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G.R. No. 88866

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RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION
G.R.No.88866February18,1991
METROPOLITANBANK&TRUSTCOMPANY,petitioner,
vs.
COURTOFAPPEALS,GOLDENSAVINGS&LOANASSOCIATION,INC.,LUCIACASTILLO,MAGNO
CASTILLOandGLORIACASTILLO,respondents.
Angara,Abello,Concepcion,Regala&Cruzforpetitioner.
Bengzon,Zarraga,Narciso,Cudala,Pecson&BengsonforMagnoandLuciaCastillo.
AgapitoS.FajardoandJaimeM.CabilesforrespondentGoldenSavings&LoanAssociation,Inc.

CRUZ,J.:
This case, for all its seeming complexity, turns on a simple question of negligence. The facts, pruned of all non
essentials,areeasilytold.
The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philippines and even
abroad. Golden Savings and Loan Association was, at the time these events happened, operating in Calapan,
Mindoro,withtheotherprivaterespondentsasitsprincipalofficers.
InJanuary1979,acertainEduardoGomezopenedanaccountwithGoldenSavingsanddepositedoveraperiodof
two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish
MarketingAuthorityandpurportedlysignedbyitsGeneralManagerandcountersignedbyitsAuditor.Sixofthese
were directly payable to Gomez while the others appeared to have been indorsed by their respective payees,
followedbyGomezassecondindorser.1
On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria
CastilloasCashierofGoldenSavingsanddepositedtoitsSavingsAccountNo.2498intheMetrobankbranchin
Calapan,Mindoro.TheywerethensentforclearingbythebranchofficetotheprincipalofficeofMetrobank,which
forwardedthemtotheBureauofTreasuryforspecialclearing.2
Morethantwoweeksafterthedeposits,GloriaCastillowenttotheCalapanbranchseveraltimestoaskwhetherthe
warrantshadbeencleared.Shewastoldtowait.Accordingly,Gomezwasmeanwhilenotallowedtowithdrawfrom
his account. Later, however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a
"valuedclient,"thepetitionersaysitfinallydecidedtoallowGoldenSavingstowithdrawfromtheproceedsofthe
warrants.3
ThefirstwithdrawalwasmadeonJuly9,1979,intheamountofP508,000.00,thesecondonJuly13,1979,inthe
amount of P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal was
P968.000.00.4
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually
collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. The last
withdrawalwasmadeonJuly16,1979.
OnJuly21,1979,MetrobankinformedGoldenSavingsthat32ofthewarrantshadbeendishonoredbytheBureau
of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously
withdrawn,tomakeupthedeficitinitsaccount.
Thedemandwasrejected.MetrobankthensuedGoldenSavingsintheRegionalTrialCourtofMindoro.5Aftertrial,
judgment was rendered in favor of Golden Savings, which, however, filed a motion for reconsideration even as
Metrobankfileditsnoticeofappeal.OnNovember4,1986,thelowercourtmodifieditsdecisionthus:
ACCORDINGLY,judgmentisherebyrendered:
1.Dismissingthecomplaintwithcostsagainsttheplaintiff
2. Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and Loan
Association,Inc.anddefendantSpousesMagnoCastilloandLuciaCastillo
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3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of
P1,754,089.00andtoreinstateandcredittosuchaccountsuchamountexistingbeforethedebitwasmade
including the amount of P812,033.37 in favor of defendant Golden Savings and Loan Association, Inc. and
thereafter,toallowdefendantGoldenSavingsandLoanAssociation,Inc.towithdrawtheamountoutstanding
thereonbeforethedebit
4.OrderingtheplaintifftopaythedefendantGoldenSavingsandLoanAssociation,Inc.attorney'sfeesand
expensesoflitigationintheamountofP200,000.00.
5.OrderingtheplaintifftopaythedefendantSpousesMagnoCastilloandLuciaCastilloattorney'sfeesand
expensesoflitigationintheamountofP100,000.00.
SOORDERED.
Onappealtotherespondentcourt, 6thedecisionwasaffirmed,promptingMetrobanktofilethispetitionforreview
onthefollowinggrounds:
1. Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms and
conditionsonthedepositslipsallowingMetrobanktochargebackanyamounterroneouslycredited.
(a)Metrobank'srighttochargebackisnotlimitedtoinstanceswherethechecksortreasurywarrants
areforgedorunauthorized.
(b)UntilsuchtimeasMetrobankisactuallypaid,itsobligationisthatofamerecollectingagentwhich
cannotbeheldliableforitsfailuretocollectonthewarrants.
2.Underthelowercourt'sdecision,affirmedbyrespondentCourtofAppeals,Metrobankismadetopayfor
warrantsalreadydishonored,therebyperpetuatingthefraudcommittedbyEduardoGomez.
3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings, the
lattershouldbeartheloss.
4. Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are not
negotiableinstruments.
Thepetitionhasnomerit.
From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in giving
GoldenSavingstheimpressionthatthetreasurywarrantshadbeenclearedandthat,consequently,itwassafeto
