NIL Cases Flashcards
‘Philippine Racing club is a domestic corporation with a Current account with Bank of America. The authorized signatories are PRCI’s President and vice president for finance. In order not to disrupt operation in their absence, they pre-signed several checks because they are scheduled to go out of the country for a business trip to insure continuity on the operations by making available cash to settle obligations that might become due. These checks were entrusted to the accountant with instruction to make use of the same as the need arose by completing the entries on the pre- signed checks. However, a John Doe presented two checks for encashment with the indicated value of P110,000.00 each from the pre-signed checks. The two checks had similar entries with similar infirmities and irregularities. On the space where the name of the payee should be indicated (Pay to the Order of) the following 2-line entries were instead typewritten: on the upper line was the word “CASH” while the lower line had the following typewritten words, viz: “ONE HUNDRED THOUSAND TEN PESOS ONLY.” Despite the highly irregular entries on the face of the checks, BOFA encashed said checks without any verification process, not even by a telephone call to PRCI. The checks appeared to have come into the hand of an employee of PRCI who was subsequently charged for qualified theft). PRCI’s demand for BOFA to pay fell on deaf ears. Hence, the complaint.
Bofa insists that it merely fulfilled its obligation under law and contract when it encashed the aforesaid checks. Invoking Sections 126 and 185 of the Negotiable Instruments Law (NIL), its duty as a drawee bank to a drawer-client maintaining a checking account with it is to pay orders for checks bearing the drawer-client’s genuine signatures. The genuine signatures of the client’s duly authorized signatories affixed on the checks signify the order for payment. Thus, pursuant to the said obligation, the drawee bank has the duty to determine whether the signatures appearing on the check are the drawer-client’s or its duly authorized signatories. If the signatures are genuine, the bank has the unavoidable legal and contractual duty to pay. If the signatures are forged and falsified, the drawee bank has the corollary, but equally unavoidable legal and contractual, duty not to pay. There exists a duty on the drawee bank to inquire from the drawer before encashing a check only when the check bears a material alteration. A material alteration is defined in Section 125 of the NIL to be one which changes the date, the sum payable, the time or place of payment, the number or relations of the parties, the currency in which payment is to be made or one which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect. Bofa points out that the checks do not contain any material alteration. The amount below the typewritten word “CASH,” expressed in words, is the very same amount indicated in figures by means of a check writer on the amount portion of the check which is a mere reiteration of the amount stated in figures. It is merely a repetition and that
a repetition is not an alteration which if present and material would have enjoined it to commence verification with respondent.
In defense of its cashier/teller’s questionable action, petitioner insists that pursuant to Sections 14 and 16 of the NIL, it could validly presume, upon presentation of the checks, that the party who filled up the blanks had authority and that a valid and intentional delivery to the party presenting the checks had taken place. Thus, the sole blame for this debacle should be shifted to respondent for having its signatories pre-sign and deliver the subject checks. The gross negligence of respondent’s accountant in safekeeping the subject checks which resulted in their theft should be treated as a voluntary delivery by the maker who is estopped from claiming non-delivery of the instrument.
Issue: a)Whether or not there were material alterations on the checks
b) Whether or not the checks are considered complete and delivered instruments
a) Yes, although not in the strict sense “material alterations,” the misplacement of the typewritten entries for the payee and the amount on the same blank and the repetition of the amount using a check writer were glaringly obvious irregularities on the face of the check. Clearly, someone made a mistake in filling up the checks and the repetition of the entries was possibly an attempt to rectify the mistake. Also, if the check had been filled up by the person who customarily accomplishes the checks of respondent, it should have occurred to petitioner’s employees that it would be unlikely such mistakes would be made. All these circumstances should have alerted the bank to the possibility that the holder or the person who is attempting to encash the checks did not have proper title to the checks or did not have authority to fill up and encash the same. A simple phone call to its client to clarify the irregularities and the loss to respondent due to the encashment of the stolen checks would have been prevented. The bank should have exercised the highest degree of care and diligence required as a banking institution.
b) No, petitioner’s contention would have been correct if the subject checks were correctly and properly filled out by the thief and presented to the bank in good order. In that instance, there would be nothing to give notice to the bank of any infirmity in the title of the holder of the checks and it could validly presume that there was proper delivery to the holder. The bank could not be faulted if it encashed the checks under those circumstances. However, the undisputed facts plainly show that there were circumstances that should have alerted the bank to the likelihood that the checks were not properly delivered to the person who encashed the same. The subject checks are properly characterized as incomplete and undelivered instruments thus making Section 15 of the NIL applicable in this case.
