BPI vs. CBP and Citibank, G.R. No. 197593. October 12, 2020.)

 

BPI vs. CBP and Citibank, G.R. No. 197593. October 12, 2020.)

Facts

BPI (Petitioner) and Citibank, N.A. (Citibank) (Respondent), both of which are members of the Clearing House supervised by the Central Bank of the Philippines (CBP), discrepancies totaling P9 million were discovered in the inter-bank reconciliation statements of BPI's Laoag City Branch in January 1982. Petitioner BPI filed a complaint with the CBP, alleging irregular charges to its demand deposit account. A separate investigation by the National Bureau of Investigation (NBI) revealed a pilferage scheme orchestrated by a criminal syndicate within the CBP's Clearing Division.

This scheme involved the infiltration of CBP's Clearing Division, pilfering "out-of-town" checks, tampering with vital banking documents, and opening current accounts at BPI Laoag City Branch and Citibank's Greenhills Branch. The fraudsters deposited checks drawn against BPI into Citibank, concealing their origins. The altered documents were then sent to BPI Laoag City Branch, which was unaware of the pilfered checks.

Citibank allowed the withdrawal of the checks, presuming they had been honored by BPI. Some individuals were convicted for their involvement, while others were discharged or acquitted. Petitioner BPI requested the CBP to credit back the P9 million, but CBP credited only P4.5 million, claiming the rest was held in a "suspense account" pending the NBI investigation's outcome. BPI filed a sum of money complaint against CBP in 1988, with CBP denying liability and filing a third-party complaint against Citibank for alleged negligence in employee supervision.

The case revolves around whether CBP should reimburse the full P9 million to BPI and whether Citibank should be held liable for negligence in the fraudulent scheme. The case highlights the complexities of a banking fraud involving multiple parties, tampered documents, and allegations of negligence.

Issue

Whether or not CBP may be sued on its governmental and/or proprietary functions.

Held

Yes. CBP is not immune to suit although it performs governmental functions. While the State may not be

sued without its consent, however, immunity from suit may be waived expressly or impliedly. Nonetheless,

while the CBP performed a governmental function in providing clearing house facilities, it is not immune from suit as its Charter, by express provision, waived its immunity from suit. 

CBP is a corporate body performing governmental functions. Operating a clearing house facility for regional checks is within CBP's governmental functions and duties as the central monetary authority

One of the generally accepted principles of international law, which we have adopted in our Constitution under Article XVI, Section 3 is the principle that a state may not be sued without its consent. However, state immunity may be waived expressly or impliedly. 

In the case of government agencies, the question of its suability depends on whether it is incorporated or unincorporated. An incorporated agency has a Charter of its own with a separate juridical personality while an unincorporated agency has none. In addition, the Charter of an incorporated agency shall explicitly provide that it has waived its immunity from suit by granting it with the authority to sue and be sued. This applies regardless of whether its functions are governmental or proprietary in nature.

Indubitably, the CBP, which was created under RA 265 as amended by Presidential Decree No. 72 (PD 72), is a government corporation with separate juridical personality and not a mere agency of the government. Specifically, Sections 1 and 4 of RA 265, as amended, provided for the creation of the CBP, a corporate body with certain corporate powers which include the authority to sue and be sued. Its main function is to administer the monetary, banking and credit system of the Philippines which is primarily governmental in nature.

(Bank of the Philippine Islands vs. Central Bank of the Philippines and Citibank, G.R. No. 197593. October 12, 2020.)

NOTE:

CBP is not immune to suit although it performed governmental functions.

Nonetheless, while the CBP performed a governmental function in providing clearing house facilities, it is not immune from suit as its Charter, by express provision, waived its immunity from suit. However, although the CBP allowed itself to be sued, it did not necessarily mean that it conceded its liability. Petitioner BPI had been given the right to bring suit against CBP, such as in this case, to obtain compensation in damages arising from torts, subject, however, to the right of CBP to interpose any lawful defense.

CBP is not liable for the acts of its employees because Valentino and Estacio were not "special agents".

Anent the issue of whether CBP is liable for the torts committed by its employees Valentino and Estacio, the test of liability depends on whether or not the employees, acting in behalf of CBP, were performing governmental or proprietary functions. The State in the performance of its governmental functions is liable only for the tortuous acts of its special agents. On the other hand, the State becomes liable as an ordinary employer when performing its proprietary functions.42 Thus, Articles 2176 and 2180 of the Civil Code provide that:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.

x x x x

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable.

x x x x

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage."

To reiterate, CBP's establishment of clearing house facilities for its member banks to which Valentino and Estacio were assigned as Bookkeeper and Janitor-Messenger, respectively, is a governmental function. As such, the State or CBP in this case, is liable only for the torts committed by its employee when the latter acts as a special agent but not when the said employee or official performs his or her functions that naturally pertain to his or her office. A special agent is defined as one who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office.

 Evidently, both Valentino and Estacio are not considered as special agents of CBP during their commission of the fraudulent acts against petitioner BPI as they were regular employees performing tasks pertaining to their offices, namely, bookkeeping and janitorial-messenger. Thus, CBP cannot be held liable for any damage caused to petitioner BPI by reason of Valentino and Estacio's unlawful acts.

Even on the assumption that CBP is performing proprietary functions, still, it cannot be held liable because Valentino and Estacio acted beyond the scope of their duties.

Nonetheless, even assuming that CBP is an ordinary employer, it still cannot be held liable. Article 2180 of the Civil Code provides that an employer shall be liable for the damages caused by their employees acting within the scope of their assigned tasks. An act is deemed an assigned task if it is "done by an employee, in furtherance of the interests of the employer or for the account of the employer at the time of the infliction of the injury or damage."44 Obviously, Valentino and Estacio's fraudulent acts of tampering with and pilfering of documents are not in furtherance of CBP's interests nor done for its account as the said acts were unauthorized and unlawful. Also, petitioner BPI has the burden to prove that Valentino and Estacio's fraudulent acts were performed within the scope of their assigned tasks,45 which it failed to do. It is only then that the presumption that CBP, as employer, was negligent would arise which then compels CBP to show evidence that it exercised due diligence in the selection and supervision of its employees.

Thus, where a public officer acts without or in excess of jurisdiction, any injury or damage caused by such acts is his or her own personal liability and cannot be imputed to the State.46 In Festejo v. Fernando,47 we ruled that the acts of the Director of Public Works in taking over a private property and constructing thereon an irrigation canal were without authority, hence, the action for the recovery of land or its value filed by the property owner was in his own personal capacity. Applying analogously our ruling in Festejo v. Fernando, the fraudulent acts of CBP's employees Valentino and Estacio, were evidently not pursuant to their functions and were in excess of or without authority; therefore, any injury or damage caused by such acts to petitioner BPI shall be Valentino's and Estacio's own personal liabilities which should not be imputed to CBP as their employer.

Finally, anent the issue of Citibank's liability as the collecting bank, we affirm the trial court's dismissal of the third-party complaint against it. In this case, the subject checks were not returned to Citibank before the lapse of the clearing period.48 Thus, Citibank acted within its authority in allowing the withdrawal of said checks after the lapse of the clearing period without any notice of dishonor from the drawee bank, petitioner BPI. The remedy, therefore, of petitioner BPI lies against the parties responsible for the tampering with and pilfering of the subject checks and other bank documents which resulted in the total damage of P9 million.

⚖️ Justice Ramon Paul L. Hernando

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