Negotiable Instruments - Atty.
Ampil
AY 2017 - 2018 - Term 1
01. MORAN v CA ​[G.R. No. 105836 March 7, 1994]
REGALADO, ​J:
FACTS:
- Petitioner Spouses George & Librada Moran are the owners of the Wack-Wack
Petron Gasoline Station located at Shaw Blvd. They maintain three joint accounts (1
current account & 2 savings account) with ​Citytrust Banking Corporation.
- As Petitioner Spouses were valued clients of Citytrust, a special privilege was
given to them by allowing them to maintain a zero balance in their ​current account.
- A ​Pre-authorized transfer (PAT) ​was arranged between the Spouses and
Citytrust wherein it was agreed upon that Citytrust should automatically transfer the
funds from their ​Savings Account ​to their ​Current Account ​at any time whenever the
funds in their current account were insufficient to meet withdrawals from said current
account.
- They regularly purchased bulk fuel and other related products from Petrophil
Corporation on cash on delivery (COD) basis. Orders for bulk fuel and other related
products were made by telephone & payments were effected by personal checks
upon delivery.
- On Dec 12, 1983, petitioners drew a check for ​PHP50,576 ​payable to Petrophil
Corporation and the next day another check in the amount of ​PHP56,090 ​also in favor
of Petrophil Corp. The total sum is ​PHP106,660.00​.
- On Dec 14, 1983 Petrophil then deposited the checks to its account in PNB
(Pandacan Branch), the collecting bank.
- PNB then presented them for clearing with the Philippine Clearing House
Corporation on the same day and it was discovered that that the ​Current Account ​had
zero balance while the ​Savings Account ​covered by the ​PAT ​had an available
balance of ​PHP26,104.30 & PHP 43,236.89. ​Since the amounts were insufficient to
cover the checks, they were ​dishonored.
- The following day (Dec 15, 1983), Petitioner George Moran went to the bank
and deposited to their Savings Account the total amount of ​PHP35,100.00. ​He also
transferred the amount of ​PHP40,000.00 & PHP 66,666.00 ​from their savings account
to their current account.
- Soon thereafter, George was informed by his wife that Petrophil refused to
deliver their orders on a credit basis because of the two dishonored checks which
caused the petitioners to temporarily stop business operations that resulted to loss of
earnings. Petrophil also cancelled their credit accommodation.
- George was then informed by the Bank that the dishonor of the checks were
committed due to operational error.
- As a way of curing the injury, Diaz (the branch manager) went to the Moran
residence to get their signatures on an application for a manager’s check so that the
dishonored checks could be redeemed. Diaz then went to Petrophil to personally
present the checks in payment for the two dishonored checks.
- 6 months later, Petitioners were asking for damages in the amount of
PHP1,000,000.00 from the said bank for the dishonor of the checks caused them
besmirches business and personal reputation, shame and anxiety. Bank did not act
on their demands.
- RTC dismissed the complaint. CA affirmed RTC’s dismissal.
- Hence this complaint.
Garcia, Pernes, Tagacay, Villasanta
ISSUE: ​WON the Citytrust (Bank) should be held liable upon the dishonor of the
checks due to insufficiency of funds?
HELD: ​NO. It is clear from the foregoing that the available balance for the savings
account on December 14, 1983 was only for PHP26,104.30, an amount obviously
insufficient to cover the two issued checks. It was only on December 15, 1983 at
around ten o'clock in the morning that the necessary funds were deposited, which
unfortunately was too late to prevent the dishonor of the checks. Petitioner had no
reason to complain, for they alone were at fault. A drawer must remember his
responsibilities every time he issues a check. He must personally keep track of his
available balance in the bank and not rely on the bank to notify him of the necessity to
fund certain checks he previously issued. A check, as distinguished from an ordinary
bill of exchange, is supposed to be drawn against a previous deposit of funds for it is
ordinarily intended for immediate payment. Moreover, between the time of the
issuance of said checks on December 12 and 13 and the time of their presentment on
December 14, petitioners had, at the very least, twenty- four hours to replenish their
balance in the bank. Therefore, ​the bank had all the right to dishonor the checks
because there were no sufficient funds to speak of in the first place. If the
demand is by check, a drawer must have to his credit enough to cover the
demand. If his credit with the bank is less than the amount on the face of the
check, the bank must lawfully refuse payment.
NOTES:
- A check is a bill of exchange drawn on a bank payable on demand. Thus, a
check is a written order addressed to a bank or persons carrying on the business of
banking, by a party having money in their hands, requesting them to pay on
presentment, to a person named therein or to bearer or order, a named sum of
money.
- By virtue of the contract of deposit between the banker and its depositor, the
banker agrees to pay checks drawn by the depositor provided that said depositor has
money in the hands of the bank.
- Hence, where the bank possesses funds of a depositor, it is bound to honor his
checks to the extent of the amount of his deposits. The failure of a bank to pay the
check of a merchant or a trader, when the deposit is sufficient, entitles the drawer to
substantial damages without any proof of actual damages.
- Conversely, a bank is not liable for its refusal to pay a check on account of
insufficient funds, notwithstanding the fact that a deposit may be made later in the
day. Before a bank depositor may maintain a suit to recover a specific amount from
his bank, he must first show that he had on deposit sufficient funds to meet his
demand.
FALLO: ​WHEREFORE, finding no reversible error in the judgment appealed from, the
same is hereby AFFIRMED, with costs against petitioners.
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
02. PNB v. CFI JUDGE QUIMPO and FRANCISCO S. GOZON II
Facts:
1. Gozon, went to PNB, accompanied by his friend Ernesto Santos, whom he left in
the car while he transacted business in the bank.
● When Santos saw that Gozon left his checkbook, he took a check, filled it up for
P5,000, forged the signature of Gozon, and encashed the check in PNB the same
day.
● Gozon asked that the said amount of P5,000 should be returned to his account
as his signature on the check was forged but the bank refused.
2. Ernesto Santos was apprehended and found guilty.
● Hence, Gozon filed the complaint for recovery of the amount of P5,000 against
PNB.
Issue: Is it Gozon’s action that was the proximate cause of the loss, thereby
precluding him from setting up forgery? - NO.
Held: PETITION DISMISSED.
1. A bank is bound to know the signatures of its customers; and if it pays a forged
check, it must be considered as making the payment out of its own funds, and cannot
ordinarily change the amount so paid to the account of the depositor whose name
was forged.
● If the paper comes to the drawee in the regular course of business, and he,
having the opportunity of ascertaining its character, pronounces it to be valid and
pays it, it is not only a question of payment under mistake, but payment in neglect of
duty which the commercial law places upon him, and the result of his negligence must
rest upon him.
● PNB, however, interposed the defense that it exercised diligence in accordance
with the accepted norms of banking practice when it accepted and paid the check.
2. A comparison of the signature on the forged check with Gozon’s exemplar
signatures with PNB would immediately show the negligence of its employees.
● The sample signatures of Gozon show marked differences with graceful lines
which is completely different from those of the signature on the forged check.
● The prime duty of a bank is to ascertain the genuineness of the signature of the
drawer or the depositor on the check being encashed.
● PNB was negligent in encashing said forged check without carefully examining
the signature which shows marked variation from the genuine signature of Gozon.
