CASE BrieF NO. 2019-0028


“Banks are required to exercise the highest degree of diligence in its banking transactions.”


CASE: Bank of the Philippine Islands and Ana C.  Gonzales vs. Spouses Fernando V. Quiaoit and Nora L. Quiaoit [G.R. No. 199562, January 16, 2019]

PONENTE: Associate Justice Antonio T. Carpio

SUBJECT:

  1. TORTS AND DAMAGES:
    i. Doctrine of proximate cause
    ii. Doctrine of last clear chance
    iii. Moral damages
    iv. Attorney’s fees
    v. Exemplary damages
    vi. Degree of diligence in banking transactions

FACTS: Fernando V. Quiaoit (Fernando) maintains peso and dollar accounts with the Bank of the Philippine Islands (BPI) Greenhills-Crossroads Branch (BPI Greenhills). On 20 April 1999, Fernando, through Merlyn Lambayong (Lambayong), encashed BPI Greenhills Check No. 003434 for US$20,000. The dollar bills were handed to Lambayong inside an envelope and in bundles. Lambayong neither check nor count them.

In a complaint filed by Fernando and his wife Nora L. Quiaoit (Nora) against BPI, they alleged that Nora purchased plane tickets worth US$13,100 for their travel abroad, using part of the US$20,000 bills withdrawn from BPI.

On 22 April 1999, the spouses Quiaoit left the Philippines for Jerusalem and Europe. Nora handcarried US$6,900 during the tour. The spouses Quiaoit alleged that Nora was placed in a shameful and embarrassing situation when several banks in Madrid, Spain refused to exchange some of the US$100 bills because they were counterfeit. Nora was also threatened that she would be taken to the police station when she tried to purchase an item in a shop with the dollar bills. The spouses Quiaoit were also informed by their friends, a priest and a nun, that the US dollar bills they gave them were refused by third persons for being counterfeit. Their aunt, Elisa Galan (Galan) also returned, via DHL, the five US$100 bills they gave her and advised them that they were not accepted for deposit by foreign banks for being counterfeit.

The spouses Quiaoit alleged that BPI failed in its duty to ensure that the foreign currency bills it furnishes its clients are genuine. According to them, they suffered public embarrassment, humiliation, and possible imprisonment in a foreign country due to BPI’s negligence and bad faith.

BPI countered that it is the bank’s standing policy and part of its internal control to mark all dollar bills with “chapa” bearing the code of the branch when a foreign currency bill is exchanged or withdrawn. The dollar bills did not bear the identiying “chapa” from BPI Greenhills and as such, they came from another source.

The Regional Trial Court ruled in favor of the spouses Quiaoit. Accordingly, BPI and the bank manager, Nora Gonzales are ordered to pay jointly and severally the Spouses Quiaoit the following:

1. the amount of Four Thousand Four Hundred US Dollars (US$4,400) as and for actual damages;
2. the amount of Two Hundred Thousand Pesos (P200,000.00) as and for moral damages;
3. the amount of Fifty Thousand Pesos (P50,000.00) as and for exemplary damages;
4. the amount of Fifty Thousand Pesos (P50,000.00) as and for attorney’s fees.

The Court of Appeals affirmed the trial court’s Decision. According to the Court of Appeals, BPI had been negligent in not listing down the serial numbers of the dollar bills. The Court of Appeals further ruled that, assuming BPI had not been negligent, it had the last clear chance or the last opportunity to avert the injury incurred by the spouses Quiaoit abroad. The Court of Appeals ruled that BPI was the proximate, immediate, and efficient cause of the loss incurred by the spouses Quiaoit.

ISSUES:

A.   Whether BPI exercised due diligence in handling the withdrawal of the US dollar bills.

B.   What is “Proximate cause”?

C.   Whether the action of BPI is the proximate cause of the loss suffered by the spouses Quiaoit?

D.   What is the “Doctrine of last clear chance”?

E.   Whether the spouses Quiaoit are entitled to moral and exemplary damages and attorney’s fees?

RULING:

A.   BPI failed to exercise due diligence. In Spouses Carbonell v. Metropolitan Bank and Trust Company [G.R. No. 178467,26 April2017], the Court emphasized that the General Banking Act of 2000 demands of banks the highest standards of integrity and performance. The Court ruled that banks are under obligation to treat the accounts of their depositors with meticulous care. 

In this case, BPI failed to exercise the highest degree of diligence that is not only expected but required of a banking institution.

