Bank of the Philippine Islands v. Roxas

536 SCRA 168

October 15, 2007

FACTS: Gregorio Roxas, as trader, delivered stocks of vegetable oil to Spouses

Rodrigo and Marissa Cawili. As payment, they issued a personal check

amounting to PHP348,805.50 which was dishonored by the drawee bank when

respondent tried to encash it.

The Spouses Cawili replaced the check with a cashier's check from Bank of the

Philippine Island (Petitioner). The cashier's check was drawn against the

account of Marissa Cawili. The Cashier Check was handed to respondent by

Rodrigo Cawili.

When respondent tried to encash the Cashier Check, it was dishonored

on the ground that the account of Marissa was closed on the same date that

respondent tried to encash such check. Respondent thereafter filed a complaint

with the Regional Trial Court for a sum of money praying that petitioner pay

him the amount of the check, damages and cost of the suit.

The RTC in its decision held that Petitioner is liable to pay the face value

of the cashier's check amounting to PHP 384, 805.50. On appeal, the CA

affirmed the decision of the RTC. Hence, the filing of the Petition for Certiorari

by the petitioner.

ISSUE:

(1) Whether or not the respondent is a holder in due course?

(2) Whether or not petitioner is liable to respondent for the amount of the

cashier’s check?

HELD:

The petition is DENIED. The assailed Decision of the Court of Appeals (Fourth

Division) is AFFIRMED.

Held [1]: Petitioner contends that the element of "value" is not present,

therefore, respondent could not be a holder in due course.

There is no dispute that respondent received Rodrigo Cawili’s cashier’s

check as payment for the former’s vegetable oil. The fact that it was Rodrigo

who purchased the cashier’s check from petitioner will not affect respondent’s

status as a holder for value since the check was delivered to him as payment

for the vegetable oil he sold to spouses Cawili. Verily, the Court of Appeals did

not err in concluding that respondent is a holder in due course of the cashier’s

check.

Held [2]: BPI is liable to Respondent.

It bears emphasis that the disputed check is a cashier’s check. A

cashier’s check is really the bank’s own check and may be treated as a

promissory note with the bank as the maker. The check becomes the primary

obligation of the bank which issues it and constitutes a written promise to pay

upon demand. The mere issuance of a cashier’s check is considered acceptance

thereof.

Petitioner bank became liable to respondent from the moment it issued

the cashier’s check. Having been accepted by respondent, subject to no

condition whatsoever, petitioner should have paid the same upon presentment

by the former.

Lim vs. Saban

The late Eduardo Ybanez entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with respondent Florencio Saban

(Saban) on February 8, 1994. Under the Agency Agreement, Ybañez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to include the amounts needed

for payment of taxes, transfer of title and other expenses incident to the sale, as well as Saban’s commission for the sale. Through Saban's effort, he sold said lot to Spouses Lim and Genevieve Lim. He sold the lot for Php600, 000.00.

Saban gave Ybanez Php230, 000.00. However, Ybanez found out that the lot was being sold for Php600, 000.00 and asked Lim to directly pay him the

balance. Lim cancelled all checks issued to Saban and paid directly to Ybanez. Saban said that Lim and Ybanez did it to deprive him of the commission due o him.

Issue:

Whether or not Lim is liable on the checks because she issued them as an accommodation party.

Ruling:

Section 29 of the Negotiable Instruments Law defines an accommodation party as a person "who has signed the negotiable instrument as maker, drawer, acceptor or indorser, without receiving value therefor, for the purpose of

lending his name to some other person." The accommodation party is liable on the instrument to a holder for value even though the holder at the time of taking the instrument knew him or her to be merely an accommodation party.

The accommodation party may of course seek reimbursement from the party accommodated.34

As gleaned from the text of Section 29 of the Negotiable Instruments Law, the

accommodation party is one who meets all these three requisites, viz: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and (3) he signed for the purpose of lending his

name to some other person. In the case at bar, while Lim signed as drawer of the checks she did not satisfy the two other remaining requisites.

The absence of the second requisite becomes pellucid when it is noted at the

outset that Lim issued the checks in question on account of her transaction, along with the other purchasers, with Ybañez which was a sale and, therefore, a reciprocal contract. Specifically, she drew the checks in payment of the

balance of the purchase price of the lot subject of the transaction. And she had to pay the agreed purchase price in consideration for the sale of the lot to her

and her co-vendees. In other words, the amounts covered by the checks form part of the cause or consideration from Ybañez’s end, as vendor, while the lot

represented the cause or consideration on the side of Lim, as vendee.35 Ergo, Lim received value for her signature on the checks.

Neither is there any indication that Lim issued the checks for the purpose of

enabling Ybañez, or any other person for that matter, to obtain credit or to raise money, thereby totally debunking the presence of the third requisite of an accommodation party.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, vs.

ANTONIO B. BALMACEDA and ROLANDO N. RAMOS, Respondents.

FACTS

On September 10, 1993, PCIB filed an action for recovery of sum of money with damages before the RTC against Antonio Balmaceda, the Branch Manager of its

Sta. Cruz, Manila branch. In its complaint, PCIB alleged that between 1991 and 1993, Balmaceda, by taking advantage of his position as branch manager, fraudulently obtained and encashed 31 Manager’s checks in the total amount

of Ten Million Seven Hundred Eighty Two Thousand One Hundred Fifty Pesos (P10,782,150.00).

