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BANK OF PHILIPPINE ISLANDS v. CENTRAL BANK OF PHILIPPINES

FACTS:

The Bank of the Philippine Islands (BPI) discovered an irregular charging of its demand deposit account amounting to P9 million. It was revealed that there was a criminal syndicate operating within the Central Bank of the Philippines (CBP) Clearing Division, which perpetrated the "pilferage scheme." The scheme involved the pilfering of "out-of-town" checks, tampering of banking documents, and withdrawal of funds through checks deposited with Citibank and drawn against BPI. The CBP bookkeeper and janitor-messenger intercepted and pilfered the BPI checks and tampered with the clearing documents to conceal the scheme. The altered documents were not included in the clearing envelope sent to BPI, and Citibank allowed the withdrawal of the checks. The fraud led to the conviction of the perpetrators by the Sandiganbayan.

BPI filed a complaint against CBP for the bank fraud. CBP denied liability and requested the return of the partial amount credited to BPI's account. CBP also filed a third-party complaint against Citibank, claiming negligence. The Regional Trial Court held CBP liable and ordered the credit of the remaining amount to BPI's account. The Court of Appeals reversed the decision, stating that CBP cannot be held liable for the actions of its employees. BPI filed a Petition for Review before the Supreme Court, raising various issues, including whether CBP can be sued for its governmental or proprietary functions, whether CBP exercised diligence in supervising its employees, and whether Citibank should bear the damage.

BPI argued that CBP should be held liable as a corporate entity for the acts of its employees and that CBP's function in operating clearing house facilities is proprietary. BPI also asserted that CBP can be sued under the Central Bank Act without any qualification. BPI further contended that CBP did not exercise sufficient diligence in supervising its employees and refused to credit the remaining amount to BPI's account. Respondent Citibank supported BPI's contention, claiming that CBP waived its non-suability by filing a third-party complaint. Citibank also argued that CBP's provision of clearing facilities and collection of fees make it vulnerable to suit and that CBP's employees were the proximate cause of BPI's defraudation.

ISSUES:

  1. Whether the Central Bank of the Philippines (CBP) can be sued under Section 4 of Republic Act No. 265 (RA 265).

  2. Whether CBP waived its non-suability by filing a third-party complaint against Citibank.

  3. Whether CBP can be held liable for the fraudulent acts of its employees.

  4. Whether Citibank can be held liable for negligence in the performance of its duties.

  5. Whether CBP can invoke Central Bank Circular No. 580, Series of 1977.

  6. Whether CBP exercised the required diligence in supervising its employees.

  7. Whether or not the Central Bank of the Philippines (CBP) can be held liable for the bank fraud committed by its employees.

  8. Whether the Central Bank of the Philippines (CBP) is authorized to establish clearing house facilities for regional checks.

  9. Whether CBP is liable for the torts committed by its employees.

  10. Whether the employer, CBP, is liable for the damages caused by its employees' acts.

  11. Whether Citibank is liable as the collecting bank.

RULING:

  1. CBP can be sued under Section 4 of RA 265.

  2. CBP did not waive its non-suability by filing a third-party complaint against Citibank.

  3. CBP cannot be held liable for the fraudulent acts of its employees.

  4. Citibank cannot be held liable for negligence in the performance of its duties.

  5. CBP cannot invoke Central Bank Circular No. 580, Series of 1977.

  6. CBP failed to exercise the required diligence in supervising its employees.

  7. CBP cannot be held liable for the bank fraud committed by its employees. The employees were not acting within the scope of their duties when they committed the fraud. Additionally, CBP has proven that it exercised proper diligence in the selection and supervision of its employees.

  8. CBP is authorized to establish clearing house facilities for regional checks. The establishment of clearing house facilities for member banks is a necessary incident to CBP's primary governmental function of administering the monetary, banking, and credit system of the Philippines. The subsequent privatization of the clearing of checks did not negate CBP's duty to establish nationwide facilities for interbank clearing.

  9. CBP is not liable for the torts committed by its employees, Valentino and Estacio. The liability of the State in performing its governmental functions is limited to the tortious acts of its special agents. Valentino and Estacio, being regular employees performing tasks pertaining to their offices, are not considered as special agents. Therefore, CBP cannot be held liable for any damage caused by their unlawful acts. Additionally, even if CBP is considered an ordinary employer, it still cannot be held liable because Valentino and Estacio acted beyond the scope of their duties.

  10. CBP is not liable for the damages caused by its employees' acts. The fraudulent acts of tampering with and pilfering of documents were not in furtherance of CBP's interests and were unauthorized and unlawful. The burden is on the petitioner BPI to prove that the fraudulent acts were performed within the scope of the employees' assigned tasks, which it failed to do. Thus, the damages caused by the employees' acts are their own personal liabilities and cannot be imputed to CBP as their employer.

  11. Citibank is not liable as the collecting bank. The subject checks were not returned to Citibank before the lapse of the clearing period. Therefore, Citibank acted within its authority in allowing the withdrawal of the checks without any notice of dishonor from petitioner BPI. The remedy for petitioner BPI lies against the parties responsible for tampering with and pilfering the checks and other bank documents.

PRINCIPLES:

  • The State may be sued when it consents to be sued, but it does not necessarily concede its liability (Article 1280 of the Civil Code).

  • CBP, in its performance of governmental functions, may be held liable only for tort committed by its employees when it acts through a special agent (Article 2180 of the Civil Code).

  • CBP cannot be held liable for damages caused by the alleged tortuous acts of its officers and employees.

  • Citibank, as the sending bank, cannot be held liable for loss or damage arising from theft, pilferage, or other causes affecting items in transit.

  • CBP is duty-bound to use its powers to achieve its objectives, primarily to maintain the monetary value of the peso and foster a balanced growth of the economy.

  • The principle of state immunity provides that a state may not be sued without its consent unless it expressly or impliedly waives its immunity.

  • The question of suability of government agencies depends on whether the agency is incorporated or unincorporated. An incorporated agency has separate juridical personality and can be sued if its charter explicitly grants it the authority to sue and be sued.

  • CBP, being a government corporation with a separate juridical personality, can be sued because its charter explicitly grants it the authority to sue and be sued.

  • CBP's function as the central monetary authority is a purely governmental function, and its main duty is to administer the monetary, banking, and credit system of the Philippines.

  • CBP has the responsibility to maintain internal and external monetary stability in the country and to foster monetary, credit, and exchange conditions conducive to a balanced and sustainable growth of the economy.

  • The Central Bank of the Philippines (CBP) is authorized to establish clearing house facilities for regional checks as part of its governmental function of administering the monetary, banking, and credit system of the Philippines.

  • CBP is not immune from suit as its Charter expressly waived its immunity, but this does not automatically imply liability.

  • The liability of the State in performing its governmental functions is limited to the tortious acts of its special agents.

  • An employer is liable for the damages caused by its employees acting within the scope of their assigned tasks, whether the employer is engaged in business or industry or not.

  • An employer is liable for the damages caused by its employees acting within the scope of their assigned tasks.

  • A public officer is personally liable for acts done without or in excess of jurisdiction and such liability cannot be imputed to the State.

  • A collecting bank is not liable if the checks were not returned within the clearing period and there was no notice of dishonor from the drawee bank.