3. The act of Gozon in leaving his checkbook in the car while he went out for a short
while can not be considered negligence sufficient to excuse PNB from its own
negligence.
● Ernesto was a long time classmate and friend remained in the same.
● Gozon could not have been expected to know that Ernesto would remove a
check from his checkbook because had trust in his classmate and friend. He had no
reason to suspect that the latter would breach that trust.
03. HSBC v People’s Bank
· PLDT drew a check on HSBC with the latter being the payee as well. The check
was sent by mail to the payee. However, the check fell into the hands of
Garcia, Pernes, Tagacay, Villasanta
Changco who erased the payees name on the instrument and replaced his own
name therein as payee.
· Changco opened an account with the People’s bank and deposited the check to
PB.
o PB stamped on the check “all prior indorsements guaranteed”.
· The checks were cleared by HSBC, and the amount was deposited to Chanco’s
account. Upon discovery of the forgery, HSBC demanded from the collecting
bank PB for reimbursement.
o PB didn’t comply
· HSBC filed an action for reimbursement, arguing that the checks were altered
and that the respondent is liable on account of its stamp “all prior indorsements
guaranteed”.
o Complaint was dismissed
§ Reason: 24-hr clearing period. It took 27 days before
HSBC notified PB.
Issue: WON HSBC can recover from PB
Held: No , HSBC can’t recover. The 24 hour regulation of Central Bank requires that
all cleared items must be returned not later than 3PM of the following business day.
Since it allowed 27 day to elapse, its failure to notify PB as to such alteration negates
whatever right it may have had against the respondent.
24-hour rule is not only applicable to forged checks but also to altered checks.
All items cleared at 11am shall be returned not later than 2pm on the same day and
all items cleared at 3pm shall be returned not later than 8:30am of the following
business day, except for items cleared on Saturday which may be returned not later
than 8:30am of the following day
04. Metropolitan Bank v. First National City Bank, G.R. No. L-55079
November 19, 1982
Facts:
· August 25 - A check for P50,000 payable to CASH was drawn by Joaquin
Cunanan & Company on respondent First National City Bank (FNCB) deposited with
petitioner Metropolitan Bank and Trust Company (Metro Bank) by a certain Salvador
Sales. (Drawee bank: FNCB, Drawer: Joaquin Cunanan & Company through
Salvador Sales, Collecting Bank: Metro Bank)
· Metro Bank immediately sent the cash check to the Clearing House of the
Central Bank. Check cleared on same day. Respondent paid petitioner Metro Bank
through clearing the amount of P50,000.00, and Sales was credited with the said
amount in his deposit with Metro Bank. August 26 – Sales made first withdrawal
(P480). August 28 – Sales made second withdrawal (P32,100). August 31 – Sales
withdrew (P17, 920) and closed account with Metro Bank.
· Sept 3 - 9 days later FNCB cancelled check of drawer Joaquin Cunanan &
Company with monthly statement of company’s account with FNCB. Said company
states that check has been altered. Actual amount of check was P50 but it was
altered to P50,000 and over the name of payee Manila Polo Club was superimposed
the word CASH.
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· Respondent FNCB notified petitioner Metro Bank of alteration by phone and
on Sept. 10, wrote a letter asking for reimbursement of the check. Petitioner refused.
Thus, respondent went to court.
· CFI of Manila rendered decision ordering petitioner Metro Bank to pay
respondent FNCB. CA affirmed. Hence, this petition.
Issue:​ Which bank is liable for payment of an altered check – Drawee Bank pursuant
to 24 hour regulation
Held:
The facts of this case fall within Section 4 of Central Bank Circular No. 9 (February
17, 1949) as amended by Circular No. 138 (January 30, 1962), and Circular No. 169
(March 30, 1964)*.
Under the procedure prescribed, the drawee bank (FNCB) receiving the check
for clearing from the Central Bank Clearing House must return the check to the
collecting bank (Metro Bank) within the 24-hour period if the check is defective
for any reason. Metro Bank invoked this regulation as a defense.
In this case, the check was not returned to Metro Bank in accordance with the
24-hour clearing house period, but was cleared by FNCB. Since both banks are part
of our banking system, they are bound by the Circular. Failure of FNCB, therefore, to
call the attention of Metro Bank to the alteration of the check in question until after the
lapse of nine days, negates whatever right it might have had against Metro Bank in
the light of the said Central Bank Circular. Its remedy lies not against Metro Bank, but
against the party responsible for the changing the name of the payee and the amount
on the face of the check.
05. REPUBLIC BANK VS CA, ​[G.R. No. 42725 April 22, 1991]
GRIÑO-AQUINO, ​J:
FACTS:
- San Miguel Corporation (SMC) drew a dividend check for PHP240.00, Philippine
Currency, on its account in the respondent ​First National City Bank ​(FNCB) in favor of
J. Roberto C. Delgado​, a stockholder.
- After the delivery of the check to Delgado, the amount on its face was
fraudulently & without authority of the drawer SMC was altered by increasing it from
PHP240 to PHP9,240.
- The check was indorsed and deposited on March 14, 1966 by Delgado in his
account with Republic Bank (Republic).
- Republic accepted the check for deposit without ascertaining its genuineness
and regularity.
- Republic then endorsed the check to FNCB by stamping on the back of the
check “all prior and/or lack of indorsement guaranteed” and presented it to FNCB for
payment through Central Bank Clearing House.
- Relying on the guaranty & endorsement of Republic appearing on the back of
the check, FNCB paid PHP9,240.00 to Republic through the Central Bank Clearing
House on March 15, 1966.
Garcia, Pernes, Tagacay, Villasanta
- On April 19,1966, SMC notified FNBC of the material alteration in the amount of
the check.
- On May 19,1966, FNBC informed Republic in writing of the alteration and the
forgery of the endorsement of Delgado, by then Delgado had already withdrawn his
account from Republic.
- FNCB then demanded that Republic refund the amount on the basis of the
latter’s endorsement and guaranty.
- Republic refused, claiming there was delay in giving it notice of the alteration
and that it was not guilty of negligence. That it was the drawer’s (SMC’s) fault in
drawing the check in such a way as to permit the insertion of numerals increasing the
amount.
- RTC rendered judgment ordering Republic to pay PHP9,240 with 6% legal
interest per annum to FNCB the amount drawn on the check.
- CA affirmed the decision.
ISSUE: ​WON Republic as collecting bank is protected by the 24 hour clearing house
rule from liability to refund the amount paid by FNBC, as drawee of the SMC dividend
check?
HELD: ​YES. Republic Bank is protected by the 24 hour clearing house rule.
The 24-hour clearing house rule embodied in Section 4(c) of Central Bank Circular
No. 9, as amended, provides:
"Items which should be returned for any reason whatsoever shall be
returned directly to the bank, institution or entity from which the item was
received. For this purpose, the Receipt for Returned Checks (Cash Form
No. 9) should be used. The original and duplicate copies of said Receipt
shall be given to the Bank, institution or entity which returned the items and
the triplicate copy should be retained by the bank, institution or entity
whose demand is being returned. At the following clearing, the original of
the Receipt for Returned Checks shall be presented through the Clearing
Office as a demand against the bank, institution or entity whose item has
been returned. Nothing in this section shall prevent the returned items from
being settled by direct reimbursement to the bank, institution or entity
returning the items. All items cleared at 11:00 o'clock A.M. shall be
returned not later than 2:00 o'clock P.M. on the same day and all items
cleared at 3:00 o'clock P.M. shall be returned not later than 8:30 A.M. of
the following business day except for items cleared on Saturday which may
be returned not later than 8:30 A.M. of the following day."
