PNB V. CA FACTS: a GSIS check no 645915B in the amount of P 57,415.00, payable to one Mauricio D.

Pulido was deposited by Augusto Lim in his account with the PCIB, drawn against PNB. Following the banking practice, PCIB stamped the following on the back of the check: all prior indorsements and/or lack of Endorsement Guaranteed, Philippine Commercial and Industrial Bank and the check was forwarded to PNB for clearing. PNB paid PCIB and debited the account of GSIS for the value in the check, notwithstanding the fact that 2 months before the check was deposited, GSIS had already notified PNB that the said check had been lost and requested that its payment be stopped. Upon demand by GSIS, PNB recredited the value of the check in the account of GSIS because the signature of the drawerofficers of GSIS were forged. PNB in turn demanded reimbursement from the PCIB contending that the latter was negligent in not discovering that the indorsement at the back of the check was forged, but the latter refused. Hence, this petition. ISSUE: Whether PNB , the drawer bank can recover reimbursement from the PCIB, the collecting bank. HELD: NO. In general, acceptance in the sense in which this term is used in the Negotiable Instruments Law is not required for checks, for the same are payable on demand. Indeed, acceptance and payment are, within the purview of said is law, essentially different things, for the former is a promise to perform an act whereas the latter is the actual performance thereof. In the words of the law, the acceptance of a bill is the signification by the drawee of his assent to the order of the drawer , which in the in the case of checks, is the payment, on demand, of a given sum of money. Upon the other hand, actual payment of the amount of a check implies not only an assent to said order of the drawer and a recognition of the drawer s obligation to pay the aforementioned sum, but, also a compliance with such obligation. PNB, by paying its amount to PCIB, it accepted that the check was genuine and good in every aspect. The question whether or not the indorsements have been falsified is immaterial to the PNB s liability as a drawee, or to its right to recover from the PCIB, for, as against the drawee, the indorsement of an intermediate bank does not guarantee the signature of the drawer, since the forgery of te indorsement is not the cause of the loss. It is undeniable that the PNB had been guilty of a greater negligence, because it had a previous and formal notice from the GSIS that the check had been lost with the request that payment be stopped. PNB s negligence was the main or proximate cause for the corresponding loss.

PNB v. QUIMPO FACTS: Francisco Gozon II, together with his friend Ernesto Santos went to PNB, Caloocan. Ernesto Santos was left in the car, while Francisco transacted business in the bank. Francisco Gozon left his checkbook inside the car, and while he was away, Santos took a check therefrom and filled up the amount of P5,000, forged the signature of Gozon and thereafter encashed the check in the bank on the same day. The amount was debited from Gozon s account and upon discovery by the latter, he asked that it be re-credited back to his account as his signature on the subject check was forged. The bank refused. Gozon filed a complaint against Santos. The latter was apprehended by the police officers and later on admitted the fact that he stole the check and forged Gozon s signature. Gozon also filed a complaint for recovery of the amount against the bank. The bank contended that it is the negligent of private respondent that is the cause of the loss, thereby precluding him from setting the defense of forgery under section 23, NIL. ISSUE: Whether the drawee bank is liable to return the amount of P5,000 to Gozon. HELD: YES. A bank is bound to know the signature of its customers, and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or the depositor on the check being encashed. It is expected to use reasonable business prudence in accepting and cashing a check presented to it. The comparison of the signature on the forged check and the sample signatures of private respondent show marked differences as the graceful lines in the sample signature which is completely different from those of the signature on the forged check. Obviously, petitioner was negligent in encashing said forged check without carefully examining the signature which shows marked variation from the genuine signature of private respondent. As regards the negligence imputed to private respondent, his act of leaving his checkbook in the car while he went out cannot be considered negligence sufficient to excuse the bank from its own negligence. It should be home in mind that when Gozon left his car, Santos, a long time classmate and a friend remained in the same. He could not have been expected to know that the said Santos would remove a check from his checkbook. Defendant had trust in his classmate and friend. He had no reason to suspect that the latter would breach that trust. REPUBLIC BANK v. CA FACTS: San Miguel Corporation (SMC) drew a dividend check for P240 on its account in First National City Bank (FNCB) in favor of Roberto Delgado, a stockholder. After delivery, and before the check was deposited and indorsed by Delgado in his account in Republic Bank, the amount indicated in the check was altered to P9,240 without authority by the SMC. Republic accepted the check, and endorsed the

