3 Case Digests Batch 3
3 Case Digests Batch 3
3 Case Digests Batch 3
endorsement valid and subsisting.” As collecting bank, Express Savings Bank is liable
DOCTRINES: A depositary/collecting bank where a check is deposited, and which BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS
endorses the check upon presentment with the drawee bank, is an endorser. Under
Section 66 of the Negotiable Instruments Law, an endorser warrants “that the
instrument is genuine and in all respects what it purports to be; that he has good title
2 & NAPIZA
GR NO. 112392, February 29, 2000
to it; that all prior parties had capacity to contract; and that the instrument is at the
time of his endorsement valid and subsisting.” FACTS: Private Respondent Napiza deposited in Foreign Currency Deposit Unit
(FCDU) Savings Account which he maintained in petitioner’s bank Continental Bank
It is well-settled that the relationship of the depositors and the Bank or similar Manager’s Check payable to cash in the amount of Two Thousand Five Hundred
institution is that of creditor-debtor. Article 1980 of the New Civil Code provides that Dollars and duly endorsed by Napiza on its dorsal side. It appears that the check
fixed, savings and current deposits of money in banks and similar institutions shall be belonged to Henry Chan who went to the office of Napiza and requested him to
governed by the provisions concerning simple loans. The bank is the debtor and the deposit the check in his dollar account. Napiza agreed to deliver to Chan a signed
depositor is the creditor. The depositor lends the bank money and the bank agrees to blank withdrawal slip with the understanding that as soon as the check is cleared,
pay the depositor on demand. The savings deposit agreement between the bank and both of them would withdraw upon Napiza’s presentation of his passbook. Using the
the depositor is the contract that determines the rights and obligations of the parties. blank withdrawal slip, one Ruben Gayon Jr was able to withdraw the amount. It was
later found out that the check was counterfeit. Petitioner filed a complaint against
FACTS: Petitioners received an order for the purchase of a motor vehicle from Gerry Napiza praying for the return of the amount of $2,500.00 plus interest.
Mambuay where the latter paid petitioners with nine (9) Philippine Veterans Affairs
Office (PVAO) checks payable to different payees and drawn against the Philippine
Veterans Bank (drawee), each valued at Two Hundred Thousand Pesos ISSUES:
(₱200,000.00). Petitioners deposited the said checks in their savings account with the 1. Is respondent Napiza liable under his warranties as a general indorser?
Express Savings Bank which, in turn, deposited the checks with its depositary bank, 2. Is petitioner grossly negligent in allowing the withdrawal?
Equitable-PCI Bank and the latter presented the checks to the drawee, the Philippine
Veterans Bank, which honored the checks. However, the subject checks were HELD:
returned by PVAO to the drawee on the ground that the amount on the face of the 1. Ordinarily, private respondent may be held liable as in indorser of the check
checks was altered from the original amount of ₱4,000.00 to ₱200,000.00. After or even as an accommodation party. Under the law, the holder or last
informing Express Savings Bank that the drawee dishonored the checks, Equitable- indorsee of a negotiable instrument has the right to enforce payment of the
PCI Bank debited the deposit account of ESB in the amount of P1.8M. Express Savings instrument for the full amount thereof against all parties liable thereon.
Bank then withdrew the amount of P1.8M representing the returned checks from Among the parties liable thereon is an indorser of the instrument. Such an
petitioners saving account. indorser ‘ who indorses without qualification ‘ inter alia ‘engages that on due
presentment … the instrument shall be accepted or paid, or both,as the case
ISSUE: Whether or not Express Savings Bank had the right to debit ₱1,800,000.00 may be, according to its tenor and that if it be dishonored ,he will pay the
from petitioners’ accounts. amount thereof to the holder.