On February 28, 1994, PCIB moved to be allowed to file an amended complaint

to implead Rolando Ramos as one of the recipients of a portion of the proceeds from Balmaceda’s alleged fraud. PCIB also increased the number of fraudulently obtained and encashed Manager’s checks to 34, in the total

amount of Eleven Million Nine Hundred Thirty Seven Thousand One Hundred Fifty Pesos (P11,937,150.00). The RTC granted this motion.

Since Balmaceda did not file an Answer, he was declared in default. On the

other hand, Ramos filed an Answer denying any knowledge of Balmaceda’s scheme. According to Ramos, he is a reputable businessman engaged in the business of buying and selling fighting cocks, and Balmaceda was one of his

clients. Ramos admitted receiving money from Balmaceda as payment for the fighting cocks that he sold to Balmaceda, but maintained that he had no knowledge of the source of Balmaceda’s money.

The RTC issued a decision in favor of PCIB ,

1. Ordering defendant Antonio Balmaceda to pay the amount of P11,042,150.00 with interest thereon at the legal rate from [the] date of his misappropriation of the said amount until full restitution shall have been

made[.]

2. Ordering defendant Rolando Ramos to pay the amount of P895,000.00 with interest at the legal rate from the date of misappropriation of the said amount

until full restitution shall have been made[.]

3. Ordering the defendants to pay plaintiff moral damages in the sum of P500,000.00 and attorney’s fees in the amount of ten (10%) percent of the total misappropriated amounts sought to be recovered.

4. Plus costs of suit.

On appeal, the CA dismissed the complaint against Ramos, holding that no sufficient evidence existed to prove that Ramos colluded with Balmaceda in the

latter’s fraudulent manipulations. And ordered to pay appellant Ramos the following:

a) P50,000.00 as moral damages

b) P50,000.00 as exemplary damages, and

c) P20,000.00 as attorney’s fees.

ISSUE:

I

THE APPELLATE COURT ERRED IN HOLDING THAT THERE IS NO EVIDENCE

TO HOLD THAT RESPONDENT RAMOS ACTED IN COMPLICITY WITH RESPONDENT BALMACEDA

II

THE APPELLATE COURT ERRED IN ORDERING THE PETITIONER TO

RELEASE THE AMOUNT OFP251,910.96 TO RESPONDENT RAMOS AND TO PAY THE LATTER MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES10

HELD

No, Ramos is not liable. The Supreme Court PARTIALLY GRANTED the petition and AFFIRMED the decision of the Court of Appeals dated with the MODIFICATION that the award of moral and

exemplary damages in favor of Rolando N. Ramos is DELETED.

PCIB, as plaintiff, had to prove, by preponderance of evidence, its positive assertion that Ramos conspired with Balmaceda in perpetrating the latter’s scheme to defraud the Bank. All that

PCIB’sevidence proves is that Balmaceda used Ramos’ name as a payee when he filled up the application forms for the Manager’s checks. But, as the CA correctly observed, the mere fact that

Balmaceda madeRamos the payee on some of the Manager’s checks is not enough basis to conclude that Ramos wascomplicit in Balmaceda’s fraud; a number of other people were

made payees on the other Manager’s checks yet PCIB never alleged them to be liable, nor did the Bank adduce any other evidence pointing

to Ramos’ participation that would justify his separate treatment from the others. Also, while Ramos is

Balmaceda’s brother -in-law, their relationship is not sufficient, by itself, to render Ramos liable, absentconcrete proof of his actual participation in the fraudulent scheme.

The party carrying the burden of proof must establish his case by a preponderance of evidence, or evidence which, to the court, is more worthy of belief than the evidence

offered in opposition. In E n c i n a s v . N a t i o n a l B o o k s t o r e , I n c . defined "preponderance of evidence" in the following manner:"

Preponderance of evidence" is the weight, credit, and value of the aggregate evidence on either sideand is usually considered to be synonymous with the term "greater weight of the

evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the last analysis,means probability of the truth. It is evidence which is

more convincing to the court as worthy of belief than that which is offered in opposition thereto.

Ramos’ participation in Balmaceda’s scheme was not proven by PCIB by preponderance of evidence. Given that PCIB failed to establish Ramos’ participation in Balmaceda’s scheme, it was not

even necessary for Ramos to provide an explanation for the money he received from Balmaceda.

Even if theevidence adduced by the plaintiff appears stronger than that presented by the defendant, a judgment cannot be entered in the plaintiff’s favor if his evidence still does not suffice to sustain his cause of action; 25 to reiterate, a preponderance of evidence as

defined must be established to achiev this result.

Engr. Jose E. Cayanan vs North Star International Travel, Inc.G.R. No. 172954 October 5, 2011

Facts NSITI (North Star) is a corporation engaged in the travel agency business while

petitioner is the owner/general manager of JEAC International Management and Contractor Services, a recruitment agency. Virginia Balagtas, the General Manager of North Star, in accommodation and upon the instruction of its

client, petitioner herein, sent the amount of US$60,000 to View Sea Ventures Ltd., in Nigeria from her personal account in Citibank Makati. On March 29, 1994, Virginia again sent US$40,000 to View Sea Ventures by telegraphic transfer,

with US$15,000 coming from petitioner. Likewise, on various dates, North Star extended credit to petitioner for the airplane tickets of his clients, with the total

amount of such indebtedness under the credit extensions eventually reaching P510,035.47.To cover payment of the obligations, petitioner issued five checks to North Star. When presented for payment, the checks in the amount of

P1,500,000 and P35,000 were dishonored for insufficiency of funds while the other three checks were dishonored because of a stop payment order from

petitioner. North Star, through its counsel, wrote petitioner informing him that the checks he issued had been dishonored. North Star demanded payment, but petitioner failed to settle his obligations. Hence, North Star instituted Criminal

Case Nos. 166549-53 charging petitioner with violation of Batas Pambansa Blg. 22 , or the Bouncing Checks Law, before the Metropolitan Trial Court (MeTC) of Makati City. Aftertrial, the MeTC found

petitioner guilty beyond reasonable doubt of violation of B.P. 22. On appeal, the RegionalTrial Court (RTC) acquitted petitioner of the criminal charges. The RTC

also held that there is no basis for the imposition of the civil liability on petitioner. The Court of Appeals reversed the ruling of the RTC and held petitioner civilly liable for the value of the subject checks.

