Bank negligent; damages awarded

G.R. No. 208293, December 10, 2014, PHILIPPINE NATIONAL BANK, PETITIONER, VS. CARMELITA S. SANTOS, REYME L. SANTOS, ANGEL L. SANTOS, NONENG S. DIANCO, ET AL., RESPONDENTS.

G.R. No. 208295, LINA B. AGUILAR, PETITIONER, VS. CARMELITA S. SANTOS, REYME L. SANTOS, ANGEL L. SANTOS, BUENVENIDO L. SANTOS, ET AL., RESPONDENTS.
(THE LAWYER’S POST)


"Petitioner PNB is a bank from which a degree of diligence higher than that of a good father of a family is expected. Petitioner PNB and its manager, petitioner Aguilar, failed to meet even the standard of diligence of a good father of a family. Their actions and inactions constitute gross negligence. It is for this reason that we sustain the trial court’s and the Court of Appeals’ rulings that petitioners PNB and Aguilar are solidarity liable with each other.⁠39."



“x x x.

The default standard of diligence in the performance of obligations is “diligence of a good father of a family.” Thus, the Civil Code provides:

ART. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care.

ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. (Emphasis supplied)
“Diligence of a good father of a family” is the standard of diligence expected of, among others, usufructuaries,⁠4 passengers of common carriers,⁠5 agents,⁠6 depositaries,⁠7 pledgees,⁠8 officious managers,⁠9 and persons deemed by law as responsible for the acts of others.⁠10 “The diligence of a good father of a family requires only that diligence which an ordinary prudent man would exercise with regard to his own property.”⁠11

Other industries, because of their nature, are bound by law to observe higher standards of diligence. Common carriers, for example, must observe “extraordinary diligence in the vigilance over the goods and for the safety of [their] passengers”⁠12 because it is considered a business affected with public interest. “Extraordinary diligence” with respect to passenger safety is further qualified as “carrying the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.”⁠13

Similar to common carriers, banking is a business that is impressed with public interest. It affects economies and plays a significant role in businesses and commerce.⁠14 The public reposes its faith and confidence upon banks, such that “even the humble wage-earner has not hesitated to entrust his life’s savings to the bank of his choice, knowing that they will be safe in its custody and will even earn some interest for him.”⁠15 This is why we have recognized the fiduciary nature of the banks’ functions, and attached a special standard of diligence for the exercise of their functions.

In Simex International (Manila), Inc. v. Court of Appeals,⁠16 this court described the nature of banks’ functions and the attitude expected of banks in handling their depositors’ accounts, thus:

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. . . .

The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.⁠17 (Emphasis supplied)
The fiduciary nature of banking is affirmed in Republic Act No. 8791 or The General Banking Law, thus:

SEC. 2. Declaration of Policy. — The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. (Emphasis supplied)


In The Consolidated Bank and Trust Corporation v. Court of Appeals,⁠18 this court explained the meaning of fiduciary relationship and the standard of diligence assumed by banks:

This fiduciary relationship means that the bank’s obligation to observe “high standards of integrity and performance” is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family.⁠19 (Emphasis supplied, citation omitted)
Petitioners PNB and Aguilar’s treatment of Angel C. Santos’ account is inconsistent with the high standard of diligence required of banks. They accepted Manimbo’s representations despite knowledge of the existence of circumstances that should have raised doubts on such representations. As a result, Angel C. Santos’ deposit was given to a person stranger to him.

Petitioner PNB pointed out that since petitioner Aguilar assumed office as PNB-Sta. Elena-Marikina City Branch Manager only five (5) years from Angel C. Santos’ death, she was not in the position to know that respondents were the heirs of Angel C. Santos.⁠20 She could not have accepted the unsigned and unnotarized extrajudicial settlement deed that respondents had first showed her.⁠21 She was not competent to make a conclusion whether that deed was genuine.⁠22 Neither could petitioners PNB and Aguilar pass judgment on a letter from respondents’ lawyer stating that respondents were the nine heirs of Angel C. Santos.⁠23

Petitioners PNB and Aguilar’s negligence is not based on their failure to accept respondents’ documents as evidence of their right to claim Angel C. Santos’ deposit. Rather, it is based on their failure to exercise the diligence required of banks when they accepted the fraudulent representations of Manimbo.

