THE PHILIPPINE NATIONAL BANK, plaintiff-

appellee, vs.
BARTOLOME PICORNELL, ET AL.,
defendants. JOAQUIN PARDO DE TAVERA,
appellant.
In a decision rendered January 9, 1922, and amended by an order of February 18th
next, the ourt of First Instance of !anila sentenced the defendants to pay
solidarily to the plaintiff ban" of the sum of #28,$9%.$2 &ith interest at the rate of 9
per centum per annum from !ay ', 1921, and costs( and the defendant )artolome
#icornell, to pay said plaintiff the sum of #1%,$'9.11 &ith interest at 9 per centum
per annum, all as aforesaid, deductin* the sum of #+,$%8.82 from such amounts to
be paid be the defendants.
,his total sum &hich the defendants are re-uired to pay represents the value of a bill
of exchan*e dra&n by )artolome #icornell in favor of the .ational )an", plaintiff,
a*ainst the firm of /yndman, ,avera 0 1entura, no& dissolved, its only successor
bein* the defendant Joa-uin #ardo de ,avera. ,he sum of #+,$%8.82, &hich the trial
court ordered deducted from the value of the bill of exchan*e, is the proceeds
received by the ban" from the sale of a part of a certain -uality of tobacco shipped
by #icornell at ebu to the /yndman, ,avera 0 1entura
company at !anila, the price of &hich, to*ether &ith his commission, &as received
by him from the branch of the plaintiff ban" in ebu, and in consideration &hereof
he dre& the bill from the central office of said ban" in !anila and a*ainst the said
/yndman, ,avera 0 1entura company, the consi*nee of the tobacco.
,he #28,$9%.$2, &hich the defendants are sentenced to pay solidarily to the
plaintiff ban", constitutes the value of the tobacco at the date &hen the bill fell
due, as appraised for the purpose.
,he reasonin* of the trial court for fixin* the respective responsibilities of the
defendants is *iven in its decision and is as follo&s2
. . . ,he defendant #ardo de ,avera, successor to /yndman, ,avera 0
1entura, by his havin* accepted the bill and denied payment thereof,
not&ithstandin* the existence of a consideration &hich is the real value of
the tobacco, and the defendant #icornell by his havin* dra&n such bill and
received its value from the branch of the plaintiff ban" in ebu, became
liable upon the same bill, the defendant #icornell to its full value, and the
defendant #ardo de ,avera to the extent of the value of the tobacco.
From this 3ud*ment the defendants appealed.
Joa-uin #ardo de ,avera alle*ed that the bill in -uestion &as &ithout consideration
and that 3ud*ment should not have been rendered a*ainst him. ,he appellant
#icornell contended that it should have been ta"en into account that he merely acted
as an a*ent of /yndman, ,avera 0 1entura in all these transactions( that the tobacco
&as not of inferior -uality, as alle*ed by the said company( that the condition 456#4
attached to the transaction &as not modified( that he had the ri*ht to complain
because the ban" consented to the said company ta"in* possession of the tobacco
before the payment of the bill( that the ban" held the tobacco as a deposit( that the
ban" &as not authori7ed to sell the tobacco, said sale not bein* allo&ed either by
la& or by the circumstances that he should not have been ordered to pay the value
of the bill &ithout proof that he &as notified of its dishonor, as re-uired by section
89 of the .e*otiable Instruments 8a&.
,he appellee ban" maintains that the appellants have no ri*ht to discuss issues of
fact in this instance for not havin* complied &ith the re-uirements enumerated in
para*raph 9a: of ;ule 1+ of the ;ules of the ourts of First Instance. ,he rule cited
refers to special proceedin*s. !oreover, &e believe, &e believe that the necessary
re-uirements in order that this court may pass upon -uestions of fact have been
complied &ith by the appellants.
,he follo&in* facts are proved2 ,hat )artolome #icornell, follo&in* instruction of
/yndman, ,avera 0 1entura, bou*ht in ebu 1,$'< bales of tobacco( that #icornell
obtained from the branch of the .ational )an" in ebu the sum of #'9,<29.8', the
value of the tobacco, to*ether &ith his commission of 1 real per -uintal 9accordin*
to stipulation =xhibit >:, havin*, in turn, dra&n the follo&in* bill of exchan*e,
=xhibit ?2
.o. 2-?. ebu, 28 febrero, 1920. For #'9,<29.8'
?t treinta 9'%: days si*ht please pay this first of exchan*e 9second
unpaid: to the order of Philippine National Bank treinta y nueve mil
quinientos veintinueve pesos con 83100! "alue receive#.
,o @res. /A.5!?., ,?1=;? A 1=.,B;?
alle @oler 2+ y 28.
9@*d.: ). #IC;.=88
,his instrument &as delivered to the branch of the .ational )an" in ebu, to*ether
&ith the invoice and bill of ladin* of the tobacco, &hich &as shipped in the boat
$on %l#efonso, on February 2$, 192%, consi*ned to /yndman, ,avera 0 1entura at
!anila. ,he invoice and bill of ladin* &ere delivered to the .ational )an" &ith the
understandin* that the ban" should not delivered them to /yndman, ,avera 0
1entura except upon payment of the bill( &hich condition &as expressed by the
&ell-"no&n formula 456#4 9documents for Da*ainstE payment:.
,he central office of the .ational )an" in !anila received the bill and the aforesaid
documents annexed thereto( and on !arch ', 192%, presented the bill to /yndman,
,avera 0 1entura, &ho accepted it statin* on the face thereof the follo&in*2
?ccepted, 'd !arch, 192%. 5ue, 2d ?pril, 192%. /yndman, ,avera 0
1entura, by 9@*d.: J. #ardo de ,avera, member of the firm.
,he tobacco havin* arrived at !anila, the firm of ,ambuntin*, o&ner of the ship
$on %l#efonso, that brou*ht the shipment, re-uested /yndman, ,avera 0 1entura
to send for the *oods, &hich &as done by the company &ithout the "no&led*e of
the .ational )an" &hich retained and al&ays had in its possession the invoice and
bill of ladin* of the tobacco, until it presented them as evidence at the trial.
/yndman, ,avera 0 1entura proceeded to the examination of the tobacco, &hich
&as deposited in their &arehouses, and &rote and cable to )artolome
#icornell, notifyin* him that of the tobacco received, there &as a certain portion
&hich &as no use and &as dama*ed. ,o these communications, #icornell ans&ered,
sendin* the follo&in* letter2
ebu, &arch 13, 1920.
!essrs. /A.5!?., ,?1=;? 0 1=.,B;?,
&anila!
,?)?C
5=?; @I;@2 Aour letters of the 'd and 9th, and your tele*ram of the <th,
inst, received and the sample of tobacco sent throu*h the captain of the
boat 5on Ildefonso.
I &ired to the seller as"in* him to come over and I hope he &ill do so at the
first opportunity.
It &ould be &ell that you should inform me of the exact number of bales
deteriorated and useless, and if possible that said information should be
furnished by the )ureau of Internal ;evenue. !oreover, it &ould be &ell
also that you should not sell any bale of said shipment until the matter is
settled.
Aours very truly,
9@*d.: ). #IC;.=88
,hrou*h these communications, therefore, #icornell learned that /yndman, ,avera
0 1entura had in their possession the tobacco aforementioned.
In vie& of the -uestion raised by the said company as to the -uality of the aforesaid
tobacco, more correspondence &as exchan*e bet&een the company and #icornell,
&ho, upon the su**estion of the former, &rote on !arch 2+, 192%, this letter2
!essrs. #hilippine .ational )an",
'ebu!
5=?; @I;@2 I &ould be obli*ed to you if you &ould &ire your central
office at !anila to extend thirty days the time for payment of the bill for
#'9,<29.8' a*ainst !essrs. /yndman, ,avera 0 1entura of !anila.
?&aitin* your favor, I remain,
Aours very truly,
9@*d.: ). #IC;.=88
,he ban" *ranted this re-uest of the defendants( &herefore /yndman, ,avera 0
1entura reaccepted the bill in the follo&in* terms2
?ccepted for thirty days. 5ue !ay 2d, 192%. /yndman, ,avera 0
1entura, )y 9@*d.: J #ardo de ,avera, member of the firm.
!ay 2, 192%, arrived and the bill &as not paid. Cn the >th of the same month,
/yndman, ,avera 0 1entura sent a letter to the plaintiff ban" as follo&s2
5=?; @I;@2 Fe very much re*ret to have to inform you that &e
absolutely refuse to pay draft .o. 2 for thirty-nine thousand five hundred
and t&enty-nine pesos and ei*hty-three cents 9#'9,<29.8':, referrin* to
1,8$1,2'< -uintals of 8eaf ,obacco )arili, o&in* to noncompliance of
the contract by the dra&er.
Fe, therefore, be* to notify you that the said 8ead ,obacco is at the
disposal of your *oodselves at our *o-do&n .o. 2+-'+ alle @oler.
,he ban" protested the bill, tool possession of the tobacco, and had it appraised on the
12th of the same month, its value havin* been fixed at #28,$9%.$2. ,hat this valuation
&as 3ust, reasonable and exact is not -uestioned by the parties.
,he ban" brou*ht this action, and about @eptember, 1921, sold the tobacco,
obtainin* from the sale #+,$%8.82.
,his action is for the recovery of the value of the bill of exchan*e above-
mentioned. ,he /yndman, ,avera 0 1entura company accepted it
unconditionally, but did not pay it at its maturity( &herefore its responsibility, or
that of its successor, J. #ardo de ,avera, to pay the same, is clear. 9@ec. +2,
.e*otiable Instruments 8a&.:
,he -uestion &hether or not the tobacco &as &orth the value of the bill, does not
concern the plaintiff ban". @uch partial &ant of consideration, if it &as, does not
exist &ith respect to the ban" &hich paid to #icornell the full value of said bill of
exchan*e. ,he ban" &as a holder in due course, and &as such for value full and
complete. ,he /yndman, ,avera 0 1entura company cannot escape liability in vie&
of section 28 of the .e*otiable Instruments 8a&.
. . . ,he dra&ee by acceptance becomes liable to the payee or his indorsee,
and also to the dra&er himself. )ut the dra&er and acceptor are the
immediate parties to the consideration, and if the acceptance be &ithout
consideration, the dra&er cannot recover of the acceptor. ,he payee holds a
different relation( he is a stran*er to the transaction bet&een the dra&er and
the acceptor, and is, therefore, in a le*al sense a remote party. In a suit by
him a*ainst the acceptor, the -uestion as to the consideration bet&een the
dra&er and the acceptor cannot be in-uired into. ,he payee or holder *ives
value to the dra&er, and if he is i*norant of the e-uities bet&een the dra&er
and the acceptor, he is in the position on a bona fide indorsee. /ence, it is
no defense to a suit a*ainst the acceptor of a draft &hich has been
discounted, and upon &hich money has been advance by the plaintiff, that
the draft &as accepted or the accommodation of the dra&er. . . . 9' ;. . 8.,
pp. 11>', 11>>, par, '<8.:
?s to )artolome #icornell, he &arranted, as dra&er of the bill, that it &ould be
accepted upon proper presentment and paid in due course, and as it &as not paid, he
became liable to the payment of its value to the holder thereof, &hich is the plaintiff
ban". 9@ec. +1, .e*otiable Instruments 8a&.:
,he fact that #icornell &as a commission a*ent of /yndman, ,avera 0 1entura, in
the purchase of the tobacco, does not necessarily ma"e him an a*ent of the
company in its obli*ations arisin* from the dra&in* of the bill by him. /is acts in
ne*otiatin* the bill constitute a different contract from that made by his havin*
purchased the tobacco on behalf of /yndman, ,avera 0 1entura. Furthermore, he
cannot exempt himself from responsibility by the fact of his havin* been a mere
a*ent of this company, because nothin* to this effect &as indicated or added to his
si*nature on si*nin* the bill. 9@ec. 2%, .e*otiable Instruments 8a&.:
,he fact that the tobacco &as or &as not of inferior -uality does not affect the
responsibility of #icornell, because &hile it may an effect upon the contract bet&een
him and the firm of /yndman, ,avera 0 1entura, yet it cannot have upon the
responsibility of both to the ban", upon the bill dra&n and accepted as above stated.
?s to the instruction 456#4 appearin* on the instrument, it &as not violated by the
ban", &hich, as above stated, "ept possession of the invoice and the bill of ladin*
of the tobacco. )y virtue of this circumstance, the ban" had the ri*ht to deal &ith
that tobacco as a security in case of non-payment of the bill, and this &as admitted
by /yndman, ,avera 0 1entura &hen, upon their refusal to pay the bill, they
placed the tobacco at the disposal of the ban".
.either does the fact of /yndman, ,avera 0 1entura havin* been *iven possession
of the tobacco before the payment of the bill affect the liability of the defendants to
the ban" thereon.
,he title of the ban" to the tobacco in -uestion by reason of the condition 456#4 &as
that a pled*ee, and its possession after its delivery to it by /yndman, ,avera 0
1entura &as of the same nature -- a discount security, &hich it &as authori7ed to
accept and retail. 9?ct .o. 29'8.:
,he appellants -uestion the po&er of the ban" to sell, as it did, the tobacco in
-uestion. ,a"in* into account the circumstances of the case, &e fold that the ban"
did not violate the la& in ma"in* such sale &ithout notice. Fe hold that it is one of
those cases provided for by la& 9sec. '', ?ct. .o. 29'8:, &herein a previous notice
of the sale is not indispensable. )esides, as to the price obtained in the sale, no
-uestion is made that it &as the best obtainable.
oncernin* the notice to #icornell of the dishonor of the bill, it appears from
=xhibit , &hich is to protest for the non-payment thereof, that a copy of such
protest &as sent by mail in *ood season addressed to )artolome #icornell, the
presumption, no& conclusive, that the latter received it 9secs. 1%<, 1%+, .e*otiable
Instruments 8a&:, not havin* been rebutted, or at least, contradicted.
Bpon the non-payment of the bill by the dra&ee-acceptor, the ban" had the ri*ht
of recourse, &hich it exercised, a*ainst the dra&er. 9@ec. 8>, .e*otiable
Instruments 8a&.:
,he dra&ee, the /yndman, ,avera 0 1entura company, or its successors, J. #ardo
de ,avera, accepted the bill and is primarily liable for the value of the ne*otiable
instrument, &hile the dra&er, )artolome #icornell, is secondarily liable. 9'. ;. .
8., pp. 11>>, 11><.: /o&ever, no -uestion has been raised about this aspect of the
responsibility of the defendants.
Fe are of the opinion that the appellants are liable to the .ational )an" for the
value of the bill of exchan*e =xhibit ?, deductin* therefrom #+,$%8.82 the
proceeds of the sale of the tobacco. )ut the ban", not havin* appealed from the
3ud*ment of the lo&er court, &e cannot alter it in favor of said party, &hich, by its
omission to appeal, has sho&n full conformity &ith the 3ud*ment rendered.
For the fore*oin*, the 3ud*ment appealed from is affirmed, &ith costs a*ainst the
defendants. @o ordered.
(raullo, '!)!, *treet, &alcolm, (vance+a, "illamor, ,stran# an# )ohns, ))!, concur.
;epublic
of the
#hilippin
es
SUP
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ME
CO
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C.
G.R. No. L-30910 F!"#$"% &',
19('
PEO
PLE
OF
THE
PHIL
IPPI
NES,
plaint
iff-
appell
ee,
vs.
JULIA MANIEGO, accused-
appellant.
NARVASA, J.:
?pplication of the established rule in
this 3urisdiction, that the ac-uittal of
an accused on reasonable doubt is not
*enerally an impediment to the
imposition, in the same criminal
action, of civil liability for dama*es
on said accused, is &hat is essentially
called into -uestion by the appellant
in this case.
,he information &hich initiated the
instant criminal proceedin*s in the
ourt of First Instance of ;i7al
indicted three 9': persons G 8t.
;i7alino !. Bbay, !rs. !ila*ros
#amintuan, and !rs. Julia ,.
!anie*o G for the crime of
!?81=;@?,IC. committed as
follo&s2
,hat on or about
the period coverin*
the month of !ay,
19<$ up to and
includin* the
month of ?u*ust,
19<$, in Hue7on
ity, #hilippines,
the above-named
accused, conspirin*
to*ether,
confederatin* &ith
and helpin* one
another, &ith intent
of *ain and &ithout
authority of la&,
did, then and there,
&illfully,
unla&fully and
feloniously
malverse,
misappropriate and
misapply public
funds in the
amount of #
++,>'>.<%
belon*in* to the
;epublic of the
#hilippines, in the
follo&in* manner,
to &it2 the accused,
8t. ;II?8I.C !.
Bbay, a duly
appointed officer in
the ?rmed Forces
of the #hilippines
in active duty, &ho,
durin* the period
specified above,
&as desi*nated as
5isbursin* Cfficer
in the Cffice of the
hief of Finance,
J/H, amp
!urphy, Hue7on
ity, and as such
&as entrusted &ith
and had under his
custody and control
public funds,
conspirin* and
confederatin* &ith
co-accused,
!I8?J;C@ ,.
#?!I.,B?. and
JB8I? ,.
!?.I=JC, did
then and there,
unla&fully,
&illfully and
feloniously, &ith
intent of *ain and
&ithout authority of
la&, and in
pursuance of their
conspiracy, ta"e,
receive, and
accept from his
said co-accused
several personal
chec"s dra&n
a*ainst the
#hilippine .ational
)an" and the )an"
of the #hilippine
Islands, of &hich
the accused,
!I8?J;C@ ,.
#?!I.,B?. is
the dra&er and the
accused, JB8I? ,.
!?.I=JC, is the
indorser, in the
total amount of
#++,>'>.<%,
cashin* said chec"s
and usin* for this
purpose the public
funds entrusted to
and placed under
the custody and
control of the said
8t. ;i7alino !.
Bbay, all the said
accused "no&in*
fully &ell that the
said chec"s are
&orthless and are
not covered by
funds in the
aforementioned
ban"s, for &hich
reason the same
&ere dishonored
and re3ected by the
said ban"s &hen
presented for
encashment, to the
dama*e and
pre3udice of the
;epublic of the
#hilippines, in the
amount of
#++,>'>.<%,
#hilippine
currency.
1
Cnly 8t. Bbay and !rs. !anie*o
&ere arrai*ned, !rs. #amintuan
havin* apparently fled to the
Bnited @tates in ?u*ust, 19+2.
&

