CASEN O. 4 G.R. No.
L-62943 July 14, 1986 execution and; that NWSA was guilty of negligence which was the proximate
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner,
vs.
COURT OF APPEALS (Now INTERMEDIATE APPELLATE COURT) and THE
PHILIPPINE NATIONAL BANK, respondents.
FORGERY
FACTS
Metropolitan Waterworks and Sewerage System (hereinafter referred to as
MWSS) is a government owned and controlled corporation created under
Republic Act No. 6234 as the successor-in- interest of the defunct NWSA.
The Philippine National Bank (PNB for short), on the other hand, is the
depository bank of MWSS and its predecessor-in-interest NWSA. Among the
several accounts of NWSA with PNB is NWSA Account No. 6, otherwise
known as Account No. 381-777 and which is presently allocated No. 010-
500281. The authorized signature for said Account No. 6 were those of
MWSS treasurer Jose Sanchez, its auditor Pedro Aguilar, and its acting
General Manager Victor L. Recio. Their respective specimen signatures were
submitted by the MWSS to and on file with the PNB. By special arrangement
with the PNB, the MWSS used personalized checks in drawing from this
account. These checks were printed for MWSS by its printer, F. Mesina
Enterprises, located at 1775 Rizal Extension, Caloocan City.
During the months of March, April and May 1969, twenty-three (23) checks
were prepared, processed, issued and released by NWSA, all of which were
paid and cleared by PNB and debited by PNB against NWSA Account No. 6.
The checks were deposited by the payees Raul Dizon, Arturo Sison and
Antonio Mendoza in their respective current accounts with the Philippine
Commercial and Industrial Bank (PCIB) and Philippine Bank of Commerce
(PBC) in the months of March, April and May 1969. Thru the Central Bank
Clearing, these checks were presented for payment by PBC and PCIB to the
defendant PNB, and paid, also in the months of March, April and May 1969.
At the time of their presentation to PNB these checks bear the standard
indorsement which reads 'all prior indorsement and/or lack of endorsement
guaranteed.'
Subsequent investigation however, conducted by the NBI showed that Raul
Dizon, Arturo Sison and Antonio Mendoza were all fictitious persons.
NWSA addressed a letter to PNB requesting the immediate restoration to its
Account No. 6, of the total sum of P3,457,903.00 corresponding to the total
amount of these twenty-three (23) checks claimed by NWSA to be forged
and/or spurious checks. "In view of the refusal of PNB to credit back to
Account No. 6 the said total sum of P3,457,903.00 MWSS filed the instant
complaint on November 10, 1972 before the Court of First Instance of
Manila.
In its answer, PNB contended among others, that the checks in question
were regular on its face in all respects, including the genuineness of the
signatures of authorized NWSA signing officers and there was nothing on its
face that could have aroused any suspicion as to its genuineness and due
cause of the loss.
PNB also filed a third party complaint against the negotiating banks PBC and
PCIB on the ground that they failed to ascertain the Identity of the payees
and their title to the checks which were deposited in the respective new
accounts of the payees with them.
ISSUES
WON THE SIGNATURES ON THE CHECKS WERE FORGED.
WON THE DRAWEE BANK WAS LIABLE FOR THE LOSS UNDER SECTION
23 OF THE NEGOTIABLE INSTRUMENTS LAW.
HELD
We have carefully reviewed the documents cited by the petitioner. There is no
express and categorical finding in these documents that the twenty-three (23)
questioned checks were indeed signed by persons other than the authorized
MWSS signatories. On the contrary, the findings of the National Bureau of
Investigation in its Report dated November 2, 1970 show that the MWSS
fraud was an "inside job" and that the petitioner's delay in the reconciliation
of bank statements and the laxity and loose records control in the printing of
its personalized checks facilitated the fraud. Likewise, the questioned
Documents Report No. 159-1074 dated November 21, 1974 of the National
Bureau of Investigation does not declare or prove that the signatures
appearing on the questioned checks are forgeries. The report merely
mentions the alleged differences in the type face, checkwriting, and printing
characteristics appearing in the standard or submitted models and the
questioned typewritings. The NBI Chemistry Report No. C-74-891 merely
describes the inks and pens used in writing the alleged forged signatures.
It is clear that these three (3) NBI Reports relied upon by the petitioner are
inadequate to sustain its allegations of forgery. These reports did not touch
on the inherent qualities of the signatures which are indispensable in the
determination of the existence of forgery. There must be conclusive findings
that there is a variance in the inherent characteristics of the signatures and
that they were written by two or more different persons.
Forgery cannot be presumed (Siasat, et al. v. Intermediate Appellate Court, et
al, 139 SCRA 238). It must be established by clear, positive, and convincing
evidence. This was not done in the present case.
The cases of San Carlos Milling Co. Ltd. v. Bank of the Philippine Islands, et
al. (59 Phil. 59) and Great Eastern Life Ins., Co. v. Hongkong and Shanghai
Bank (43 Phil. 678) relied upon by the petitioner are inapplicable in this case
because the forgeries in those cases were either clearly established or
admitted while in the instant case, the allegations of forgery were not clearly
established during trial.
Considering the absence of sufficient security in the printing of the checks
coupled with the very close similarities between the genuine signatures and
the alleged forgeries, the twenty-three (23) checks in question could have
been presented to the petitioner's signatories without their knowing that they
were bogus checks. Indeed, the cashier of the petitioner whose signatures
were allegedly forged was unable to ten the difference between the allegedly
forged signature and his own genuine signature. On the other hand, the
MWSS officials admitted that these checks could easily be passed on as
genuine.
Moreover, the petitioner is barred from setting up the defense of forgery
under Section 23 of the Negotiable Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is forged
or made without authority of the person whose signature it purports to be, it
is wholly inoperative, and no right to retain the instrument, or to give a
discharge therefor, or to enforce payment thereof against any party thereto
can be acquired through or under such signature unless the party against
whom it is sought to enforce such right is precluded from setting up the
forgery or want of authority.
because it was guilty of negligence not only before the questioned checks
were negotiated but even after the same had already been negotiated. (See
Republic v. Equitable Banking Corporation, 10 SCRA 8) The records show
that at the time the twenty-three (23) checks were prepared, negotiated, and
encashed, the petitioner was using its own personalized checks, instead of
the official PNB Commercial blank checks. In the exercise of this special
privilege, however, the petitioner failed to provide the needed security
measures. That there was gross negligence in the printing of its personalized
checks
Hence, even if the twenty-three (23) checks in question are considered
forgeries, considering the petitioner's gross negligence, it is barred from
setting up the defense of forgery under Section 23 of the Negotiable
Instruments Law.
CASE NO. 5
Samsung Construction Corporation, Inc. v. Far East Bank and Trust
Company
G.R. No. 129015; August 13, 2004;
Tinga, J.:
Facts:
Samsung Construction held an account with Far East Bank. A check
worth P999,500 payable to cash was presented by Robert Gonzaga. The
Check was certified to be true by Jose Sempio, the assistant accountant of
Samsung who happened to be present in the bank during the time that the
check was presented.
