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FIRST DIVISION

[G.R. No. 74917. January 20, 1988.]

BANCO DE ORO SAVINGS AND MORTGAGE BANK,

petitioner, vs. EQUITABLE BANKING CORPORATION,
PHILIPPINE CLEARING HOUSE CORPORATION, AND
REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH XCII
(92) respondents.

SYLLABUS

1. COMMERCIAL LAW; BANKING; PHILIPPINE CLEARING

HOUSE CORPORATION (PCHC); AUTHORITY TO CLEAR CHECKS
AND/OR CHECKING ITEMS; TRANSACTIONS ON NON-NEGOTIABLE
CHECKS WITHIN THE AMBIT OF ITS JURISDICTION. — As provided in
the articles of incorporation of PCHC its operation extend to "clearing
checks and other clearing items." No doubt transactions on non-negotiable
checks are within the ambit of its jurisdiction. In a previous case, this Court
had occasion to rule: "Ubilex non distinguit nec nos distinguere debemos."
There should be no distinction in the application of a statute where none is
indicated for courts are not authorized to distinguish where the law makes
no distinction. They should instead administer the law not as they think it
ought to be but as they find it and without regard to consequences. The
participation of the two banks, petitioner and private respondent, in the
clearing operations of PCHC is a manifestation of their submission to its
jurisdiction. Viewing the provisions the conclusion is clear that the PCHC
Rules and Regulations should not be interpreted to be applicable only to
checks which are negotiable instruments but also to non-negotiable
instruments, and that the PCHC has jurisdiction over this case even as the
checks subject of this litigation are admittedly non-negotiable.
2. STATUTORY CONSTRUCTION; APPLICATION OF A
STATUTE; NO DISTINCTION WHERE NONE IS INDICATED. — The term,
check as used in the said Articles of Incorporation of PCHC can only
connote checks in general use in commercial and business activities. It
cannot be conceived to be limited to negotiable checks only. Checks are
used between banks and bankers and their customers, and are designed
to facilitate banking operations. It is of the essence to be payable on
demand, because the contract between the banker and the customer is
that the money is needed on demand.

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3. COMMERCIAL LAW; BANKING: STAMPING GUARANTEE

OF PRIOR ENDORSEMENT AT THE BACK OF A CHECK EQUIVALENT
TO ASSUMPTION OF WARRANTY OF AN ENDORSER. — The petitioner
having stamped its guarantee of "all prior endorsements and/or lack of
endorsements" (Exh. A-2 to F-2) is now estopped from claiming that the
checks under consideration are not negotiable instruments. The checks
were accepted for deposit by the petitioner stamping thereon its guarantee,
in order that it can clear the said checks with the respondent bank. By such
deliberate and positive attitude of the petitioner it has for all legal intents
and purposes treated the said checks as negotiable instruments and
accordingly assumed the warranty of the endorser when it stamped its
guarantee of prior endorsements at the back of the checks. It led the said
respondent to believe that it was acting as endorser of the checks and on
the strength of this guarantee said respondent cleared the checks in
question and credited the account of the petitioner. Petitioner is now barred
from taking an opposite posture by claiming that the disputed checks are
not negotiable instrument.
4. ID.; ID.; ID.; BASES OF THE DOCTRINE OF ESTOPPEL. —
The Court enunciated in Philippine National Bank vs. Court of Appeals, a
point relevant to the issue when it stated — "the doctrine of estoppel is
based upon the grounds of public policy, fair dealing, good faith and justice
and its purpose is to forbid one to speak against his own act,
representations or commitments to the injury of one to whom they were
directed and who reasonably relied thereon."
5. ID.; ID.; ID.; FORGERY IN ENDORSEMENT; LOSS
SUFFERED BY THE COLLECTING BANK OR LAST ENDORSER. —
Apropos the matter of forgery in endorsements, this Court has succinctly
emphasized that the collecting bank or last endorser generally suffers the
loss because it has the duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting the check for payment
to the drawee is an assertion that the party making the presentment has
done its duty to ascertain the genuineness of the endorsements. This is
laid down in the case of PNB vs. National City Bank. In another case, this
court held that if the drawee-bank discovers that the signature of the payee
was forged after it has paid the amount of the check to the holder thereof,
it can recover the amount paid from the collecting bank.
6. ID.; ID.; CHECKS: DUTY OF DILIGENCE NOT OWNED BY
THE DRAWER TO THE COLLECTING BANK. — It has been enunciated
in an American case particularly in American Exchange National Bank vs.
Yorkville Bank that: "the drawer owes no duty of diligence to the collecting
bank (one who had accepted an altered check and had paid over the
proceeds to the depositor) except of seasonably discovering the alteration
by a comparison of its returned checks and check stubs or other equivalent
record, and to inform the drawee thereof." Thus We hold that while the
drawer generally owes no duty of diligence to the collecting bank, the law
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imposes a duty of diligence on the collecting bank to scrutinize 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 and the law holds it to a high standard
of conduct.