HELD: No, Express Savings Bank cannot debit the savings account of petitioners. A However, to hold Napiza liable without considering the attending
depositary/collecting bank where a check is deposited, and which endorses the check circumstances in the case would result in an injustice and in erosion of the
upon presentment with the drawee bank, is an endorser. Under Section 66 of the public trust in the banking system. The interest of justice thus demands
Negotiable Instruments Law, an endorser warrants “that the instrument is genuine looking into the events that led to the encashment of the check.
and in all respects what it purports to be; that he has good title to it; that all prior
parties had capacity to contract; and that the instrument is at the time of his
1| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
2. Yes. To withdraw the amount, a duly-filled up withdrawal slip and its issuance. By its peculiar character and general use in commerce, a manager’s check
depositor’s passbook must be presented. Such requirements were not or a cashier’s check is regarded substantially to be as good as the money it represents.
complied with yet the amount was withdrawn. Petitioner violated its own While manager’s and cashier’s checks are still subject to clearing, they cannot be
rules by allowing the withdrawal of an amount that is definitely over and countermanded for being drawn against a closed account, for being drawn against
above the aggregate amount of private respondent’s dollar deposits that had insufficient funds, or for similar reasons such as a condition not appearing on the face
yet to be cleared. of the check. Long standing and accepted banking practices do not countenance the
countermanding of manager’s and cashier’s checks on the basis of a mere allegation
The negligence of petitioner’s personnel was the proximate cause of the loss of failure of the payee to comply with its obligations towards the purchaser.
that petitioner sustained. The proximate cause of the withdrawal and Therefore, when Nuguid failed to deliver the agreed amount to Chiok, the latter had a
eventual loss of the amount was part of the petitioner’s negligence in cause of action against Nuguid to ask for the rescission of their contract; but, Chiok
allowing such withdrawal in disregard of its own rules. did not have a cause of action against Metrobank and Global Bank that would allow
him to rescind the contracts of sale of the manager’s or cashier’s checks, which would
have resulted in the crediting of the amounts thereof back to his accounts.
2| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
ISSUE: Whether or not Ramos who received a portion of the money that Balmaceda
5
took from PCIB, should also be held liable for the return of this money to the Bank. RCBC SAVINGS BANK VS. ODRADA
GR NO. 219037, October 19, 2016
RULING: 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.
FACTS: In April 2002, respondent Noel M. Odrada (Odrada) sold a second-hand
PCIB, as plaintiff, had to prove, by preponderance of evidence, its positive assertion Mitsubishi Montero (Montero) to Teodoro L. Lim (Lim) for One Million Five Hundred
that Ramos conspired with Balmaceda in perpetrating the latter’s scheme to defraud Ten Thousand Pesos (P1,510,000), Of the total consideration, Six Hundred Ten
the Bank. All that PCIB’s evidence proves is that Balmaceda used Ramos’ name as a Thousand Pesos (P610,000) was initially paid by Lim and the balance of Nine
payee when he filled up the application forms for the Manager’s checks. But, as the CA Hundred Thousand Pesos (P900,000) was paid in manager’s check issued by RCBC
correctly observed, the mere fact that Balmaceda made Ramos the payee on some of dated April 12, 2002.
the Manager’s checks is not enough basis to conclude that Ramos was complicit in After the issuance of the manager's checks and their turnover to Odrada but prior to
Balmaceda’s fraud; a number of other people were made payees on the other the checks’ presentation, Lim notified Odrada in a letter dated 15 April 2002 that
Manager’s checks yet PCIB never alleged them to be liable, nor did the Bank adduce there was an issue regarding the road worthiness of the Montero. Among the issues
any other evidence pointing to Ramos’ participation that would justify his separate with the Montero are hidden defects such as misalignment of engine and signs of head
treatment from the others. Also, while Ramos is Balmaceda’s brother -in-law, their on collision despite Odrada’s claim that the car never had any collision. A meeting was
relationship is not sufficient, by itself, to render Ramos liable, absent concrete proof requested with regard to the matter. However, Odrada did not go to the slated
of his actual participation in the fraudulent scheme. The party carrying the burden of meeting and instead deposited the manager's checks with International Exchange
proof must establish his case by a preponderance of evidence, or evidence which, to Bank (Ibank) on April 16, 2002 and redeposited them on April19,2002 but the checks
the court, is more worthy of belief than the evidence offered in opposition. were dishonored both times apparently upon Lim's instruction to RCBC.
