Banco de Oro vs. JAPRL Development Corporation G.R. No.
179901, April 14, 2008 securities” which an investment company, like ASIA PACIFIC, is authorized to
Under Sec. 40 of the General Banking Law, should such statements (financial)
prove to be false or incorrect in any material detail, the bank may terminate any
loan or credit accommodation granted on the basis of said statements and shall
have the right to demand immediate repayment or liquidation of the obligation.
Facts: Banco de Oro extended financial facilities to JAPRL Development
Corporation (JAPRL) amounting to P230,000,000 with co-respondents Rapid Forming
Corporation (RFC) and Jose Arollado acting as sureties. JAPRL defaulted in the
payment of four trust receipts. Petitioner bank subsequently found out that JAPRL
altered and falsified its financial statements to project itself as a viable investment.
Because the demand for payment was unheeded, petitioner bank sued JAPRL and the
sureties for payment of the balance due on the trust receipts in RTC Makati.
Respondents then hastily filed a petition for rehabilitation and stay order in Calamba of
RTC which were granted. As a result, the complaint was dismissed with respect to
JAPRL and RFC. Arollado remained as defendant. Respondents filed a petition for
certiorari before the CA, contending that the trial court did not acquire jurisdiction over
them as the summons were served on a mere administrative assistant. CA granted the
petition and dismissed petitioner’s motion for reconsideration.
Issues: 1) Whether or not jurisdiction over the defendants was acquired
2) Whether or not JAPRL are liable to pay their obligations
Held:
1) Whether or not jurisdiction over the defendants was acquired
When respondents moved for the suspension of proceedings of the civil case before
the Makati RTC, on the basis of the stay order of the Calamba RTC, they waived
whatever defect there was in the service of summons and were deemed to have
submitted themselves voluntarily to the jurisdiction of the Makati RTC.
2) Whether or not JAPRL are liable to pay their obligations.
Considering the amount of petitioner’s exposure in JAPRL, justice and fairness dictate
that the Makati RTC hear whether or not respondents indeed committed fraud in
securing the credit accomodation. In this event, petitioner can use the finding of fraud
to move for the dismissal of the rehabilitation case in the Calamba RTC. Moreover,
under Sec. 40 of the General Banking Law, should such statements (financial) prove to
be false or incorrect in any material detail, the bank may terminate any loan or credit
accommodation granted on the basis of said statements and shall have the right to
demand immediate repayment or liquidation of the obligation.
Banas vs. Asia Pacific Finance Corporation G.R. No. 128703, October 18, 2000
An investment company refers to any issuer which is or holds itself out as being
engaged or proposes to engage primarily in the business of investing,
reinvesting or trading in securities. As defined in Revised Securities Act,
securities “shall include commercial papers evidencing indebtedness of any
person, financial or non-financial entity, irrespective of maturity, issued,
endorsed, sold, transferred or in any manner conveyed to another with or without
recourse, such as promissory notes. Clearly, the transaction between petitioners
and respondent was one involving not a loan but purchase of receivables at a
discount, well within the purview of “investing, reinvesting or trading in
perform and does not constitute a violation of the General Banking Act.
Facts: Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon
Construction whereby for value received he promised to pay to the order of C. G. Dizon
Construction the sum ofP390,000.00 in installments of “P32,500.00 every 25th day of
the month starting from September 25, 1980 up to August 25, 1981.”Later, C. G. Dizon
Construction endorsed with recourse the Promissory Note to ASIA PACIFIC, and to
secure payment thereof, C. G. Dizon Construction, through its corporate officers, Cenen
Dizon, President, and Juliette B. Dizon, Vice President and Treasurer, executed a Deed
of Chattel Mortgage covering three heavy equipment units of Caterpillar Bulldozer
Crawler Tractors Moreover, Cenen Dizon executed a Continuing Undertaking wherein
he bound himself to pay the obligation jointly and severally with C. G. Dizon
Construction.
In compliance thereof, C. G. Dizon Construction made three installment payments to
ASIA PACIFIC for a total of P130,000.00. Thereafter, however, C. G. Dizon
Construction defaulted in the payment of the remaining installments, prompting ASIA
PACIFIC to send a Statement of Account to Cenen Dizon for the unpaid balance
of P267,737.50 inclusive of interests and charges, and P66,909.38 representing
attorney’s fees. As the demand was unheeded, ASIA PACIFIC filed a complaint for a
sum of money with prayer for a writ of replevin against Teodoro Bañas, C. G. Dizon
Construction and Cenen Dizon. The trial court issued a writ of replevin against
defendant C. G. Dizon Construction for the surrender of the bulldozer crawler tractors.
