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FIRSTDIVISION

METROPOLITANBANKAND G.R.No.179952
TRUST COMPANY (formerly
ASIANBANK
Present:
CORPORATION),

Petitioner,
PUNO,C.J.,Chairperson,

CARPIOMORALES,

LEONARDODECASTRO,

BERSAMIN,and

VILLARAMA,JR.,JJ.
versus

BAFINANCE

CORPORATIONand
Promulgated:
MALAYANINSURANCECO.,
December4,2009
INC.,

Respondents.
xx

DECISION

CARPIOMORALES,J.:
Lamberto Bitanga (Bitanga) obtained from respondent BA Finance Corporation (BA
[1]
[2]
Finance)aP329,280 loantosecurewhich,hemortgagedhiscartorespondentBAFinance.
Themortgagecontainedthefollowingstipulation:

The MORTGAGOR covenants and agrees that he/it will cause the property(ies)
hereinabovemortgagedtobeinsuredagainstlossordamagebyaccident,theftandfirefora
periodofoneyearfromdatehereofwithaninsurancecompanyorcompaniesacceptabletothe
MORTGAGEE in an amount not less than the outstanding balance of mortgage obligations
and that he/it will make all loss, if any, under such policy or policies, payable to the
[3]
MORTGAGEEoritsassignsasitsinterestmayappearxxx. (emphasisandunderscoring
supplied)

Bitanga thus had the mortgaged car insured by respondent Malayan Insurance Co., Inc.
[4]
(MalayanInsurance) whichissuedapolicystipulatingthat,interalia,


Loss,ifanyshallbepayabletoBAFINANCECORP.asitsinterestmayappear.Itis
hereby expressly understood that this policy or any renewal thereof, shall not be cancelled
[5]
without prior notification and conformity by BA FINANCE CORPORATION. (emphasis
andunderscoringsupplied)

Thecarwasstolen.OnBitangasclaim,MalayanInsuranceissuedacheckpayabletothe
order of B.A. Finance Corporation and Lamberto Bitanga for P224,500, drawn against China
BankingCorporation(ChinaBank).ThecheckwascrossedwiththenotationForDepositPayees
[6]
AccountOnly.

WithouttheindorsementorauthorityofhiscopayeeBAFinance,Bitangadepositedthe
check to his account with the Asianbank Corporation (Asianbank), now merged with herein
petitionerMetropolitanBankandTrustCompany(Metrobank). Bitanga subsequently withdrew
theentireproceedsofthecheck.

Inthemeantime,Bitangasloanbecamepastdue,butdespitedemands,hefailedtosettleit.

BAFinanceeventuallylearnedofthelossofthecarandofMalayanInsurancesissuance
of a crossed check payable to it and Bitanga, and of Bitangas depositing it in his account at
Asianbankandwithdrawingtheentireproceedsthereof.

BA Finance thereupon demanded the payment of the value of the check from
[7]
Asianbank but to no avail, prompting it to file a complaint before the Regional Trial Court
[8]
(RTC)ofMakatiforsumofmoneyanddamagesagainstAsianbankandBitanga, allegingthat,
interalia,itisentitledtotheentireproceedsofthecheck.
[9]
In its Answer with Counterclaim, Asianbank alleged that BA Finance instituted [the]
complaintinbadfaithtocoerce[it]intopayingthewholeamountoftheCHECKknowingfully
[10]
wellthatitsrightfulclaim,ifany,isagainstMalayan[Insurance].

[11]
AsianbankthereafterfiledacrossclaimagainstBitanga,
allegingthathefraudulently
induced its personnel to release to him the full amount of the check and that on being later
informed that the entire amount of the check did not belong to Bitanga, it took steps to get in
[12]
touchwithhimbuthehadchangedresidencewithoutleavinganyforwardingaddress.

[13]
AndAsianbankfiledathirdpartycomplaintagainstMalayanInsurance,
allegingthat
MalayanInsurancewasgrosslynegligentinissuingthecheckpayabletobothBitangaandBA
[14]
FinanceanddeliveringittoBitangawithouttheconsentofBAFinance.

