Areza v. Express Savings Bank, GR No. 176697, September 10, 2014, Perez, J.

Doctrine: Under Section 66 of the Negotiable Instruments Law, an endorser warrants that the
instrument is genuine and in all respects what it purports to be; that he has good title to it; that all
prior parties had capacity to contract; and that the instrument is at the time of his endorsement valid
and subsisting.

Facts: Petitioners’ received an order for the purchase of a motor vehicle from one Gerry Mambuay
and paid the petitioners with nine Philippine Veterans Affairs Office checks payable to different
payees and drawn against the the Latter Bank, in the amount of 200,000 per check. Petitioners’
deposited the said checks in their savings account with the Express Savings Bank which, in turn,
deposited the checks with its depositary bank, Equitable-PCI Bank and the latter presented the checks
to the drawee, the Philippine Veterans Bank, which honored the checks. The Issue Began when the
checks were returned by PVAO to the drawee on the ground that the amount on the face of the
checks was altered from the original amount of ₱4,000.00 to ₱200,000.00. Later on, The Checks were
Dishonore. The Equitable-PCI Bank debited the deposit account of ESB in the amount of P1.8M.
Express Savings Bank then withdrew the amount of P1.8M representing the returned checks from
petitioners saving account.

Issue: Whether or Not The Express Savings Bank has the right to charge the Petitioners for the
deposit amounting to 1,800,000

Ruling:
The Court Ruled in The Negative.

Pursuant to Section 66 of the Negotiable Instruments Law which provides that an endorser warrants
that the instrument is genuine and in all respects what it purports to be; that he has good title to it;
that all prior parties had capacity to contract; and that the instrument is at the time of his
endorsement valid and subsisting.

In the Case at Bar, Express Savings Bank is liable for the amount of the materially altered checks. It
cannot further pass the liability back to the petitioners absent any showing in the negligence on the
part of the petitioners which substantially contributed to the loss from alteration.
BDO Unibank, Inc. v. Lao, GR No. 227005, June 19, 2017, Mendoza, J.

Doctrine: The liability of the drawee bank is based on its contract with the drawer and its duty to
charge to the latter's accounts only those payables authorized by him. A drawee bank is under strict
liability to pay the check only to the payee or to the payee's order. When the drawee bank pays a
person other than the payee named in the check, it does not comply with the terms of the check and
violates its duty to charge the drawer's account only for properly payable items.

Facts: The Respondent Engineer filed before the Regional Trial Court a complaint for a collection of
sum of money against Equitable Banking Corporation, now petitioner Banco de Oro Unibank (BDO),
Everlink Pacific Ventures, Inc. and Wu Hsieh. The Respondent alleged that he was doing business
under the name and style of "Selwyn Lao Construction", that he was a majority stockholder of Wing
An Construction and Development Corporation (Wing An); that he entered into a transaction with
Everlink, through its authorized representative Wu, under which, Everlink would supply him with
"HCG sanitary wares" and that for the down payment, he issued two Equitable crossed checks
payable to Everlink in the amounts of P273,300.00 and P336,500.00, respectively.

In Addition, The Respondent filed an Amended Complaint, wherein he impleaded Union Bank as
additional defendant for allowing the deposit of the crossed checks in two bank accounts other than
the payee's, in violation of its obligation to deposit the same only to the payee's account.

Issue: Whether or Not The Petitioner is Liable for the amount of the checks including moral
damages, exemplary damages, and Attorney’s Fee.

Ruling:
The Court ruled in the Positive.

Based on Case Law, The liability of the drawee bank is based on its contract with the drawer and its
duty to charge to the latter's accounts only those payables authorized by him. A drawee bank is under
strict liability to pay the check only to the payee or to the payee's order. When the drawee bank pays
a person other than the payee named in the check, it does not comply with the terms of the check
and violates its duty to charge the drawer's account only for properly payable items.

In the Case at Bar, there was nothing irregular with the transaction of the Check because the same
was deposited in Everlink's account with Union Bank. It, however, found that the other check was
irregularly deposited and encashed because it was not issued for the account of Everlink, the payee,
but for the account of New Wave. In addition, The Second Check was not even endorsed by Everlink
to New Wave. Thus, it opined that Union Bank was negligent in allowing the deposit and encashment
of the said check without proper endorsement.