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Westmont Bank vs Ong GR No.

132250, The Regional Trial Court of Manila ruled in favor


Jan. 20, 1998 of Eugene Ong. It was then elevated to the Court
of Appeals which affirmed the decision of the
FACTS: RTC.
Eugene Ong maintained a current account with ISSUE:
petitioner Westmont Bank. In May 1976 he sold
certain shares of stocks through Island Securities Whether or not respondent Ong has a cause of
Corporation. To pay Ong, Island Securities action against petitioner Westmont Bank
purchased two (2) Pacific Banking Corporation HELD:
managers checks, both dated May 4, 1976,
issued in the name of Eugene Ong as YES.
payee. Before Ong could get hold of the checks,
The SC held that there is no reversible error in
his friend Paciano Tanlimco got hold of them,
the assailed decisions of the appellate and trial
forged Ongs signature and deposited these with
courts, hence there is no justifiable reason to
petitioner, where Tanlimco was also a
grant the petition.
depositor. Even though Ongs specimen
signature was on file, petitioner accepted and Petitioners claim that respondent has no cause
credited both checks to the account of Tanlimco, of action against the bank is clearly misplaced. As
without verifying the signature indorsements defined, a cause of action is the act or omission
appearing at the back thereof. Tanlimco then by which a party violates a right of another. The
immediately withdrew the money and essential elements of a cause of action are: (a) a
absconded. legal right or rights of the plaintiff, (b) a
correlative obligation of the defendant, and (c)
It was only on October 7, 1977, about five (5)
an act or omission of the defendant in violation
months from discovery of the fraud, demanded
of said legal right.
in his complaint that petitioner pay the value of
the two checks from the bank on whose gross Section 23 of the Negotiable Instruments Law
negligence he imputed his loss. In his suit, he provides that hen a signature is forged or made
insisted that he did not deliver, negotiate, without the authority of the person whose
endorse or transfer to any person or entity the signature it purports to be, it is wholly
subject checks issued to him and asserted that inoperative, and no right to retain the
the signatures on the back were spurious. instrument, or to give a discharge therefor, or to
enforce payment thereof against any party
The bank did not present evidence to the
thereto, can be acquired through or under such
contrary, but simply contended that since
signature, unless the party against whom it is
plaintiff Ong claimed to have never received the
sought to enforce such right is precluded from
originals of the two (2) checks in question from
setting up the forgery or want of authority.
Island Securities, much less to have authorized
Tanlimco to receive the same, he never acquired Since the signature of the payee, in the case at
ownership of these checks. Thus, he had no legal bar, was forged to make it appear that he had
personality to sue as he is not a real party in made an indorsement in favor of the forger, such
interest. The bank then filed a demurrer to signature should be deemed as inoperative and
evidence which was denied. ineffectual. Petitioner, as the collecting bank,
grossly erred in making payment by virtue of said
forged signature. The payee, herein respondent,
should therefore be allowed to recover from the checkbook with blank checks. Eugenio was able
collecting bank. to encash and deposit to her personal account
about seventeen (17) checks drawn against the
The theory of the rule is that the possession of
account of the petitioner at the respondent
the check on the forged or unauthorized
bank.
indorsement is wrongful, and when the money
had been collected on the check, the bank or Petitioner was not able to check his statement of
other person or corporation can be held as for account until a business partner apprised him
moneys had and received, and the proceeds are that he saw Eugenio use his credit cards.
held for the rightful owners who may recover Petitioner fired Eugenio immediately, and
them. The position of the bank taking the check instituted a criminal action against her for estafa
on the forged or unauthorized indorsement is thru falsification and also lodged a complaint for
the same as if it had taken the check and estafa thru falsification of commercial
collected the money without indorsement at all documents against Eugenio on the basis of
and the act of the bank amounts to conversion petitioner's statement that his signatures in the
of the check. checks were forged.