DECISION

GANCAYCO, J : p

This is a petition for review on certiorari of a decision of the Regional

Trial Court of Quezon City promulgated on March 24, 1986 in Civil Case
No. Q-46517 entitled Banco de Oro Savings and Mortgage Bank versus
Equitable Banking Corporation and the Philippine Clearing House
Corporation after a review of the Decision of the Board of Directors of the
Philippine Clearing House Corporation (PCHC) in the case of Equitable
Banking Corporation (EBC) vs. Banco de Oro Savings and Mortgage
(BCO), ARBICOM Case No. 84-033.
The undisputed facts are as follows:
"It appears that sometime in March, April, May and August
1983, plaintiff through its Visa Card Department, drew six crossed
Manager's check (Exhibits 'A' to 'F', and herein referred to as
Checks) having an aggregate amount of Forty Five Thousand Nine
Hundred and Eighty Two & 23/100 (P45,982.23) Pesos and payable
to certain member establishments of Visa Card. Subsequently, the
Checks were deposited with the defendant to the credit of its
depositor, a certain Aida Trencio.
Following normal procedures, and after stamping at the back
of the Checks the usual endorsements: 'All prior and/or lack of
endorsement guaranteed' the defendant sent the checks for clearing
through the Philippine Clearing House Corporation (PCHC).
Accordingly, plaintiff paid the Checks; its clearing account was
debited for the value of the Checks and defendant's clearing account
was credited for the same amount.
Thereafter, plaintiff discovered that the endorsements
appearing at the back of the Checks and purporting to be that of the
payees were forged and/or unauthorized or otherwise belong to
persons other than the payees.
Pursuant to the PCHC Clearing Rules and Regulations,
plaintiff presented the Checks directly to the defendant for the
purpose of claiming reimbursement from the latter. However,
defendant refused to accept such direct presentation and to
reimburse the plaintiff for the value of the Checks; hence, this case.

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In its Complaint, plaintiff prays for judgment to require the

defendant to pay the plaintiff the sum of P45,982.23 with interest at
the rate of 12% per annum from the date of the complaint plus
attorney's fees in the amount of P10,000.00 as well as the cost of the
suit.
In accordance with Section 38 of the Clearing House Rules
and Regulations, the dispute was presented for Arbitration; and Atty.
Ceasar Querubin was designated as the Arbitrator.
After an exhaustive investigation and hearing the Arbiter
rendered a decision in favor of the plaintiff and against the defendant
ordering the PCHC to debit the clearing account of the defendant,
and to credit the clearing account of the plaintiff of the amount of
P45,982.23 with interest at the rate of 12% per annum from date of
the complaint and Attorney's fee in the amount of P5,000.00. No
pronouncement as to cost was made." 1
In a motion for reconsideration filed by the petitioner, the Board of
Directors of the PCHC affirmed the decision of the said Arbiter in this wise:
"'In view of all the foregoing the decision of the Arbiter is
confirmed"; and the Philippine Clearing House Corporation is hereby
ordered to debit the clearing account of the defendant and credit the
clearing account of plaintiff the amount of Forty Five Thousand Nine
Hundred Eighty Two & 23/100 (P45,982.23) Pesos with interest at
the rate of 12% per annum from date of the complaint, and the
Attorney's fee in the amount of Five Thousand (P5,000.00) Pesos.'"
Thus, a petition for review was filed with the Regional Trial Court of
Quezon City, Branch XCII, wherein in due course a decision was rendered
affirming in toto the decision of the PCHC.
Hence this petition.
The petition is focused on the following issues:
1. Did the PCHC have any jurisdiction to give due course to
and adjudicate Arbicom Case No. 84-033?
2. Were the subject checks non-negotiable and if not, does
it fall under the ambit of the power of the PCHC?
3. Is the Negotiable Instrument Law, Act No. 2031
applicable in deciding controversies of this nature by the
PCHC?
4. What law should govern in resolving controversies of this
nature?
5. Was the petitioner bank negligent and thus responsible
for any undue payment?

