3HR2 OCUMIN, Rochelle

RONQUILLO, Marc Jayson

SARMIENTO, Errol
TACUS, Mitch Daryll
ZAMUDIO, Honey Laureen

Allied Banking Corp. v. Lim Sio Wan (549 SCRA 504)

FACTS
FCC had deposited a money market placement with Producers Bank. Deborah Dee Santos was the
money market trader assigned to handle FCCs account. When the placement matured, FCC
demanded the payment of the proceeds of the placement. November 14, 1983, Lim Sio Wan
deposited with Allied Banking Corporation (Allied) a money market placement for a term of 31 days.
December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and
instructed the latter to pre-terminate Lim Sio Wans money market placement, to issue a managers
check and to give the check to Santos who would pick up the check. Lim Sio Wan described the
appearance of Santos. Santos arrived at the bank and signed the application form for a managers
check to be issued. The bank issued Managers Check in the name of Lim Sio Wan, as payee, cross-
checked "For Payees Account Only" and given to Santos. Allied managers check was deposited in
the account of Filipinas Cement Corporation (FCC) at Metropolitan Bank and Trust Co.
(Metrobank), with the forged signature of Lim Sio Wan as indorser. Metrobank stamped a guaranty on
the check, which reads: "All prior endorsements and/or lack of endorsement guaranteed." Upon the
presentment of the check, Allied funded the check even without checking the authenticity of Lim Sio
Wans purported indorsement. December 9, 1983, Lim Sio Wan deposited with Allied a second money
market placement to mature on January 9, 1984. December 14, 1983, upon the maturity date of the
first money market placement, Lim Sio Wan went to Allied to withdraw it. She was then informed that
the placement had been pre-terminated upon her instructions which she denied. Lim Sio Wan filed
with the RTC against Allied to recover the proceeds of her first money market placement. May 15,
1984, Allied informed Metrobank that the signature on the check was forged. Metrobank withheld the
amount represented by the check from FCC. Lim Sio Wan thereafter filed an amended complaint to
include Metrobank as a party-defendant, along with Allied.

ISSUE
Can a drawee bank be held liable together with a collecting bank for a forged indorsement even if it
was latter that stamped the guarantee on all prior indorsements?

RULING
Yes. The institution issuing the check is just as liable as or more liable than the collecting bank. The
warranty that the instrument is genuine and in all respects what it purports to be covers all the
defects in the instrument affecting the validity thereof, including a forged signature.

Allied bank was negligent in issuing the managers check in transmitting it to Santos without written
authorization. Moreover, Metrobank indorsed the check without verifying the authenticity of Lim Sio
Wans indorsement despite the fact that it was cross-checked payable to payees account. Since
Filipinas Cement Corporation (FCC) was not part of any negotiation stage, it will not be held liable.
Lastly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan since the proceeds was
deposited in Producers Bank account in Metrobank without any justification.
 3HR2 OCUMIN, Rochelle
RONQUILLO, Marc Jayson
SARMIENTO, Errol
TACUS, Mitch Daryll
ZAMUDIO, Honey Laureen

Allied Banking Corp. v. Lim Sio Wan (549 SCRA 504)

FACTS
Lim Sio Wan deposited a money market placement in Allied Bank. Before its maturity, an
impostor call an Allied officer instructing her to pre-terminate Lim SioWans money
market placement and to issue a managers check which will be picked up by Santos.
The check was issued to Santos and deposited in the account of Filipinas Cement
Corporation (FCC) at Metrobank with Wans forged signature as indorser. The deposit was
said to be the Producer Banks payment of its obligation to FCC. Upon the maturity date
of the money market placement, Wan went to Allied bank to withdraw it. Allied refused to
pay her, thus, she filed a complaint.

ISSUE
Can a drawee bank be held liable together with a collecting bank for a forged
indorsement even if it was latter that stamped the guarantee on all prior indorsements?

RULING
Yes. The institution issuing the check is just as liable as or more liable than the collecting
bank. The warranty that the instrument is genuine and in all respects what it purports to
be covers all the defects in the instrument affecting the validity thereof, including a
forged signature.

Allied bank was negligent in issuing the managers check in transmitting it to Santos
without written authorization. Moreover, Metrobank indorsed the check without verifying
the authenticity of Lim Sio Wans indorsement despite the fact that it was cross-checked
payable to payees account. Since Filipinas Cement Corporation (FCC) was not part of
any negotiation stage, it will not be held liable. Lastly, Producers Bank was unjustly
enriched at the expense of Lim Sio Wan since the proceeds was deposited in Producers
Bank account in Metrobank without any justification.