MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P.

TUAZON, Spouses
ANASTACIO MARY T. BUENAVENTURA vs HEIRS OF BARTOLOME RAMOS
G.R. No. 156262, July 14, 2005

FACTS:

In 1988, spouses Leonilo and Maria Tuazon purchased cavans of rice from the
deceased Bartolome Ramos (substituted by his heirs). As payment of the unpaid
balance valued at P1,211,919.00, the spouses issued several Traders Royal Bank
checks. However, the checks bounced due to insufficiency of funds. When the
spouses refused to pay upon repeated demands, criminal and civil cases were filed
against them.

In their defense, the spouses argued that Maria Tuazon was merely an agent of
Ramos wife, Magdalena Ramos. It was actually Evangeline Santos who was the
buyer of the rice and issued the subject checks to Maria Tuazon as payment
therefor. They insisted that Santos be impleaded as an indispensable party to the
cases and was the person primarily liable to respondents-heirs.

Both the RTC and CA ruled in favor of respondents-heirs holding that Maria Tuazon
shall be liable as an indorser and that there was no need to implead Santos as the
drawer.

ISSUE:

WON Maria Tuazon is liable as an indorser of the check drawn by Evangeline Santos
who was not impleaded in this case.

HELD:

Yes. The Court ruled that when Tuazon indorsed the checks in favor of respondents,
she warranted that upon due presentment, the checks were to be accepted or paid,
or both, according to their tenor; and that in case they were dishonored, she would
pay the corresponding amount. After an instrument is dishonored by nonpayment,
indorsers cease to be merely secondarily liable; they become principal debtors
whose liability becomes identical to that of the original obligor. The holder of a
negotiable instrument need not even proceed against the maker before suing the
indorser. Clearly, Evangeline Santos -- as the drawer of the checks -- is not an
indispensable party in an action against Maria Tuazon, the indorser of the checks.
There was also no privity of contract between respondents and Santos.

PCIB vs. CA, Ford Philippines, Inc. and Citibank, N.A.

G.R. Nos. 121413, 121479, 128604, January 29, 2001

FACTS:

Ford issued several crossed checks in favor of the Commissioner of Internal Revenue
(CIR) in the amounts of P4,746,114.41 and of P12,163,298.10 as payment of its
percentage sales taxes for the years 1977-1989. However, the value of said checks
were embezzled by an organized syndicate and as a consequence thereof, Ford
made a second payment to BIR upon the latters demand. Ford then filed a
complaint against PCIB and Citibank, the drawee bank and collecting bank
respectively, for the reimbursement of the amount it paid to BIR. The trial court held
both banks solidarily liable to Ford. On appeal, the CA modified the RTC decision and
ruled that only PCIB is liable. Hence, these three petitions which are consolidated by
the Court.

ISSUE:

WON Ford can rightfully recover from PCIB and Citibank the value of the crossed
checks.

HELD:

In GR Nos. 121413 and 121479, the Court ruled that PCIBs negligence is the
proximate cause of the loss since it is its duty as a collecting bank to ascertain that
the crossed check bearing the phrase Payees Account Only be deposited as such.
It is the collecting bank which is bound to scrutinize the check and to know its
depositors before it could make the clearing indorsement all prior indorsements
and/or lack of indorsement guaranteed.

In GR No. 128604, the Court ruled that both PCIB and Citibank are equally liable for
failing in their respective obligations and for negligence in the selection and
supervision of their employees resulting in the encashment of the checks. However,
Ford was held to be negligent as well in in failing to examine its records and
discover within a reasonable time any discrepancy in its accounts. Thus, Fords
negligence serves to mitigate the banks liability.

In resolving the issues in these petitions, the Court determined the question of
liability (who must bear the burden of loss of the millions of pesos involved in the
transactions) based on the degree of negligence among the parties concerned,
pursuant to the applicable law in this case which is Section 55 of the Negotiable
Instruments Law on the unlawful negotiation of the check. Based on this provision, it
is vital to show that the negotiation is made by the perpetrator in breach of faith
amounting to fraud. The person negotiating the checks must have gone beyond the
authority given by his principal. If the principal could prove that there was no
negligence in the performance of his duties, he may set up the personal defense to
escape liability and recover from other parties, who through their own negligence,
allowed the commission of the crime.