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Petitioner maintains that the PCHC is not clothed with jurisdiction

because the Clearing House Rules and Regulations of PCHC cover and
apply only to checks that are genuinely negotiable. Emphasis is laid on the
primary purpose of the PCHC in the Articles of Incorporation, which states:
"To provide, maintain and render an effective, convenient,
efficient, economical and relevant exchange and facilitate service
limited to check processing and sorting by way of assisting member
banks, entities in clearing checks and other clearing items as defined
in existing and in future Central Bank of the Philippines circulars,
memoranda, circular letters, rules and regulations and policies in
pursuance to the provisions of Section 107 of R.A. 265. . ."
and Section 107 of R.A. 265 which provides:
xxx xxx xxx
The deposit reserves maintained by the banks in the Central
Bank, in accordance with the provisions of Section 1000 shall serve
as a basis for the clearing of checks, and the settlement of interbank
balances . . ."
Petitioner argues that by law and common sense, the term check
should be interpreted as one that fits the articles of incorporation of the
PCHC, the Central Bank and the Clearing House Rules stating that it is a
negotiable instrument citing the definition of a "check" as basically a "bill of
exchange" under Section 185 of the NIL and that it should be payable to
"order" or to "bearer" under Section 126 of same law. Petitioner alleges that
with the cancellation of the printed word "or bearer" from the face of the
check, it becomes non-negotiable so the PCHC has no jurisdiction over the
case.
The Regional Trial Court took exception to this stand and conclusion
put forth by the herein petitioner as it held:
"Petitioner's theory cannot be maintained. As will be noted, the
PCHC makes no distinction as to the character or nature of the
checks subject of its jurisdiction. The pertinent provisions quoted in
petitioner's memorandum simply refer to check(s). Where the law
does not distinguish, we shall not distinguish.
In the case of Reyes vs. Chuanico (CA-G.R. No. 20813-R,
Feb. 5, 1962) the Appellate Court categorically stated that there are
four kinds of checks in this jurisdiction; the regular check; the
cashier's check; the traveller's check; and the crossed check. The
Court, further elucidated, that while the Negotiable Instruments Law
does not contain any provision on crossed checks, it is common
practice in commercial and banking operations to issue checks of this
character, obviously in accordance with Article 541 of the Code of
Commerce. Attention is likewise called to Section 185 of the
Negotiable Instruments Law:

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'Sec. 185. Check defined. — A check is a bill of

