Philippine National Bank vs.

Quimpo [GR L-53194, 14 March 1988] First Division, Gancayco (J): 4 concur Facts: On 3 July 1973, Francisco S. Gozon II, who was a depositor of the Caloocan City Branch of the Philippine National Bank (PNB), went to the bank in his car 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 check book he took a check therefrom, filled it up for the amount of P5,000.00, forged the signature of Gozon, and thereafter he encashed the check in the bank on the same day. The account of Gozon was debited the said amount. Upon receipt of the statement of account from the bank, Gozon asked that the said amount of P5,000.00 should be returned to his account as his signature on the check was forged but the bank refused. Upon Gozons complaint on 1 February 1974 Ernesto Santos was apprehended by the police authorities and upon investigation he admitted that he stole the check of Gozon, forged his signature and encashed the same with the Bank. Gozon filed the complaint for recovery of the amount of P5,000.00, plus interest, damages, attorney's fees and costs against the bank in the CFI Rizal (Branch XIC, Hon. Romulo S. Quimpo presiding). After the issues were joined and the trial on the merits ensued, a decision was rendered on 4 February 1980, by the Court, ordering the bank to return the amount of P5,000 which it had unlawfully withheld, with interest at the legal rate from 22 September 1972 until the amount is fully delivered. The bank was further condemned to pay Gozon the sum of P2,000.00 as attorney's fees and to pay the costs of the suit. The bank filed a petition for review on certiorari. Issue: Whether the act of Gozon in putting his checkbook containing the forged check into the hands of Santos was the proximate cause of the loss, precluding him from setting up the defense of forgery. Held: 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. It is expected to use reasonable business prudence in accepting and cashing a check presented to it. 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. This rule is absolutely necessary to the circulation of drafts and checks, and is based upon the presumed negligence of the drawee in failing to meet its obligation to know the signature of its correspondent. There is nothing inequitable in such a rule. If the paper comes to the drawee in the regular course of business, and he, having the opportunity 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. 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. It should be borne in mind that when Gozon left his car, Santos, a long time classmate and friend remained in the same. Gozon could not have been expected to know that the said Santos would remove a check from his checkbook. Gozon had trust in his classmate and friend. He had no reason to suspect that the latter would breach that trust.

Philippine Bank of Commerce vs CA

The negligence must be the proximate cause of the loss

FACTS: Rommels Marketing Corporation (RMC) maintained two separate current accounts with PBC in connection with its business of selling appliances. The RMC General Manager Lipana entrusted to his secretary, Irene Yabut, RMC funds amounting to P300,000+ for the purpose of depositing the same to RMCs account with PBC. However, it turned out that Yabut deposited the amounts in her husbands account instead of RMC. Lipana never checked his monthly statement of accounts regularly furnished by PBC so that Yabuts modus operandi went on for the span of more than one year. ISSUE:

What is the proximate cause of the loss Lipanas negligence in not checking his monthly statements or the banks negligence through its teller in validating the deposit slips?

HELD: The bank teller was negligent in validating, officially stamping and signing all the deposit slips prepared and presented by Yabut, despite the glaring fact that the duplicate copy was not completely accomplished contrary to the self-imposed procedure of the bank with respect to the proper validation of deposit slips, original or duplicate. The bank tellers negligence, as well as the negligence of the bank in the selection and supervision of its bank teller, is the proximate cause of the loss suffered by the private respondent, not the latters entrusting cash to a dishonest employee. Even if Yabut had the fraudulent intention to misappropriate the funds, she would not have been able to deposit those funds in her husbands current account, and then make plaintiff believe that it was in the latters accounts wherein she had deposited them, had it not been for the bank tellers aforesaid gross and reckless negligence. Doctrine of Last Clear Chance where both parties are negligent, but the negligent act of one is appreciably later in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident, the one who had the last clear opportunity to avoid the impending harm and failed to do so is chargeable with the consequences thereof. It means that the antecedent negligence of a person does not preclude the recovery of damages for the supervening negligence of, or bar a defense against liability sought by another, if the latter, who had the last fair chance, could have avoided the impending harm by exercise of due diligence. (Phil. Bank of Commerce v. CA, supra)

