FIRSTDIVISION

METROPOLITANBANKAND G.R.No.179952
TRUST COMPANY (formerly
ASIANBANK
Present:
CORPORATION),

Petitioner,
PUNO,C.J.,Chairperson,

CARPIOMORALES,

LEONARDODECASTRO,

BERSAMIN,and

VILLARAMA,JR.,JJ.
versus

BAFINANCE

CORPORATIONand
Promulgated:
MALAYANINSURANCECO.,
December4,2009
INC.,

Respondents.
xx

DECISION

CARPIOMORALES,J.:
Lamberto Bitanga (Bitanga) obtained from respondent BA Finance Corporation (BA
[1]
[2]
Finance)aP329,280 loantosecurewhich,hemortgagedhiscartorespondentBAFinance.
Themortgagecontainedthefollowingstipulation:

The MORTGAGOR covenants and agrees that he/it will cause the property(ies)
hereinabovemortgagedtobeinsuredagainstlossordamagebyaccident,theftandfirefora
periodofoneyearfromdatehereofwithaninsurancecompanyorcompaniesacceptabletothe
MORTGAGEE in an amount not less than the outstanding balance of mortgage obligations
and that he/it will make all loss, if any, under such policy or policies, payable to the
[3]
MORTGAGEEoritsassignsasitsinterestmayappearxxx. (emphasisandunderscoring
supplied)

Bitanga thus had the mortgaged car insured by respondent Malayan Insurance Co., Inc.
[4]
(MalayanInsurance) whichissuedapolicystipulatingthat,interalia,


Loss,ifanyshallbepayabletoBAFINANCECORP.asitsinterestmayappear.Itis
hereby expressly understood that this policy or any renewal thereof, shall not be cancelled
[5]
without prior notification and conformity by BA FINANCE CORPORATION. (emphasis
andunderscoringsupplied)

Thecarwasstolen.OnBitangasclaim,MalayanInsuranceissuedacheckpayabletothe
order of B.A. Finance Corporation and Lamberto Bitanga for P224,500, drawn against China
BankingCorporation(ChinaBank).ThecheckwascrossedwiththenotationForDepositPayees
[6]
AccountOnly.

WithouttheindorsementorauthorityofhiscopayeeBAFinance,Bitangadepositedthe
check to his account with the Asianbank Corporation (Asianbank), now merged with herein
petitionerMetropolitanBankandTrustCompany(Metrobank). Bitanga subsequently withdrew
theentireproceedsofthecheck.

Inthemeantime,Bitangasloanbecamepastdue,butdespitedemands,hefailedtosettleit.

BAFinanceeventuallylearnedofthelossofthecarandofMalayanInsurancesissuance
of a crossed check payable to it and Bitanga, and of Bitangas depositing it in his account at
Asianbankandwithdrawingtheentireproceedsthereof.

BA Finance thereupon demanded the payment of the value of the check from
[7]
Asianbank but to no avail, prompting it to file a complaint before the Regional Trial Court
[8]
(RTC)ofMakatiforsumofmoneyanddamagesagainstAsianbankandBitanga, allegingthat,
interalia,itisentitledtotheentireproceedsofthecheck.
[9]
In its Answer with Counterclaim, Asianbank alleged that BA Finance instituted [the]
complaintinbadfaithtocoerce[it]intopayingthewholeamountoftheCHECKknowingfully
[10]
wellthatitsrightfulclaim,ifany,isagainstMalayan[Insurance].

[11]
AsianbankthereafterfiledacrossclaimagainstBitanga,
allegingthathefraudulently
induced its personnel to release to him the full amount of the check and that on being later
informed that the entire amount of the check did not belong to Bitanga, it took steps to get in
[12]
touchwithhimbuthehadchangedresidencewithoutleavinganyforwardingaddress.

[13]
AndAsianbankfiledathirdpartycomplaintagainstMalayanInsurance,
allegingthat
MalayanInsurancewasgrosslynegligentinissuingthecheckpayabletobothBitangaandBA
[14]
FinanceanddeliveringittoBitangawithouttheconsentofBAFinance.

[15]
BitangawasdeclaredindefaultinAsianbankscrossclaim.

Branch 137 of the Makati RTC, finding that Malayan Insurance was not privy to the
contractbetweenBAFinanceandBitanga,andnotingtheclaimofMalayanInsurancethatitis
its policy to issue checks to both the insured and the financing company, held that Malayan
InsurancecannotbefaultedfornegligenceforissuingthecheckpayabletobothBAFinanceand
Bitanga.

The trial court, holding that Asianbank was negligent in allowing Bitanga to deposit the
check to his account and to withdraw the proceeds thereof, without his copayee BA Finance
[16]
havingeitherindorseditorauthorizedhimtoindorseitinitsbehalf,
found Asianbank and
Bitanga jointly and severally liable to BA Finance following Section 41 of the Negotiable
[17]
InstrumentsLawandAssociatedBankv.CourtofAppeals.