exchange drawn on a bank payable on demand. Except as
herein otherwise provided, the provisions of this act applicable
to a bill of exchange payable on demand apply to a check.'
and the provisions of Section 61 (supra) that the drawer may
insert in the instrument an express stipulation negating or limiting his
own liability to the holder. Consequently, it appears that the use of the
term 'check' in the Articles of Incorporation of PCHC is to be
perceived as not limited to negotiable checks only, but to checks as is
generally known in use in commercial or business transactions.
Anent Petitioner's liability on said instruments, this court is in
full accord with the ruling of the PCHC Board of Directors that:
'In presenting the Checks for clearing and for payment,
the defendant made an express guarantee on the validity of
'all prior endorsements'. Thus, stamped at the back of the
checks are the defendant's clear warranty; ALL PRIOR
ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS
GUARANTEED. Without such warranty, plaintiff would not
have paid on the checks.
No amount of legal jargon can reverse the clear
meaning of defendant's warranty. As the warranty has proven
to be false and inaccurate, the defendant is liable for any
damage arising out of the falsity of its representation.
The principle of estoppel, effectively prevents the
defendant from denying liability for any damage sustained by
the plaintiff which, relying upon an action or declaration of the
defendant, paid on the Checks. The same principle of estoppel
effectively prevents the defendant from denying the existence
of the Checks.' (Pp. 10-11 Decision; pp. 43-44, Rollo)"
We agree.
As provided in the aforecited articles of incorporation of PCHC its
operation extend to "clearing checks and other clearing items." No doubt
transactions on non-negotiable checks are within the ambit of its
jurisdiction.
In a previous case this Court had occasion to rule: "Ubilex non
distinguit nec nos distinguere debemos." 2 It was enunciated in Loc Cham
v. Ocampo, 77 Phil. 636 (1946):
"The rule, founded on logic, is a corollary of the principle that
general words and phrases in a statute should ordinarily be accorded
their natural and general significance. In other words, there should be
no distinction in the application of a statute where none is indicated."

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There should be no distinction in the application of a statute where

none is indicated for courts are not authorized to distinguish where the law
makes no distinction. They should instead administer the law not as they
think it ought to be but us they find it and without regard to consequences.
3

The term, check as used in the said Articles of Incorporation of

PCHC can only connote checks in general use in commercial, and
business activities. It cannot be conceived to be limited to negotiable
checks only. cdreo

Checks are used between banks and bankers and their customers,
and are designed to facilitate banking operations. It is of the essence to be
payable on demand, because the contract between the banker and the
customer is that the money is needed on demand. 4
The participation of the two banks, petitioner and private respondent,
in the clearing operations of PCHC is a manifestation of their submission to
its jurisdiction. Sec. 3 and 36.6 of the PCHC-CHRR clearing rules and
regulations provide:
"SEC. 3. AGREEMENT TO THESE RULES. — It is the
general agreement and understanding that any participant in the
Philippine Clearing House Corporation, MICR clearing operations by
the mere fact of their participation, thereby manifests its agreement to
these Rules and Regulations and its subsequent amendments."
Sec. 36.6. (ARBITRATION) — The fact that a bank
participates in the clearing operations of the PCHC shall be deemed
its written and subscribed consent to the binding effect of this
arbitration agreement as if it had done so in accordance with section
4 of (the) Republic Act No. 876, otherwise known as the Arbitration
Law."
Further Section 2 of the Arbitration Law mandates:
"Two or more persons or parties may submit to the arbitration
of one or more arbitrators any controversy existing between them at
the time of the submission and which may be the subject of an
action, or the parties of any contract may in such contract agree to
settle by arbitration a controversy thereafter arising between them.
Such submission or contract shall be valid and irrevocable, save
upon grounds as exist at law for the revocation of any contract.
"Such submission or contract may include question arising out
of valuations, appraisals or other controversies which may be
collateral, incidental, precedent or subsequent to any issue between
the parties . . ."
Sec. 21 of the same rules, says:

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"Items which have been the subject of material alteration or

