G.R. No. 171050; July 4, 2012
FAR EAST BANK AND TRUST COMPANY (now Bank of the Philippine Islands), Petitioner, vs. TENTMAKERS GROUP, INC., GREGORIA PILARES SANTOS and RHOEL P. SANTOS, Respondents.

FACTS

Petitioner Far East Bank and Trust Company (FEBTC) filed a complaint for sum of money against corporate respondent Tentmakers Group, Inc. (TGI) and its officers, Gregoria Pilares Santos and Rhoel P. Santos, based on three promissory notes they signed. The respondents admitted signing the notes but claimed they did so in blank, upon the representation of FEBTC’s branch manager that these were for future use. They denied receiving the loan proceeds, alleging these were instead received by another entity, Eliezer Crafts. They further contended that FEBTC violated banking rules by not requiring a board resolution authorizing the loan, a standard prerequisite for corporate borrowings.
The Regional Trial Court (RTC) ruled in favor of FEBTC, holding the respondents jointly and severally liable. The court found the promissory notes valid and binding, with the signatures establishing personal and solidary liability. The Court of Appeals (CA) reversed the RTC decision. The CA noted the absence of a required board resolution and collateral, and the failure to prove actual receipt of the loan proceeds by the respondents. It characterized the transaction as suspicious, possibly an “inside job” by a bank employee.

ISSUE

Whether the Court of Appeals erred in dismissing FEBTC’s complaint and absolving the respondents from liability on the promissory notes.

RULING

The Supreme Court denied the petition and affirmed the CA decision. The legal logic centered on the bank’s failure to adhere to fundamental banking norms and its consequent inability to prove a valid loan transaction. First, the Court emphasized that banks are bound to exercise the highest degree of diligence. FEBTC’s omission to secure a board resolution from TGI, a basic and mandatory requirement under the Manual of Regulations for Banks to establish the authority of the signatories, constituted gross negligence. This lapse was fatal to its claim, as it could not prove the corporate act of borrowing.
Second, the bank failed to substantiate the essential element of consideration. FEBTC could not present credible evidence that the loan proceeds were actually received by TGI or the individual respondents. The promissory notes, allegedly signed in blank, were insufficient to establish receipt of the funds. The Court found the circumstances supported the respondents’ claim that the bank officer may have orchestrated the transaction improperly. Consequently, the loss suffered by FEBTC was due to its own negligence in policing its personnel and non-compliance with banking regulations, a case of damnum absque injuria (damage without injury). Without proof of a valid contract and the release of proceeds, no obligation to pay arose on the part of the respondents.