PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIB) vs.

Court of
Appeals and FORD PHILIPPINES, INC. and CITIBANK, N.A.
G.R. No. 121413, January 29, 2001
QUISUMBING, J.

FACTS:
Ford, allegedly drew a check in favor of Commissioner of Internal
Revenue (CIR), which it deposited to PCIB as payment, cleared by Central
Bank and was debited from their Citibank account. Amount was not received
by the Commissioner; hence, Ford had to issue another payment. An NBI
investigation showed that one of the checks issued by Ford was withdrawn
from PCIB by Ford’s accountant for an alleged computation error. PCIB
replaced it with 2 of its manager’s checks, which were allegedly stolen by
the syndicate and deposited in their own account.
Ford Philippines filed actions to recover from the drawee bank,
Citibank, and collecting bank, PCIB, the value of subject checks payable to
the CIR which were embezzled allegedly by an organized syndicate.
The trial court decided in favor of Ford; thus, this petition.
ISSUE: Did Ford have the right to recover the value of the checks intended
for CIR from PCIB and Citibank?
HELD:
The title of the person negotiating the same was allegedly defective
because the instrument was obtained by fraud and unlawful means, and the
proceeds of the checks were remitted to the syndicate instead of CIR.
Pursuant Sec. 55 of the NIL, it is vital to show that the negotiation is
made by the perpetrator in breach of faith amounting to fraud. The person
negotiating the checks must have gone beyond the authority given by his
principal. If the principal could prove that there was no negligence in the
performance of his duties, he may set up the personal defense to escape
liability and recover from other parties who, through their own negligence,
allowed the commission of the crime.
The actions of Ford’s employees were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford's negligence, if
any, could not be characterized as the proximate cause of the injury to the
parties.
PCIB and Citibank were negligent. PCIB it failed to verify the authority
of depositor to negotiate the checks; while, Citibank failed to establish that
its payment of Ford's checks were made in due course and legally in order.
Hence, Ford had a right to recover and PCIB and Citibank are equally liable.