FAR EAST BANK vs GOLD PALACE Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law) FACTS: June 1998: Samuel Tagoe, a foreigner, purchased from Gold Palace Jewellery Co.'s (Gold Palace's) store at SM-North EDSA several pieces of jewelry valued at P258,000paid w/ Foreign Draft issued by the United Overseas Bank (Malaysia) to Land Bank of the Philippines, Manila (LBP) for P380,000

Teller of Far East Bank, next door tenant, informed Julie Yang-Go (manager of Gold Palace) that a foreign draft has similar nature to a manager's check, but advised her not to release the pieces of jewelry until the draft had been cleared Yang issued Cash Invoice so the jewelries can be released Yang deposited the draft in the company's account with the Far East on June 2, 1998 When Far East, the collecting bank, presented the draft for clearing to LBP, the drawee bank, cleared the it and Gold Palace's account with Far East was credited June 6, 1998: The foreigner eventually returned to claim the purchased goods. After ascertaining that the draft had been cleared, Yang released the pieces of jewelry and his change, Far East Check of P122,000 paid by the bank June 26, 1998: LBP informed Far East that the Foreign Draft had been materially altered from P300 to P300,000and that it was returning the same Far East refunded the amount to LBP and debit only P168,053.36 of the amount left in Gold Palace' account without a prior written notice to the account holder Far East only notified by phone the representatives of the Gold Palace August 12, 1998: Far East demanded from Gold Palace the payment of balance and upon refusal filed in the RTC RTC: in favor of Far East on the basis that Gold Palace was liable under the liabilities of a general indorser CA: reversed since Far East failed to undergo the proceedings on the protest of the foreign draft or to notify Gold Palace of the draft's dishonor; thus, Far East could not charge Gold Palace on its secondary liability as an indorser

ISSUE: W/N Gold Palace should be liable for the altered Foreign Draft HELD: NO. AFFIRMED WITH THE MODIFICATION that the award of exemplary damages and attorney's fees is DELETED

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.

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 The tenor of the acceptance is determined by the terms of the bill as it is when the drawee accepts. LBP was liable on its payment of the check according to the tenor of the check at the time of payment, which was the raised amount. Gold Palace was not a participant in the alteration of the draft, was not negligent, and was a holder in due course LBP, having the most convenient means to correspond with UOB, did not first verify the amount of the draft before it cleared and paid the same Gold Palace had no facility to ascertain with the drawer, UOB Malaysia, the true amount in the draft. It was left with no option but to rely on the representations of LBP that the draft was good Principle that the drawee bank, having paid to an innocent holder the amount of an uncertified, altered check in good faith and without negligence which contributed to the loss, could recover from the person to whom payment was made as for money paid by mistake - NOT applicable The Court is also aware that under the Uniform Commercial Code in the United States of America, if an unaccepted draft is presented to a drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that the draft has not been altered - absent any similar provision in our law, cannot extend the same preferential treatment to the paying bank 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 The subsequent payment by the drawee bank and the collection of the amount by the collecting bank closed the transaction insofar as the drawee and the holder of the check or his agent are concerned, converted the check into a mere voucher, and, as already discussed, foreclosed the recovery by the drawee of the amount paid. This closure of the transaction is a matter of course; otherwise, uncertainty in commercial transactions, delay and annoyance will arise if a bank at some future time will call on the payee for the return of the money paid to him on the check

As the transaction in this case had been closed and the principal-agent relationship between the payee and the collecting bank had already ceased, the latter in returning the amount to the drawee bank was already acting on its own and should now be responsible for its own actions. Neither can petitioner be considered to have acted as the representative of the drawee bank when it debited respondent's account, because, as already explained, the drawee bank had no right to recover what it paid. Likewise, Far East cannot invoke the warranty of the payee/depositor who indorsed the instrument for collection to shift the burden it brought upon itself. This is precisely because the said indorsement is only for purposes of collection which, under Section 36 of the NIL, is a restrictive indorsement. It did not in any way transfer the title of the instrument to the collecting bank. Far East did not own the draft, it merely presented it for payment. Considering that the warranties of a general indorser as provided in Section 66 of the NIL are based upon a transfer of title and are available only to holders in due course, these warranties did not attach to the indorsement for deposit and collection made by Gold Palace to Far East. Without any legal right to do so, the collecting bank, therefore, could not debit respondent's account for the amount it refunded to the drawee bank.