Of the three bulldozer crawler tractors, only two were actually turned over by
defendants which units were subsequently foreclosed by ASIA PACIFIC to satisfy the
obligation. The two bulldozers were sold both to ASIA PACIFIC as the highest bidder.
Petitioners insist that ASIA PACIFIC was organized as an investment house which
could not engage in the lending of funds obtained from the public through receipt of
deposits. The disputed Promissory Note, Deed of Chattel Mortgage and Continuing
Undertaking were not intended to be valid and binding on the parties as they were
merely devices to conceal their real intention which was to enter into a contract of loan
in violation of banking laws. The Regional Trial Court ruled in favor of ASIA PACIFIC
holding the defendants jointly and severally liable for the unpaid balance of the
obligation under the Promissory Note. The Court of Appeals affirmed the decision of the
trial court
Issues: Whether the disputed transaction between ASIA PACIFIC was engaged in
banking activities.
Held: An investment company refers to any issuer which is or holds itself out as being
engaged or proposes to engage primarily in the business of investing, reinvesting or
trading in securities. As defined in Revised Securities Act, securities “shall include
commercial papers evidencing indebtedness of any person, financial or non-financial
entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner
conveyed to another with or without recourse, such as promissory notes” Clearly, the
transaction between petitioners and respondent was one involving not a loan but
purchase of receivables at a discount, well within the purview of “investing, reinvesting
or trading in securities” which an investment company, like ASIA PACIFIC, is authorized
to perform and does not constitute a violation of the General Banking Act.
What is prohibited by law is for investment companies to lend funds obtained from the
public through receipts of deposit, which is a function of banking institutions. But here,
the funds supposedly “lent” to petitioners have not been shown to have been obtained
from the public by way of deposits, hence, the inapplicability of banking laws.
Wherefore, the assailed decision of the Court of Appeals was affirmed.
BPI vs. Court of Appeals and Napiza
FACTS:
A certain Henry Chan owned a Continental Bank Manager’s Check payable to "cash" in
the amount of Two Thousand Five Hundred Dollars ($2,500.00). Chan went to the
office of Benjamin Napiza and requested him to deposit the check in his dollar account
by way of accommodation and for the purpose of clearing the same. Private respondent
acceded, and agreed to deliver to Chan a signed blank withdrawal slip, with the
understanding that as soon as the check is cleared, both of them would go to the bank
to withdraw the amount of the check upon private respondent’s presentation to the bank
of his passbook. Napiza thus endorsed the check and deposited it in a Foreign
Currency Deposit Unit (FCDU) Savings Account he maintained with BPI. Using the
blank withdrawal slip given by private respondent to Chan, one Ruben Gayon, Jr. was
able to withdraw the amount of $2,541.67 from Napiza's FCDU account. It turned out
that said check deposited by private respondent was a counterfeit check.
*When BPI demanded the return of $2,500.00, private respondent claimed that he
deposited the check "for clearing purposes" only to accommodate Chan.
**Petitioner claims that private respondent, having affixed his signature at the dorsal
side of the check, should be liable for the amount stated therein in accordance with the
provision of the Negotiable Instruments Law on the liability of a general indorser (Sec.
66).
ISSUE:*
Whether private respondent is obliged to return the money paid out by BPI on a
counterfeit check even if he deposited the check "for clearing purposes" only to
accommodate Chan.
ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a general indorser.
RULING:
Ordinarily private respondent may be held liable as an indorser of the check or even as
an accommodation party. However, petitioner BPI, in allowing the withdrawal of private
respondent’s deposit, failed to exercise the diligence of a good father of a family. BPI
violated its own rules by allowing the withdrawal of an amount that is definitely over and
above the aggregate amount of private respondent’s dollar deposits that had yet to be
cleared. The proximate cause of the eventual loss of the amount of $2,500.00 on BPI's
part was its personnel’s negligence in allowing such withdrawal in disregard of its own
rules and the clearing requirement in the banking system. In so doing, BPI assumed the
risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it
should suffer the resulting damage.