Three bank personnel examined the check and compared the
signature on the check with the specimen signatures of Samsungs President,
Jong. After ascertatining that the signature was genuine, and that the
account had sufficient funds, Gonzaga was asked to submit 3 proofs of his
identity. Eventually, Gonzaga was able to encash the check.
Samsung, upon discovering the unauthorized withdrawal, filed a
complaint against FEBTC for violation of Section 23 of the Negotiable
Instruments Law.
During the trial , both parties presented their respective expert
witnesses.
RTC rendered judgment in favor of Samsung.
CA reversed the RTC and absolved FEBTC from any liability.
Issue:
Whether Samsung could set up the defense of forgery under Sec. 23.
Ruling:
The check having been proved to be forged, Samsung could now set
up the defense of forgery.
The general rule is to the effect that a forged signature is wholly
inoperative, and payment made through or under such signature is
ineffectual or does not discharge the instrument. If payment is made, the
drawee cannot charge it to the drawers account. The traditional justification
for the result is that the drawee is in a superior position to detect a forgery
because he has the makers signature and is expected to know and compare
it.
Under Sec 23 of the Negotiable Instruments Law, forgery is a real or
absolute defense by the party whose signature is forged. Such liability
attaches even if the bank exerts due diligence and care in preventing such
faulty discharge.
Although the Court recognized that Sec 23 bars a party from setting
up the defense of forgery if it is guilty of negligence, it was unable to conclude
that Samsung was guilty of negligence.
The bare fact that the forgery was committed by an employee of the
party whose signature was forged cannot necessarily imply that such partys
negligence was the cause for the forgery.
Admittedly, the record does not establish what measures Samsung
employed to safeguard its blank checks. Jongs testimony regarding the use
of a safety box by Kyu was considered hearsay. But when CA ruled that
Samsung was negligent, it did not really explain how and why.
In the absence of evidence to the contrary, the court concluded that
there was no negligence, the presumption being that every person takes
ordinary care of his concerns.
The CA Decision extensively discussed the FEBTCs efforts in
establishing that there no negligence on its part in the acceptance and
payment of the forged check. However, the degree of diligence exercised by
the bank would be irrelevant if the drawer is not precluded from setting up
the defense of forgery under Sec 23 by his own negligence.
Case No. 6
Associated Bank v. Court of Appeals
G.R. No. 107382, 31 January 1996
Romero, J:
Facts:
The Province of Tarlac maintains a current account with the
Philippine National Bank (PNB) Tarlac Branch where the provincial funds are
deposited. Checks issued by the Province are signed by the Provincial
Treasurer and countersigned by the Provincial Auditor or the Secretary of the
Sangguniang Bayan. A portion of the funds of the province is allocated to the
Concepcion Emergency Hospital. 2 The allotment checks for said government
hospital are drawn to the order of "Concepcion Emergency Hospital,
Concepcion, Tarlac" or "The Chief, Concepcion Emergency Hospital,
Concepcion, Tarlac." The checks are released by the Office of the Provincial
Treasurer and received for the hospital by its administrative officer and
cashier. The books of account of the Provincial Treasurer were post-audited
by the Provincial Auditor. It was then discovered that the hospital did not
receive several allotment checks drawn by the Province.
Fausto Pangilinan was the cashier of Concepcion Emergency Hospital in
Tarlac until his retirement in 1978. He used to handle checks issued by the
provincial government of Tarlac to the said hospital. However, after his
retirement, the provincial government still delivered checks to him until its
discovery of this irregularity in 1981. By forging the signature of the chief
payee of the hospital (Dr. Adena Canlas), Pangilinan was able to deposit 30
checks amounting to P203k to his account with the Associated Bank.
Provincial Treasurer wrote the manager of the PNB seeking the restoration of
the various amounts debited from the current account of the Province. In
turn, the PNB manager demanded reimbursement from the Associated Bank.
As both banks resisted payment, the Province of Tarlac brought suit against
PNB which, in turn, impleaded Associated Bank as third-party defendant.
The Trial Court ordered to pay PNB the amount of the checks and seek
reimbursement from Associated Bank. The Banks appealed before CA and
the latter affirmed the trial courts decision hence, the petition.
Issue:
Who bears the loss of indorsed checks with forged signature.
Held:
The Supreme Court ruled in this case that the drawer, drawee and
the collecting bank will bear the loss. Where the instrument is payable to
order at the time of the forgery, such as the checks in this case, the signature
of its rightful holder (here, the payee hospital) is essential to transfer title to
the same instrument. When the holders indorsement is forged, all parties
prior to the forgery may raise the real defense of forgery against all parties
subsequent thereto.
A collecting bank (in this case Associated Bank) where a check is deposited
and which indorses the check upon presentment with the drawee bank
(PNB), is such an indorser. So even if the indorsement on the check deposited
by the bankss client is forged, Associated Bank is bound by its warranties as
an indorser and cannot set up the defense of forgery as against the PNB.
Exception is that, if it can be shown that the drawee bank (PNB)
unreasonably delayed in notifying the collecting bank (Associated Bank) of
the fact of the forgery so much so that the latter can no longer collect
reimbursement from the depositor-forger.
The bank on which a check is drawn, known as the drawee bank (PNB), is
under strict liability to pay the check to the order of the payee (Provincial
Government of Tarlac). Payment under a forged indorsement is not to the
drawers order. When the drawee bank pays a person other than the payee, it
does not comply with the terms of the check and violates its duty to charge
its customers (the drawer) account only for properly payable items. Since the
drawee bank did not pay a holder or other person entitled to receive
payment, it has no right to reimbursement from the drawer. The general rule
then is that the drawee bank may not debit the drawers account and is not
entitled to indemnification from the drawer. The risk of loss must perforce fall
on the drawee bank.
Exception is when the drawee bank (PNB) can prove a failure by the
customer/drawer (Tarlac Province) to exercise ordinary care that
substantially contributed to the making of the forged signature, the drawer is
precluded from asserting the forgery.
In sum, by reason of Associated Banks indorsement and warranties of prior
indorsements as a party after the forgery, it is liable to refund the amount to
PNB. The Province of Tarlac can ask reimbursement from PNB because the
Province is a party prior to the forgery. Hence, the instrument is inoperative.
HOWEVER, it has been proven that the Provincial Government of Tarlac has
been negligent in issuing the checks especially when it continued to deliver
the checks to Pangilinan even when he already retired. Due to this
contributory negligence, PNB is only ordered to pay 50% of the amount or
half of P203 K.
Since PNB can pass its loss to Associated Bank (by reason of Associated
Banks warranties), PNB can ask the 50% reimbursement from Associated
Bank. Associated Bank can ask reimbursement from Pangilinan but
unfortunately in this case, the court did not acquire jurisdiction over him.
Case # 7 : Quirino Gonzales Logging Concessionaire et al. Vs. CA and
Republic Planters Bank
-Carpio Morales
Facts
In the expansion of its logging business, respondent bank granted
the application for credit accommodation of the petitioner Quirino. Granting
it a credit line of P900,000.00 broken into an overdraft line of P500,000.00
which was later reduced to P450,000.00 and a Letter of Credit (LC) line of
P400,000.00. Petitioners' obligations under the credit line were secured by a
real estate mortgage on four parcels of land.
