PCIB V.

CA

350 SCRA 446

FACTS:

Ford Philippines filed actions to recover from the drawee bank Citibank and
collecting bank PCIB the value of several checks payable to the
Commissioner of Internal Revenue which were embezzled allegedly by an
organized syndicate. What prompted this action was the drawing of a
check by Ford, which it deposited to PCIB as payment and was debited from
their Citibank account. It later on found out that the payment wasn’t
received by the Commissioner. Meanwhile, according to the NBI report, one of
the checks issued by petitioner was withdrawn from PCIB for alleged mistake in the
amount to be paid. This was replaced with manager’s check
by PCIB, which were allegedly stolen by the syndicate and deposited in their own
account.

The trial court decided in favor of Ford.

ISSUE:

Has Ford the right to recover the value of the checks intended as payment to CIR?

HELD:

The checks were drawn against the drawee bank but the title of the person negotiating
the same was allegedly defective because the instrument was
obtained by fraud and unlawful means, and the proceeds of the checks were not
remitted to the payee. It was established that instead paying the
Commissioner, the checks were diverted and encashed for the eventual
distribution among members of the syndicate.

Pursuant to this, 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.
It should be resolved if Ford is guilty of the imputed contributory negligence that
would defeat its claim for reimbursement, bearing in mind that its employees were
among the members of the syndicate. It appears
although the employees of Ford initiated the transactions attributable to
the organized syndicate, their actions were not the proximate cause of
encashing the checks payable to CIR. The degree of Ford’s negligence
couldn’t be characterized as the
proximate cause of the injury to parties. The mere fact that the forgery was co
mmitted by a drawer-payor’s confidential employee or agent, who by virtue of his
position had unusual facilities for perpetrating the fraud and imposing the forged paper
upon the bank, doesn’t entitle the bank to shift the loss to the drawer-payor, in the
absence of some circumstance raising estoppel against the drawer.

Note: not only PCIB but also Citibank is responsible for negligence. Citibank was
negligent in the performance of its duties as a drawee
bank. It failed to establish its payments of Ford’s checks were made in due
course and legally in order.