However, we do agree with petitioner that respondent’s officers’ practice of pre-signing of blank checks should be deemed seriously negligent behavior and a highly risky means of purportedly ensuring the efficient operation of businesses. It should have occurred to respondent’s officers and managers that the pre-signed blank checks could fall into the wrong hands as they did in this case where the said checks were stolen from the company accountant to whom the checks were entrusted.
Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the loss, petitioner will still emerge as the party foremost liable in this case. In instances where both parties are at fault, this Court has consistently applied the doctrine of last clear chance in order to assign liability.
Samsung Construction filed a complaint in the RTC after a certain Robert Gonzaga, drew cash against Samsung’s current account amounting to P999,500 from Far East Bank and Trust Company at Bel-Air Makati. The signature was alleged to be forged according to Jong, the sole signatory of Samsung Construction’s checks and demanded that the amount be credited to it. RTC ruled in favor of Samsung Construction after examining the testimonies presented by both parties. FEBTC filed an appeal before the Court of Appeals and reversed the ruling of the RTC. Samsung Construction elevated the case to the Supreme Court and granted its petition, reversing the decision of the Court of Appeals and held that Samsung Construction is not precluded by negligence from setting up the forgery hence the general rule should apply: liability is imputed on the drawee who paid out on the forgery.
Whether or not Samsung Construction was precluded from setting up the defense of forgery . under Section 23 of the Negotiable Instruments Law
No. Sec. 23 of the Negotiable Instruments Law states that a forged makes the instrument “wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. The Court held that Samsung Corporation was not guilty of negligence hence, was not barred from setting up the defense of forgery. It contended that the bare fact that the forgery was committed by a drawer-payor’s 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, does not entitle the bank to shift the loss to the drawer-payor. Furthermore, it was held that negligence is not presumed but must be proved by him who alleges it and in this case, FEBTC failed to dispute the presumption of ordinary care exercised by Samsung Construction. Additionally, the Court upheld the general rule that imputes liability on the drawee who paid out on the forgery. The Court held that the bank was amiss in its failure to employ a higher degree of caution considering the circumstances such as the amount in the check nearly total one million pesos and payable in cash which should arouse the suspicion of the bank as it is not ordinary business practice for a check that large amount to be made payable to cash or to bearer, instead of to the order of a specified person. FEBTC should have not merely complied with its internal procedures but undertake mandatory earnest efforts to ensure the validity of the check and authority of Gonzaga to collect the payment. Lastly, extraordinary diligence dictates that FEBTC should have ascertained from Jong personally that the signature in the questionable check was his. Hence, the Court granted the petition and reversed the decision of the Court of Appeals.
Junnel’s Marketing Corporation (JMC) is a depositor of Metropolitan Bank & Trust Co. (Metrobank)
against which it draws company checks. - Upon its audit JMC discovered that eight checks were stolen and encashed. Subsequently, it was
found that the said checks were deposited in AUB in the name of Casquero.
o According to AUB, the checks contained the indorsement at the back by the payees (those named in the eight checks). o Thereafter, the checks were presented to Metrobank, which cleared and authorized the payment thereof.
- Puriicacion Delizo (Delizo) confessed that while she was employed as an Accountant, at JMC, she stole several company checks drawn against JMC’s Metrobank current account.
o The stolen checks were not delivered to the named payee therein, but were instead given to a certain Lita Bituin and an unidentiied bank manager with whom Delizo colluded and connived in encashing said checks, and shared in the proceeds thereof.
- IN THE RTC:
o It ruled that the defendants are jointly and severally liable to JMC due the following reasons:
▪ That AUB allowed Casquero to deposit in her checking account the eight checks despite the fact that she is not the named payee therein. Also, the checks, being crossed checks, are meant for payees account only; and
▪ That Metrobank cleared the said checks; thereby, allowing AUB to convert the said
checks and credit their value to Casquero’s account.
