Metrobank vs CA

Metropolitan Bank & Trust Company vs. Court of Appeals G.R. No. 88866 February 18, 1991 -negotiability

FACTS: Eduardo Gomez opened an account with Golden Savings and Loan Association and deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37. All these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its savings account in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. Before they were cleared, petitioner decided to allow Golden Savings to withdraw from the proceeds of the warrants. Golden Savings in turn subsequently allowed Gomez to make withdrawals from his own account. Subsequently, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account. Metrobank contends 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. ISSUE: Whether petitioner can hold Golden Savings liable as an indorser of the treasury warrants based on the predication that the treasury warrants involved in this case are negotiable instruments. RULING: Clearly stamped on the face of the treasury warrants is the word "non-negotiable." It is also indicated that they are payable from a particular fund, to wit, Fund 501. The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay "not unconditional" and the warrants themselves non-negotiable. Petitioner cannot hold Golden Savings liable as an indorser under Section 66 of the NIL for the simple reason that this law is not applicable to the non-negotiable treasury warrants.

PNB v. Rodriguez Facts: Respondents-Spouses Erlando and Norma Rodriguez were clients of petitioner Philippine National Bank (PNB), Amelia Avenue Branch, Cebu City. They maintained savings and demand/checking accounts, namely, PNBig Demand Deposits (Checking/Current Account No. 810624-6 under the account name Erlando and/or Norma Rodriguez), and PNBig Demand Deposit (Checking/Current Account No. 810480-4 under the account name Erlando T. Rodriguez). The spouses were engaged in the informal lending business. In line with their business, they had a discounting arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees. Naturally, PEMSLA was likewise a client of PNB Amelia Avenue Branch. The association maintained current and savings accounts with petitioner bank. PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members whenever the association was short of funds. As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the members. It was PEMSLAs policy not to approve applications for loans of members with outstanding debts. To subvert this policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan accounts. They took out loans in the names of unknowing members, without the knowledge or consent of the latter. The PEMSLA checks issued for these loans were then given to the spouses for rediscounting. The officers carried this out by forging the indorsement of the named payees in the checks. In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the checks to an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the spouses to their account. Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named payees. This was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. It appears that this became the usual practice for the parties. For the period November 1998 to February 1999, the spouses issued sixty nine (69) checks, in the total amount ofP2,345,804.00. These were payable to forty seven (47) individual payees who were all members of PEMSLA. Petitioner PNB eventually found out about these fraudulent acts. To put a stop to this scheme, PNB closed the current account of PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason Account Closed. The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The amounts were duly debited from the Rodriguez account. Thus, because the PEMSLA checks given as payment were returned, spouses Rodriguez incurred losses from the rediscounting transactions. Issue: Whether the subject checks are payable to order or to bearer and who bears the loss? Held: In the case at bar, respondents-spouses were the banks depositors. The checks were drawn against respondents-spouses accounts. PNB, as the drawee bank, had the responsibility to ascertain the regularity of the indorsements, and the genuineness of the signatures on the checks before accepting them for deposit. Lastly, PNB was obligated to pay the checks in strict accordance with the instructions of the drawers. Petitioner miserably failed to discharge this burden. The checks were presented to PNB for deposit by a representative of PEMSLA absent any type of indorsement, forged or otherwise. The facts clearly show that the bank did not pay the checks in strict accordance with the instructions of the drawers, respondents-spouses. Instead, it paid the values of the checks not to the named payees or their order, but to PEMSLA, a third party to the transaction between the drawers and the payees. Moreover, PNB was negligent in the selection and supervision of its employees. The trustworthiness of bank employees is indispensable to maintain the stability of the banking industry. Thus, banks are enjoined to be extra vigilant in the management and supervision of their employees.