check to FNCB by stamping on the back of the check all prior and/or lack of indorsement guaranteed . Believing that the check was genuine and relying on the endorsement made by the Republic Bank, FNCB paid P9, 240 to Republic Bank on March 15, 1966. On April 19,1966, SMC notified FNCB of the material alteration in the check, and so the bank re-credited the amount to SMC s account. On May 19,1966, FNCB wrote a letter to Republic informing it about the alteration made in the check and the forgery of the endorsement of Delgado, but the latter had already withdrawn his account with said bank. FNCB demanded reimbursement from the Republic Bank but was refused contending that there was delay in giving notice of the alteration and it was not guilty of negligence. Hence, this petition ISSUE: Whether the Republic Bank, as collecting bank is liable HELD: No. Under the 24-hour clearing house rule embodied in Section 4(c) of Central Bank Circular 9, as amended, provides, Items which should be returned for any reason whatsoever shall be returned directly to the bank, institution or entity from which the item was received . For this purpose, the Receipt for Returned Checks should be used. The original and duplicate copies of said Receipt shall be given to the Bank, institution or entity which returned the items and the triplicate shall be retained by the bank, institution or entity whose demand is being returned. ...x...x all items cleared at 11:00 am shall be returned not later than 2:00pm on the same day and all items cleared at 3:00pm shall be returned not later than 8:30am of the following business day...x..x It is true that when endorsement if forged, the collecting bank or last endorser as a general rule, bears the loss. But the unqualified endorsement of the collecting bank on the check should be read with the 24-hour regulation on clearing house operation. Thus, when the drawee bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing period, the collecting bank is absolved from liability. ASSOCIATED BANK v. CA FACTS: Private Respondent is engaged in the business of ready-to wear garments under the firm name Melissa s RTW . She deals with, among other customers like Robinson s Department Store, Payless Department Store .... x...x. When she went to these companies to collect payment for their accounts, she was informed that they had already issued crossed check payable to Melissa RTW. It was revealed later on that the said checks were deposited with the Associated Bank and withdrawn by one Rafael Sayson, who was not authorized by the private respondent to encash it. Private Respondent file d a complaint for recovery of the total value of the checks against Associated Bank, however the latter refused.

Hence, this petition ISSUE: Whether petitioner bank is liable HELD: Yes. The contents of the said checks issued by the customers of the private respondent had not been questioned. There is no dispute that the same are crossed checks or for payee s account only. That private respondent had clearly shown that she had never authorized anyone to deposit the said checks nor to encash the same, that the petitioner had allowed all said checks to be deposited, cleared and paid to one Rafael Sayson in violation of the instructions in the said crossed checks that the same shall be for the payee s account only. The subject checks were accepted for deposit by the Bank for the account of Rafael Sayson although they were crossed checks and the payee was not Sayson but Melissa s RTW. The bank stamped thereon its guarantee that all prior endorsements and/or lack of endorsements guaranteed . By such deliberate and positive act, the Bank had for all legal intents and purposes treated the said checks as negotiable instruments and accordingly, assumed the warranty of the endorser. The petitioners were negligent when they permitted the encashment of the checks by Sayson. The Bank should have first verified his right to endorse the crossed checks, of which he was not the payee, and to deposit the proceeds of teh checks to his own account. The payee of the illegally encashed checks should be allowed to recover directly from the bank responsible for such encashment regardless of whether or not the checks were actually delivered to the payee. BPI v. CA FACTS: Eligia Fernando, the treasurer of PHILAMLIFE has a money market placement as evidenced by Promissory Note with a maturity date November 11, 1981 with BPI. Bpi s Money Market Department, thru Eustaquio received a phone call from a woman who identified herself as Eligia Fernando and she wanted to preterminate the placement. Eustaquio made certain that the woman in the line was the real Eligia Fernando by verifying the details the caller gave with the details in the account. The said caller asked the pretermination and that 2 checks be issued for the proceeds, and that the checks be delivered to her office at PHILAMLIFE. Eustaquio prepared the purchase order slip and checks were signed by authorized officers of BPI. later on, same woman called and changed the delivery instructions, that instead of delivery in his office, her niece, Rosemarie Fernando would pick up the checks, and so Eustaquio changed the details in the purchase order. When the allegedly Rosemarie Fernando got the checks, the dispatcher failed to get or to require the surrender of the promissory note evidencing the placement. The signature in the letter requesting the pretermination was not verified and compared with the signature of Eligia Fernando in BPI s file. Later on, the same woman applied to CBC s Head Office for the opening of a current account. The application form shows the signature of Eligia Fernando , tax account number, etc and made initial deposit of P10,000. The following day, the allegedly Eligia Fernando deposited the 2 checks in controversy with CBC account. The endorsement was found to

