G.R. No.

133179
March 27, 2008

ALLIED BANKING CORPORATION, Petitioner

versus
LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., Respondents

Facts:
On November 14, 1983, Lim Sio Wan deposited a money market placement worth
Php1,152,597.35 to Allied Bank for a term of 31 days to mature on December 15,
1983. On December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina
So, an officer of Allied Bank, and instructed her to preterminate the money market
placement and to issue a manager’s check representing the proceeds from the
placement and to give the check to one Deborah Dee Santos, who would pick up
the check.

Santos arrived at the bank and signed the application form for a manager’s check
to be issued. The check was cross-checked for Payees Account Only and given to
Santos. Then the check was deposited to the account of Filipinas Cement
Corporation (FCC) at Metrobank, with the forged signature of Lim Sio Wan.

Earlier, on September 21, 1983, FCC had deposited a money market placement
forPhp2 million to Producers Bank. Santos was the money market trader assigned
to handle FCC’s account. The placement matured on October 25, 1983, and was
rolled over until December 5, 1983. The Allied check was deposited with
Metrobank in the account of FCC as Producers Bank’s payment of its obligation to
FCC.

Metrobank stamped a guaranty on the check in compliance with the requirements

of the Philippine Clearing House Corporation (PCHC) Rules and Regulations. The
guaranty read: All prior endorsements and/or lack of endorsement guaranteed.
The check was then sent to Allied Bank through the PCHC. Upon the presentment
of the check, Allied funded it even without checking the authenticity of Lim Sio
Wan’s purported indorsement. So the amount of the check was credited to the
account of FCC.

On December 14, 1983, Lim Sio Wan went to Allied Bank to withdraw the money
market placement. When she was informed that the placement has been
terminated upon her instructions, she took action. She filed a complaint with the
RTC against Allied to recover the proceeds of the money market placement.

Allied filed a third party complaint against Metrobank and Santos. In turn,
Metrobank filed a fourth party complaint against FCC. Then FCC filed a fifth party
complaint against Producers Bank.

Six months after the funding of the check, Allied informed Metrobank that the
signature in the check was forged. Thus, Metrobank withheld the amount but later
on agreed to release it to FCC after the latter executed an undertaking, promising
to indemnify Metrobank in case it was made to reimburse the amount.

Lim Sio Wan then filed an amended complaint, adding Metrobank as party-
defendant along with Allied. The RTC rendered the following decision:

1. Ordering defendant Allied Banking Corporation to pay plaintiff the amount of

P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid;
2. Ordering defendant Allied Bank to pay plaintiff the amount of P100,000.00 by
way of moral damages;
 3. Ordering defendant Allied Bank to pay plaintiff the amount of P173,792.20 by
way of attorney’s fees; and,
4. Ordering defendant Allied Bank to pay the costs of suit.

Defendant Allied Banks cross-claim against defendant Metrobank is DISMISSED.

Likewise defendant Metrobanks third-party complaint as against Filipinas Cement
Corporation is
DISMISSED.

Filipinas Cement Corporations fourth-party complaint against Producers Bank is

also
DISMISSED.

Upon appeal, the CA promulgated the following decision:

WHEREFORE, premises considered, the decision appealed from is MODIFIED.

Judgment is rendered ordering and sentencing defendant-appellant Allied Banking
Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank
and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interest
per annum from March 16, 1984 until fully paid. The moral damages, attorney’s
fees and costs of suit adjudged shall likewise be paid by defendant-appellant Allied
Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company
in the same proportion of 60-40. Except as thus modified, the decision appealed
from is AFFIRMED.

Allied alleged that there was unjust enrichment on the part of Producers Bank.

Issue:
Was Allied Bank correct in saying that Producers Bank was unjustly enriched?

Ruling:
Yes. Under Article 22 of the Civil Code, there is unjust enrichment when the
following concur:

1. A person is unjustly benefited

2. Such benefit is derived at the expense of or with damages to another

In the instant case, Lim Sio Wans money market placement in Allied Bank was
preterminated and withdrawn without her consent. Moreover, the proceeds of the
placement were deposited in Producers Banks account in Metrobank without any
justification. It cannot be validly claimed that FCC, and not Producers Bank,
should be considered as having been unjustly enriched. It must be remembered
that FCCs money market placement with Producers Bank was already due and
demandable; thus, Producers Banks payment thereof was justified.