)oth Bbay and !anie*o entered a
plea of not *uilty.
3
?fter trial 3ud*ment &as
rendered by the ourt of
First Instance,
)
the
dispositive part &hereof
reads2
,here bein*
sufficient evidence
beyond reasonable
doubt a*ainst the
accused, ;i7alino
!. Bbay, the ourt
hereby convicts
him of the crime of
malversation and
sentences him to
suffer the penalty
of reclusion
temporal of
,F=81= 912:
A=?;@, C.= 91:
5?A to
FCB;,==. 91>:
A=?;@, =IJ/,
98: !C.,/@, and
a fine of
#<$,>'>.<% &hich
is the amount
malversed, and to
suffer perpetual
special
dis-ualification.
%n the absence of
evi#ence a-ainst
accuse# )ulia .!
&anie-o, the
'ourt hereby
acquits her, but
both she an#
/i0al .! 1bay are
hereby or#ere# to
pay 2ointly an#
severally the
amount of
P34,535!30 to the
-overnment!
5
!anie*o sou*ht reconsideration of
the 3ud*ment, prayin* that she be
absolved from civil liability or, at the
very least, that her liability be
reduced to #>+,9'>.<%.
*
,he ourt
declined to ne*ate her civil liability,
but did reduce the amount thereof to
# >+,9'>.<%.
'
@he appealed to the
ourt of ?ppeals
(
as Bbay had
earlier done.
9
BbayKs appeal &as subse-uently
dismissed by the ?ppellate ourt
because of his failure to file brief.
10

Cn the other hand, !anie*o
submitted her brief in due course,
and ascribed three 9': errors to the
ourt a quo, to &it2
1) ,he 8o&er
ourt erred in
holdin* her civilly
liable to indemnify
the Jovernment
for the value of the
chee"s after she
had been found not
*uilty of the crime
out of &hich the
civil liability
arises.
2) =ven assumin*
ar*uendo that she
could properly be
held civilly liable
after her ac-uittal,
it &as error for the
lo&er ourt to
ad3ud*e her liable
as an indorser to
indemnify the
*overnment for the
amount of the
chee"s.
3) ,he 8o&er
ourt erred in
declarin* her
civilly liable
3ointly and
severally &ith her
co-defendant
Bbay, instead of
absolvin* her
alto*ether.
11

)ecause, in the ?ppellate ourtKs
vie&, !anie*oKs brief raised only
-uestions of la&, her appeal &as later
certified to this ourt pursuant to
@ection 1$, in relation to @ection '1,
of the Judiciary ?ct, as amended, and
@ection ', ;ule <% of the ;ules of
ourt.
1&
,he verdict must *o a*ainst the
appellant.
Fell "no&n is the principle that 4any
person criminally hable for felony is
also civilly liable.4
13
)ut a person
ad3ud*ed not criminally responsible
may still be held to be civilly liable.
? personKs ac-uittal of a crime on the
*round that his *uilt has not been
proven beyond reasonable doubt
1)

does not bar a civil action for
dama*es founded on the same acts
involved in the offense.
1+
=xtinction
of the penal action does not carry
&ith it extinction of the civil unless
the extinction proceeds from a
declaration in a final 3ud*ment that
the fact from &hich the civil mi*ht
arise did not exist.
1*
;ule III @=.
'9b: G
=xtinction of the
penal action does
not carry &ith it
extinction of the
civil, unless the
extinction
proceeds from a
declaration in a
final 3ud*ment
that the fact from
&hich the civil
mi*ht arise did
not exist. In other
cases, the person
entitled to the
civil action may
institute it in the
3urisdiction and
in the manner
provided by la&
a*ainst the person
&ho may be
liable for
restitution of the
thin* and
reparation of
indemnity for the
dama*e suffered.
9198< ;ules on
riminal
#rocedure:.
/ence, contrary to her submission,
1'
!anie*oKs ac-uittal on reasonable
doubt of the crime of !alversation
imputed to her and her t&o 92: co-
accused did not operate to absolve
her from civil liability for
reimbursement of the amount
ri*htfully due to the Jovernment as
o&ner thereof. /er liability therefor
could
properly be ad3ud*ed, as it &as so
ad3ud*ed, by the ,rial ourt on the
basis of the evidence before it,
&hich ade-uately establishes that
she &as an indorser of several
chec"s dra&n by her sister, &hich
&ere dishonored after they had been
exchan*ed &ith cash belon*in* to
the Jovernment, then in the official
custody of 8t. Bbay.
?ppellantKs contention that as mere
indorser, she may not be made liable on
account of the dishonor of the chec"s
indorsed by her, is li"e&ise untenable.
Bnder the la&, the holder or last
indorsee of a ne*otiable instrument has
the ri*ht to 4enforce payment of the
instrument for the full amount thereof
a*ainst all parties liable thereon.4
1(
?mon* the 4parties liable thereon4 is
an indorser of the instrument i.e., 4a
person placin* his si*nature upon an
instrument other&ise than as ma"er,
dra&er, or acceptor LL unless he clearly
indicates by appropriate &ords his
intention to be bound in some other
capacity. 4
19
@uch an indorser 4&ho
indorses &ithout -ualification,4 inter
alia 4en*a*es that on due presentment,
LL 9the instrument: shall be accepted or
paid, or both, as the case may be,
accordin* to its tenor, and that if it be
dishonored, and the necessary
proceedin*s on dishonor be duly ta"en,
he &ill pay the amount thereof to the
holder, or to any subse-uent indorser
&ho may be compelled to pay
it.4
&0
!anie*o may also be deemed
an 4accommodation party4 in the
li*ht of the facts, i.e., a person 4&ho
has si*ned the instrument as ma"er,
dra&er, acceptor, or indorser, &ithout
receivin* value therefor, and for the
purpose of lendin* his name to some
other person.4
&1
?s such, she is
under the la& 4liable on the
instrument to a holder for value,
not&ithstandin* such holder at the
time of ta"in* the instrument "ne&
LL 9her: to be only an
accommodation
party,4
&&
althou*h she has the ri*ht,
after payin* the holder, to obtain
reimbursement from the party
accommodated, 4since the relation
bet&een them is in effect that of
principal and surety, the
accommodation party bein* the
surety.4
&3
Cne last &ord. ,he ,rial ourt acted
correctly in ad3ud*in* !anie*o to be
civilly liable in the same criminal
action in &hich she had been
ac-uitted of the felony of
!alversation ascribed to her,
dispensin* &ith the necessity of
havin* a separate civil action
subse-uently instituted a*ainst her
for the purpose.
&)
F/=;=FC;=, the 3ud*ment of the
,rial ourt, bein* entirely in accord
&ith the facts and the la&, is hereby
affirmed in toto, &ith costs a*ainst
the appellant.
@C C;5=;=5.
6ap 7'hairman8, &elencio9
:errera, 'ru0, ;eliciano,
<ancayco an# *armiento, ))!,
concur!
;epublic
of the
#hilippin
es
SUP
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CO
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G.R. No. L-&*'*' F!"#$"%

