#16 NIL Case PCI Bank vs. CA and Ford Phils Inc. et.al.

G.R. No. 121413

29 January 2001
Ponente: J. Quisumbing
Topic: Forgery, contributory negligence, banking employees responsibility,
nature of banking business
Doctrine: Forgery committed by an employee or agent does not entitle bank
to shift loss to the drawer/payor. Banking business requires that the one who
first cashes and negotiates the check must take same precaution to learn
whether or not it is genuine. a banking corporation is liable for
wrongful/tortuous acts and declarations of its officers or agents within the
course and scope of their employment. Bank should treat accounts of its
depositors with meticulous care due to the fiduciary (business built in trust)
nature of their relationship.
Facts: This case is composed of 3 consolidated petitions involving several
checks, payable to BIR but was embezzled allegedly by an organized
syndicate.
First Case
1. 19 October 1977- Ford issued Citibank check P4,746,114.41 in favor of
CIR for payment of manufacturers taxes.
2. The check was deposited with IBAA/PCIB, subsequently cleared by CB
and paid by Citibank to PCIB.
3. The proceeds never reached BIR.
4. Ford issued another check.
5. PCIB refused to reimburse Ford.
6. Ford filed a complaint.
7. During the investigation, it was revealed that Godofredo Rivera,
general ledger accountant of Ford, recalled check and replaced by a
managers check.
8. Alleged members of a syndicate deposited the 2 MCs with Pacific
Banking Corporation (PBC).
9. Ford filed a 3rd party complaint against Rivera and PBC.
10.
The cases were dismissed.
11.
RTC held Citibank and PCIB jointly and severally liable to Ford.
12.
CA only held PCIB liable.
Second and Third Cases
1. Ford drew 2 checks in favor of CIR, P5,851,706.37 and P6,311,591.73.
2. Both are crossed checks payable to payees account only.

3. The checks never reached BIR so Ford compelled to make 2 nd

payments.
4. Ford also instituted an action for recovery against PCIB and Citibank.
5. On NBI investigation, modus operandi was discovered.
6. Godofredo Rivera, general ledger accountant of Ford, made checks but
instead of delivering to BIR, passed it to Castro, who was the manager
of PCIB San Andres.
7. Castro opened a checking account in the name of a fictitious person
Reynaldo Reyes.
8. Castro deposited a worthless Bank of America check with same amount
as issued by Ford.
9. While en-route to CB for clearing, worthless Bank of America check was
replaced by the genuine one from Ford.
10.
RTC absolved PCIB and held Citibank liable, as also affirmed by
CA.
Issues:
1. WON contributory negligence of Ford?
2. WON PCIB and Citibank jointly and severally liable?
Ruling:
1. For all cases: No. Contributory negligence must be proximate cause,
i.e. natural and continuous sequence, unbroken by an efficient,
intervening cause produces the injury and without the result would not
have occurred. Although Ford employees initiated the transactions, it is
not the proximate cause. Forgery committed by an employee or agent
does not entitle bank to shift loss to the drawer/payor/Ford.
2. First Case- PCIB only one liable
a. PCIB failed to verify Mr. Riveras authority to negotiate the checks.
This showed lack of care and prudence. Since PCIB is authorized to
collect payment of taxpayers in behalf of BIR, it is duty bound to
consult its principal regarding unwarranted instructions given by
payor or its agent.
b. Since it was also a crossed check, the phrase Payees account
only is a warning that check should be deposited only on account
of CIR.
c. Banking business requires that the one who first cashes and
negotiates the check must take same precaution to learn whether or
not it is genuine.
Second and Third Cases- PCIB and Citibank jointly and severally liable

a. No evidence presented confirming PCIB conscious participation in

the embezzlement. PCIB is also victim of the scheme in which its
own management employees had participated. But in this case,
responsibility for negligence does not lie on PCIBs shoulders alone.
Also, a banking corporation is liable for wrongful/tortuous acts and
declarations of its officers or agents within the course and scope of
their employment.
b. Citibank failed to notice and verify absence of clearing stamps. It
failed to ensure amount of checks should be paid only to its
designated payee. Bank should treat accounts of its depositors with
meticulous care due to the fiduciary (business built in trust) nature
of their relationship.
Dispositive: Wherefore, the assailed decision and resolution of the Court of
Appeals in CA-GR CV No. 25017, are affirmed. PCIBank, known formerly as
Insular Bank of Asia and America is declared solely responsible for the loss of
the proceeds of Citibank Check No. SN 04867 in the amount of
P4,746,114.41, which shall be paid together with 6% interest thereon to Ford
Philippines Inc. from the date when the original complaint was filed until said
amount is fully paid.
However, the Decision and Resolution of the Court of Appeals in CA-GR No.
28430 are modified as follows: PCIBank and Citibank are adjudged liable for
and must share the loss, (concerning the proceeds of Citibank Check
Numbers SN 10597 and 16508 totalling P12,163,298.10) on a fifty-fifty ratio,
and each bank is ordered to pay Ford Philippines Inc P6,081,649.05 with 6%
interest thereon, from the date the complaint was filed until full payment of
said amount.
Cost against PCIBank and Citibank, NA.