conform with the depositor s specimen signature. The checks were guaranteed by CBC and later on sent to BPI for clearing. Withdrawals were later on made. On the November 11, 1981, the maturity date of the money market placement, the real Eligia Fernando went to BPI for the roll-over of her placement. She disclaimed having preterminated the money market and that although she was the payee in the 2 checks, she never received nor endorsed them and the signature at the back of the checks were forged. On Nov 12, Bpi returned the 2 checks in controversy to CBC for payee s endorsement forged , while CBC returned it back beyond clearing time . Hence, this petition. ISSUE: Whether BPI is liable, despite the warranty made by the collecting bank as the last endorser HELD: Yes. In this jurisdiction, we recognize negligence of the party invoking forgery as an exception to teh general rule in Section 23, NIL. In the present petition, the payee s names in the checks were forged. Following the general rule, the checks are wholly inoperative and of no effect. However, the underlying circumstances of the case show that the general rule on forgery does not apply. The records show that the petitioner as drawee bank and respondent CBC as collecting bank were both negligent resulting in the encashment of the forged checks. Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. In the present case, there is no dispute that the banks were negligent in the selection and supervision of their employees. To the extent that the degree of negligence is equated to the proximate cause of the loss, we rule that the issue as to whose negligence is graver is relevant. While it is true that the proximate cause of the loss was because of BPI s negligence (failed to verify the signature in the pretermination from its own file), respondent CBC s negligence contributed equally to the success of the impostor in enchashing the proceeds of the forged checks. (employees closed their eyes to the suspicious circumstances of huge over-counter deposits just right after the opening of the account). considering the comparative negligence of the 2 banks, demands of substantial justice are satisfied by allocating the loss on a 60-40 ratio. BPI shall be responsible for the 60% of the loss and 40% by CBC. GEMPESAW v. CA FACTS: Gempesaw owns 4 grocery stores. In order to facilitate payment to her suppliers, she maintained a current account with PBC, Caloocan. She issues checks prepared and filled up as to the material particulars by her bookkeeper Alicia Galang. The checks will only be presented to her for her signature together with the invoice receipts., without verifying the accuracy of the amount indicated in the invoices. The delivery of the checks to the respective payees were left to the bookkeeper. The

