G.R. No.

88866 February 18, 1991 The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July
13, 1979, in the amount of P310,000.00, and the third on July 16, 1979, in the amount of
METROPOLITAN BANK & TRUST COMPANY, petitioner, P150,000.00. The total withdrawal was P968.000.00.4
vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account,
MAGNO CASTILLO and GLORIA CASTILLO, respondents. eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently
cleared warrants. The last withdrawal was made on July 16, 1979.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and Lucia Castillo. On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings & Loan Association, Inc. dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to make up the deficit in its account.

The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of
Mindoro.5 After trial, judgment was rendered in favor of Golden Savings, which, however, filed a
CRUZ, J.: motion for reconsideration even as Metrobank filed its notice of appeal. On November 4, 1986,
the lower court modified its decision thus:
This case, for all its seeming complexity, turns on a simple question of negligence. The facts,
pruned of all non-essentials, are easily told. ACCORDINGLY, judgment is hereby rendered:

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the 1. Dismissing the complaint with costs against the plaintiff;
Philippines and even abroad. Golden Savings and Loan Association was, at the time these
events happened, operating in Calapan, Mindoro, with the other private respondents as its 2. Dissolving and lifting the writ of attachment of the properties of defendant Golden
principal officers. Savings and Loan Association, Inc. and defendant Spouses Magno Castillo and Lucia
Castillo;
In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and
deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37. 3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the
They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its sum of P1,754,089.00 and to reinstate and credit to such account such amount existing
General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez before the debit was made including the amount of P812,033.37 in favor of defendant
while the others appeared to have been indorsed by their respective payees, followed by Gomez Golden Savings and Loan Association, Inc. and thereafter, to allow defendant Golden
as second indorser.1 Savings and Loan Association, Inc. to withdraw the amount outstanding thereon before
the debit;
On various dates between June 25 and July 16, 1979, all these warrants were subsequently
indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account 4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc.
No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the attorney's fees and expenses of litigation in the amount of P200,000.00.
branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury
for special clearing.2 5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo
attorney's fees and expenses of litigation in the amount of P100,000.00.
More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times
to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was SO ORDERED.
meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over Gloria's
repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally
decided to allow Golden Savings to withdraw from the proceeds of the On appeal to the respondent court,6 the decision was affirmed, prompting Metrobank to file this
warrants.3 petition for review on the following grounds:
 1. Respondent Court of Appeals erred in disregarding and failing to apply the clear signature as checked by Golden Savings. In fact, the treasury warrants were dishonored allegedly
contractual terms and conditions on the deposit slips allowing Metrobank to charge back because of the forgery of the signatures of the drawers, not of Gomez as payee or indorser.
any amount erroneously credited. Under the circumstances, it is clear that Golden Savings acted with due care and diligence and
cannot be faulted for the withdrawals it allowed Gomez to make.
(a) Metrobank's right to charge back is not limited to instances where the
checks or treasury warrants are forged or unauthorized. By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not
trifling — more than one and a half million pesos (and this was 1979). There was no reason why it
(b) Until such time as Metrobank is actually paid, its obligation is that of a mere should not have waited until the treasury warrants had been cleared; it would not have lost a
collecting agent which cannot be held liable for its failure to collect on the single centavo by waiting. Yet, despite the lack of such clearance — and notwithstanding that it
warrants. had not received a single centavo from the proceeds of the treasury warrants, as it now
repeatedly stresses — it allowed Golden Savings to withdraw — not once, not twice, but thrice —
from the uncleared treasury warrants in the total amount of P968,000.00
2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank
is made to pay for warrants already dishonored, thereby perpetuating the fraud
committed by Eduardo Gomez. Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the
clearance and it also wanted to "accommodate" a valued client. It "presumed" that the warrants
had been cleared simply because of "the lapse of one week." 8 For a bank with its long
3. Respondent Court of Appeals erred in not finding that as between Metrobank and experience, this explanation is unbelievably naive.
Golden Savings, the latter should bear the loss.
And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the
4. Respondent Court of Appeals erred in holding that the treasury warrants involved in dorsal side of the deposit slips through which the treasury warrants were deposited by Golden
this case are not negotiable instruments. Savings with its Calapan branch. The conditions read as follows:

The petition has no merit. Kindly note that in receiving items on deposit, the bank obligates itself only as the
depositor's collecting agent, assuming no responsibility beyond care in selecting
From the above undisputed facts, it would appear to the Court that Metrobank was indeed correspondents, and until such time as actual payment shall have come into possession
negligent in giving Golden Savings the impression that the treasury warrants had been cleared of this bank, the right is reserved to charge back to the depositor's account any amount
and that, consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his previously credited, whether or not such item is returned. This also applies to
account with it. Without such assurance, Golden Savings would not have allowed the checks drawn on local banks and bankers and their branches as well as on this
withdrawals; with such assurance, there was no reason not to allow the withdrawal. Indeed, bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft
Golden Savings might even have incurred liability for its refusal to return the money that to all or any other reason. (Emphasis supplied.)
appearances belonged to the depositor, who could therefore withdraw it any time and for any
reason he saw fit. According to Metrobank, the said conditions clearly show that it was acting only as a
collecting agent for Golden Savings and give it the right to "charge back to the depositor's
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited account any amount previously credited, whether or not such item is returned. This also applies to
them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied checks ". . . which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft of any
on Metrobank to determine the validity of the warrants through its own services. The proceeds of other reason." It is claimed that the said conditions are in the nature of contractual stipulations
the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to and became binding on Golden Savings when Gloria Castillo, as its Cashier, signed the deposit
withdraw them from its own deposit.7 It was only when Metrobank gave the go-signal that Gomez slips.
was finally allowed by Golden Savings to withdraw them from his own account.
Doubt may be expressed about the binding force of the conditions, considering that they have
The argument of Metrobank that Golden Savings should have exercised more care in checking apparently been imposed by the bank unilaterally, without the consent of the depositor. Indeed, it
the personal circumstances of Gomez before accepting his deposit does not hold water. It was could be argued that the depositor, in signing the deposit slip, does so only to identify himself and
Gomez who was entrusting the warrants, not Golden Savings that was extending him a loan; and not to agree to the conditions set forth in the given permit at the back of the deposit slip. We do
moreover, the treasury warrants were subject to clearing, pending which the depositor could not not have to rule on this matter at this time. At any rate, the Court feels that even if the deposit slip
withdraw its proceeds. There was no question of Gomez's identity or of the genuineness of his were considered a contract, the petitioner could still not validly disclaim responsibility thereunder
in the light of the circumstances of this case.
In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to Sec. 1. — Form of negotiable instruments. — An instrument to be negotiable must
be suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On conform to the following requirements:
the contrary, Article 1909 of the Civil Code clearly provides that —
(a) It must be in writing and signed by the maker or drawer;
Art. 1909. — The agent is responsible not only for fraud, but also for negligence, which
shall be judged 'with more or less rigor by the courts, according to whether the agency (b) Must contain an unconditional promise or order to pay a sum certain in money;
was or was not for a compensation.
(c) Must be payable on demand, or at a fixed or determinable future time;
The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the
clearance given by it that assured Golden Savings it was already safe to allow Gomez to
withdraw the proceeds of the treasury warrants he had deposited Metrobank misled Golden (d) Must be payable to order or to bearer; and
Savings. There may have been no express clearance, as Metrobank insists (although this is
refuted by Golden Savings) but in any case that clearance could be implied from its allowing (e) Where the instrument is addressed to a drawee, he must be named or otherwise
Golden Savings to withdraw from its account not only once or even twice but three times. The indicated therein with reasonable certainty.
total withdrawal was in excess of its original balance before the treasury warrants were deposited,
which only added to its belief that the treasury warrants had indeed been cleared. xxx xxx xxx

Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any Sec. 3. When promise is unconditional. — An unqualified order or promise to pay is
reason is not acceptable. Any reason does not mean no reason at all. Otherwise, there would unconditional within the meaning of this Act though coupled with —
have been no need at all for Golden Savings to deposit the treasury warrants with it for clearance.
There would have been no need for it to wait until the warrants had been cleared before paying
the proceeds thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests, (a) An indication of a particular fund out of which reimbursement is to be made or a
is not binding for being arbitrary and unconscionable. And it becomes more so in the case at bar particular account to be debited with the amount; or
when it is considered that the supposed dishonor of the warrants was not communicated to
Golden Savings before it made its own payment to Gomez. (b) A statement of the transaction which gives rise to the instrument judgment.

The belated notification aggravated the petitioner's earlier negligence in giving express or at least But an order or promise to pay out of a particular fund is not unconditional.
implied clearance to the treasury warrants and allowing payments therefrom to Golden Savings.
But that is not all. On top of this, the supposed reason for the dishonor, to wit, the forgery of the
The indication of Fund 501 as the source of the payment to be made on the treasury warrants
signatures of the general manager and the auditor of the drawer corporation, has not been
makes the order or promise to pay "not unconditional" and the warrants themselves non-
established.9 This was the finding of the lower courts which we see no reason to disturb. And as
negotiable. There should be no question that the exception on Section 3 of the Negotiable
we said in MWSS v. Court of Appeals:10
Instruments Law is applicable in the case at bar. This conclusion conforms to Abubakar vs.
Auditor General11 where the Court held:
Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be
established by clear, positive and convincing evidence. This was not done in the present
The petitioner argues that he is a holder in good faith and for value of a negotiable
case.
instrument and is entitled to the rights and privileges of a holder in due course, free from
defenses. But this treasury warrant is not within the scope of the negotiable instrument
A no less important consideration is the circumstance that the treasury warrants in question are law. For one thing, the document bearing on its face the words "payable from the
not negotiable instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, appropriation for food administration, is actually an Order for payment out of "a particular
and this is of equal significance, it is indicated that they are payable from a particular fund, to wit, fund," and is not unconditional and does not fulfill one of the essential requirements of a
Fund 501. negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable
Instruments Law).
The following sections of the Negotiable Instruments Law, especially the underscored parts, are
pertinent: Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed
that they were "genuine and in all respects what they purport to be," in accordance with Section
66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the
non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the
purpose of guaranteeing the genuineness of the warrants but merely to deposit them with
Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on the
back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed,
Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands, 12 but we
feel this case is inapplicable to the present controversy.1âwphi1 That case involved checks
whereas this case involves treasury warrants. Golden Savings never represented that the
warrants were negotiable but signed them only for the purpose of depositing them for clearance.
Also, the fact of forgery was proved in that case but not in the case before us. Finally, the Court
found the Jai Alai Corporation negligent in accepting the checks without question from one
Antonio Ramirez notwithstanding that the payee was the Inter-Island Gas Services, Inc. and it did
not appear that he was authorized to indorse it. No similar negligence can be imputed to Golden
Savings.

We find the challenged decision to be basically correct. However, we will have to amend it insofar
as it directs the petitioner to credit Golden Savings with the full amount of the treasury checks
deposited to its account.

The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez
was allowed to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor. The
amount he has withdrawn must be charged not to Golden Savings but to Metrobank, which must
bear the consequences of its own negligence. But the balance of P586,589.00 should be debited
to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount from
his deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To also
credit the balance to Golden Savings would unduly enrich it at the expense of Metrobank, let
alone the fact that it has already been informed of the dishonor of the treasury warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of
the dispositive portion of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter
allowing defendant Golden Savings & Loan Association, Inc. to withdraw the amount
outstanding thereon, if any, after the debit.

SO ORDERED.