[15]
BitangawasdeclaredindefaultinAsianbankscrossclaim.

Branch 137 of the Makati RTC, finding that Malayan Insurance was not privy to the
contractbetweenBAFinanceandBitanga,andnotingtheclaimofMalayanInsurancethatitis
its policy to issue checks to both the insured and the financing company, held that Malayan
InsurancecannotbefaultedfornegligenceforissuingthecheckpayabletobothBAFinanceand
Bitanga.

The trial court, holding that Asianbank was negligent in allowing Bitanga to deposit the
check to his account and to withdraw the proceeds thereof, without his copayee BA Finance
[16]
havingeitherindorseditorauthorizedhimtoindorseitinitsbehalf,
found Asianbank and
Bitanga jointly and severally liable to BA Finance following Section 41 of the Negotiable
[17]
InstrumentsLawandAssociatedBankv.CourtofAppeals.

Thusthetrialcourtdisposed:
WHEREFORE,premisesconsidered,judgmentisherebyrenderedorderingdefendants
AsianBankCorporationandLambertoBitanga:

1)TopayplaintiffjointlyandseverallythesumofP224,500.00withinterest
thereonattherateof12%fromSeptember25,1992untilfullypaid
2)TopayplaintiffthesumofP50,000.00asexemplarydamagesP20,000.00
asactualdamagesP30,000.00asattorneysfeeand
3)Topaythecostsofsuit.

AsianbanksandBitangas[sic]counterclaimsaredismissed.

The third party complaint of defendant/third party plaintiff against thirdparty


defendant Malayan Insurance, Co., Inc. is hereby dismissed. Asianbank is ordered to pay
MalayanattorneysfeeofP50,000.00andaperappearancefeeofP500.00.

On the crossclaim of defendant Asianbank, codefendant Lamberto Bitanga is


orderedtopaytheformertheamountsthelatterisorderedtopaytheplaintiffinNos.1,
2and3abovementioned.

[18]
SOORDERED.
(emphasisandunderscoringsupplied)

BeforetheCourtofAppeals,Asianbank,initsAppellantsBrief,submittedthefollowing
issuesforconsideration:

3.01.1.1WhetherBAFinancehasacauseofactionagainstAsianbank.

3.01.1.2 AssumingthatBAFinancehasavalidcauseofaction,mayitclaimfrom
Asianbankmorethanonehalfofthevalueofthecheckconsideringthatitisamerecopayee
orjointpayeeofthecheck?

3.01.1.3 Whether BA Finance is liable to Asianbank for actual and exemplary


damagesforwrongfullybringingthecasetocourt.

3.01.1.4WhetherMalayanisliabletoAsianbankforreimbursementofanysumof
moneywhichthisHonorableCourtmayawardtoBAFinanceinthiscase.
supplied)

[19]

(underscoring

Anditprofferedthefollowingarguments:

A.BA Finance has no cause of action againstAsianbank as it has no legal right and title to the check
consideringthatthecheckwasnotdeliveredtoBAFinance.Hence,BAFinanceisnotaholder
thereofundertheNegotiableInstrumentsLaw.

B.Asianbank,ascollectingbank,isnotliabletoBAFinanceastherewasnoprivityofcontractbetween
them.

C. Asianbank, as collecting bank, is not liable to BA Finance, considering that, as the intermediary
between the payee and the drawee Chinabank, it merely acted on the instructions of drawee
Chinabank to pay the amount of the check to Bitanga, hence, the consequent damage to BA
FinancewasduetothenegligenceofChinabank.

D.MalayansactofissuinganddeliveringthechecksolelytoBitangainviolationofthelosspayeeclause
inthePolicy,istheproximatecauseoftheallegeddamagetoBAFinance.

E.AssumingAsianbankisliable,BAFinancecanclaimonlyhisproportionateinterestonthecheckasit
isajointpayeethereof.

F.Bitanga alone is liable for the amount to BAFinance on the ground of unjust enrichment or solutio
indebiti.