The 24-hour clearing house rule is a valid rule applicable to commercial banks. It is
true that when an endorsement is forged, the collecting bank or last endorser, as a
general rule, bears the loss (Banco de Oro Savings & Mortgage Bank vs. Equitable
Banking Corp., 167 SCRA 188​). But the unqualified endorsement of the collecting
bank on the check should be read together with the 24-hour regulation on clearing
house operation (Metropolitan Bank & Trust Co. vs. First National City Bank, supra).
Thus, ​when the drawee bank fails to return a forged or altered check to the
collecting bank within the 24-hour clearing period, the collecting bank is
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AY 2017 - 2018 - Term 1
absolved from liability. The following decisions of this Court are also relevant and
persuasive:
In ​Metropolitan Bank & Trust Co vs First National City Bank:
"The validity of the 24-hour clearing house regulation has been
upheld by this Court in Republic vs. Equitable Banking
Corporation, 10 SCRA 8 (1964). As held therein, since both
parties are part of our banking system, and both are subject to
the regulations of the Central Bank, they are bound by the
24-hour clearing house rule of the Central Bank.
"In this case, the check was not returned to Metro Bank in
accordance with the 24- hour clearing house period, but was
cleared by FNCB. Failure of FNCB, therefore, to call the
attention of Metro Bank to the alteration of the check in
question until after the lapse of nine days, negates whatever
right it might have had against Metro Bank in the light of the
said Central Bank Circular. Its remedy lies not against Metro
Bank, but against the party responsible for changing the name
of the payee (Hongkong & Shanghai Banking Corp. vs.
People's Bank & Trust Co., 35 SCRA 140) and the amount on
the face of the check."
Every bank that issues checks for the use of its customers should know whether or
not the drawer's signature thereon is genuine, whether there are sufficient funds in
the drawer's account to cover checks issued, and it should be able to detect
alterations, erasures, superimpositions or intercalations thereon, for these
instruments are prepared, printed and issued by itself, it has control of the drawer's
account, and it is supposed to be familiar with the drawer's signature.
FALLO: ​WHEREFORE, the petition for review is granted. The decision of the Court of
Appeals is hereby reversed and set aside, and another is entered absolving the
petitioner Republic Bank from liability to refund to the First National City Bank the sum
of P9,240, which the latter paid on the check in question. No costs.
06. BPI v. CA, CHINA BANKING CORP., and PHILIPPINE CLEARING HOUSE
CORPORATION
Facts: 1. On October 9, 1981 (Fri), a phone call to BPI's Money Market Department
by a woman who identified herself as Eligia Fernando who had a money market
placement (evidenced by a PN with a maturity date of November 11, 1981 and a
maturity value of P2,462,243.19).
● The caller wanted to preterminate the placement, but Reginaldo Eustaquio,
Dealer Trainee in Dept., who received the call and was alone, told her 'trading time'
was over.
● The PN that the caller wanted to preterminate was a roll-over of an earlier
50-day money market placement that had matured on September 24, 1981.
2. In the morning of October 12, 1981 (next Mon), the caller followed up with
Eustaquio, by phone again, on the pretermination of the placement.
Garcia, Pernes, Tagacay, Villasanta
● Eustaquio 'made certain' that the caller was the real Eligia by 'verifying' that the
details the caller gave about the placement tallied with BPI’s details of her. But
nobody in BPI, called up Eligia at her Philamlife office to verify the request for
pretermination.
● The caller still insisted on the pretermination despite knowing that it will yield
less, and asked that 2 checks be issued for the proceeds, one for P1.8M and the
second for the balance, and that the checks be delivered to her office at Philamlife.
● The checks went to the dispatcher for delivery.
3. Later in the same morning, the caller changed the delivery instructions; she would
herself pick up the checks or send her niece, Rosemarie Fernando, to pick them up.
● Eustaquio was assured that the niece would pick it up so he hurriedly went to
the dispatcher, Bernardo Laderas, to tell him of the new delivery instructions;
● in fact, he changed the delivery instruction on the purchase order slip, writing
thereon 'Rosemarie Fernando release only with authority to pick up.'
● The delivery reciept showed Rosemarie got the two checks from the dispatcher.
4. But as it turned out, the same impersonated both Eligia and Rosemarie.
● The dispatcher also failed to get the PN evidencing the placement.
5. In the afternoon of October 13, 1981, a woman who represented herself to be
Eligia applied at CBC's Head Office for the opening of a current account, which was
opened.
6. On October 14, 1981, the woman holding herself out as Eligia deposited the 2
checks in the Current Account. Her endorsement on the two checks was found to
conform with the depositor's specimen signature. CBC's guaranty of prior
endorsements and/or lack of endorsement was then stamped on the 2 checks. CBC
sent to it to clearing and BPI cleared on the same day.
7. On October 16, 1981, withdrawals began on the Current Account through 5
checks. The last withdrawal left the Current Account with a balance of only P571.61.
8. On November 11, 1981, the real Eligia went to BPI for the roll-over of her
placement. She disclaimed having preterminated her placement by executing an
affidavit stating that while she was the payee of the 2 checks, she never received nor
endorsed them and that her purported signature on the back of the checks was not
hers but forged.
● With her surrender of the original of PN evidencing the placement which
matured that day, BPI issued her a new PN to evidence a roll-over of the placement.
9. On November 12, 1981, BPI returned the 2 checks to CBC for the reason 'Payee's
endorsement forged'. A ping-pong started when CBC, in turn, returned the checks for
reason 'Beyond Clearing Time', and the stoppage of this ping-pong, as we mentioned
at the outset, prompted the filing of this case.
Issues:
1. When a bank (CBC) presents checks for clearing and payment, what is the extent
of the bank's warranty of the validity of all prior endorsements stamped at the back of
the checks?
2. In the event that the payee's signature is forged, may the drawer/drawee bank
(BPI) claim reimbursement from the collecting bank (CBC) which earlier paid the
proceeds of the checks after the same checks were cleared by BPI through the
PCHC?
Held:
Negotiable Instruments - Atty. Ampil
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1. BPI first returned to CBC the 2 checks on the ground that "Payee's endorsement
(was) forged." At that time the clearing regulation then in force under PCHC's
Clearing House Rules and Regulations.
● It allows a return of a check "bearing forged endorsement when such
endorsement is necessary for negotiation" even beyond the next regular clearing
although not beyond the prescriptive period "for the filing of a legal action by the
returning bank."
○ BPI's theory that the present clearing guarantee requirement imposed on the
representing or collecting bank under the PCHC rules and regulations is independent
of the Negotiable Instruments Law is not in order.
2. In connection with Sec. 23, here, the payee's names in the 2 checks were forged.
Following the general rule, the checks are "wholly inoperative" and of no effect, which
is not applicable in this case.
● BPI as drawee bank and CBC as representing or collecting bank were both
negligent resulting in the encashment of the forged checks.
● The banks were negligent in the selection and supervision of their employees.
The issue as to whose negligence is graver is relevant. Now, whose negligence was
the proximate cause of the payment of the forged checks by an impostor?