In Encinas v. National Bookstore, Inc., defined "preponderance of evidence" in the Consequently, Odrada filed a collection suit against Lim and RCBC in the Regional
following manner: "Preponderance of evidence" is the weight, credit, and value of the Trial Court of Makati.
aggregate evidence on either side and is usually considered to be synonymous with
the term "greater weight of the evidence" or "greater weight of the credible evidence." In his Answer, Lim alleged that the cancellation of the manager’s check was at his
instance, upon discovery of the misrepresentations by Odrada about the Montero's
Preponderance of evidence is a phrase which, in the last analysis, means probability road worthiness. Lim claimed that the cancellation was not done ex parte but through
of the truth. It is evidence which is more convincing to the court as worthy of belief a letter dated 15 April 2002. He further alleged that the letter was delivered to Odrada
than that which is offered in opposition thereto. Ramos’ participation in Balmaceda’s prior to the presentation of the manager's checks to RCBC. On the other hand, RCBC
scheme was not proven by PCIB by preponderance of evidence.
contended that the manager's checks were dishonored because Lim had cancelled the
Given that PCIB failed to establish Ramos’ participation in Balmaceda’s scheme, it was loan. RCBC claimed that the cancellation of the check was prior to the presentation of
not even necessary for Ramos to provide an explanation for the money he received the manager's checks. Moreover, RCBC alleged that despite notice of the defective
from Balmaceda. Even if the evidence adduced by the plaintiff appears stronger than condition of the Montero, which constituted a failure of consideration, Odrada still
that presented by the defendant, a judgment cannot be entered in the plaintiff’s favor proceeded with presenting the manager's checks. RTC and CA ruled in favor of
if his evidence still does not suffice to sustain his cause of action; to reiterate, a Odrada.
preponderance of evidence as defined must be established to achieve this result.
ISSUE/S: WON drawee bank can still deny payment of a manager’s check due to the
Personal Defense of Lim that a defective Montero was sold to Lim.
3| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
HELD: YES. As a general rule, the drawee bank is not liable until it accepts. Since Odrada was not a holder in due course, the instrument becomes subject to
Acceptance, therefore, creates a privity of contract between the holder and the personal defenses under the Negotiable Instruments Law. Hence, RCBC may legally
drawee so much so that the latter, once it accepts, becomes the party primarily liable act on a countermand by Lim, the purchaser of the manager's checks.
on the instrument.
A manager’s check makes the bank primarily liable as there is already acceptance FACTS: Evangelista obtained a loan from Screenex which issued 2 checks to the
upon issuance of a manager’s check. HOWEVER, the SC ruled that the issuing bank former. There were also vouchers of Screenex that were signed by the accused
could validly refuse payment when the holder is NOT a holder in due course. evidencing that he received the 2 checks in acceptance of the loan granted to him. As
security for the payment, Evangelista gave 2 open-dated checks, both pay to order of
In this case, the Court of Appeals gravely erred when it considered Odrada as a holder Screenex. From the time it was issued, they were held in safekeeping together with
in due course. Section 52 of the Negotiable Instruments Law defines a holder in due the other documents and papers of the company by Philip Gotuaco, Sr., father-in-law
course as one who has taken the instrument under the following conditions: of respondent Alexander Yu, until the former’s death. Before the checks were
deposited, there was a personal demand from the family for Evangelista to settle the
a. That it is complete and regular upon its face; loan and a demand letter was sent by the family lawyer.
b. That he became the holder of it before it was overdue, and without notice
that it has been previously dishonored, if such was the fact; Evangelista was charged with violation of BP 22 in a criminal case filed with the MeTC
c. That he took it in good faith and for value; of Makati. The MeTC found that the prosecution had indeed proved the first 2
d. That at the time it was negotiated to him, he had no notice of any infirmity in elements of cases involving BP 22 but failed to prove the 3rd element. Also, there was
the instrument or defect in the title of the person negotiating it. failure on the part of Yu to prove that the demand letter had actually been received
by the addressee and there was no way to determine when the 5-day period should
To be a holder in due course, the law requires that a party must have acquired the start to toll, there was failure to establish prima facie evidence of knowledge of
instrument in good faith and/or value. Odrada did not acquire the instrument in good insufficiency of funds, hence, the court acquitted Evangelista of the criminal charges.
faith as he sold a defective Montero. He immediately presented the check for payment Ruling on the civil aspect, the court held that while Evangelista admitted to having
upon notice of the Montero’s defect. issued and delivered the checks to Gotuaco and having fully paid the amount, no
evidence of payment was presented. In the end, Evangelista was declared liable for
RCBC acted in good faith in following the instructions of Lim. The records show that the civil obligation.