It was established that on 15 April 1999, Fernando informed BPI to prepare US$20,000 that he would withdraw from his account. The withdrawal, through encashment of BPI Greenhills Check No. 003434, was done five days later, or on 20 April 1999. BPI had ample opportunity to prepare the dollar bills. Since the dollar bills were handed to Lambayong inside an envelope and in bundles, Lambayong did not check them. However, as pointed out by the Court of Appeals, BPI could have listed down the serial numbers of the dollar bills and erased any doubt as to whether the counterfeit bills came from it. While BPI Greenhills marked the dollar bills with “chapa” to identify that they came from that branch, Lambayong was not informed of the markings and hence, she could not have checked if all the bills were marked.

BPI insists that there is no law requiring it to list down the serial numbers of the dollar bills. However, it is well-settled that the diligence required of banks is more than that of a good father of a family [Philippine National Bank v. Spouses Cheah 686 PhiL 760 (2012)]. Banks are required to exercise the highest degree of diligence in its banking transactions.In releasing the dollar bills without listing down their serial numbers, BPI failed to exercise the highest degree of care and diligence required of it. BPI exposed not only its client but also itself to the situation that led to this case. Had BPI listed down the serial numbers, BPI’s presentation of a copy of such listed serial numbers would establish whether the dollar bills came from BPI or not.

B.   Proximate cause is defined as the cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred. 

C.   The action of BPI is the proximate cause of the loss suffered by the spouses Quiaoit. Granting that Lambayong counted the two bundles of the US$100 bills she received from the bank, there was no way for her, or for the spouses Quiaoit, to determine whether the dollar bills were genuine or counterfeit. They did not have the expertise to verify the genuineness of the bills, and they were not informed about the “chapa” on the bills so that they could have checked the same. BPI cannot pass the burden on the spouses Quiaoit to verify the genuineness of the bills, even if they did not check or count the dollar bills in their possession while they were abroad.

D.   The Court has also applied the doctrine of last clear chance in banking transactions. In Allied Banking Corporation v. Bank of the Philippine Islands [705 Phil. 174 (2013)],  the Court explained:

The doctrine of last clear chance, stated broadly, is that the negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff’s negligence. The doctrine necessarily assumes negligence on the part of the defendant and contributory negligence on the part of the plaintiff, and does not apply except upon that assumption. Stated differently, the antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence. Moreover, in situations where the doctrine has been applied, it was defendant’s failure to exercise such ordinary care, having the last clear chance to avoid loss or injury, which was the proximate cause of the occurrence of such loss or injury. 

BPI had the last clear chance to prove that all the dollar bills it issued to the spouses Quiaoit were genuine and that the counterfeit bills did not come from it if only it listed down the serial numbers of the bills. BPI’s lapses in processing the transaction fall below the extraordinary diligence required of it as a banking institution. Hence, it must bear the consequences of its action.

E.   Respondents are entitled to moral damages and attorney’s fees but not exemplary damages.

We sustain the award of moral damages to the spouses Quiaoit.

In Pilipinas Bank v. Court of Appeals [304 Phil. 601 (1994)], the Court sustained the award of moral damages and explained that while the bank’s negligence may not have been attended with malice and bad faith, it caused serious anxiety, embarrassment, and humiliation to respondents. We apply the same in this case. In this case, it was established that the spouses Quiaoit suffered serious anxiety, embarrassment, humiliation, and even threats of being taken to police authorities for using counterfeit bills. Hence, they are entitled to the moral damages awarded by the trial court and the Court of Appeals.

Nevertheless, we delete the award of exemplary damages since it does not appear that BPI’s negligence was attended with malice and bad faith. We sustain the award of attorney’s fees because the spouses Quiaoit were forced to litigate to protect their rights.

Related Case BrieFs:
a. Spouses Carbonell v. Metropolitan Bank and Trust Company [G.R. No. 178467,26 April2017]
b. Philippine National Bank v. Spouses Cheah 686 PhiL 760 (2012)
c. Allied Banking Corporation v. Bank of the Philippine Islands [705 Phil. 174 (2013)]
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THINGS DECIDED:

A. Banks are required to exercise the highest degree of diligence in its banking transactions.
B. Proximate cause is defined as the cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury and without which the result would not have occurred.
C. The doctrine of last clear chance, stated broadly, is that the negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff’s negligence.

‘Stand by things decided’ ~ Stare Decisis


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