Considering the circumstances in this case, in our Petitioner then requested the respondent bank
view, petitioner could not escape liability for its to credit back and restore to its account the
negligent acts. Admittedly, respondent Eugene value of the checks which were wrongfully
Ong at the time the fraudulent transaction took encashed but respondent bank refused. Hence,
place was a depositor of petitioner bank. Banks petitioner filed the instant case.
are engaged in a business impressed with public
Several employees of Manila Bank were also
interest, and it is their duty to protect in return
called to the witness, they testified that it is the
their many clients and depositors who transact
bank's standard operating procedure that
business with them. They have the obligation to
whenever a check is presented for encashment
treat their clients account meticulously and with
or clearing, the signature on the check is first
the highest degree of care, considering the
verified against the specimen signature cards on
fiduciary nature of their relationship. The
file with the bank. The court a quo rendered
diligence required of banks, therefore, is more
judgment finding no sufficient basis for plaintiff's
than that of a good father of a family. In the
cause herein against defendant bank, thus
present case, petitioner was held to be grossly
dismissing said action. Aggrieved, petitioner
negligent in performing its duties.
elevated the case to the Court of Appeals by way
The instant petition is DENIED and the judgment of a petition for review but without success. The
of the Regional Trial Court of Manila, is appellate court held that petitioner's own
AFFIRMED. negligence was the proximate cause of his loss.

Ilusorio vs CA GR No. 139130, ISSUE:


