G.R. No.

121413 January 29, 2001 PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA), petitioner, vs. COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A., respondents.

G.R. No. 121479 January 29, 2001 FORD PHILIPPINES, INC., petitioner-plaintiff, vs. COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE COMMERCIAL INTERNATIONAL BANK, respondents.

G.R. No. 128604 January 29, 2001 FORD PHILIPPINES, INC., petitioner, vs. CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL BANK and COURT OF APPEALS, respondents.

These consolidated petitions involve several fraudulently negotiated checks

The original actions a quo were instituted by Ford Philippines to recover from the drawee bank, CITIBANK, N.A. (Citibank) and collecting bank, Philippine Commercial International Bank (PCIBank), the value of several checks payable to the Commissioner of Internal Revenue, which were embezzled allegedly by an organized syndicate. G.R. Nos. 121413 and 121479 are twin petitions for review of the March 27, 1995 Decision1 of the Court of Appeals, entitled "Ford Philippines, Inc. vs. Citibank, N.A. and Insular Bank of Asia and America (now Philipppine Commercial International Bank ordering the collecting bank, Philippine Commercial International Bank, to pay the amount of Citibank Check No. SN04867. In G.R. No. 128604, petitioner Ford Philippines assails the October 15, 1996 Decision3 of the Court of Appeals and its March 5, 1997 Resolution4 in CAG.R. No. 28430 entitled "Ford Philippines, Inc. vs. Citibank, N.A. and Philippine Commercial International Bank," affirming in toto the judgment of the trial court holding the defendant drawee bank, Citibank, N.A., solely liable to pay the amount of P12,163,298.10 as damages for the misapplied proceeds of the plaintiff's Citibanl Check Numbers SN-10597 and 16508.

Facts of the Case

For 121413 and 121479

Ford drew and issued its CitiBank check in favor of the Commissioner of Internal Revenue as payment of percentage sales tax for the third quarter of 1977 so the check was deposited with IBAA (now PCIBank) and was cleared at the Central Bank. Proceeds never reached CIR so ford payed again.

Ford filed a third-party complaint before the trial court impleading the Pacific Banking Corporation and Godofredo Rivera (General Ledger Accountant of Ford who prepared the check) as third party defendants but it was dismissed for lack of cause of action and that Rivera could not be served with summons as a fugitive from justice. The Trial Court held that Citibank and IBAA are jointly and severally liable to pay Ford

128604

This involves the same syndicate again

On 1978, and 1979, Ford drew CitiBank Checks representing the payment of percentage tax for 1978, and1979 also payable to CIR and tax receipt was issued. The checks were crossed checks within which were written the words payable to the payees account only. but the check never reached the payee (CIR) The checks never reached CIR.

As far as the BIR is concerned, the tax receipts were considered fake and spurious
It forced Ford to pay BIR again and it filed a case against CitiBank and PCIBank for recovery

In the RTC... The Modus Operandi

Rivera
General Ledger Accountant of Ford Prepared the check for payment to BIR

Castro
Gave Check
Manager of PCIB Co-conspirator

Dulay
connive
Assistant manager of PCIB

Deposited

Opened checking account

PCIB main office

Bank of America check

Worthless but with same amount as first Ford Check

Reynaldo Reyes
Fictitious Person Only P100 initial deposit With Bank of America Check

Central bank
Central Bank cleared it Replaced the check with Fords

As a result, fords check was cleared by CitiBank and the fictitious deposit account of Reynaldo Reyes was cedited at the PCIBank From Reynaldo Reyes account, Castro drew various checks to several people On December 9, 1988, the RTC declared citibank to be liable for the value of the 2 checks while absolving PCIBank from any liability

Issue

Whether petitioner Ford has the right to recover from the collecting bank and the drawee bank the value of the checks intended as payment to the Commissioner of Internal Revenue?

Held

PCIBank is declared solely responsible for the loss of the proceeds of Citibank Check for P4,746, 114.41 which shall be paid with 6% interest from date of the complaint. Also, PCIBank and Citibank are liable and must share the loss of Citibank checks amounting to P12,163,298.10 on a 50-50 ratio and each bank is ordered to file P6,081,649.05 with 6% interest.

It must take note that checks were drawn against the drawee bank but the title of the person here was defective because of fraud Section 55 of NIL speaks of when title is defective. In the present case, the perpetrators are already fugitives from justice so we are left only with the task of determining who of the present parties must bear the burden of loss.

Also, since Rivera was an employee of Ford, does it not make Ford guilty of the contributory negligence?

Ford denies negligence and mentioned the Gempesaw v CA case GEMPESAW v CA even if there is negligence in drawer, the drawee bank is ordered to pay damages Ford also contends that Rivera is not authorized to make any representation in its behalf and that the board of directors did not confirm the request of rivera to recall the checks. Neither was it in the ordinary course of business of PCIBank to validate the same. The fact that the forgery was committed by the drawer-payors employee, who in the course of his position had unusual facilities for perpetrating the fraud does not entitle the bank to shift the loss to the drawer-payor.

121413 , 121479
Checks were sent to central clearing with indorsement All prior indorsements and lack of indorsement guaranteed and PCIBank, instead of remitting to CIR, prepared 2 managers check and made the syndicate encashed. PCIBank failed to verify the authority of Rivera and it also admitted that it has responsibility to make sure that the check is deposited in payees account only As agent of CIR, PCIBank should receive only instruction form CIR and not other person.

The rule in payee/holder and bank which is sent for collection is principal and agent.

One who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee bank.
Collecting banks negligence is the proximate cause of the loss and PCIBank is liable in the amount correspoing to the proceeds of Citibank.

128604
There is no proof that PCIBank contributed any participation in the process of the switching operation since it was performed by the member of the syndicate in their own personal capacity and done without the knowledge of the defendant PCIBank. The general rule is that a banking corporation is liable for the wrongful act of their officers within the course of their employment. Here, PCIBank appears also to be a victim of the scheme and responsibility for negligence does not lie on PCIBanks shoulders alone. Evidence shows that Ciibank as drawee bank was likewise negligent in the performance of its duties because it failed to establish that its payment of Fords checks were made in due course and legally in order. Ford cited Section 62 of the NIL ford argues that by accepting the instrument, the acceptor which is Citibank engages that it will pay according to the tenor of its acceptance, and that it will pay only to the payee (CIR), considering the fact that here the check was crossed with annotation Payees Account Only

Citibank must also answer for damages since it breached its contractual obligation with Ford.

Citibank should have scrutinized the check before paying the amount of the proceeds to the collecting bank of the BIR.
Citibank failed to notice and verify the absence of the clearing stamps which is very essential because if this was duly examined, the switching will be worthless. In invoking the doctrine of comparative negligence, PCIBank and Citibank failed in their respective obligations and both were negligent. Since Banks business involves public interest, the bank is under obligation to treat the accounts of its depositors with meticulous care.