○ BPI's reliance on the doctrine of last clear chance is not well-taken as CBC had
no prior notice of the fraud perpetrated by BPI's employees on the pretermination of
Eligia's money market placement. Fernando is not a depositor of CBC. Hence, a
comparison of the signature of Eligia with that of the impostor, which CBC did, could
not have resulted in the discovery of the fraud.
○ BPI's contention that CBC (doctrine of proximate cause) alone should bear the
loss must fail. The gap of 1 day between the issuance and delivery of the checks
bearing the impostor's name as payee and the impostor's negotiating the said forged
checks by opening an account and depositing the same with CBC is not controlling. It
is not unnatural that after taking the risk of impersonating Eligia with the connivance
of BPI's employees, the impostor would complete her deception by encashing the
forged checks. Thus, the proximate cause of the payment of the forged checks by an
impostor was due to the negligence of BPI.
FINALLY:
● While it is true that BPI's negligence may have been the proximate cause of the
loss, CBC's negligence contributed equally to the success of the impostor in
encashing the proceeds of the forged checks. (Article 2179 mitigates loss of CBC).
● BPI is liable for 60% while CBC shall share 40% of the loss P2,413,215.16 and
the arbitration costs of P7,250. The PCHC is directed to effect the corresponding
entries to the banks' clearing accounts.
07. Manila Lighter Transportation v CA
Facts:
· 49 checks were issued by customers of the Manila Lighter in payment of
brokerage services and were all delivered, without petitioner's knowledge, to its
collector, Augusto Perez.
o 26 – Payable to Manila Lighter or order
o 23 – Payable to Manila Lighter or bearer
Garcia, Pernes, Tagacay, Villasanta
· The checks as thus endorsed were negotiated by Wilfredo Lagamon,
accountant of Manila Lighter and relative of Luis Gaskell with Cao Pek
and Co., an electronic store, whose treasurer is Ko Lit. Most of the
checks, with a total amount of P90,500.24, were deposited by Ko Lit in
his account with China Banking Corp. Three checks with a total amount
of P1,115.05 were deposited in the account of Cao Pek & Co. while one
check for P2,735.19 was deposited in the accounts of Lu Siu Po,
manager of Cao Pek & Co.
· Proceeds were later withdrawn
· China Bank denied liability for the petitioner's loss which was due to its own
negligence. It alleged that petitioner is estopped from denying its collector's
authority to receive the checks from the drawers/customers; that petitioner failed
to give defendant Bank and the drawee Banks notice of the alleged forged or
unauthorized indorsements within a reasonable time; and that its loss was
occasioned by its own failure to observe the proper degree of diligence in the
supervision of its employees, particularly its collector, Augusta Perez
Issue: WON China bank should bear the loss
Held: No
Since the petitioner was not a client of China Bank, it had no way of ascertaining the
authenticity of its indorsements on the checks which were deposited in the accounts
of the third-party defendants.
China Bank is not negligent because in accordance with banking practice, it caused
the checks to pass through the clearing house before it allowed their proceeds to be
withdrawn by the depositors
08 Tan vs. CA, G.R. No. 108555, December 20, 1994
Facts:
Petitioner Ramon Tan, a trader-businessman and community leader in Puerto
Princesa, had maintained since 1976 account with respondent Rizal Commercial
Banking Corporation (RCBC) Binondo branch.
Before going to Manila, petitioner secured a cashier’s check to avoid carrying cash
while enroute to Manila, he secured a Cashier's Check No. L 406000126 from the
Philippine Commercial Industrial Bank (PCIB), Puerto Princesa branch, in the amount
of Thirty Thousand (P30,000.00) Pesos, payable to his order. He deposited it to his
account in RCBC Binondo branch thereafter. RCBC erroneously sent the same
cashier's check for clearing to the Central Bank which was returned for having been
"missent" or "misrouted." RCBC then debited the amount covered by the same
cashier's check from the account of the petitioner.
Respondent bank at this time had not informed the petitioner of its action which the
latter claims he learned of only 42 days after, when he received the bank's debit
memo. Relying on the common knowledge that a cashier's check was as good as
cash, that the usual banking practice that local checks are cleared within three (3)
working days and regional checks within seven (7) working days, and the fact that the
Negotiable Instruments - Atty. Ampil
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cashier's check was accepted, petitioner issued two (2) personal checks both dated
March 18 and both these checks bounced for insufficient funds.
RTC ruled in favor of petitioner. CA reversed in favor of respondent. Hence, this
petition.
Issue: WON respondent bank liable to petitioner - YES
Held:
The respondent bank cannot exculpate itself from liability by claiming that its
depositor "impliedly instructed" the bank to clear his check with the Central Bank by
filling a local check deposit slip. Bank transactions pass through a succession of bank
personnel whose duty is to check and countercheck transactions for possible errors.
In the instant case, the teller should not have accepted the local deposit slip with the
cashier's check that on its face was clearly a regional check without calling the
depositor's attention to the mistake at the very moment this was presented to her.
Immediate payment without awaiting clearance of a cashier's check is NOT
discretionary with the bank to whom the check is presented. An ordinary check is not
a mere undertaking to pay an amount of money. There is an element of certainty or
assurance that it will be paid upon presentation that is why it is perceived as a
convenient substitute for currency in commercial and financial transactions.
What was presented for deposit in the instant cases was not just an ordinary check
but a cashier's check payable to the account of the depositor himself. ​A cashier's
check is a primary obligation of the issuing bank and ​accepted in advance​ by
its mere issuance. ​By its very nature, a cashier's check is the bank's order to pay
drawn upon itself, committing in effect its total resources, integrity and honor behind
the check. A cashier's check by its peculiar character and general use in the
commercial world is regarded substantially to be as good as the money which it
represents. In this case, therefore, PCIB by issuing the check ​created an
unconditional credit​ in favor of any collecting bank.
09. PNB vs Spouses Cheah Chee Chong, ​[G.R. No. 170865 April 25, 2012]
DEL CASTILLO, ​J:
*guys the dates are very important on this case so please take note J
*sorry guys mej mahaba but I don’t want to miss any important detail from the case.
Peace!
FACTS:
- On November 2, 1992: Ofelia Cheah (Ofelia) & her friend Adelina were having a
conversation when Adelina’s friend, ​FILIPINA TUAZON ​approached her to ask if she
could have Filipina’s check cleared and encashed for a service fee of 2.5%.
- The check is Bank of America Check No. 190 under the account of Alejandria
Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales against Bank of
America, Alhambra Branch in California, USA with an amount of $300,000.00,
payable in cash.
Garcia, Pernes, Tagacay, Villasanta
- Because Adelina did not have a dollar account, she asked Ofelia if she could
accommodate Filipina’s request since she has a joint dollar savings account with her
Malaysian husband with PNB Buendia Branch.
- To exercise due diligence and caution, that same day (NOV 2, 1992) Ofelia &
Adelina went to PNB Buendia Branch to inquire upon the process of the check. Garin
(PNB Division Chief) discussed with them the process of clearing the subject check
and they were told that it normally takes ​15 days.
- Because of the assurance undertaken by the bank, Ofelia deposited Filipina’s
check.
- PNB then sent it for clearing through its correspondent bank, Philadelphia
National Bank.