Philippine Savings Bank v. Chowking Food Corporation G.R. No. 177526
The General Banking Law 2000 imposes to all banks to observe meticulous care
in treating the accounts of their depositors. The bank’s negligence contributed to
the fraud committed by Manzano as it is primarily liable for the negligence of its
officers and agents who are acting within the scope of their employment.
For estoppel to occur the following requisites should be met: (a) conduct
amounting to false representation or concealment of material facts or at least
calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (b)
intent, or at least expectation that this conduct shall be acted upon, or at least
influenced by the other party; and (c) knowledge, actual or constructive of the
actual facts.
Facts: Rino Manzano, acting accounting manager of Chowking, endorsed and
encashed from the petitioner 5 checks amounting to a total of P556,981.86. The checks
were encashed without the signatures of the other authorized officials of Chowking but
was accepted and honored by Santos. Manzano misappropriated the amount and when
Chowking found out it demanded reimbursement from the bank. The bank refused thus
the respondent filed a complaint for the sum of money with damages. It impleaded the
bank president, Antonio Abacan and the bank branch manager, Santos who in turn filed
a cross claim and third party complaint against Manzano.
The bank maintained it exercised due diligence in the supervision of its employees
while Santos denied to be negligent on her job. Abacan invokes that the respondent
does not have any cause of action against him because he has no involvement to the
transaction. Santos and Abacan both contend that Chowking is estopped from claiming
reimbursement and damages because of its negligence for allowing Manzano to take
hold, endorse and encash its checks.
Issue:
1) Whether or not Chowking is estopped from its claim against for the wrongful
encashment of the checks
2) whether Chowking should bear the loss from its own negligence.
Ruling:
1) Whether or not Chowking is estopped from its claim against for the wrongful
encashment of the checks
No. For estoppel to occur the following requisites should be met: (a) conduct amounting
to false representation or concealment of material facts or at least calculated to convey
the impression that the facts are otherwise than, and inconsistent with, those which the
party subsequently attempts to assert; (b) intent, or at least expectation that this
conduct shall be acted upon, or at least influenced by the other party; and (c)
knowledge, actual or constructive of the actual facts.
Chowking did not in any way show misrepresentation on the material facts on the
encashment of checks. They do not allow the encashment of checks without the
signature of all its authorized signatories. This the bank knows this as the customary
practice of Chowking. However, the bank failed to provide evidence to show they
observe due diligence required from banks by the law.
2) whether Chowking should bear the loss from its own negligence.
No. The General Banking Law 2000 imposes to all banks to observe meticulous care in
treating the accounts of their depositors. The bank’s negligence contributed to the fraud
committed by Manzano as it is primarily liable for the negligence of its officers and
agents who are acting within the scope of their employment. Petition was denied.
PHILIPPINE SAVINGS BANK VS. CHOWKING FOOD CORPORATION
Facts: The RTC ordered petitioner PSBank and its Bustos Branch Head, Erlinda O.
Santos, to reimburse respondent Chowking the amount corresponding to five (5)
illegally encashed checks. The total amount of the subject checks reached
P556,981.86. On the respective due dates of each check, Chowking's acting
accounting manager, Rino T. Manzano, endorsed and encashed said checks with the
Bustos branch of respondent PSBank. All the five checks were honored by defendant
Santos, even with only the endorsement of Manzano approving them. The signatures of
the other authorized officers of respondent corporation were absent in the five (5)
checks, contrary to usual banking practice. Unexpectedly, Manzano absconded with
and misappropriated the check proceeds. When Chowking found out Manzano's
scheme, it demanded reimbursement from PSBank. When PSBank refused to pay,
Chowking filed a complaint for a sum of money with damages before the RTC. In its
Answer, petitioner did not controvert the foregoing facts, but denied liability to
respondent for the encashed checks. RTC rendered judgment in favor of respondent.
On motion for reconsideration of the plaintiff, the RTC reversed its earlier decision and
dismissed Chowking's complaint. In its appeal, CA granted the petition reinstating the
first decision of the RTC.
Issue: WON banks' required diligence is that of pater familias.
Ruling: CA decision affirmed. Petition Denied.