[20]

G.BAFinanceisliabletopayAsianbankactualandexemplarydamages.

(underscoringsupplied)

Theappellatecourt,summarizingtheerrorsattributedtothetrialcourtbyAsianbanktobe
whetherBA Finance has a cause of action against [it] even if the subject check had not been
deliveredtoBAFinancebytheissueritself,heldintheaffirmativeandaccordinglyaffirmedthe
[21]
trialcourtsdecisionbutdeletedtheawardofP20,000asactualdamages.

[22]
Hence, the present Petition for Review on Certiorari
filed by Metrobank (hereafter
petitioner)towhichAsianbankwas,asearlierstated,merged,faultingtheappellatecourt

I. xxxinapplyingthecaseofAssociatedBankv.CourtofAppeals,inthe
absenceoffactualsimilarityandofthelegalrelationshipsnecessaryforthe
applicationofthedesirableshortcutrule.xxx
II.xxxinnotfindingthatxxxthegeneralrulethatthepayeehasnocauseof
actionagainstthecollectingbankabsentdeliverytohimmustbeapplied.
III. xxxinfindingthatalltheelementsofacauseofactionbyBAFinance
CorporationagainstAsianbankCorporationarepresent.
IV.xxxinfindingthatArticle1208oftheCivilCodeisnotapplicable.
V. xxxinawardingofexemplarydamagesevenintheabsenceofmoral,
temperate, liquidated or compensatory damages and a finding of fact that
Asianbankactedinawanton,fraudulent,reckless,oppressiveormalevolent
manner.
xxxx
VII. x x x in dismissing Asianbanks counterclaim and Third Party complaint
[23]
[against Malayan Insurance].
(italics in the original underscoring
supplied)

Petitioner proffers the following arguments against the application of Associated Bank v.
CAtothecase:

x x x [T]he rule established in the Associated Bank case has provided a speedier
remedyforthepayeetorecoverfromerringcollectingbanksdespitetheabsenceofdeliveryof
thenegotiableinstrument.However,theapplicationoftheruledemandscarefulconsideration
ofthefactualsettingsandissuesraisedinthecasexxx.

OneoftherelevantcircumstancesraisedinAssociatedBankistheexistenceofforgery
orunauthorizedindorsement.xxx

xxxx

Inthecaseatbar,Bitangaisauthorizedtoindorsethecheckasthedrawernameshim
asoneofthepayees.Moreover,hissignatureisnotaforgerynorhasheoranyoneforgedthe
signature of the representative of BA Finance Corporation. No unauthorized indorsement
appearsonthecheck.

xxxx

Absent the indispensable fact of forgery or unauthorized indorsement, the desirable


[24]
shortcutrulecannotbeapplied,
(underscoringsupplied)

Thepetitionfails.

Section41oftheNegotiableInstrumentsLawprovides:
Whereaninstrumentispayabletotheorderoftwoormorepayeesorindorseeswho
are not partners, all must indorse unless the one indorsing has authority to indorse for the
others.(emphasisandunderscoringsupplied)

Bitangaaloneendorsedthecrossedcheck,andpetitionerallowedthedepositandrelease
of the proceeds thereof, despite the absence of authority of Bitangas copayee BA Finance to
[25]
endorseitonitsbehalf.
Denying any irregularity in accepting the check, petitioner maintains that it followed
normal banking procedure. The testimony of Imelda Cruz, Asianbanks then accounting head,
showsotherwise,however,viz:

QNow,couldyoubefamiliarwithaparticularpolicyofthebankwithrespecttochecks
withjoined(sic)payees?
AYes,sir.

QAndwhatwouldbetheparticularpolicyofthebankregardingthistransaction?
AThebankpolicyandprocedureregardingthejointchecks.Onceitisdepositedtoa
singleaccount,wearenotacceptingjointchecksforsingleaccount,depositing
toasingleaccount(sic).

QWhathappenedtothebankemployeewhoallowedthisparticulartransactiontooccur?
AOncethebranchpersonnel,thebankpersonnel(sic)acceptedit,heisliable.