Thusthetrialcourtdisposed:
WHEREFORE,premisesconsidered,judgmentisherebyrenderedorderingdefendants
AsianBankCorporationandLambertoBitanga:

1)TopayplaintiffjointlyandseverallythesumofP224,500.00withinterest
thereonattherateof12%fromSeptember25,1992untilfullypaid
2)TopayplaintiffthesumofP50,000.00asexemplarydamagesP20,000.00
asactualdamagesP30,000.00asattorneysfeeand
3)Topaythecostsofsuit.

AsianbanksandBitangas[sic]counterclaimsaredismissed.

The third party complaint of defendant/third party plaintiff against thirdparty

defendant Malayan Insurance, Co., Inc. is hereby dismissed. Asianbank is ordered to pay
MalayanattorneysfeeofP50,000.00andaperappearancefeeofP500.00.

On the crossclaim of defendant Asianbank, codefendant Lamberto Bitanga is

orderedtopaytheformertheamountsthelatterisorderedtopaytheplaintiffinNos.1,
2and3abovementioned.

[18]
SOORDERED.
(emphasisandunderscoringsupplied)

BeforetheCourtofAppeals,Asianbank,initsAppellantsBrief,submittedthefollowing
issuesforconsideration:

3.01.1.1WhetherBAFinancehasacauseofactionagainstAsianbank.

3.01.1.2 AssumingthatBAFinancehasavalidcauseofaction,mayitclaimfrom
Asianbankmorethanonehalfofthevalueofthecheckconsideringthatitisamerecopayee
orjointpayeeofthecheck?

3.01.1.3 Whether BA Finance is liable to Asianbank for actual and exemplary

damagesforwrongfullybringingthecasetocourt.

3.01.1.4WhetherMalayanisliabletoAsianbankforreimbursementofanysumof
moneywhichthisHonorableCourtmayawardtoBAFinanceinthiscase.
supplied)

[19]

(underscoring

Anditprofferedthefollowingarguments:

A.BA Finance has no cause of action againstAsianbank as it has no legal right and title to the check
consideringthatthecheckwasnotdeliveredtoBAFinance.Hence,BAFinanceisnotaholder
thereofundertheNegotiableInstrumentsLaw.

B.Asianbank,ascollectingbank,isnotliabletoBAFinanceastherewasnoprivityofcontractbetween
them.

C. Asianbank, as collecting bank, is not liable to BA Finance, considering that, as the intermediary
between the payee and the drawee Chinabank, it merely acted on the instructions of drawee
Chinabank to pay the amount of the check to Bitanga, hence, the consequent damage to BA
FinancewasduetothenegligenceofChinabank.

D.MalayansactofissuinganddeliveringthechecksolelytoBitangainviolationofthelosspayeeclause
inthePolicy,istheproximatecauseoftheallegeddamagetoBAFinance.

E.AssumingAsianbankisliable,BAFinancecanclaimonlyhisproportionateinterestonthecheckasit
isajointpayeethereof.

F.Bitanga alone is liable for the amount to BAFinance on the ground of unjust enrichment or solutio
indebiti.

[20]

G.BAFinanceisliabletopayAsianbankactualandexemplarydamages.

(underscoringsupplied)

Theappellatecourt,summarizingtheerrorsattributedtothetrialcourtbyAsianbanktobe
whetherBA Finance has a cause of action against [it] even if the subject check had not been
deliveredtoBAFinancebytheissueritself,heldintheaffirmativeandaccordinglyaffirmedthe
[21]
trialcourtsdecisionbutdeletedtheawardofP20,000asactualdamages.

[22]
Hence, the present Petition for Review on Certiorari
filed by Metrobank (hereafter
petitioner)towhichAsianbankwas,asearlierstated,merged,faultingtheappellatecourt

I. xxxinapplyingthecaseofAssociatedBankv.CourtofAppeals,inthe
absenceoffactualsimilarityandofthelegalrelationshipsnecessaryforthe
applicationofthedesirableshortcutrule.xxx
II.xxxinnotfindingthatxxxthegeneralrulethatthepayeehasnocauseof
actionagainstthecollectingbankabsentdeliverytohimmustbeapplied.
III. xxxinfindingthatalltheelementsofacauseofactionbyBAFinance
CorporationagainstAsianbankCorporationarepresent.
IV.xxxinfindingthatArticle1208oftheCivilCodeisnotapplicable.
V. xxxinawardingofexemplarydamagesevenintheabsenceofmoral,
temperate, liquidated or compensatory damages and a finding of fact that
Asianbankactedinawanton,fraudulent,reckless,oppressiveormalevolent
manner.
xxxx
VII. x x x in dismissing Asianbanks counterclaim and Third Party complaint
[23]
[against Malayan Insurance].
(italics in the original underscoring
supplied)

Petitioner proffers the following arguments against the application of Associated Bank v.
CAtothecase:

x x x [T]he rule established in the Associated Bank case has provided a speedier
remedyforthepayeetorecoverfromerringcollectingbanksdespitetheabsenceofdeliveryof
thenegotiableinstrument.However,theapplicationoftheruledemandscarefulconsideration
ofthefactualsettingsandissuesraisedinthecasexxx.