Republic Planters Bank vs. CA

Facts: Republic Planters Bank issued 9 promissory notes signed by Shozo Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc. Yamaguchi and Canlas were authorized by the corporation to apply for credit facilities with the bank in form of export advances and letters of credit or trust receipts accommodations. Three years after, the bank filed an action to recover the sums of money covered by the promissory notes. Worldwide Garment Manufacturing changed its name to Pinch Manufacturing Corp. Canlas alleged he was not liable personally for the corporate acts that he performed, and that the notes were still blank when he signed them. Issue: Whether the corporate treasurer is liable for the amounts in the promissory notes. Held: Canlas is a co-maker of the promissory notes, under the law, and cannot escape liability arising therefrom. Inasmuch as the instrument contained the words I promise to pay and is signed by two or more persons, said persons are deemed to be jointly and severally liable thereon. As the promissory notes are stereotype ones issued by the bank in printed form with blank spaces filled up as per agreed terms of the loan, following customary procedures, leaving the debtors to do nothing but read the terms and conditions therein and to sign as makers or co-makers. Section 14 of the Negotiable Instruments Law, therefore, does not apply. Canlas is solidarily liable with the corporation for the amount of the 9 promissory notes.

PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS

FACTS:Ministry of Education Culture issued a check payable to Abante Marketing and drawn against Philippine National Bank (PNB). Abante Marketing, deposited the questioned check in its savings account with Capitol City Development Bank (CAPITOL). In turn, Capitol deposited the same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the check to PNB for clearing. PNB cleared the check as good and thereafter, PBCom credited Capitol's account for the amount stated in the check. However, PNB returned the check to PBCom and debited PBCom's account for the amount covered by the check, the reason being that there was a "material alteration" of the check number. PBCom, as collecting agent of Capitol, then proceeded to debit the latter's account for the same amount, and subsequently, sent the check back to petitioner. PNB, however, returned the check to PBCom. On the other hand, Capitol could not in turn, debit Abante Marketing's account since the latter had already withdrawn the amount of the check. Capitol sought clarification from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and re-crediting from PNB. Since the demands of Capitol were not heeded, it filed a civil suit against PBCom which in turn, filed a third-party complaint against PNB for reimbursement/indemnity with respect to the claims of Capitol. PNB, on its part, filed a fourth-party complaint against Abante Marketing. The Trial Court rendered its decision, ordering PBCom to re-credit or reimburse; PNB to reimburse and indemnify PBCom for whatever amount PBCom pays to Capitol; Abante Marketing to reimburse and indemnify PNB for whatever amount PNB pays to PBCom. The court dismissed the counterclaims of PBCom and PNB. The appellate court modified the appealed judgment by ordering PNB to honor the check. After the check shall have been honored by PNB, the court ordered PBCom to re-credit Capitol's account with it the amount. PNB filed the petition for review on certiorari averring that under Section 125 of the NIL, any change that alters the effect of the instrument is a material alteration. ISSUE:WON an alteration of the serial number of a check is a material alteration under the NIL. HELD:NO, alteration of a serial number of a check is not a material alteration contemplated under Sec. 125 of the NIL. RATIO:An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to 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. In the present case what was altered is the serial number of the check in question, an item which is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. The check's serial number is not the sole indication of its origin. The name of the government agency which issued the subject check was prominently printed therein. The check's issuer was therefore insufficiently identified, rendering the referral to the serial number redundant and inconsequential.

Intl Corporate Bank vs CA

FACTS The Ministry of Education and Culture issued 15 checks drawn against PNB which International Corp. Bank (Int'l) accepted for deposit on various dates. After 24 hours from submission of the checks to Int'l for clearing, it paid the value of the checks and allowed the withdrawals of the deposits October 14, 1981, PNB returned all the checks to Int'l without clearing them on the ground that they were materially altered. Int'l instituted an action for collection of sums of money against respondent to recover the value of the checks. RTC: dismissed CA: Reversed materially altered shall be returned within 24 hours after discovery of the alteration. C.B. Circular does not provide the drawee bank the license to be grossly negligent on the one hand nor does it preclude the collecting bank from raising available defenses even if the check is properly returned within the 24-hour period after discovery of the material alteration ISSUES: W/N PNB should be liable for not returning the check with material alteration w/in the 24-hour period HELD: NO. CA set aside Alteration of Serial Number Not Material The Court will not rule on the proper application of Central Bank Circular No. 580 in this case since there were no material alterations on the checks, PNB as drawee bank has no right to dishonor them and return them to petitioner, the collecting bank