- On Nov 16, 1992, Garin called up Ofelia to inform her that the check had already
been cleared.
- The amounts were then withdrawn both Ofelia and Adelina (authorized by
Ofelia).
- In the mean time, the cable division of PNB Head office in Escolta, Manila
received on Nov. 16, 1992 a SWIFT message from Philadelphia National Bank dated
Nov. 13, 1992 to return the subject check for insufficient funds.
- On Nov 20, 1992: PNB Buendia Branch learned about the bounced check.
- Ofelia upon receiving the information immediately contacted Filipina to get the
money back however the latter was told that all the money had already been given to
several people who asked for the check’s encashment.
- Spouses Cheah then sought the help of the NBI and the said agency’s
Anti-Fraud & Action Division was later able to apprehend some of the beneficiaries of
the proceeds of the check & recover from them $20,000.00.
- PNB demanded payment of around PHP8,202,220.44 plus interests and
attorney’s fees.
- As their main defense, Cheah claimed that the proximate cause of PNB’s injury
was its own negligence of paying a US dollar denominated check without waiting for
the 15 day clearing period, in violation of its bank practice as mandated by its own
bank circular.
- RTC ruled in favour of PNB.
- CA ruled that both parties are equally negligent and that it is right and just that
both of them should equally suffer & shoulder the loss.
- Hence this appeal.
ISSUE: ​WON the CA is correct in holding that both parties should suffer the loss?
HELD: ​YES.
1. PNB is liable because they failed to follow the 15 day clearing period. PNB
Buendia Branch, upon calling up Ofelia that the check had been cleared, allowed the
proceeds thereof to be withdrawn on November 17 and 18, 1992, a week before the
lapse of the standard 15-day clearing period. Hence, the 15th banking day from the
date of said deposit should fall on November 25, 1992.
Also, in ​Associated Bank v. Tan​, wherein the bank allowed the withdrawal of the
value of a check prior to its clearing, we said that "[b]efore the check shall have been
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cleared for deposit, the collecting bank can only 'assume' at its own risk . . . that the
check would be cleared and paid out."
The delay in the receipt by PNB Buendia Branch of the November 13, 1992 SWIFT
message notifying it of the dishonor of the subject check is of no moment, ​because
had PNB Buendia Branch waited for the expiration of the clearing period and
had never released during that time the proceeds of the check, it would have
already been duly notified of its dishonor. Clearly, PNB's disregard of its
preventive and protective measure against the possibility of being victimized by bad
checks had brought upon itself the injury of losing a significant amount of money.
It bears stressing that "the diligence required of banks is more than that of a Roman
paler familias or a good father of a family. The highest degree of diligence is
expected." ​PNB miserably failed to do its duty of exercising extraordinary
diligence and reasonable business prudence. ​The disregard of its own banking
policy amounts to gross negligence, which the law defines as "negligence
characterized by the want of even slight care, acting or omitting to act in a situation
where there is duty to act, not inadvertently but wilfully and intentionally with a
conscious indifference to consequences in so far as other persons may be affected."
With regard to collection or encashment of checks, suffice it to say that the law
imposes on the collecting bank the duty to scrutinize diligently the checks deposited
with it for the purpose of determining their genuineness and regularity. "The collecting
bank, being primarily engaged in banking, holds itself out to the public as the expert
on this field, and the law thus holds it to a high standard of conduct." A bank is
expected to be an expert in banking procedures and it has the necessary means to
ascertain whether a check, local or foreign, is sufficiently funded.
2. The Spouses Cheah are guilty of contributory negligence and are bound to
share the loss with the bank.
"Contributory negligence is conduct on the part of the injured party, contributing as a
legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection."
Indeed, Ofelia failed to observe caution in giving her full trust in accommodating a
complete stranger and this led her and her husband to be swindled. Considering that
Filipina was not personally known to her and the amount of the foreign check to be
encashed was $300,000.00, a higher degree of care is expected of Ofelia which she,
however, failed to exercise under the circumstances.
Another circumstance which should have goaded Ofelia to be more circumspect in
her dealings was when a bank officer called her up to inform that the Bank of America
check has already been cleared way earlier than the 15-day clearing period. The fact
that the check was cleared after only eight banking days from the time it was
deposited or contrary to what Garin told her that clearing takes 15 days should have
already put Ofelia on guard.
Garcia, Pernes, Tagacay, Villasanta
She should have first verified the regularity of such hasty clearance considering that if
something goes wrong with the transaction, it is she and her husband who would be
put at risk and not the accommodated party. However, Ofelia chose to ignore the
same and instead actively participated in immediately withdrawing the proceeds of
the check.
FALLO: WHEREFORE, premises considered, the Petitions for Review on Certiorari in
G.R. No. 170865 and in G.R. No. 170892 are both DENIED. The assailed August 22,
2005 Decision and December 21, 2005 Resolution of the Court of Appeals in CA-G.R.
CV No. 63948 are hereby AFFIRMED in toto.
10 . BANK OF AMERICA v. ASSOCIATED BANK, BA-FINANCE CORP., MILLER
OFFSET PRESS, INC., UY KIAT CHUNG, CHING UY SENG, UY CHUNG GUAN
SENG, and CA
ASSOCIATED BANK v. BA-FINANCE CORP., MILLER OFFSET PRESS, INC., UY
KIAT CHUNG, CHING UY SENG, UY CHUNG GUAN SENG, and BANK OF
AMERICA
Facts: This involves consolidated cases.
1. BA-Finance granted Miller Inc. (through its reps: Chung, Uy Seng, and Guan Seng)
a credit line facility through which the latter could assign or discount its trade
receivables with the former.
● The 3 reps executed a Continuing Suretyship Agreement with BA-Finance.
● Miller discounted and assigned several trade receivables to BA-Finance.
● BA-Finance issued 4 checks payable to the "Order of Miller Offset Press,
Inc." with the notation "For Payee's Account Only". These were drawn
against Bank of America.
2. The 4 checks were deposited by Uy Seng, corporate secretary of Miller, in
Associated Bank.
● Associated Bank stamped the checks with the notation "all prior
endorsements and/or lack of endorsements guaranteed", and sent them
through clearing.
● Later, the drawee bank, Bank of America, honored the checks and paid the
proceeds to Associated Bank as the collecting bank.
3. Miller failed to deliver to BA-Finance the proceeds of the assigned trade
receivables.
● BA-Finance filed a Complaint against Miller and 3 reps for collection of sum
of money.
● BA-Finance also impleaded Bank of America for allowing encashment and
collection of the checks by person or persons other than the payee named
thereon.
● Bank of America filed a Third Party Complaint against Associated Bank.
Issues:
Is Bank of America liable to pay BA-Finance the amount of the 4 checks? - YES.
Is Associated Bank liable to reimburse Bank of America the amount of the 4 checks?
- YES.
Are the reps liable to pay Associated Bank the amount of the 4 checks? - YES.
Negotiable Instruments - Atty. Ampil
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Held: PETITIONS DENIED.
1. Bank of America (drawee bank), is under strict liability to pay the check only to the
payee or the payee's order. When the drawee bank pays a person other than the
payee named on the check, it violates its duty to charge the drawer's account only for
properly payable items.