allowGomeztowithdrawtheproceedsthereoffromhisaccountwithit.Withoutsuchassurance,GoldenSavings
would not have allowed the withdrawals with such assurance, there was no reason not to allow the withdrawal.
Indeed,GoldenSavingsmightevenhaveincurredliabilityforitsrefusaltoreturnthemoneythattoallappearances
belongedtothedepositor,whocouldthereforewithdrawitanytimeandforanyreasonhesawfit.
Itwas,infact,tosecuretheclearanceofthetreasurywarrantsthatGoldenSavingsdepositedthemtoitsaccount
withMetrobank.GoldenSavingshadnoclearingfacilitiesofitsown.ItreliedonMetrobanktodeterminethevalidity
ofthewarrantsthroughitsownservices.TheproceedsofthewarrantswerewithheldfromGomezuntilMetrobank
allowedGoldenSavingsitselftowithdrawthemfromitsowndeposit. 7 It was only when Metrobank gave the go
signalthatGomezwasfinallyallowedbyGoldenSavingstowithdrawthemfromhisownaccount.
The argument of Metrobank that Golden Savings should have exercised more care in checking the personal
circumstancesofGomezbeforeacceptinghisdepositdoesnotholdwater.ItwasGomezwhowasentrustingthe
warrants,notGoldenSavingsthatwasextendinghimaloanandmoreover,thetreasurywarrantsweresubjectto
clearing,pendingwhichthedepositorcouldnotwithdrawitsproceeds.TherewasnoquestionofGomez'sidentityor
ofthegenuinenessofhissignatureascheckedbyGoldenSavings.Infact,thetreasurywarrantsweredishonored
allegedly because of the forgery of the signatures of the drawers, not of Gomez as payee or indorser. Under the
circumstances, it is clear that Golden Savings acted with due care and diligence and cannot be faulted for the
withdrawalsitallowedGomeztomake.
Bycontrast,Metrobankexhibitedextraordinarycarelessness.Theamountinvolvedwasnottriflingmorethanone
andahalfmillionpesos(andthiswas1979).Therewasnoreasonwhyitshouldnothavewaiteduntilthetreasury
warrants had been cleared it would not have lost a single centavo by waiting. Yet, despite the lack of such
clearance and notwithstanding that it had not received a single centavo from the proceeds of the treasury
warrants,asitnowrepeatedlystressesitallowedGoldenSavingstowithdrawnotonce,nottwice,butthrice
fromtheunclearedtreasurywarrantsinthetotalamountofP968,000.00
Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it also
wantedto"accommodate"avaluedclient.It"presumed"thatthewarrantshadbeenclearedsimplybecauseof"the
lapseofoneweek."8Forabankwithitslongexperience,thisexplanationisunbelievablynaive.
And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side of the
depositslipsthroughwhichthetreasurywarrantsweredepositedbyGoldenSavingswithitsCalapanbranch.The
conditionsreadasfollows:
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Kindlynotethatinreceivingitemsondeposit,thebankobligatesitselfonlyasthedepositor'scollectingagent,
assumingnoresponsibilitybeyondcareinselectingcorrespondents,anduntilsuchtimeasactualpayment
shallhavecomeintopossessionofthisbank,therightisreservedtochargebacktothedepositor'saccount
anyamountpreviouslycredited,whetherornotsuchitemisreturned.Thisalsoappliestochecksdrawnon
localbanksandbankersandtheirbranchesaswellasonthisbank,whichareunpaidduetoinsufficiencyof
funds,forgery,unauthorizedoverdraftoranyotherreason.(Emphasissupplied.)
According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for Golden
Savingsandgiveittherightto"chargebacktothedepositor'saccountanyamountpreviouslycredited,whetheror
notsuchitemisreturned.Thisalsoappliestochecks"...whichareunpaidduetoinsufficiencyoffunds,forgery,
unauthorized overdraft of any other reason." It is claimed that the said conditions are in the nature of contractual
stipulationsandbecamebindingonGoldenSavingswhenGloriaCastillo,asitsCashier,signedthedepositslips.
Doubt may be expressed about the binding force of the conditions, considering that they have apparently been
imposedbythebankunilaterally,withouttheconsentofthedepositor.Indeed,itcouldbearguedthatthedepositor,
insigningthedepositslip,doessoonlytoidentifyhimselfandnottoagreetotheconditionssetforthinthegiven
permitatthebackofthedepositslip.Wedonothavetoruleonthismatteratthistime.Atanyrate,theCourtfeels
that even if the deposit slip were considered a contract, the petitioner could still not validly disclaim responsibility
thereunderinthelightofthecircumstancesofthiscase.
InstressingthatitwasactingonlyasacollectingagentforGoldenSavings,Metrobankseemstobesuggestingthat
asamereagentitcannotbeliabletotheprincipal.Thisisnotexactlytrue.Onthecontrary,Article1909oftheCivil
Codeclearlyprovidesthat
Art.1909.Theagentisresponsiblenotonlyforfraud,butalsofornegligence,whichshallbejudged'with
moreorlessrigorbythecourts,accordingtowhethertheagencywasorwasnotforacompensation.
ThenegligenceofMetrobankhasbeensufficientlyestablished.Torepeatforemphasis,itwastheclearancegiven
by it that assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury
warrants he had deposited Metrobank misled Golden Savings. There may have been no express clearance, as