Associated Bank vs. CA, January 31, 1996

Facts: Faustino Pangilinan, cashier of the Concepcion Emergency Hospital, forged the signature of Dr. Adena Canlas who was the Chief of the said hospital and endorsed 30 checks amounting to P203,300 to himself. The money was drawn from the account of the Province of Tarlac with PNB. Pangilinan deposited the checks to his personal savings account with Associated Bank which was cleared and paid for by PNB. The checks have a stamp of Associated Bank which reads All prior endorsements guaranteed by Associated Bank. The Province of Tarlac, through the Provincial Treasurer, wrote PNB to restore the various amounts debited from the current account of the Province. PNB on its part demanded reimbursement from Associated Bank. Both banks resisted payment which led to the Province of Tarlac suing PNB. PNB in turn impleaded Associated Bank in the suit as a third-party defendant while Associated Bank impleaded Canlas and Pangilinan as fourth-party defendants. The trial court ruled that 1) PNB should pay the Province of Tarlac the P203,300 with legal interests, 2) Associated Bank should be pay the same amount to PNB and 3) dismissed the complaints against Canlas and Pangilinan. On appeal, the CA affirmed the ruling of the trial court Issue: Who should bear the loss arising from the forgery, the Province of Tarlac, PNB, Associated Bank or Pangilinan? Held: The SC held that the Province and Associated Bank should bear losses in the proportion of 50-50. The Province can only recover 50% of the P203,300 from PNB because of the negligence they exhibited in releasing the checks to the then already retired Pangilinan who is an unauthorized person to handle the said checks. On the other hand, Associated Bank is liable to PNB only to 50% of the same amount because of its liability as indorser of the checks that were deposited by Pangilinan, and guaranteed the genuineness of the said checks. They failed to exercise due diligence in checking the veracity of indorsements.

Metropolitan Bank And Trust Co. V. Cablizo

Lessons Applicable: Discharge of instrument and persons secondarily liable (Negotiable Instruments Law) FACTS: November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank Check payable to "CASH" and postdated on November 24, 1994 in the amount of P1,000 drawn against his Metrobank account to Mr. Marquez, as his sales commission check was presented to Westmont Bank for payment who indorsed it to Metrobank for appropriate clearing After the entries thereon were examined, including the availability of funds and the authenticity of the signature of the drawer, Metrobank cleared the check for encashment in accordance with the Philippine Clearing House Corporation (PCHC) Rules November 16, 1994: Cabilzos representative was at Metrobank when he was asked by a bank personnel if Cabilzo had issued a check in the amount of P91K to which he replied in negative That afternoon: Cabilzo called Metrobank to reiterate that he did not issue the check He later discovered that the check of P1K was altered to P91K and date was changed from Nov 24 to Nov 14. Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account June 30, 1995: Through counsel sent a letter-demand for the amount of P90K CA affirmed RTC: Favored Cablizo ISSUE: W/N Cablizo can recover from Metrobank HELD: YES. CA Affirmed material alteration changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law Section 1. Form of negotiable instruments. - An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand or at a fixed determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. changes the effect of the instrument 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 no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect is a material alteration. In the case at bar, the check was altered so that the amount was increased from P1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14 November 1994. Section 124. Alteration of instrument; effect of. Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized,and assented to the alteration and subsequent indorsers. 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. Cabilzo was not the one who made nor authorized the alteration. Neither 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 which could have otherwise prevented the loss. bank must be a high degree of diligence, if not the utmost diligence Surprisingly, however, Metrobank failed to detect the above alterations which could not escape the attention of even an ordinary person "NINETY" is also typed differently and with a lighter ink only 2 asterisks were placed before the amount in figures, while 3 asterisks were placed after such amount "NINETY" are likewise a little bigger when compared with the letters of the words "ONE THOUSAND PESOS ONLY" When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge its clients account only for bona fide disbursements he had made. The corollary liability of Westmont Ban's indorsement, if any, is separate and independent from the liability of Metrobank to Cabilzo.