Caltex vs CA

Caltex (Philippines) Inc. vs. CA GR 97753, 10 August 1992 -negotiability

FACTS: Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of one Mr. Angel dela Cruz who deposited with the bank P1.12 million. Dela Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from the latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance of the replacement CTDs. When Caltex presented said CTDs for verification with the bank and formally informed the bank of its decision to preterminate the same, the bank rejected Caltex claim and demand as Caltex failed to furnish copies of certain requested documents. In 1983, dela Cruz loan matured and the bank set-off and applied the time deposits as payment for the loan. Caltex filed a complaint which was dismissed on the ground that the subject certificates of deposit are non-negotiable.

ISSUE: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

RULING: The CTDs in question are negotiable instruments as they meet the requirements of the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. The documents provide that the amounts deposited shall be repayable to the depositor. And according to the document, the depositor is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment. However, petitioner cannot recover on the CTDs. Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and dela Cruz, as ultimately ascertained, requires both delivery and indorsement. In this case, there was no indorsement as the CTDs were delivered not as payment but only as a security for dela Cruz' fuel purchases.

**The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. The CTDs in question are negotiable instruments as they meet the requirements of the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. The documents provide that the amounts deposited shall be repayable to the depositor. And according to the document, the depositor is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment.

BANK V. COURT OF APPEALS 216 SCRA 738

FACTS: Yamaguchi and Canlas are officers of the Worldwide Garment Manufacturing, which later changed its name to Pinch Manufacturing. They were authorized to apply for credit facilities with the petitioner bank. The two officers signed the promissory notes issued to secure the payment of the obligations. Later, the bank instituted an action for collection of money, impleading also the two officers. The trial court held the two officers personally liable also.

HELD: Canlass is solidarily liable on each of the promissory notes to which his signature appears. The promissory notes in question are negotiable instruments and thus, governed by the Negotiable Instruments Law. Under the Negotiable Instruments Law, persons who write their names in the instrument are makers are liable as such. By signing the note, the maker promises to pay to the order of the payee or any holder the tenor of the obligation. Based on the above provisions of the law, there is no denying that Canlass is one of the co-makers of the promissory note

ASSOCIATED BANK V. CA 252 SCRA 620

FACTS: The province of Tarlac maintains an account with PNB-Tarlac. Part of its funds is appropriated for the benefit of Concepcion Emergency Hospital. During a post-audit done by the province, it was found out that 30 of its checks werent received by the hospital. Upon further investigation, it was found out that the checks were encashed by Pangilinan who was a former cashier and administrative officer of the hospital through forged indorsements. This prompted the provincial treasurer to ask for reimbursement from PNB and thereafter, PNB from Associated Bank. As the two banks didn't want to reimburse, an action was filed against them.

HELD: There is a distinction on forged indorsements with regard bearer instruments and instruments payable to order. With instruments payable to bearer, the signature of the payee or holder is unnecessary to pass title to the instrument. Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against holder in due course. In instruments payable to order, the signature of the rightful holder is essential to transfer title to the same instrument. When the holders signature is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto. In connection to this, an indorser warrants that the instrument is genuine. A collecting bank is such an indorser. So even if the indorsement is forged, the collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. Furthermore, in cases involving checks with forged indorsements, such as the case at bar, the chain of liability doesn't end with the drawee bank. The drawee bank may not debit the account of the drawer but may generally pass liability back through the collection chain to the

party who took from the forger and of course, the forger himself, if available. In other words, the drawee bank can seek reimbursement or a return of the amount it paid from the collecting bank or person. The collecting bank generally suffers the loss because it has te duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements. With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it of the opportunity to go after the forger, signifies negligence on the part of the drawee bank and will preclude it from claiming reimbursement. In this case, PNB wasn't guilty of any negligent delay. Its delay hasn't prejudiced Associated Bank in any way because even if there wasn't delay, the fact that there was nothing left of the account of Pangilinan, there couldn't be anymore reimbursement.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18657 August 23, 1922