drawee bank always notify Gempesaw as to the checks presented to it for payment, but she never bothered to verify the correctness stated in the checks. She had issued 82 crossed checks and the indorsers of these checks presented them for payment. Repsondent Bank debited the amount against petitioner s account. Most of the aforementioned checks were for amount in excess of her actual obligations. Gempesaw only found out about the fraudulent manipulations of her bookkeeper after 2 years. The 82 crossed checks with forged signatures of payees were brought to the Chief Accountant of the drawee bank , without authority, credited the amount in the checks in the account of Romero and Lam. Under the rules of the drawee bank, only Branch Manager may accept second endorsement on a check for deposit/cross check. Petitioner demanded on respondent drawee bank to credit back in her account the money value of the 82 checks, but the latter refused. Hence, this petition ISSUE: Whether both the drawer and drawee are liable for the loss. HELD: Yes. The case covers checks were the indorsements of the payees were forged and the latter never received the said checks. Under the provision, a forged signature is wholly inoperative , no one can gain title to the instrument through such forged indorsement. Such an indorsement prevents any subsequent party from acquiring right as against any party whose name appears prior to the forgery. Such forged indorsement cuts off the rights of all subsequent parties as against parties prior to the forgery. However, the law makes an exception to these rules where a party is precluded from setting up forgery as a defense. As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer s account for the amount of said check. An exception to this rule is where the drawer is guilty of such negligence which causes the bank to honor such checks. The negligence of a depositor which will prevent recovery of an unauthorized payment is based on failure of the depositor to act as a prudent businessman would under the circumstances. In the case at bar, the petitioner relied implicitly upon the honesty and loyalty of her bookkeeper and did not even verify the accuracy of the amounts of the checks she signed. Although she regularly received her bank statements, she apparently did not carefully examine the same nor check stubs and returned checks. Otherwise, she could have discovered the discrepancies and subsequent forgeries would not have been accomplished. Petitioner s failure to make such inquiries constituted negligence which resulted in the bank s honouring of the checks. We hold that the banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be a high degree of diligence, if not the utmost diligence. Respondent bank cannot claim

that it exercised such degree of diligence that is required of it. There is no way we can allow it to escape liability. Art 172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable but such liability may be regulated by the courts according to the circumstances.

Samsung construction v. Far east bank and trust comp

FACTS: Plaintiff Samsung Construction Company Philippines, Inc. (Samsung Construction), maintained a current account with defendant Far East Bank and Trust Company (FEBTC) at the latters Bel-Air, Makati branch. The sole signatory to Samsung Constructions account was Jong Kyu Lee (Jong), its Project Manager, while the checks remained in the custody of the companys accountant, Kyu Yong Lee (Kyu). On 19 March 1992, a certain Roberto Gonzaga presented for payment FEBTC Check No. 432100 to the banks branch in Bel-Air, Makati . The check, payable to cash and drawn against Samsung Constructions current account, was in the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00). The bank teller, Cleofe exercise the bank procedure in encashment using check. She then asked Gonzaga to submit proof of his identity, and the latter presented three (3) identification cards.The bank officer Syfu also noticed Jose Sempio III (Sempio), the assistant accountant of Samsung Construction , who supported the claim of Gonzaga. Syfu showed the check to Sempio, who vouched for the genuineness of Jongs signature. Confirming the identity of Gonzaga, Sempio said that the check was for the purchase of equipment for Samsung Construction. Satisfied with the genuineness of the signature of Jong, Syfu authorized the banks encashment of the check to Gonzaga. The following day Kyu, discovered that a check in the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00) had been encashed. Kyu perused the checkbook and found that the last blank check was missing. He reported the matter to Jong, who then proceeded to the bank. Jong learned of the encashment of the check, and realized that his signature had been forged. The Bank Manager reputedly told Jong that he would be reimbursed for the amount of the check. Jong proceeded to the police station and consulted with his lawyers. Subsequently, a criminal case for qualified theft was filed against Sempio before the Laguna court. FEBTC on the other hand, said that it was still conducting an investigation on the matter. Unsatisfied, Samsung Construction filed aComplaint on 10 June 1992 for violation of Section 23 of the Negotiable Instruments Law, before the Regional Trial Court (RTC) of Manila , Branch 9. During the trial, both sides presented their respective expert witnesses to testify on the claim that Jongs signature was forged. Samsung Corporation, which had referred the check for investigation to the NBI, presented Senior NBI Document Examiner Roda B. Flores. She testified that based on her examination, she concluded that Jongs signature had been forged on the check. On the other hand, FEBTC, which had sought the assistance of the Philippine National Police (PNP), presented Rosario C. Perez, a document examiner from the PNP Crime Laboratory. She testified that her findings showed that Jongs signature on the check was genuine. ISSUE: Whether or not the signature of Jong in the subject check was forged? RULING Upon examination of the record, and based on the applicable laws and jurisprudence, we reverse the Court of Appeals decision. Indeed there was forgery in this case. Section 23 of the Negotiable Instruments Law states: When a signature is forged or made without the 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. (Emphasis supplied) The crucial fact in question is whether or not the check was forged, not whether the bank could have detected the forgery. The latter issue becomes relevant only if there is need to weigh the comparative negligence between the bank and the party whose signature was forged. In this case, indeed there was forgery. A bank is liable, irrespective of its good faith, in paying a forged check. WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 28 November 1996 is REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9, dated 25 April 1994 is REINSTATED. Costs against respondent. SO ORDERED. ____________