I ssue: Whether or not the petitioner should be civilly liable to North Star for the value

of the checks Held:

Affirmative. Petitioner contends that the CA erred in holding him civilly liable to North Star for the value of the checks since North Star did not give any valuable consideration for the checks. He insists that theUS$85,000 sent to

View Sea Ventures was not sent for the account of North Star but for the account of Virginia as her investment. He points out that said amount was

taken from Virginia’s personal dollar account in Citibank and not from North Star’ s corporate account. Respondent North Star, for its part, counters that petitioner is liable for the value of the five subject checks as they were issued

for value. Respondent insists that petitioner owes North Star plus interest. Upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration which may

consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss or

some responsibility, to act, or labor, or service given, suffered or undertaken by the other side. Under the Negotiable Instruments Law, it is

presumed that every party to an instrument acquires the same for a consideration or for value. As petitioner alleged that there was no consideration

for the issuance of the subject checks, it devolved upon him to present convincing evidence to overthrow the presumption and prove that the checks were in fact issued without valuable consideration.

SAN MIGUEL CORPORATION vs. BARTOLOME PUZON, JR.

FACTS

Respondent Bartolome V. Puzon, Jr., (Puzon) owner of Bartenmyk Enterprises, was a dealer of beer products of petitioner San Miguel Corporation. Puzon

purchased SMC products on credit. To ensure payment and as a business practice, SMC required him to issue postdated checks equivalent to the value

of the products purchased on credit before the same were released to him. Said checks were returned to Puzon when the transactions covered by these checks were paid or settled in full.

Puzon purchased products on credit amounting to P11,820,327 for which he

issued, and gave to SMC, Bank of the Philippine Islands (BPI) Check Nos. 27904 (for P309,500.00) and 27903 (forP11,510,827.00) to cover the said

transaction.

Puzon, together with his accountant, visited the SMC Sales Office to reconcile his account with SMC. During that visit Puzon allegedly requested to see BPI Check No. 17657. However, when he got hold of BPI Check No. 27903 which

was attached to a bond paper together with BPI Check No. 17657 he allegedly immediately left the office with his accountant, bringing the checks with them.

SMC sent a letter to Puzon demanding the return of the said checks. Puzon

ignored the demand hence SMC filed a complaint against him for theft with the City Prosecutor’s Office.

Rulings of the Prosecutor and the Secretary of Department of Justice (DOJ)

The investigating prosecutor, Elizabeth Yu Guray found that the "relationship

between [SMC] and [Puzon] appears to be one of credit or creditor-debtor relationship. The problem lies in the reconciliation of accounts and the non-

payment of beer empties which cannot give rise to a criminal prosecution for theft." She recommended the dismissal of the case for lack of evidence. SMC appealed.

The DOJ issued its resolution5 affirming the prosecutor’s Resolution dismissing

the case.

Ruling of the Court of Appeals

The CA found that the postdated checks were issued by Puzon merely as a security for the payment of his purchases and that these were not intended to

be encashed. It thus concluded that SMC did not acquire ownership of the checks as it was duty bound to return the same checks to Puzon after the

transactions covering them were settled. The CA agreed with the prosecutor that there was no theft, considering that a person cannot be charged with theft

for taking personal property that belongs to himself.

ISSUE

Whether the checks issued by Puzon were payments for his purchases or were intended merely as security to ensure payment.

"[T]he essential elements of the crime of theft are the following: (1) that there be

a taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use

of violence or intimidation against persons or force upon things."

Considering that the second element is that the thing taken belongs to another, it is relevant to determine whether ownership of the subject check was

transferred to petitioner. On this point the Negotiable Instruments Law provides:

Sec. 12. Antedated and postdated – The instrument is not invalid for the

reason only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.

(Underscoring supplied.)

Note however that delivery as the term is used in the aforementioned provision means that the party delivering did so for the purpose of giving

effect thereto. Otherwise, it cannot be said that there has been delivery of the negotiable instrument. Once there is delivery, the person to whom the instrument is delivered gets the title to the instrument completely and

irrevocably.

If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. However,

if the check was not given as payment, there being no intent to give effect to the instrument, then ownership of the check was not transferred

to SMC.

The evidence of SMC failed to establish that the check was given in payment of the obligation of Puzon. There was no provisional receipt or official receipt issued for the amount of the check. What was issued was a receipt for the document, a "POSTDATED CHECK SLIP."

Furthermore, the petitioner's demand letter sent to respondent states "As per company policies on receivables, all issuances are to be covered by

post-dated checks. However, you have deviated from this policy by forcibly taking away the check you have issued to us to cover the

December issuance." Notably, the term "payment" was not used instead the terms "covered" and "cover" were used.