In separate transactions, petitioners, to secure certain advances from the
Bank in connection with QGLC's exportation of logs, executed a promissory
note in 1964 in favor of the Bank. They were to execute three more
promissory notes in 1967. petitioners having long defaulted in the payment
of their obligations under the credit line, the Bank foreclosed the mortgage
and bought the properties covered thereby, it being the highest bidder in the
auction sale held in the same year. Ownership over the properties was later
consolidated in the Bank on account of which.
Alleging non-payment of the balance of QGLC's obligation after the proceeds
of the foreclosure sale were applied thereto, and non-payment of the
promissory notes despite repeated demands, the Bank filed a complaint for
"sum of money".
The sixth to ninth causes of action are anchored on the promissory notes
issued by petitioners allegedly to secure certain advances from the Bank in
connection with the exportation of logs as reflected above. The notes were
payable 30 days after date and provided for the solidary liability of petitioners
as well as attorney's fees at ten percent of the total amount due in the event
of their non-payment at maturity.
The note dated June 18, 1964, subject of the sixth cause of action, has a face
value of P55,000.00 with interest rate of twelve percent per annum; that
dated July 7, 1967 subject of the seventh has a face value of P20,000.00;
that dated July 18, 1967 subject of the eighth has a face value of
P38,000.00; and that dated August 23, 1967 subject of the ninth has a face
value of P11,000.00. The interest rate of the last three notes is pegged at
thirteen percent per annum.
The petitioners in its answer denied that they availed of the credit
accommodations and having received the value of the promissory notes, as
they do deny having physically received the tractors and equipment subject
of the LCs and they also alleged that they signed the PN in blank.
The RTC ruled in favor of the petitioners. With respect to the 7th and 8th
note, the authenticity of which documents were partly in doubt in the light of
the categorical and uncontradicted statements that in 1965, defendant
Quirino Gonzales logging concession was terminated. If this is the case, the
Court is in a quandary why there were log exports in 1967? Because of the
foregoing, the Court does not find any valid ground to sustain the seventh
and eight causes of action of plaintiff's complaint.
Issue: WON the petitioners received the tractors and equipment which are
the consideration of the issuance of the PN.
Ruling
YES. The genuineness and due execution of the notes had, however,
been deemed admitted by petitioners, they having failed to deny the same
under oath.
Petitioners' admission of the genuineness and due execution of the
promissory notes notwithstanding, they raise want of consideration thereof.
The promissory notes, however, appear to be negotiable as they meet the
requirements of Section 1 of the Negotiable Instruments Law. Such being the
case, the notes are prima facie deemed to have been issued for consideration.
It bears noting that no sufficient evidence was adduced by petitioners to
show otherwise.
In any case, it is no defense that the promissory notes were signed in blank
as Section 14 of the Negotiable Instruments Law concedes the prima facie
authority of the person in possession of negotiable instruments, such as the
notes herein, to fill in the blanks.
Case 8: Mangahas vs. Brobio
FACTS:
Pacifico Brobio died intestate, leaving 3 parcels of land. He was survived by
his wife, respondent Eufrocina, and 4 legitimate and 3 illegitimate children;
petitioner Carmela Mangahas is one of the illegitimate children.
They executed a Deed of Extrajudicial Settlement with Waiver. In the Deed,
petitioner and Pacificos other children, in consideration of their love and
affection for respondent and the sum of P150K, waived and ceded their
respective shares over the 3 parcels of land in favor of respondent. In
addition, according to Carmela, respondent promised to give her an
additional amount but refused to pay.
A year later, Eufrocina summoned Carmela for the signing of the copy of the
Deed for tax purposes, but she refused and demanded the additional amount
of P1M in lieu of the promised money. At that time, since Eufrocina did not
have the money she begged to lower the amount and executed a PN
amounting to P600K for Carmela to countersign the deed, to wit:
XXX
This is to promise that I will give a Financial Assistance to CARMELA B.
MANGAHAS the amount of P600K only on June 15, 2003.
XXX
When the promissory note fell due, respondent failed and refused to pay
because she kept on insisting that she had no money. Hence, petitioner filed
a Complaint for Specific Performance with Damages, alleging that in
consideration of the said waiver in the extra-judicial settlement defendant
executed a PN on June 15, 2003 committing herself to give petitioner a
financial assistance in the amount of P600K. However, defendant failed to
make good of her promise.
Respondent admitted that she signed the promissory note but claimed that
she was forced to do so. She also claimed that the undertaking was not
supported by any consideration.
RTC then rendered a decision in favor of the petitioner. RTC brushed aside
respondents claim that the PN was not supported by valuable consideration.
The court maintained that the PN was an additional consideration for the
waiver of petitioners share in the three properties in favor of respondent. Its
conclusion was bolstered by the fact that the PN was executed after
negotiation and haggling between the parties.
CA reversed the RTC decision and dismissed the complaint. The CA found
that there was a complete absence of consideration in the execution of the
PN, which made it inexistent and without any legal force and effect. The court
noted that financial assistance was not the real reason why respondent
executed the promissory note, but only to secure petitioners signature. The
CA held that the waiver of petitioners share in the three properties, as
expressed in the deed of extrajudicial settlement, may not be considered as
the consideration of the PN, considering that petitioner signed the Deed way
back in 2002 and she had already received the consideration of P150K for
signing the same. The CA went on to hold that if petitioner disagreed with the
amount she received, then she should have filed an action for partition.
ISSUE:
WON the PN is supported by a consideration.
RULING:
On the issue that the PN is void for not being supported by a consideration,
we likewise disagree with the CA.
A contract is presumed to be supported by cause or consideration. The
presumption that a contract has sufficient consideration cannot be
overthrown by a mere assertion that it has no consideration. To overcome the
presumption, the alleged lack of consideration must be shown by
preponderance of evidence. The burden to prove lack of consideration rests
upon whoever alleges it, which, in the present case, is respondent.
Respondent failed to prove that the PN was not supported by any
consideration. From her testimony and her assertions in the pleadings, it is
clear that the promissory note was issued for a cause or consideration,
which, at the very least, was petitioners signature on the document.
It may very well be argued that if such was the consideration, it was
inadequate. Nonetheless, even if the consideration is inadequate, the contract
would not be invalidated, unless there has been fraud, mistake, or undue
influence but none of these grounds had been proven present in the case.
Case No. 10
FIDELIZA J. AGLIBOT VS. INGERSOL L. SANTIA, G.R. NO. 185945, 05
DECEMBER 2012
Facts: Private respondent-complainant Engr. Ingersol L. Santia (Santia)
loaned the amount of 2,500,000.00 to Pacific Lending & Capital Corporation
(PLCC), through its Manager, petitioner Fideliza J. Aglibot (Aglibot). The loan
was evidenced by a Promissory Note dated July 1, 2003, issued by Aglibot in
behalf of PLCC. Allegedly as a guaranty or security for the payment of the
note, Aglibot also issued and delivered to Santia eleven (11) post-dated
personal checks drawn from her own demand account maintained at
Metrobank. Upon presentment of the aforesaid checks for payment, they
were dishonored by the bank for having been drawn against insufficient
funds or closed account. Santia thus demanded payment from PLCC and
Aglibot of the face value of the checks, but neither of them heeded his
demand. Consequently, eleven (11) Informations for violation of Batas
Pambansa Bilang 22 (B.P. 22), corresponding to the number of dishonored
checks, were filed against Aglibot.