BPI V. CASA MONTESORRI INTERNATIONALE 430 SCRA 261

FACTS:
CASA has a current account with BPI. It was discovered that for a material period of time, several checks were encashed by a certain Sonny Santos, who eventually was known to be a fictitious name used by the external auditor of CASA. The external auditor admitted forging the signature of CASAs president to be able to encash the checks. The trial court held the bank liable but this was modified. The modified decision apportioned the loss between BPI and CASA.

HELD:

A forged signature is a real and absolute defense, and a person whose signature appears on a negotiable instrument is forged is deemed to never have become a party thereto and to have never consented to the contract that allegedly gave rise to it. The counterfeiting of any writing, consisting in the signing of anothers name with intent to defraud, is forgery. First, there was really a finding of forgery. The forger admitted even in his affidavit of his forgery. Second, there was a finding by the police laboratory that indeed the signatures were forged. Furthermore, the negligence is attributable to BPI alone. Its negligence consisted in the omission of the degree of diligence required of a bank. *Loss borne by proximate cause of negligence

Haystack: Manila Lighter Transportation vs. Court of Appeals (GR L-50373, 15 February 1990)
Manila Lighter Transportation vs. CA [G.R. No. L-50373. February 15, 1990.] First Division, Grino-Aquino (J): 3 concurring, 1 on leave Facts: A complaint for recovery of the value of 49 checks (P91,153.11) with alleged forged/unauthorized indorsements of the payee of which 26 were paid to the company or order and 23 to company or bearer, was filed by was filed by Manila Lighter Transportation Inc. against China Banking Corporation on 22 May 1962. The complaint alleged that the checks were issued by customers of the company in payment of brokerage/lighterage services and were all delivered, without its knowledge, to its collector, Augusto Perez. Upon forged indorsements of the company's general manager, Luis Gaskell, the checks found their way into the accounts of third persons in the bank and the proceeds were later withdrawn, to the damage of the company who sought reimbursement or restoration by said bank of the value of the checks. Bank denied liability for the company's loss which was due to its own negligence. It alleged that the company is estopped from denying its collector's authority to receive the checks from the drawers/customers; that the company failed to give Bank and the drawee Banks notice of the alleged forged or unauthorized indorsements within a reasonable time; and that its loss was occasioned by its own failure to observe the proper degree of diligence in the supervision of its employees, particularly its collector, Augusto Perez. Upon leave of court, the Bank filed a third-party complaint against Cao Pek & Co. and Ko Lit who had deposited the checks in question in their respective accounts with the former and had thereafter withdrawn the proceeds thereof. In the decision of 22 January 1972, the lower court found both parties equally negligent, the company, for allowing a state of affairs in which its employees could appropriate the checks and falsify the indorsement thereon of its manager with impunity, and the bank, for not detecting the falsification made by the company's employees when the checks were presented to it. The court ordered the bank to pay the company the amount equal to 50% of the total amount of the checks, ordered the company to pay the bank the amount equal to 50% of the Tabacalera check, ordered third-party defendants Ko Lit and Cao Pek to pay ChinaBank the amounts of P90,500.24 and 1,215.05 respectively, and ordered ChinaBank to pay the company 50% of the amounts recovered from the third-party defendants; with the parties bearing their own costs and attorneys fees. Both the company and the bank appealed to the Court of Appeals. Ko Lit and Cao Pek also appealed but their appeal was dismissed for failure to pay the docket fee and to file the record on appeal. On 18 January 1979, the Court of Appeals rendered judgment, modifying that of the lower court, such that the complaint is dismissed and the bank is freed from any liability to the company. The counterclaim of P3,453.53 is granted with interests from the date the amended counterclaim was filed. The third-party defendants are adjudged directly liable to the company for the checks they respectively indorsed; without costs. The company filed a motion for reconsideration of the decision but it was denied. Hence, the petition for review. The Supreme Court denied the petition for lack of merit; with costs against the company. 1. Issues raised are factual The company alleged that the Court of Appeals erred in finding that the petitioner was negligent; in holding that said negligence constituted sufficient ground to preclude it from alleging forgery or want of authority; in not ruling that the proximate cause for the loss was the Bank's failure in its duty to ascertain the genuineness of the signatures appearing in the checks; in not ruling that the Bank should have been held entirely liable for the loss; and in not condemning Bank to pay the company damages, attorney's fees, expenses and costs. The issues raised therein are factual. The main issue of the company's negligence had already been determined by the trial court against company and affirmed by the Court of Appeals after examining the evidence in the records. 2. Bank was not negligent Since the company was not a client of Bank, i.e., did not maintain an account in said Bank, the latter had no way of ascertaining the authenticity