THE GREAT EASTERN LIFE INSURANCE CO., plaintiff-appellant, vs. HONGKONG & SHANGHAI BANKING CORPORATION and PHILIPPINE NATIONAL BANK, defendants-appellees. Camus and Delgado for appellant. Fisher and DeWitt and A. M. Opisso for Hongkong and Shanghai Bank. Roman J. Lacson for Philippine National Bank. STATEMENT The plaintiff is an insurance corporation, and the defendants are banking corporations, and each is duly licensed to do its respective business in the Philippines Islands. May 3, 1920, the plaintiff drew its check for P2,000 on the Hongkong and Shanghai Banking Corporation with whom it had an account, payable to the order of Lazaro Melicor. E. M. Maasim fraudulently obtained possession of the check, forged Melicor's signature, as an endorser, and then personally endorsed and presented it to the Philippine National Bank where the amount of the check was placed to his credit. After having paid the check, and on the next day, the Philippine national Bank endorsed the check to the Hongkong and Shanghai Banking Corporation which paid it and charged the amount of the check to the account of the plaintiff. In the ordinary course of business, the Hongkong Shanghai Banking Corporation rendered a bank statement to the plaintiff showing that the amount of the check was charged to its account, and no objection was then made to the statement. About four months after the check was charged to the account of the plaintiff, it developed that Lazaro Melicor, to whom the check was made payable, had never received it, and that his signature, as an endorser, was forged by Maasim, who presented and deposited it to his private account in the Philippine National Bank. With this knowledge , the plaintiff promptly made a demand upon the Hongkong and Shanghai Banking Corporation that it should be given credit for the amount of the forged check, which the bank refused to do, and the plaintiff commenced this action to recover the P2,000 which was paid on the forged check. On the petition of the Shanghai Bank, the Philippine National Bank was made defendant. The Shanghai Bank denies any liability, but prays that, if a judgment should be rendered against it, in turn, it should have like judgment against the Philippine National Bank which denies all liability to either party. Upon the issues being joined, a trial was had and judgment was rendered against the plaintiff and in favor of the defendants, from which the plaintiff appeals, claiming that the court erred in dismissing the case, notwithstanding its finding of fact, and in not rendering a judgment in its favor, as prayed for in its complaint.

JOHNS, J.: There is no dispute about any of the findings of fact made by the trial court, and the plaintiff relies upon them for a reversal. Among other things, the trial court says:

Who is responsible for the refund to the drawer of the amount of the check drawn and payable to order, when its value was collected by a third person by means of forgery of the signature of the payee? Is it the drawee or the last indorser, who ignored the forgery at the time of making the payment, or the forger? To lower court found that Melicor's name was forged to the check. "So that the person to whose order the check was issued did not receive the money, which was collected by E. M. Maasim," and then says: Now then, the National Bank should not be held responsible for the payment of made to Maasim in good faith of the amount of the check, because the indorsement of Maasim is unquestionable and his signature perfectly genuine, and the bank was not obliged to identify the signature of the former indorser. Neither could the Hongkong and Shanghai Banking Corporation be held responsible in making payment in good faith to the National Bank, because the latter is a holder in due course of the check in question. In other words, the two defendant banks can not be held civilly responsible for the consequences of the falsification or forgery of the signature of Lazaro Melicor, the National Bank having had no notice of said forgery in making payment to Maasim, nor the Hongkong bank in making payment to National Bank. Neither bank incurred in any responsibility arising from that crime, nor was either of the said banks by subsequent acts, guilty of negligence or fault. This was fundamental error. Plaintiff's check was drawn on Shanghai Bank payable to the order of Melicor. In other words, the plaintiff authorized and directed the Shanghai Bank to pay Melicor, or his order, P2,000. It did not authorize or direct the bank to pay the check to any other person than Melicor, or his order, and the testimony is undisputed that Melicor never did part with his title or endorse the check, and never received any of its proceeds. Neither is the plaintiff estopped or bound by the banks statement, which was made to it by the Shanghai Bank. This is not a case where the plaintiff's own signature was forged to one of it checks. In such a case, the plaintiff would have known of the forgery, and it would have been its duty to have promptly notified the bank of any forged signature, and any failure on its part would have released bank from any liability. That is not this case. Here, the forgery was that of Melicor, who was the payee of the check, and the legal presumption is that the bank would not honor the check without the genuine endorsement of Melicor. In other words, when the plaintiff received it banks statement, it had a right to assume that Melicor had personally endorsed the check, and that, otherwise, the bank would not have paid it. Section 23 of Act No. 2031, known as the Negotiable Instruments Law, says: When a signature is forged or made without the authority of the person whose signature it purports to be, it is 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. That section is square in point. The money was on deposit in the Shanghai Bank, and it had no legal right to pay it out to anyone except the plaintiff or its order. Here, the plaintiff ordered the Shanghai Bank to pay the P2,000 to Melicor, and the money was actually paid to Maasim and was never paid to Melicor, and he never paid to Melicor, and he never personally endorsed the check, or authorized any one to endorse it for him, and the alleged endorsement was a forgery. Hence, upon the undisputed facts, it must follow that the Shanghai Bank has no defense to this action. It is admitted that the Philippine National Bank cashed the check upon a forged signature, and placed the money to the credit of Maasim, who was a forger. That the Philippine National Bank then endorsed the check and forwarded it to the Shanghai Bank by whom it was paid. The Philippine National Bank had no license or authority to pay the money to Maasim or anyone else upon a forge signature. It was its legal duty to know that Melicor's endorsment was genuine before cashing the check. Its remedy is against Maasim to whom it paid the money. The judgment of the lower court is reversed, and one will be entered here in favor of the plaintiff and against the Hongkong and Shanghai Banking Corporation for the P2,000, with interest thereon from November 8, 1920 at the rate of 6 per cent per annum, and the costs of this action, and a corresponding judgment will be entered in favor of the Hongkong Shanghai Banking Corporation against the Philippine National Bank for the same amount, together with the amount of its costs in this action. So ordered. Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand and Romualdez, JJ., concur.