The MTCC rendered a judgment acquitting Aglibot, and the RTC, on appeal,
absolved her of any civil liability towards Santia. The RTC held that nowhere
in the promissory note does it indicate that Aglibot was acting in the capacity
of an accommodation party, and that she just signed it on behalf of PLCC as
manager thereof and the issuance of her personal checks was merely to
guarantee the indebtedness of PLCC
The CA however reversed the findings of the lower courts and declared that
she was acting in the capacity of an accommodation party.
Issue: Guaranty v. Accommodation Party
Held:
Sec. 29. Liability of an accommodation party. An accommodation party is
one who has signed the instrument as maker, drawer, acceptor, or indorser,
without receiving value 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.
As stated in the case of The Phil. Bank of Commerce v. Aruego, The relation
between an accommodation party and the party accommodated is, in effect,
one of principal and surety the accommodation party being the surety. It
is a settled rule that a surety is bound equally and absolutely with the
principal and is deemed an original promisor and debtor from the beginning.
The liability is immediate and direct.It is not a valid defense that the
accommodation party did not receive any valuable consideration when he
executed the instrument; nor is it correct to say that the holder for value is
not a holder in due course merely because at the time he acquired the
instrument, he knew that the indorser was only an accommodation party.
Xxx
unlike in a contract of suretyship, the liability of the accommodation party
remains not only primary but also unconditional to a holder for value, such
that even if the accommodated party receives an extension of the period for
payment without the consent of the accommodation party, the latter is still
liable for the whole obligation and such extension does not release him
because as far as a holder for value is concerned, he is a solidary co-debtor.
In the present case: Article 2055 of the Civil Code provides that a guaranty is
not presumed, but must be express, and cannot extend to more than what is
stipulated therein. This is the obvious rationale why a contract of guarantee
is unenforceable unless made in writing or evidenced by some writing. For as
pointed out by Santia, Aglibot has not shown any proof, such as a contract, a
secretarys certificate or a board resolution, nor even a note or memorandum
thereof, whereby it was agreed that she would issue her personal checks in
behalf of the company to guarantee the payment of its debt to Santia.
Certainly, there is nothing shown in the Promissory Note signed by Aglibot
herself remotely containing an agreement between her and PLCC resembling
her guaranteeing its debt to Santia. And neither is there a showing that PLCC
thereafter ratified her act of "guaranteeing" its indebtedness by issuing her
own checks to Santia.
The appellate court ruled, as upheld by the SC, that by issuing her own post-
dated checks, Aglibot thereby bound herself personally and solidarily to pay
Santia, and dismissed her claim that she issued her said checks in her
official capacity as PLCCs manager merely to guarantee the investment of
Santia. It noted that she could have issued PLCCs checks, but instead she
chose to issue her own checks, drawn against her personal account with
Metrobank. It concluded that Aglibot intended to personally assume the
repayment of the loan, pointing out that in her Counter-Affidavit, she even
admitted that she was personally indebted to Santia, and only raised
payment as her defense, a clear admission of her liability for the said loan.
Case 16
Caltex (Phils.), Inc. vs. Court of Appeals, et. al.
[G.R. No. 97753. August 10, 1992]
FACTS:
Security Bank and Trust Company (Security Bank), a commercial
banking institution, issued 280 certificates of time deposit (CTDs) in favour of
Angel dela Cruz (Dela Cruz), which the latter delivered to herein plaintiff
(Caltex) in connection with his purchase of fuel products. Dela Cruz then
informed Security Bank that he lost all the certificates. He executed and
delivered to defendant bank an Affidavit of Loss, on the basis of which 280
replacement CTDs were issued. Dela Cruz obtained a loan from defendant
bank and executed a notarized deed of assignment of time deposits that
authorizes said bank to set-off and apply the CTDs as payment for the loan.
Defendant bank rejected plaintiffs demand and claim for payment of the
value of the CTDs.
ISSUE:
Whether or not the subject certificates are negotiable instruments.
RULING:
The negotiability or non-negotiability of an instrument is determined
from the writing, that is, from the face of the instrument itself.
The CTDs are negotiable instruments. The documents provide that
the amounts deposited shall be repayable to the depositor who, according to
the document, is the bearer.
Petitioner, however, cannot rightly recover. A valid negotiation
thereof requires both delivery and indorsement. The CTDs were delivered as
security, not payment, for purchases of fuel products
CASE 23.
METROPOLITAN BANK AND TRUST COMPANY, v. PHILIPPINE BANK OF
COMMUNICATIONS, FILIPINAS ORIENT FINANCE CORPORATION, PIPE
MASTER CORPORATION and TAN JUAN LIAN
SANDOVAL-GUTIERREZ, J.
Facts:
On July 1, 1978, the Board of Directors of Pipe Master issued a Board
Resolution authorizing Yu Kio, in his capacity as president, and/or Tan Juan
Lian, in his capacity as vice-president, to execute, indorse, make, sign,
deliver or negotiate instruments, documents and such other papers
necessary in connection with any transaction coursed through Filipinas
Orient for and in behalf of the corporation.
Under the check discounting agreement between Pipe Master and Filipinas
Orient, Yu Kio sold to Filipinas Orient four Metropolitan Bank and Trust
Company (Metro Bank) checks amounting to P1,000,000.00. In exchange for
the four Metro Bank checks, Filipinas Orient issued to Yu Kio four Philippine
Bank of Communications (PBCom) crossed checks totaling P964,303.62,
payable to Pipe Master with the statement for payees account only.
Upon his receipt of the four PBCom checks, Yu Kio indorsed and deposited in
the Metro Bank, in his personal account, three of the checks valued at
P721,596.95. As to the remaining check amounting to P242,706.67, he
deposited it in the Solid Bank Corporation (Solid Bank), also in his personal
account. Eventually, PBCom paid Metro Bank and Solid Bank the amounts
of the checks. In turn, Metro Bank and Solid Bank credited the value of the
checks to the personal accounts of Yu Kio.
Subsequently, when Filipinas Orient presented the four Metro Bank checks
equivalent to P1,000,000.00 it received from Yu Kio, they were dishonored by
the drawee bank.Pipe Master, the drawer, refused to pay the amounts of the
checks, claiming that it never received the proceeds of the PBCom checks as
they were delivered and paid to the wrong party, Yu Kio, who was not the
named payee.
Filipinas Orient then demanded that PBCom restore to its (Filipinas Orients)
account the value of the PBCom checks. In turn, PBCom sought
reimbursement from Metro Bank and Solid Bank, being the collecting banks,
but they refused. Thus, Filipinas Orient filed with the Regional Trial Court
(RTC), Branch 39, Manila a complaint for a sum of money against Pipe
Master, Tan Juan Lian and/or PBCom.
