Where a client of a bank was defrauded and lost her money due to the negligence of the bank’s employees, the bank itself can be liable.

A bank client who maintained a checking account got acquainted with the bank’s signature verifier with whom she had a special arrangement. In the event of an overdraft or should she issue checks that exceed the balance of her account, the verifier would finance or provide sufficient funds for it, making sure that such checks were not dishonored. In exchange, the client paid the verifier P50 a day for every P40,000 financed. The arrangement lasted for eleven years.

Pursuant to the agreement, the client drew several checks payable to cash. One of these checks was a “stale” P200,000 guarantee check originally dated 28 August 1987 but was altered to make it appear that it was dated 8 May 1988. Despite the obviously superimposed date, the verifier deposited the check in another client’s account and the amount was charged against the first client’s checking account. The latter claimed that the check was deposited by the verifier without her consent. She thus filed a complaint against the verifier and the bank to recover the amount.

The Regional Trial Court ruled in favor of the client, holding the bank, the verifier, and the other client liable for the said amount plus damages. The Court of Appeals affirmed the decision but modified the amounts due. It based the bank’s liability on its failure to double check and ascertain the genuineness of an obviously altered date. Such alteration was not countersigned by the drawer to make it a valid correction in accordance with the standard operating procedures of the institution.

Before the Supreme Court, the bank questioned the decree holding it solidarily liable with the signature verifier. It denied liability since it was the verifier, its employee, who was negligent and not the bank itself. But in upholding the ruling of the lower courts, the Supreme Court held:

It must be remembered that public interest is intimately carved into the banking industry because the primordial concern here is the trust and confidence of the public. This fiduciary nature of every bank’s relationship with its clients/depositors impels it to exercise the highest degree of care, definitely more than that of a reasonable man or a good father of a family. It is, therefore, required to treat the accounts and deposits of these individuals with meticulous care…

Considering that banks can only act through their officers and employees, the fiduciary obligation laid down for these institutions necessarily extends to their employees. Thus, banks must ensure that their employees observe the same high level of integrity and performance for it is only through this that banks may meet and comply with their own fiduciary duty. It has been repeatedly held that “a bank’s liability as an obligor is not merely vicarious, but primary” since they are expected to observe an equally high degree of diligence, not only in the selection, but also in the supervision of its employees. Thus, even if it is their employees who are negligent, the bank’s responsibility to its client remains paramount making its liability to the same to be a direct one.

The relationship between a bank and its client is a fiduciary one, one of utmost trust and confidence. Given this and the high standard expected from banks, the bank should have done everything in its power to ensure the safety and protection of their client’s money, which was deposited and entrusted to it. Although it was the bank employee who dealt directly with the client and not the bank itself, the latter cannot distance itself from its employees, through whom it transacts

(Westmont Bank v. Dela Rosa-Ramos, G.R. No. 160260, 24 October 2012).