Petitioners PNB and Aguilar disregarded their own requirements for the release of the deposit to persons claiming to be heirs of a deceased depositor. When respondents asked for the release of Angel C. Santos’ deposit, they were required to present the following: “(1) original or certified true copy of the Death Certificate of Angel C. Santos; (2) certificate of payment of, or exemption from, estate tax issued by the Bureau of Internal Revenue (BIR); (3) Deed of Extrajudicial Settlement; (4) Publisher’s Affidavit of publication of the Deed of Extrajudicial Settlement; and (5) Surety bond effective for two (2) years and in an amount equal to the balance of the deposit to be withdrawn.”⁠24

Petitioners PNB and Aguilar, however, accepted Manimbo’s representations, and they released Angel C. Santos’ deposit based on only the following documents:

1. Death certificate of Angel C. Santos;

2. Birth certificate of Reyme L. Santos;

3. Affidavit of self-adjudication of Reyme L. Santos;

4. Affidavit of publication;

5. Special power of attorney that Reyme L. Santos executed in favor of Bernardito Manimbo and Angel P. Santos;

6. Personal items of Angel C. Santos, such as photocopies or originals of passport, residence certificate for year 1990, SSS I.D., etc.;

7. Surety good for two (2) years; and

8. Certificate of Time Deposit No. 341306.⁠25

Based on these enumerations, petitioners PNB and Aguilar either have no fixed standards for the release of their deceased clients’ deposits or they have standards that they disregard for convenience, favor, or upon exercise of discretion. Both are inconsistent with the required diligence of banks. These threaten the safety of the depositors’ accounts as they provide avenues for fraudulent practices by third persons or by bank officers themselves.

In this case, petitioners PNB and Aguilar released Angel C. Santos’ deposit to Manimbo without having been presented the BIR-issued certificate of payment of, or exception from, estate tax. This is a legal requirement before the deposit of a decedent is released. Presidential Decree No. 1158,⁠26 the tax code applicable when Angel C. Santos died in 1991, provides:

SEC. 118. Payment of tax antecedent to the transfer of shares, bonds, or rights. — There shall not be transferred to any new owner in the books of any corporation,sociedad anonima, partnership, business, or industry organized or established in the Philippines, any shares, obligations, bonds or rights by way of gift inter vivos ormortis causa, legacy, or inheritance unless a certification from the Commissioner that the taxes fixed in this Title and due thereon have been paid is shown.

If a bank has knowledge of the death of a person who maintained a hank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid; Provided, however, That the administrator of the estate or any one of the heirs of the decedent may upon authorization by the Commissioner of Internal Revenue, withdraw an amount not exceeding P10,000 without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors.⁠27 (Emphasis supplied)
This provision was reproduced in Section 97 of the 1997 National Internal Revenue Code, thus:

SEC. 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights. — There shall not be transferred to any new owner in the books of any corporation, sociedad anonima, partnership, business, or industry organized or established in the Philippines any share, obligation, bond or right by way of gift inter vivos or mortis causa, legacy or inheritance, unless a certification from the Commissioner that the taxes fixed in this Title and due thereon have been paid is shown.

If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid: Provided, however, That the administrator of the estate or any one (1) of the heirs of the decedent may, upon authorization by the Commissioner, withdraw an amount not exceeding Twenty thousand pesos (P20,000) without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors. (Emphasis supplied)
Taxes are created primarily to generate revenues for the maintenance of the government. However, this particular tax may also serve as guard against the release of deposits to persons who have no sufficient and valid claim over the deposits. Based on the assumption that only those with sufficient and valid claim to the deposit will pay the taxes for it, requiring the certificate from the BIR increases the chance that the deposit will be released only to them.

In their compulsory counterclaim,⁠28 petitioners PNB and Aguilar claimed that Manimbo presented a certificate of payment of estate tax.⁠29 During trial, however, it turned out that this certificate was instead an authority to accept payment, which is not the certificate required for the release of bank deposits.⁠30 It appears that Manimbo was not even required to submit the BIR certificate⁠31. He, thus, failed to present such certificate. Petitioners PNB and Aguilar provided no satisfactory explanation why Angel C. Santos’ deposit was released without it.