Clearly, Producers Bank must be held liable to Allied and Metrobank for the
amount of the check plus 12% interest per annum, moral damages, attorney’s fees,
and costs of suit which Allied and Metrobank are adjudged to pay Lim Sio Wan
based on a proportion of 60:40.

Thus, the Supreme Court held that the CA’s ruling be upheld with modification.
Producers Bank was ordered to pay Allied and Metrobank the amounts.
Samsung vs. Fareast Bank, GR No. 129015

FACTS:
A check drawn against petitioner was presented for payment to
respondent Bank. Satisfied with the authenticity of the signature
appearing thereon, the check was encashed. The following day,
petitioner’s accountant who had custody of the company
checks discovered that a check was missing and reported the
petitioner’s project manager who is also the sole signatory to
its checking account. Petitioner demanded that it be reimbursed for
the proceeds of the check.

ISSUE(S):
Whether or not respondent bank is liable to reimburse for the
payment of the forged check.

RULING:
YES. 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 meticulously and with the highest degree
of care, considering the fiduciary nature of their relationship.
The diligence required of banks, therefore, is more than that of a
good father of a family. Given the
circumstances, extraordinary diligence dictates that FEBTC should
have ascertained from Jong personally that the signature in the
questionable check was his. Since the drawer, Samsung
Construction, is not precluded by negligence from setting up the
forgery, the general rule should apply. Consequently, if a bank pays
a forged check, it must be considered as paying out of its funds and
cannot charge the amount so paid to the account of the depositor. A
bank is liable, irrespective of its good faith, in paying a forged check

Ilusorio vs. CA, GR No. 139140

FACTS:

Ilusorio was a businessman who was in charge of 20 or so corporations. He

was a depositor in good standing of Manila Banking Corporation. As he was
in charge of a big number of corporations, he was usually out of the country
for business. He then entrusted his credit cards, checkbook, blank checks,
passbooks, etc to his secretary, Katherine Eugenio. Eugenio was also in
charge of verifying and reconciling the statements of Ilusorio’s checking
account.
Eugenio was able to encash and deposit to her personal account checks
drawn against Ilusorio’s account with an aggregate amount of 119K. Ilusorio
didn’t bother to check his statement of account until a business partner
informed him that he saw Eugenio using his credit cards. Ilusorio then fired
her and instituted criminal case of Estafa thru falsification against Eugenio.
Manila Banking Corp. also instituted a complaint of estafa against Eugenio
based on the affidavit of Dante Razon, an employee. Razon stated that he
personally examined and scrutinized the encashed checks in accordance with
their verification procedures.

Manila Bank sought the expertise of NBI in determining the genuineness of

the checks but Ilusorio failed to submit specimen signatures and thus, NBI
could not conduct the examination.

Issue: W/N Manila Bank is liable for damages for failing to detect a forged
check

Held: No. To be entitled to damages, Ilusorio has the burden of poving that
the bank was negligent in failing to detect the discrepancy in the signatures
on the checks. Ilusorio had to establish the fact of forgery which he failed to
do by failing to submit his specimen signatures for NBI to conclusively
establish forgery.

Furthermore, the Bank was not negligent in verifying the checks as they
verified the drawer’s signatures against their specimen signatures and in
doubt, referred to more experienced verifier for further verification.

On the contrary, it was Ilusorio who was found to be negligent. He accorded

his secretary with an unusual degree of trust and unrestricted access to his
finances. Furthermore, despite the fact that the bank was regularly sending
statements of account, he failed to check them until he found out that his
secretary was using his credit cards.

Sec. 23 of the Negotiable Instruments law provides that a forged check is

inoperative, meaning there was no right to enforce payment against any
party. But it also provides an exception: “unless the party against whom it is
sought enforce such right is precluded from setting up the forgery or want of
authority”. This case falls under the exception since Ilusorio is precluded
from setting up forgery due to his own negligence considering that he
allowed his secretary access to his credit cards, checkbook, and allowed his
secretary to verify his statements of account.
G.R. No. 138510 October 10, 2002
Lessons Applicable: Liabilities of the Parties (Negotiable Instruments
Law)

FACTS: Traders (sold 3 managers check)> RPN,IBC,BBC (received by

<Mrs. Vera) --(not received) BIR-- > SBTC (deposited by unknown
persons)
 April 15, 1985: Bureau of Internal Revenue (BIR) assessed Radio
Philippines Network (RPN), Intercontinental Broadcasting
Corporation (IBC), and Banahaw Broadcasting Corporation (BBC)
of their tax obligations for the taxable years 1978 to 1983.

