Case Digest: The Metropolitan Bank and Trust Company v. Rosales, G.R. No. 183204, January 13, 2014

Commercial Law | Bank Deposit

Parties:

• Petitioner: Metropolitan Bank and Trust Company (Metrobank), a domestic banking corporation.
• Defendants: Ana Grace Rosales, owner of China Golden Bridge Travel Services, and Yo Yuk To, mother of respondent Rosales.

Facts: 

• In 2000, respondents opened a Joint Peso Account with Metrobank Pritil-Tondo branch, which showed a balance of ₱2,515,693.52 as of August 4, 2004.
• In May 2002, Rosales accompanied her client Liu Chiu Fang, a Taiwanese National, to Metrobank-Escolta branch to open a savings account as required by the Philippine Leisure and Retirement Authority (PLRA) for retiree’s visa application. Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as an interpreter for her.
• On March 3, 2003, respondents opened a Joint Dollar Account with an initial deposit of US$14,000.00 at Metrobank Pritil-Tondo Branch.
• On July 31, 2003, Metrobank issued a "Hold Out" order against respondents' accounts.
• On September 3, 2003, Metrobank filed a criminal case for Estafa through False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents accusing Rosales and an unidentified woman of orchestrating the fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s dollar account at Metrobank-Escolta Branch.
• It was claimed that on February 5, 2003, the branch received a Withdrawal Clearance from the PLRA for Liu Chiu Fang's dollar account.
• Respondent Rosales allegedly visited the Escolta Branch that day, informing Branch Head Celia A. Gutierrez of Liu Chiu Fang's intention to withdraw cash.
• Gutierrez advised Rosales to return the next day due to insufficient funds.
• On February 6, 2003, Rosales purportedly accompanied an impostor of Liu Chiu Fang to the bank, who successfully withdrew US$75,000.00.
• Further, on March 3, 2003, respondents opened a dollar account with petitioner, and it was later discovered that the serial numbers of deposited dollars matched those withdrawn by the impostor.
• Rosales denied involvement in the withdrawal.

City Prosecutor of Manila: Initially dismissed the criminal case but later reversed the decision.

• Respondents filed a civil case (No. 04110895) against Metrobank for Breach of Obligation and Contract with Damages, seeking withdrawal of their deposits and damages.

RTC-Manila: Ruled in favor of respondents, ordering Metrobank to allow withdrawal of deposits and awarding damages.

CA: Affirmed the RTC decision but deleted the award of actual damages of actual damages.

Issue: 

• Whether the deposits are in the nature of a loan; thus, petitioner had the obligation to return the deposits to them upon demand. YES
• Whether the CA erred in not applying the "Hold Out" clause stipulated in the Application and Agreement for Deposit Account. NO

Petitioner’s Arguments:

• It posits that the said clause applies to any and all kinds of obligation as it does not distinguish between obligations arising ex contractu or ex delictu.
• Petitioner also contends that the fraud committed by respondent Rosales was clearly established by evidence; thus, it was justified in issuing the "Hold-Out" order.
• Petitioner likewise denies that its employees were negligent in releasing the dollars.
• It claims that it was the deception employed by respondent Rosales that caused petitioner’s employees to release Liu Chiu Fang’s funds to the impostor.

Respondents’ Arguments

• Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold their deposits because they have no monetary obligation to petitioner.
• They insist that petitioner miserably failed to prove its accusations against respondent Rosales.
• In fact, no documentary evidence was presented to show that respondent Rosales participated in the unauthorized withdrawal.
• They also question the fact that the list of the serial numbers of the dollar notes fraudulently withdrawn on February 6, 2003, was not signed or acknowledged by the alleged impostor.
• Respondents likewise maintain that what was established during the trial was the negligence of petitioner’s employees as they allowed the withdrawal of the funds without properly verifying the identity of the depositor.
• Furthermore, respondents contend that their deposits are in the nature of a loan; thus, petitioner had the obligation to return the deposits to them upon demand.
• Failing to do so makes petitioner liable to pay respondents moral and exemplary damages, as well as attorney’s fees.

Held:

The Petition is bereft of merit.

At the outset, the relevant issues in this case are (1) whether petitioner breached its contract with respondents, and (2) if so, whether it is liable for damages. The issue of whether petitioner’s employees were negligent in allowing the withdrawal of Liu Chiu Fang’s dollar deposits has no bearing in the resolution of this case. Thus, we find no need to discuss the same.

The "Hold Out" clause does not apply to the instant case.

Petitioner claims that it did not breach its contract with respondents because it has a valid reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold respondents’ deposits on the Application and Agreement for Deposit Account, which reads:

Authority to Withhold, Sell and/or Set Off:

The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, all monies, properties or securities of the Depositor now in or which may hereafter come into the possession or under the control of the Bank, whether left with the Bank for safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much thereof as will be sufficient to pay any or all obligations incurred by Depositor under the Account or by reason of any other transactions between the same parties now existing or hereafter contracted, to sell in any public or private sale any of such properties or securities of Depositor, and to apply the proceeds to the payment of any Depositor’s obligations heretofore mentioned.

x x x x

JOINT ACCOUNT

x x x x

The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert a lien on any balance of the Account and apply all or any part thereof against any indebtedness, matured or unmatured, that may then be owing to the Bank by any or all of the Depositors. It is understood that if said indebtedness is only owing from any of the Depositors, then this provision constitutes the consent by all of the depositors to have the Account answer for the said indebtedness to the extent of the equal share of the debtor in the amount credited to the Account.

Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account is misplaced.

The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-delict. And although a criminal case was filed by petitioner against respondent Rosales, this is not enough reason for petitioner to issue a "Hold Out" order as the case is still pending and no final judgment of conviction has been rendered against respondent Rosales. In fact, it is significant to note that at the time petitioner issued the "Hold Out" order, the criminal complaint had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis for petitioner to issue the "Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA that the "Hold Out" clause does not apply in the instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiably refused to release respondents’ deposit despite demand. Having breached its contract with respondents, petitioner is liable for damages.

Respondents are entitled to moral and exemplary damages and attorney’s fees.

In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or in bad faith, or is "guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations."

In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order reveals that petitioner issued the "Hold Out" order in bad faith. 

First of all, the order was issued without any legal basis. 

Second, petitioner did not inform respondents of the reason for the "Hold Out."

Third, the order was issued prior to the filing of the criminal complaint. 

Records show that the "Hold Out" order was issued on July 31, 2003, while the criminal complaint was filed only on September 3, 2003. All these taken together lead us to conclude that petitioner acted in bad faith when it breached its contract with respondents. As we see it then, respondents are entitled to moral damages.

As to the award of exemplary damages, Article 2229 of the Civil Code provides that exemplary damages may be imposed "by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages." They are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent manner when it refused to release the deposits of respondents without any legal basis. We need not belabor the fact that the banking industry is impressed with public interest. As such, "the highest degree of diligence is expected, and high standards of integrity and performance are even required of it." It must therefore "treat the accounts of its depositors with meticulous care and always to have in mind the fiduciary nature of its relationship with them." For failing to do this, an award of exemplary damages is justified to set an example.

The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 2208 of the Civil Code.

In closing, it must be stressed that while we recognize that petitioner has the right to protect itself from fraud or suspicions of fraud, the exercise of his right should be done within the bounds of the law and in accordance with due process, and not in bad faith or in a wanton disregard of its contractual obligation to respondents.

WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SO ORDERED.