PHIL COMML INTL BANK V CA

Negotiable Instruments Law Rights of the Holder 350 SCRA 446

What Constitutes a Holder in Due Course Negligence of the
Collecting Bank and the Drawee Bank
There are three cases consolidated here: G.R. No. 121413 (PCIB vs
CA and Ford and Citibank), G.R. No. 121479 (Ford vs CA and Citibank
and PCIB), and G.R. No. 128604 (Ford vs Citibank and PCIB and CA).
G.R. No. 121413/G.R. No. 121479
In October 1977, Ford Philippines drew a Citibank check in the amount
of P4,746,114.41 in favor of the Commissioner of the Internal Revenue
(CIR). The check represents Fords tax payment for the third quarter of
1977. On the face of the check was written Payees account only
which means that the check cannot be encashed and can only be
deposited with the CIRs savings account (which is with Metrobank).
The said check was however presented to PCIB and PCIB accepted
the same. PCIB then indorsed the check for clearing to Citibank.
Citibank cleared the check and paid PCIB P4,746,114.41. CIR later
informed Ford that it never received the tax payment.
An investigation ensued and it was discovered that Fords accountant
Godofredo Rivera, when the check was deposited with PCIB, recalled
the check since there was allegedly an error in the computation of the
tax to be paid. PCIB, as instructed by Rivera, replaced the check with
two of its managers checks.
It was further discovered that Rivera was actually a member of a
syndicate and the managers checks were subsequently deposited with
the Pacific Banking Corporation by other members of the syndicate.
Thereafter, Rivera and the other members became fugitives of justice.
G.R. No. 128604
In July 1978 and in April 1979, Ford drew two checks in the amounts of
P5,851,706.37 and P6,311,591.73 respectively. Both checks are again
for tax payments. Both checks are for Payees account only or for the
CIRs bank savings account only with Metrobank. Again, these checks
never reached the CIR.
In an investigation, it was found that these checks were embezzled by
the same syndicate to which Rivera was a member. It was established
that an employee of PCIB, also a member of the syndicate, created a
PCIB account under a fictitious name upon which the two checks,
through high end manipulation, were deposited. PCIB unwittingly
endorsed the checks to Citibank which the latter cleared. Upon
clearing, the amount was withdrawn from the fictitious account by
syndicate members.
ISSUE: What are the liabilities of each party?
HELD: G.R. No. 121413/G.R. No. 121479
PCIB is liable for the amount of the check (P4,746,114.41). PCIB, as a
collecting bank has been negligent in verifying the authority of Rivera
to negotiate the check. It failed to ascertain whether or not Rivera can
validly recall the check and have them be replaced with PCIBs
managers checks as in fact, Ford has no knowledge and did not
authorize such. A bank (in this case PCIB) which cashes a check
drawn upon another bank (in this case Citibank), 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. Hence, PCIB is liable for the amount of the
embezzled check.
G.R. No. 128604
PCIB and Citibank are liable for the amount of the checks on a 50-50
basis.
As a general rule, a bank is liable for the negligent or tortuous act of its
employees within the course and apparent scope of their employment
or authority. Hence, PCIB is liable for the fraudulent act of its employee
who set up the savings account under a fictitious name.
Citibank is likewise liable because it was negligent in the performance
of its obligations with respect to its agreement with Ford. The checks
which were drawn against Fords account with Citibank clearly states
that they are payable to the CIR only yet Citibank delivered said
payments to PCIB. Citibank however argues that the checks were
indorsed by PCIB to Citibank and that the latter has nothing to do but
to pay it. The Supreme Court cited Section 62 of the Negotiable
Instruments Law which mandates the Citibank, as an acceptor of the
checks, to engage in paying the checks according to the tenor of the
acceptance which is to deliver the payment to the payees account
only.
But the Supreme Court ruled that in the consolidated cases, that PCIB
and Citibank are not the only negligent parties. Ford is also negligent
for failing to examine its passbook in a timely manner which could have
avoided further loss. But this negligence is not the proximate cause of
the loss but is merely contributory. Nevertheless, this mitigates the
liability of PCIB and Citibank hence the rate of interest, with which
PCIB and Citibank is to pay Ford, is lowered from 12% to 6% per
annum.
MESINA V IAC
Negotiable Instruments Law Rights of the Holder 145 SCRA 497
What Constitutes a Holder in Due Course Stolen Check
Jose Go maintains an account with Associated Bank. He needed to
transfer P800,000.00 from Associated Bank to another bank but he
realized that he does not want to be carrying that cash so he bought a
cashiers check from Associated Bank worth P800,000.00. Associated
Bank then issued the check but Jose Go forgot to get the check so it
was left on top of the desk of the bank manager. The bank manager,
when he found the check, entrusted it to Albert Uy for the later to safe
keep it. The check was however stolen from Uy by a certain Alexander
Lim.
Jose Go learned that the check was stolen son he made a stop
payment order against the check. Meanwhile, Associated Bank
received the subject check from Prudential Bank for clearing.
Apparently, the check was presented by a certain Marcelo Mesina for
payment. Associated Bank dishonored the check.
When asked how Mesina got hold of the check, he merely stated that
Alfredo Lim, whos already at large, paid the check to him for a certain
transaction.
ISSUE: Whether or not Mesina is a holder in due course.
HELD: No. Admittedly, Mesina became the holder of the cashiers
check as endorsed by Alexander Lim who stole the check. Mesina
however refused to say how and why it was passed to him. Mesina
had therefore notice of the defect of his title over the check from the
start. The holder of a cashiers check who is not a holder in due course
cannot enforce such check against the issuing bank which dishonors
the same. The check in question suffers from the infirmity of not having
been properly negotiated and for value by Jose Go who is the real
owner of said instrument.