- IN THE CA:
o It found no merit on the appeal of Delizo, Casquero, AUB and Metrobank.
▪ It ruled that the iduciary nature of banking requires the banks to observe the highest standard of integrity and diligence in the exercise of their function. Both Metrobank and AUB, in handling the subject checks, acted inconsistently with the standard required of them.
* The CA pointed out that the crossed-checks already served as a warning
to the holder that the checks have been issued for a deinite purpose such
that the holder must inquire if the checks have been received pursuant to
that purpose.
* The crossing of a check gives some measure of protection to the drawer
and drawee bank inasmuch as it ensures that the check will be encashed
by the rightful payee.
* The subject crossed checks, however, were deposited to the account of
Casquero in AUB, and not to the account of the named payees.
* Metrobank, as the drawee bank is under strict liability to pay the check only
to the payee named therein; otherwise, it would be violating the
instructions of the drawer.
- Hence, the recent petition. o Arguments:
▪ Metrobank argues that as the drawee bank, it is only obliged to conirm the due execution of the checks and to verify the signature on the checks vis-a-vis the signature on the signature cards of the account holder. It insists that it had no way of knowing that the checks were not deposited to the intended payee’s account, precisely because the checks were not presented to it for deposit, but to the presenting bank, AUB
▪ Metrobank also maintained that AUB was negligent by allowing the deposit of eight
checks in the account of a person who was not the named payee thereof. According
to Metrobank, AUB, as the collecting bank, has the responsibility of ensuring that the crossed checks were deposited to the account of the rightful payee considering that it holds the account of the depositor and is in the position to identify the latter’s identity.
▪ As such, under Section 66 of the Negotiable Instruments Law (NIL), AUB warrants
that the instrument is genuine and in all respect what it purports to be; that it has a
good title to it and all prior parties had the capacity to contract; and the instrument
is, at the time of the indorsement, valid and subsisting. Metrobank, thus, argues that
AUB, in presenting the checks for clearing and payment, made an express guaranty
on the validity of all prior indorsements..
Whether Metrobank and AUB are liable to Junnel’s Marketing for the encashed checks.
AS TO METROBANK’S LIABILITY: YES. (Note: They are only liable to seven checks because Casquero had acquired title to one)
- In cases of unauthorized payment of checks to persons other than the named payee therein or his
- Hence, the recent petition. o Arguments:
▪ Metrobank argues that as the drawee bank, it is only obliged to conirm the due, execution of the checks and to verify the signature on the checks vis-a-vis the signature on the signature cards of the account holder. It insists that it had no way
of knowing that the checks were not deposited to the intended payee’s account, precisely because the checks were not presented to it for deposit, but to the presenting bank, AUB
▪ Metrobank also maintained that AUB was negligent by allowing the deposit of eight
checks in the account of a person who was not the named payee thereof. According
to Metrobank, AUB, as the collecting bank, has the responsibility of ensuring that
the crossed checks were deposited to the account of the rightful payee considering
that it holds the account of the depositor and is in the position to identify the latter’s
identity.
▪ As such, under Section 66 of the Negotiable Instruments Law (NIL), AUB warrants
that the instrument is genuine and in all respect what it purports to be; that it has a
good title to it and all prior parties had the capacity to contract; and the instrument
is, at the time of the indorsement, valid and subsisting. Metrobank, thus, argues that
AUB, in presenting the checks for clearing and payment, made an express guaranty
on the validity of all prior indorsements.
order, the drawee bank is liable to the drawer for the amount of the checks. In turn, the drawee bank may seek reimbursement from the collecting bank.
- The drawee bank, or the bank on which a check is drawn, is bound by its contractual obligation to checks were crossed and were payable to Ramon Victor Ranee and Nila Valdes. Five checks were payable to the orders of speciied persons, while one check was payable to bearer. With regard to the check payable to bearer, the CA correctly ruled that Casquero acquired title to the said instrument and was authorized to encash the same.
its client, the drawer, to pay the check only to the payee or to the payee’s order. The drawee bank is duty-bound to follow strictly the instructions of its client, which is relected on the face of, and by the terms of, the check. When the drawee bank pays a person other than the named payee on the check, the drawee bank violates its contractual obligation to its client. Thus, it shall be held liable for the amount charged to the drawer’s account. When an unauthorized payment on the checks is made, the liability of Metrobank to JMC attaches even if it merely acted upon the guarantee of the collecting bank.
o In this case, Metrobank allowed the payment of eight checks to Casquero. Two of these
AS TO THE LIABILITY OF AUB: YES.
