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issued by petitioner was withdrawn from PCIB for alleged mistake in the amount to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, ed 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.