Issue:
Whether Metro Bank and Solid Bank, petitioners, are liable to respondent
Filipinas Orient for accepting the PBCom crossed checks payable to Pipe
Master.
Ruling: Yes.
Petitioner banks accommodated Yu Kio, being a valued client and the
president of Pipe Master, and accepted the crossed checks. They stamped at
the back thereof that all prior indorsements and/or lack of indorsements are
guaranteed. In so doing, they became general endorsers. 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 a good title to
it; that all prior parties had capacity to contract; and that the instrument is
at the time of his indorsement valid and subsisting.
Clearly, petitioner banks, being endorsers, cannot deny liability.
In Associated Bank v. Court of Appeals, we held that the collecting bank or
last endorser generally suffers the loss because it has the duty to ascertain
the genuineness of all prior indorsements and is privy to the depositor who
negotiated the check.
PBCom, as the drawee bank, cannot be held liable since it mainly relied on
the express guarantee made by petitioners, the collecting banks, of all prior
indorsements.
Evidently, petitioner banks disregarded established banking rules and
procedures. They were negligent in accepting the checks and allowing the
transaction to push through. In Jai-Alai Corp. of the Phil. v. Bank of the Phil.
Islands, we ruled that one who accepts and encashes a check from an
individual knowing that the payee is a corporation does so at his peril.
Therefore, petitioner banks are liable to respondent Filipinas Orient.
CASE NO. 33 [G.R. No. 109491. February 28, 2001] ATRIUM
MANAGEMENT CORPORATION, petitioner, vs. COURT OF APPEALS, E.T.
HENRY AND CO., LOURDES VICTORIA M. DE LEON, RAFAEL DE LEON,
JR., AND HI-CEMENT CORPORATION, respondents.
Holder in Due Course
FACTS
On January 3, 1983, Atrium Management Corporation filed with the Regional
Trial Court, Manila an action for collection of the proceeds of four postdated
checks in the total amount of P2 million. Hi-Cement Corporation through its
corporate signatories, petitioner Lourdes M. de Leon,[2] treasurer, and the
late Antonio de las Alas, Chairman, issued checks in favor of E.T. Henry and
Co. Inc., as payee. E.T. Henry and Co., Inc., in turn, endorsed the four
checks to petitioner Atrium Management Corporation for valuable
consideration. Upon presentment for payment, the drawee bank dishonored
all four checks for the common reason payment stopped. Atrium, thus,
instituted this action after its demand for payment of the value of the checks
was denied.[3]
After due proceedings, on July 20, 1989, the trial court rendered a decision
ordering Lourdes M. de Leon, her husband Rafael de Leon, E.T. Henry and
Co., Inc. and Hi-Cement Corporation to pay petitioner Atrium, jointly and
severally, the amount of P2 million corresponding to the value of the four
checks, plus interest and attorneys fees.
In due time, both Lourdes M. de Leon and Hi-Cement appealed to the Court
of Appeals.[9]
Lourdes M. de Leon submitted that the trial court erred in ruling that she
was solidarilly liable with Hi-Cement for the amount of the check. Also, that
the trial court erred in ruling that Atrium was an ordinary holder, not a
holder in due course of the rediscounted checks.[10]
Hi-Cement on its part submitted that the trial court erred in ruling that even
if Hi-Cement did not authorize the issuance of the checks, it could still be
held liable for the checks. And assuming that the checks were issued with its
authorization, the same was without any consideration, which is a defense
against a holder in due course and that the liability shall be borne alone by
E.T. Henry.
Court of Appeals promulgated its decision modifying the decision of the trial
court, absolving Hi-Cement Corporation from liability and dismissing the
complaint as against it. The appellate court ruled that: (1) Lourdes M. de
Leon was not authorized to issue the subject checks in favor of E.T. Henry,
Inc.; (2) The issuance of the subject checks by Lourdes M. de Leon and the
late Antonio de las Alas constituted ultra vires acts; and (3) The subject
checks were not issued for valuable consideration.
ISSUE
Whether or not petitioner Atrium was a holder of the checks in due course.
HELD
The Negotiable Instruments Law, Section 52 defines a holder in due course,
thus:
A holder in due course is a holder who has taken the instrument under the
following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice
that it had been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity
in the instrument or defect in the title of the person negotiating it.
In the instant case, the checks were crossed checks and specifically indorsed
for deposit to payees account only. From the beginning, Atrium was aware of
the fact that the checks were all for deposit only to payees account, meaning
E.T. Henry. Clearly, then, Atrium could not be considered a holder in due
course.
However, it does not follow as a legal proposition that simply because
petitioner Atrium was not a holder in due course for having taken the
instruments in question with notice that the same was for deposit only to the
account of payee E.T. Henry that it was altogether precluded from recovering
on the instrument. The Negotiable Instruments Law does not provide that a
holder not in due course can not recover on the instrument.[19]
The disadvantage of Atrium in not being a holder in due course is that the
negotiable instrument is subject to defenses as if it were non-negotiable.[20]
One such defense is absence or failure of consideration.[21] We need not rule
on the other issues raised, as they merely follow as a consequence of the
foregoing resolutions.
CASE NO. 34
Equitable PCI Bank v. Rowena Ong
G.R. No. 156207, Sept. 15, 2006;
CHICO-NAZARIO, J.:
Facts:
Warliza Sarande deposited in her account at Philippine Commercial
International Bank a check in the amount of P225,000.00. Sarande was then
informed that said check has been cleared. Relying on such assurance, she
issued two (2) checks where one was issued to respondent Rowena Ong
Owing to a business transaction. The latter then requested PCI Bank to
convert the proceeds thereof into a manager's check, which the PCI Bank
obliged. When Ong deposited the manager's check in her account with
Equitable Banking Corporation, she received a check return-slip informing
her that PCI Bank had stopped the payment of the said check on the ground
of irregular issuance. Ong then filed a complaint for sum of money against
herein petitioner. Petitioner countered that the check was returned as the
account against which it was drawn was already closed.
Issue:
Whether Ong was a Holder in Due Course.
Ruling:
Yes. Rowena Ong was a Holder in Due Course.
According to Sec. 52 of the Negotiable Instruments Law:
SECTION 52. What constitutes a holder in due course. A holder in
due course is a holder who has taken the instrument under the
following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and
without notice it had been previously dishonored, if such was the
fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.
The same law provides further:
Sec. 24. Presumption of consideration. Every negotiable instrument
is deemed prima facie to have been issued for a valuable
consideration; and every person whose signature appears thereon to
have become a party thereto for value.
Sec. 26. What constitutes holder for value. Where value has at any
time been given for the instrument, the holder is deemed a holder for
value in respect to all parties who become such prior to that time.
Sec. 28. Effect of want of consideration. Absence or failure of
consideration is a matter of defense as against any person not a
holder in due course; and partial failure of consideration is a
defense pro tanto, whether the failure is an ascertained and
liquidated amount or otherwise.