The evidence proves that the check was accepted, not as payment, but in accordance with the long-standing policy of SMC to require its dealers to issue

postdated checks to cover its receivables. The check was only meant to cover the transaction and in the meantime Puzon was to pay for the

transaction by some other means other than the check. This being so, title to the check did not transfer to SMC; it remained with Puzon.

18 EQUITABLE PCI BANK vs. ARCELITO B. TAN

G.R. No. 165339, August 23, 2010

Facts: Arcelito Tan maintained a current and savings account with Philippine Commercial International Bank (PCIB), now Equitable PCI Bank. On May 13,

1992, Tan issued a PCIB Check No. 275100 allegedly dated May 30, 1992 in the amount of P34,588.72 in favor of Sulpicio Lines, Inc. As of May 14, 1992, Tan had a balance of P35,147.59. The check was cleared by the bank and

thereby leaving a balance of P558.87 in Tan’s account. On May 9 to May 16, 1992, Tan issued three (3) checks: 1) Check No. 275080

dated May 9, 1992 in the amount of P6,427.68 payable to Agusan del Sur Electric Cooperative Inc. (ASELCO); 2) Check No. 275097 dated May 10, 1992 in the amount of P6,472.01 payable to Agusan del Norte Electric Cooperative

Inc. (ANECO); and 3) Check No. 314104 dated May 16, 1992 in the amount of P10,000.00 payable to cash. When presented for payment, the 3 checks were

dishonored for being drawn against insufficient funds. As a result, the electric power supply for the two mini-sawmills owned and operated by Tan was cut off and restored only after a month.

Tan filed with the RTC Cebu City a complaint against the bank for payment of losses and damages. Tan claimed that he would have sufficient funds to cover the payment of the three checks were it not for the negligence of the bank in

immediately debiting from his account Check No. 275100 in the amount of P34,588.72 even as the said check was postdated to May 30, 1992. The bank

denied that the check was postdated May 30, 1992 and claimed that it was dated May 3, 1992. RTC decided in favor of the bank and on appeal to the CA, it reversed the decision of RTC and directed the bank to pay Tan the amount of

damages. Issue/s: Whether or not Check No. 275100 was dated May 3, 1992 or May 30, 1992.

Held: The SC held that the check was dated May 30, 1992 and decided in favor of

Tan. The date of the check is written as follows – “5/3/0/92”. SC discussed both the findings of RTC and CA. RTC concluded that the check was dated May 3, 1992 because the same check was not issued to pay the three Bill of Ladings

to which SC said was preposterous and illogical because the purpose for the issuance of the check has no logical connection with the date of the check. CA

correctly observed that the alleged (/) separating ―3‖ and ―0‖ was an unintentional marking or line done with a very light stroke unlike the bar in year 1992 done in heavy, well-defined and bold strokes. It is then concluded

that the check was postdated to May 30, 1992 and Bank or its personnel erred in debiting the amount of the check from Tan’s account even before the check’s due date.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of R.A. 8791 decrees:

Declaration of Policy. – The State recognizes the vital role of banks in providing an environment conducive to the

sustained development of the national economy and the fiduciary nature of banking that requires high standards of

integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic

and responsive to the demands of a developing economy. Although R.A. 8791 took effect only in the year 2000, the Court had already

imposed on banks the same high standard of diligence required under R.A. 8791 at the time of the untimely debiting of respondent's account by petitioner in May 1992. In Simex International (Manila), Inc. v. Court of Appeals, which

was decided in 1990, the Court held that as a business affected with public interest and because of the nature of its functions, the bank is under obligation

to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father

of a family. In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately,

down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor

can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. From the foregoing, it is clear that petitioner bank did not exercise the degree of diligence that it ought to have exercised in dealing with

its client. The bank on which the check is drawn, known as the drawee bank, is under

strict liability to pay to the order of the payee in accordance with the drawer’s instructions as reflected on the face and by the terms of the check. Thus, payment made before the date specified by the drawer is clearly against the

drawee bank's duty to its client As a matter of practice, bank tellers would not receive nor honor such checks which they believe to be unclear, without the counter-signature of its

drawer. PCIB should have exercised the highest degree of diligence required of it by ascertaining from the respondent the accuracy of the entries therein, in

order to settle the confusion, instead of proceeding to honor and receive the check.

Allied Bank vs. Lim Sio Wan

Facts:

On November 14, 1983, respondent Lim Sio Wan deposited with petitioner Allied Banking Corporation (Allied) at its Quintin Paredes Branch in Manila a money market placement of PhP 1,152,597.35 for a term of 31 days to mature

on December 15, 1983, as evidenced by Provisional Receipt No. 1356 dated November 14, 1983. On December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina

So, an officer of Allied, and instructed the latter to pre-terminate Lim Sio Wan’s money market placement, to issue a manager’s check representing the

proceeds of the placement, and to give the check to one Deborah Dee Santos who would pick up the check. Lim Sio Wan described the appearance of Santos so that So could easily identify her.

Later, Santos arrived at the bank and signed the application form for a manager’s check to be issued. The bank issued Manager’s Check No. 035669

for PhP 1,158,648.49, representing the proceeds of Lim Sio Wan’s money market placement in the name of Lim Sio Wan, as payee. The check was cross-checked "For Payee’s Account Only" and given to Santos.

Thereafter, the manager’s check was deposited in the account of Filipinas Cement Corporation (FCC) at respondent Metropolitan Bank and Trust Co. (Metrobank), with the forged signature of Lim Sio Wan as indorser.