Lim notified RCBC of the defective condition of the Montero before Odrada presented
the manager's checks. Lim informed RCBC of the hidden defects of the Montero Timely appeal was made to the RTC raising two errors of the MeTC, to wit: 1) Lower
including a misaligned engine, smashed condenser, crippled bumper support, and court erred in not appreciating the fact that the prosecution failed to prove the civil
defective transmission. RCBC acted in good faith in stopping the payment of the liability and 2) any civil liability attributable to Evangelista had been extinguished by
manager's checks. prescription. RTC held that the checks should be taken as evidence of Evangelista’s
indebtedness to prove that the obligation subsisted. Also, the alleged payment of by
Section 58 of the Negotiable Instruments Law provides: "In the hands of any holder Evangelista was an affirmative defense that he had the burden of proving but that he
other than a holder in due course, a negotiable instrument is subject to the same failed to discharge.
defenses as if it were non-negotiable. xx x.”
4| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
CA, upon petition for review, denied the same. It held that the reckoning time for the
METROPOLITAN BANK & TRUST COMPANY VS. RENATO D.
7
prescriptive period began when the instrument was issued and the corresponding
check returned by the bank to its depositor; that the issue of prescription was raised CABILZO
for the first time on appeal; and that the loan obligation was never denied by GR NO. 154469, December 6, 2006
Evangelista, who claimed it was already settled, but failed to show any proof of
payment.
FACTS: Petitioner Metrobank is a banking institution duly organized and existing as
ISSUE: Whether or not the CA committed a reversible error in holding that such under Philippine laws. Respondent Renato D. Cabilzo (Cabilzo) was one of
Evangelista is still liable for the total amount indicated in the 2 checks considering Metrobank’s clients who maintained a current account with Metrobank Pasong Tamo
that he was already acquitted in the criminal charged for violation of BP 22. Branch. On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988,
payable to “CASH” and postdated on 24 November 1994 in the amount of One
Thousand Pesos (P 1,000.00). The check was drawn against Cabilzo’s Account with
HELD: In BP 22 cases, the action for the corresponding civil obligation is deemed
Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and was
instituted with the criminal action. The criminal action for violation of BP 22
paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the
necessarily includes the corresponding civil action and no reservation to file such civil
check was presented to Westmont Bank for payment. Westmont Bank, in turn,
action separately shall be allowed or recognized. This notwithstanding, the civil
indorsed the check to Metrobank for appropriate clearing. After the entries thereon
action deemed instituted with the criminal action is treated as an independent civil
were examined, including the availability of funds and the authenticity of the
liability based on contract.
signature of the drawer, Metrobank cleared the check for encashment in accordance
with the Philippine Clearing House Corporation (PCHC) Rules. On 16 November
By definition, a check is a bill of exchange drawn on a bank payable on demand. It is 1994, Cabilzo’s representative was at Metrobank Pasong Tamo Branch to make some
an undertaking that the drawer will pay the amount indicated thereon. Sec 119 of the transaction when he was asked by a bank personnel if Cabilzo had issued a check in
NIL, however, states that a negotiable instrument like a check may be discharged by the amount of P 91,000.00 to which the former replied in the negative. On the
any other act which will discharge a simple contract for the payment of money. A afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did
check is therefore subject to a 10-year prescription of actions upon a written contract. not issue a check in the amount of P 91,000.00 and requested that the questioned
If the check is undated as in the present case, the cause of action is reckoned from the check be returned to him for verification, to which Metrobank complied. 1,000.00 was
issuance of the check. Assuming that Yu had authority to insert the dates in the checks, altered to P Upon receipt of the check, Cabilzo discovered that Metrobank Check No.
the fact that he did so after the lapse of more than 10 years cannot qualify as changes 985988 which he issued on 12 November 1994 in the amount of P 91,000.00 and the
made within a reasonable period. The cause of action on the checks has become stale, date 24 November 1994 was changed to 14 November 1994.
hence time-barred. Prescription has indeed set in.