Samsung vs Far East Bank

Facts: Samsung Construction held an account with Far East Bank.One day a check worth 900,000, payable to cash, was presented by one Roberto Gonzaga in the Makati Branch of Far East Bank. The check was certified to be true by Jose Sempio, the assistant accountant of Samsung, who was also present during the time the check was cashed. Later however it was discovered that no such check was ever approved by the Samsungs head accountant, the president of the company also never signed any such check. Issue: Whether or not Far East Bank is liable to reimburse Samsung for cashing out the forged check, which was drawn from the accountof Samsung Held: Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable Instrument Law states that a forged signature makes the instrument wholly inoperative. If payment is made the drawee (Far East) cannot charge it to the drawers account (Samsung). The fact that the forgery is clever is immaterial. The forged signature may so closely resemble the genuine as to defy detection by the depositor himself. And yet, if the bank pays the check, it is paying out with its own money and not of the depositors. This rule of liability can be stated briefly in these words: A bank is bound to know its depositors signature. The accusation of negligence on the part of Samsung was not clearly proven. Absence of proof to the contrary, the presumption is that the ordinary course of business was followed.

Traders Royal vs Radio Philippines

FACTS: On 1985, BIR assessed plaintiffs Radio Philippines Network (RPN), IBC, and BBC of their tax obligations for the taxable years 1978 to 1983. On March 25, 1987, Mrs. Vera, plaintiffs comptroller, sent a letter to the BIR requesting settlement of plaintiffs tax obligations. The BIR granted the request and accordingly, on June 26, 1986, plaintiffs purchased from defendant Traders Royal Bank (TRB) 3 managers checks to be used as payment for their tax liabilities. TRB, through Aida Nuez, TRB Branch Manager at Broadcast City Branch, turned over the checks to Mrs. Vera who was supposed to deliver the same to the BIR in payment of plaintiffs taxes. On 1988, the BIR again assessed plaintiffs for their tax liabilities for the years 1979-82. It was then they discovered that the 3 managers checks intended as payment for their taxes were never delivered nor paid to the BIR by Mrs. Vera. Instead, the checks were presented for payment by unknown persons to defendant SBTC. Meanwhile, for failure of the plaintiffs to settle their obligations, the BIR issued warrants of levy, distraint and garnishment against them. Plaintiffs sent letters to TRB and SBTC, demanding that the amounts covered by the checks be reimbursed or credited to their account. The defendants refused. RTC rendered in favor of the plaintiffs and against the defendants. TRB to reimburse the respondents; SBTC to reimburse TRB CA absolved SBTC from any liability and held TRB solely liable to respondent networks for damages and costs of suit. ISSUE: WON TRB should be held solely liable when it paid the amount of the checks in question to a person other than the payee indicated on the face of the check, the BIR. HELD: YES. SECTION 23 provides for the effect of forged signature. In the instant case, the 3 checks were payable to the BIR. It was established that said checks were never delivered or paid to the payee BIR but were in fact presented for payment by some unknown persons who, in order to receive payment therefor, forged the name of the payee. Despite this fraud, petitioner TRB paid the 3 checks. TRB should know that, where a check is drawn payable to the order of one person and is presented for payment by another and purports upon its face to have been duly indorsed by the payee of the check, it is the primary duty of TRB 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 TRB who cashed the check. Its only remedy is against the person to whom it paid the money. By encashing in favor of unknown persons checks which were on their face payable to the BIR, a government agency which can only act only through its agents, TRB did so at its peril and must suffer the consequences of the unauthorized or wrongful endorsement. In this light, TRB cannot exculpate itself from liability by claiming that respondent networks were themselves negligent. As to the alleged liability of SBTC, a close examination of the records constrains us to deviate from the lower courts finding that SBTC, as a collecting bank, should similarly bear the loss.

A collecting bank where a check is deposited and which indorses the check upon presentment with the drawee bank, is such an indorser. So even if the indorsement on the check deposited by the banks client is forged, the collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. 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 CA. Since TRB did not pay the rightful holder or other person or entity entitled to receive payment, it has no right to reimbursement. TRB was remiss in its duty and obligation, and must therefore suffer the consequences of its own negligence and disregard of established banking rules and procedures.