Earlier, on September 21, 1983, FCC had deposited a money market placement for PhP 2 million with respondent Producers Bank. Santos was the money

market trader assigned to handle FCC’s account. Such deposit is evidenced by Official Receipt No. 31756813 and a Letter dated September 21, 1983 of Santos addressed to Angie Lazo of FCC, acknowledging receipt of the placement. The

placement matured on October 25, 1983 and was rolled-over until December 5, 1983 as evidenced by a Letter dated October 25, 1983. When the placement matured, FCC demanded the payment of the proceeds of the placement. On

December 5, 1983, the same date that So received the phone call instructing her to pre- terminate Lim Sio Wan’s placement, the manager’s check in the

name of Lim Sio Wan was deposited in the account of FCC, purportedly representing the proceeds of FCC’s money market placement with Producers Bank. In other words, the Allied check was deposited with Metrobank in the

account of FCC as Producers Bank’s payment of its obligation to FCC. To clear the check and in compliance with the requirements of the Philippine

Clearing House Corporation (PCHC) Rules and Regulations, Metrobank stamped a guaranty on the check, which reads: "All prior endorsements and/or lack of endorsement guaranteed."

The check was sent to Allied through the PCHC. Upon the presentment of the check, Allied funded the check even without checking the authenticity of Lim Sio Wan’s purported indorsement. Thus, the amount on the face of the check

was credited to the account of FCC. On December 9, 1983, Lim Sio Wan deposited with Allied a second money

market placement to mature on January 9, 1984. On December 14, 1983, upon the maturity date of the first money market

placement, Lim Sio Wan went to Allied to withdraw it. She was then informed that the placement had been pre- terminated upon her instructions. She

denied giving any instructions and receiving the proceeds thereof. She desisted from further complaints when she was assured by the bank’s manager that her money would be recovered.

When Lim Sio Wan’s second placement matured on January 9, 1984, So called Lim Sio Wan to ask for the latter’s instructions on the second placement. Lim Sio Wan instructed So to roll- over the placement for another 30 days. On

January 24, 1984, Lim Sio Wan, realizing that the promise that her money would be recovered would not materialize, sent a demand letter to Allied asking

for the payment of the first placement. Allied refused to pay Lim Sio Wan, claiming that the latter had authorized the pre-termination of the placement and its subsequent release to Santos.

Issue:

Whether or not collecting bank was liable

Held: NO. Allied avers that even if it had not issued the check payment, the money

represented by the check would still be lost because of Metrobank’s negligence in indorsing the check without verifying the genuineness of the indorsement

thereon. Section 66 in relation to Sec. 65 of the Negotiable Instruments Law provides: Section 66. Liability of general indorser.—Every indorser who indorses without

qualification, warrants to all subsequent holders in due course; a) The matters and things mentioned in subdivisions (a), (b) and (c) of the next preceding section; and

b) That the instrument is at the time of his indorsement valid and subsisting; And in addition, he engages that on due presentment, it shall be accepted or

paid, or both, as the case may be according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may

be compelled to pay it. Section 65. Warranty where negotiation by delivery, so forth.—Every person

negotiating an instrument by delivery or by a qualified indorsement, warrants: a) That the instrument is genuine and in all respects what it purports to be; b) That he has a good title of it;

c) That all prior parties had capacity to contract; d) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.

But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee.

The provisions of subdivision (c) of this section do not apply to persons negotiating public or corporation securities, other than bills and notes.

The warranty "that the instrument is genuine and in all respects what it purports to be" covers all the defects in the instrument affecting the validity

thereof, including a forged indorsement. Thus, the last indorser will be liable for the amount indicated in the negotiable instrument even if a previous indorsement was forged. We held in a line of cases that "a collecting bank

which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor."

However, this general rule is subject to exceptions. One such exception is when the issuance of the check itself was attended with negligence. Thus, in the

cases cited above where the collecting bank is generally held liable, in two of the cases where the checks were negligently issued, this Court held the institution issuing the check just as liable as or more liable than the collecting

bank. In isolated cases where the checks were deposited in an account other than

that of the payees on the strength of forged indorsements, we held the collecting bank solely liable for the whole amount of the checks involved for having indorsed the same. In Republic Bank v. Ebrada, the check was properly

issued by the Bureau of Treasury. While in Banco de Oro Savings and Mortgage Bank (Banco de Oro) v. Equitable Banking Corporation, Banco de Oro admittedly issued the checks in the name of the correct payees. And in Traders

Royal Bank v. Radio Philippines Network, Inc., the checks were issued at the request of Radio Philippines Network, Inc. from Traders Royal Bank.

However, in Bank of the Philippine Islands v. Court of Appeals, we said that the drawee bank is liable for 60% of the amount on the face of the negotiable instrument and the collecting bank is liable for 40%. We also noted the relative

negligence exhibited by two banks, to wit: Both banks were negligent in the selection and supervision of their employees resulting in the encashment of the forged checks by an impostor. Both banks were not able to overcome the

presumption of negligence in the selection and supervision of their employees. It was the gross negligence of the employees of both banks which resulted in

the fraud and the subsequent loss. While it is true that petitioner BPI’s negligence may have been the proximate cause of the loss, respondent CBC’s negligence contributed equally to the success of the impostor in encashing the

proceeds of the forged checks. Under these circumstances, we apply Article 2179 of the Civil Code to the effect that while respondent CBC may recover its

losses, such losses are subject to mitigation by the courts. ( See Phoenix Construction Inc. v. Intermediate Appellate Courts, 148 SCRA 353 [1987]). Considering the comparative negligence of the two (2) banks, we rule that the

demands of substantial justice are satisfied by allocating the loss of P2,413,215.16 and the costs of the arbitration proceeding in the amount of P7,250.00 and the cost of litigation on a 60-40 ratio .