ISSUE: Whether or not the alteration made in the subject check is a material
We therefore have no other recourse but to grant the petition on the ground of alteration.
prescription. Even if the defense was belatedly raised before the RTC for the first time
on appeal from the ruling of MeTC, we nonetheless dismiss the complaint, seeking to
HELD: Yes. An alteration is said to be material if it changes the effect of the
enforce civil liability of Evangelista based on the undated checks. Holding Evanglista
instrument. It means that an unauthorized change in an instrument that purports to
liable for the 2 checks has already prescribed.
modify in any respect the obligation of a party or an unauthorized addition of words
or numbers or other change to an incomplete instrument relating to the obligation of
a party.In other words, a material alteration is one which changes the items which are
required to be stated under Section 1 of the Negotiable Instruments Law.
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
5| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
no place of payment is specified, or any other change or addition which alters the facts on record are bare of evidence to support such conclusion. The doctrine of
effect of the instrument in any respect is a material alteration. equitable estoppel states that when one of the two innocent persons, each guiltless of
any intentional or moral wrong, must suffer a loss, it must be borne by the one whose
In the case at bar, the check was altered so that the amount was increased from P erroneous conduct, either by omission or commission, was the cause of injury.
1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14 Metrobank’s reliance on this dictum, is misplaced. For one, Metrobank’s
November 1994. Apparently, since the entries altered were among those enumerated representation that it is an innocent party is flimsy and evidently, misleading. At the
under Section 1 and 125, namely, the sum of money payable and the date of the check, same time, Metrobank cannot asseverate that Cabilzo was negligent and this
the instant controversy therefore squarely falls within the purview of material negligence was the proximate cause of the loss in the absence of even a scintilla proof
alteration. to buttress such claim. Negligence is not presumed but must be proven by the one
who alleges it.
Now, having laid the premise that the present petition is a case of material alteration,
it is now necessary for us to determine the effect of a materially altered instrument, When the drawee bank pays a materially altered check, it violates the terms of the
as well as the rights and obligations of the parties thereunder. The following provision check, as well as its duty to charge its client’s account only for bona fide
of the Negotiable Instrument Law will shed us some light in threshing out this issue: disbursements he had made. Since the drawee bank, in the instant case, did not pay
according to the original tenor of the instrument, as directed by the drawer, then it
has no right to claim reimbursement from the drawer, much less, the right to deduct
Section 124. Alteration of instrument; effect of. – Where a negotiable instrument
the erroneous payment it made from the drawer’s account which it was expected to
is materially altered without the assent of all parties liable thereon, it is avoided,
treat with utmost fidelity.
except as against a party who has himself made, authorized, assented to the alteration
and subsequent indorsers . and 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.
Indubitably, Cabilzo was not the one who made nor authorized the alteration. Neither
8 BANK OF AMERICA NT & SA VS. PHILIPPINE RACNG CLUB
GR NO. 150228, July 30, 2009
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
DOCTRINE: Last Clear Chance
which could have otherwise prevented the loss. As correctly ruled by the appellate
court, Cabilzo was never remiss in the preparation and issuance of the check, and
there were no indicia of evidence that would prove otherwise. Indeed, Cabilzo placed FACTS: The President and Vice President of respondent PRCI corporation were
asterisks before and after the amount in words and figures in order to forewarn the scheduled to go out of the country in connection with the corporation’s business. In
subsequent holders that nothing follows before and after the amount indicated other order not to disrupt operations in their absence, they pre-signed several checks
than the one specified between the asterisks. relating to the corporation’s Current Account with BA to insure continuity of plaintiff-
appellee’s operations by making available cash/money to settle obligations that
might become due. These checks were entrusted to the accountant with instruction
The degree of diligence required of a reasonable man in the exercise of his tasks and
to make use of the same as the need arose.
the performance of his duties has been faithfully complied with by Cabilzo. In fact, he
was wary enough that he filled with asterisks the spaces between and after the
amounts, not only those stated in words, but also those in numerical figures, in order A John Doe presented to BA for encashment a couple of PRCI’s pre-signed checks.
to prevent any fraudulent insertion, but unfortunately, the check was still successfully
altered, indorsed by the collecting bank, and cleared by the drawee bank, and The two checks had similar entries with similar infirmities and irregularities. On the
encashed by the perpetrator of the fraud, to the damage and prejudice of Cabilzo. space where the name of the payee should be indicated, appeared 2-lines, on the
upper line was the word “CASH” while the lower line had the following typewritten
Verily, Metrobank cannot lightly impute that Cabilzo was negligent and is therefore words: “ONE HUNDRED TEN THOUSAND PESOS ONLY.” Appellant bank encashed
prevented from asserting his rights under the doctrine of equitable estoppel when the said checks.
6| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
The checks actually came into the hands of an employee of PRCI who completed the Nevertheless, even if we assume that both parties were guilty of negligent acts that
pre-signed checks without authority. PRCI’s demand for defendant-appellant to pay led to the loss, petitioner will still emerge as the party foremost liable in this case. In
fell on deaf ears. Hence, the complaint. instances where both parties are at fault, this Court has consistently applied the
doctrine of last clear chance in order to assign liability.
The trial court rendered a Decision in favor of PRCI, and ordered BA to pay plaintiff.
In Westmont Bank v. Ong, we ruled:
Petitioner appealed to the CA which, however, affirmed said decision in toto. After
denial of the MR, …[I]t is petitioner [bank] which had the last clear chance to stop the fraudulent
encashment of the subject checks had it exercised due diligence and followed the
Petitioner now comes before this Court. proper and regular banking procedures in clearing checks. As we had earlier ruled,
the one who had a last clear opportunity to avoid the impending harm but failed to do
so is chargeable with the consequences thereof.
ISSUE: Whether the proximate cause of the wrongful encashment of the checks in
question was due to:
In the case at bar, petitioner cannot evade responsibility for the loss by attributing
negligence on the part of respondent because, even if we concur that the latter was
(a) petitioner’s failure to make a verification regarding the said checks with the
indeed negligent in pre-signing blank checks, the former had the last clear chance to
respondent in view of the misplacement of entries on the face of the checks; or
avoid the loss.
(b) the practice of the respondent of pre-signing blank checks and leaving the
same with its employees.
Verily, petitioner had the final opportunity to avert the injury that befell the
respondent.
RULING: It is well-settled that banks are engaged in a business impressed with public
interest, and it is their duty to protect in return their many clients and depositors who
transact business with them. They have the obligation to treat their client’s account In the interest of fairness, however, we believe it is proper to consider respondent’s
meticulously and with the highest degree of care, considering the fiduciary nature of own negligence to mitigate petitioner’s liability.
their relationship. The diligence required of banks, therefore, is more than that of a
good father of a family. Following established jurisprudential precedents, we believe the allocation of sixty
percent (60%) of the actual damages involved in this case to petitioner is proper
In the case at bar, extraordinary diligence demands that petitioner should have under the premises. Respondent should, in light of its contributory negligence, bear
ascertained from respondent the authenticity of the subject checks or the accuracy of forty percent (40%) of its own loss.
the entries therein not only because of the presence of highly irregular entries on the
face of the checks but also of the decidedly unusual circumstances surrounding their
encashment.
7| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
DOCTRINES: Respondent Junnel’s Marketing Corporation (JMC) has a current account with
1. When a drawee bank pays a person other than the payee named on the check, it Metrobank from which it draws checks to pay its different suppliers.
essentially commits a breach of its obligation and renders the payment it made During an audit of its financial records, JMC discovered an anomaly involving 11
unauthorized. In such cases and under normal circumstances, the drawee bank checks it had issued to the orders of Jardine and Premiere on various dates
may be held liable to the drawer for the amount charged against the latter's between October 1998 to May 1999.
account. it is only when the unauthorized payment of a check had been caused or The subject checks, which are all crossed checks (P1.4M) had already been
was attended by the fault or negligence of the drawer himself can the drawee bank charged against JMC’s current account, but were not covered by any official
be excused, whether wholly or partially, from being held liable to the drawer for receipt from Jardine or Premiere.