It cannot be over emphasized that the banking business is impressed with public
interest. Of paramount importance is the trust and confidence of the public in general in
the banking industry. Consequently, the diligence required of banks is more than that of
a Roman pater familias or a good father of a family. The highest degree of diligence is
expected. In its declaration of policy, the General Banking Law of 2000 requires of
banks the highest standards of integrity and performance. Needless to say, a bank is
"under obligation to treat the accounts of its depositors with meticulous care. The
fiduciary nature of the relationship between the bank and the depositors must always
be of paramount concern.
"Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done....Art. 2180. The obligation imposed
by Art. 2176 is demandable not only for one's own acts or omissions but also for those
of persons for whom one is responsible.
x x x xEmployers shall be liable for the damage caused by their employees and
household helpers acting within the scope of their assigned tasks even though the
former are not engaged in any business or activity.
x x x xThe responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage."x x x
However, with banks like PSB, the degree of diligence required is more than that of a
good father of a family considering that the business of banking is imbued with public
interest due to the nature of its functions. Highest degree of diligence is needed which
PSB, in this case, failed to observe. x x x Its argument that it should no be held
responsible for the negligent acts of Santos because those were independent acts x x x
perpetrated without its knowledge and consent is without basis in fact and in law.
Assuming that PSB did not err in hiring Santos for her position, its lack of supervision
over her made it solidarily liable for the unauthorized encashment of the checks
involved. In the supervision of employees, the employer must formulate standard
operating procedures, monitor their implementation and impose disciplinary measures
for the breach thereof. The appellee, in this case, presented no evidence that it
formulated rules/guidelines for the proper performance of functions of its employees
and that it strictly implemented and monitored compliance therewith. x x x
Philippine Savings Bank v Chowking Food Corp. GR No. 177526, July 4, 2008
Facts:
Rino Manzano, acting accounting manager of Chowking, endorsed and encashed from
the petitioner 5 checks amounting to a total of P556,981.86. The checks were
encashed without the signatures of the other authorized officials of Chowking but was
accepted and honored by Santos. Manzano misappropriated the amount and when
Chowking found out it demanded reimbursement from the bank. The bank refused thus
the respondent filed a complaint for the sum of money with damages. It impleaded the
bank president, Antonio Abacan and the bank branch manager, Santos who in turn filed
a cross claim and third party complaint against Manzano. But summon was not served
to Manzano and the third party complaint was archived when Santos did not take any
further action. The bank maintained it exercised due diligence in the supervision of its
employees while Santos denied to be negligent on her job. Abacan invokes that the
respondent does not have any cause of action against him because he has no
involvement to the transaction. Santos and Abacan both contend that Chowking is
estopped from claiming reimbursement and damages because of its negligence for
allowing Manzano to take hold, endorse and encash its checks.
RTC Ruling: Ordered the bank and Santos to pay Chowking jointly and severally.
Likewise Santos and Manzano are jointly and severally ordered to reimburse the bank
for whatever amount the bank will be paying to Chowking. On motion for
reconsideration, the court dismissed the complaint of Chowking and ordered Manzano
or Santos to pay Chowking for reimbursement and damages. Chowking appealed
before the CA assailing the court decision that the proximate cause of its loss is due to
its negligence.
CA Ruling: Bank and Santos should bear the loss since it is undisputed
that Santos was negligent for honoring the checks signed only by Manzano. Art. 2180
provides that the obligation imposed on Art. 2176 on negligence is demandable not only
to one’s own act but also to the acts of persons for whom one is responsible. Hence the
bank is liable for the negligence of its employee. The bank invokes that Chowking is
estopped from its claim against the bank and that the proximate cause of its loss is due
to its own negligence.
Issue: Whether or not Chowking is estopped from its claim against the petitioner and
whether Chowking should bear the loss from its own negligence.
Ruling:
The doctrine of estoppel is not applicable in the case at bar. For estoppel to occur the
following requisites should be met: (a) conduct amounting to false representation or
concealment of material facts or at least calculated to convey the impression that the
facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (b) intent, or at least expectation that this conduct shall be acted
upon, or at least influenced by the other party; and (c) knowledge, actual or constructive
of the actual facts. Chowking did not in any way show misrepresentation on the material
facts on the encashment of checks. They do not allow the encashment of checks
without the signature of all its authorized signatories. This the bank knows as the
customary practice of Chowking and it failed to provide evidence to show they observe
due diligence required from banks by the law. The General Banking Law 2000 imposes
to all banks to observe meticulous care in treating the accounts of their depositors. The
bank’s negligence contributed to the fraud committed by Manzano as it is primarily
liable for the negligence of its officers and agents who are acting within the scope of
their employment. Petition was denied.