● BA-Finance (drawer) issued crossed checks. The 4 checks were drawn by
BA-Finance and made payable to the "Order of Miller Offset Press, Inc." The
checks were also crossed and issued "For Payee's Account Only". Clearly,
the drawer intended the check for deposit only by Miller Offset Press, Inc. in
the latter's bank account.
● Thus, when a person other than Miller, Uy Seng, presented and deposited
the checks in his own personal account, and Bank of America, paid the
value of the checks, Bank of America is deemed to have violated the
instructions of the drawer, and therefore, is liable for the amount charged to
the drawer's account.
2. Associated Bank (collecting bank) where a check is deposited, and which endorses
the check upon presentment with the drawee bank, is an endorser, with warranties
under Sec. 66.
● When Associated Bank stamped the back of the 4 checks with the phrase
"all prior endorsements and/or lack of endorsement guaranteed", that bank
accordingly assumed the warranty of an endorser. Associated Bank cannot
deny liability on the checks.
● The payee of the checks is a corporation while the person who deposited the
checks in his own account is an individual. Associated Bank is negligent,
thus, it should reimburse the amount of the 4 checks to Bank of America.
3. Since Uy Seng and/or Guan Seng received the proceeds of the checks as they
were deposited in their personal joint account with Associated Bank,
● They’re obliged to reimburse Associated Bank for the amount it has to pay to
Bank of America; no person should be allowed to unjustly enrich himself at
expense of another.
11 Westmont Bank v Eugene Ong
Facts:
· Ong maintained an account with Associated Banking Corp (now
Westmont Bank)
· Ong sold shares of stock through Island Securities Corp.
· Island Securities Corp paid Ong through 2 Pacific Banking Corp.
manager‘s checks. Both indicated Ong as payee
· Before Ong could get hold of the checks, his friend Paciano Tanlimco
got hold of them, forged Ong‘s signature and deposited these with
petitioner, where Tanlimco was also a depositor. Even though Ong‘s
specimen signature was on file, petitioner accepted and credited both
checks to the account of Tanlimco, without verifying the ̳signature
indorsements‘ appearing at the back thereof. Tanlimco then immediately
withdrew the money
Garcia, Pernes, Tagacay, Villasanta
· Instead of going straight to the bank to stop or question the payment,
Ong first sought the help of Tanlimco‘s family reported the incident to
the Central Bank to recover the amount. Both attempts are futile
· About five (5) months from discovery of the fraud, Ong demanded in his
complaint that petitioner pay the value of the two checks from the bank
on whose gross negligence he imputed his loss.
· The bank did not present evidence to the contrary, but simply contended
that since plaintiff Ong claimed to have never received the originals of
the two (2) checks in question from Island
· Securities, much less to have authorized Tanlimco to receive the same, he never
acquired ownership of these checks. Thus, he had no legal personality to sue as
he is not a real party in interest. Petitioner argues, respondent cannot sue
petitioner because under Section 51 of the Negotiable Instruments Law ​it is only
when a person becomes a holder of a negotiable instrument can he sue in his
own name. Petitioner also cites Article 1249 of the Civil Code explaining that a
check, even if it is a manager‘s check, is not legal tender. Hence, the creditor
cannot be compelled to accept payment thru this means
Issues:
1. WON respondent Ong has a cause of action against petitioner Westmont Bank
2. WON Ong is barred to recover the money from Westmont Bank due to laches.
Ruling:
1. Yes
Petitioner‘s claim that respondent has no cause of action against the bank is clearly
misplaced. As defined, a cause of action is the act or omission by which a party
violates a right of another. The essential elements of a cause of action are: (a) a legal
right or rights of the plaintiff, (b) a correlative obligation of the defendant, and (c) an
act or omission of the defendant in violation of said legal right.
The complaint filed before the trial court expressly alleged respondent‘s right as
payee of the manager‘s checks to receive the amount involved, petitioner‘s
correlative duty as collecting bank to ensure that the amount gets to the rightful
payee or his order, and a breach of that duty because of a blatant act of
negligence on the part of petitioner which violated respondent‘s rights.
Since the signature of the payee, in the case at bar, was forged to make it
appear that he had made an indorsement in favor of the forger, such signature should
be deemed as inoperative and ineffectual. Petitioner, as the collecting bank, grossly
erred in making payment by virtue of said forged signature. The payee, herein
respondent, should therefore be allowed to recover from the collecting bank.
The collecting bank is liable to the payee and must bear the loss because it
is its legal duty to ascertain that the payee‘s endorsement was genuine before
cashing the check
2. No
In the case at bar, it cannot be said that respondent sat on his rights. He immediately
acted after knowing of the forgery by proceeding to seek help from the Tanlimco
family and later the Central Bank, to remedy the situation and recover his money from
the forger, Paciano Tanlimco.
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Only after he had exhausted possibilities of settling the matter amicably with the
family of Tanlimco and through the CB, about five months after the unlawful
transaction took place, did he resort to making the demand upon the petitioner and
eventually before the court for recovery of the money value of the two checks. These
acts cannot be construed as undue delay in or abandonment of the assertion of his
rights.
12. Associated Bank v. CA, G.R. No. 89802, May 7, 1992
Facts:
The private respondent is engaged in the business of ready-to-wear garments under
the firm name "Melissa's RTW." Her clients (Robinson’s Department Store, Payless
Department Store, Rempson Department Stores and Corona Bazzar) issued payment
of their respective accounts crossed checks payable to her.
She went to collect but was informed of the issuance of crossed checks deposited to
petitioner-bank paid by it to one Rafael Sayon, a “trusted depositor” according to
co-petitioner and branch manager Conrado Cruz. Private respondent states Sayon
was not authorized by her to do so. Hence, private respondent went to court to sue
petitioners.
RTC rendered a judgment favoring private respondent. CA affirmed. Hence, this
petition.
Issue:​ WON private respondent has cause of action against petitioners for
encashment to another person of the crossed checks issued in her favor - YES
Held:
The petitioner-bank stamped thereon its guarantee that "all prior endorsements
and/or lack of endorsements (were) guaranteed." By such deliberate and positive act,
it had for all legal intents and purposes treated the said checks as negotiable
instruments and, accordingly, assumed the warranties of an endorser.
The petitioners were negligent when they permitted the encashment of the checks by
Sayson. The petitioner-bank should have first verified his right to endorse the crossed
checks, of which he was not the payee, and to deposit the proceeds of the checks to
his own account.
The Bank was by reason of the nature of the checks put upon notice that they
were issued for deposit ​only to the private respondent's account​. Its failure to
inquire into Sayson's authority was a breach of a duty it owed to the private
respondent.
The petitioners insist that the private respondent has no cause of action against them
because they have no privity of contract with her. They also argue that it was Eddie
Reyes, the private respondent's own husband, who endorsed the checks. Assuming
that Eddie Reyes did endorse the crossed checks, or such endorsements were
forged, as alleged, the ​petitioner-bank would still be liable to the private
respondent for not verifying the endorser's authority​.
Garcia, Pernes, Tagacay, Villasanta
There is no substantial difference between an actual forging of a name to a check as
an endorsement by a person not authorized to make the signature and the affixing of
a name to a check as an endorsement by a person not authorized to endorse it.​ It
was petitioner-bank’s responsibility to inquire as to the authority of Rafael Sayson to
deposit crossed checks payable to Melissa's RTW upon a prior endorsement by
Eddie Reyes.