of its indorsements on the checks which were deposited in the accounts of the third-party defendants in said Bank. The Bank was not negligent because, in accordance with banking practice, it caused the checks to pass through the clearing house before it allowed their proceeds to be withdrawn by the depositors (third-party defendants in the lower court). 3. Supreme Court decides appeals which only involve questions of law The Supreme Court decides appeals which only involve questions of law. It is not the function of the Supreme Court to analyze or weigh the evidence all over again, its jurisdiction being limited to resolving errors of law that might have been committed by the lower court. (Dihiansan vs. Court of Appeals, 153 SCRA 712; Francisco vs. Mandi, 152 SCRA 711; Director of Lands vs. Funtilar, 142 SCRA 57).

ASSOCIATED BANK V. CA 252 SCRA 620

FACTS:
The province of Tarlac maintains an account with PNB-Tarlac. Part of its funds is appropriated for the benefit of Concepcion Emergency Hospital. During a post-audit done by the province, it was found out that 30 of its checks werent received by the hospital. Upon further investigation, it was found out that the checks were encashed by Pangilinan who was a former cashier and administrative officer of the hospital through forged indorsements. This prompted the provincial treasurer to ask for reimbursement from PNB and thereafter, PNB from Associated Bank. As the two banks didn't want to reimburse, an action was filed against them.

HELD:
There is a distinction on forged indorsements with regard bearer instruments and instruments payable to order. With instruments payable to bearer, the signature of the payee or holder is unnecessary to pass title to the instrument. Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against holder in due course. In instruments payable to order, the signature of the rightful holder is essential to transfer title to the same instrument. When the holders signature is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto. In connection to this, an indorser warrants that the instrument is genuine. A collecting bank is such an indorser. So even if the indorsement is forged, the collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. Furthermore, in cases involving checks with forged indorsements, such as the case at bar, the chain of liability doesn't end with the drawee bank. The drawee bank may not debit th e account of the drawer but may generally pass liability back through the collection chain to the party who took from the forger and of course, the forger himself, if available. In other words, the drawee bank can seek reimbursement or a return of the amount it paid from the collecting bank or person. The collecting bank generally suffers the loss because it has te duty to ascertain the genuineness of all prior endorsements 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 the indorsements. With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it of the opportunity to go after the forger, signifies negligence on the part of the drawee bank and will preclude it from claiming reimbursement. In this case, PNB wasn't guilty of any negligent

delay. Its delay hasn't prejudiced Associated Bank in any way because even if there wasn't delay, the fact that there was nothing left of the account of Pangilinan, there couldn't be anymore reimbursement.

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 wasnt 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 managers 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:
Has Ford 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 Fords negligence couldnt be characterized as the proximate cause of the injury to parties. The mere fact that the forgery was committed by a drawerpayors 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, doesnt 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 Fords checks were made in due course and legally in order.