65 Loss the proximate cause of which is the peril insured against

ALLIED BANKING CORPORATION vs. LIM SIO WAN, METROBANK

G.R. No. 133179. March 27, 2008.

FACTS:
 On November 14, 1983, respondent Lim Sio Wan deposited with petitioner Allied Banking
Corporation a money market placement
 One month later, a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and
instructed the latter to pre-terminate Lim Sio Wan’s money market placement, to issue a manager’s
check representing the proceeds of the placement, and to give the check to one Deborah Dee
Santos who would pick up the check
 the manager’s check was deposited in the account of Filipinas Cement Corporation (FCC) at
respondent Metropolitan Bank and Trust Co with the forged signature of Lim Sio Wan as indorser
 Santos was the money market trader assigned to handle FCC’s account for a money market placement
with respondent Producer’s Bank; the Allied check was deposited with Metrobank in the account of FCC
as Producer Bank’s payment of its obligation to FCC
 Allied funded the check even without checking the authenticity of Lim Sio Wan’s purported indorsement.
 Lim Sio Wan filed a complaint for recovery of proceeds of the money market placement against Allied
 RTC ordered Allied to pay Lim the amount of the money market placement
 On appeal, CA likewise found Metrobank liable hence modified the payment of the amount to 60%
from Allied Bank and 40% from Metrobank

ISSUE: Whether Metrobank as guarantor of all endorsements on the check is ultimately liability for the full
amount of the money market placement.

RULING: NO. PROXIMATE CAUSE is “that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury and without which the result would not have
occurred.” Thus, there is an efficient supervening event if the event breaks the sequence leading from the cause
to the ultimate result. To determine the proximate cause of a controversy, the question that needs to be
asked is: If the event did not happen, would the injury have resulted? If the answer is NO, then the event
is the proximate cause.

The trial court correctly found Allied negligent in issuing the manager’s check and in transmitting it to
Santos without even a written authorization. In fact, Allied did not even ask for the certificate evidencing the
money market placement or call up Lim Sio Wan at her residence or office to confirm her instructions. Both
actions could have prevented the whole fraudulent transaction from unfolding. ALLIED’S NEGLIGENCE MUST
BE CONSIDERED AS THE PROXIMATE CAUSE OF THE RESULTING LOSS. To reiterate, had Allied
exercised the diligence due from a financial institution, the check would not have been issued and no
loss of funds would have resulted. In fact, there would have been no issuance of indorsement had there been
no check in the first place.

The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of the check. When
Metrobank indorsed the check in compliance with the PCHC Rules and Regulations without verifying the
authenticity of Lim Sio Wan’s indorsement and when it accepted the check despite the fact that it was cross-
checked payable to payee’s account only, its negligent and cavalier indorsement contributed to the easier
release of Lim Sio Wan’s money and perpetuation of the fraud. Given the relative participation of Allied and
Metrobank to the instant case, both banks cannot be adjudged as equally liable. Hence, the 60:40 ratio
of the liabilities of Allied and Metrobank, as ruled by the CA, must be upheld.