&&, 19*(
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LOREN,O TING, -o./0
!#1./11 #/-" 23 /$4
$/- 12%5 o6 PRUNES
PRESERVED MFG., $/-
FELIPE ANG, defendants.
FELIPE ANG, defendant-appellant.
'hipeco = (lcara0, )r! for plaintiff9
appellee!
(n-, (tien0a = .abora for
#efen#ant9appellant!
CASTRO, J.:
Cn ?u*ust 1<, 19+% 8oren7o
,in* issued #hilippine )an" of
ommunications chec" M-81+18, for
the sum of #>,%%%, payable to 4cash
or bearer4. Fith Felipe ?n*Ks
si*nature 9indorsement in blan": at
the bac" thereof, the instrument &as
received by the plaintiff ?n* ,ion*
&ho thereafter presented it to the
dra&ee ban" for payment. ,he ban"
dishonored it. ,he plaintiff then
made &ritten demands on both
8oren7o ,in* and Felipe ?n* that
they ma"e *ood the amount
represented by the chec". ,hese
demands &ent unheeded( so he filed
in the municipal court of !anila an
action for collection of the sum of
#>,%%%, plus #<%% attorneyKs fees.
Cn !arch +, 19+2 the municipal
court ad3ud*ed for the plaintiff
a*ainst the t&o defendants.
Cnly Felipe ?n* appealed to
the ourt of First Instance of !anila
9civil case <%%18:, &hich rendered
3ud*ment on July '1, 19+2, amended
by an order dated ?u*ust 9, 19+2,
directin* him to pay to the plaintiff
4the sum of #>,%%%, &ith interest at
the le*al rate from the date of the
filin* of the complaint, a further sum
of #>%% as attorneyKs fees, and costs.4
Felipe ?n* then elevated the
case to the ourt of ?ppeals, &hich
certified it to this ourt because the
issues raised are purely of la&.
,he appellant imputes to the
court a quo three errors, namely, 91:
that it refused to apply article 2%$1
of the ne& ivil ode to the case at
bar( 92: that it ad3ud*ed him a
*eneral indorser under the
.e*otiable Instruments 8a& 9?ct
2%'1:( and 9': that it held that he
4cannot obtain his release from the
contract of suretyship or obtain
security to protect himself a*ainst
any proceedin*s on
the part of the creditor and a*ainst
the dan*er of insolvency of the
principal debtor,4 because he is
43ointly and severally liable on the
instrument.4
,his, appeal is absolutely
&ithout merit.
1. ,he *enuineness and
due execution of the
instrument are not
controverted. ,hat the
appellee is a holder thereof for
value is admitted.
/avin* arisen from a ban"
chec" &hich is indisputably a
ne*otiable instrument, the present
case is, therefore, in so far as the
indorsee is concerned vis9a9vis the
indorser, *overned solely plaintiff the
.e*otiable Instruments 8a& 9see
secs. 1 and 18<:. ?rticle 2%$1 of the
ne& ivil ode, invo"ed by the
appellant, the pertinent portion of
&hich states, 4,he *uarantor, even
before been paid, may proceed
a*ainst the principal debtor( 91: &hen
he is sued for the payment( . . . the
action of the *uarantor is to obtain
release from the *uaranty, to demand
a security that shall protect him from
any proceedin*s by the creditor . . .,4
is here completely irrelevant and can
have no application &hatsoever.
Fe are in a*reement &ith the
trial 3ud*e that nothin* in the chec"
in -uestion indicates that the
appellant is not a *eneral indorser
&ithin the purvie& of section +' of
the .e*otiable Instruments 8a&
&hich ma"es 4a person placin* his
si*nature upon an instrument
other&ise than as ma"er, dra&er or
acceptor4 a *eneral indorser, G
4unless he clearly indicates plaintiff
appropriate &ords his intention to be
bound in some other capacity,4
&hich he did not do. ?nd section ++
ordains that 4every indorser &ho
indorses &ithout -ualification,
&arrants to all subse-uent holders in
due course4 9a: that the instrument is
*enuine and in all respects &hat it
purports to be( 9b: that he has a *ood
title to it( 9c: that all prior parties
have capacity to contract( and 9d:
that the instrument is at the time of
his indorsement valid and
subsistin*. In addition, 4he en*a*es
that on due presentment, it shall be
accepted or paid, or both, as the case
may be, and that if it be dishonored,
he &ill pay the amount thereof to the
holder.4
1
2. =ven on the assumption that
the appellant is a mere
accommodation party, as he professes
to be, he is nevertheless, by the clear
mandate of section 29 of the
.e*otiable Instruments 8a&, yet
4liable on the instrument to a holder
for value, not&ithstandin* that such
holder at the time of ta"in* the
instrument "ne& him to be only an
accommodation party.4 ,o
paraphrase, the accommodation party
is liable to a holder for value as if the
contract &as not for accommodation.
It is not a valid defense that the
accommodation party did not receive
any valuable consideration &hen he
executed the instrument. .or is it
correct to say that the holder for
value is not a holder in due course
merely because at the time he
ac-uired the instrument, he "ne& that
the indorser &as only an
accommodation party.
2
'. ,hat the appellant, a*ain assumin* him to be an accommodation indorser,
may obtain security from the ma"er to protect himself a*ainst the dan*er of
insolvency of the latter, cannot in any manner affect his liability to the appellee, as
the said remedy is a matter of concern exclusively bet&een accommodation indorser
and accommodated party. @o that the fact that the appellant stands only as a surety in
relation to the ma"er, *rantin* this to be true for the sa"e of ar*ument, is immaterial
to the claim of the appellee, and does not a &hit diminish nor defeat the ri*hts of the
latter &ho is a holder for value. ,he liability of the appellant remains primary and
unconditional. ,o sanction the appellantKs theory is to *ive un&arranted le*al
reco*nition to the patent absurdity of a situation &here an indorser, &hen sued on an
instrument by a holder in due course and for value, can escape liability on his
indorsement by the convenient expedient of interposin* the defense that he is a mere
accomodation indorser.
?C;5I.J8A, the 3ud*ment a quo is affirmed in toto, at appellantKs cost.
'oncepcion, '!)!, /eyes, )!B!>!, $i0on, &akalintal, Ben-0on, )!P!, ?al#ivar,
*anche0, (n-eles an# ;ernan#o, ))!, concur!1@AphB1!+Ct
Foo2/o21
;epublic
of the
#hilippin
es
SUP
RE
ME
CO
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T
!
a
n
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a
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,
5I
1I
@I
C.
G.R. No. ')91' J$/#$"% &0, 19((
BANCO DE ORO
SAVINGS AND
MORTGAGE
BANK, petitioner,
vs.
EQUITABLE BANKING
CORPORATION, PHILIPPINE
CLEARING HOUSE
CORPORATION, AND
REGIONAL TRIAL COURT OF
QUE,ON CIT7, BRANCH 8CII
99&:, respondents.
GANCA7CO, J.:
,his is a petition for revie& on
certiorari of a decision of the
;e*ional ,rial ourt of Hue7on ity
promul*ated on !arch 2>, 198+ in
ivil ase .o. H->+<1$ entitled
)anco de Cro @avin*s and !ort*a*e
)an" versus =-uitable )an"in*
orporation and the #hilippine
learin* /ouse orporation after a
revie& of the 5ecision of the )oard
of 5irectors of the #hilippine
learin* /ouse orporation 9#/:
in the case of =-uitable )an"in*
orporation 9=): vs. )anco de Cro
@avin*s and !ort*a*e 9)C:,
?;)IC! ase .o. 8>%''.
,he undisputed facts are as follo&s2
It appears that
some time in
!arch, ?pril,
!ay and
?u*ust 198',
plaintiff
throu*h its 1isa
ard
5epartment,
dre& six
crossed
!ana*erKs
chec" 9=xhibits
4?4 to 4F4, and
herein referred
to as hec"s:
havin* an
a**re*ate
amount of Forty
Five ,housand
.ine /undred
and =i*hty ,&o
0 2'61%%
9#><,982.2':
#esos and
payable to
certain member
establishments
of 1isa ard.
@ubse-uently,
the hec"s
&ere deposited
&ith the
defendant to the
credit of its
depositor, a
certain ?ida
,rencio.
Follo&in* normal
procedures, and
after stampin* at
the bac" of the
hec"s the usual
endorsements. ?ll
prior and6or lac"
of endorsement
*uaranteed the
defendant sent the
chec"s for
clearin* throu*h
the #hilippine
learin* /ouse
orporation
9#/:.
?ccordin*ly,
plaintiff paid the
hec"s( its
clearin* account
&as debited for
the value of the
hec"s and
defendantK
s clearin*
account
&as
credited
for the
same
amount,
,hereafter,
plaintiff
discovered that
the endorsements
appearin* at the
bac" of the
hec"s and
purportin* to be
that of the payees
&ere for*ed
and6or
unauthori7ed or
other&ise belon*
to persons other
than the payees.
#ursuant to the
#/ learin*
;ules and
;e*ulations,
plaintiff presented
the hec"s directly
to the defendant
for the purpose of
claimin*
reimbursement
from the latter.
/o&ever,
defendant refused
to accept such
direct presentation
and to reimburse
the plaintiff for the
value of the
hec"s( hence,
this case.
In its omplaint,
plaintiff prays for
3ud*ment to
re-uire the
defendant to pay
the plaintiff the
sum of
#><,982.2' &ith
interest at the rate
of 12N per
annum from the
date of the
complaint plus
attorneyKs fees in
the amount of
#1%,%%%.%% as
&ell as the cost of
the suit.
In accordance
&ith @ection '8 of
the learin*
/ouse ;ules and
;e*ulations, the
dispute &as
presented for
?rbitration( and
?tty. easar
Huerubin &as
desi*nated as the
?rbitrator.
?fter an exhaustive
investi*ation and
hearin* the ?rbiter
rendered a decision
in favor of the
plaintiff and
a*ainst the
defendant orderin*
the #/ to debit
the clearin*
account of the
defendant, and to
credit the clearin*
account of the
plaintiff of the
amount of
#><,982.2' &ith
interest at the rate
of 12N per annum
from date of the
complaint and
?ttorneyKs fee in
the amount of
#<,%%%.%%. .o
pronouncement as
to cost &as
made.
1
In a motion for reconsideration filed
by the petitioner, the )oard of
5irectors of the #/ affirmed the
decision of the said ?rbiter in this
&ise2
In vie& of all the
fore*oin*, the
decision of the
?rbiter is
confirmed( and the
#hilippine learin*
/ouse orporation
is hereby ordered to
debit the clearin*
account of the
defendant and
credit the clearin*
account of plaintiff
the amount of Forty
Five ,housand .ine
/undred =i*hty
,&o 0 2'61%%
9#><,982.2': #esos
&ith interest at the
rate of 12N per
annum
from date
of the
complaint,
and the
?ttorneyKs
fee in the
amount of
Five
,housand
9#<,%%%.%%:
#esos.
,hus, a petition for revie& &as
filed &ith the ;e*ional ,rial ourt
of Hue7on ity, )ranch OII,
&herein in due course a decision
&as rendered affirmin* in toto the
decision of the #/.
/ence this petition.
,he petition is focused on the
follo&in* issues2
1.5id the #/ have any
3urisdiction to *ive due course
to and ad3udicate ?rbicom
ase .o. 8>%''P
2.Fere the sub3ect chec"s non-
ne*otiable and if not, does it fall
under the ambit of the po&er of the
#/P
3.Is the .e*otiable
Instrument 8a&, ?ct .o.
2%'1 applicable in decidin*
controversies of this nature
by the #/P
4. Fhat la& should *overn in
resolvin* controversies of this
natureP
5.Fas the petitioner ban"
ne*li*ent and thus
responsible for any undue
paymentP
#etitioner maintains that the #/
is not clothed &ith 3urisdiction
because the learin* /ouse ;ules
and ;e*ulations of #/ cover
and apply only to chec"s that are
*enuinely ne*otiable. =mphasis is
laid on the primary purpose of the
#/ in the ?rticles of
Incorporation, &hich states2
,o provide,
maintain and
render an
effective,
convenient,
efficient,
economical and
relevant exchan*e
and facilitate
service limited to
chec" processin*
and sortin* by &ay
of assistin*
member ban"s,
entities in clearin-
checks an# other
clearin- items as
defined in existin*
and in future
entral )an" of
the #hilippines
circulars,
memoranda,
circular letters,
rules and
re*ulations and
policies in
pursuance to the
provisions of
@ection 1%$ of
;.?. 2+<. ...
and @ection 1%$ of ;.?. 2+< &hich
provides2
xxx xxx xxx
,he deposit
reserves
maintained by the
ban"s in the
entral )an", in
accordance &ith
the provisions of
@ection 1%%% shall
serve as a basis for
the clearin* of
chec"s, and the
settlement of
interban"
balances ...
#etitioner ar*ues that by la& and
common sense, the term chec"
should be interpreted as one that fits
the articles of incorporation of the
#/, the entral )an" and the
learin* /ouse ;ules statin* that it
is a ne*otiable instrument citin* the
definition of a 4chec"4 as basically a
4bill of exchan*e4 under @ection 18<
of the .I8 and that it should be
payable to 4order4 or to 4bearer4
under @ection 12+ of *ame la&.
#etitioner alle*es that &ith the
cancellation of the printed &ords 4or
bearer from the face of the chec", it
becomes non-ne*otiable so the
#/ has no 3urisdiction over the
case.
,he ;e*ional ,rial ourt too"
exception to this stand and
conclusion put forth by the herein
petitioner as it held2
#etitionerKs theory
cannot be
maintained. ?s
&ill be noted, the
#/ ma"es no
distinction as to
the character or
nature of the
chec"s sub3ect of
its 3urisdiction.
,he pertinent
provisions -uoted
in petitioners
memorandum
simply refer to
chec"9s:. Fhere
the la& does not
distin*uish, &e
shall not
distin*uish.
In the case of
;eyes vs.
huanico 9?-
J.;. .o. 2%81' ;,
Feb. <, 19+2: the
?ppellate ourt
cate*orically
stated that there
are four "inds of
chec"s in this
3urisdiction( the
re*ular chec"( the
cashierKs chec"(
the travellerKs
chec"( and the
crossed chec".
,he ourt,
further
elucidated, that
&hile the
.e*otiable
Instruments
8a& does not
contain any
provision on
crossed chec"s,
it is coon
practice in
commercial and
ban"in*
operations to
issue chec"s of
this character,
obviously in
accordance &ith
?rticle <>1 of
the ode of
ommerce.
?ttention is
li"e&ise called
to @ection 18<
of the
.e*otiable
Instruments
8a&2
@
e
c.
1
8
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&
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p
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and the
provisions of
@ection +1
9supra: that the
dra&er may
insert in the
instrument an
express
stipulation
ne*atin* or
limitin* his o&n
liability to the
holder.
onse-uently, it
appears that the
use of the term
4chec"4 in the
?rticles of
Incorporation of
#/ is to be
perceived as not
limited to
ne*otiable chec"s
only, but to
chec"s as is
*enerally "no&n
in use in
commercial or
business
transactions.
?nent #etitionerKs
liability on said
instruments, this
court is in full
accord &ith the
rulin* of the
#/ )oard of
5irectors that2
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:
Fe a*ree.
?s provided in the aforecited
articles of incorporation of #/
its operation extend to 4clearin*
chec"s and other clearin* items.4
.o doubt transactions on non-
ne*otiable chec"s are &ithin the
ambit of its 3urisdiction.
In a previous case, this ourt had
occasion to rule2 D1bi leE non
#istin-uish nec nos #istin-uere
#ebemos!D
&
It &as enunciated in
8oc ham v. Ccampo, $$ #hil.
+'+ 919>+:2 ,he rule,
founded on lo*ic
is a corollary of
the principle that
*eneral &ords
and phrases in a
statute should
ordinarily be
accorded their
natural and
*eneral
si*nificance. In
other &ords,
there should be
no distinction in
the application
of a statute
&here none is
indicated.
,here should be no distinction in the
application of a statute &here none is
indicated for courts are not
authori7ed to distin*uish &here the
la& ma"es no distinction. ,hey
should instead administer the la& not
as they thin" it ou*ht to be but as
they find it and &ithout re*ard to
conse-uences.
3
,he term chec" as used in the said
?rticles of Incorporation of #/
can only connote chec"s in *eneral
use in commercial and business
activities. It cannot be conceived to
be limited to ne*otiable chec"s
only.
hec"s are used bet&een ban"s and
ban"ers and their customers, and are
desi*ned to facilitate ban"in*
operations. It is of the essence to be
payable on demand, because the
contract bet&een the ban"er and the
customer is that the money is needed
on demand.
)
,he participation of the t&o ban"s,
petitioner and private respondent,
in the clearin* operations of
#/ is a manifestation of their
submission to its 3urisdiction. @ec.
' and '+.+ of the #/-/;;
clearin* rules and re*ulations
provide2
@=. '.
?J;==!=., ,C
,/=@= ;B8=@.
G It is the *eneral
a*reement and
understandin* that
any participant in
the #hilippine
learin* /ouse
orporation, !I;
clearin* operations
by the mere fact of
their participation,
thereby manifests
its a*reement to
these ;ules and
;e*ulations and its
subse-uent
amendments.4
@ec '+.+.
9?;)I,;?,IC.:
G ,he fact that a
ban" participates
in the clearin*
operations of the
#/ shall be
deemed its &ritten
and subscribed
consent to the
bindin* effect of
this arbitration
a*reement as if it
had done so in
accordance &ith
section > of the
;epublic ?ct .o.
8$+, other&ise
"no&n as the
?rbitration 8a&.
Further @ection 2 of the ?rbitration
8a& mandates2
,&o or more
persons or parties
may submit to the
arbitration of one
or more arbitrators
any controversy
existin* bet&een
them at the time of
the submission and
&hich may be the
sub3ect of an
action, or the
parties of any
contract may in
such contract
a*ree to settle by
arbitration a
controversy
thereafter arisin*
bet&een them.
@uch submission
or contract shall be
valid and
irrevocable, save
upon *rounds as
exist at la& for the
revocation of any
contract.
@uch submission
or contract may
include -uestion
arisin* out of
valuations,
appraisals or
other
controversies
&hich may be
collateral,
incidental,
precedent or
subse-uent to any
issue bet&een the
parties. ...
@ec. 21 of the same rules, says2
%tems Ahich have
been the sub2ect of
material alteration
or items bearin-
for-e#
en#orsement Ahen
such en#orsement
is necessary for
ne-otiation shall
be returne# by
#irect presentation
or #eman# to the
Presentin- Bank
and not throu*h the
re*ular clearin*
house facilities
&ithin the period
prescribed by la&
for the filin* of a
le*al action by the
returnin*
ban"6branch,
institution or entity
sendin* the same.
9=mphasis
supplied:
1ie&in* these provisions the
conclusion is clear that the #/
;ules and ;e*ulations should not be
interpreted to be applicable only to
chec"s &hich are ne*otiable
instruments but also to non-
ne*otiable instruments and that the
#/ has 3urisdiction over this case
even as the chec"s sub3ect of this
liti*ation are admittedly non-
ne*otiable.
!oreover, petitioner is estopped
from raisin* the defense of non-
ne*otiability of the chec"s in
-uestion. It stamped its *uarantee on
the bac" of the chec"s and
subse-uently presented these chec"s
for clearin* and it &as on the basis of
these endorsements by the petitioner
that the proceeds &ere credited in its
clearin* account.
,he petitioner by its o&n acts and
representation can not no& deny
liability because it assumed the
liabilities of an endorser by
stampin* its *uarantee at the bac"
of the chec"s.
,he petitioner havin* stamped its
*uarantee of 4all prior endorsements
and6or lac" of endorsements4 9=xh.
?-2 to F-2: is no& estopped from
claimin* that the chec"s under
consideration are not ne*otiable
instruments. ,he chec"s &ere
accepted for deposit by the petitioner
stampin* thereon its *uarantee, in
order that it can clear the said chec"s
&ith the respondent ban". )y such
deliberate and positive attitude of the
petitioner it has for all le*al intents
and purposes
treated the said chee"s as ne*otiable
instruments and accordin*ly assumed
the &arranty of the endorser &hen it
stamped its *uarantee of prior
endorsements at the bac" of the
chec"s. It led the said respondent to
believe that it &as actin* as endorser
of the chec"s and on the stren*th of
this *uarantee said respondent cleared
the chec"s in -uestion and credited the
account of the petitioner.
#etitioner is no& barred from
ta"in* an opposite posture by
claimin* that the disputed chec"s
are not ne*otiable instrument.
,his ourt enunciated in Philippine
National Bank vs! 'ourt of (ppeals
+
a
point relevant to the issue &hen it
stated the doctrine of estoppel is based
upon the *rounds of public policy, fair
dealin*, *ood faith and 3ustice and its
purpose is to forbid one to spea"
a*ainst his o&n act, representations or
commitments to the in3ury of one to
&hom they &ere directed and &ho
reasonably relied thereon.
? commercial ban" cannot escape the
liability of an endorser of a chec" and
&hich may turn out to be a for*ed
endorsement. Fhenever any ban"
treats the si*nature at the bac" of the
chec"s as endorsements and thus
lo*ically *uarantees the same as such
there can be no doubt said ban" has
considered the chec"s as ne*otiable.
?propos the matter of for*ery in
endorsements, this ourt has
succinctly emphasi7ed that the
collectin* ban" or last endorser
*enerally suffers the loss because it
has the duty to ascertain the
*enuineness of all prior endorsements
considerin* that the act of presentin*
the chec" for payment to the dra&ee
is an assertion that the party ma"in*
the presentment has done its duty to
ascertain the *enuineness of the
endorsements. ,his is laid do&n in
the case of PNB vs! National 'ity
Bank.
*
In another case, this court
held that if the dra&ee-ban"
discovers that the si*nature of the
payee &as for*ed after it has paid the
amount of the chec" to the holder
thereof, it can recover the amount
paid from the collectin* ban".
'
? truism stated by this ourt is that
G 4,he doctrine of estoppel
precludes a party from repudiatin*
an obli*ation voluntarily assumed
after havin* accepted benefits
therefrom. ,o countenance such
repudiation &ould be contrary to
e-uity and put premium on fraud or
misrepresentation4.
(
Fe made clear in Cur decision in
#hilippine .ational )an" vs. ,he
.ational ity )an" of .A 0 !otor
@ervice o. that2
Fhere a chec" is
accepted or
certified by the
ban" on &hich it is
dra&n, the ban" is
estopped to deny
the *enuineness of
the dra&ers
si*nature and his
capacity to issue
the instrument.
If a dra&ee ban"
pays a for*ed
chec" &hich &as
previously
accepted or
certified by the
said ban", it can
not recover from a
holder &ho did not
participate in the
for*ery and did not
have actual notice
thereof.
,he payment of a
chec" does not
include or imply
its acceptance in
the sense that this
&ord is used in
@ection +2 of the
.e*otiable
Instruments ?ct.
9
,he point that comes uppermost is
&hether the dra&ee ban" &as
ne*li*ent in failin* to discover the
alteration or the for*ery. 1ery a"in
to the case at bar is one &hich
involves a suit filed by the dra&er
of chec"s a*ainst the collectin*
ban" and this came about in
Farmers @tate )an"
10
&here it &as
held2
? cause of action
a*ainst the
9collectin* ban": in
favor of the
appellee 9the
dra&er: accrued as
a result of the ban"
breachin* its
implied &arranty of
the *enuineness of
the indorsements of
the name of the
payee by brin*in*
about the
presentation of the
chec"s 9to the
dra&ee ban": and
collectin* the
amounts thereof,
the ri*ht to enforce
that cause of action
&as not destroyed
by the
circumstance that
another cause of
action for the
recovery of the
amounts paid on
the chec"s &ould
have accrued in
favor of the
appellee a*ainst
another or to others
than the ban" if
&hen the chec"s
&ere paid they
have been indorsed
by the payee.
9Bnited @tates vs.
.ational =xchan*e
)an", 21> B@, '%2,
29 @ ,++<, <' 8.
=d 1%%+, 1+ ?m.
as. 11 8>(
Cnonda*a ounty
@avin*s )an" vs.
Bnited @tates
9=..?.: +> F $%':
@ection ++ of the .e*otiable
Instruments ordains that2
=very indorser &ho
indorsee &ithout
-ualification,
&arrants to all
subse-uent holders
in due courseK 9a:
that the instrument
is *enuine and in
all respects &hat it
purports to be( 9b:
that he has *ood
title to it( 9c: that
all prior parties
have capacity to
contract( and 9d:
that the instrument
is at the time of his
indorsement valid
and subsistin*.
11
It has been enunciated in an
?merican case particularly in
?merican =xchan*e .ational )an"
vs. Aor"ville )an"
1&
that2 4the
dra&er o&es no duty of dili*ence
to the collectin* ban" 9one &ho
had accepted an altered chec" and
had paid over the proceeds to the
depositor: except of seasonably
discoverin* the alteration by a
comparison of its returned chec"s
and chec" stubs or other
e-uivalent record, and to inform the
dra&ee thereof.4 In this case it &as
further held that2
,he real and
underlyin* reasons
&hy ne*li*ence of
the dra&er
constitutes no
defense to the
collectin* ban" are
that there is no
privity bet&een the
dra&er and the
collectin* ban"
9orn =xchan*e
)an" vs. .assau
)an", 2%> ..A.@.
8%: and the dra&er
o&e to that ban" no
duty of vi*ilance
9.e& Aor" #roduce
=xchan*e )an" vs.
,&elfth Fard
)an", 2%> ..A.@.
<>: and no act of
the collectin* ban"
is induced by any
act or
representation or
admission of the
dra&er 9@eaboard
.ational )an" vs.
)an" of ?merica
9supra: and it
follo&s that
ne*li*ence on the
part of the dra&er
cannot create any
liability from it to
the collectin* ban",
and the dra&er thus
is neither a
necessary nor a
proper party to an
action by the
dra&ee ban"
a*ainst such ban".
It is -uite true that
depositors in ban"s
are under the
obli*ation of
examinin* their
passboo"s and
returned vouchers
as a protection
a*ainst the payment
by the depository
ban" a*ainst for*ed
chec"s, and
ne*li*ence in the
performance of that
obli*ation may
relieve that ban" of
liability for the
repayment of
amounts paid out
on for*ed chec"s,
&hich but for such
ne*li*ence it &ould
be bound to repay.
? leadin* case on
that sub3ect is
!or*an vs. Bnited
@tates !ort*a*e
and ,rust ol. 2%8
..A. 218, 1%1 ..=.
8$1 ?mn. as.
191>5, >+2, 8.;.?.
191<5, $>.
,hus Fe hold that &hile the dra&er
*enerally o&es no duty of dili*ence
to the collectin* ban", the la&
imposes a duty of dili*ence on the
collectin* ban" to scrutini7e chec"s
deposited &ith it for the purpose of
determinin* their *enuineness and
re*ularity. ,he collectin* ban" bein*
primarily en*a*ed in ban"in* holds
itself out to the public as the expert
and the la& holds it to a hi*h
standard of conduct.
?nd althou*h the sub3ect
chec"s are non-ne*otiable
the responsibility of
petitioner as indorser thereof
remains.
,o countenance a repudiation by the
petitioner of its obli*ation &ould be
contrary to e-uity and &ould deal a
ne*ative blo& to the &hole ban"in*
system of this country.
,he court reproduces &ith approval
the follo&in* dis-uisition of the
#/ in its decision G
II. #ayments ,o
#ersons Cther
,han ,he
#ayees
?re .ot
1alid
?nd Jive
;ise ,o
?n
Cbli*ation
,o ;eturn
?mounts
;eceived
.othin* is more clear than
that neither the defendantKs
depositor nor the defendant is
entitled to receive payment
payable for the hec"s. ?s
the chec"s are not payable to
defendantKs depositor,
payments to persons other
than payees named therein,
their successor-in-interest or
any person authori7ed to
receive payment are not
valid. ?rticle 12>%, .e&
ivil ode of the #hilippines
une-uivocably provides that2
4?rt.
12>%.
#ayment
shall be
made to
the person
in &hose
favor the
obli*ation
has been
constitute
d, or his
successo-
in-
interest,
or any
person
authori7ed
to receive
it. 4
onsiderin* that neither the
defendantKs depositor nor the
defendant is entitled to
receive payments for the
hec"s, payments to any of
them *ive rise to an
obli*ation to return the
amounts received. @ection
21<> of the .e& ivil ode
mandates that2
?rticle
21<>.
If
someth
in* is
receive
d &hen
there is
no ri*ht
to
deman
d it,
and it
&as
unduly
deliver
ed
throu*h
mista"e
, the
obli*ati
on to
return
it
arises.
It is contended that plaintiff
should be held responsible
for issuin* the hec"s
not&ithstandin* that the
underlyin* transactions
&ere fictitious ,his
contention has no basis in
our 3urisprudence.
,he nullity of the
underlyin* transactions does
not diminish, but in fact
stren*thens, plaintiffs ri*ht
to recover from the
defendant. @uch nullity
clearly emphasi7es the
obli*ation of the payees to
return the proceeds of the
hec"s. If a failure of
consideration is sufficient to
&arrant a findin* that a
payee is not entitled to
payment or must return
payment already made, &ith
more reason the defendant,
&ho is neither the payee nor
the person authori7ed by the
payee, should be compelled
to surrender the proceeds of
the hec"s received by it.
5efendant
does not have any title to
the hec"s( neither can it
claim any derivative title
to them.
III. /avin* 1iolated Its
Farranty
Cn
1alidity
Cf ?ll
=ndorsem
ents,
ollectin*
)an"
annot
5eny
liability
,o ,hose
Fho
;elied
Cn Its
Farranty
In presentin* the hec"s
for clearin* and for
payment, the defendant
made an express *uarantee
on the validity of 4all prior
endorsements.4 ,hus,
stamped at the ban" of the
chec"s are the defendantKs
clear &arranty2 ?88
#;IC;
=.5C;@=!=.,@
?.56C; 8?M CF
=.5C;@=!=.,@
JB?;?.,==5. Fithout
such &arranty, plaintiff
&ould not have paid on the
chec"s.
.o amount of le*al 3ar*on
can reverse the clear
meanin* of defendantKs
&arranty. ?s the &arranty
has proven to be false and
inaccurate, the defendant
is liable for any dama*e
arisin* out of the falsity of
its representation.
,he principle of estoppel
effectively prevents the
defendant from denyin*
liability for any dama*es
sustained by the plaintiff
&hich, relyin* upon an
action or declaration of the
defendant, paid on the
hec"s. ,he same
principle of estoppel
effectively prevents the
defendant from denyin*
the existence of the
hec"s.
Fhether the hec"s have
been issued for valuable
considerations or not is of
no serious moment to this
case. ,hese hec"s have
been made the sub3ect of
contracts of endorsement
&herein the defendant made
expressed &arranties to
induce payment by the
dra&er of the hec"s( and
the defendant cannot no&
refuse liability for breach of
&arranty as a conse-uence
of such for*ed
endorsements. ,he
defendant has falsely
&arranted in favor of
plaintiff the validity of all
endorsements and the
*enuineness of the chee"s in
all respects &hat they
purport to be.
,he dama*e that &ill result if 3ud*ment is not
rendered for the plaintiff is irreparable. ,he
collectin* ban" has privity &ith the depositor &ho
is the principal culprit in this case. ,he defendant
"no&s the depositor( her address and her history,
5epositor is defendantKs client. It has ta"en a ris"
on its depositor &hen it allo&ed her to collect on
the crossed-chec"s.
/avin* accepted the crossed chec"s from
persons other than the payees, the defendant is
*uilty of ne*li*ence( the ris" of &ron*ful
payment has to be assumed by the defendant.
Cn the matter of the a&ard of the interest and
attorneyKs fees, the )oard of 5irectors finds no
reason to reverse the decision of the ?rbiter. ,he
defendantKs failure to reimburse the plaintiff has
constrained the plaintiff to re*ular the services of
counsel in order to protect its interest
not&ithstandin* that plaintiffs claim is plainly
valid 3ust and demandable. In addition,
defendantKs clear obli*ation is to reimburse
plaintiff upon direct presentation of the chec"s(
and it is undenied that up to this time the
defendant has failed to ma"e such
reimbursement.
F/=;=FC;=, the petition is 5I@!I@@=5 for lac" of merit
&ithout pronouncement as to costs. ,he decision of the
respondent court of 2> !arch 198+ and its order of ' June 198+
are hereby declared to be imme#iately eEecutory!
@C C;5=;=5.
.eehankee, '!)!, Narvasa, 'ru0 an# Paras, ))!, concur!
;
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DI
VI
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ON
G.R. No. 10'3(&;G.R. No.
10'*1&
J$/#$"% 31, 199*
A
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D

