CHINA BANK V. LAGON (G.R. NO.

160843)
Facts:
Jao asked for a credit accommodation from petitioner bank to be secured by a
parcel of land in the name of Maria Lago, as authorized by a SPA. Jao obtained
more various loans on the same line, all of which were secured by mortgage
over the lots of Maria Lago again allegedly through a SPA. The loans matured
but were unpaid and petitioner bank moved for the extra-judicial foreclosure
of the said properties but were prevented by a TRO of the court. During the
pendency of the case, Jao and Maria Lagon died. The court then rendered a
decision in favor of petitioner bank finding that the signatures in the SPA were
authentic. CA reversed the decision and declared the SPA and mortagages
null and void.
Issue:
Whether or not petitioner bank exercised due diligence in extending the loan
to Jao.
Ruling: NO.
Moreover, petitioner could not be considered a mortgagee in good faith. It
had knowledge that respondent was in the United States at the time the SPAs
were allegedly executed, yet, it did not question their due execution. Though
petitioner is not expected to conduct an exhaustive investigation on the
history of the mortgagor’s title, it cannot be excused from the duty of
exercising the due diligence required of a banking institution. Banks are
expected to exercise more care and prudence than private individuals in their
dealings, even those that involve registered lands, for their business is
affected with public interest.

CITIBANK vs SPOUSES
CABAMONGAN G.R. No. 146918, May
2, 2006
MARCH 16, 2014LEAVE A COMMENT
A bank is ‘bound to know the signatures of its customers; and if it
pays a forged check, it must be considered as making the
payment out of its own funds, and cannot ordinarily charge the
amount so paid to the account of the depositor whose name was
forged.[45]Such principle equally applies here. The time deposit
subject matter of herein petition is a simple loan.The provisions
of the New Civil Code on simple loan govern the contract between
a bank and its depositor. Specifically, Article 1980 thereof
categorically provides that ‘. . . savings . . . deposits of money in
banks and similar institutions shall be governed by the provisions
concerning simple loan. Thus, the relationship between a bank
and its depositor is that of a debtor-creditor, the depositor being
the creditor as it lends the bank money, and the bank is the
debtor which agrees to pay the depositor on demand.
Facts: Souses Cabamongan opened a joint and/or foreign currency time
deposit in favor of their two children with Citibank. On When she left
with the money, she left an identification card. The account officer
then called up the address. The spouses and their family knew of the
incident. They were presently residing in the US and there was a prior
incident wherein they got robbed in their house, with jewelry box, a the
bank certificate and cards stolen. Subsequently, a person who claimed
to be Carmelita sought the pre-termination of the account. She
presented identification cards to ascertain her identity to the then
account officer. The the person withdrew all the proceeds from the
dollar account.

Spouses made several demands for the return of the amount but Citibank
refused to do so. Subsequently, Citibank, thru a new counsel, contended
that assuming that it was negligent, the Cabamongan spouses were guilty
of contributory negligence since they failed to notify Citibank that they
had migrated to the United States and were residents thereat and after
having been victims of a burglary, they should have immediately assessed
their loss and informed Citibank of the disappearance of the bank
certificate, their passports and other identification cards, then the fraud
would not have been perpetuated and the losses avoided.It further argues
that since the Cabamongan spouses are guilty of contributory negligence,
the doctrine of last clear chance is inapplicable.
Issue: Whether or not City Bank is negligent in letting the
person withdraw all the funds from the dollar account.

Held: Citibank was negligent. First, the “depositor” didn’t present the
Certificate of Deposit. Second, from the internal memorandum issued by
the Account Officer, he admitted to the fact that the specimen signature
was different from the one who misrepresented herself as Carmelita.
Third, the bank kept in its records pictures of its depositors. It is
inconceivable how the bank was duped by an impostor. As to the second
ground, Citibank argues that the Cabamongan spouses are not entitled to
moral damages since moral damages can be awarded only in cases of
breach of contract where the bank has acted willfully, fraudulently or in
bad faith. It submits that it has not been shown in this case that Citibank
acted willfully, fraudulently or in bad faith and mere negligence, even if
the Cabamongan spouses suffered mental anguish or serious anxiety on
account thereof, is not a ground for awarding moral damages.
In this case, it has been sufficiently shown that the signatures of Carmelita
in the forms forpretermination of deposits are forgeries.Citibank, with its
signature verification procedure, failed to detect the forgery.Its negligence
consisted in the omission of that degree of diligence required of
banks. The Court has held that a bank is ‘bound to know the signatures of
its customers; and if it pays a forged check, it must be considered as
making the payment out of its own funds, and cannot ordinarily charge
the amount so paid to the account of the depositor whose name was
forged. Such principle equally applies here. The time deposit subject
matter of herein petition is a simple loan.The provisions of the New Civil
Code on simple loan govern the contract between a bank and its
depositor. Specifically, Article 1980 thereof categorically provides that
‘. . . savings . . . deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan. Thus, the
relationship between a bank and its depositor is that of a debtor-creditor,
the depositor being the creditor as it lends the bank money, and the bank
is the debtor which agrees to pay the depositor on demand. As to moral
damages, in culpa contractual or breach of contract, as in the case before
the Court, moral damages are recoverable only if the defendant has acted
fraudulently or in bad faith, or is found guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual
obligations. The act of Citibank’s employee in allowing
the pretermination of Cabamonganspouses’ account despite the noted
discrepancies in Carmelita’s signature and photograph, the absence of the
original certificate of time deposit and the lack of notarized waiver
dormant, constitutes gross negligence amounting to bad faith under
Article 2220 of the Civil Code.