the said payment. The bank on which a check is drawn, known as the drawee bank, An examination of the dorsal portion of the subject checks revealed that all had
is under strict liability, based on the contract between the bank and its customer been deposited with an account in Bankcom, Dau Branch. And upon inquiring
(drawer), to pay the check only to the payee or the payee's order. x x with Jardine and Premiere, JMC was able to confirm that neither of them owns a
2. A collecting bank's mere act of presenting a check for payment to the drawee bank Bankcom Account.
is itself an assertion, on the part of the former, that it had done its duty to ascertain Meanwhile, Respondent Delizo, a former accountant of JMC, executed a
the validity of prior indorsements. handwritten letter addressed to the President of JMC. Delizo confessed that,
3. In the event that it is made to reimburse the drawee bank, the collecting bank can during her time as an accountant for JMC, she stole several company checks
seek similar reimbursement from the very persons who caused the checks to be drawn against JMC’s current account. She professed that the said checks were
deposited and received the unauthorized payments. Such persons are the ones never given to the named payees but were forwarded by her to one Lita Bituin
ultimately liable for the unauthorized payments and their liability rests on their (Bituin). Delizo further admitted that she, Bituin and an unknown bank manager
absolute lack of valid title to the checks that they were able to encash. colluded to cause the deposit and encashing of the stolen checks and shared in
the proceeds thereof.
PARTIES: JMC – Drawer; Metrobank - Drawee Bank; Jardine and Premiere – Payees JMC filed before the RTC a complaint for sum of money against Delizo, Bankcom,
and Metrobank. JMC alleged that the wrongful conversion of the subject checks
Junnel Marketing Corp (JMC) has a current account with Metrobank from which it was caused by a combination of the "tortious and felonious" scheme of Delizo
draws checks to pay its creditors. JMC discovered an anomaly involving 11 checks, and the "negligent and unlawful acts" of Bankcom and Metrobank. JMC prayed
which had already been charged against its account but were not covered by any that Delizo, Bankcom and Metrobank be held solidarily liable in its favor for the
official receipt. These checks were drawn against Metrobank and made payable to the amount of the subject checks.
orders of Jardine and Premiere. These checks were deposited to an account in The RTC rendered a decision holding both Bankcom and Metrobank liable to
Bankcom, an account that does not belong to either payee or indorsees. The checks JMC – on a 2/3 to 1/3 ratio but absolving Delizo from any liability. The decision
were then presented to Metrobank, which honored it, resulting to loss on the part of was hinged on the finding that the subject checks were complete and not forged.
JMC. Delizo, a former accountant of JMC, confessed that she stole several checks, The involvement of Bankcom and Metrobank on the wrongful encashment of the
deposited, and encashed it. JMC filed a complaint for sum of money against Delizo, subject checks were clearly established.
Bankcom, and Metrobank. The SC ruled that both Metrobank and Bankcom should The CA affirmed the decision.
bear the loss. Metrobank is liable to return to JMC the amount of the checks plus Metrobank posits that it should be absolved because it had exercised absolute
interest, while Bankcom is liable to reimburse Metrobank the same amount plus diligence in verifying the genuineness of the subject checks. Metrobank also
interest. submits that, it should be Bankcom – as the last indorser of the subject checks
– that should bear the loss and be held solely liable to JMC.
Bankcom can seek reimbusement from the persons who cause the checks to be Bankcom, on the other hand, argues that it should be absolved because it was
deposited and received the authorized payments. However, none of such persons never a party to the wrongful encashment of the subject checks. Bankcom
were impleaded, thus, no pronouncement as to this matter can be made in favor of proffers the view that it is JMC that should bear the loss of the subject checks. It
Bankcom. was JMC’s faulty accounting procedures which led to the subject checks being
stolen and misappropriated.
FACTS:
ISSUE: Who should bear the loss?
8| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
HELD: Both. however, is a complete falsity because the subjectchecks were, in truth, deposited to
an account that neither belongs to
(1) Metrobank (as drawee bank) is liable to return to JMC the entire amount of
the subject checks + 6% interest; and the payees of the subject checks nor to their indorsees. Hence, as the subject checks
(2) Bankcom liable to reimburse Metrobank the same amount plus interest. were paid under Bankcom's false guaranty, the latter — as collecting bank — stands
liable to return the value of such checks to Metrobank.