items bearing forged endorsement when such endorsement is
necessary for negotiation shall be returned by direct presentation or
demand to the Presenting Bank and not through the regular clearing
house facilities within the period prescribed by law for the filing of a
legal action by the returning bank/branch, institution or entity sending
the same." (Emphasis supplied)
Viewing these provisions the conclusion is clear that the PCHC
Rules and Regulations should not be interpreted to be applicable only to
checks which are negotiable instruments but also to non-negotiable
instruments, and that the PCHC has jurisdiction over this case even as the
checks subject of this litigation are admittedly non-negotiable.
Moreover, petitioner is estopped from raising the defense of non-
negotiability of the checks in question. It stamped its guarantee on the
back of the checks and subsequently presented these checks for clearing
and it was on the basis of these endorsements by the petitioner that the
proceeds were credited in its clearing account.
The petitioner by its own acts and representation can not now deny
liability because it assumed the liabilities of an endorser by stamping its
guarantee at the back of the checks.
The petitioner having stamped its guarantee of "all prior
endorsements and/or lack of endorsements" (Exh. A-2 to F-2) is now
estopped from claiming that the checks under consideration are not
negotiable instruments. The checks were accepted for deposit by the
petitioner stamping thereon its guarantee, in order that it can clear the said
checks with the respondent bank. By such deliberate and positive attitude
of the petitioner it has for all legal intents and purposes treated the said
checks as negotiable instruments and accordingly assumed the warranty
of the endorser when it stamped its guarantee of prior endorsements at the
back of the checks. It led the said respondent to believe that it was acting
as endorser of the checks and on the strength of this guarantee said
respondent cleared the checks in question and credited the account of the
petitioner. Petitioner is now barred from taking an opposite posture by
claiming that the disputed checks are not negotiable instrument.
This Court enunciated in Philippine National Bank vs. Court of
Appeals, 5 a point relevant to the issue when it stated — "the doctrine of
estoppel is based upon the grounds of public policy, fair dealing, good faith
and justice and its purpose is to forbid one to speak against his own act,
representations or commitments to the injury of one to whom they were
directed and who reasonably relied thereon."
A commercial bank cannot escape the liability of an endorser of a
check and which may turn out to be a forged endorsement. Whenever any
bank treats the signature at the back of the checks as endorsements and

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thus logically guarantees the same as such there can be no doubt said
bank has considered the checks as negotiable. cdrep

Apropos the matter of forgery in endorsements, this Court has

succinctly emphasized that the collecting bank or last endorser generally
suffers the loss because it has the duty to ascertain the genuineness of all
prior endorsements considering that the act of presenting the check for
payment to the drawee is an assertion that the party making the
presentment has done its duty to ascertain the genuineness of the
endorsements. This is laid down in the case of PNB vs. National City Bank.
6 In another case, this court held that if the drawee-bank discovers that the

signature of the payee was forged after it has paid the amount of the check
to the holder thereof, it can recover the amount paid from the collecting
bank. 7
A truism stated by this Court is that — "The doctrine of estoppel
precludes a party from repudiating an obligation voluntarily assumed after
having accepted benefits therefrom. To countenance such repudiation
would be contrary to equity and put premium on fraud or
misrepresentation." 8
We made clear in Our decision in Philippine National Bank vs. The
National City Bank of NY & Motor Service Co. that:
"Where a check is accepted or certified by the bank on which
it is drawn, the bank is estopped to deny the genuineness of the
drawer's signature and his capacity to issue the instrument.
If a drawee bank pays a forged check which "was previously
accepted or certified by the said bank, it can not recover from a
holder who did not participate in the forgery and did not have actual
notice thereof.
The payment of a check does not include or imply its
acceptance in the sense that this word is used in Section 62 of the
Negotiable Instruments Act." 9
The point that comes uppermost is whether the drawee bank was
negligent in failing to discover the alteration or the forgery.
Very akin to the case at bar is one which involves a suit filed by the
drawer of checks against the collecting bank and this came about in
Farmers State Bank 10 where it was held:
"A cause of action against the (collecting bank) in favor of the
appellee (the drawer) accrued as a result of the bank breaching its
implied warranty of the genuineness of the indorsements of the name
of the payee by bringing about the presentation of the checks (to the
drawee bank) and collecting the amounts thereof, the right to enforce
that cause of action was not destroyed by the circumstance that
another cause of action for the recovery of the amounts paid on the
checks would have accrued in favor of the appellee against another
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or to others than the bank if when the checks were paid they have
been indorsed by the payee." (United States vs. National Exchange
Bank, 214 US, 302, 29 S CT-665, 53 L. Ed 1006,16 Am. Cas. 1184;
Onondaga County Savings Bank vs. United States (E.C.A.) 64 F
703)".
Section 66 of the Negotiable Instruments ordains that:
"Every indorser who indorses without qualification, warrants to
all subsequent holders in due course" (a) that the instrument is
genuine and in all respects what it purports to be; (b) that he has
good title to it; (c) that all prior parties have capacity to contract; and
(d) that the instrument is at the time of his indorsement valid and
subsisting. 11
It has been enunciated in an American case particularly in American
Exchange National Bank vs. Yorkville Bank 12 that: "the drawer owes no
duty of diligence to the collecting bank (one who had accepted an altered
check and had paid over the proceeds to the depositor) except of
seasonably discovering the alteration by a comparison of its returned
checks and check stubs or other equivalent record, and to inform the
drawee thereof."
In this case it was further held that:
"The real and underlying reasons why negligence of the
drawer constitutes no defense to the collecting bank are that there is
no privity between the drawer and the collecting bank (Corn
Exchange Bank vs. Nassau Bank, 204 N.Y.S. 80) and the drawer
owes to that bank no duty of vigilance (New York Produce Exchange
Bank vs. Twelfth Ward Bank, 204 N.Y.S. 54) and no act of the
collecting bank is induced by any act or representation or admission
of the drawer (Seaboard National Bank vs. Bank of America (supra)
and it follows that negligence on the part of the drawer cannot create
any liability from it to the collecting bank, and the drawer thus is
neither a necessary nor a proper party to an action by the drawee
bank against such bank. It is quite true that depositors in banks are
under the obligation of examining their passbooks and returned
vouchers as a protection against the payment by the depository bank
against forged checks, and negligence in the performance of that
obligation may relieve that bank of liability for the repayment of
amounts paid out on forged checks, which but for such negligence it
would he bound to repay. A leading case on that subject is Morgan
vs. United States Mortgage and Trust Col. 208 N.Y. 218, 101 N.E.
871 Amn. Cas. 1914D, 462, L.R.A. 1915D, 74."
Thus We hold that while the drawer generally owes no duty of
diligence to the collecting bank, the law imposes a duty of diligence on the
collecting bank to scrutinize checks deposited with it for the purpose of