 March 25, 1987: Mrs. Lourdes C. Vera, RPN,IBC,BBC comptroller,

sent a letter to the BIR requesting settlement of their tax
obligations which was granted

 June 26, 1986: RPN, IBC and BBC purchased from Traders 3
manager’s checks to be used as payment for their tax liabilities

 Traders, through Aida Nuñez, turned over the checks to Mrs. Vera
who was supposed to deliver them to the BIR in payment

 September, 1988: BIR again assessed plaintiffs for their tax

liabilities for the years 1979-82. It was discovered the 3 managers
checks were never delivered nor paid to the BIR by Mrs. Vera. The
checks were presented for payment by unknown persons to
Security Bank and Trust Company (SBTC).

 BIR issued warrants of levy, distraint and garnishment against

them.

 They were constrained to enter into a compromise and paid BIR

P18,962,225.25 in settlement

 Traders sent letters to RPN and SBTC, demanding that the

amounts covered by the checks be reimbursed or credited to their
account

 RTC: favored Traders against RPN and SBTC

 CA: absolved SBTC and held Traders solely liable

 SBTC denies liability on the ground that it had no participation in

the negotiation of the checks

ISSUE: W/N Traders should solely bare the loss for its negligence

HELD: YES. CA affirmed.

 if a bank pays a forged check, it must be considered as paying out
of its funds and cannot charge the amount so paid to the account
of the depositor

 Despite the fraud, Traders paid the 3 checks in the total amount of
P9,790,716.87

 primary duty of Traders to know that the check was duly indorsed
by the original payee and, where it pays the amount of the check
to a third person who has forged the signature of the payee, the
loss falls upon it who cashed the check.

 only remedy is against the person to whom it paid the money

 It should be noted further that one of the subject checks was

crossed.

 The crossing of one of the subject checks should have put

petitioner on guard

 it was duty-bound to ascertain the indorser’s title to the check or

the nature of his possession.

 effects of a crossed check:

 (a) the check may not be encashed but only deposited in the bank;
(b) the check may be negotiated only once to one who has an
account with a bank and

 (c) the act of crossing the check serves as a warning to the holder
that the check has been issued for a definite purpose so that he
must inquire if he has received the check pursuant to that purpose,
otherwise, he is not a holder in due course

 A collecting bank which indorses a check bearing a forged

indorsement and presents it to the drawee bank guarantees all
prior indorsements, including the forged indorsement itself, and
ultimately should be held liable therefor. However, it is doubtful if
the subject checks were ever presented to and accepted by SBTC
so as to hold it liable as a collecting bank, as held by the Court of
Appeals.

Associated Bank vs. CA, GR No. 107382

FACTS:
The Province of Tarlac maintains a current accountwith the Philippine
National Bank (PNB) where the provincial funds – including an
appropriation for the Concepcion Emergency Hospital – are
deposited. Checks are drawn against such account payable to the
order of the said hospital, released by the Provincial Treasurer and
received for the hospital by its administrative officer and cashier.
Faustino Pangilinan was the hospital’s administrative officerand
cashier until his retirement in February 28, 1978. However, it was
later discovered that even after retirement Pangilinan was able to
collect and encash thirty (30) checks with petitioner Bank by forging
the indorsement of the chief of payee hospital. The Province sought
from PNB the restoration of the amounts of the checks. PNB in turn
demanded reimbursement from petitioner Bank. Both banks resisted
payment.

ISSUE(S):
Whether or not petitioner Bank should bear the loss on forged
indorsement.

RULING:
YES. A collecting bank which indorses a check bearing a forged
indorsement and presents it to the drawee bank guarantees all prior
indorsements, including the forged indorsement. It warrants that the
instrument is genuine, and that it is valid and subsisting at the time of
his indorsement. Because the indorsement is forgery, the collecting
bank commits a breach of this warranty and will be accountable to the
drawee bank. This liability scheme operates without regard to fault on
the part of the collecting/presenting bank. Even if the latter bank was
not negligent, it would still be liable to the drawee bank because of its
indorsement. Moreover, the collecting bank is made liable because it
is privy to the depositor who negotiated the check. The bank knows
him. his address and history because he is a client. It has taken a risk
on his deposit. The bank is also in a better position to detect forgery,
fraud or irregularity in the indorsement.