Nov. 27, 2002
Whether or not petitioner has a cause of action
FACTS: against private respondent.
Ilusorio was a depositor in good standing of
RULING:
respondent bank, the Manila Banking
Corporation. He entrusted to his secretary, The SC find that petitioner has no cause of action
Katherine E. Eugenio, his credit cards and his against Manila Bank.
To be entitled to damages, petitioner has the Petitioner further contends that under Section
burden of proving negligence on the part of the 23 of the Negotiable Instruments Law a forged
bank for failure to detect the discrepancy in the check is inoperative
signatures on the checks. Petitioner failed to
True, it is a rule that when a signature is forged
submit additional specimen signatures as
or made without the authority of the person
requested by the National Bureau of
whose signature it purports to be, the check is
Investigation from which to draw a conclusive
wholly inoperative. However, the rule does
finding regarding forgery.
provide for an exception, namely unless the
The Court of Appeals found that petitioner, by party against whom it is sought to enforce such
his own inaction, was precluded from setting up right is precluded from setting up the forgery or
forgery. Aside from his own testimony, the want of authority. In the instant case, it is the
appellant presented no other evidence to prove exception that applies. In our view, petitioner is
the fact of forgery. Also petitioner's contention precluded from setting up the forgery, assuming
that Manila Bank was remiss in the exercise of its there is forgery, due to his own negligence in
duty as drawee lacks factual basis. entrusting to his secretary his credit cards and
checkbook including the verification of his
The bank's employees in the present case did not
statements of account.
have a hint as to Eugenio's modus operandi
because she was a regular customer of the bank
and it was petitioner, not the bank, who was
BPI vs Casa de Montessori GR No. 149454,
negligent.
May 2, 2004
Negligence is the omission to do something
which a reasonable man, guided by those FACTS:
considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing On November 8, 1982, plaintiff CASA Montessori
International opened Current Account No. 0291-
of something which a prudent and reasonable
0081-01 with defendant BPI with CASAs
man would do. It appears that petitioner
President Ms. Ma. Carina C. Lebron as one of its
accorded his secretary unusual degree of trust authorized signatories.
and unrestricted access to his credit cards,
passbooks, check books In 1991, after conducting an investigation,
plaintiff discovered that nine (9) of its checks had
Petitioner's failure to examine his bank
been encashed by a certain Sonny D. Santos
statements appears as the proximate cause of
since 1990 in the total amount of P782,000.00.
his own damage. The bank was not shown to be
remiss in its duty of sending monthly bank It turned out that Sonny D. Santos with account
statements to petitioner so that any error or at BPIs Greenbelt Branch was a fictitious name
discrepancy in the entries therein could be used by third party defendant Leonardo T. Yabut
brought to the bank's attention at the earliest who worked as external auditor of CASA. Third
opportunity. But, petitioner failed to examine party defendant voluntarily admitted that he
these bank statements not because he was forged the signature of Ms. Lebron and encashed
prevented by some cause in not doing so, but the checks.
because he did not pay sufficient attention to the On March 4, 1991, plaintiff filed the herein
matter. Complaint for Collection with Damages against
defendant bank praying that the latter be
ordered to reinstate the amount
of P782,500.00 in the current and savings have already ruled that a bank is bound to know
accounts of the plaintiff with interest at 6% per the signatures of its customers; and if it pays a
annum. forged check, it must be considered as making
On February 16, 1999, the RTC rendered the the payment out of its own funds, and cannot
decision in favor of the plaintiff. On appeal the ordinarily charge the amount so paid to the
CA modified the Decision of the Regional Trial account of the depositor whose name was
Court (RTC), the CA apportioned the loss forged. In fact, BPI was the same bank involved
between BPI and CASA. The appellate court took when we issued this ruling seventy years ago.
into account CASAs contributory negligence that
resulted in the undetected forgery. Associated Bank vs CA GR No. 107382,
Jan. 31, 1995
ISSUE:
FACTS:
WON BPI liable as the drawee bank for allowing
payment on the checks to a wrongful and On November 14, 1983, respondent Lim Sio Wan
fictitious payee? deposited with petitioner Allied Banking
Corporation (Allied) at its Quintin Paredes
HELD: Branch in Manila a money market placement of
PhP 1,152,597.35 for a term of 31 days to mature
Having established the forgery of the drawers on December 15, 1983 and on December 5,
signature, BPI -- the drawee -- erred in making 1983, a person claiming to be Lim Sio Wan called
payments by virtue thereof. The forged up Cristina So, an officer of Allied, and instructed
