FACTS:

In this case, private respondent Benjamin C. Napiza deposited a Manager's Check in his Foreign Currency Deposit Unit (FCDU) Savings Account with petitioner Bank of the Philippine Islands (BPI). Napiza agreed to give Chan a blank withdrawal slip, with the understanding that they would both go to the bank to withdraw the amount once the check is cleared. However, Ruben Gayon Jr. was able to withdraw a higher amount using the blank withdrawal slip. BPI informed Napiza about the dishonor of the check, and his son, who worked in BPI, undertook to return the money but failed to do so within the given deadline. BPI then filed a complaint against Napiza for the recovery of the amount. Napiza admitted giving the blank withdrawal slip but argued that BPI was to blame for its employees' negligence or bad faith.

In another case, the petitioner is an indorser of a promissory note. The respondent, as the holder of the note, presented it for payment but it was dishonored. The respondent demanded payment from the petitioner as an indorser. The petitioner refused to pay, claiming that he cannot be held liable as an indorser since he did not receive any value from the respondent. The trial court ruled in favor of the respondent, holding the petitioner liable. The Court of Appeals affirmed the decision.

These two cases raise issues regarding the liability of a bank for the withdrawal made using a blank withdrawal slip and the liability of an indorser of a promissory note. The Supreme Court was asked to resolve these issues.

ISSUES:

1. Whether private respondent can be held liable as an indorser of the check or as an accommodation party.

2. Whether private respondent can be held liable for the amount of the check he deposited without considering the attending circumstances in the case.

3. Whether private respondent complied with the rules on withdrawal of deposits issued by petitioner bank.

4. Whether the typewritten name of "Ruben C. Gayon, Jr." on the withdrawal slip was valid and authorized.

5. Whether the presentation of the passbook and the requirement for an authority to withdraw was necessary for the withdrawal to be valid.

6. Whether private respondent became the outright owner of the amount stated in the check after depositing it with petitioner.

7. Whether the petitioner bank failed to exercise the diligence of a good father of a family in allowing the withdrawal of private respondent's deposit;

8. Whether the petitioner violated its own rules by allowing the withdrawal of an amount that exceeded the aggregate amount of private respondent's dollar deposits that had yet to be cleared;

9. Whether the negligence of petitioner's personnel was the proximate cause of the loss sustained by the petitioner.

RULING:

1. Private respondent may be held liable as an indorser of the check or as an accommodation party.

2. Holding private respondent liable for the amount of the check without considering the attending circumstances in the case would result in an injustice and erode public trust in the banking system.

3. Private respondent did not comply with the rules on withdrawal of deposits issued by petitioner bank.

4. The typewritten name of "Ruben C. Gayon, Jr." on the withdrawal slip was not valid and authorized.

5. The presentation of the passbook and the requirement for an authority to withdraw were necessary for the withdrawal to be valid.

6. Private respondent did not become the outright owner of the amount stated in the check after depositing it with petitioner.

7. Yes, the petitioner bank failed to exercise the diligence of a good father of a family in allowing the withdrawal of private respondent's deposit.

8. Yes, the petitioner violated its own rules by allowing the withdrawal of an amount that exceeded the aggregate amount of private respondent's dollar deposits that had yet to be cleared.

9. Yes, the negligence of petitioner's personnel was the proximate cause of the loss sustained by the petitioner.

PRINCIPLES:

• An indorser of a negotiable instrument who indorses without qualification is liable to pay the amount of the instrument to the holder or any subsequent indorser who may be compelled to pay it.

• An accommodation party is liable on the instrument to a holder for value, even if the holder knew the party to be only an accommodation party, but the accommodation party has the right to obtain reimbursement from the party accommodated.

• Compliance with the rules on withdrawal of deposits is necessary for the validity of the withdrawal.

• The banking business is affected with public interest.

• A bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.

• A bank should exercise its functions not only with the diligence of a good father of a family but also with the highest degree of care.

• The presenting bank has the duty to ascertain the genuineness of all prior endorsements.

• The drawee bank's paying the amount of the check or the check being cleared for deposit is necessary for crediting the amount in the depositor's account.

• Banks should adhere to normal or ordinary banking practices, especially when dealing with foreign banks and large amounts.

• Negligence is the omission to do something which a reasonable person would have done in the same situation. The test to determine negligence is whether the defendant used the reasonable care and caution that an ordinarily prudent person would have used in the same situation.

• The negligence of the bank's personnel, in allowing the withdrawal of an amount exceeding the deposit and not waiting for clearance, was the proximate cause of the loss.

• The proximate cause is the cause that, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred. The proximate cause of the loss sustained by the petitioner was the bank's personnel's negligence in allowing the withdrawal in disregard of its own rules and the clearing requirement in the banking system.