G.R. No.

121413 January 29, 2001

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF
ASIA AND AMERICA), petitioner, vs. COURT OF APPEALS and FORD PHILIPPINES, INC.
and CITIBANK, N.A., respondents.
FACTS:
 This case is composed of three consolidated petitions involving several checks, payable to
the Bureau of Internal Revenue, but was embezzled allegedly by an organized syndicate.
 (G.R. Nos. 121413 and 121479) On October 19, 1977, plaintiff Ford issued a Citibank check
amounting to P4,746,114.41 in favor of the Commissioner of Internal Revenue for the
payment of manufacturer’s taxes. The check was deposited with defendant IBAA (now
PCIB), subsequently cleared the Central Bank, and paid by Citibank to IBAA.
 The proceeds never reached BIR, so plaintiff was compelled to make a second payment.
Defendant refused to reimburse plaintiff, and so the latter filed a complaint.
 An investigation revealed that the check was recalled by Godofredo Rivera, the general
ledger accountant of Ford, and was replaced by a manager’s check. Alleged members of a
syndicate deposited the two manager’s checks with Pacific Banking Corporation. Ford filed a
third party complaint against Rivera and PBC. The case against PBC was dismissed.
 (G.R. No. 128604) On another case, Ford drew two checks in favor of the Commissioner of
Internal Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks
payable to payee’s account only. The checks never reached BIR, so plaintiff was compelled
to make second payments.
 On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made the
checks but instead of delivering them to BIR, passed it to Castro, who was the manager of
PCIB San Andres. Castro opened a checking account in the name of a fictitious person
“Reynaldo Reyes”. Castro deposited a worthless Bank of America check with the same
amount as that issued by Ford. While being routed to the Central Bank for clearing, the
worthless check was replaced by the genuine one from Ford.
 Thus, Ford instituted actions to recover the amounts from the collecting (depository) and
drawee banks.
ISSUE: W/N Ford can hold both PCIB and Citibank liable
RULING: YES
The mere fact that forgery was committed by a drawer-payor’s confidential employee or
agent, who by virtue of his position had unusual facilities to perpetrate the fraud and imposing
the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in
the absence of some circumstance raising estoppel against the drawer. The rule applies to checks
fraudulently negotiated or diverted by the confidential employees who hold them in their
possession.
In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to
negotiate the checks. Furthermore, PCIBank’s clearing stamp which guarantees prior or lack of
indorsements render PCIBank liable as it allowed Citibank without any other option but to pay
the checks. PCIBank, being a depository / collecting bank of the BIR, had the responsibility to
make sure that the crossed checks were deposited in “Payee’s account only” as found in the
instrument.
In GR 128604, on the other hand, the switching operation involving the checks, while in
transit for clearing, were the clandestine or hidden actuations performed by the members of the
syndicate in their own personal, covert and private capacity; without the knowledge nor official
or conscious participation of PCIBank in the process of embezzlement. Central Bank Circular
580 (1977), however, provide d that any theft affecting items in transit for clearing are for the
account of the sending bank (herein PCIBank). Still, Citibank was likewise negligent in the
performance of its duties as it failed to establish its payment of Ford’s checks were made in due
course and legally in order. The fact that drawee bank did not discover the irregularity
seasonably constitutes negligence in carrying out the bank’s duty to its depositors.
[G.R. No. 96160. June 17, 1992]
Stelco Marketing Corporation v. Court of Appeals
FACTS:
 Stelco Marketing Corporation sold and delivered bars and wires on seven occasions to RYL
Construction, Inc. The aggregate price for the purchases was P126,859.61. They agreed that
RYL would pay Cash on Delivery but the latter made no payments for the construction
materials.
 RYL gave to Armstrong, Industries — described by STELCO as it’s “sister corporation” and
“manufacturing arm” — a check drawn against Metrobank. That check was a company check
of another corporation, Steelweld Corporation of the Philippines, signed by its President and
its Vice-President. The check was issued by Limson at the behest of his friend, President of
RYL. Romeo Lim had asked Limson for financial assistance, and the latter had agreed to
give Lim a check only by way of accommodation, “only as guaranty but not to pay for
anything. When the latter deposited the check at its bank, it was dishonored because “drawn
against insufficient funds.” When so deposited, the check bore two (2) endorsements, that of
“RYL Construction,” followed by that of “Armstrong Industries.”
 On account of the dishonored check, Armstrong filed a case against Limson and Torres for
violation of BP 22. They were acquitted on the ground that the check in question was not
issued by the drawer ‘to apply on account for value,’ it being merely for
accommodation purposes. That judgment however conditioned the acquittal with the
following pronouncement: “This is not however to release Steelweld Corporation from its
liability under Sec. 29 of the Negotiable Instruments Law for having issued it for the
accommodation of Romeo Lim.”
 STELCO filed with the RTC a civil complaint against both RYL and STEELWELD for the
recovery of the value of the steel bars.
ISSUE: Whether Steelweld as an accommodating party can be held liable by Stelco for the
dishonored check.

RULING: Steelweld may be held liable but not by Stelco

There is no evidence whatever that STELCO’s possession of Check ever dated back to
nay time before the instrument’s presentment and dishonor. There is no evidence whatsoever that
the check was ever given to it, or indorsed to it in any manner or form in payment of an
obligation or as security for an obligation, or for any other purpose before it was presented for
payment. On the contrary, the factual finding of the Court of Appeals, which by traditional
precept is normally conclusive on this Court, is that STELCO never became a holder for value
and that “nowhere in the check itself does the name of Stelco Marketing appear as payee,
indorsee or depositor thereof.

Under Section 29 of the NIL, Steelweld Corp. can be held liable for having issued the
subject check for the accommodation of Romeo Lim.  An accommodation party is one who has
singed the instrument as maker, drawer, acceptor, or indorser, without receiving valued therefor,
and for the purpose of lending his name to some other person. Such a person is liable on the
instrument to a holder for value, notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation party.   Stelco however, cannot be deemed a
holder of the check for value as it does not meet two essential requisites prescribed by statute, i.e.
that it did not become “the holder of it before it was overdue, and without notice that it had been
previously dishonored,” and that it did not take the check “in good faith and for value.”