CITIBANK, N.A., Petitioner, Vs .SPS.

LUIS and CARMELITA CABAMONGAN and

FACTS: On August 16, 1933, spouses Luis and Carmelita Cabamongan opened a joint
“an/or” foreign currency time deposit in trust for their sons Luis, Jr. and Lito at Citibank,
N.A., Makati branch in the amount of $55,216.69 for a term of 182 days or until
February 14, 1994, at 2.5625 per cent interest per annum.
Prior to maturity, on November 10, 1933, a person claiming to be Carmelita went
to Makati branch and pre-terminated the said foreign currency time deposit by
presenting a passport, a Bank of America Versatele Card, an ATM card and a Mabuhay
Credit card. She filled up the necessary forms for pre-termination of deposits with the
assistance of Account Officer Yeye San Pedro. While the transaction was being
processed, she was casually interviewed by San Pedro about her personal
circumstances and investment plans. Since the said person failed to surrender the
original Certificate of Deposit, she had to execute a notarized release and waiver
document in favor of Citibank, pursuant to Citibank's internal procedure, before the
money was released to her. The release and waiver document was not notarized on
that same day but the money was nonetheless given to the person withdrawing. The
transaction lasted for about 40 minutes.
After said person left, San Pedro realized that she left behind an identification
card. Thus, San Pedro called up Carmelita's listed address at No. 48 Ranger Street,
Moonwalk Village, Las Pinas, Metro Manila on the same day to have the card picked
up. Marites, the wife of Lito, received San Pedro's call and was stunned by the news
that Carmelita preterminated her foreign currency time deposit because Carmelita was
working and residing in the United States at that time. Marites made an overseas call to
Carmelita to inform her about what happened. The Cabamongan spouses were
shocked at the news. It seems that sometime in June 1993, an unidentified person
broke in at the couple's residence in California. Initially, they reported that only
Carmelita's jewelry box was missing, but later on, they discovered that other items, such
as their passports, bank deposit certificates, including the subject foreign currency
deposit, and identification cards were also missing. It was only then that the
Cabamongan spouses realized that their passports and bank deposit certificates were
lost.
On January 1995, the Cabamongan spouses filed a complaint against Citibank
before the RTC of Makati for Specific Performance with damages. In its answer,
Citibank insists that it was not negligent of its duties since the deposit was released to
Carmelita only upon proper identification and verification. The RTC rendered a decision
in favor of spouses Cabamongan. The RTC reasoned that: Citibank committed
negligence. The forgery of the signatures has been categorically established by the
handwriting expert. Citibank clearly remiss in its duty to treat the account with the
highest degree of care, considering the nature of their relationship, Banks are under the
obligation to treat the accounts of their depositors with meticulous care.
Citibank filed an appeal with the CA, the CA rendered a decision sustaining the
finding of the RTC that Citibank was negligent, declaring that: First, the said person did
not present the certificate of deposit issued to Carmelita Cabamongan. This would not
have been an insurmountable obstacle as the bank, in the absence of such certificate,
allows the termination of the deposit for as long as the depositor executes a notarized
release and waiver document in favor of the bank. Second, in the internal
memorandum of Account Officer Yeye San Pedro regarding the incident, she reported
that upon comparing the authentic signatures of Carmelita Cabamongan on file with the
bank with the signatures made by the person claiming to be Cabamongan on the
documents required for the termination of the deposit, she noticed that one letter in the
latter signatures was different from that in the standard signatures. She requested said
person to sign again and scrutinized the identification cards presented. Presumably,
San Pedro was satisfied with the second set of signatures made as she eventually
authorized the termination of the deposit. Third, as the bank had on file pictures of its
depositors, it is inconceivable how bank employees could have been duped by an
impostor. San Pedro admitted in her testimony that the woman she dealt with did not
resemble the pictures appearing on the identification cards presented but San Pedro
still went on with the sensitive transaction. The CA affirmed the decision of the RTC.
ISSUE: Whether Citibank is negligent and should be held liable when it allowed
the pretermination of the TD in favor of the impostor.
RULING: The Court has repeatedly emphasized that, since the banking business is
impressed with public interest, of paramount importance thereto is the trust and
confidence of the public in general. Consequently, the highest degree of diligence is
expected, and high standards of integrity and performance are even required, of it. By
the nature of its functions, 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.

In this case, it has been sufficiently shown that the signatures of Carmelita in the forms
for pretermination 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.

Citibank cannot label its negligence as mere mistake or human error. Banks
handle daily transactions involving millions of pesos. By the very nature of their works
the degree of responsibility, care and trustworthiness expected of their employees and
officials is far greater than those of ordinary clerks and employees. Banks are expected
to exercise the highest degree of diligence in the selection and supervision of their
employees.