Similarly, we ruled in Associated Bank v. Court of Appeals that the issuing institution and the collecting bank should equally share the liability for the loss

of amount represented by the checks concerned due to the negligence of both parties:

The Court finds as reasonable, the proportionate sharing of fifty percent-fifty percent (50%- 50%). Due to the negligence of the Province of Tarlac in releasing

the checks to an unauthorized person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee hospital for a period close to three years and in not properly ascertaining why the retired hospital

cashier was collecting checks for the payee hospital in addition to the hospital’s real cashier, respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In

effect, the Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB.

The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the

genuineness of all prior indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to

ascertain the genuineness of the payee’s indorsement. A reading of the facts of the two immediately preceding cases would reveal that the reason why the bank or institution which issued the check was held

partially liable for the amount of the check was because of the negligence of these parties which resulted in the issuance of the checks. In the instant case, the trial court correctly found Allied negligent in issuing

the manager’s check and in transmitting it to Santos without even a written authorization. In fact, Allied did not even ask for the certificate evidencing the

money market placement or call up Lim Sio Wan at her residence or office to confirm her instructions. Both actions could have prevented the whole fraudulent transaction from unfolding. Allied’s negligence must be considered

as the proximate cause of the resulting loss. To reiterate, had Allied exercised the diligence due from a financial institution, the check would not have been issued and no loss of funds would have

resulted. In fact, there would have been no issuance of indorsement had there been no check in the first place.

The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of the check. When Metrobank indorsed the check in compliance with the PCHC Rules and Regulations without verifying the authenticity of Lim Sio

Wan’s indorsement and when it accepted the check despite the fact that it was cross-checked payable to payee’s account only, its negligent and cavalier

indorsement contributed to the easier release of Lim Sio Wan’s money and perpetuation of the fraud. Given the relative participation of Allied and Metrobank to the instant case, both banks cannot be adjudged as equally

liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank, as ruled by the CA, must be upheld. FCC, having no participation in the negotiation of the check and in the forgery

of Lim Sio Wan’s indorsement, can raise the real defense of forgery as against both banks .

As to Producers Bank, Allied Bank’s argument that Producers Bank must be held liable as employer of Santos under Art. 2180 of the Civil Code is

erroneous. Art. 2180 pertains to the vicarious liability of an employer for quasi-delicts that an employee has committed. Such provision of law does not apply

to civil liability arising from delict. One also cannot apply the principle of subsidiary liability in Art. 103 of the Revised Penal Code in the instant case. Such liability on the part of the

employer for the civil aspect of the criminal act of the employee is based on the conviction of the employee for a crime. Here, there has been no conviction for any crime.

As to the claim that there was unjust enrichment on the part of Producers Bank, the same is correct. Allied correctly claims in its petition that Producers

Bank should reimburse Allied for whatever judgment that may be rendered against it pursuant to Art. 22 of the Civil Code, which provides: "Every person who through an act of performance by another, or any other means, acquires

or comes into possession of something at the expense of the latter without just cause or legal ground, shall return the same to him."1avvphi1

The above provision of law was clarified in Reyes v. Lim, where we ruled that "[t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against

the fundamental principles of justice, equity and good conscience." In Tamio v. Ticson, we further clarified the principle of unjust enrichment, thus: "Under Article 22 of the Civil Code, there is unjust enrichment when (1) a

person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another."

In the instant case, Lim Sio Wan’s money market placement in Allied Bank was pre-terminated and withdrawn without her consent. Moreover, the proceeds of the placement were deposited in Producers Bank’s account in Metrobank

without any justification. In other words, there is no reason that the proceeds of Lim Sio Wans’ placement should be deposited in FCC’s account purportedly as payment for FCC’s money market placement and interest in Producers

Bank.lavvphil With such payment, Producers Bank’s indebtedness to FCC was extinguished, thereby benefitting the former. Clearly, Producers Bank was

unjustly enriched at the expense of Lim Sio Wan. Based on the facts and circumstances of the case, Producers Bank should reimburse Allied and Metrobank for the amounts the two latter banks are ordered to pay Lim Sio

Wan. It cannot be validly claimed that FCC, and not Producers Bank, should be

considered as having been unjustly enriched. It must be remembered that FCC’s money market placement with Producers Bank was already due and demandable; thus, Producers Bank’s payment thereof was justified. FCC was

entitled to such payment. As earlier stated, the fact that the indorsement on the check was forged cannot be raised against FCC which was not a part in any stage of the negotiation of the check. FCC was not unjustly enriched.

DY v PEOPLE

G.R. No. 158312 November 14, 2008

FACTS:

John Dy under the business name Dyna MarketinG has been the

distributor of W.L. Food Products (W.L. Foods). Dy would pay W.L. Foods in

either cash or check upon pick up of stocks of snack foods. At times, he

would entrust the payment to one of his drivers.

June 24, 1992: Dy's driver went to the branch office of W.L. Foods to pick

up stocks of snack foods. He introduced himself to the checker, Mary Jane

D. Maraca, who upon confirming Dy's credit with the main office, gave him

merchandise worth P106,579.60. In return, the driver handed her a blank

Far East Bank and Trust Company (FEBTC) Check postdated July 22,

1992 signed by Dy

July 1, 1992: the driver obtained snack foods worth P226,794.36 in

exchange for a blank FEBTC Check postdated July 31, 1992. In both

instances, the driver was issued an unsigned delivery receipt. When

presented for payment, FEBTC dishonored the checks for insufficiency of

funds.