- Metrobank which merely relied upon the guaranty of the collecting bank, AUB, may seek
reimbursement from the latter.
o A collecting bank where a check is deposited, and which endorses the check upon
checks to Casquero’s account only after Metrobank cleared them for payment. Since the subject checks were deposited in Casquero’s account in AUB, AUB also has the opportunity to determine whether the checks will be paid to the rightful payee. The fact that two of the checks were crossed should have alerted AUB that these checks are meant to be deposited only to the payee’s account.
o As regards the checks payable to order, AUB, as the last endorser, is liable for the
payment of the checks even if the previous indorsements were forged.
presentment with the drawee bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants: (1) that the instrument is genuine and in all respects what it purports to be; (2) that the endorser has good title to it; (3) that all prior parties had capacity to contract; and (4) that the instrument is, at the time of the indorsement, valid and subsisting. When a collecting bank presents a check to the drawee bank for payment, the former thereby assumes the same warranties assumed by an endorser of a negotiable instrument and if any of these warranties turn out to be false, the collecting bank becomes liable to the drawee bank for the payments made under these false warranties.
▪ In this case, When AUB presented the subject checks to Metrobank for payment, it
guaranteed that the checks were genuine and in all respect what it purports to be and deposited to an account that has a good title to these checks. These guaranties, however, turned out to be false as Delizo admitted that she stole the subject checks and that they were not delivered to the named payee therein. These checks were instead deposited to Casquero’s account, who was not the named payee thereof. Since these checks were paid under these false guaranties, AUB is liable to reimburse Metrobank with the value of the checks.
▪ AUB cannot absolve itself from liability by arguing that it credited the amount of the
▪ Thus, AUB should be liable to reimburse Metrobank for the amount of the seven
checks.
RATIO DECIDENDI:
- Banking business is imbued with public interest. The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. Hence, banks are required to exercise the highest standard of diligence, as well as high standards of integrity and performance in all its transactions.
o Owing to the fiduciary nature of their relationship, Metrobank is under obligation to treat the account of JMC with utmost fidelity and meticulous care. It is Metrobank’s failure to uphold this obligation which caused the unauthorized payment of the checks, to the prejudice of JMC.
- Neither can AUB impute liability upon JMC by invoking the doctrine of contributory negligence (they impute that JMC was negligent on its accounting).
o The alleged contributory negligence was not established. AUB’s mere allegation cannot overcome the fact that AUB, as collecting bank, is remiss in its obligations.
- The law 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.
- Thus, Metrobank is liable to JMC for the unauthorized encashment of the seven checks. AUB, in turn, is liable to Metrobank for the amount it paid to JMC
This case started out as a complaint for sum of money and damages by Respondent Dionisio Llamas against x x x Petitioner Romeo Garcia and Eduardo de Jesus. Romeo and de Jesus borrowed ₱400,000.00 from [respondent]; that, on the same day, they executed a promissory note wherein they bound themselves jointly and severally to pay the loan on or before 23 January 1997 with a 5% interest per month; that the loan has long been overdue and, despite repeated demands, Romeo and De Jesus have failed and refused to pay it. Respondent then filed a complaint before the RTC. In his answer Romeo, averred that he assumed no liability under the promissory note because he signed it merely as an accommodation party for de Jesus. The trial court rendered judgment in favor of Dionisio and against Romeo and De Jesus, who are hereby ordered to pay, jointly and severally, the Dionisio.
Aggrieved, petitioner, appealed to the CA wherein the appellate court treated his case as a summary judgment, because his Answer had failed to raise even a single genuine issue regarding any material fact. According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and De Jesus. Respondent’s acceptance of the check did not serve to make De Jesus the sole debtor because, first, the obligation incurred by him and petitioner was joint and several; and, second, the check – which had been intended to extinguish the obligation – bounced upon its presentment.