signatures are wholly inoperative, and CASA -- the latter to pre-terminate Lim Sio Wans money
the drawer whose authorized signatures do not market placement, to issue a managers check
appear on the negotiable instruments -- cannot representing the proceeds of the placement, and
be held liable thereon. Neither is the latter to give the check to one Deborah Dee Santos
precluded from setting up forgery as a real who would pick up the check. Lim Sio Wan
defense. described the appearance of Santos so that So
We have repeatedly emphasized that, since the could easily identify her.
banking business is impressed with public
interest, of paramount importance thereto is the Later, Santos arrived at the bank and signed the
trust and confidence of the public in application form for a managers check to be
general. Consequently, the highest degree of issued. The bank issued Managers Check No.
diligence is expected and high standards of 035669 for PhP 1,158,648.49, representing the
integrity and performance are even required, of proceeds of Lim Sio Wans money market
it. By the nature of its functions, a bank is under placement in the name of Lim Sio Wan, as
obligation to treat the accounts of its depositors payee. The check was cross-checked for Payees
with meticulous care, always having in mind the Account Only and given to Santos.
fiduciary nature of their relationship.
BPI contends that it has a signature verification Thereafter, the managers check was deposited
procedure, in which checks are honored only in the account of Filipinas Cement Corporation
when the signatures therein are verified to be (FCC) at respondent Metropolitan Bank and
the same with or similar to the specimen Trust Co. (Metrobank), with the forged signature
signatures on the signature cards. Nonetheless, of Lim Sio Wan as indorser.
it still failed to detect the eight instances of
forgery. Its negligence consisted in the omission On December 14, 1983, upon the maturity date
of that degree of diligence required of a bank. It of the first money market placement, Lim Sio
cannot now feign ignorance, for very early on we Wan went to Allied to withdraw it. She was then
informed that the placement had been pre- checks bearing the forged signature of the
terminated upon her instructions. She denied drawer. A forged signature, whether it be that of
giving any instructions and receiving the the drawer or the payee, is wholly inoperative
proceeds thereof. She desisted from further and no one can gain title to the instrument
complaints when she was assured by the banks through it. A person whose signature to an
manager that her money would be recovered. instrument was forged was never a party and
never consented to the contract which allegedly
On January 24, 1984, Lim Sio Wan, realizing that gave rise to such instrument. Section 23 does not
the promise that her money would be recovered avoid the instrument but only the forged
would not materialize, sent a demand letter to signature. Thus, a forged indorsement does not
Allied asking for the payment of the first operate as the payee’s indorsement.
placement. Allied refused to pay Lim Sio Wan, A collecting bank where a check is deposited and
claiming that the latter had authorized the pre- which indorses the check upon presentment
termination of the placement and its subsequent with the drawee bank, is such an indorser. So
release to Santos. even if the indorsement on the check deposited
by the banks’s client is forged, the collecting
Consequently, Lim Sio Wan filed with the RTC a bank is bound by his warranties as an indorser
Complaint dated February 13, 1984 docketed as and cannot set up the defense of forgery as
Civil Case No. 6757 against Allied to recover the against the drawee bank.
proceeds of her first money market placement. In cases involving checks with forged
Sometime in February 1984, she withdrew her indorsements, such as the present petition, the
second placement from Allied. chain of liability does not end with the drawee
bank. The drawee bank may not debit the
Lim Sio Wan thereafter filed an amended account of the drawer but may generally pass
complaint to include Metrobank as a party- liability back through the collection chain to the
defendant, along with Allied. The RTC admitted party who took from the forger and, of course,
the amended complaint despite the opposition to the forger himself, if available. In other words,
of Metrobank. Consequently, Allieds third party the drawee bank can seek reimbursement or a
complaint against Metrobank was converted return of the amount it paid from the presentor
into a cross-claim and the latters fourth party bank or person.
complaint against FCC was converted into a third In this case, the checks were indorsed by the
party complaint. collecting bank (Associated Bank) to the drawee
bank (PNB). The former will necessarily be liable
After trial, the RTC issued its Decision in favor of to the latter for the checks bearing forged
Lim Sio Wan. On appeal the CA also ruled in favor indorsements. If the forgery is that of the
of Lim Sio Wan with modifications. payee’s or holder’s indorsement, the collecting
bank is held liable, without prejudice to the latter
ISSUE: proceeding against the forger.
