PCIB V.

CA
350 SCRA 446

FACTS: Ford Philippines filed actions to recover from the drawee bank Citibank and collecting bank
PCIB the value of several checks payable to the Commissioner of Internal Revenue which were
embezzled allegedly by an organized syndicate. What prompted this action was the drawing of a
check by Ford, which it deposited to PCIB as payment and was debited from their Citibank account.
It later on found out that the payment wasn’t received by the Commissioner.
Meanwhile, according to the NBI report, one of the checks issued by petitioner was withdrawn from
PCIB for alleged mistake in the amount to be paid. This was replaced with manager’s check
by PCIB, which were allegedly stolen by the syndicate and deposited in their own account.

The trial court decided in favor of Ford.

ISSUE:

WON Ford has the right to recover the value of the checks intended as payment to CIR?

HELD:

The checks were drawn against the drawee bank but 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 not remitted to the payee. It was established that instead paying the
Commissioner, the checks were diverted and encashed for the eventual distribution among members
of the syndicate.

Pursuant to this, 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.

It should be resolved if Ford is guilty of the imputed contributory negligence that would defeat its
claim for reimbursement, bearing in mind that its employees were among the members of the
syndicate. It appears although the employees of Ford initiated the transactions attributable to
the organized syndicate, their actions were not the proximate cause of
encashing the checks payable to CIR. The degree of Ford’s negligence couldn’t be characterized as the
proximate cause of the injury to parties. The mere fact that the forgery was committed by a d
rawer-payor’s confidential employee or agent, who by virtue of his position had unusual facilities for
perpetrating the fraud and imposing the forged paper upon the bank, doesn’t entitle the bank to shift the
loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer.

Note: Not only PCIB but also Citibank is responsible for negligence. Citibank was negligent in the
performance of its duties as a drawee bank. It failed to establish its payments of Ford’s checks were mde
in due course and legally in order

Ramon Ilusorio vs CA
FACTS:
Ilusorio was a businessman who was in charge of 20 or so corporations. He was a depositor in
good standing of Manila Banking Corporation. As he was in charge of a big number of
corporations, he was usually out of the country for business. He then entrusted his credit cards,
checkbook, blank checks, passbooks, etc to his secretary, Katherine Eugenio. Eugenio was also in
charge of verifying and reconciling the statements of Ilusorio’s checking account.
Eugenio was able to encash and deposit to her personal account checks drawn against Ilusorio’s
account with an aggregate amount of 119K. Ilusorio didn’t bother to check his statement of
account until a business partner informed him that he saw Eugenio using his credit cards. Ilusorio
then fired her and instituted criminal case of Estafa thru falsification against Eugenio. Manila
Banking Corp. also instituted a complaint of estafa against Eugenio based on the affidavit of
Dante Razon, an employee. Razon stated that he personally examined and scrutinized the
encashed checks in accordance with their verification procedures.
Manila Bank sought the expertise of NBI in determining the genuineness of the checks but Ilusorio
failed to submit specimen signatures and thus, NBI could not conduct the examination.
Issue: W/N Manila Bank is liable for damages for failing to detect a forged check
Held: No. To be entitled to damages, Ilusorio has the burden of poving that the bank was
negligent in failing to detect the discrepancy in the signatures on the checks. Ilusorio had to
establish the fact of forgery which he failed to do by failing to submit his specimen signatures for
NBI to conclusively establish forgery.
Furthermore, the Bank was not negligent in verifying the checks as they verified the drawer’s
signatures against their specimen signatures and in doubt, referred to more experienced verifier
for further verification.
On the contrary, it was Ilusorio who was found to be negligent. He accorded his secretary with
an unusual degree of trust and unrestricted access to his finances. Furthermore, despite the fact
that the bank was regularly sending statements of account, he failed to check them until he found
out that his secretary was using his credit cards.
Sec. 23 of the Negotiable Instruments law provides that a forged check is inoperative, meaning
there was no right to enforce payment against any party. But it also provides an exception:
“unless the party against whom it is sought enforce such right is precluded from setting up the
forgery or want of authority”. This case falls under the exception since Ilusorio is precluded from
setting up forgery due to his own negligence considering that he allowed his secretary access to
his credit cards, checkbook, and allowed his secretary to verify his statements of account.

RAMON K. ILUSORIO v. COURT OF APPEALS. G.R. No. 139130. November 27, 2002.
FACTS: Ramon Ilusorio entrusted his credit cards and checkbooks and blank checks to his
secretary. Apparently, his secretary was able to encash and deposit to her personal account 17
checks drawn against his account.
Ilusorio requested to restore to his account the value of the checks that were wrongfully
encashed but the bank refused, hence the case.
In court, the bank testified that they make sure that the sign on the check is verified. When asked
by the NBI to submit standard signs to compare, Ilusorio failed to comply. The lower held held in
favor of defendant.

ISSUE: Whether the bank was negligent in receiving the checks.

RULING: The SC affirmed the lower court's decision. Ilusorio failed to prove that the bank was
negligent on their part as he has the burden of proof. The bank's employees did not know the
secretary's modus operandi as she was always transacting in behalf of Ilusorio.
The SC even held that it was Ilusorio who was negligent as he trusted his secretary of unusual
degree.

Ilusorio also cites Sec. 23 of the NIL that a forged check is inoperative and that he bank has no
authority to pay. While true, the case at bar falls under the exception stated in the section. The
SC held that Ilusorio is precluded from setting up the forgery, assuming there is forgery, due to
his own negligence in entrusting his secretary.
Samsung Construction v. Far East Bank (August 15, 2004)

Facts: Samsung Construction held an account with Far East Bank. One day a check worth 900,000,
payable to cash, was presented by one Roberto Gonzaga in the Makati Branch of Far East Bank.
The check was certified to be true by Jose Sempio, the assistant accountant of Samsung, who was
also present during the time the check was cashed. Later however it was discovered that no such
check was ever approved by the Samsung’s head accountant, the president of the company also
never signed any such check.

Issue: Whether or not Far East Bank is liable to reimburse Samsung for cashing out the forged
check, which was drawn from the account of Samsung

Held: Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable Instrument Law states
that a forged signature makes the instrument “wholly inoperative”. If payment is made the
drawee (FarEast) cannot charge it to the drawer’s account (Samsung). The fact that the forgery
is clever is immaterial. The forged signature may so closely resemble the genuine as to defy
detection by the depositor himself. And yet, if the bank pays the check, it is paying out with its
own money and not of the depositor’s. This rule of liability can be stated briefly in these words:
“A bank is bound to know its depositor’s signature.” The accusation of negligence on the part of
Samsung was not clearly proven. Absence of proof to the contrary, the presumption is that the
ordinary course of business was followed.