What Ong obtained from PCI Bank was not just any ordinary check
but a manager's check. A manager's check is an order of the bank to pay,
drawn upon itself, committing in effect its total resources, integrity and
honor behind its issuance. By its peculiar character and general use in
commerce, a manager's check is regarded substantially to be as good as the
money it represents.
A manager's check stands on the same footing as a certified
check. The effect of certification is found in Section 187, Negotiable
Instruments Law.
Sec. 187. Certification of check; effect of. Where a check is certified
by the bank on which it is drawn, the certification is equivalent to an
acceptance.26
A manager's check is one drawn by the bank's manager upon the
bank itself. It is similar to a cashier's check both as to effect and use.
A cashier's check is a check of the bank's cashier on his own or
another check. In effect, it is a bill of exchange drawn by the cashier
of a bank upon the bank itself, and accepted in advance by the act of
its issuance. It is really the bank's own check and may be treated as
a promissory note with the bank as a maker. The check becomes the
primary obligation of the bank which issues it and constitutes its
written promise to pay upon demand. The mere issuance of it is
considered an acceptance thereof.
 By accepting PCI Bank Check No. 073661 issued by Sarande to Ong
and issuing in turn a manager's check in exchange thereof, PCI Bank
assumed the liabilities of an acceptor under Section 62 of the Negotiable
Instruments Law
Sec. 62. Liability of acceptor. The acceptor by accepting the instruments
engages that he will pay it according to the tenor of his acceptance; and
admits
(a) The existence of the drawer, the genuineness of his signature, and
his capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
Section 2, of Republic Act No. 8791, The General Banking Law of 2000
decrees:
SEC. 2. Declaration of Policy. The State recognizes the vital role of
banks in providing an environment conducive to the sustained
development of the national economy and the fiduciary nature of
banking that requires high standards of integrity and performance.
In furtherance thereof, the State shall promote and maintain a stable
and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a developing
economy.
The degree of diligence required of banks is more than that of a good
father of a family where the fiduciary nature of their relationship with their
depositors is concerned. Indeed, the banking business is vested with the
trust and confidence of the public, hence the appropriate standard of
diligence must be very high, if not the highest degree of diligence.
Case No. 35
De Ocampo v. Gatchalian
G.R. No. L-15126, 30 November 30, 1961
Labrador, J.:
Facts:
Matilde Gonzales was a patient of the De Ocampo Clinic owned by Vicente De
Ocampo. She incurred a debt amounting to P441.75. Her husband, Manuel
Gonzales designed a scheme in order to pay off this debt: In 1953, Manuel
went to a certain Anita Gatchalian. Manuel purported himself to be selling
the car of Vicente De Ocampo. Gatchalian was interested in buying said car
but Manuel told her that De Ocampo will only sell the car if Gatchalian
shows her willingness to pay for it.
Manuel advised Gatchalian to draw a check of P600.00 payable to De
Ocampo so that Manuel may show it to De Ocampo and that Manuel in the
meantime will hold it for safekeeping. Gatchalian agreed and gave Manuel
the check. After that, Manuel never showed himself to Gatchalian.
Meanwhile, Manuel gave the check to his wife who in turn gave the check to
De Ocampo as payment of her bills with the clinic. De Ocampo received the
check and even gave Matilde her change (sukli). On the other hand, since
Gatchalian never saw Manuel again, she placed a stop-payment on the
P600.00 check so De Ocampo was not able to cash on the check. Eventually,
the issue reached the courts and the trial court ordered Gatchalian to pay De
Ocampo the amount of the check.
Gatchalian argued that De Ocampo is not entitled to payment because there
was no valid indorsement. De Ocampo argued tha he is a holder in due
course because he is the named payee.
Issue:
Whether De Ocampo is a holder in due course.
Ruling:
Supreme Court ruled in the negative. Under Section 52 of the Negotiable
Instruments Law, it defines holder in due course, thus:
A holder in due course is a holder who has taken the instrument under the
following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without
notice that it had been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating it.
The Supreme Court emphasized that if one is such a holder in due course, it
is immaterial that he was the payee and an immediate party to the
instrument. The Supreme Court however ruled that De Ocampo is not a
holder in due course for his lack of good faith. De Ocampo should have
inquired as to the legal title of Manuel to the said check. The fact that
Gatchalian has no obligation to De Ocampo and yet hes named as the payee
in the check hould have apprised De Ocampo; that the check did not
correspond to Matilde Gonzales obligation with the clinic because of the fact
that it was for P600.00 more than the indebtedness; that why was Manuel
in possession of the check all these gave De Ocampo the duty to ascertain
from the holder Manuel Gonzales what the nature of the latters title to the
check was or the nature of his possession.
Case # 36: Cely Yang vs. CA and PCIB et al.
Facts
 Petitioner Cely Yang and private respondent Prem Chandiramani
entered into an agreement whereby the latter was to give Yang a PCIB
managers check in the amount of 4.2 million in exchange for two (2) of
Yangs managers checks, each in the amount of 2.087 million, both payable
to the order of private respondent Fernando David. Yang and Chandiramani
agreed that the difference of 26,000.00 in the exchange would be their profit
to be divided equally between them.
Yang and Chandiramani also further agreed that the former would
secure from FEBTC a dollar draft in the amount of US$200,000.00, payable
to PCIB FCDU Account No. 4195-01165-2, which Chandiramani would
exchange for another dollar draft in the same amount to be issued by Hang
Seng Bank Ltd. of Hong Kong.
Yang through his deliveryman, Ranigo brought the PCIB managers
check together with FEBTC dollar draft in the meeting place of exchange.
However, Chandiramani did not appear and the checks and dollar draft were
allegedly lost by Ranigo. It was later on reported to the police.
However, the checks and the dollar draft were not lost, for
Chandiramani was able to get hold of said instruments, without delivering
the exchange consideration consisting of the PCIB managers check and the
Hang Seng Bank dollar draft.
Chandiramani delivered to respondent Fernando David at China Banking
Corporation the checks and was able to obtained from David $360,000.00
and $200,000 which later on deposited on the savings account of the wife
and mother of Chandiramani respectively.
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the
instruments she believed to be lost. Both banks complied with her request,
but upon the representation of PCIB, FEBTC subsequently lifted the stop
payment order on FEBTC Dollar Draft No. 4771, thus enabling the holder of
PCIB FCDU Account No. 4195-01165-2 to receive the amount of
US$200,000.00.
Yang lodged a Complaint against Chandiramani, David and the banks.
Petitioner posits that the last two requisites of Section 52 are missing,
thereby preventing David from being considered a holder in due course. (FOR
VALUE and NO KNOWLEDGE OF ANY INFIRMITY)
Issue: WON David is a holder in due course
Ruling
YES. Every holder of a negotiable instrument is deemed prima facie a
holder in due course. However, this presumption arises only in favor of a
person who is a holder as defined in Section 191 of the Negotiable
Instruments Law, meaning a "payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof."
