Citystate Savings Bank v. Tobias, G.R. No. 227990, 07 March 2018, (858 SCRA 63)

 

The Supreme Court held that petitioner bank is jointly and solidarily liable with Robles. It emphasized that the business of banking is one imbued with public interest, and that as such, banking institutions are obliged to exercise the highest degree of diligence as well as high standards of integrity and performance in all its transactions.

The Supreme Court stressed that banks may be held liable for damages for failure to exercise the degree of diligence required of it resulting to contractual breach. In the case at bar, the records show that the (1) petitioners did not deny the validity of the respondents’ accounts, (2) respondents entered into two types of transactions with the bank, on of savings, and of loan agreements, and (3) transactions were entered into outside of the petitioner bank’s premises. It was clear from the records that the proximate cause of respondents’ loss is the misappropriation of Robles, but petitioner liable is still liable under Article 1911 of the NCC, which states that:

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarity liable with the agent if the former allowed the latter to act as though he had full powers.

It explained then that the bank is liable for the wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their respective capacity, but not for the acts outside the scope of their authority. A banking corporation is made liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority, although, in the case at bar, the agent is secretly abusing his authority and attempting to perpetuate a fraud upon his principal for his benefit. This is because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded when banks do not exercise the care and diligence required of them.