Metrobankinsists(althoughthisisrefutedbyGoldenSavings)butinanycasethatclearancecouldbeimpliedfrom
its allowing Golden Savings to withdraw from its account not only once or even twice but three times. The total
withdrawalwasinexcessofitsoriginalbalancebeforethetreasurywarrantsweredeposited,whichonlyaddedtoits
beliefthatthetreasurywarrantshadindeedbeencleared.
Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any reason is not
acceptable.Anyreasondoesnotmeannoreasonatall.Otherwise,therewouldhavebeennoneedatallforGolden
Savingstodepositthetreasurywarrantswithitforclearance.Therewouldhavebeennoneedforittowaituntilthe
warrantshadbeenclearedbeforepayingtheproceedsthereoftoGomez.Suchacondition,ifinterpretedintheway
thepetitionersuggests,isnotbindingforbeingarbitraryandunconscionable.Anditbecomesmoresointhecaseat
bar when it is considered that the supposed dishonor of the warrants was not communicated to Golden Savings
beforeitmadeitsownpaymenttoGomez.
Thebelatednotificationaggravatedthepetitioner'searliernegligenceingivingexpressoratleastimpliedclearance
tothetreasurywarrantsandallowingpaymentstherefromtoGoldenSavings.Butthatisnotall.Ontopofthis,the
supposedreasonforthedishonor,towit,theforgeryofthesignaturesofthegeneralmanagerandtheauditorofthe
drawercorporation,hasnotbeenestablished. 9Thiswasthefindingofthelowercourtswhichweseenoreasonto
disturb.AndaswesaidinMWSSv.CourtofAppeals:10
Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be established by clear,
positiveandconvincingevidence.Thiswasnotdoneinthepresentcase.
A no less important consideration is the circumstance that the treasury warrants in question are not negotiable
instruments.Clearlystampedontheirfaceistheword"nonnegotiable."Moreover,andthisisofequalsignificance,
itisindicatedthattheyarepayablefromaparticularfund,towit,Fund501.
ThefollowingsectionsoftheNegotiableInstrumentsLaw,especiallytheunderscoredparts,arepertinent:
Sec.1.Formofnegotiableinstruments.Aninstrumenttobenegotiablemustconformtothefollowing
requirements:
(a)Itmustbeinwritingandsignedbythemakerordrawer
(b)Mustcontainanunconditionalpromiseorordertopayasumcertaininmoney
(c)Mustbepayableondemand,oratafixedordeterminablefuturetime
(d)Mustbepayabletoorderortobearerand
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonablecertainty.
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Sec.3.Whenpromiseisunconditional.Anunqualifiedorderorpromisetopayisunconditionalwithinthe
meaningofthisActthoughcoupledwith
(a)Anindicationofaparticularfundoutofwhichreimbursementistobemadeoraparticularaccounttobe
debitedwiththeamountor
(b)Astatementofthetransactionwhichgivesrisetotheinstrumentjudgment.
Butanorderorpromisetopayoutofaparticularfundisnotunconditional.
TheindicationofFund501asthesourceofthepaymenttobemadeonthetreasurywarrantsmakestheorderor
promisetopay"notunconditional"andthewarrantsthemselvesnonnegotiable.Thereshouldbenoquestionthat
the exception on Section 3 of the Negotiable Instruments Law is applicable in the case at bar. This conclusion
conformstoAbubakarvs.AuditorGeneral11wheretheCourtheld:
Thepetitionerarguesthatheisaholderingoodfaithandforvalueofanegotiableinstrumentandisentitled
to the rights and privileges of a holder in due course, free from defenses. But this treasury warrant is not
withinthescopeofthenegotiableinstrumentlaw.Foronething,thedocumentbearingonitsfacethewords
"payablefromtheappropriationforfoodadministration,isactuallyanOrderforpaymentoutof"aparticular
fund,"andisnotunconditionalanddoesnotfulfilloneoftheessentialrequirementsofanegotiableinstrument
(Sec.3lastsentenceandsection[1(b)]oftheNegotiableInstrumentsLaw).
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were
"genuineandinallrespectswhattheypurporttobe,"inaccordancewithSection66oftheNegotiableInstruments
Law.Thesimplereasonisthatthislawisnotapplicabletothenonnegotiabletreasurywarrants.Theindorsement
was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but merely to
depositthemwithMetrobankforclearing.ItwasinfactMetrobankthatmadetheguaranteewhenitstampedonthe
back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust
Co.,CalapanBranch."
ThepetitionerlaysheavystressonJaiAlaiCorporationv.BankofthePhilippineIslands, 12butwefeelthiscaseis
inapplicabletothepresentcontroversy. Thatcaseinvolvedcheckswhereasthiscaseinvolvestreasurywarrants.
Golden Savings never represented that the warrants were negotiable but signed them only for the purpose of
depositingthemforclearance.Also,thefactofforgerywasprovedinthatcasebutnotinthecasebeforeus.Finally,
the Court found the Jai Alai Corporation negligent in accepting the checks without question from one Antonio
RamireznotwithstandingthatthepayeewastheInterIslandGasServices,Inc.anditdidnotappearthathewas
authorizedtoindorseit.NosimilarnegligencecanbeimputedtoGoldenSavings.
1wphi1