ISSUE: Whether the defense that petitioner was only an accommodation party had any basis.
No, because the note herein is not a negotiable instrument. The note was made payable to a specific person rather than to bearer or to order, which is a requisite for negotiability under Act 2031, the Negotiable Instruments Law (NIL). Hence, petitioner cannot avail himself of the NIL’s provisions on the liabilities and defenses of an accommodation party. Besides, a non-negotiable note is merely a simple contract in writing and is evidence of such intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL.
Even granting arguendo that the NIL was applicable, still, petitioner would be liable for the promissory note. Under Article 29 of Act 2031, an accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety and in this case the accommodation party is the surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissor and debtor from the beginning. The liability is immediate and direct.
Petitioner Sally Go-Bangayan filed a complaint for sum of money and damages against respondents Spouses Leoncio and Judy Cham Ho.
Respondents obtained a loan of P700,000.00 from the petitioner in October 1997, with a monthly interest of 3%.
Respondents were able to pay the monthly interest but failed to settle the principal loan.
Petitioner claimed that respondents issued two crossed checks from their joint account with the Philippine Bank of Communications as payment for the loan.
The checks were received by the petitioner’s sister-in-law at the respondents’ office.
Petitioner agreed not to deposit the checks as respondents planned to redeem them in cash.
Respondents failed to fulfill their promise and ignored petitioner’s subsequent demands for payment.
Issue:
Whether the petitioner was able to establish her cause of action for a sum of money against the respondents by preponderance of evidence.
First. Section 24 of the Negotiable Instruments Law embodies the presumption that when negotiable instruments such as checks are delivered to their intended payees, such instruments have been issued for value, viz.:
Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.
Meanwhile, Section 25 of the same law expressly recognizes a pre-existing debt as valid consideration to support the issuance of a negotiable instrument like a check:
Sec. 25. Value, what constitutes. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value and is deemed such whether the instrument is payable on demand or at a future time.
Here, respondents admitted the genuineness and due execution of the crossed checks they issued in petitioner’s name. As such, the presumption that said checks were for valuable consideration comes into play. Notably, respondents failed to rebut this presumption. All they offered was a bare denial that they incurred the loans in exchange for their checks. Surely, bare denial, without more, is not sufficient to overthrow the presumption under Section 24 of the Negotiable Instruments Law. We therefore give credence to petitioner’s claim that the checks were issued and delivered to her by respondents in payment of their indebtedness to her.
Bank of America NT & SA (petitioner) and Philippine Racing Club (respondent) are involved in the case.
The respondent maintained several accounts with different banks, including a current account with the petitioner.
The authorized signatories for the respondent’s current account were its President and Vice President for Finance.
In December 1988, the President and Vice President pre-signed several checks relating to the current account to ensure continuity of operations while they were out of the country.
The checks were entrusted to the accountant with instructions to complete the entries when needed.
A John Doe presented two of the pre-signed checks to the petitioner for encashment.
The checks had irregular entries, with the word “CASH” and the amount “ONE HUNDRED TEN THOUSAND PESOS ONLY” typed in the payee section.
The petitioner encashed the checks without verifying their legitimacy.
It was later discovered that the checks were stolen and completed without authority by an employee of the respondent.
The respondent demanded payment from the petitioner, but the petitioner refused.
Issue:
Whether the proximate cause of the wrongful encashment of the checks was due to the petitioner’s failure to verify the checks’ legitimacy or the respondent’s practice of pre-signing blank checks.
