By Atty. Jun de Zuñiga
When one deals with banks, the expectation is that they will discharge their responsibilities to the public in a matter befitting the fiduciary relationship between them. Rightly so, because it is basic that every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family (Art. 1163, Civil Code).
How would one then define the degree of due diligence that banks should observe? The law provides a guide in saying that such diligence is that which is required by the nature of the obligation and corresponds with the circumstances of person, time and place (Art. 1173, ibid.).
In line with this guide, the Supreme Court in several cases has made these pronouncements: (1) the degree of diligence required of banks should be more than that of a good father of a family and it is grounded on the fiduciary nature of the relationship between the bank and its depositors; (2) no less than the highest degree of diligence is required of banks by reason of the fact that the banking business is impressed with public interest; (3) the degree of responsibility, care and trustworthiness expected of the banks’ employees is far greater than those of ordinary clerks and employees; and (4) the fiduciary relationship between the bank and the depositor means that the bank’s obligation to observe high standards of integrity and performance is deemed written into every deposit agreement.
For trust corporations and for banks discharging trust functions, this expected degree of diligence would even be higher under the prudent man’s rule (Sec. 80, General Banking Law). This is a rule for those who are investing the money of others who are thus required to act as a prudent man would act with discretion and intelligence to seek reasonable income, preserve capital and in general avoid speculative investments (Barron’s Financial Guides). What is the reason then why a higher diligence is required from the trustee? The basic difference is that a bank which lends out the amount deposited would still be liable to pay the depositor even if the loan turns sour because of the debtor-creditor relationship between them, whereas in an investment made by the trustee who in effect merely acts as agent, in case of loss it is borne by the trustor, and not by the trustee.
For completion of the discussion on due diligence, the next level of due diligence in the Philippine legal system is that of extraordinary diligence required from common carriers or those engaged in the business of carrying or transporting passengers or goods or both, by land, water or air for compensation, offering their services to the public (Arts. 1732 and 1733, Civil Code). The standards for such extraordinary diligence were defined to mean that “a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons with a due regard for all the circumstances (Art. 1755, ibid.). Also under Section 16 of the BSP Charter, members of the Monetary Board and personnel of the Bangko Sentral are expected to exercise extraordinary diligence in the performance of their duties.
The above comments are the personal views of the writer. His email address is firstname.lastname@example.org