The instant case involves the unauthorized payment of valid checks, i.e., the payment
of checks to persons other than the payee named therein or his order. The subject Recourse of Bankcom: (see doctrine #3)
checks herein are considered valid because they are complete and bear genuine
signatures. Bankcom ought to have a right of recourse against the persons that caused the
anomalous deposit of the subject checks and received payments therefor.
The present case involved crossed checks payable to the order of a specified payee Unfortunately — as none of such persons were impleaded in the case before us — no
that were deposited in a collecting bank under an account not belonging to the payee pronouncement as to this matter can be made in favor of Bankcom.
or his indorsee but which, upon presentment, were subsequently honored by the
drawee bank. In cases involving the unauthorized payment of valid checks, the
drawee bank becomes liable to the drawer for the amount of the checks but the
drawee bank, in turn, can seek reimbursement from the collecting bank.
It has been repeatedly held that in check transactions, the collecting bank generally
suffers the loss because it has the duty to ascertain the genuineness of all prior 10 MANUEL UBAS VS. WILSON CHAN
GR NO. 215910, February 6, 2017
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. If any of the warranties made by the DOCTRINE: Complete but Undelivered Negotiable Instrument
collecting bank turns out to be false, then the drawee bank may recover from it up to
the amount of the check.
FACTS: Petitioner filed a Complaint against respondent, alleging that respondent,
“doing business under the name and style of UNIMASTER,” was indebted to him in the
Metrobank is liable to JMC: (see doctrine # 1) amount of P1,500,000.00, representing the price of construction materials allegedly
purchased by respondent from him for the construction of the Macagtas Dam project.
In the present case, it is apparent that Metrobank had breached JMC's instructions
when it paid the value of the subject checks to Bankcom for the benefit of a certain He averred that respondent had issued three checks, payable to “CASH”, but when
Account. The payment to such Account was unauthorized as it was established that petitioner presented the subject checks for encashment, the same were dishonored
the said account does not belong to Jardine or Premiere, the payees of the subject due to a stop payment order. Petitioner demanded from respondent the value of the
checks, or to their indorsees. In addition, causal or concurring negligence on the part dishonored checks, but to no avail.
of JMC had not been proven. Under such circumstances, Metrobank is clearly liable to
return to JMC the amount of the subject checks.
For his part, respondent admitted to having issued the subject checks. However, he
claimed that they were not issued to petitioner, but to the project engineer, who,
Bankcom is liable to Metrobank: (see doctrine #2) however, lost the same.
Here, it is clear that Bankcom had assumed the warranties of an indorser when it The RTC ruled in favor of petitioner and ordered respondent to pay petitioner the
forwarded the subject checks to PCHC for presentment to Metrobank. By such amount of P1,500,000.00 representing the principal obligation plus legal interests.
presentment, Bankcom effectively guaranteed to Metrobank that the subject checks
had been deposited with it to an account that has good title to the same. This guaranty,
9| Elixir C. Langanlangan
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020
NEGOTIABLE INSTRUMENTS LAW – CASE DIGESTS BATCH 3
On appeal, the CA reversed and set aside the RTC’s ruling, dismissing petitioner’s
complaint. Hence, the instant petition.
ISSUE: Whether or not the CA erred in dismissing petitioner’s complaint for lack of
cause of action.
Jurisprudence holds that “in a suit for a recovery of sum of money, as here, the
plaintiff-creditor [(petitioner in this case)] has the burden of proof to show that
defendant [(respondent in this case)] had not paid [him] the amount of the contracted
loan. However, it has also been long established that where the plaintiff-creditor
possesses and submits in evidence an instrument showing the indebtedness, a
presumption that the credit has not been satisfied arises in [his] favor.
This presumption stems from Section 24 of the NIL, which provides that:
Besides, Section 16 of the NIL provides that when an instrument is no longer in the
possession of the person who signed it and it is complete in its terms, “a valid and
intentional delivery by him is presumed until the contrary is proved,” as in this case.
Although the checks were under the account name of Unimasters, it should be
emphasized that the manner or mode of payment does not alter the nature of the
obligation.
10 | E l i x i r C . L a n g a n l a n g a n
Negotiable Instruments Law – Atty. Soraya S. Laut
XU – College of Law, 2019-2020