B
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v
s
.
HON. COURT
OF APPEALS,
PROVINCE OF
TARLAC $/-
PHILIPPINE
NATIONAL
BANK,
respondents.
x x x x x x x x x x x x x x x x x x x
x x
J.;. .o. 1%$+12 January '1, 199+
#
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s
.
HONORABLE COURT
OF APPEALS,
PROVINCE OF TARLAC,
$/- ASSOCIATED BANK,
respondents.
D E C I S I O N
ROMERO, J.<
Fhere thirty chec"s
bearin* for*ed
endorsements are paid, &ho
bears the loss, the dra&er,
the dra&ee ban" or the
collectin* ban"P
,his is the main issue in
these consolidated
petitions for revie&
assailin* the decision of
the ourt of ?ppeals in
4#rovince of ,arlac v.
#hilippine .ational
)an" v. ?ssociated )an"
v. Fausto #an*ilinan, et.
al.4 9?-J.;. .o. 1
.o.
1$9+2:.
1
,he facts of the case are as
follo&s2
,he #rovince of ,arlac
maintains a current account
&ith the #hilippine .ational
)an" 9#.): ,arlac )ranch
&here the provincial funds
are deposited. hec"s issued
by the #rovince are si*ned
by the #rovincial ,reasurer
and countersi*ned by the
#rovincial ?uditor or the
@ecretary of the
@an**unian* )ayan.
? portion of the funds of
the province is allocated to
the oncepcion =mer*ency
/ospital.
2
,he allotment
chec"s for said *overnment
hospital are dra&n to the
order of 4oncepcion
=mer*ency /ospital,
oncepcion, ,arlac4 or
4,he hief, oncepcion
=mer*ency /ospital,
oncepcion, ,arlac.4 ,he
chec"s are released by the
Cffice of the #rovincial
,reasurer and received for
the hospital by its
administrative officer and
cashier.
In January 1981, the
boo"s of account of the
#rovincial ,reasurer &ere
post-audited by the
#rovincial ?uditor. It &as
then discovered that the
hospital did not receive
several allotment chec"s
dra&n by the #rovince.
Cn February 19, 1981, the
#rovincial ,reasurer
re-uested the mana*er of
the #.) to return all of its
cleared chec"s &hich &ere
issued from 19$$ to 198% in
order to verify the re*ularity
of their encashment. ?fter
the chec"s &ere examined,
the #rovincial ,reasurer
learned that '% chec"s
amountin* to #2%','%%.%%
&ere encashed by one
Fausto #an*ilinan, &ith the
?ssociated )an" actin* as
collectin* ban".
It turned out that Fausto
#an*ilinan, &ho &as the
administrative officer and
cashier of payee hospital
until his retirement on
February 28, 19$8,
collected the -uestioned
chec"s from the office of
the #rovincial ,reasurer. /e
claimed to be assistin* or
helpin* the hospital follo&
up the release of the chec"s
and had official receipts.
'
#an*ilinan sou*ht to
encash the first chec"
>
&ith
?ssociated )an". /o&ever,
the mana*er of ?ssociated
)an" refused and su**ested
that #an*ilinan deposit the
chec" in his personal
savin*s account &ith the
same ban". #an*ilinan &as
able to &ithdra& the money
&hen the chec" &as cleared
and paid by the dra&ee
ban", #.).
?fter for*in* the si*nature
of 5r. ?dena anlas &ho
&as chief of the payee
hospital, #an*ilinan
follo&ed the same procedure
for the second chec", in the
amount of #<,%%%.%% and
dated ?pril 2%, 19$8,
<
as
&ell as for t&enty-ei*ht
other chec"s of various
amounts and on various
dates. ,he last chec"
ne*otiated by #an*ilinan
&as for f8,%%%.%% and dated
February 1%, 1981.
+
?ll the
chec"s bore the stamp of
?ssociated )an" &hich
reads 4?ll prior
endorsements *uaranteed
?@@CI?,=5 )?.M.4
Jesus 5avid, the mana*er
of ?ssociated )an"
testified that #an*ilinan
made it appear that the
chec"s &ere paid to him
for certain pro3ects &ith
the
hospital.
$
/e did not find as
irre*ular the fact that the
chec"s &ere not payable to
#an*ilinan but to the
oncepcion =mer*ency
/ospital. Fhile he admitted
that his &ife and
#an*ilinanKs &ife are first
cousins, the mana*er denied
havin* *iven #an*ilinan
preferential treatment on this
account.
8
Cn February 2+, 1981, the
#rovincial ,reasurer &rote
the mana*er of the #.)
see"in* the restoration of
the various amounts
debited from the current
account of the #rovince.
9
In turn, the #.) mana*er
demanded reimbursement
from the ?ssociated )an"
on !ay 1<, 1981.
1%
?s both ban"s resisted
payment, the #rovince of
,arlac brou*ht suit
a*ainst #.) &hich, in
turn, impleaded
?ssociated )an" as third-
party defendant. ,he
latter then filed a fourth-
party complaint a*ainst
?dena anlas and Fausto
#an*ilinan.
11
?fter trial on the
merits, the lo&er court
rendered its decision on
!arch 21, 1988,
disposin* as follo&s2
F/=;=FC;=, in
vie& of the
fore*oin*,
3ud*ment is hereby
rendered2
1.Cn the basic
complaint, in
favor of plaintiff
#rovince of
,arlac and
a*ainst defendant
#hilippine
.ational )an"
9#.):, orderin*
the latter to pay
to the former, the
sum of ,&o
/undred ,hree
,housand ,hree
/undred
9#2%','%%.%%:
#esos &ith le*al
interest thereon
from !arch 2%,
1981 until fully
paid(
2.Cn the third-
party complaint, in
favor of
defendant6third-
party plaintiff
#hilippine
.ational )an"
9#.): and a*ainst
third-party
defendant6fourth-
party plaintiff
?ssociated )an"
orderin* the latter
to reimburse to the
former the amount
of ,&o /undred
,hree ,housand
,hree /undred
9#2%','%%.%%:
#esos &ith le*al
interests thereon
from !arch 2%,
1981 until fully
paid(.
3.Cn the fourth-
party complaint,
the same is hereby
ordered dismissed
for lac" of cause of
action as a*ainst
fourth-party
defendant ?dena
anlas and lac" of
3urisdiction over
the person of
fourth-party
defendant Fausto
#an*ilinan as
a*ainst the latter.
4.Cn the
counterclaims on
the complaint,
third-party
complaint and
fourth-party
complaint, the same
are hereby ordered
dismissed for lac"
of merit.
@C C;5=;=5.
12
#.) and ?ssociated )an"
appealed to the ourt of
?ppeals.
1'
;espondent
court affirmed the trial
courtKs decision in toto on
@eptember '%, 1992.
/ence these
consolidated
petitions &hich
see" a reversal of
respondent
appellate courtKs
decision.
#.) assi*ned t&o errors.
First, the ban" contends
that respondent court erred
in exemptin* the #rovince
of ,arlac from liability
&hen, in fact, the latter
&as ne*li*ent because it
delivered and released the
-uestioned chec"s to
Fausto #an*ilinan &ho
&as then already retired as
the hospitalKs cashier and
administrative officer.
#.) also maintains its
innocence and alle*es that
as bet&een t&o innocent
persons, the one &hose act
&as the cause of the loss,
in this case the #rovince of
,arlac, bears the loss.
.ext, #.) asserts that it
&as error for the court to
order it to pay the province
and then see"
reimbursement from
?ssociated )an".
?ccordin* to petitioner
ban", respondent appellate
ourt should have directed
?ssociated )an" to pay the
ad3ud*ed liability directly
to the #rovince of ,arlac to
avoid circuity.
1>
?ssociated )an", on the
other hand, ar*ues that the
order of liability should be
totally reversed, &ith the
dra&ee ban" 9#.): solely
and ultimately bearin* the
loss.
;espondent court alle*edly
erred in applyin* @ection 2'
of the #hilippine learin*
/ouse ;ules instead of
entral )an" ircular .o.
<8%, &hich, bein* an
administrative re*ulation
issued pursuant to la&, has
the force and effect of la&.
1<
,he #/ ;ules are merely
contractual stipulations
amon* and bet&een member-
ban"s. ?s such, they cannot
prevail over the aforesaid )
ircular.
It li"e&ise contends that
#.), the dra&ee ban", is
estopped from assertin* the
defense of *uarantee of
prior indorsements a*ainst
?ssociated )an", the
collectin* ban". In stampin*
the *uarantee 9for all prior
indorsements:, it merely
follo&ed a mandatory
re-uirement for clearin* and
had no choice but to place
the stamp of *uarantee(
other&ise, there &ould be
no clearin*. ,he ban" &ill
be in a 4no-&in4 situation
and &ill al&ays bear the
loss as a*ainst the dra&ee
ban".
1+
?ssociated )an" also claims
that since #.) already
cleared and paid the value of
the for*ed chec"s in
-uestion, it is no& estopped
from assertin* the defense
that ?ssociated )an"
*uaranteed prior
indorsements. ,he dra&ee
ban" alle*edly has the
primary duty to verify the
*enuineness of payeeKs
indorsement before payin*
the chec".
1$
Fhile both ban"s are
innocent of the for*ery,
?ssociated )an" claims
that #.) &as at fault and
should solely bear the loss
because it cleared and paid
the for*ed chec"s.
xxx
xxx xxx
,he case at bench concerns
chec"s payable to the order
of oncepcion =mer*ency
/ospital or its hief. ,hey
&ere properly issued and
bear the *enuine si*natures
of the dra&er, the #rovince
of ,arlac. ,he infirmity in
the -uestioned chec"s lies
in the payeeKs 9oncepcion
=mer*ency /ospital:
indorsements &hich are
for*eries. ?t the time of
their indorsement, the
chec"s &ere order
instruments.
hec"s havin* for*ed
indorsements should be
differentiated from for*ed
chec"s or chec"s bearin* the
for*ed si*nature of the
dra&er.
@ection 2' of the .e*otiable
Instruments 8a& 9.I8:
provides2
@ec. 2'. FC;J=5
@IJ.?,B;=,
=FF=, CF. G
Fhen a si*nature is
for*ed or made
&ithout authority of
the person &hose
si*nature it
purports to be, it is
&holly inoperative,
and no ri*ht to
retain the
instrument, or to
*ive a dischar*e
therefor, or to
enforce payment
thereof a*ainst any
party thereto, can
be ac-uired throu*h
or under such
si*nature unless the
party a*ainst &hom
it is sou*ht to
enforce such ri*ht
is precluded from
settin* up the
for*ery or &ant of
authority.
? for*ed si*nature,
&hether it be that of
the dra&er or the
payee, is &holly
inoperative and no one
can *ain title to the
instrument throu*h it.
? person &hose
si*nature to an
instrument &as for*ed
&as never a party and
never consented to the
contract &hich
alle*edly *ave rise to
such
instrument.
18
@ection
2' does not avoid the
instrument but only the
for*ed si*nature.
19