The Court has consistently ruled that “the
WON PNB and Associated Bank should be held collecting bank or last endorser generally suffers
liable the loss because it has the duty to ascertain the
genuineness of all prior endorsements
HELD: considering that the act of presenting the check
for payment to the drawee is an assertion that
YES. PARTIALLY GRANTED. The collecting bank, the party making the presentment has done its
Associated Bank, shall be liable to PNB for 50% duty to ascertain the genuineness of the
of P203,300. Checks having forged indorsements endorsements.”
should be differentiated from forged checks or
The collecting bank is made liable because it is described the appearance of Santos so that So
privy to the depositor who negotiated the check. could easily identify her.
The bank knows him, his address and history
because he is a client. It has taken a risk on his Later, Santos arrived at the bank and signed the
deposit. The bank is also in a better position to application form for a managers check to be
detect forgery, fraud or irregularity in the issued. The bank issued Managers Check No.
indorsement. 035669 for PhP 1,158,648.49, representing the
Hence, the drawee bank can recover the amount proceeds of Lim Sio Wans money market
paid on the check bearing a forged indorsement placement in the name of Lim Sio Wan, as
from the collecting bank. However, a drawee payee. The check was cross-checked for Payees
bank has the duty to promptly inform the Account Only and given to Santos.
presentor of the forgery upon discovery. If the
drawee bank delays in informing the presentor Thereafter, the managers check was deposited
of the forgery, thereby depriving said presentor in the account of Filipinas Cement Corporation
of the right to recover from the forger, the (FCC) at respondent Metropolitan Bank and
former is deemed negligent and can no longer Trust Co. (Metrobank), with the forged signature
recover from the presentor. of Lim Sio Wan as indorser.
Applying these rules to the case at bench, PNB,
the drawee bank, cannot debit the current On December 14, 1983, upon the maturity date
account of the Province of Tarlac because it paid of the first money market placement, Lim Sio
checks which bore forged indorsements. Wan went to Allied to withdraw it. She was then
However, if the Province of Tarlac as drawer was informed that the placement had been pre-
negligent to the point of substantially terminated upon her instructions. She denied
contributing to the loss, then the drawee bank giving any instructions and receiving the
PNB can charge its account. If both drawee bank- proceeds thereof. She desisted from further
PNB and drawer-Province of Tarlac were complaints when she was assured by the banks
negligent, the loss should be properly manager that her money would be recovered.
apportioned between them.
On January 24, 1984, Lim Sio Wan, realizing that
the promise that her money would be recovered
Allied Bank vs Lim Sio Wan GR No. 133179, would not materialize, sent a demand letter to
March 27, 2008 Allied asking for the payment of the first
placement. Allied refused to pay Lim Sio Wan,
FACTS: claiming that the latter had authorized the pre-
On November 14, 1983, respondent Lim Sio Wan termination of the placement and its subsequent
deposited with petitioner Allied Banking release to Santos.
Corporation (Allied) at its Quintin Paredes
Branch in Manila a money market placement of Consequently, Lim Sio Wan filed with the RTC a
PhP 1,152,597.35 for a term of 31 days to mature Complaint dated February 13, 1984 docketed as
on December 15, 1983 and on December 5, Civil Case No. 6757 against Allied to recover the
1983, a person claiming to be Lim Sio Wan called proceeds of her first money market placement.
up Cristina So, an officer of Allied, and instructed Sometime in February 1984, she withdrew her
the latter to pre-terminate Lim Sio Wans money second placement from Allied.
market placement, to issue a managers check
representing the proceeds of the placement, and Lim Sio Wan thereafter filed an amended
to give the check to one Deborah Dee Santos complaint to include Metrobank as a party-
who would pick up the check. Lim Sio Wan defendant, along with Allied. The RTC admitted
the amended complaint despite the opposition
of Metrobank. Consequently, Allieds third party And as a general rule, collecting bank which
complaint against Metrobank was converted indorses a check bearing a forged indorsement
into a cross-claim and the latters fourth party and presents it to the drawee bank guarantees
complaint against FCC was converted into a third all prior indorsements, including the forged
party complaint. indorsement itself, and ultimately should be held
liable therefor
After trial, the RTC issued its Decision in favor of
Lim Sio Wan. On appeal the CA also ruled in favor Allied Bank is negligent in issuing the manager’s
of Lim Sio Wan with modifications. check and in transmitting it to Santos without
even a written authorization and did not even
ISSUE: ask for the certificate evidencing the money
WON Allied should be solely liable to Lim Sio market placement or call up Lim Sio Wan at her
Wan. residence or office to confirm her instructions.