RCBC vs HI-TRI DEVELOPMENT CORPORATION

Luz [R.] Bakunawa and her husband Manuel, now deceased (Spouses Bakunawa) are registered owners of six (6) parcels of land in Marikina City. These lots were sequestered by the Presidential Commission on Good Government [(PCGG)]. Sometime in 1990, a certain TeresitaMillan (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 down payment 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. 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 Millans company Rosmil Realty and Development Corporation (Rosmil) c/o TeresitaMillan 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. All throughout the proceedings in Civil Case, especially during negotiations for a possible settlement of the case, Millan was informed that the Managers Check was available for her withdrawal, she being the payee. On January 31, 2003, during the pendency of the abovementioned case and without the knowledge of [Hi-Tri and Spouses Bakunawa], x xx 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. 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. On April 30, 2008, [Spouses Bakunawa] settled amicably their dispute with Rosmil and Millan. Instead of only the amount of 1,019,514.29, [Spouses Bakunawa] agreed to pay Rosmil and Millan the amount of 3,000,000.00, [which is] inclusive [of] the amount of []1,019,514.29. But during negotiations and evidently prior to said settlement, [Manuel Bakunawa, through Hi-Tri] inquired from RCBCErmita the availability of the 1,019,514.29 under RCBC Managers Check No. ER 034469. [Hi-Tri and Spouses Bakunawa] were however dismayed when they were informed that the amount was already subject of the escheat proceedings before the RTC. Spouses Bakunawa contended that the deposit would be taken from [HiTris] RCBC bank account once an order to debit is issued upon the payees presentation of the Managers Check. Since the payee rejected the negotiated Managers Check, presentation of the Managers Check was never made. RCRC contended that Contrary to what Hi-Tri hopes for, the funds covered by the Managers Check No. ER034469 does not form part of the Banks own account. By simple operation of law, the funds covered by the managers check in issue became a deposit/credit susceptible for inclusion in the escheat case initiated by the OSG and/or Bureau of Treasury. Granting arguendo that the Bank was duty-bound to make good the check, the Banks obligation to do so prescribed as early as October 2001.

Issue:

Whether or not the allocated funds may be escheated in favor of the Republic

HELD: Escheat proceedings refer to the judicial process in which the state, by virtue of its sovereignty, steps in and claims abandoned, left vacant, or unclaimed property, without there being an interested person having a legal claim thereto. [15] In the case of dormant accounts, the state inquires into the status, custody, and ownership of the unclaimed balance to determine whether the inactivity was brought about by the fact of death or absence of or abandonment by the depositor.[16]If after the proceedings the property remains without a lawful owner interested to claim it, the property shall be reverted to the state to forestall an open invitation to self-service by the first comers.[17] However, if interested parties have come forward and lain claim to the property, the courts shall determine whether the credit or deposit should pass to the claimants or be forfeited in favor of the state.[18] We emphasize that escheat is not a proceeding to penalize depositors for failing to deposit to or withdraw from their accounts. It is a proceeding whereby the state compels the surrender to it of unclaimed deposit balances when there is substantial ground for a belief that they have been abandoned, forgotten, or without an owner.[19]

An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank (drawee),[24] requesting the latter to pay a person named therein (payee) or to the order of the payee or to the bearer, a named sum of money.[25] The issuance of the check does not of itself operate as an assignment of any part of the funds in the bank to the credit of the drawer.[26] Here, the bank becomes liable only after it accepts or certifies the check.[27] After the check is accepted for payment, the bank would then debit the amount to be paid to the holder of the check from the account of the depositor-drawer.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.[28] 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. Since the bank issues the check in its name, with itself as the drawee, the check is deemed accepted in advance.[29] Ordinarily, the check becomes the primary obligation of the issuing bank and constitutes its written promise to pay upon demand.[30]

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. Petitioner acknowledges that the Managers Check was procured by respondents, and that the amount to be paid for the check would be sourced from the deposit account of Hi-Tri.[32] When Rosmil did not accept the Managers Check offered by respondents, the latter retained custody of the instrument instead of cancelling it. As the Managers Check neither went to the hands of Rosmil nor was it further negotiated to other persons, the instrument remained undelivered. Petitioner does not dispute the fact that respondents retained custody of the instrument.[33]Since there was no delivery, presentment of the check to the bank for payment did not occur. An order to debit the account of respondents was never made. 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.[34] 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. 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.