In the present case, it is not disputed that David was the payee of the checks
in question. The weight of authority sustains the view that a payee may be a
holder in due course. Hence, the presumption that he is a prima facie holder
in due course applies in his favor. However, said presumption may be
rebutted. Hence, what is vital to the resolution of this issue is whether David
took possession of the checks under the conditions provided for in Section 52
of the Negotiable Instruments Law. All the requisites provided for in Section
52 must concur in Davids case, otherwise he cannot be deemed a holder in
due course.
David is a holder in due course because; first, with respect to consideration,
Section 24 of the Negotiable Instruments Law creates a presumption that
every party to an instrument acquired the same for a consideration or for
value. Thus, the law itself creates a presumption in Davids favor that he gave
valuable consideration for the checks in question. In alleging otherwise, the
petitioner has the onus to prove that David got hold of the checks absent
said consideration. In other words, the petitioner must present convincing
evidence to overthrow the presumption. Our scrutiny of the records, however,
shows that the petitioner failed to discharge her burden of proof.
Second, petitioner fails to point any circumstance which should have put
David on inquiry as to the why and wherefore of the possession of the checks
by Chandiramani. David was not privy to the transaction between petitioner
and Chandiramani. Instead, Chandiramani and David had a separate dealing
in which it was precisely Chandiramanis duty to deliver the checks to David
as payee. The evidence shows that Chandiramani performed said task to the
letter. Petitioner admits that David took the step of asking the manager of his
bank to verify from FEBTC and Equitable as to the genuineness of the checks
and only accepted the same after being assured that there was nothing
wrong with said checks. At that time, David was not aware of any "stop
payment" order. Under these circumstances, David thus had no obligation to
ascertain from Chandiramani what the nature of the latters title to the
checks was, if any, or the nature of his possession. Thus, we cannot hold
him guilty of gross neglect amounting to legal absence of good faith, absent
any showing that there was something amiss about Chandiramanis
acquisition or possession of the checks. David did not close his eyes
deliberately to the nature or the particulars of a fraud allegedly committed by
Chandiramani upon the petitioner, absent any knowledge on his part that
the action in taking the instruments amounted to bad faith
Case 37: Gempesaw vs. CA
FACTS:
Petitioner filed a Complaint against the private respondent PBC (respondent
drawee Bank) for recovery of the money value of 82 checks charged against
the petitioner's account with the respondent drawee Bank on the ground that
the payees' indorsements were forgeries.
Petitioner Natividad Gempesaw owns and operates grocery stores. To
facilitate payment of debts to her suppliers, she maintained a checking
account with PBC branch. As customary practice in issuing checks in
payment of her suppliers, Natividads bookkeeper, Alicia Galang prepares the
checks and submits them for signature.
In the course of her business operations covering a period of 2 years,
petitioner issued, following her usual practice, a total of 82 checks in favor of
several suppliers. All the checks issued and honored by the respondent
drawee bank were crossed checks. Aside from the daily notice given to the
petitioner by the respondent drawee Bank, the latter also furnished her with
a monthly statement of her transactions, attaching thereto all the cancelled
checks she had issued and which were debited against her current account.
It was only after the lapse of more 2 years that petitioner found out about the
fraudulent manipulations of her bookkeeper.
All the 82 checks with forged signatures of the payees were brought to Ernest
Boon, Chief Accountant of respondent drawee Bank at the Buendia branch,
who, without authority, accepted them all for deposit at the Buendia branch
to the credit and/or in the accounts of Alfredo Y. Romero and Benito Lam
and some of the checks were deposited at the Elcano branch of PBC.
Under the rules of the respondent Bank, only a BM and no other official of
the respondent bank may accept a second indorsement on a check for
deposit. In the case at bar, all the deposit slips of the 82 checks in question
were initialed and/or approved for deposit by Ernest Boon. The BMs of the
Ongpin and Elcao branches accepted the deposits made in the Buendia
branch and credited the accounts of Alfredo Y. Romero and Benito Lam in
their respective branches.
Petitioner made a written demand on the drawee Bank to credit her account
with the money value of the 82 checks totalling P1M + for having been
wrongfully charged against her account. Respondent drawee Bank refused to
grant petitioner's demand. Thereafter, Natividad filed a complaint.
RTC dismissed the case and on appeal, CA affirmed the lower court decision.
ISSUE: WON the issued 82 checks are restrictive indorsements checks.
RULING:
Petitioner argues that respondent drawee Bank should not have honored the
checks because they were crossed checks. Issuing a crossed check imposes
no legal obligation on the drawee not to honor such a check. It is more of a
warning to the holder that the check cannot be presented to the drawee bank
for payment in cash. Instead, the check can only be deposited with the
payee's bank which in turn must present it for payment against the drawee
bank in the course of normal banking transactions between banks. The
crossed check cannot be presented for payment but it can only be deposited
and the drawee bank may only pay to another bank in the payee's or
indorser's account.
Petitioner likewise contends that banking rules prohibit the drawee bank
from having checks with more than one indorsement. The banking rule
banning acceptance of checks for deposit or cash payment with more than
one indorsement unless cleared by some bank officials does not invalidate
the instrument; neither does it invalidate the negotiation or transfer of the
said check. In effect, this rule destroys the negotiability of bills/checks by
limiting their negotiation by indorsement of only the payee.
Under the NIL, the only kind of indorsement which stops the further
negotiation of an instrument is a restrictive indorsement which prohibits the
further negotiation thereof.
Sec. 36. When indorsement restrictive. An indorsement is restrictive which
either
(a) Prohibits further negotiation of the instrument; or
In this kind of restrictive indorsement, the prohibition to transfer or negotiate
must be written in express words at the back of the instrument, so that any
subsequent party may be forewarned that ceases to be negotiable. However,
the restrictive indorsee acquires the right to receive payment and bring any
action thereon as any indorser, but he can no longer transfer his rights as
such indorsee where the form of the indorsement does not authorize him to
do so.
Although the holder of a check cannot compel a drawee bank to honor it
because there is no privity between them, as far as the drawer-depositor is
concerned, such bank may not legally refuse to honor a negotiable bill of
exchange or a check drawn against it with more than one indorsement if
there is nothing irregular with the bill or check and the drawer has sufficient
funds. The drawee cannot be compelled to accept or pay the check by the
drawer or any holder because as a drawee, he incurs no liability on the check
unless he accepts it. But the drawee will make itself liable to a suit for
damages at the instance of the drawer for wrongful dishonor of the bill or
check.
Thus, it is clear that under the NIL, petitioner is precluded from raising the
defense of forgery by reason of her gross negligence.
There is no question that there is a contractual relation between petitioner as
depositor (obligee) and the respondent drawee bank as the obligor. In the
performance of its obligation, the drawee bank is bound by its internal
banking rules and regulations which form part of any contract it enters into
with any of its depositors. When it violated its internal rules that second
endorsements are not to be accepted without the approval of its branch
managers and it did accept the same upon the mere approval of Boon, a chief
accountant, it contravened the tenor of its obligation at the very least, if it
were not actually guilty of fraud or negligence.
Furthermore, the fact that the respondent drawee Bank did not discover the
irregularity with respect to the acceptance of checks with second
indorsement for deposit even without the approval of the branch manager
despite periodic inspection conducted by a team of auditors from the main
office constitutes negligence on the part of the bank in carrying out its
obligations to its depositors.