Notes:
The effects of crossing a check:
(1) that the check may not be encashed but only deposited in the bank
(2) that the check may be negotiated only once — to one who has an account with a
bank;
(3) that the act of crossing the check serves as a warning to the holder that the check
has been issued for a definite purpose so that he must inquire if he has received the
check pursuant to that purpose. (State Investment House vs. IAC)
13. FAR EAST BANK & TRUST COMPANY vs GOLD PALACE JEWELLERY CO.
[G.R. No. 168274 August 20, 2008]
NACHURA, ​J:
FACTS:
- Samuel Tagoe purchased from the respondent Gold Palace Jewellery Co’s
(Gold Palace’s) store at SM North Edsa several pieces of jewelry valued at
PHP258,000.00.
- In payment of the same, he offered Foreign Draft No. M-069670 issued by the
United Overseas Bank (UOB) (Malaysia) BHD Medan Pasar, Kuala Lumpur,
addressed to the Land Bank of the Philippines (LBP) and payable to Gold Palace
Jewellery.
- However, before receiving the draft, respondent Judy Yang, the assistant
general manager of Gold Palace inquired from petitioner the nature of the draft.
- The teller informed her that the same was similar to a manager’s check but
advised her not to release the pieces of jewelry until the draft has been cleared.
- Yang then issued Cash Invoice No. 1609 to Tagoe and asked him to come back
when the check has been cleared so that the jewelries will be released to him.
- Julie Yang-Go, the manager of Gold Palace consequently deposited the draft in
the company’s account with the petitioner.
- When Far East ( the collecting bank), presented the draft for clearing to LBP (the
drawee bank), the latter cleared the same – UOB’s account with LBP was debited.
- Relying on the information that the draft has been cleared, Yang released the
pieces of jewelry to Tagoe and because the amount in the draft was more than the
value of the purchased goods, she issued as a change a check drawn against the
petitioner for PHP122,000.00 and was later on presented for encashment and was in
fact paid by the said bank.
- ​Three weeks later it has been discovered that the foreign draft had been
materially altered from PHP300.00 to PHP380,000.00.
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- It is noted at this point that the material alteration was discovered by UOB after
LBP had informed it that its funds were being depleted following the encashment of
the subject draft.
- Intending to debit the amount from respondent's account, Far East subsequently
refunded the P380,000.00 earlier paid by LBP.
- Gold Palace in the meantime had already utilized portions of the amount. Thus,
on July 20, 1998, as the outstanding balance of its account was already inadequate,
Far East was able to debit only PHP168,053.36 but was done without prior written
notice to the account holder. Far East only notified by phone Gold Palace.
- Petitioner demanded from respondents the payment of P211,946.64 or the
difference between the amount in the materially altered draft and the amount debited
from the respondent company's account.
- RTC ruled in favour of Far East. CA reversed. Hence this appeal.
ISSUE: ​WON Gold Palace should be liable for the altered Foreign Draft?
HELD: ​NO. Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides
that the acceptor, by accepting the instrument, engages that he will pay it according
to the tenor of his acceptance.
- This provision applies with equal force in case the drawee pays a bill without
having previously accepted it.
- His actual payment of the amount in the check implies not only his assent to the
order of the drawer and a recognition of his corresponding obligation to pay the
aforementioned sum, but also, his clear compliance with that obligation.
- Actual payment by the drawee is greater than his acceptance, which is merely a
promise in writing to pay. The payment of a check includes its acceptance.
- ​Gold Palace was not a participant in the alteration of the draft, was not
negligent, and was a holder in due course — it received the draft complete and
regular on its face, before it became overdue and without notice of any
dishonor, in good faith and for value, and absent any knowledge of any
infirmity in the instrument or defect in the title of the person negotiating it.
- ​Having relied on the drawee bank's clearance and payment of the draft and
not being negligent (it delivered the purchased jewelry only when the draft was
cleared and paid), respondent is amply protected by the said Section 62.
- ​Commercial policy favors the protection of any one who, in due course,
changes his position on the faith of the drawee bank's cl earance and payment
of a check or draft.
- ​LBP having the most convenient means to correspond with UOB should
have first verified the amount of the draft before it cleared and paid the same.
Garcia, Pernes, Tagacay, Villasanta
- ​Gold Palace had no facility to ascertain with the drawer, UOB Malaysia, the
true amount of the draft. Hence it was left with no option but to rely on the
representations of LBP that the draft was good.
- Gold Palace is protected by Section 62 of the NIL, its collecting agent, Far
East, should not have debited the money paid by the drawee bank from respondent
company's account. When Gold Palace deposited the check with Far East, it, under
the terms of the deposit and the provisions of the NIL, became an agent of the Gold
Palace for the collection of the amount in the draft.
FALLO: ​WHEREFORE, premises considered, the March 15, 2005 Decision and the
May 26, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 71858 are
AFFIRMED WITH THE MODIFICATION that the award of exemplary damages and
attorney's fees is DELETED.
14 SECURITY BANK AND TRUST COMPANY v. RCBC
RCBC v. SECURITY BANK AND TRUST COMPANY
Facts: This is a case of consolidated petitions.
1. Security Bank issued a manager's check for P8M, payable to "CASH", as proceeds
of the loan granted to Guidon Construction & Development Corp.
● The check was deposited by Continental Manufacturing Corp with RCBC.
RCBC honored the and allowed CMC to withdraw the same.
2. GCDC issued a "Stop Payment Order" to Security Bank, claiming that the check
was released to a third party by mistake.
● Security Bank dishonored and returned the manager's check to RCBC.
● Thereafter, the check was returned back and forth between the two banks,
resulting in automatic debits and credits in each bank's clearing balance.
3. RCBC led a complaint for damages against Security Bank.
● Meanwhile, following the rules of the Philippine Clearing House, RCBC and
Security Bank stopped returning the checks to each other.
● By way of a temporary arrangement pending resolution of the case, the P8M
check was equally divided between, and credited to, RCBC and Security
Bank.
Issues:
Is Security Bank liable to RCBC for the remaining P4M? - YES.
Is Security Bank liable to pay for lost interest income on the remaining P4M? - YES.
Held: SECURITY BANK IS LIABLE.
1. The check issued by Security Bank is a manager's check.
● A manager's check is one drawn by a bank's manager upon the bank itself.
It stands on the same footing as a certified check, which is deemed to have
been accepted by the bank that certified it. A manager's check becomes the
primary obligation of the bank and is accepted in advance by the act of its
issuance.
2. RCBC, in immediately crediting the amount of P8M to CMC's account, relied on the
integrity and honor of the check as it is regarded in commercial transactions.
Negotiable Instruments - Atty. Ampil
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● Where the check, payable to "Cash", appeared regular on its face, and the
bank found nothing unusual in the transaction, as the drawer usually issued
checks in big amounts made payable to cash, RCBC cannot be faulted in
paying the value of the check.
2. Security Bank cannot escape liability by invoking Monetary Board Resolution No.
2202, prohibiting drawings against uncollected deposits because banks were
given the discretion to allow immediate drawings on uncollected deposits of
manager's checks.
● RCBC, in allowing the immediate withdrawal against the manager's check,
only exercised a prerogative expressly granted to it by the Monetary Board.