HELD: Allied Bank’s negligence must be considered as


YES. CA affirmed. Modified Porudcers Bank to the proximate cause of the resulting loss. When
reimburse Allied and Metrobank. Metrobank indorsed the check without verifying
the authenticity of Lim Sio Wan’s indorsement
As provided for Articles 1953 and 1980 of the and when it accepted the check despite the fact
Civil Code that it was cross-checked payable to payee’s
account only contributed to the easier release of
Art. 1953. A person who receives a loan of money Lim Sio Wan’s money and perpetuation of the
or any other fungible thing acquires the fraud.
ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and Given the relative participation of Allied and
quality. Metrobank to the instant case, both banks
cannot be adjudged as equally liable. Hence, the
Art. 1980. Fixed, savings, and current deposits of 60:40 ratio of the liabilities of Allied and
money in banks and similar institutions shall be Metrobank, as ruled by the CA, must be upheld.
governed by the provisions concerning simple
loan. Equitable PCI Bank vs Ong GR No. 156207

Bank deposit is in the nature of a simple loan or FACTS:


mutuum and money market is a market dealing Warliza Sarande deposited in her account at
in standardized short-term credit instruments
Philippine Commercial International (PCI) Bank a
(involving large amounts) where lenders and
PCI Bank TCBT Check of P225K. And on
borrowers do not deal directly with each other
December 5 1991 upon inquiry by Serande at PCI
but through a middle man or dealer in open
market. In a money market transaction, the Bank on whether the TCBT Check had been
investor is a lender who loans his money to a cleared, she received an affirmative
borrower through a middleman or dealer. answer. Relying on this assurance, she issued 2
checks drawn against the proceeds of TCBT
Lim Sio Wan, as creditor of the bank for her Check. PCI Bank Check No. 073661 dated 5
money market placement, is entitled to payment December 1991 for P132K which Sarande issued
upon her request, or upon maturity of the to respondent Rowena Ong owing to a business
placement, or until the bank is released from its transaction.
obligation as debtor
On the same day, Ong presented to PCI Bank (b) That he became the holder of it before it was
requesting PCI to convert the proceeds into a overdue, and without notice it had been
manager’s check, which the PCI obliged. And on previously dishonored, if such was the fact;
December 6 1991, Ong deposited PCI Bank
(c) That he took it in good faith and for value;
Manager's Check in her account with Equitable
Banking Corporation. On December 9 1991 she (d) That at the time it was negotiated to him, he
received a check return-slip informing her that had no notice of any infirmity in the instrument
PCI Bank had stopped the payment of the check or defect in the title of the person negotiating it.
on the ground of irregular issuance.
The same law provides further:
Despite several demands made, it was refused
by which Ong was constrained to file a Complaint Sec. 24. Presumption of consideration. – Every
for sum of money, damages and attorney's fees negotiable instrument is deemed prima facie to
against PCI Bank have been issued for a valuable consideration;
and every person whose signature appears
After trial the RTC rendered a judgment in favor thereon to have become a party thereto for
of Ong by which the CA affirmed RTC. value.
ISSUE: Sec. 26. What constitutes holder for value. –
Where value has at any time been given for the
WON Ong can hold PCI liable
instrument, the holder is deemed a holder for
HELD: value in respect to all parties who become such
prior to that time.
YES. The Petition is DENIED. CA affirmed.
Sec. 28. Effect of want of consideration. –
By admitting it committed an error, clearing the
Absence or failure of consideration is a matter of
check of Sarande and issuing in favor of Ong not
defense as against any person not a holder in
just any check but a manager's check for that
due course; and partial failure of consideration is
matter, PCI Bank's liability is fixed
a defense pro tanto, whether the failure is an
Equitable PCI as drawee bank is bound on the ascertained and liquidated amount or otherwise.
instrument upon certification and it is
immaterial to such liability in favor of Ong who is
a holder in due course whether the drawer Manila Lighter vs CA 182 SCRA 251
(Warliza Sarande) had funds or not with the
FACTS:
Equitable PCI Bank
A complaint for recovery of the value of forty-
The SC also held that there is no unjust
nine (49) checks with alleged
enrichment.
forged/unauthorized indorsements of the payee
SECTION 52. What constitutes a holder in due of which 26 were paid to the petitioner or order
course. – A holder in due course is a holder who and twenty-three (23) to petitioner or bearer,
has taken the instrument under the following was filed by herein petitioner against private
conditions: respondent China Banking Corporation on May
22, 1962. The complaint alleged that the checks
(a) That it is complete and regular upon its face;
were issued by customers of the petitioner in
payment of brokerage/lighterage services and
were all delivered, without petitioner's
knowledge, to its collector, Augusto Perez. Upon falsification made by the plaintiffs employees
forged indorsements of the petitioner's general when the checks were presented to it.
manager, the checks found their way into the
The trial rendered a judgment as follow:
accounts of third persons in the respondent bank
and the proceeds were later withdrawn, to the 1. Ordering defendant China Banking
damage of the petitioner who sought Corporation to pay plaintiff Manila Lighter
reimbursement or restoration by said bank of Transportation, Inc., an amount equal to 50% of
the value of the checks. the total amount of the checks Exhibits A to E-2;
Respondent Bank denied liability for the 2. Ordering plaintiff to pay defendant 50% of the