Wefindthechallengeddecisiontobebasicallycorrect.However,wewillhavetoamenditinsofarasitdirectsthe
petitionertocreditGoldenSavingswiththefullamountofthetreasurychecksdepositedtoitsaccount.
The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was allowed to
withdrawP1,167,500.00beforeGoldenSavingswasnotifiedofthedishonor.Theamounthehaswithdrawnmustbe
chargednottoGoldenSavingsbuttoMetrobank,whichmustbeartheconsequencesofitsownnegligence.Butthe
balanceofP586,589.00shouldbedebitedtoGoldenSavings,asobviouslyGomezcannolongerbepermittedto
withdrawthisamountfromhisdepositbecauseofthedishonorofthewarrants.Gomezhasinfactdisappeared.To
alsocreditthebalancetoGoldenSavingswouldundulyenrichitattheexpenseofMetrobank,letalonethefactthat
ithasalreadybeeninformedofthedishonorofthetreasurywarrants.
WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the dispositive
portionofthejudgmentofthelowercourtshallberewordedasfollows:
3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing defendant
GoldenSavings&LoanAssociation,Inc.towithdrawtheamountoutstandingthereon,ifany,afterthedebit.
SOORDERED.
Narvasa,Gancayco,GrioAquinoandMedialdea,JJ.,concur.

Footnotes
1

Rollo,pp.1213.

Ibid.,p.52.

Id.,p.14.

Id.

ThroughJudgeMarcianoT.Virola.

PennedbyEjercito,J.,withPeandVictor,JJ.,concurring.

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7

Rollo,p.84.

TSN,July29,1983,p.20.

Rollo,p.61.

10

143SCRA20.

11

81Phil.359.

12

66SCRA29.F

TheLawphilProjectArellanoLawFoundation

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