,hus, a for*ed
indorsement does not
operate as the payeeKs
indorsement.
,he exception to the *eneral
rule in @ection 2' is &here
4a party a*ainst &hom it is
sou*ht to enforce a ri*ht is
precluded from settin* up
the for*ery or &ant of
authority.4 #arties &ho
&arrant or admit the
*enuineness of the si*nature
in -uestion and those &ho,
by their acts, silence or
ne*li*ence are estopped
from settin* up the defense
of for*ery, are precluded
from usin* this defense.
Indorsers, persons
ne*otiatin* by delivery and
acceptors are &arrantors of
the *enuineness of the
si*natures on the instrument.
2%
In bearer instruments, the
si*nature of the payee or
holder is unnecessary to
pass title to the instrument.
/ence, &hen the
indorsement is a for*ery,
only the person &hose
si*nature is for*ed can
raise the defense of for*ery
a*ainst a holder in due
course.
21
,he chec"s involved in
this case are order
instruments, hence, the
follo&in* discussion is
made &ith reference to
the effects of a for*ed
indorsement on an
instrument payable to
order.
Fhere the instrument is
payable to order at the time
of the for*ery, such as the
chec"s in this case, the
si*nature of its ri*htful
holder 9here, the payee
hospital: is essential to
transfer title to the same
instrument. Fhen the
holderKs indorsement is
for*ed, all parties prior to
the for*ery may raise the
real defense of for*ery
a*ainst all parties
subse-uent thereto.
22
?n indorser of an order
instrument &arrants 4that
the instrument is *enuine
and in all respects &hat it
purports to be( that he has
a *ood title to it( that all
prior parties had capacity
to contract( and that the
instrument is at the time
of his indorsement valid
and subsistin*.4
2'
/e
cannot interpose the
defense that si*natures
prior to him are for*ed.
? collectin* ban" &here a
chec" is deposited and
&hich indorses the chec"
upon presentment &ith the
dra&ee ban", is such an
indorser. @o even if the
indorsement on the chec"
deposited by the ban"sKs
client is for*ed, the
collectin* ban" is bound by
his &arranties as an indorser
and cannot set up the
defense of for*ery as a*ainst
the dra&ee ban".
,he ban" on &hich a chec"
is dra&n, "no&n as the
dra&ee ban", is under strict
liability to pay the chec" to
the order of the payee. ,he
dra&erKs instructions are
reflected on the face and by
the terms of the chec".
#ayment under a for*ed
indorsement is not to the
dra&erKs order. Fhen the
dra&ee ban" pays a person
other than the payee, it does
not comply &ith the terms
of the chec" and violates its
duty to char*e its customerKs
9the dra&er: account only
for properly payable items.
@ince the dra&ee ban" did
not pay a holder or other
person entitled to receive
payment, it has no ri*ht to
reimbursement from the
dra&er.
2>
,he *eneral rule
then is that the dra&ee
ban" may not debit the
dra&erKs account and is not
entitled to indemnification
from the dra&er.
2<
,he
ris" of loss must perforce
fall on the dra&ee ban".
/o&ever, if the dra&ee ban"
can prove a failure by the
customer6dra&er to exercise
ordinary care that
substantially contributed to
the ma"in* of the for*ed
si*nature, the dra&er is
precluded from assertin* the
for*ery.
If at the same time the
dra&ee ban" &as also
ne*li*ent to the point of
substantially
contributin* to the loss,
then such loss from the
for*ery can be
apportioned bet&een
the ne*li*ent dra&er
and the ne*li*ent ban".
2+
In cases involvin* a for*ed
chec", &here the dra&erKs
si*nature is for*ed, the
dra&er can recover from
the dra&ee ban". .o
dra&ee ban" has a ri*ht to
pay a
for*ed chec". If it does, it
shall have to recredit the
amount of the chec" to
the account of the dra&er.
,he liability chain ends
&ith the dra&ee ban"
&hose responsibility it is
to "no& the dra&erKs
si*nature since the latter
is its customer.
2$
In cases involvin* chec"s
&ith for*ed indorsements,
such as the present petition,
the chain of liability does
not end &ith the dra&ee
ban". ,he dra&ee ban" may
not debit the account of the
dra&er but may *enerally
pass liability bac" throu*h
the collection chain to the
party &ho too" from the
for*er and, of course, to the
for*er himself, if available.
28
In other &ords, the
dra&ee ban" cansee"
reimbursement or a return of
the amount it paid from the
presentor ban" or person.
29

,heoretically, the latter can
demand reimbursement
from the person &ho
indorsed the chec" to it and
so on. ,he loss falls on the
party &ho too" the chec"
from the for*er, or on the
for*er himself.
In this case, the chec"s &ere
indorsed by the collectin*
ban" 9?ssociated )an": to
the dra&ee ban" 9#.):. ,he
former &ill necessarily be
liable to the latter for the
chec"s bearin* for*ed
indorsements. If the for*ery
is that of the payeeKs or
holderKs indorsement, the
collectin* ban" is held
liable, &ithout pre3udice to
the latter proceedin* a*ainst
the for*er.
@ince a for*ed indorsement
is inoperative, the collectin*
ban" had no ri*ht to be paid
by the dra&ee ban". ,he
former must necessarily
return the money paid by the
latter because it &as paid
&ron*fully.
'%
!ore importantly, by reason
of the statutory &arranty of a
*eneral indorser in section
++ of the .e*otiable
Instruments 8a&, a
collectin* ban" &hich
indorses a chec" bearin* a
for*ed indorsement and
presents it to the dra&ee
ban" *uarantees all prior
indorsements, includin* the
for*ed indorsement. It
&arrants that the instrument
is *enuine, and that it is
valid and subsistin* at the
time of his indorsement.
)ecause the indorsement is a
for*ery, the collectin* ban"
commits a breach of this
&arranty and &ill be
accountable to the dra&ee
ban". ,his liability scheme
operates &ithout re*ard to
fault on the part of the
collectin*6presentin* ban".
=ven if the latter ban" &as
not ne*li*ent, it &ould still
be liable to the dra&ee ban"
because of its indorsement.
,he ourt has consistently
ruled that 4the collectin*
ban" or last endorser
*enerally suffers the loss
because it has the duty to
ascertain the *enuineness of
all prior endorsements
considerin* that the act of
presentin* the chec" for
payment to the dra&ee is an
assertion that the party
ma"in* the presentment has
done its duty to ascertain the
*enuineness of the
endorsements.4
'1
,he dra&ee ban" is not
similarly situated as the
collectin* ban" because
the former ma"es no
&arranty as to the
*enuineness. of any
indorsement.
'2
,he
dra&ee ban"Ks duty is but
to verify the *enuineness
of the dra&erKs si*nature
and not of the
indorsement because the
dra&er is its client.
!oreover, the collectin*
ban" is made liable because
it is privy to the depositor
&ho ne*otiated the chec".
,he ban" "no&s him, his
address and history because
he is a client. It has ta"en a
ris" on his deposit. ,he
ban" is also in a better
position to detect for*ery,
fraud or irre*ularity in the
indorsement.
/ence, the dra&ee ban" can
recover the amount paid on
the chec" bearin* a for*ed
indorsement from the
collectin* ban". /o&ever, a
dra&ee ban" has the duty to
promptly inform the
presentor of the for*ery
upon discovery. If the
dra&ee ban" delays in
informin* the presentor of
the for*ery, thereby
deprivin* said presentor of
the ri*ht to recover from the
for*er, the former is deemed
ne*li*ent and can no lon*er
recover from the presentor.
''
?pplyin* these rules to the
case at bench, #.), the
dra&ee ban", cannot debit
the current account of the
#rovince of ,arlac because
it paid chec"s &hich bore
for*ed indorsements.
/o&ever, if the #rovince of
,arlac as dra&er &as
ne*li*ent to the point of
substantially contributin*
to the loss, then the dra&ee
ban" #.) can char*e its
account. If both dra&ee
ban"-#.) and dra&er-
#rovince of ,arlac &ere
ne*li*ent, the loss should
be properly apportioned
bet&een them.
,he loss incurred by
dra&ee ban"-#.) can be
passed on to the collectin*
ban"-?ssociated )an"
&hich presented and
indorsed the chec"s to it.
?ssociated )an" can, in
turn, hold the for*er, Fausto
#an*ilinan, liable.
If #.) ne*li*ently
delayed in informin*
?ssociated )an" of the
for*ery, thus deprivin* the
latter of the opportunity to
recover from the for*er, it
forfeits its ri*ht to
reimbursement and &ill be
made to bear the loss.
?fter careful
examination of the
records, the ourt finds
that the #rovince of
,arlac &as e-ually
ne*li*ent and should,
therefore, share the
burden of loss from the
chec"s bearin* a for*ed
indorsement.
,he #rovince of ,arlac
permitted Fausto #an*ilinan
to collect the chec"s &hen
the latter, havin* already
retired from *overnment
service, &as no lon*er
connected &ith the hospital.
Fith the exception of the
first chec" 9dated January
1$, 19$8:, all the chec"s
&ere issued and released
after #an*ilinanKs retirement
on February 28, 19$8. ?fter
nearly three years, the
,reasurerKs office &as still
releasin* the chec"s to the
retired cashier. In addition,
some of the aid allotment
chec"s &ere released to
#an*ilinan and the others to
=li7abeth Juco, the ne&
cashier. ,he fact that there
&ere no& t&o persons
collectin* the chec"s for the
hospital is an unmista"able
si*n of an irre*ularity &hich
should have alerted
employees in the
,reasurerKs office of the
fraud bein* committed.
,here is also evidence
indicatin* that the
provincial employees &ere
a&are of #an*ilinanKs
retirement and conse-uent
dissociation from the
hospital. Jose !eru, the
#rovincial ,reasurer,
testified2.
?,,A. !C;J?2
H .o&, is it
true that for a
*iven month
there &ere
t&o releases
of chec"s,
one &ent to
!r.
#an*ilinan
and one &ent
to !iss JucoP
JC@= !=;B2
? Aes, sir.
H Fill you please
tell us ho& at the
time 9sic: &hen the
authori7ed
representative of
oncepcion
=mer*ency
/ospital is and &as
supposed to be
!iss JucoP
? Fell, as far as
my investi*ation
sho& 9sic: the
assistant cashier
told me that
#an*ilinan
represented himself
as also authori7ed
to help in the
release of these
chec"s and &e
&ere apparently
misled because
they accepted the
representation of
#an*ilinan that he
&as helpin* them
in the release of the
chec"s and besides
accordin* to them
they &ere,
#an*ilinan, li"e the
rest, &as able to
present an official
receipt to
ac"no&led*e these
receipts and
accordin* to them
since this is a
*overnment chec"
and believed that it
&ill eventually *o
to the hospital
follo&in* the
standard procedure
of ne*otiatin*
*overnment chec"s,
they released the
chec"s to
#an*ilinan aside
from !iss Juco.
'>
,he failure of the #rovince
of ,arlac to exercise due
care contributed to a
si*nificant de*ree to the
loss tantamount to
ne*li*ence. /ence, the
#rovince of ,arlac should
be liable for part of the
total amount paid on the
-uestioned chec"s.
,he dra&ee ban" #.) also
breached its duty to pay
only accordin* to the terms
of the chec". /ence, it
cannot escape liability and
should also bear part of the
loss.
?s earlier stated, #.) can
recover from the collectin*
ban".
In the case of (ssociate#
Bank v. '(,
'<
six crossed
chec"s &ith for*ed
indorsements &ere
deposited in the for*erKs
account &ith the
collectin* ban" and &ere
later paid by four
different dra&ee ban"s.
,he ourt found the
collectin* ban"
9?ssociated: to be
ne*li*ent and held2
,he )an" should
have first verified
his ri*ht to endorse
the crossed chec"s,
of &hich he &as
not the payee, and
to deposit the
proceeds of the
chec"s to his o&n
account. ,he )an"
&as by reason of
the nature of the
chec"s put upon
notice that they
&ere issued for
deposit only to the
private
respondentKs
account. . . .
,he situation in the case at
bench is analo*ous to the
above case, for it &as not
the payee &ho deposited
the chec"s &ith the
collectin* ban". /ere, the
chec"s &ere all payable to
oncepcion =mer*ency
/ospital but it &as Fausto
#an*ilinan &ho deposited
the chec"s in his personal
savin*s account.
?lthou*h ?ssociated )an"
claims that the *uarantee
stamped on the chec"s 9?ll
prior and6or lac" of
endorsements *uaranteed: is
merely a re-uirement forced
upon it by clearin* house
rules, it cannot but remain
liable. ,he stamp
*uaranteein* prior
indorsements is not an
empty rubric &hich a ban"
must fulfill for the sa"e of
convenience. ? ban" is not
re-uired to accept all the
chec"s ne*otiated to it. It is
&ithin the ban"Ks discretion
to receive a chec" for no
ban"in* institution &ould
consciously or deliberately
accept a chec" bearin* a
for*ed indorsement. Fhen a
chec" is deposited &ith the
collectin* ban", it ta"es a
ris" on its depositor. It is
only lo*ical that this ban"
be held accountable for
chec"s deposited by its
customers.
? delay in informin* the
collectin* ban" 9?ssociated
)an": of the for*ery, &hich
deprives it of the
opportunity to *o after the
for*er, si*nifies ne*li*ence
on the part of the dra&ee
ban" 9#.): and &ill
preclude it from claimin*
reimbursement.
It is here that ?ssociated
)an"Ks assi*nment of error
concernin* .). ircular
.o. <8% and @ection 2' of
the #hilippine learin*
/ouse orporation ;ules
comes to fore. Bnder
@ection >9c: of ) ircular
.o. <8%, items bearin* a
for*ed endorsement shall be
returned &ithin t&enty-@our
92>: hours after discovery of
the for*ery but in no event
beyond the period fixed or
provided by la& for filin* of
a le*al action by the
returnin* ban". @ection 2'
of the #/ ;ules deleted
the re-uirement that items
bearin* a for*ed
endorsement should be
returned &ithin t&enty-four
hours. ?ssociated )an" no&
ar*ues that the
aforementioned entral
)an" ircular is applicable.
@ince #.) did not return the
-uestioned chec"s &ithin
t&enty-four hours, but
several days later,
?ssociated )an" alle*es that
#.) should be considered
ne*li*ent and not entitled to
reimbursement of the
amount it paid on the
chec"s.
,he ourt deems it
unnecessary to discuss
?ssociated )an"Ks
assertions that ) ircular
.o. <8% is an administrative
re*ulation issued pursuant
to la& and as such, must
prevail over the #/ rule.
,he entral )an" circular
&as in force for all ban"s
until June 198% &hen the
#hilippine learin* /ouse
orporation 9#/: &as
set up and commenced
operations. )an"s in !etro
!anila &ere
covered by the #/
&hile ban"s located
else&here still had to *o
throu*h entral )an"
learin*. In any event, the
t&enty-four-hour return
rule &as adopted by the
#/ until it &as chan*ed
in 1982. ,he contendin*
ban"s herein, &hich are
both branches in ,arlac
province, are therefore not
covered by #/ ;ules
but by ) ircular .o.
<8%. learly then, the )
circular &as applicable
&hen the for*ery of the
chec"s &as discovered in
1981.
,he rule mandates that the
chec"s be returned &ithin
t&enty-four hours after
discovery of the for*ery but
in no event beyond the
period fixed by la& for
filin* a le*al action. ,he
rationale of the rule is to
*ive the collectin* ban"
9&hich indorsed the chec":
ade-uate opportunity to
proceed a*ainst the for*er. If
prompt notice is not *iven,
the collectin* ban" maybe
pre3udiced and lose the
opportunity to *o after its
depositor.
,he ourt finds that even if
#.) did not return the
-uestioned chec"s to
?ssociated )an" &ithin
t&enty-four hours, as
mandated by the rule, #.)
did not commit ne*li*ent
delay. Bnder the
circumstances, #.) *ave
prompt notice to ?ssociated
)an" and the latter ban"
&as not pre3udiced in *oin*
after Fausto #an*ilinan.
?fter the #rovince of ,arlac
informed #.) of the
for*eries, #.) necessarily
had to inspect the chec"s
and conduct its o&n
investi*ation. ,hereafter, it
re-uested the #rovincial
,reasurerKs office on !arch
'1, 1981 to return the
chec"s for verification. ,he
#rovince of ,arlac returned
the chec"s only on ?pril 22,
1981. ,&o days later,
?ssociated )an" received
the chec"s from #.).
'+
?ssociated )an" &as also
furnished a copy of the
#rovinceKs letter of demand
to #.) dated !arch 2%,
1981, thus *ivin* it notice
of the for*eries. ?t this
time, ho&ever, #an*ilinanKs
account &ith ?ssociated had
only #2>.+' in it.
'$
/ad
?ssociated )an" decided to
debit #an*ilinanKs account,
it could not have recovered
the amounts paid on the
-uestioned chec"s. In
addition, &hile ?ssociated
)an" filed a fourth-party
complaint a*ainst Fausto
#an*ilinan, it did not
present evidence a*ainst
#an*ilinan and even
presented him as its rebuttal
&itness.
'8
/ence,
?ssociated )an" &as not
pre3udiced by #.)Ks failure
to comply &ith the t&enty-
four-hour return rule.
.ext, ?ssociated )an"
contends that #.) is
estopped from re-uirin*
reimbursement because the
latter paid and cleared the
chec"s. ,he ourt finds this
contention unmeritorious.
=ven if #.) cleared and
paid the chec"s, it can still
recover from ?ssociated
)an". ,his is true even if the
payeeKs hief Cfficer &ho
&as supposed to have
indorsed the chec"s is also a
customer of the dra&ee
ban".
'9
#.)Ks duty &as to
verify the *enuineness of the
dra&erKs si*nature and not
the *enuineness of payeeKs
indorsement. ?ssociated
)an", as the collectin* ban",
is the entity &ith the duty to
verify the *enuineness of the
payeeKs indorsement.
#.) also avers that
respondent court erred in
ad3ud*in* circuitous
liability by directin* #.)
to return to the #rovince of
,arlac the amount of the
chec"s and then directin*
?ssociated )an" to
reimburse #.). ,he ourt
finds nothin* &ron* &ith
the mode of the a&ard. ,he
dra&er, #rovince of ,arlac,
is a clientor customer of the
#.), not of ?ssociated
)an". ,here is no privity of
contract bet&een the
dra&er and the collectin*
ban".
,he trial court made #.)
and ?ssociated )an" liable
&ith le*al interest from
!arch 2%, 1981, the date of
extra3udicial demand made
by the #rovince of ,arlac on
#.). ,he payments to be
made in this case stem from
the deposits of the #rovince
of ,arlac in its current
account &ith the #.). )an"
deposits are considered
under the la& as loans.
>%

entral )an" ircular .o.
>1+ prescribes a t&elve
percent 912N: interest per
annum for loans,
forebearance of money,
*oods or credits in the
absence of express
stipulation. .ormally,
current accounts are li"e&ise
interest-bearin*, by express
contract, thus excludin*
them from the covera*e of
) ircular .o. >1+. In this
case, ho&ever, the actual
interest rate, if any, for the
current account opened by
the #rovince of ,arlac &ith
#.) &as not *iven in
evidence. /ence, the ourt
deems it &ise to affirm the
trial courtKs use of the le*al
interest rate, or six percent
9+N: per annum. ,he
interest rate shall be
computed from the date of
default, or the date of
3udicial or extra3udicial
demand.
>1
,he trial court
did not err in *rantin* le*al
interest from !arch 2%,
1981, the date of
extra3udicial demand.
,he ourt finds as
reasonable, the
proportionate sharin* of
fifty percent - fifty percent
9<%N-<%N:. 5ue to the
ne*li*ence of the #rovince
of ,arlac in releasin* the
chec"s to an unauthori7ed
person 9Fausto #an*ilinan:,
in allo&in* the retired
hospital cashier to receive
the chec"s for the payee
hospital for a period close to
three years and in not
properly ascertainin* &hy
the retired hospital cashier
&as collectin* chec"s for
the payee hospital in
addition to the hospitalKs real
cashier, respondent #rovince
contributed to the loss
amountin* to #2%','%%.%%
and shall be liable to the
#.) for fifty 9<%N: percent
thereof. In effect, the
#rovince of ,arlac can only
recover fifty percent 9<%N:
of #2%','%%.%% from #.).
,he collectin* ban",
?ssociated )an", shall be
liable to #.) for fifty 9<%N:
percent of #2%','%%.%%. It is
liable on its &arranties as
indorser of the chec"s &hich
&ere deposited by Fausto
#an*ilinan, havin*
*uaranteed the *enuineness
of all prior indorsements,
includin* that of the chief of
the payee hospital, 5r.
?dena anlas. ?ssociated
)an" &as also remiss in its
duty to ascertain the
*enuineness of the payeeKs
indorsement.
I. 1I=F CF ,/=
FC;=JCI.J, the petition
for revie& filed by the
#hilippine .ational )an"
9J.;. .o. 1%$+12: is hereby
#?;,I?88A J;?.,=5.
,he petition for revie& filed
by the ?ssociated )an"
9J.;. .o. 1%$'82: is hereby
5=.I=5. ,he decision of
the trial court is
!C5IFI=5. ,he #hilippine
.ational )an" shall
pay fifty percent 9<%N: of #2%','%%.%% to the #rovince of
,arlac, &ith le*al interest from !arch 2%, 1981 until the
payment thereof. ?ssociated )an" shall pay fifty percent 9<%N:
of #2%','%%.%% to the #hilippine .ational )an", li"e&ise, &ith
le*al interest from !arch 2%, 1981 until payment is made.
@C C;5=;=5.
/e-ala#o, Puno an# &en#o0a, ))!, concur.
;
ep
ub
lic
of
th
e
#h
ili
pp
in
es
SUPR
EME
COU
RT
!anila
@=C
.5
5I1I@
IC.
G.R. No. 1&1)13
J$/#$"% &9, &001
PHILIPPINE
COMMERCIAL
INTERNATIONAL
BANK 96o"4"5%
INSULAR BANK OF
ASIA AND
AMERICA:,petitione
r,
vs.
COURT OF
APPEALS $/-
FORD
PHILIPPINES,
INC. $/-
CITIBANK,
N.A.,
respondents.
G.R. No. 1&1)'9
J$/#$"% &9, &001
F
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.
COURT OF
APPEALS $/-
CITIBANK, N.A. $/-
PHILIPPINE
COMMERCIAL
INTERNATIONAL
BANK,respondents.
G.R. No. 1&(*0)
J$/#$"% &9, &001
F
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CITIBANK, N.A.,
PHILIPPINE
COMMERCIAL
INTERNATIONAL
BANK $/- COURT
OF APPEALS,
respondents.
QUISUMBING, J.<
,hese consolidated
petitions involve several
fraudulently ne*otiated
chec"s.
,he ori*inal actions a quo
&ere instituted by Ford
#hilippines to recover
from the dra&ee ban",
I,I)?.M, ..?.
9itiban": and collectin*
ban", #hilippine
ommercial International
)an" 9#I)an": Dformerly
Insular )an" of ?sia and
?mericaE, the value of
several chec"s payable to
the ommissioner of
Internal ;evenue, &hich
&ere embe77led alle*edly
by an or*ani7ed
syndicate.1FAphi1!nGt
J.;. .os. 121>1' and
121>$9 are t&in
petitions for revie& of
the !arch 2$, 199<
5ecision
1
of the ourt of
?ppeals in ?-J.;. 1
.o. 2<%1$, entitled
4Ford #hilippines, Inc.
vs. itiban", ..?. and
Insular )an" of ?sia and
?merica 9no&
#hilipppine ommercial
International )an":, and
the ?u*ust 8, 199<
;esolution,
2
orderin* the
collectin* ban",
#hilippine ommercial
International )an", to
pay the amount of
itiban" hec" .o. @.-
%>8+$.
In J.;. .o. 128+%>,
petitioner Ford #hilippines
assails the Cctober 1<,
199+ 5ecision
'
of the
ourt of ?ppeals and its
!arch <, 199$ ;esolution
>
in ?-J.;. .o. 28>'%
entitled 4Ford #hilippines,
Inc. vs. itiban", ..?. and
#hilippine ommercial
International )an",4
affirmin* in toto the
3ud*ment of the trial court
holdin* the defendant
dra&ee ban", itiban",
..?., solely liable to pay
the amount of
#12,1+',298.1% as
dama*es for the
misapplied proceeds of the
plaintiffKs itibanl hec"
.umbers @.-1%<9$ and
1+<%8.
I.
G
.
R
.
N
o
1
.
1
&
1
)
1
3
$
/
-
1
&
1
)
'
9
,he stipulated
facts submitted
by the parties as
accepted by the
ourt of ?ppeals
are as follo&s2
4Cn Cctober
19, 19$$, the
plaintiff Ford
dre& and issued
its itiban"
hec" .o. @.-
%>8+$ in the
amount of
#>,$>+,11>.>1,
in favor of the
ommissioner
of Internal
;evenue as
payment of
plaintiff(s
percenta*e or
manufacturerKs
sales taxes for
the third -uarter
of 19$$.
,he aforesaid
chec" &as
deposited
&ith the
de*endant
I)?? 9no&
#I)an":
and &as
subse-uently
cleared at the
entral
)an". Bpon
presentment
&ith the
defendant
itiban", the
proceeds of
the chec"
&as paid to
I)?? as
collectin* or
depository
ban".
,he proceeds of
the same
itiban" chec"
of the plaintiff
&as never paid
to or received by
the payee
thereof, the
ommissioner of
Internal
;evenue.
?s a
conse-uence,
upon demand of
the )ureau and6or
ommissioner of
Internal ;evenue,
the plaintiff &as
compelled to
ma"e a second
payment to the
)ureau of
Internal ;evenue
of its
percenta*e6manu
facturersK sales
taxes for the
third -uarter of
19$$ and that
said second
payment of
plaintiff in the
amount of
#>,$>+,11>.>1
&as duly
received by the
)ureau of
Internal ;evenue.
It is further
admitted by
defendant
itiban" that
durin* the time
of the
transactions in
-uestion,
plaintiff had
been
maintainin* a
chec"in*
account &ith
defendant
itiban"( that
itiban" hec"
.o. @.-%>8+$
&hich &as dra&n and
issued by the plaintiff
in favor of the
ommissioner of
Internal ;evenue &as a
crossed chec" in that,
on its face &ere t&o
parallel lines and
&ritten in bet&een said
lines &as the phrase
4#ayeeKs ?ccount
Cnly4( and that
defendant itiban" paid
the full face value of
the chec" in the amount
of #>,$>+,11>.>1 to the
defendant I)??.
It has been duly
established that for the
payment of plaintiffKs
percenta*e tax for the
last -uarter of 19$$, the
)ureau of Internal
;evenue issued ;evenue
,ax ;eceipt .o.
18$>$%%2, dated
Cctober 2%, 19$$,
desi*natin* therein in
!untinlupa, !etro !anila,
as the authori7ed a*ent ban"
of !etrobanl, ?laban*
branch to receive the tax
payment of the plaintiff.
Cn 5ecember 19, 19$$,
plaintiffKs itiban" hec"
.o. @.-%>8+$, to*ether
&ith the ;evenue ,ax
;eceipt .o. 18$>$%%2, &as
deposited &ith defendant
I)??, throu*h its =rmita
)ranch. ,he latter accepted
the chec" and sent it to the
entral learin* /ouse for
clearin* on the samd day,
&ith the indorsement at the
bac" 4all prior
indorsements and6or lac" of
indorsements *uaranteed.4
,hereafter, defendant I)??
presented the chec" for
payment to defendant
itiban" on same date,
5ecember 19, 19$$, and the
latter paid the face
value of the chec" in the
amount of
#>,$>+,11>.>1.
onse-uently, the
amount of
#>,$>+,11>.>1 &as
debited in plaintiffKs
account &ith the
defendant itiban" and
the chec" &as returned
to the plaintiff.
Bpon verification,
plaintiff discovered that
its itiban" hec" .o.
@.-%>8+$ in the amount
of #>,$>+,11>.>1 &as not
paid to the ommissioner
of Internal ;evenue.
/ence, in separate letters
dated Cctober 2+, 19$9,
addressed to the
defendants, the plaintiff
notified the latter that in
case it &ill be re-assessed
by the )I; for the
payment of the taxes
covered by the said
chec"s, then plaintiff
shall hold the defendants
liable for reimbursement
of the face value of the
same. )oth defendants
denied liability and
refused to pay.
In a letter dated
February 28, 198% by
the ?ctin*
ommissioner of
Internal ;evenue
addressed to the plaintiff
- supposed to be =xhibit
454, the latter &as
officially informed, amon*
others, that its chec" in the
amount of #>, $>+,11>.>1
&as not paid to the
*overnment or its
authori7ed a*ent and instead
encashed by unauthori7ed
persons, hence, plaintiff has
to pay the said amount
&ithin fifteen days from
receipt of the letter. Bpon
advice of the plaintiffKs
la&yers, plaintiff on !arch
11, 1982, paid to the )ureau
of Internal ;evenue, the
amount of #>,$>+,11>.>1,
representin* payment of
plaintiffKs percenta*e tax for
the third -uarter of 19$$.
?s a
conse-uence
of
defendantKs
refusal to
reimburse
plaintiff of
the payment
it had made
for the
second time
to the )I; of
its
percenta*e
taxes,
plaintiff filed
on January
2%, 198' its
ori*inal
complaint
before this
ourt.
Cn 5ecember
2>, 198<,
defendant
I)?? &as
mer*ed &ith the
#hilippine
ommercial
International
)an" 9#I
)an": &ith the
latter as the
survivin* entity.
5efendant
itiban"
maintains that(
the payment it
made of
plaintiffKs
itiban" hec"
.o. @.-%>8+$
in the amount of
#>,$>+,11>.>1
4&as in due
course4( it merely
relied on the
clearin* stamp of
the
depository6collectin
* ban", the
defendant I)??
that 4all prior
indorsements and6or
lac" of
indorsements
*uaranteed4( and the
proximate cause of
plaintiffKs in3ury is
the *ross ne*li*ence
of defendant I)??
in indorsin* the
plaintiffKs itiban"
chec" in -uestion.
It is admitted that
on 5ecember 19,
19$$ &hen the
proceeds of
plaintiffKs itiban"
hec" .o. @.-
%>88+$ &as paid to
defendant I)?? as
collectin* ban",
plaintiff &as
maintainin* a
chec"in* account
&ith defendant
itiban".4
<
?lthou*h it &as not amon*
the stipulated facts, an
investi*ation by the .ational
)ureau of Investi*ation
9.)I: revealed that itiban"
hec" .o. @.-%>8+$ &as
recalled by Jodofredo
;ivera, the Jeneral 8ed*er
?ccountant of Ford. /e
purportedly needed to hold
bac" the chec" because there
&as an error in the
computation of the tax
due to the )ureau of
Internal ;evenue 9)I;:.
Fith ;iveraKs
instruction, #I)an"
replaced the chec" &ith
t&o of its o&n !ana*erKs
hec"s 9!s:. ?lle*ed
members of a syndicate
later deposited the t&o
!s &ith the #acific
)an"in* orporation.
Ford, &ith leave of court,
filed a third-party
complaint before the trial
court impleadin* #acific
)an"in* orporation
9#): and Jodofredo
;ivera, as third party
defendants. )ut the court
dismissed the complaint
a*ainst #) for lac" of
cause of action. ,he
course li"e&ise
dismissed the third-party
complaint a*ainst Jodofredo
;ivera because he could not
be served &ith summons as
the .)I declared him as a
4fu*itive from 3ustice4.
Cn June 1<, 1989, the trial
court rendered its decision,
as follo&s2
4#remises
considered,
3ud*ment is hereby
rendered as follo&s2
41.
Crderin*
the
defendants
itiban"
and I)??
9no& #I
)an":,
3ointly and
severally,
to pay the
plaintiff the
amount of
#>,$>+,1
1>.>1
representi
n* the
face
value of
plaintiffKs
itiban"
hec"
.o. @.-
%>8+$,
&ith
interest
thereon at
the le*al
rate
startin*
January
2%, 198',
the date
&hen the
ori*inal
complain
t &as
filed until
the
amount
is fully
paid, plus
costs(
42. Cn
defendan
t
itiban"K
s cross-
claim2
orderin*
the
cross-
defendan
t I)??
9no& #I
)an": to
reimburs
e
defendan
t
itiban"
for
&hatever
amount
the latter
has paid
or may
pay to
the
plaintiff
in
accordan
ce &ith
next
precedin
*
para*rap
h(
4'. ,he
countercl
aims
asserted
by the
defendant
s a*ainst
the
plaintiff,
as &ell as
that
asserted
by the
cross-
defendant
a*ainst
the cross-
claimant
are
dismissed
, for lac"
of merits(
and
4>. Fith
costs
a*ainst
the
defendant
s.
@C C;5=;=5.4
+
.ot satisfied &ith the said
decision, both defendants,
itiban" and #I)an",
elevated their respective
petitions for revie& on
certiorari to the ourts of
?ppeals. Cn !arch 2$,
199<, the appellate court
issued its 3ud*ment as
follo&s2
4F/=;
=FC;=,
in vie&
of the
fore*oin
*, the
court
?FFI;
!@ the
appealed
decision
&ith
modifica
tions.
,he court hereby
renderes
3ud*ment2
1.D.14.
11./0
the
complai
nt in
ivil
ase
.o.
>928$
insofar
as
defenda
nt
itiban"
..?. is
concern
ed(
2.O"-
"./0 the
defenda
nt I)??
no&
#I
)an" to
pay the
plaintiff
the
amount
of
#>,$>+,
11>.>1
represen
tin* the
face
value of
plaintiffK
s
itiban"
hec"
.o. @.-
%>8+$,
&ith
interest
thereon
at the
le*al
rate
startin*
January
2%,
198',
the date
&hen
the
ori*inal
complai
nt &as
filed
until the
amount
is fully
paid(
3.5i
smiss
in*
the
count
erclai
ms
assert
ed by
the
defen
dants
a*ain
st the
plaint
iff as
&ell
as
that
assert
ed by
the
cross
-
defen
dant
a*ain
st the
cross
-
claim
ant,
for
lac"
of
merit
s.
osts
a*ainst
the
defendant
I)??
9no& #I
)an":.
I, I@ @C
C;5=;=
5.4
$
#I )an" moved to
reconsider the above-
-uoted decision of the
ourt of ?ppeals, &hile
Ford filed a 4!otion for
#artial ;econsideration.4
)oth motions &ere
denied for lac" of merit.
@eparately, #I)an"
and Ford filed before
this ourt, petitions for
revie& by certiorari
under ;ule ><.
In J.;. .o. 121>1',
#I)an" see"s the reversal
of the decision and
resolution of the ,&elfth
5ivision of the ourt of
?ppeals contendin* that it
merely acted on the
instruction of Ford and
such casue of action had
already prescribed.
#I)an" sets forth the
follo&in* issues for
consideration2
I. 5id the
respondent court
err &hen, after
findin* that the
petitioner acted
on the chec"
dra&n by
respondent Ford
on the said
respondentKs
instructions, it
nevertheless
found the
petitioner liable to
the said
respondent for the
full amount of the
said chec".
II. 5id the
respondent
court err
&hen it did
not find
prescription
in favor of the
petitioner.
8
In a counter move,
Ford filed its petition
doc"eted as J.;. .o.
121>$9, -uestionin*
the same decision and
resolution of the ourt
of ?ppeals, and
prayin* for the
reinstatement in toto
of the decision of the
trial court &hich found
both #I)an" and
itiban" 3ointly and
severally liable for the
loss.
In J.;. .o. 121>$9,
appellant Ford
presents the
follo&in*
propositions for
consideration2
I. ;esponde
nt itiban" is
liable to
petitioner Ford
considerin* that2
1.?s
dra&ee
ban",
responde
nt
itiban"
o&es to
petitioner
Ford, as
the
dra&er of
the
sub3ect
chec"
and a
depositor
of
responde
nt
itiban",
an
absolute
and
contractu
al duty to
pay the
proceeds
of the
sub3ect
chec"
only to
the payee
thereof,
the
ommiss
ioner of
Internal
;evenue.
2.;e
spon
dent
itib
an"
faile
d to
obser
ve its
duty
as
ban"
er
&ith
respe
ct to
the
sub3e
ct
chec
",
&hic
h
&as
cross
ed
and
paya
ble
to
4#ay
eeKs
?cco
unt
Cnly.
4
3.;
espo
nde
nt
iti
ban
"
raise
s an
issu
e for
the
first
time
on
appe
al(
thus
the
sam
e
shou
ld
not
be
cons
ider
ed
by
the
/on
orab
le
ou
rt.
4.?s
correc
tly
held
by the
trial
court,
there
is no
eviden
ce of
*ross
ne*li*
ence
on the
part of
petitio
ner
Ford.
9
II. #I )an" is
liable to petitioner
Ford considerin*
that2
1.,here
&ere no
instructi
ons
from
petition
er Ford
to
deliver
the
proceed
s of the
sub3ect
chec" to
a person
other
than the
payee
named
therein,
the
ommis
sioner
of the
)ureau
of
Internal
;evenu
e( thus,
#I)an
"Ks only
obli*ati
on is to
deliver
the
proceed
s to the
ommis
sioner
of the
)ureau
of
Internal
;evenu
e.
1%

2.#I)
an"
&hich
affixed
its
indorse
ment on
the
sub3ect
chec"
94?ll
prior
indorse
ment
and6or
lac" of
indorse
ment
*uarante
ed4:, is
liable as
collectin
*
ban".
11

3.#I
)an"
is
barred
from
raisin*
issues
of fact
in the
instant
procee
din*s.
1
2

4. #etitio
ner
FordKs
cause
of
action
had not
prescri
bed.
1'

II.
G.R
.
No.
1&(
*0)
,he same sysndicate
apparently embe77led the
proceeds of chec"s
intended, this time, to settle
FordKs percenta*e taxes
appertainin* to the second
-uarter of 19$8 and the first
-uarter of 19$9.
,he facts as narrated by the
ourt of ?ppeals are as
follo&s2
Ford dre& itiban"
hec" .o. @.-1%<9$
on July 19, 19$8 in the
amount of
#<,8<1,$%+.'$
representin* the
percenta*e tax due for
the second -uarter of
19$8 payable to the
ommissioner of
Internal ;evenue. ?
)I; ;evenue ,ax
;eceipt .o. 28+><'8<
&as issued for the said
purpose.
Cn ?pril 2%, 19$9, Ford
dre& another itiban"
hec" .o. @.-1+<%8 in
the amount of
#+,'11,<91.$',
representin* the
payment of percenta*e
tax for the first -uarter
of 19$9 and payable to
the ommissioner of
Internal ;evenue. ?*ain
a )I; ;evenue ,ax
;eceipt .o. ?-1+9$1+%
&as issued for the said
purpose.
)oth chec"s &ere 4crossed
chec"s4 and contain t&o
dia*onal lines on its upper
corner bet&een, &hich
&ere &ritten the &ords
4payable to the payeeKs
account only.4
,he chec"s never
reached the payee, I;.
,hus, in a letter dated
February 28, 198%, the
)I;, ;e*ion >-),
demanded for the said
tax payments the
correspondin* periods
above-mentioned.
?s far as the )I; is
concernced, the said t&o
)I; ;evenue ,ax ;eceipts
&ere considered 4fa"e and
spurious4. ,his anomaly
&as confirmed by the .)I
upon the initiative of the
)I;. ,he findin*s forced
Ford to pay the )I; a ne&,
&hile an action &as filed
a*ainst itiban" and
#I)an" for the recovery
of the amount of itiban"
hec" .umbers @.-1%<9$
and 1+<%8.
,he ;e*ional ,rial
ourt of !a"ati,
)ranch <$, &hich tried
the case, made its
findin*s on the mo#us
operan#i of the
syndicate, as follo&s2
4? certain !r.
Jodofredo ;ivera
&as employed by
the plaintiff FC;5
as its Jeneral
8ed*er
?ccountant. ?s
such, he prepared
the plaintiffKs
chec" mar"ed =x.
K?K Ditiban"
hec" .o. @n-
1%<9$E for
payment to the
)I;. Instead,
ho&ever, fo
deliverin* the
same of the payee,
he passed on the
chec" to a co-
conspirator named
;emberto astro
&ho &as a pro-
mana*er of the
@an ?ndres
)ranch of #I).L
In connivance
&ith one Finston
5ulay, astro
himself
subse-uently
opened a
hec"in* ?ccount
in the name of a
fictitious person
denominated as
K;eynaldo reyesK in
the !eralco
)ranch of
#I)an" &here
5ulay &or"s as
?ssistant
!ana*er.
?fter an initial
deposit of #1%%.%%
to validate the
account, astro
deposited a
&orthless )an" of
?merica hec" in
exactly the same
amount as the first
FC;5 chec" 9=xh.
4?4,
#<,8<1,$%+.'$:
&hile this
&orthless chec"
&as coursed
throu*h #I)Ks
main office
enroute to the
entral )an" for
clearin*, replaced
this &orthless
chec" &ith
FC;5Ks =xhibit K?K
and accordin*ly
tampered the
accompanyin*
documents to
cover the
replacement. ?s a
result, =xhibit K?K
&as cleared by
defendant
I,I)?.M, and
the fictitious
deposit account of
K;eynaldo ;eyesK
&as credited at the
#I) !eralco
)ranch &ith the
total amount of the
FC;5 chec"
=xhibit K?K. ,he
same method &as
a*ain utili7ed by
the syndicate in
profitin* from
=xh. K)K Ditiban"
hec" .o. @.-
1+<%8E &hich &as
subse-uently
pilfered by ?lexis
!arindo, ;iveraKs
?ssistant at
FC;5.
From this
K;eynaldo
;eyesK account,
astro dre&
various chec"s
distributin* the
sahres of the
other
participatin*
conspirators
namely
91: ;I@?.,C
)=;.?)=, the
mastermind &ho
formulated the
method
for the
embe77lement( 92:
;C5C8FC ;. 5=
8=C. a customs
bro"er &ho
ne*otiated the
initial contact
bet&een )ernabe,
FC;5Ks
Jodofredo ;ivera
and #I)Ks
;emberto astro(
9': JB?.
1?@,I88C &ho
assisted de 8eon in
the initial
arran*ements( 9>:
JC5CF;=5C
;I1=;?, FC;5Ks
accountant &ho
passed on the first
chec" 9=xhibit
4?4: to astro( 9<:
;=!=;,C
?@,;C, #I)Ks
pro-mana*er at
@an ?ndres &ho
performed the
s&itchin* of
chec"s in the
clearin* process
and opened the
fictitious ;eynaldo
;eyes account at
the #I) !eralco
)ranch( 9+:
FI.@,C.
5B8?A, #I)Ks
?ssistant !ana*er
at its !eralco
)ranch, &ho
assisted astro in
s&itchin* the
chec"s in the
clearin* process
and facilitated the
openin* of the
fictitious
;eynaldo ;eyesK
ban" account( 9$:
?8=OI@
!?;I.5C,
;iveraKs ?ssistant
at FC;5, &ho
*ave the second
chec" 9=xh. 4)4:
to astro( 98:
=8=B,=;IC
JI!=.=I, )I;
ollection ?*ent
&ho provided the
fa"e and spurious
revenue tax
receipts to ma"e it
appear that the
)I; had received
FC;5Ks tax
payments.
@everal other
persons and
entities &ere
utili7ed by the
syndicate as
conduits in the
disbursements
of the proceeds
of the t&o
chec"s, but li"e
the
aforementioned
participants in
the conspiracy,
have not been
impleaded in the
present case.
,he manner by
&hich the said
funds &ere
distributed
amon* them are
traceable from
the record of
chec"s dra&n
a*ainst the
ori*inal
4;eynaldo
;eyes4 account
and indubitably
identify the
parties &ho
ille*ally
benefited
therefrom and
readily indicate
in &hat amounts
they did so.4
1>
Cn 5ecember 9, 1988,
;e*ional ,rial ourt of
!a"ati, )ranch <$, held
dra&ee-ban", itiban",
liable for the value of the
t&o chec"s &hile
adsolvin* #I)an" from
any liability, disposin* as
follo&s2
4F/=;=FC;=,
3ud*ment is
hereby rendered
sentencin*
defendant
I,I)?.M to
reimburse
plaintiff FC;5
the total amount
of
#12,1+',298.1%
prayed for in its
complaint, &ith
+N interest
thereon from
date of first
&ritten demand
until full
payment, plus
#'%%,%%%.%%
attorneyKs fees
and expenses
liti*ation, and to
pay the
defendant, #I)
9on its
counterclaim to
crossclaim: the
sum of
#'%%,%%%.%% as
attorneyKs fees
and costs of
liti*ation, and
pay the costs.
@C C;5=;=5.4
1<
)oth Ford and itiban"
appealed to the ourt of
?ppeals &hich affirmed, in
toto, the decision of the
trial court. /ence, this
petition.
#etitioner Ford prays that
3ud*ment be rendered settin*
aside the portion of the ourt
of ?ppeals decision and its
resolution dated !arch <,
199$, &ith respect
to the dismissal of the
complaint a*ainst
#I)an" and holdin*
itiban" solely
responsible for the
proceeds of itiban"
hec" .umbers @.-
1%<9$ and 1+<%8 for
#<,8<1,$%+.$' and
#+,'11,<91.$'
respectively.
Ford avers that the ourt
of ?ppeals erred in
dismissin* the complaint
a*ainst defendant
#I)an" considerin*
that2
I. 5efendant
#I)an" &as
clearly
ne*li*ent &hen
it failed to
exercise the
dili*ence
re-uired to be
exercised by it
as a ban"in*
insitution.
II. 5efendant
#I)an" clearly
failed to observe
the dili*ence
re-uired in the
selection and
supervision of its
officers and
employees.
III. 5efendant
#I)an" &as,
due to its
ne*li*ence,
clearly liable for
the loss or
dama*e
resultin* to the
plaintiff Ford as
a conse-uence
of the
substitution of
the chec"
consistent &ith
@ection < of
entral )an"
ircular .o. <8%
series of 19$$.
I1. ?ssumin*
ar-ue#o that
defedant #I)an"
did not accept,
endorse or
ne*otiate in due
course the sub3ect
chec"s, it is liable,
under ?rticle
21<> of the ivil
ode, to return
the money &hich
it admits havin*
received, and
&hich &as
credited to it its
entral ban"
account.
1+
,he main issue presented
for our consideration by
these petitions could be
simplified as follo&s2
/as petitioner Ford the
ri*ht to recover from the
collectin* ban"
9#I)an": and the
dra&ee ban" 9itiban":
the value of the chec"s
intended as payment to
the ommissioner of
Internal ;evenueP Cr has
FordKs cause of action
already prescribedP
.ote that in these cases,
the chec"s &ere dra&n
a*ainst the dra&ee ban",
but the title of the person
ne*otiatin* the same &as
alle*edly defective
because the instrument
&as obtained by fraud and
unla&ful means, and the
proceeds of the chec"s
&ere not remitted to the
payee. It &as established
that instead of payin* the
chec"s to the I;, for the
settlement of the
approprite -uarterly
percenta*e taxes of Ford,
the chec"s &ere diverted
and encashed for the
eventual distribution
amon* the mmbers of the
syndicate. ?s to the
unla&ful ne*otiation of the
chec" the applicable la& is
@ection << of the
.e*otiable Instruments
8a& 9.I8:, &hich
provides2
4Fhen title
defective -- ,he
title of a person
&ho ne*otiates an
instrument is
defective &ithin
the meanin* of
this ?ct &hen he
obtained the
instrument, or
any si*nature
thereto, by fraud,
duress, or fore
and fear, or other
unla&ful means,
or for an ille*al
consideration,
or &hen he
ne*otiates it in
breach of faith or
under such
circumstances as
amount to a
fraud.4
#ursuant to this provision,
it is vital to sho& that the
ne*otiation is made by the
perpetator in breach of
faith amountin* to fraud.
,he person ne*otiatin* the
chec"s must have *one
beyond the authority *iven
by his principal. If the
principal could prove that
there &as no ne*li*ence in
the performance of his
duties, he may set up the
personal defense to escape
liability and recover from
other parties &ho. ,hou*h
their o&n ne*li*ence,
alo&ed the commission of
the crime.
In this case, &e note that
the direct perpetrators of
the offense, namely the
embe77lers belon*in* to a
syndicate, are no&
fu*itives from 3ustice.
,hey have, even if
temporarily, escaped
liability for the
embe77lement of millions
of pesos. Fe are thus left
only &ith the tas" of
determinin* &ho of the
present parties before us
must bear the burden of
loss of these millions. It
all boils do&n to
the-uestion of liability
based on the de*ree of
ne*li*ence amon* the
parties concerned.
Foremost, &e must
resolve &hether the
in3ured party, Ford, is
*uilty of the 4imputed
contributory
ne*li*ence4 that
&ould defeat its claim
for reimbursement,
bearin* in* mind that
its employees,
Jodofredo ;ivera and
?lexis !arindo, &ere
amon* the members
of the syndicate.
itiban" points out that Ford
allo&ed its very o&n
employee, Jodofredo
;ivera, to ne*otiate the
chec"s to his co-
conspirators, instead of
deliverin* them to the
desi*nated authori7ed
collectin* ban" 9!etroban"-
?laban*: of the payee, I;.
itiban" be&ails the fact
that Ford &as remiss in the
supervision and control of
its o&n employees,
inasmuch as it only
discovered the syndicateKs
activities throu*h the
information *iven by the
payee of the chec"s after
an unreasonable period of
time.
#I)an" also blames Ford
of ne*li*ence &hen it
alle*edly authori7ed
Jodofredo ;ivera to divert
the proceeds of itiban"
hec" .o. @.-%>8+$,
instead of usin* it to pay
the )I;. ?s to the
subse-uent run-around of
unds of itiban" hec"
.os. @.-1%<9$ and 1+<%8,
#I)an" claims that the
proximate cause of the
dam*e to Ford lies in its
o&n officers and
employees &ho carried out
the fradulent schemes and
the transactions. ,hese
circumstances &ere not
chec"ed by other officers of
the company includin* its
comptroller or internal
auditor. #I)an" contends
that the inaction of Ford
despite the enormity of the
amount involved &as a
sheer ne*li*ence and stated
that, as bet&een t&o
innocent persons, one of
&hom must suffer the
conse-uences of a breach
of trust, the one &ho made
it possible, by his act of
ne*li*ence, must bear the
loss.
For its part, Ford denies
any ne*li*ence in the
performance of its duties. It
avers that there &as no
evidence presented before
the trial court sho&in* lac"
of dili*ence on the part of
Ford. ?nd, citin* the case
of <empesaA vs! 'ourt of
(ppeals,
1$
Ford ar*ues that
even if there &as a findin*
therein that the dra&er &as
ne*li*ent, the dra&ee ban"
&as still ordered to pay
dama*es.
Furthermore, Ford contends
the Jodofredo rivera &as not
authori7ed to ma"e any
representation in its behalf,
specifically, to divert the
proceeds of the chec"s. It
adds that itiban" raised the
issue of imputed ne*li*ence
a*ainst Ford for the first time
on appeal. ,hus, it should
not be considered by this
ourt.
Cn this point,
3urisprudence re*ardin* the
imputed ne*li*ence of
employer in a master-
servant relationship is
instructive. @ince a master
may be held for his
servantKs &ron*ful act, the
la& imputes to the master
the act of the servant, and
if that act is ne*li*ent or
&ron*ful and proximately
results in in3ury to a third
person, the ne*li*ence or
&ron*ful conduct is the
ne*li*ence or &ron*ful
conduct of the master, for
&hich he is liable.
18
,he
*eneral rule is that if the
master is in3ured by the
ne*li*ence of a third
person and by the
concurin* contributory
ne*li*ence of his o&n
servant or a*ent, the latterKs
ne*li*ence is imputed to
his superior and &ill defeat
the superiorKs action a*ainst
the third person, asumin*,
of course that the
contributory ne*li*ence
&as the ="o>.4$2 ?$#1
of the in3ury of &hich
complaint is made.
19
?ccordin*ly, &e need to
determine &hether or not
the action of Jodofredo
;ivera, FordKs Jeneral
8ed*er ?ccountant, and6or
?lexis !arindo, his
assistant, &as the
proximate cause of the loss
or dama*e. ?@ defined,
proximate cause is that
&hich, in the natural and
continuous se-uence,
unbro"en by any efficient,
intervenin* cause produces
the in3ury and &ithout the
result &ould not have
occurred.
2%
It appears that althou*h
the employees of Ford
initiated the transactions
attributable to an
or*ani7ed syndicate, in
our vie&, their actions
&ere not the proximate
cause of encashin* the
chec"s payable to the
I;. ,he de*ree of
FordKs ne*li*ence, if any,
could not be
characteri7ed as the
proximate cause of the
in3ury to the parties.
,he )oard of 5irectors of
Ford, &e note, did not
confirm the re-uest of
Jodofredo ;ivera to recall
itiban" hec" .o. @.-
%>8+$. ;iveraKs instruction
to replace the said chec"
&ith #I)an"Ks !ana*erKs
hec" &as not in
theordinary course of
business &hich could have
prompted #I)an" to
validate the same.
?s to the preparation of
itiban" hec"s .os. @.-
1%<9$ and 1+<%8, it &as
established that these
chec"s &ere made payable
to the I;. )oth &ere
crossed
chec"s. ,hese chec"s
&ere apparently turned
around by FordKs
emploees, &ho &ere
actin* on their o&n
personal capacity.
Jiven these circumstances,
the mere fact that the
for*ery &as committed by
a dra&er-payorKs
confidential employee or
a*ent, &ho by virtue of his
position had unusual
facilities for perpertratin*
the fraud and imposin* the
for*ed paper upon the
ban", does notentitle the
ban" toshift the loss to the
dra&er-payor, in the
absence of some
circumstance raisin*
estoppel a*ainst the
dra&er.
21
,his rule li"e&ise
applies to the chec"s
fraudulently ne*otiated or
diverted by the confidential
employees &ho hold them
in their possession.
Fith respect to the
ne*li*ence of #I)an" in
the payment of the three
chec"s involved,
separately, the trial courts
found variations bet&een
the ne*otiation of
itiban" hec" .o. @.-
%>8+$ and the
misapplication of total
proceeds of hec"s @.-
1%<9$ and 1+<%8.
,herefore, &e have to
scrutini7e, separately,
#I)an"Ks share of
ne*li*ence &hen the
syndicate achieved its
ultimate a*enda of
stealin* the proceeds of
these chec"s.
G
.
R
.
N
o
1.
1
&
1
)
1
3
$
/
-
1
&
1
)
'
9
itiban" hec" .o. @.-
%>8+$ &as deposited at
#I)an" throu*h its
=rmita )ranch. It &as
coursed throu*h the
ordinary ban"in*
transaction, sent to
entral learin* &ith the
indorsement at the bac"
4all prior indorsements
and6or lac" of
indorsements
*uaranteed,4 and &as
presented to itiban" for
payment. ,hereafter
#I)an", instead of
remittin* the proceeds to
the I;, prepared t&o of
its !ana*erKs chec"s and
enabled the syndicate to
encash the same.
Cn record, #I)an"
failed to verify the
authority of !r. ;ivera to
ne*otiate the chec"s. ,he
ne*lect of #I)an"
employees to verify
&hether his letter
re-uestin* for the
replacement of the
itiban" hec" .o. @.-
%>8+$ &as duly
authori7ed, sho&ed lac"
of care and prudence
re-uired in the
circumstances.
Furthermore, it &as
admitted that #I)an" is
authori7ed to collect the
payment of taxpayers in
behalf of the )I;. ?s an
a*ent of )I;, #I)an" is
duty bound to consult its
principal re*ardin* the
un&arranted instructions
*iven by the payor or its
a*ent. ?s aptly stated by
the trial court, to &it2
4xxx. @ince the
-uestioned
crossed chec"
&as deposited
&ith I)?? Dno&
#I)an"E, &hich
claimed to be a
depository6collec
tin* ban" of )I;,
it has the
responsibility to
ma"e sure that
the chec" in
-uestion is
deposited in
#ayeeKs account
only.
xxx
xxx xxx
?s a*ent of the
)I; 9the payee of
the chec":,
defendant I)??
should receive
instructions only
from its principal
)I; and not from
any other person
especially so
&hen that person
is not "no&n to
the defendant. It is
very imprudent on
the part of the
defendant I)??
to 3ust rely on the
alle*ed telephone
call of the one
Jodofredo ;ivera
and in his
si*nature
considerin* that
the plaintiff is not
a client of the
defendant I)??.4
It is a &ell-settled rule that
the relationship bet&een
the payee or holder of
commercial paper and the
ban" to &hich it is sent for
collection is, in the
absence of an ar*reement
to the contrary, that of
principal and a*ent.
22
?
ban" &hich receives such
paper for collection is the
a*ent of the payee or
holder.
2'
=ven considerin*
ar-uen#o, that the
diversion of the amount of
a chec" payable to the
collectin* ban" in behalf of
the desi*nated payee may
be allo&ed, still such
diversion must be properly
authori7ed by the payor.
Cther&ise stated, the
diversion can be 3ustified
only by proof of authority
from the dra&er, or that the
dra&er has clothed his
a*ent &ith apparent
authority to receive the
proceeds of such chec".
itiban" further ar*ues that
#I )an"Ks clearin* stamp
appearin* at the bac" of the
-uestioned chec"s statin*
that ?88 #;IC;
I.5C;@=!=.,@
?.56C; 8?M CF
I.5C;@=!=.,@
JB;?.,==5 should
render #I)an" liable
because it made it pass
throu*h the clearin* house
and therefore itiban" had
no other option but to pay
it. ,hus, itiban" had no
other option but to pay it.
,hus, itiban" assets that
the proximate cause of
FordKs in3ury is the *ross
ne*li*ence of #I)an".
@ince the -uestione
dcrossed chec" &as
deposited &ith #I)an",
&hich claimed to be a
depository6collectin* ban"
of the )I;, it had the
responsibility to ma"e sure
that the chec" in -uestions
is deposited in #ayeeKs
account only.
Indeed, the crossin* of the
chec" &ith the phrase
4#ayeeKs ?ccount Cnly,4 is
a &arnin* that the chec"
should be deposited only in
the account of the I;.
,hus, it is the duty of the
collectin* ban" #I)an"
to ascertain that the chec"
be deposited in payeeKs
account only. ,herefore, it
is the collectin* ban"
9#I)an": &hich is bound
to scrunini7e the chec" and
to "no& its depositors
before it could ma"e the
clearin* indorsement 4all
prior indorsements and6or
lac" of indorsement
*uaranteed4.
In Banco
#e ,ro
*avin-s
an#
&ort-a-e
Bank vs!
Hquitable
Bankin-
'orporatio
n,
25
&e
ruled2
4?nent
petitionerKs
liability on
said
instruments,
this court is
in full accord
&ith the
rulin* of the
#/Ks
)oard of
5irectors
that2
KIn presentin* the
chec"s for
clearin* and for
payment, the
defendant made
an express
*uarantee on the
validity of 4all
prior
endorsements.4
,hus, stamped at
the bac" of the
chec"s are the
defedantKs clear
&arranty2 ?88
#;IC;
=.5C;@=!=.
,@ ?.56C;
8?M CF
=.5C;@=!=.
,@
JB?;?.,==5
. Fithout such
&arranty,
plaintiff &ould
not have paid on
the chec"s.K
.o amount of
le*al 3ar*on can
reverse the clear
meanin* of
defendantKs
&arranty. ?s the
&arranty has
proven to be false
and inaccurate,
the defendant is
liable for any
dama*e arisin*
out of the falsity
of its
representation.4
2<
8astly, ban"in* business
re-uires that the one &ho
first cashes and ne*otiates
the chec" must ta"e some
percautions to learn &hether
or not it is *enuine. ?nd if
the one cashin* the chec"
throu*h indifference or othe
circumstance assists the
for*er in committin* the
fraud, he should not be
permitted to retain the
proceeds of the chec" from
the dra&ee &hose sole fault
&as that it did not discover
the for*ery or the defect in
the title of the person
ne*otiatin* the instrument
before payin* the chec". For
this reason, a ban" &hich
cashes a chec" dra&n upon
another ban", &ithout
re-uirin* proof as to the
identity of persons
presentin* it, or ma"in*
in-uiries &ith re*ard to
them, cannot hold the
proceeds a*ainst the dra&ee
&hen the proceeds of the
chec"s &ere after&ards
diverted to the hands of a
third party. In such cases the
dra&ee ban" has a ri*ht to
believe that the cashin* ban"
9or the collectin* ban": had,
by the usual proper
investi*ation, satisfied itself
of the authenticity of the
ne*otiation of the chec"s.
,hus, one &ho encashed a
chec" &hich had been for*ed
or diverted and in turn
received payment thereon
from the dra&ee, is *uilty of
ne*li*ence &hich
proximately contributed to
the success of the fraud
practiced on the dra&ee
ban". ,he latter may recover
from the holder the money
paid on the chec".
2+
/avin* established that
the collectin* ban"Ks
ne*li*ence is the
proximate cause of the
loss, &e conclude that
#I)an" is liable in the
amount correspondin* to
the proceeds of itiban"
hec" .o. @.-%>8+$.
G.R.
No.
1&(*
0)
,he trial court and the
ourt of ?ppeals found that
#I)an" had no official act
in the ordinary course of
business that &ould
attribute to it the case of the
embe77lement of itiban"
hec" .umbers @.-1%<9$
and 1+<%8, because
#I)an" did not actually
receive nor hold the t&o
Ford chec"s at all. ,he trial
court held, thus2
4.either is there
any proof that
defendant
#I)an"
contributed any
official or
conscious
participation in
the process of the
embe77lement.
,his ourt is
convinced that the
s&itchin*
operation
9involvin* the
chec"s &hile in
transit for
4clearin*4: &ere
the clandestine or
hidden actuations
performed by the
members of the
syndicate in their
o&n personl,
covert and private
capacity and done
&ithout the
"no&led*e of the
defendant
#I)an"Q4
2$
In this case, there &as no
evidence presented
confirmin* the conscious
particiapation of #I)an"
in the embe77lement. ?s a
*eneral rule, ho&ever, a
ban"in* corporation is
liable for the &ron*ful or
tortuous acts and
declarations of its officers
or a*ents &ithin the
course and scope of their
employment.
28
? ban"
&ill be held liable for the
ne*li*ence of its officers
or a*ents &hen actin*
&ithin the course and
scope of their
employment. It may be
liable for the tortuous acts
of its officers even as
re*ards that species of tort
of &hich malice is an
essential element. In this
case, &e find a situation
&here the #I)an"
appears also to be the
victim of the scheme
hatched by a syndicate in
&hich its o&n
mana*ement employees
had particiapted.
,he pro-mana*er of @an
?ndres )ranch of
#I)an", ;emberto
astro, received itiban"
hec" .umbers @.-1%<9$
and 1+<%8. /e passed the
chec"s to a co-conspirator,
an ?ssistant !ana*er of
#I)an"Ks !eralco
)ranch, &ho helped astro
open a hec"in* account
of a fictitious person
named 4;eynaldo ;eyes.4
astro deposited a
&orthless )an" of ?merica
hec" in exactly the same
amount of Ford chec"s.
,he syndicate tampered
&ith the chec"s and
succeeded in replacin* the
&orthless chec"s and the
eventual encashment of
itiban" hec" .os. @.
1%<9$ and 1+<%8. ,he
#I)an" #tro-mana*er,
astro, and his co-
conspirator ?ssistant
!ana*er apparently
performed their activities
usin* facilities in their
official capacity or
authority but for their
personal and private *ain
or benefit.
? ban" holdin* out its
officers and a*ents as
&orthy of confidence &ill
not be permitted to profit
by the frauds these officers
or a*ents &ere enabled to
perpetrate in the apparent
course of their
employment( nor &ill t be
permitted to shir" its
responsibility for such
frauds, even thou*h no
benefit may accrue to the
ban" therefrom. For the
*eneral rule is that a ban" is
liable for the fraudulent
acts or representations of an
officer or a*ent actin*
&ithin the course and
apparent scope of his
employment or authority.
29