Later, Gonzales sent Atty. Jimeno another letter advising her that FEBTC

Check for P106,579.60 was returned to the drawee bank for the reasons

stop payment order and drawn against uncollected deposit (DAUD), and not

because it was drawn against insufficient funds as stated in the first letter.

Dy's savings deposit account ledger reflected a balance of P160,659.39 as of

July 22, 1992. This, however, included a regional clearing check

for P55,000 which he deposited on July 20, 1992, and which took 5

banking days to clear. When William Lim, owner of W.L. Foods, phoned Dy

about the matter, the latter explained that he could not pay since he had

no funds yet. This prompted the former to send petitioner a demand letter,

which the latter ignored.

July 16, 1993: Lim charged Dy with 2 counts of estafa under Article 315,

paragraph 2(d) of RPC and 2 counts of violation of B.P. Blg. 22. RTC

convicted Dy on two counts each of estafa and violation of B.P. Blg. 22. CA:

affirmed

Dy contends that the checks were ineffectively issued. W.L. Foods'

accountant had no authority to fill the amounts.

ISSUE: did petitioner violate B.P. Blg. 22?

HELD:

B.P. Blg. 22 elements = malum prohibitum

the making, drawing and issuance of any check to apply to account or

for value

the knowledge of the maker, drawer or issuer that at the time of issue

he does not have sufficient funds in or credit with the drawee bank for

the payment of such check in full upon its presentment

subsequent dishonor of the check by the drawee bank for insufficiency

of funds or credit or dishonor for the same reason had not the drawer,

without any valid cause, ordered the bank to stop payment -

considered by the bank to retroactively have had P160,659.39 in his

account on July 22, 1992 which was more than enough to cover the

first check

Dy admitted that he issued the checks, and that the signatures appearing on

them were his. Section 2 of B.P. Blg. 22, petitioner was prima facie presumed to

know of the inadequacy of his funds with the bank when he did not pay the

value of the goods or make arrangements for their payment in full within 5

banking days upon notice.

SEC. 14. Blanks; when may be filled.-Where the instrument is wanting in any

material particular, the person in possession thereof has a prima

facie authority to complete it by filling up the blanks therein. And

a signature on a blank paper delivered by the person making the signature in

order that the paper may be converted into a negotiable instrument operates as

a prima facie authority to fill it up as such for any amount.

The law merely requires that the instrument be in the possession of a person

other than the drawer or maker. From such possession, together with the fact

that the instrument is wanting in a material particular, the law presumes

agency to fill up the blanks .

Burden of proving want of authority or that the authority granted was

exceeded, is placed on the person questioning such authority - Dy didn't fulfill

this. estafa punished under Article 315, paragraph 2(d) of the Revised Penal

Code is committed when a check is dishonored for being drawn against

insufficient funds or closed account, and not against uncollected

deposit. Corollarily, the issuer of the check is not liable for estafa if the

remaining balance and the uncollected deposit, which was duly collected, could

satisfy the amount of the check when presented for payment.

Hi-cement Corporations vs. Insular Bank of Asia and America

FACTS:

Enrique Tan and Lilia Tan (spouses Tan) were the controlling stockholders

of E.T. Henry & Co., Inc. (E.T. Henry), a company engaged in the business

of processing and distributing bunker fuel.

E.T. Henry's customers were Hi-Cement Corporation (Hi-Cement), Riverside

Mills Corporation (Riverside) and Kanebo Cosmetics Philippines, Inc.

(Kanebo) who issued post-dated checks for their purchases

Sometime in 1979: Insular Bank of Asia and America (turned PCIB then

Equitable PCI-Bank) granted E.T. Henry a credit facility known as

―Purchase of Short Term Receivables.‖ (re-discounting arrangement)

Through this, E.T. Henry was able to encash, with pre-deducted interest,

the post-dated checks of its clients.

For every transaction, E.T. Henry had to execute a promissory note and a

deed of assignment

1979-1981: E.T. Henry was able to re-discount its clients' checks

February 1981: 20 checks of Hi-Cement (which were crossed and which

bore the restriction ―deposit to payee’s account only‖) were dishonored. So

were the checks of Riverside and Kanebo.

Bank filed a complaint for sum of money in CFI against E.T. Henry, the

spouses Tan, Hi-Cement (including its general manager and its treasurer as

signatories of the post-dated crossed checks), Riverside and Kanebo

CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-Cement, Riverside

and Kanebo, jointly and severally, to pay bank damages represented by the

face value of the post-dated checks plus interests, services, charges and

penalties until fully paid

G.R. 132403: RTC & CA

Hi-Cement authorized its general manager and treasurer to issue the

subject post-dated crossed checks

Hi-Cement was already estopped from denying such authority since it

never objected to the signatories' issuance of all previous checks to E.T.

Henry

ISSUE:

1. W/N bank was a holder in due course - NO

2. W/N Hi-Cement can still be made liable for the checks - NO

HELD: CA AFFIRMED with MODIFICATION remanded to RTC for

recomputation

1. NO.

Section 191

Section 52

Bank was all too aware that subject checks were crossed and bore

restrictions that they were for deposit to payee's account only; hence, they

could not be further negotiated to it

irregularity - only the treasurer's signature appeared on the deed of

assignment

As a banking institution, it behooved respondent to act with extraordinary

diligence in every transaction

Its business is impressed with public interest, thus, it was not expected to

be careless and negligent, especially so where the checks it dealt with were

crossed.