Petitioners PNB and Aguilar’s negligence is also clear when they accepted as bases for the release of the deposit to Manimbo: (a) a mere photocopy of Angel C. Santos’ death certificate;⁠32 (b) the falsified affidavit of self-adjudication and special power of attorney purportedly executed by Reyme L. Santos;⁠33 and (c) the certificate of time deposit.⁠34

Petitioner Aguilar was aware that there were other claimants to Angel C. Santos’ deposit. Respondents had already communicated with petitioner Aguilar regarding Angel C. Santos’ account before Manimbo appeared. Petitioner Aguilar even gave respondents the updated passbook of Angel C. Santos’ account.⁠35 Yet, petitioners PNB and Aguilar did not think twice before they released the deposit to Manimbo. They did not doubt why no original death certificate could be submitted. They did not doubt why Reyme L. Santos would execute an affidavit of self-adjudication when he, together with others, had previously asked for the release of Angel C. Santos’ deposit. They also relied on the certificate of time deposit and on Manimbo’s representation that the passbook was lost when the passbook had just been previously presented to Aguilar for updating.⁠36

During the trial, petitioner PNB’s counsel only reasoned that the photocopy of the death certificate was also submitted with other documents, which led him to no other conclusion than that Angel C. Santos was already dead.⁠37 On petitioners PNB and Aguilar’s reliance special power of attorney allegedly executed by Reyme L. Santos, Aguilar admitted that she did not contact Reyme L. Santos for verification. Her reason was that Reyme L. Santos was not their client. Therefore, they had no obligation to do so.⁠38

Given the circumstances, “diligence of a good father of a family” would have required petitioners PNB and Aguilar to verify. A prudent man would have inquired why Reyme L. Santos would issue an affidavit of self-adjudication when others had also claimed to be heirs of Angel C. Santos. Contrary to petitioner Aguilar’s reasoning, the fact that Reyme L. Santos was not petitioner PNB’s client should have moved her to take measures to ensure the veracity of Manimbo’s documents and representations. This is because she had no previous knowledge of Reyme L. Santos his representatives, and his signature.

Petitioner PNB is a bank from which a degree of diligence higher than that of a good father of a family is expected. Petitioner PNB and its manager, petitioner Aguilar, failed to meet even the standard of diligence of a good father of a family. Their actions and inactions constitute gross negligence. It is for this reason that we sustain the trial court’s and the Court of Appeals’ rulings that petitioners PNB and Aguilar are solidarity liable with each other.⁠39

For the same reason, we sustain the award for moral damages. Petitioners PNB and Aguilar’s gross negligence deprived Angel C. Santos’ heirs what is rightfully theirs. Respondents also testified that they experienced anger and embarrassment when petitioners PNB and Aguilar refused to release Angel C. Santos’ deposit.⁠40 “The bank’s negligence was the result of lack of due care and caution required of managers and employees of a firm engaged in so sensitive and demanding business as banking.”⁠41

Exemplary damages should also be awarded. “The law allows the grant of exemplary damages by way of example for the public good. The public relies on the banks’ sworn profession of diligence and meticulousness in giving irreproachable service. The level of meticulousness must be maintained at all times by the banking sector.”⁠42

Since exemplary damages are awarded and since respondents were compelled to litigate to protect their interests,⁠43 the award of attorney’s fees is also proper.

The Court of Appeals’ award of interest should be modified to 12% from demand on April 26, 1998 until June 30, 2013, and 6% from July 1, 2013 until fully paid. InNacar v. Gallery Frames:⁠44

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money. . . shall no longer be twelve percent (12%) per annum. . . but will now be six percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that. . . the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.

….

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand. . .

….

1. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.⁠45

WHEREFORE, the Court of Appeals’ decision dated July 25, 2013 is AFFIRMED with the MODIFICATIONS in that petitioners Philippine National Bank and Lina B. Aguilar are ordered solidarity liable to pay respondents P100,000.00 as exemplary damages. Further, the interest rate for the amount of P1,882,002.05, representing the face value of PNB Manager’s Check No. AF-974686B is modified to 12% from April 26, 1998 until June 30, 2013, and 6% from July 1, 2013 until satisfaction. All monetary awards shall then earn interest at the rate of 6% per annum from finality of the decision until full satisfaction.

SO ORDERED.



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