BANK OF THE PHILIPPINE ISLANDS v. CASA MONTESSORI INTERNATIONALE
and LEONARDO T. YABUT
[G.R. No. 149454. May 28, 2004] (430 SCRA 261)
FACTS:
CASA Montessori International opened a current account with BPI with CASAs
President Ms. Ma. Carina C. Lebron as one of its authorized signatories. In 1991, after
conducting an investigation, plaintiff discovered that nine (9) of its checks had been
encashed by a certain Sonny D. Santos since 1990 in the total amount of P782,000.00.
It turned out that Sonny D. Santos with account at BPIs Greenbelt Branch [was] a
fictitious name used by third party defendant Leonardo T. Yabut who worked as
external auditor of CASA. Third party defendant voluntarily admitted that he forged the
signature of Ms. Lebron and encashed the checks.
The PNP Crime Laboratory conducted an examination of the nine (9) checks
and concluded that the handwritings thereon compared to the standard signature of Ms.
Lebron were not written by the latter.
On March 4, 1991, plaintiff filed the herein Complaint for Collection with
Damages against defendant bank.
ISSUE 2:
Is BPI liable as the drawee bank for allowing payment on the checks to a
wrongful and fictitious payee?
HELD:
YES. BPI -- the drawee bank -- becomes liable to its depositor-drawer for
allowing payment on the checks to a wrongful and fictitious payee. Since the encashing
bank is one of its branches, BPI can easily go after it and hold it liable for
reimbursement. It may not debit the drawers account and is not entitled to
indemnification from the drawer. In both law and equity, when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must be borne by the
one whose negligence was the proximate cause of the loss or who put it into the power
of the third person to perpetrate the wrong.
A bank is bound to know the signatures 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.
BPI VS. CASA MONTESSORI INTERNATIONAL
FACTS: On November 8, 1982, CASA Montessori International opened Current
AccouNT with BPI with CASA’s President Lebron as one of its authorized signatories. In
1991, after conducting an investigation, plaintiff discovered that nine of its checks had
been encashed by a certain Sonny D. Santos since 1990 in the total amount of
P782,000.00. It turned out that Santos with account at BPI Greenbelt Branch was a
fictitious name used by third party defendant Leonardo T. Yabut who worked as
external auditor of CASA. Third party defendant voluntarily admitted that he forged the
signature of Lebron and encashed the checks. In 1991, plaintiff filed Complaint for
Collection with Damages against defendant bank praying that the latter be ordered to
reinstate the amount of P782,500.00 with interest. RTC rendered decision in favor of
the plaintiff. CA modified decision holding CASA as contributory negligent hence
ordered Yabut to reimburse BPI half the total amount claimed and CASA, the other half.
It also disallowed attorney’s fees and moral and exemplary damages.
ISSUE: W/N moral and exemplary damages and attorney’s fees should be awarded.
RULING: Moral and exemplary damages denied but atty.’s fees granted.
In the absence of a wrongful act or omission, or of fraud or bad faith, moral damages
cannot be awarded. The adverse result of an action does not per se make the action
wrongful, or the party liable for it.CASA was unable to identify the particular instance
upon which its claim for moral damages is predicated. Neither bad faith nor negligence
so gross that it amounts to malice can be imputed to BPI.
Imposed by way of correction for the public good, exemplary damages cannot be
recovered as a matter of right. There is no bad faith on the part of BPI for paying the
checks of CASA upon forged signatures. Therefore, the former cannot be said to have
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The latter,
having no right to moral damages, cannot demand exemplary damages.
When the act or omission of the defendant has compelled the plaintiff to incur expenses
to protect the latter’s interest, or where the court deems it just and equitable, attorney’s
fees may be recovered. In the present case, BPI persistently denied the claim of CASA
under the NIL to recredit the latter’s account for the value of the forged checks. This
denial constrained CASA to incur expenses and exert effort for more than ten years in
order to protect its corporate interest in its bank account.