It is then settled that crossing of checks should put the holder on inquiry

and upon him devolves the duty to ascertain the indorser’s title to the check

or the nature of his possession. - failure: guilty of gross negligence

amounting to legal absence of good faith

2. NO.

the drawer of the post-dated crossed checks was not liable to the holder

who was deemed not a holder in due course

may recover from the party who indorsed/encashed the checks ―if the latter

has no valid excuse for refusing payment - E.T. Henry had no justification

to refuse payment, it should pay.

Metropolitan Bank and Trust Company VS Cabilzo

FACTS:

November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank

Check payable to "CASH" and postdated on November 24, 1994 in the

amount of P1,000 drawn against his Metrobank account to Mr. Marquez,

as his sales commission

check was presented to Westmont Bank for payment who indorsed it

to Metrobank for appropriate clearing

After the entries thereon were examined, including the availability of funds

and the authenticity of the signature of the drawer, Metrobank cleared the

check for encashment in accordance with the Philippine Clearing House

Corporation (PCHC) Rules

November 16, 1994: Cabilzo’s representative was at Metrobank when he

was asked by a bank personnel if Cabilzo had issued a check in the amount

of P91K to which he replied in negative

That afternoon: Cabilzo called Metrobank to reiterate that he did not issue

the check

He later discovered that the check of P1K was altered to P91K and date was

changed from Nov 24 to Nov 14.

Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to

his account

June 30, 1995: Through counsel sent a letter-demand for the amount of

P90K

CA affirmed RTC: Favored Cablizo

ISSUE: W/N Cablizo can recover from Metrobank

HELD: YES. CA Affirmed

material alteration

changes the items which are required to be stated under Section 1 of the

Negotiable Instruments Law

Section 1. Form of negotiable instruments. - An instrument to be negotiable

must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in

money;

(c) Must be payable on demand or at a fixed determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or

otherwise indicated therein with reasonable certainty.

changes the effect of the instrument

Section 125. What constitutes material alteration. – Any alteration which

changes:

(a) The date;

(b) The sum payable, either for principal or interest;

(c) The time or place of payment;

(d) The number or the relation of the parties;

(e) The medium or currency in which payment is to be made;

Or which adds a place of payment where no place of payment is specified, or

any other change or addition which alters the effect of the instrument in any

respect is a material alteration.

In the case at bar, the check was altered so that the amount was increased

from P1,000.00 to P91,000.00 and the date was changed from 24 November

1994 to 14 November 1994.

Section 124. Alteration of instrument; effect of. – Where a negotiable

instrument is materially altered without the assent of all parties liable

thereon, it is avoided, except as against a party who has

himself made, authorized,and assented to the alteration and subsequent

indorsers.

But when the instrument has been materially altered and is in the hands of

a holder in due course not a party to the alteration, he may enforce the

payment thereof according to its original tenor.

Cabilzo was not the one who made nor authorized the alteration. Neither did

he assent to the alteration by his express or implied acts

There is no showing that he failed to exercise such reasonable degree of

diligence required of a prudent man which could have otherwise prevented

the loss.

bank must be a high degree of diligence, if not the utmost diligence

Surprisingly, however, Metrobank failed to detect the above alterations

which could not escape the attention of even an ordinary person

"NINETY" is also typed differently and with a lighter ink

only 2 asterisks were placed before the amount in figures, while 3 asterisks

were placed after such amount

"NINETY" are likewise a little bigger when compared with the letters of the

words "ONE THOUSAND PESOS ONLY"

When the drawee bank pays a materially altered check, it violates the terms

of the check, as well as its duty to charge its client’s account only for bona

fide disbursements he had made.

The corollary liability of Westmont Ban's indorsement, if any, is separate

and independent from the liability of Metrobank to Cabilzo.

29. Melva Theresa Gonzales vs. Rizal Commercial Banking Corporation

Facts: Gonzales was an employee of Rizal Commercial Banking Corporation (RCBC). A foreign check in the amount of $7,500 was drawn by Dr. Don

Zapanta and payable to Gonzales’ mother, defendant Eva Alviar. Alviar then endorsed this check. Gonzales presented the foreign check to Olivia Gomez. After examining this, Olivia Gomez acquiesced to the early encashment of the

check and signed the check but indicated thereon her authority of ―up to P17,500.00 only. RCBC then tried to collect the check with the drawee bank but was dishonored because of irregular indorsement. Insisting, RCBC again

sent the check to the drawee bank, but this time the check was returned due to ―account closed.‖ Unable to collect, RCBC demanded from Gonzales the

payment of the peso equivalent of the check that she received. Issue: Whether or not Gonzales is liable to the subsequent indorser despite of

the defect introduced by the latter which rendered the instrument dishonored.

Held: The foreign drawee bank, Wilshire Center Bank N.A., refused to pay the bearer of this dollar-check drawn by Don Zapanta because of the defect introduced by RCBC through its employee, Olivia Gomez. There is no doubt in

the mind of the Court that a subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith. The holder or subsequent endorser who tries to claim under the

instrument which had been dishonored for ―irregular endorsement‖ must not be the irregular endorser himself who gave cause for the dishonor. RCBC,

which caused the dishonor of the check upon presentment to the drawee bank, through the qualified endorsement of its employee, Olivia Gomez, cannot hold prior endorsers, Alviar and Gonzales in this case, liable on the instrument.