n defense of its cashier/teller’s questionable action, petitioner insists that pursuant to Sections 14 16 and 16 17 of the NIL, it could validly presume, upon presentation of the checks, that the party who filled up the blanks had authority and that a valid and intentional delivery to the party presenting the checks had taken place. Thus, in petitioner’s view, the sole blame for this debacle should be shifted to respondent for having its signatories pre-sign and deliver the subject checks. 18 Petitioner argues that there was indeed delivery in this case because, following American jurisprudence, the gross negligence of respondent’s accountant in safekeeping the subject checks which resulted in their theft should be treated as a voluntary delivery by the maker who is estopped from claiming non-delivery of the instrument. 19 EDcIAC
Petitioner’s contention would have been correct if the subject checks were correctly and properly filled out by the thief and presented to the bank in good order. In that instance, there would be nothing to give notice to the bank of any infirmity in the title of the holder of the checks and it could validly presume that there was proper delivery to the holder. The bank could not be faulted if it encashed the checks under those circumstances. However, the undisputed facts plainly show that there were circumstances that should have alerted the bank to the likelihood that the checks were not properly delivered to the person who encashed the same. In all, we see no reason to depart from the finding in the assailed CA Decision that the subject checks are properly characterized as incomplete and undelivered instruments thus making Section 15 20 of the NIL applicable in this case. As we previously stated, respondent’s practice of signing checks in blank whenever its authorized bank signatories would travel abroad was a dangerous policy, especially considering the lack of evidence on record that respondent had appropriate safeguards or internal controls to prevent the pre-signed blank checks from falling into the hands of unscrupulous individuals and being used to commit a fraud against the company. We cannot believe that there was no other secure and reasonable way to guarantee the non-disruption of respondent’s business. As testified to by petitioner’s expert witness, other corporations would ordinarily have another set of authorized bank signatories who would be able to sign checks in the absence of the preferred signatories. 26 Indeed, if not for the fortunate happenstance that the thief failed to properly fill up the subject checks, respondent would expectedly take the blame for the entire loss since the defense of forgery of a drawer’s signature(s) would be unavailable to it. Considering that respondent knowingly took the risk that the pre-signed blank checks might fall into the hands of wrongdoers, it is but just that respondent shares in the responsibility for the loss.
The Province of Tarlac maintains a current account with Philippine National Bank (PNB).
Checks issued by the Province are signed by the Provincial Treasurer and countersigned by the Provincial Auditor or the Secretary of the Sangguniang Bayan.
Fausto Pangilinan, the retired administrative officer and cashier of the Concepcion Emergency Hospital, collected and encashed 30 checks with forged indorsements at Associated Bank.
Pangilinan claimed to be assisting the hospital in following up the release of the checks and had official receipts.
Pangilinan deposited the checks in his personal savings account at Associated Bank and later withdrew the money when the checks were cleared and paid by PNB.
The Province of Tarlac requested PNB to return the cleared checks for verification and discovered that the indorsements were forgeries.
PNB demanded reimbursement from Associated Bank, which led to the filing of various complaints and counterclaims.
The trial court held PNB liable to the Province of Tarlac for the amount of the checks and ordered Associated Bank to reimburse PNB.
The court also dismissed the fourth-party complaint against Fausto Pangilinan.
The decision was affirmed by the Court of Appeals.
Issue:
Who bears the loss when checks with forged indorsements are paid - the drawer, the drawee bank, or the collecting bank?
The Supreme Court ruled that the collecting bank is liable for checks with forged indorsements.
The drawee bank is not liable for the loss on a forged indorsement.
PNB can recover the amount paid on the checks from Associated Bank.
PNB has the duty to promptly inform the collecting bank of the forgery upon discovery.
The loss should be apportioned between the Province of Tarlac and PNB.
PNB is entitled to reimbursement from Associated Bank.
The legal interest rate of six percent per annum should be applied from the date of extrajudicial demand made by the Province of Tarlac.
Ratio:
A forged signature, whether of the drawer or the payee, is wholly inoperative, and no one can gain title to the instrument through it.
Indorsers, persons negotiating by delivery, and acceptors are warrantors of the genuineness of the signatures on the instrument.
The collecting bank has the duty to verify the genuineness of the indorsements on checks.
The drawee bank’s duty is to verify the genuineness of the drawer’s signature.
PNB can recover the amount paid on the checks from Associated Bank based on its warranties as an indorser and its duty to verify the genuineness of the payee’s indorsement.
PNB has the duty to promptly i
The Court finds as reasonable, the proportionate sharing of fifty percent-fifty percent (50%-50%). Due to the negligence of the Province of Tarlac in releasing the checks to an unauthorized person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee hospital for a period close to three years and in not properly ascertaining why the retired hospital cashier was collecting checks for the payee hospital in addition to the hospital’s real cashier, respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In effect, the Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB.
The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the genuineness of all prior indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to ascertain the genuineness of the payee’s indorsement.