Premises considered, respondent drawee Bank is adjudged liable to share the
loss with the petitioner on a 50-50 ratio in accordance with Article 172 of the
Civil Code. With the said provisions of the Civil Code being relied upon, it is
being made clear that the decision to hold the drawee bank liable is based on
law and substantial justice and not on mere equity. And although the case
was brought before the court not on breach of contractual obligations, the
courts are not precluded from applying to the circumstances of the case the
laws pertinent thereto. Thus, the fact that petitioner's negligence was found
to be the proximate cause of her loss does not preclude her from recovering
damages. The reason why the decision dealt on a discussion on proximate
cause is due to the error pointed out by petitioner as allegedly committed by
the respondent court. And in breaches of contract under Article 1173, due
diligence on the part of the defendant is not a defense.
Case No. 39
METROPOLITAN BANKING AND TRUST COMPANY (formerly ASIANBANK
CORPORATION) VS. BA FINANCE CORPORATION and MALAYAN
INSURANCE CP., INC., G.R. 179952, 04 DECEMBER 2009
Facts: Lamberto Bitanga (Bitanga) obtained from respondent BA Finance
Corporation (BA Finance) a 329,280 loan to secure which, he mortgaged his
car to respondent BA Finance. The mortgage also stated that the car must be
insured, in which Bitanga insured it with Malayan Insurance Co., Inc.
(Malayan Insurance). The policy stated, among others, that: Loss, if any
shall be payable to BA FINANCE CORP. as its interest may appear. It is
hereby expressly understood that this policy or any renewal thereof, shall not
be cancelled without prior notification and conformity by BA FINANCE
CORPORATION.
The car was stolen. On Bitangas claim, Malayan Insurance issued a check
payable to the order of "B.A. Finance Corporation and Lamberto Bitanga" for
224,500, drawn against China Banking Corporation (China Bank). The
check was crossed with the notation "For Deposit Payees Account Only."
Without the indorsement or authority of his co-payee BA Finance, Bitanga
deposited the check to his account with the Asianbank Corporation
(Asianbank), now merged with herein petitioner Metropolitan Bank and Trust
Company (Metrobank). Bitanga subsequently withdrew the entire proceeds of
the check.
BA Finance eventually learned of the loss of the car and of Malayan
Insurances issuance of a crossed check payable to it and Bitanga, and of
Bitangas depositing it in his account at Asianbank and withdrawing the
entire proceeds thereof. BA Finance thereupon demanded the payment of the
value of the check from Asianbank7 but to no avail, prompting it to file a
complaint before the Regional Trial Court (RTC) of Makati for sum of money
and damages against Asianbank and Bitanga, alleging that, inter alia, it is
entitled to the entire proceeds of the check.
Issue: Whether an instrument which is payable to the order of two or more
payees or indorsees must all indorse the instrument.
Held: Section 41 of the Negotiable Instruments Law provides:
Where an instrument is payable to the order of two or more payees or
indorsees who are not partners, all must indorse unless the one indorsing
has authority to indorse for the others.
The Court in Associated Bank vs. CA held that The payment of an
instrument over a missing indorsement is the equivalent of payment on a
forged indorsement or an unauthorized indorsement in itself in the case of
joint payees.
In the present case: Bitanga alone endorsed the crossed check, and petitioner
allowed the deposit and release of the proceeds thereof, despite the absence
of authority of Bitangas co-payee BA Finance to endorse it on its behalf.
Clearly, petitioner, through its employee, was negligent when it allowed the
deposit of the crossed check, despite the lone endorsement of Bitanga,
ostensibly ignoring the fact that the check did not, it bears repeating, carry
the indorsement of BA Finance.
A collecting bank, Asianbank in this case, where a check is deposited and
which indorses the check upon presentment with the drawee bank, is an
indorser. This is because in indorsing a check to the drawee bank, a
collecting bank stamps the back of the check with the phrase "all prior
endorsements and/or lack of endorsement guaranteed" and, for all intents
and purposes, treats the check as a negotiable instrument, hence, assumes
the warranty of an indorser. Without Asianbanks warranty, the drawee bank
(China Bank in this case) would not have paid the value of the subject check.
Petitioner, as the collecting bank or last indorser, generally suffers the loss
because it has the duty to ascertain the genuineness of all prior
indorsements considering that the act of presenting the check for payment to
the drawee is an assertion that the party making the presentment has done
its duty to ascertain the genuineness of prior indorsements.
Accordingly, one who credits the proceeds of a check to the account of the
indorsing payee is liable in conversion to the non-indorsing payee for the
entire amount of the check.
Case 45
ANAMER SALAZAR VS. J.Y. BROTHERS MARKETING CORP.
[G.R. No. 171998. October 20, 2010]
PERALTA, J.:
FACTS:
J.Y. Brothers Marketing (J.Y. Bros., for short) is a corporation
engaged in the business of selling sugar, rice and other commodities.
Salazar, with Calleja and Kallos, procured from J. Y. Bros. 300 cavans of rice
worth P214,000.00. As payment, Salazar negotiated and indorsed to J.Y.
Bros. Prudential Bank Check No. 067481. However, upon presentment, the
check was dishonored due to closed account. Informed of the dishonor of the
check, Calleja, Kallos and Salazar delivered to J.Y. Bros. a replacement cross
Solid Bank Check No. PA365704. but which, just the same, bounced due to
insufficient funds. J.Y. Bros. charged Salazar with the crime of estafa before
the Regional Trial Court.

ISSUE:
Whether or not the issuance of another check and the acceptance
thereof in replacement of a previous dishonored check amounted to novation
that discharged the latter check.

RULING:
We find no merit in this petition.
Section 119 of the Negotiable Instrument Law provides, thus:
SECTION 119. Instrument; how discharged. A negotiable instrument is
discharged:
xxx
(d) By any other act which will discharge a simple contract for the payment
of money;
xxx
And, under Article 1231 of the Civil Code, obligations are extinguished:
xxx
(6) By novation.
Petitioner's claim that respondent's acceptance of the Solid Bank
check which replaced the dishonored Prudential bank check resulted to
novation which discharged the latter check is unmeritorious.
In this case, respondents acceptance of the Solid Bank check, which
replaced the dishonored Prudential Bank check, did not result to novation as
there was no express agreement to establish that petitioner was already
discharged from his liability to pay respondent. Novation is never presumed,
there must be an express intention to novate. In fact, when the Solid Bank
check was delivered to respondent, the same was also indorsed by petitioner
which shows petitioners recognition of the existing obligation to respondent.

Moreover, respondents acceptance of the Solid Bank check did not

result to any incompatibility, since the two checks were precisely for the
purpose of paying the credit obtained from respondent. Indeed, there was no
substantial change in the object or principal condition of the obligation of
petitioner.

Considering that when the Solid Bank check, which replaced the
Prudential Bank check, was presented for payment, the same was again
dishonored; thus, the obligation which was secured by the Prudential Bank
check was not extinguished and the Prudential Bank check was not
discharged.