● Security Bank’s liability as drawer remains the same — by drawing the
instrument, it admits the existence of the payee and his then capacity to
indorse; and engages that on due presentment, the instrument will be
accepted, or paid, or both, according to its tenor.
3. Concerning RCBC's claim for lost interest income on the remaining P4 million, this
is already covered by the amount of damages in the form of legal interest of 6%,
based on Articles 2200 and 2209 of the Civil Code.
4. Security Bank is ordered to pay RCBC: (1) the remaining P4M with legal interest
thereon at (6%); (2) exemplary damages of P50,000; and (3) attorney's fees of
P25,000.
15. RCBC v Hi-Tri
Facts:
· Luz Bakunawa and her husband Manuel, now deceased (Spouses Bakunawa)
are registered owners of six (6) parcels of land
o These lots were sequestered by the Presidential Commission on
Good Government [(PCGG)].
· Sometime in 1990, a certain Teresita Millan (Millan), through her representative,
Jerry Montemayor, offered to buy said lots for ₱6,724,085.71, with the promise
that she will take care of clearing whatever preliminary obstacles there may be to
effect a completion of the sale.
· The Spouses Bakunawa gave to Millan the Owners Copies of said TCTs and in
turn, Millan made a downpayment of ₱1,019,514.29 for the intended purchase.
However, for one reason or another, Millan was not able to clear said obstacles.
As a result, the Spouses Bakunawa rescinded the sale and offered to return to
Millan her downpayment of ₱1,019,514.29 ​by Manager’s Check.
· However, Millan refused to accept back the ₱1,019,514.29 downpayment.
Consequently, the Spouses Bakunawa, through their company, the Hi-Tri
Development Corporation (Hi-Tri) took out on October 28, 1991, a Managers
Check from RCBC-Ermita in the amount of ₱1,019,514.29, payable to Millan’s
company Rosmil Realty and Development Corporation (Rosmil) c/o Teresita
Millan and used this as one of their basis for a complaint against Millan and
Montemayor which they filed with the Regional Trial Court of Quezon City,
Branch 99.
· On January 31, 2003, during the pendency of the above mentioned case and
without the knowledge of [Hi-Tri and Spouses Bakunawa], RCBC reported the
₱1,019,514.29-credit existing in favor of Rosmil to the Bureau of Treasury as
among its unclaimed balances as of January 31, 2003 ​subject to escheat​.
Garcia, Pernes, Tagacay, Villasanta
· Hi Tri contends that they were not notified.
· Allegedly, a copy of the Sworn Statement executed by Florentino N. Mendoza,
Manager and Head of RCBCs Asset Management, Disbursement & Sundry
Department (AMDSD) was posted within the premises of RCBC-Ermita.
Issue: Whether or not the escheat of the account of Hi-Tri in RCBC is proper.
Held:
1. There are checks of a special type called managers or cashiers checks.
These are bills of exchange drawn by the banks manager or cashier, in the
name of the bank, against the bank itself. Typically, a managers or a
cashiers check is procured from the bank by allocating a particular amount
of funds to be debited from the depositors account or by directly paying or
depositing to the bank the value of the check to be drawn.
2. Since the bank issues the check in its name, with itself as the drawee, the
check is deemed accepted in advance. Ordinarily, the check becomes the
primary obligation of the issuing bank and constitutes its written promise to
pay upon demand.
3. Nevertheless, the mere issuance of a managers check does not ipso facto
work as an automatic transfer of funds to the account of the payee. In case
the procurer of the managers or cashiers check retains custody of the
instrument, does not tender it to the intended payee, or fails to make an
effective delivery, an order to debit the account of respondents was never
made.
4. In fact, petitioner confirms that the Managers Check was never negotiated or
presented for payment to its Ermita Branch, and that the allocated fund is
still held by the bank. As a result, the assigned fund is deemed to remain
part of the account of Hi-Tri, which procured the Managers Check. The
doctrine that the deposit represented by a managers check automatically
passes to the payee is inapplicable, because the instrument although
accepted in advance remains undelivered.
5. Hence, respondents should have been informed that the deposit had been
left inactive for more than 10 years, and that it may be subjected to escheat
proceedings if left unclaimed.
16. Equitable Banking v. Special Steel Products, GR No. 175350
June 13, 2012
Facts:
1. Respondent Special Steel Products, Inc. (SSPI) is a private domestic
corporation selling steel products. Its co-respondent Augusto L. Pardo
(Pardo) is SSPI's President and majority stockholder. Jose Isidoro Uy, alias
Jolly Uy (Uy), is an International Copra Export Corporation (Interco)
employee, in charge of the purchasing department, and the son-in-law of its
majority stockholder.
2. Petitioner Equitable Banking Corporation (Equitable or bank) is a private
domestic corporation engaged in banking and is the depository bank of
Interco and of Uy.
Negotiable Instruments - Atty. Ampil
AY 2017 - 2018 - Term 1
Garcia, Pernes, Tagacay, Villasanta

3. Interco issued three checks for payment and each check was crossed with
the notation "account payee only" and was drawn against Equitable to SSPI
for welding electrodes. SSPI provided that Interco would pay interest at the
rate of 36%per annum in case of delay.
4. Eventually, Uy presented each crossed check to Equitable on the day of its
issuance and claimed that he had good title thereto and demanded the
deposit of the checks in his personal accounts in Equitable. The bank did so
on relying on Uy’s status as a valued client and as son-in-law of Interco’s
majority stock holder.
5. SSPI reminded Interco of the unpaid welding electrodes, and Interco replied
it had already issued three checks payable to SSPI and drawn against
Equitable, which was denied by SSPI. Later, it was determined that Uy, not
SSPI, received the proceeds of the three checks that were payable to SSPI.
Thus, on June 30, 1993 (23 months after the issuance of the three checks),
Interco paid the value of the three checks to SSPI, plus a portion of the
accrued interests.
6. Interco refused to pay the entire accrued interest of P767,345.64 on the
ground that it was not responsible for the delay. SSPI was unable to collect
P437,040.35 (at the contracted rate of 36% per annum) in interest income.
7. Hence, Pardo filed a complaint for damages against Uy and Equitable
alleging that the 3 the crossed checks, all payable to SSPI should only be
deposited and encashed by them.
8. RTC ruled in favor of SSPI. CA affirmed. Hence, this appeal.

Issue​: WON SSPI has a cause of action against Equitable Bank - YES

Held:
SSPI's cause of action is not based on the three checks. SSPI does not ask Equitable
or Uy to deliver to it the proceeds of the checks as the rightful payee. SSPI does not
assert a right based on the undelivered checks or for breach of contract. Instead, it
asserts a cause of action based on quasi-delict*.

The checks that Interco issued in favor of SSPI were all crossed, made payable to
SSPI's order, and contained the notation "account payee only." This creates a
reasonable expectation that the payee alone would receive the proceeds of the
checks and that diversion of the checks would be averted.

This expectation arises from the accepted banking practice that crossed checks are
intended for deposit in the named payee's account only and no other.

At the very least, the nature of crossed checks should place a bank on notice that it
should exercise more caution or expend more than a cursory inquiry, to ascertain
whether the payee on the check has authorized the holder to deposit the same in a
different account.

Notes:
A quasi-delict is an act or omission, there being fault or negligence, which causes
damage to another. Quasi-delicts exist even without a contractual relation between
the parties.