petitioner's loss which was due to its own amount of the Tabacalera checks Exhibits 2-A to
negligence. It alleged that petitioner is estopped 2-D;
from denying its collector's authority to receive
the checks from the drawers/customers; that 3. Ordering third-party defendant Ko Lit to pay
petitioner failed to give defendant Bank and the P90,500.24 and third-party defendant Cao Pek &
drawee Banks notice of the alleged forged or Co. to pay Pl,215.05, both to China Banking
unauthorized indorsements within a reasonable Corporation;
time; and that its loss was occasioned by its own 4. Ordering China Banking Corporation to pay
failure to observe the proper degree of diligence plaintiff 50% of any amount it may recover from
in the supervision of its employees, particularly Ko Lit and Cao Pek & Co.
its collector, Augusta Perez.
The parties shall bear their own costs and
Upon leave of court, respondent Bank filed a attorney's fees.
third-party complaint against Cao Pek & Co. and
Ko Lit who had deposited the checks in question Both petitioner and private respondent
in their respective accounts with the former and appealed to the Court of Appeals, contending
had thereafter withdrawn the proceeds thereof. that the other should be entirely liable. Ko Lit
and Cao Pek also appealed but their appeal was
Plaintiff made its initial demand against dismissed for failure to pay the docket fee and to
defendant bank for the refund of the amount of file the record on appeal.
the checks on September 9, 1961 (Exh T). There
were some attempts made to negotiate an Court of Appeals rendered judgment, that the
amicable settlement, but nothing came of it." complaint is dismissed and the defendant-
appellant is freed from any liability to the
On May 30, 1962, the defendant Bank filed a plaintiff-appellant. The counterclaim of
third-party complaint against Cao Pek and Co. P3,453.53 is granted with interests from the date
and Ko Lit. Cao Pek and Co., in turn, filed a cross- the amended counterclaim was filed. The third-
claim against Ko Lit. (pp. 38-40, Rollo.) party defendants are adjudged directly liable to
The lower court found both parties equally the plaintiff-appellant for the checks they
negligent, the plaintiff (herein petitioner), for respectively indorsed. No costs.
allowing a state of affairs in which its employees Petitioner filed a motion for reconsideration of
could appropriate the checks and falsify the the decision but it was denied, hence, this
indorsement thereon of its manager with petition for review, alleging that the Court of
impunity, and the defendant (private Appeals erred:
respondent herein), for not detecting the
ISSUE: P57,415.00, drawn against the PNB; that,
following an established banking practice in the
WON the respondent Bank should have been
Philippines, the check was, on the same date,
held entirely liable for the loss.
forwarded, for clearing, through the Central
HELD: Bank, to the PNB, which did not return said check
the next day, or at any other time, but retained
The instant petition for review must necessarily it and paid its amount to the PCIB, as well as
fail. The issues raised therein are factual. The debited it against the account of the GSIS in the
main issue of petitioner's negligence had already PNB; that, subsequently, or on January 31, 1962,
been determined by the trial court against upon demand from the GSIS, said sum of
petitioner and affirmed by the Court of Appeals P57,415.00 was re-credited to the latter's
after examining the evidence in the records. account, for the reason that the signatures of its
Since the petitioner was not a client of officers on the check were forged; and that,
respondent Bank, i.e., did not maintain an thereupon, or on February 2, 1962, the PNB
account in said Bank, the latter had no way of demanded from the PCIB the refund of said sum,
ascertaining the authenticity of its indorsements which the PCIB refused to do. Hence, the present
on the checks which were deposited in the action against the PCIB, which was dismissed by
accounts of the third-party defendants in said the Court of First Instance of Manila, whose
Bank. Respondent Bank was not negligent decision was, in turn, affirmed by the Court of
because, in accordance with banking practice, it Appeals.
caused the checks to pass through the clearing It is not disputed that the signatures of the
house before it allowed their proceeds to be General Manager and the Auditor of the GSIS on
withdrawn by the depositors (third-party the check, as drawer thereof, are forged; that
defendants in the lower court). the person named in the check as its payee was
The Supreme Court decides appeals which only one Mariano D. Pulido, who purportedly
involve questions of law. It is not the function of indorsed it to one Manuel Go; that the check
the Supreme Court to analyze or weigh the purports to have been indorsed by Manuel Go to
evidence all over again, its jurisdiction being Augusto Lim, who, in turn, deposited it with the
limited to resolving errors of law that might have PCIB, on January 15, 1962; that, thereupon, the
been committed by the lower court. PCIB stamped the following on the back of the
(WHEREFORE, the petition for review is denied check: "All prior indorsements and/or Lack of
for lack of merit. Costs against the petitioner. Endorsement Guaranteed, Philippine
Commercial and Industrial Bank," Padre Faura
Branch, Manila; that, on the same date, the PCIB
PNB vs CA 25 SCRA 693 sent the check to the PNB, for clearance, through
the Central Bank; and that, over two (2) months
FACTS: before, or on November 13, 1961, the GSIS had
notified the PNB, which acknowledged receipt of
A partial stipulation of facts entered into by the
the notice, that said check had been lost, and,
parties and the decision of the Court of Appeals
accordingly, requested that its payment be
show that, on about January 15, 1962, one
stopped.
Augusto Lim deposited in his current account
with the PCIB branch at Padre Faura, Manila,
GSIS Check No. 645915- B, in the sum of
ISSUE:

