SC: BDO Negligent for Allowing Unauthorized Withdrawals

Banks are required to exercise the highest degree of diligence, along with high standards of integrity and performance in view of its significant role in commercial transactions.

Thus underscored the Supreme Court’s Third Division in a 19-page Decision, penned by Associate Justice Alfredo Benjamin S. Caguioa, denying the Petition for Review on Certiorari filed by Banco de Oro Universal Bank, Inc. (BDO), Vivian Duldulao, and Christine T. Nakanishi. The petition assailed the rulings of the Court of Appeals (CA) and the Regional Trial Court (RTC), which found the petitioners liable to Liza A. Seastres, a depositor in BDO.

In 2012, Seastres sued petitioner BDO for collection of sum of money after discovering that unauthorized transactions in the total amount of PhP8,121,939.59 made by Anabelle Benaje, the Chief Operating Officer of Seastres’ business, Las Management and General Services, Inc., were allowed by BDO.

The RTC ruled that BDO, through its employees, failed to fulfill its obligation to treat the accounts of its customers, particularly Seastres, with meticulous care and extraordinary diligence. BDO, together with Nakanishi, BDO People Support Branch Head, and Duldulao, BDO Rufino Branch Head, were thus ordered to pay Seastres over PhP8,000,000.00 in actual and moral damages, attorney’s fees, and costs of suit. The Court also ordered Benaje to indemnify and pay BDO, Nakanishi, and Duldulao.

The CA affirmed the RTC’s findings that BDO, et al. failed to exercise the degree of diligence required of banking institutions. However, the CA also found Seastres guilty of contributory negligence, and hence was made to shoulder 40% of the actual damages, with the remaining 60% to be paid by BDO, et al.

The Supreme Court affirmed the RTC’s factual findings that BDO totally failed to comply with its duty to exercise extraordinary diligence in taking care of Seastres’ bank accounts.

The Court reiterated the doctrine established in jurisprudence that as a business affected with public interest and because of the nature of its functions, banks are under obligation to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship.

In the case of BDO, the Court said that BDO was duty bound to exercise the highest degree of diligence in handling Seastres’ bank accounts and in ascertaining that the signatures in the subject withdrawal slips and manager’s checks were made by Seastres and not by anybody else.

However, the Court found that BDO failed to comply with its own rules and regulations regarding withdrawals made through a representative.

As established during trial, BDO’s own rules and regulations require all withdrawals to be made by the depositor by properly filing out a withdrawal slip. Further, withdrawals made by a person other than the depositor him/herself may be allowed only upon the depositor’s written authorization to be verified by the bank teller.

However, in the case of Seastres, BDO allowed Benaje to personally transact the unauthorized withdrawals without confirming from Seastres the authority of Benaje. The Court noted that the alleged written authorization in favor of Benaje is limited to deposits, inquiries, pick-ups, and printouts on behalf of Seastres. The same authorization did not authorize Benaje to make any withdrawals.

The Court also found that BDO allowed the withdrawal even without Seastres accomplishing the authority for withdrawal through representative as indicated in the withdrawal slips, which were not duly filled out at all.

BDO also violated its contractual duty and obligation to Seastres by allowing the encashment of manager’s checks despite the fact that the payee in the said checks was Seastres, but the person encashing the same was Benaje.

“BDO had existing rules and regulations for the withdrawal and encashment of checks through a representative…these were not followed at all. To be sure, the procedure for withdrawal and encashment by a representative is a very basic and uncomplicated banking procedure. Safeguards are embedded in BDO’s procedures for the protection of the depositor and the payee. Accordingly, BDO’s blatant disregard of its own procedures, as admitted by BDO’s own officers, constitutes a clear violation of the bank’s fiduciary obligation to its depositor and account holder,” held the Court.

The Court however, modified the ruling of the CA that Seastres must also bear part of the actual damages due to her own contributory negligence.

While Seastres did deal with the bank through Benaje, the Court ruled this cannot be considered contributory negligence because it was done within the parameters set by the BDO itself in transactions through a representative, with the alleged written authorization specifying what specific acts are allowed the representative. Nothing in the said authorization declared that Benaje was authorized to make any withdrawals.

Further, BDO’s violation of its own procedures and disregard of the limits of Benaje’s authority as representative of Seastres show they were done to accommodate Benaje. This is “contrary to the interests of [BDO’s] depositor, Seastres, to whom it owed the fiduciary duty of treating her accounts with the highest degree of care,” said the Court.

The Court added that “the ‘practice’ adverted to by BDO of transacting with Seastres through Benaje was a practice it had with Benaje, not Seastres. This ‘practice’ does not detract from or diminish the obligation of BDO to exercise extraordinary diligence in taking care of Seastres’ accounts,” the Court ruled.

The Court further found that Seastres showed vigilance when, after being informed by her accountant of the suspicious withdrawals, Seastres immediately conducted an investigation on her bank accounts and caused the production of new passbooks and account printouts when Benaje failed to promptly deliver the passbooks as demanded by Seastres.

The Supreme Court thus ruled that BDO is solely liable to Seastres for over PhP8,000,000.00 in actual and moral damages, attorney’s fees, and cost of suit, to earn legal interest of six percent per annum from finality of judgment until fully paid. (Courtesy of the Supreme Court Public Information Office)

Full text of G.R. No. 257151 (Banco De Oro Universal Bank, Inc. v. Liza A. Seastres, February 13, 2023) at:

Full text of the Dissenting Opinion of Associate Justice Samuel H. Gaerlan: