LAND BANK OF THE PHILIPPINES v. NARCISO L.

KHO
G.R. No. 205839, July 7, 2016
BRION, J.

Facts:
Narciso L. Kho (Kho) purchased a managers check from Land Bank of the
Philippines (LBP) worth Php 25,000,000.00 paid using the money from his savings
account in the same bank. The check was purchased in order to negotiate a deal
with Red Orange. LBP gave Kho the check and a photocopy of the check. The
photocopy was given to Red Orange. The deal between Kho and Red Orange did not
push through. Rudy Medel (representing Red Orange) went to LBP to negotiate the
check, LBP cleared the check and notified Kho of the transaction. Kho was surprised
as the original check was still with him. It turns out that the check negotiated by
Medel with LBP is spurious. Kho tried to recover the Php 25,000,000.00 from LBP,
but the latter claims that the former was negligent for giving Medel the photocopy
of the check which was used to make the spurious check and thus they cannot be
held liable for the lost amount.

Issue:
Whether or not LBP should pay for the Php 25,000,000.00

Held:
The genuine check No. 07410 remained in Khos possession the entire time
and Land Bank admits that the check it cleared was a fake. When Land Banks CCD
forwarded the deposited check to its Araneta branch for inspection, its officers had
every opportunity to recognize the forgery of their signatures or the falsity of the
check. Whether by error or neglect, the bank failed to do so, which led to the
withdrawal and eventual loss of the Php 25,000,000.00. This is the proximate cause
of the loss. Land Bank breached its duty of diligence and assumed the risk of
incurring a loss on account of a forged or counterfeit check. Hence, it should suffer
the resulting damage.

We cannot agree with the Land Bank and the RTCs positions that Kho is
precluded from invoking the forgery. A drawer or a depositor of the bank is
precluded from asserting the forgery if the drawee bank can prove his failure to
exercise ordinary care and if this negligence substantially contributed to the forgery
or the perpetration of the fraud.

The business of banking is imbued with public interest; it is an industry where

the general publics trust and confidence in the system is of paramount importance.
Consequently, banks are expected to exert the highest degree of, if not the utmost,
diligence. They are obligated to treat their depositors accounts with meticulous
care, always keeping in mind the fiduciary nature of their relationship.