OneoftherelevantcircumstancesraisedinAssociatedBankistheexistenceofforgery
orunauthorizedindorsement.xxx

xxxx

Inthecaseatbar,Bitangaisauthorizedtoindorsethecheckasthedrawernameshim
asoneofthepayees.Moreover,hissignatureisnotaforgerynorhasheoranyoneforgedthe
signature of the representative of BA Finance Corporation. No unauthorized indorsement
appearsonthecheck.

xxxx

Absent the indispensable fact of forgery or unauthorized indorsement, the desirable

[24]
shortcutrulecannotbeapplied,
(underscoringsupplied)

Thepetitionfails.

Section41oftheNegotiableInstrumentsLawprovides:
Whereaninstrumentispayabletotheorderoftwoormorepayeesorindorseeswho
are not partners, all must indorse unless the one indorsing has authority to indorse for the
others.(emphasisandunderscoringsupplied)

Bitangaaloneendorsedthecrossedcheck,andpetitionerallowedthedepositandrelease
of the proceeds thereof, despite the absence of authority of Bitangas copayee BA Finance to
[25]
endorseitonitsbehalf.
Denying any irregularity in accepting the check, petitioner maintains that it followed
normal banking procedure. The testimony of Imelda Cruz, Asianbanks then accounting head,
showsotherwise,however,viz:

QNow,couldyoubefamiliarwithaparticularpolicyofthebankwithrespecttochecks
withjoined(sic)payees?
AYes,sir.

QAndwhatwouldbetheparticularpolicyofthebankregardingthistransaction?
AThebankpolicyandprocedureregardingthejointchecks.Onceitisdepositedtoa
singleaccount,wearenotacceptingjointchecksforsingleaccount,depositing
toasingleaccount(sic).

QWhathappenedtothebankemployeewhoallowedthisparticulartransactiontooccur?
AOncethebranchpersonnel,thebankpersonnel(sic)acceptedit,heisliable.

QWhatdoyoumeanbythebranchpersonnelbeingheldliable?
ABecausesince(sic)thebankpolicy,wearenotsupposedtoacceptjointcheckstoa
[single]account,sowemeanthatpersonnelwouldbeheldliableinthesense
that(sic)onceitiswithdrawnorencashed,itwillnotbeallowed.

Q In your experience, have you encountered any bank employee who was subjected to
disciplinaryactionbynotfollowingbankpolicies?
ATheonethathappenedinthatcase,sinceIreallydontknowwhothatpersonnelis,heis
nolongerconnectedwiththebank.


QWhataboutingeneral,doyouknowofanydisciplinaryaction,Madamwitness?
ASincetheresanegligenceonthepartofthebankpersonnel,itwillbeagroundfor
[26]
hisseparation[from]thebank.
(emphasis,italicsandunderscoringsupplied)

Admittedly,petitionerdismissedtheemployeewhoallowedthedepositofthecheckinBitangas
account.

Petitioners argument that since there was neither forgery, nor unauthorized indorsement
becauseBitangawasacopayeeinthesubjectcheck,thedictuminAssociatedBankv.CAdoes
notapplyinthepresentcasefails.Thepaymentofaninstrumentoveramissingindorsementis
[27]
theequivalentofpaymentonaforgedindorsement
oranunauthorizedindorsementinitself
[28]
inthecaseofjointpayees.

Clearly,petitioner,throughitsemployee,wasnegligentwhenitallowedthedepositofthe
crossed check, despite the lone endorsement of Bitanga, ostensibly ignoring the fact that the
[29]
checkdidnot,itbearsrepeating,carrytheindorsementofBAFinance.

Ashasbeenrepeatedlyemphasized,thebankingbusinessisimbuedwithpublicinterest
suchthatthehighestdegreeofdiligenceandhigheststandardsofintegrityandperformanceare
expectedofbanksinordertomaintainthetrustandconfidenceofthepublicingeneralinthe
[30]
bankingsector.
Undoubtedly,BAFinancehasacauseofactionagainstpetitioner.

IspetitionerliabletoBAFinanceforthefullvalueofthecheck?

Petitioner,atallevents,arguethatitsliabilitytoBAFinanceshouldonlybeonehalfofthe
amountcoveredbythecheckasthereisnoindicationinthecheckthatBitangaandBAFinance
are solidary creditors to thus make them presumptively joint creditors under Articles 1207 and
1208oftheCivilCodewhichrespectivelyprovide:

Art.1207.Theconcurrenceoftwoormorecreditorsoroftwoormoredebtorsinone
andthesameobligationdoesnotimplythateachoneoftheformerhasarighttodemand,or
thateachoneofthelatterisboundtorender,entirecompliancewiththeprestations.Thereisa
solidaryliabilityonlywhentheobligationexpresslysostates,orwhenthelaworthenatureof
theobligationrequiressolidarity.