?nd if an officer or
employee of a ban", in his
official capacity, receives
money to satisfy an
evidence of indebetedness
lod*ed &ith his ban" for
collection, the ban" is liable
for his misappropriation of
such sum.
'%
!oreover, as correctly
pointed out by Ford, @ection
<
'1
of entral )an" ircular
.o. <8%, @eries of 19$$
provides that any theft
affectin* items in transit for
clearin*, shall be for the
account of sendin* ban",
&hich in this case is
#I)an".
)ut in this case,
responsibility for
ne*li*ence does
not lie on
#I)an"Ks
shoulders alone.
,he evidence on record
sho&s that itiban" as
dra&ee ban" &as li"e&ise
ne*li*ent in the
performance of its duties.
itiban" failed to establish
that its payment of FordKs
chec3s &ere made in due
course and le*ally in order.
In its defense, itiban"
claims the *enuineness
and due execution of said
chec"s, considerin* that
itiban" 91: has no
"no&led*e of any
informity in the issuance
of the chec"s in -uestion
92: coupled by the fact that
said chec"s &ere
sufficiently funded and 9':
the endorsement of the
#ayee or lac" thereof &as
*uaranteed by #I )an"
9formerly I)??:, thus, it
has the obli*ation to honor
and pay the same.
For its part, Ford
contends that itiban" as
the dra&ee ban" o&es to
Ford an absolute and
contractual duty to pay
the proceeds of the
sub3ect chec" only to the
payee thereof, the I;.
itin* @ection +2
'2
of
the .e*otiable
Instruments 8a&, Ford
ar*ues that by acceptin*
the instrument, the
acceptro &hich is
itiban" en*a*es that it
&ill pay accordin* to the
tenor of its acceptance,
and that it &ill pay only
to the payee, 9the I;:,
considerin* the fact that
here the chec" &as
crossed &ith annotation
4#ayees ?ccount Cnly.4
?s ruled by the ourt of
?ppeals, itiban" must
li"e&ise ans&er for the
dama*es incurred by Ford
on itiban" hec"s
.umbers @. 1%<9$ and
1+<%8, because of the
contractual relationship
existin* bet&een the t&o.
itiban", as the dra&ee
ban" breached its
contractual obli*ation &ith
Ford and such de*ree of
culpability contributed to
the dama*e caused to the
latter. Cn this score, &e
a*ree &ith the respondent
courtKs rulin*.
itiban" should have
scrutini7ed itiban" hec"
.umbers @. 1%<9$ and
1+<%8 before payin* the
amount of the proceeds
thereof to the collectin*
ban" of the )I;. Cne thin*
is clear from the record2 the
clearin* stamps at the bac"
of itiban" hec" .os. @.
1%<9$ and 1+<%8 do not
bear any initials. itiban"
failed to notice and verify
the absence of the clearin*
stamps. /ad this been duly
examined, the s&itchin* of
the &orthless chec"s to
itiban" hec" .os. 1%<9$
and 1+<%8 &ould have
been discovered in time.
For this reason, itiban"
had indeed failed to
perform &hat &as
incumbent upon it, &hich is
to ensure that the amount of
the chec"s should be paid
only to its desi*nated
payee. ,he fact that the
dra&ee ban" did not
discover the irre*ularity
seasonably, in our vie&,
consitutes ne*li*ence in
carryin* out the ban"Ks duty
to its depositors. ,he point
is that as a business
affected &ith public interest
and because of the nature
of its functions, the ban" is
under obli*ation to treat the
accounts of its depositors
&ith meticulous care,
al&ays havin* in mind the
fiduciary nature of their
relationship.
''
,hus, invo"in* the
doctrine of comparative
ne*li*ence, &e are of the
vie& that both #I)an"
and itiban" failed in
their respective
obli*ations and both &ere
ne*li*ent in the selection
and supervision of their
employees resultin* in
the encashment of
itiban" hec" .os. @.
1%<9$ ?.5 1+<%8. ,hus,
&e are constrained to
hold them e-ually liable
for the loss of the
proceeds of said chec"s
issued by Ford in favor of
the I;.
,ime and a*ain, &e have
stressed that ban"in*
business is so impressed
&ith public interest &here
the trust and confidence of
the public in *eneral is of
paramount umportance such
that the appropriate standard
of dili*ence must be very
hi*h, if not the hi*hest,
de*ree of dili*ence.
'>
?
ban"Ks liability as obli*or is
not merely vicarious but
primary, &herein the defense
of exercise of due dili*ence
in the selection and
supervision of its employees
is of no moment.
'<
)an"s handle daily
transactions involvin*
millions of pesos.
'+
)y the
very nature of their &or"
the de*ree of responsibility,
care and trust&orthiness
expected of their
employees and officials is
far *reater than those of
ordinary cler"s and
employees.
'$
)an"s are
expected to exercise the
hi*hest de*ree of dili*ence
in the selection and
supervision of their
employees.
'8
Cn the issue of
prescription, #I)an"
claims that the action of
Ford had prescribed
because of its inability to
see" 3udicial relief
seasonably, considerin*
that the alle*ed ne*li*ent
act too" place prior to
5ecember 19, 19$$ but
the relief &as sou*ht only
in 198', or seven years
thereafter.
,he statute of
limitations be*ins to
run &hen the ban"
*ives the depositor
notice of the payment,
&hich is ordinarily
&hen the chec" is
returned to the alle*ed
dra&er as a voucher
&ith a statement of his
account,
'9
and an
action upon a chec" is
ordinarily *overned by
the statutory period
applicable to
instruments in
&ritin*.
>%
Cur la&s on the matter
provide that the action
upon a &ritten contract
must be brou*ht &ithin ten
year from the time the ri*ht
of action accrues.
>1
hence,
the rec"onin* time for the
prescriptive period be*ins
&hen the instrument &as
issued and the
correspondin* chec" &as
returned by the ban" to its
depositor 9normally a
month thereafter:.
?pplyin* the same rule, the
cause of action for the
recovery of the proceeds of
itiban" hec" .o. @.
%>8+$ &ould normally be a
month after 5ecember 19,
19$$, &hen itiban" paid
the face value of the chec"
in the amount of
#>,$>+,11>.>1. @ince the
ori*inal complaint for the
cause of action &as filed
on January 2%, 198>, barely
six years had lapsed. ,hus,
&e conclude that FordKs
cause of action to recover
the amount of itiban"
hec" .o. @. %>8+$ &as
seasonably filed &ithin the
period provided by la&.
Finally, &e also find thet Ford is not completely blameless in its failure to
detect the fraud. Failure on the part of the depositor to examine its
passboo", statements of account, and cancelled chec"s and to *ive notice
&ithin a reasonable time 9or as re-uired by statute: of any discrepancy
&hich it may in the exercise of due care and dili*ence find therein, serves
to miti*ate the ban"sK liability by reducin* the a&ard of interest from
t&elve percent 912N: to six percent 9+N: per annum. ?s provided in
?rticle 11$2 of the ivil ode of the #hilippines, respondibility arisin*
from ne*li*ence in the performance of every "ind of obli*ation is also
demandable, but such liability may be re*ulated by the courts, accordin* to
the circumstances. In -uasi-delicts, the contributory ne*li*ence of the
plaintiff shall reduce the dama*es that he may recover.
>2
@HEREFORE, the assailed 5ecision and ;esolution of the ourt of
?ppeals in ?-J.;. 1 .o. 2<%1$ areAFFIRMED. #I)an", "no&
formerly as Insular )an" of ?sia and ?merica, id declared solely
responsible for the loss of the proceeds of itiban" hec" .o @. %>8+$
in the amount #>,$>+,11>.>1, &hich shall be paid to*ether &ith six
percent 9+N: interest thereon to Ford #hilippines Inc. from the date &hen
the ori*inal complaint &as filed until said amount is fully paid.
/o&ever, the 5ecision and ;esolution of the ourt of ?ppeals in ?-
J.;. .o. 28>'% are MODIFIED as follo&s2 #I)an" and itiban" are
ad3ud*ed liable for and must share the loss, 9concernin* the proceeds of
itiban" hec" .umbers @. 1%<9$ and 1+<%8 totallin* #12,1+',298.1%:
on a fifty-fifty ratio, and each ban" is ORDEREDto pay Ford #hilippines
Inc. #+,%81,+>9.%<, &ith six percent 9+N: interest thereon, from the date
the complaint &as filed until full payment of said amount.1FAphi1!nGt
osts a*ainst #hilippine ommercial International )an" and itiban" ..?.
SO ORDERED.
Bellosillo, &en#o0a, Buena, $e >eon, )r!, )), concur.