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determining their genuineness and regularity. The collecting bank being

primarily engaged in banking holds itself out to the public as the expert and
the law holds it to a high standard of conduct. LLpr

And although the subject checks are non-negotiable the

responsibility of petitioner as indorser thereof remains.
To countenance a repudiation by the petitioner of its obligation would
be contrary to equity and would deal a negative blow to the whole banking
system of this country.
The court reproduces with approval the following disquisition of the
PCHC in its decision —
"II. Payments To Persons Other
Than The Payees Are Not Valid
And Give Rise To An Obligation
To Return Amounts Received.
Nothing is more clear than that neither the defendant's
depositor nor the defendant is entitled to receive payment payable for
the Checks. As the checks are not payable to defendant's depositor,
payments to persons other than payees named therein, their
successor-in-interest or any person authorized to receive payment
are not valid. Article 1240, New Civil Code of the Philippines
unequivocably provides that:
'Art. 1240. Payment shall be made to the person in
whose favor the obligation has been constituted, or his
successor-in-interest, or any person authorized to receive it.'
Considering that neither the defendant's depositor nor the
defendant is entitled to receive payments for the Checks, payments
to any of them give rise to an obligation to return the amounts
received. Section 2154 of the New Civil Code mandates that: —
'Article 2154. If something is received when there is no
right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises.
It is contended that plaintiff should be held responsible for
issuing the Checks notwithstanding that the underlying transactions
were fictitious. This contention has no basis in our jurisprudence.
The nullity of the underlying transactions does not diminish,
but in fact strengthens, plaintiff's right to recover from the defendant.
Such nullity clearly emphasizes the obligation of the payees to return
the proceeds of the Checks. If a failure of consideration is sufficient
to warrant a finding that a payee is not entitled to payment or must
return payment already made, with more reason the defendant, who
is neither the payee nor the person authorized by the payee, should

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be compelled to surrender the proceeds of the Checks received by it.