WON PCIB is guilty of negligence and since the Republic Bank vs CA 196 SCRA 100
check had not been accepted by the PNB, the
FACTS:
latter is entitled to reimbursement therefor.
On January 25, 1966, San Miguel Corporation
HELD:
drew a dividend Check No. 108854 for P240,
The PNB maintains that the lower court erred in Philippine currency, on its account in the
not finding that the PCIB had been guilty of respondent First National City Bank in favor of J.
negligence in not discovering that the check was Roberto C. Delgado, a stockholder. After the
forged. Assuming that there had been such check had been delivered to Delgado, the
negligence on the part of the PCIB, it is amount on its face was fraudulently and without
undeniable, however, that the PNB has, also, authority of the drawer, SMC, altered by
been negligent, with the particularity that the increasing it from P240 to P9,240. The check was
PNB had been guilty of a greater degree of indorsed and deposited on March 14, 1966 by
negligence, because it had a previous and formal Delgado in his account with the petitioner
notice from the GSIS that the check had been lost, Republic Bank (hereafter "Republic").
with the request that payment thereof be
stopped. Just as important, if not more Republic accepted the check for deposit without
important and decisive, is the fact that the PNB's ascertaining its genuineness and regularity.
negligence was the main or proximate cause for Later, Republic endorsed the check to FNCB by
the corresponding loss. stamping on the back of the check "all prior
and/or lack of indorsement guaranteed" and
Thus, by not returning the check to the PCIB, by
presented it to FNCB for payment through the
thereby indicating that the PNB had found
Central Bank Clearing House. Believing the check
nothing wrong with the check and would honor
was genuine, and relying on the guaranty and
the same, and by actually paying its amount to
endorsement of Republic appearing on the back
the PCIB, the PNB induced the latter, not only to
of the check, FNCB paid P9,240 to Republic
believe that the check was genuine and good in
through the Central Bank Clearing House on
every respect, but, also, to pay its amount to
March 15, 1966.
Augusto Lim. In other words, the PNB was the
primary or proximate cause of the loss, and,
On April 19, 1966, SMC notified FNCB of the
hence, may not recover from the PCIB.13
material alteration in the amount of the check in
It is a well-settled maxim of law and equity that question. FNCB lost no time in recrediting P9,240
when one of two (2) innocent persons must to SMC. On May 19, 1966, FNCB informed
suffer by the wrongful act of a third person, the Republic in writing of the alteration and the
loss must be borne by the one whose negligence forgery of the endorsement of J. Roberto C.
was the proximate cause of the loss or who put Delgado. By then, Delgado had already
it into the power of the third person to withdrawn his account from Republic.
perpetrate the wrong.14
On August 15, 1966, FNCB demanded that
Then, again, it has, likewise, been held that, Republic refund the P9,240 on the basis of the
where the collecting (PCIB) and the drawee latter’s endorsement and guaranty. Republic
(PNB) banks are equally at fault, the court will refused, claiming there was delay in giving it
leave the parties where it finds them. notice of the alteration; that it was not guilty of
negligence; that it was the drawer’s (SMC’s) fault
in drawing the check in such a way as to permit
the insertion of numerals increasing the amount;
that FNCB, as drawee, was absolved of any
liability to the drawer (SMC), thus, FNCB had no
right of recourse against Republic.

The trial court rendered judgment ordering


Republic to pay P9,240 to FNCB with 6% interest
per annum from February 27, 1967 until fully
paid, plus P2,000 for attorney’s fees and costs of
the suit. The Court of Appeals affirmed that
decision, but modified the award of attorney’s
fees by reducing it to P1,000 without
pronouncement as to costs.

ISSUE:

Whether petitioner Republic Bank as the


collecting bank should bear the loss resulting
from the altered check.

RULING:

The drawee bank, FNCB, should bear the loss for


the payment of the altered check for its failure
to detect and warn Republic Bank of the
fraudulent character of the check within the 24-
hour clearing house rule. Republic Bank, as the
collecting bank, is protected by the 24-hour
clearing house rule found in Central Bank
Circular No. 9. When an indorsement is forged,
the collecting bank or last indorser, as a general
rule, bears the loss. But the unqualified
indorsement of the collecting bank on the check
should be read together with the 24-hour
regulation on clearing house operation. Hence,
when a drawee bank fails to return a forged or
altered check to the collecting bank within the
24-hour clearing period, the collecting bank is
absolved from liability.