PCIB v.

CA
G.R. No. 121413
January 29, 2001
Secs. 55 and 56: Holder in Good Faith

FACTS: This case involves defendant Ford who drew and issued a citibank
check in the amount of 4,746,114.41 in favor of the Commission of Internal
Revenue as payment of their percentage or manufacturers sales taxes for
the third quarter of 1977. The checks were then deposited to IBAA (now PCI
Bank) and was subsequently cleared at the Central Bank. Upon presentment
with Citibank, the proceeds of the check was paid to IBAA as collecting bank.
However, the proceeds of the were never paid to CIR. The plaintiff was
prompted by the CIR to make a second payment of its manufacturers sales
taxes for 1977. Ford together with the check and the Revenue Tax Receipt
was deposited with defendant IBAA and later accepted the check and sent to
the Central Clearing House. After presentment of the check for payment to
Citibank, the latter paid for the face value and was debited to defendants
account with Citibank. Plaintiff then discovered that the amount was not paid
to CIR which prompted Ford to notify the latter that in case it will be re-
assessed by the BIR for payment of the taxes covered by the said checks,
plaintiff shall hold the defendants liable for reimbursement for the value of
the check. Both IBAA and Citibank denied liability and refused to payeven
after BIR notified the parties. IBAA was then merged with PCIBank. Upon
investigation of the NBI, Godofredo Rivera, the General Ledger Accountant of
Ford recalled the check since there was an error with the computation. With
Riveras instruction, PCIBank replaced the check with two of its own
Managers check. Subsequently, alleged members of a syndicate later
deposited the two MCs with Pacific Banking Corporation. ford then filed a
third-part complaint before the trial court imploding Pacific Banking
Corporation and Godofredo Rivera. The RTC favord Ford and asked Citibank
and PCIBank liable. Upon appeal, CA modified the judgment making IBAA
solely liable. Hence, this petition

The same syndicate apparently embezzled the proceeds of the check to

settle Fords percentage taxes for 1978-1979. The RTC rendered Citibank
liable to reimburse Ford at total of 12,163,298.10 PHP.

ISSUE: Whether or not petitioner Ford the right to recover from the collecting
bank (PCIBank) the drawee bank the value of the checks intended as
payment to the Commission of Internal Revenue or is he already prescribed.

HELD: Yes, Ford can recover from PCIBank along with Citibank. The checks
were drawn against the drawee bank but the title of the person
negotiating the same was allegedly defective because the
instrument was obtained by fraud and unlawful means, and
the proceeds of the checks were not remitted to the payee. It
was established that instead paying the Commissioner, the
checks were diverted and encashed for the eventual
distribution among members of the syndicate. Pursuant to this,
it is vital to show that the negotiation is made by the
perpetrator in breach of faith amounting to fraud. The person
negotiating the checks must have gone beyond the authority
given by his principal. If the principal could prove that there was
no negligence in the performance of his duties, he may set up
the personal defense to escape liability and recover from
other parties who, through their own negligence, allowed the
commission of the crime. It should be resolved if Ford is
guilty of the imputed contributory negligence that would defeat
its claim for reimbursement, bearing in mind that its employees
were among the members of the syndicate. It appears although
the employees of Ford initiated the transactions attributable
to the organized syndicate, their actions were not the
proximate cause of encashing the checks payable to CIR.
The degree of Fords negligence couldnt be characterized as
the proximate cause of the injury to parties. The mere fact
that the forgery was committed by a drawer-payors
confidential employee or agent, who by virtue of his position had
unusual facilities for perpetrating the fraud and imposing the
forged paper upon the bank, doesnt entitle the bank to shift the
loss to the drawer-payor, in the absence of some circumstance
raising estoppel against the drawer.