Defendant does not have any title to the Checks; neither can it claim
any derivative title to them.
"III. Having Violated Its Warranty
On Validity Of All Endorsements,
Collecting Bank Cannot Deny
Liability To Those Who Relied
On Its Warranty.
In presenting the Checks for clearing and for payment, the
defendant made an express guarantee on the validity of 'all prior
endorsements'. Thus, stamped at the bank of the checks are the
defendant's clear warranty: ALL PRIOR ENDORSEMENTS AND/OR
LACK OF ENDORSEMENTS GUARANTEED. Without such
warranty, plaintiff would not have paid on the checks.
No amount of legal jargon can reverse the clear meaning of
defendant's warranty. As the warranty has proven to be false and
inaccurate, the defendant is liable for any damage arising out of the
falsity of its representation.
The principle of estoppel effectively prevents the defendant
from denying liability for any damages sustained by the plaintiff
which, relying upon an action or declaration of the defendant, paid on
the Checks. The same principle of estoppel effectively prevents the
defendant from denying the existence of the Checks.
Whether the Checks have been issued for valuable
considerations or not is of no serious moment to this case. These
Checks have been made the subject of contracts of endorsement
wherein the defendant made expressed warranties to induce
payment by the drawer of the Checks; and the defendant cannot now
refuse liability for breach of warranty as a consequence of such
forged endorsements. The defendant has falsely warranted in favor
of plaintiff the validity of all endorsements and the genuineness of the
checks in all respects what they purport to be. cdreo

The damage that will result if judgment is not rendered for the
plaintiff is irreparable. The collecting bank has privity with the
depositor who is the principal culprit in this case. The defendant
knows the depositor; her address and her history, Depositor is
defendant's client. It has taken a risk on its depositor when it allowed
her to collect on the crossed-checks.
Having accepted the crossed checks from persons other than
the payees, the defendant is guilty of negligence; the risk of wrongful
payment has to be assumed by the defendant.
On the matter of the award of the interest and attorney's fees,
the Board of Directors finds no reason to reverse the decision of the
Arbiter. The defendant's failure to reimburse the plaintiff has
constrained the plaintiff to hire the services of counsel in order to
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10/14/2019 G.R. No. 74917 | Banco De Oro v. Equitable Banking Corp.

protect its interest notwithstanding that plaintiff's claim is plainly valid,

just and demandable. In addition, defendant's clear obligation is to
reimburse plaintiff upon direct presentation of the checks; and it is
undenied that up to this time the defendant has failed to make such
reimbursement."

WHEREFORE, the petition is DISMISSED for lack of merit without

pronouncement as to costs. The decision of the respondent court of 24
March 1986 and its order of 3 June 1986 are hereby declared to be
immediately executory.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Paras, JJ., concur.

Footnotes
1. Decision, pp. 2-3, pp. 35-36, Rollo. These are the findings of facts in the
said decision of the Philippine Clearing House Corporation (PCHC), board
of directors in Arbitration Case No. 84-033, which are final and conclusive
upon all parties in said arbitration dispute appealable only on question of
law. (Section 13 PCHC-ARR, rules of procedure).
2. Phil. Veiriah Assurance Co. Inc. vs. The Honorable Intermediate
Appellate Court, Sycwin Coating and Wires Inc. and Aminador Cacpal,
Chief Deputy Sheriff of Manila D.R. 72005.
3. Loc Cham vs. Ocampo, supra.
4. Harker v. Anderson, 21 Wend. (N.Y.), 2 Sto. 502, Fed. Case No. 1,985;
Merchants National Bank v. Bank, 10 Wall (U.S.) 647,19 L. Ed. 1008; Wood
River Bank v. Bank, 36 Neb. 744 N.W. 239.
5. 94 SCRA 357.
6. 63 Phil. 711.
7. Republic Bank vs. Ebrada, 65 SCRA 680.
8. 10 Saura Import & Export Co., 24 SCRA 974.
9. Supra.
10. Markel vs. United States, 62 F ed. 178.
11. Ang Tiong vs. Ting, L-16767, Feb. 28, 1968, 22 SCRA 713.
12. 204 N.Y.S. 621 101 N.E. 871 Amn. Cas. 1914D, 462, L.R.A. 191D, 74.

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