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 CASA’s 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 another’s 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
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:
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 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
drawer-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 made in due course and legally in order.
PCIB v. CA
Facts:
This case is composed of three consolidated petitions involving several checks, payable
to the Bureau of Internal Revenue, but was embezzled allegedly by an organized
syndicate.
I. G. R. Nos. 121413 and 121479
On October 19, 1977, plaintiff Ford issued a Citibank check amounting to
P4,746,114.41 in favor of the Commissioner of Internal Revenue for the payment of
manufacturer’s taxes. The check was deposited with defendant IBAA (now PCIB),
subsequently cleared the the Central Bank, and paid by Citibank to IBAA. The proceeds
never reached BIR, so plaintiff was compelled to make a second payment. Defendant
refused to reimburse plaintiff, and so the latter filed a complaint. An investigation
revealed that the check was recalled by Godofredo Rivera, the general ledger
accountant of Ford, and was replaced by a manager’s check. Alleged members of a
syndicate deposited the two manager’s checks with Pacific Banking Corporation. Ford
filed a third party complaint against Rivera and PBC. The case against PBC was
dismissed. The case against Rivera was likewise dismissed because summons could
not be served. The trial court held Citibank and PCIB jointly and severally liable to Ford,
but the Court of Appeals only held PCIB liable.
II. G. R. No. 128604
Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to
P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payee’s
account only. The checks never reached BIR, so plaintiff was compelled to make
second payments. Plaintiff instituted an action for recovery against PCIB and Citibank.
On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made
the checks but instead of delivering them to BIR, passed it to Castro, who was the
manager of PCIB San Andres. Castro opened a checking account in the name of a
fictitious person “Reynaldo Reyes”. Castro deposited a worthless Bank of America
check with the same amount as that issued by Ford. While being routed to the Central
Bank for clearing, the worthless check was replaced by the genuine one from Ford.
The trial court absolved PCIB and held Citibank liable, which decision was affirmed in
toto by the Court of Appeals.
Issues:
(1) Whether there is contributory negligence on the part of Ford
(2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the
drawee bank (Citibank) the value of the checks intended as payment to the
Commissioner of Internal Revenue?
Held:
(2) The general rule is that if the master is injured by the negligence of a third person
and by the concuring contributory negligence of his own servant or agent, the latter's
negligence is imputed to his superior and will defeat the superior's action against the
third person, asuming, of course that the contributory negligence was theproximate
cause of the injury of which complaint is made. As defined, proximate cause is that
which, in the natural and continuous sequence, unbroken by any efficient, intervening
cause produces the injury and without the result would not have occurred. It appears
that although the employees of Ford initiated the transactions attributable to an
organized syndicate, in our view, their actions were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford's negligence, if any,
could not be characterized as the proximate cause of the injury to the parties. The mere
fact that the forgery was committed by a drawer-payor's confidential employee or agent,
who by virtue of his position had unusual facilities for perpertrating the fraud and
imposing the forged paper upon the bank, does notentitle the bank toshift the loss to
the drawer-payor, in the absence of some circumstance raising estoppel against the
drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by
the confidential employees who hold them in their possession.
(2) We have to scrutinize, separately, PCIBank's share of negligence when the
syndicate achieved its ultimate agenda of stealing the proceeds of these checks.
a. G. R. Nos. 121413 and 121479
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks.
The neglect of PCIBank employees to verify whether his letter requesting for the
replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of
care and prudence required in the circumstances. Furthermore, it was admitted that
PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an
agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted
instructions given by the payor or its agent. It is a well-settled rule that the relationship
between the payee or holder of commercial paper and the bank to which it is sent for
collection is, in the absence of an argreement to the contrary, that of principal and
agent. A bank which receives such paper for collection is the agent of the payee or
holder.
Indeed, the crossing of the check with the phrase "Payee's Account Only," is a warning
that the check should be deposited only in the account of the CIR. Thus, it is the duty of
the collecting bank PCIBank to ascertain that the check be deposited in payee's
account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize
the check and to know its depositors before it could make the clearing indorsement "all
prior indorsements and/or lack of indorsement guaranteed".
