of last clear chance does not apply in this case. Solidbank is liable for breach of contract due to negligence, and the contributory negligence or last clear chance by L.C. Diaz does not exculpate Solidbank from its breach of contract. The doctrine of last clear chance is not applicable to cases of culpa contractual.

  12. Yes, the depositor is guilty of contributory negligence.

  13. The damages should be allocated between the depositor and the bank on a 40-60 ratio.

PRINCIPLES:

  • The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family.

  • The contract between a bank and its depositor is governed by the provisions of the Civil Code on simple loan.

  • The absence of an express or implied trust agreement does not convert a bank-depositor relationship into a trust agreement.

  • Banks are required to observe high standards of integrity and performance in servicing their depositors. This obligation is deemed written into every deposit agreement.

  • The degree of diligence required of a bank is that prescribed by law or contract, or in the absence thereof, the diligence of a good father of a family.

  • The relationship between a bank and its depositor is a loan, not a trust agreement.

  • The bank is held to a higher standard of integrity and performance in complying with its obligations under the contract of a simple loan.

  • Banks are not obligated to enrich depositors but to earn money for themselves.

  • The interest spread or differential belongs to the bank and not to the depositors.

  • In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption that the defendant was at fault or negligent.

  • The burden is on the defendant to prove that he was not at fault or negligent in culpa contractual.

  • The bank is liable for breach of its contractual obligation to return the passbook only to the authorized representative of the depositor.

  • The bank's negligence in not returning the passbook to the authorized party constitutes a breach of the savings deposit agreement.

  • The bank is bound by the negligence of its employees under the principle of respondeat superior.

  • The defense of exercising the required diligence in the selection and supervision of employees is not a complete defense in culpa contractual.

  • Proximate cause is determined by the facts of each case upon mixed considerations of logic, common sense, policy, and precedent.

  • The proximate cause of the unauthorized withdrawal cannot be attributed to either L.C. Diaz or the bank teller.

  • The negligent act of a party that is appreciably later than that of the other may be the proximate cause of the loss. (Doctrine of Proximate Cause)

  • The duty of a bank to verify a withdrawal by calling up its client may not be imposed unless there is an arrangement or practice that directs such verification. (Duty of Verification)

  • Factual findings of the trial and appellate courts are generally upheld and respected by the Supreme Court. (Rule on Factual Findings)

  • The doctrine of last clear chance does not apply in cases of culpa contractual. (Doctrine of Last Clear Chance)

  • Liability for culpa contractual may be regulated by the courts based on the circumstances, and damages may be reduced if the plaintiff is guilty of contributory negligence. (Mitigated Damages)

  • Contributory negligence refers to the negligence of the plaintiff which, combined with the negligence of the defendant, contributes to the injury or damage suffered by the plaintiff.

  • Damages may be apportioned between the parties involved in a negligence case based on their respective degrees of fault.

  • The court has the power to modify the decision of a lower court, including the allocation of damages.