Lastly, banking business requires that the one who first cashes and negotiates the
check must take some precautions to learn whether or not it is genuine. And if the one
cashing the check through indifference or other circumstance assists the forger in
committing the fraud, he should not be permitted to retain the proceeds of the check
from the drawee whose sole fault was that it did not discover the forgery or the defect in
the title of the person negotiating the instrument before paying the check. For this
reason, a bank which cashes a check drawn upon another bank, without requiring proof
as to the identity of persons presenting it, or making inquiries with regard to them,
cannot hold the proceeds against the drawee when the proceeds of the checks were
afterwards diverted to the hands of a third party. In such cases the drawee bank has a
right to believe that the cashing bank (or the collecting bank) had, by the usual proper
investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus,
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. The latter may recover from
the holder the money paid on the check.
b. G. R. No. 128604
In this case, there was no evidence presented confirming the conscious participation of
PCIBank in the embezzlement. As a general rule, however, a banking corporation is
liable for the wrongful or tortuous acts and declarations of its officers or agents within
the course and scope of their employment. A bank will be held liable for the negligence
of its officers or agents when acting within the course and scope of their employment. It
may be liable for the tortuous acts of its officers even as regards that species of tort of
which malice is an essential element. In this case, we find a situation where the
PCIBank appears also to be the victim of the scheme hatched by a syndicate in which
its own management employees had participated. But in this case, responsibility for
negligence does not lie on PCIBank's shoulders alone.
Citibank failed to notice and verify the absence of the clearing stamps. For this reason,
Citibank had indeed failed to perform what was incumbent upon it, which is to ensure
that the amount of the checks should be paid only to its designated payee. The point is this case may not have been attended with malice and bad faith, nevertheless, it
that as a business affected with public interest and because of the nature of its caused serious anxiety, embarrassment and humiliation”.
functions, the bank is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their relationship. Thus,
invoking the doctrine of comparative negligence, we are of the view that both PCIBank
and Citibank failed in their respective obligations and both were negligent in the
selection and supervision of their employees resulting in the encashment of Citibank
Check Nos. SN 10597 AND 16508. Thus, we are constrained to hold them equally
liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR.

Prudential Bank vs. Court of Appeals G.R. No. 125536, March 16, 2000

FACTS: Private respondent Leticia Tupasi-Valenzuela opened anaccount in the

Petitioner Prudential bank. On June 1, 1988, herein private
respondent deposited P35,271.60 drawn against the Philippine Commercial
International Bank (PCIB). Thereafter, private respondent issued Prudential Bank check
in the amount of P11,500 post-dated June 20, 1988 in favor of one Belen Legaspi.
Legaspi, who was in jewelry trade, endorsed the check to Philip Lhuiller, a businessman
in the same field. When the check was deposited with the PCIB, it was dishonored for
being drawn against insufficient funds. Private respondent asked why her check
was dishonored where there was sufficient funds. The bank officer told her there was
no need to review the passbook because the bank ledger was the best proof that she
did not have sufficient funds. Then he abruptly faced his typewriter and started typing.
Later, it was found out that the bank misposted private respondent’s check deposit to
another accountand delayed the posting of the same to the proper account. The bank
admitted that it was at fault. But since it is not the first time that private
respondent experienced this scenario, she commenced a suit for damages.

ISSUE: Can damages be awarded to private respondent on accountof the bank’s

negligence ?

HELD: Yes. The trial court found “that the misposting is a clear proof of lack of
supervision on the part of the defendant bank”. The appellatecourt also found out that
“while it may be true that the bank’s negligence in dishonoring the properly funded
check might not have been attended with malice and bad faith, as appellee submits,
nevertheless, it is the result of lack of due care and caution expected of an employee of
a firm engaged in so sensitive and accurately demanding task as banking”.

In Simex International vs. CA, 183 SCRA 360,367 (1990), and BPI vs. IAC, 206 SCRA
408, this court had occasion to stress the fiduciary nature of the relationship between a
bank and its depositors and the extent ofdiligence expected from the former in handling
the accounts entrusted to its care.

In the case of PNB vs. CA, we held that “a bank is under obligation to treat the accounts
of its depositors with meticulous care whether suchaccount consists only of a few
hundred pesos or millions of pesos. Responsibility arising from negligence in the
performance of every kind of obligation is demandable. While petitioner’s negligence in