QWhatdoyoumeanbythebranchpersonnelbeingheldliable?
ABecausesince(sic)thebankpolicy,wearenotsupposedtoacceptjointcheckstoa
[single]account,sowemeanthatpersonnelwouldbeheldliableinthesense
that(sic)onceitiswithdrawnorencashed,itwillnotbeallowed.

Q In your experience, have you encountered any bank employee who was subjected to
disciplinaryactionbynotfollowingbankpolicies?
ATheonethathappenedinthatcase,sinceIreallydontknowwhothatpersonnelis,heis
nolongerconnectedwiththebank.


QWhataboutingeneral,doyouknowofanydisciplinaryaction,Madamwitness?
ASincetheresanegligenceonthepartofthebankpersonnel,itwillbeagroundfor
[26]
hisseparation[from]thebank.
(emphasis,italicsandunderscoringsupplied)

Admittedly,petitionerdismissedtheemployeewhoallowedthedepositofthecheckinBitangas
account.

Petitioners argument that since there was neither forgery, nor unauthorized indorsement
becauseBitangawasacopayeeinthesubjectcheck,thedictuminAssociatedBankv.CAdoes
notapplyinthepresentcasefails.Thepaymentofaninstrumentoveramissingindorsementis
[27]
theequivalentofpaymentonaforgedindorsement
oranunauthorizedindorsementinitself
[28]
inthecaseofjointpayees.

Clearly,petitioner,throughitsemployee,wasnegligentwhenitallowedthedepositofthe
crossed check, despite the lone endorsement of Bitanga, ostensibly ignoring the fact that the
[29]
checkdidnot,itbearsrepeating,carrytheindorsementofBAFinance.

Ashasbeenrepeatedlyemphasized,thebankingbusinessisimbuedwithpublicinterest
suchthatthehighestdegreeofdiligenceandhigheststandardsofintegrityandperformanceare
expectedofbanksinordertomaintainthetrustandconfidenceofthepublicingeneralinthe
[30]
bankingsector.
Undoubtedly,BAFinancehasacauseofactionagainstpetitioner.

IspetitionerliabletoBAFinanceforthefullvalueofthecheck?

Petitioner,atallevents,arguethatitsliabilitytoBAFinanceshouldonlybeonehalfofthe
amountcoveredbythecheckasthereisnoindicationinthecheckthatBitangaandBAFinance
are solidary creditors to thus make them presumptively joint creditors under Articles 1207 and
1208oftheCivilCodewhichrespectivelyprovide:

Art.1207.Theconcurrenceoftwoormorecreditorsoroftwoormoredebtorsinone
andthesameobligationdoesnotimplythateachoneoftheformerhasarighttodemand,or
thateachoneofthelatterisboundtorender,entirecompliancewiththeprestations.Thereisa
solidaryliabilityonlywhentheobligationexpresslysostates,orwhenthelaworthenatureof
theobligationrequiressolidarity.

Art. 1208. If from the law, or the nature or wording of the obligations to which the
precedingarticlereferstothecontrarydoesnotappear,thecreditordebtshallbepresumedto
bedividedintoasmanyequalsharesastherearecreditorsordebtors,thedebtsorcreditsbeing
considereddistinctfromoneanother,subjecttotheRulesofCourtgoverningthemultiplicity
ofsuits.

Petitionersargumentisflawed.

The provisions of the Negotiable Instruments Law and underlying jurisprudential


teachings on the blackletter law provide definitive justification for petitioners full liability on
thevalueofthecheck.

To be sure, a collecting bank, Asianbank in this case, where a check is deposited and
[31]
which indorses the check upon presentment with the drawee bank, is an indorser.
This is
becauseinindorsingachecktothedraweebank,acollectingbankstampsthebackofthecheck
[32]
with the phrase all prior endorsements and/or lack of endorsement guaranteed
and, for all
intentsandpurposes,treatsthecheckasanegotiableinstrument,hence,assumesthewarrantyof
[33]
anindorser.
WithoutAsianbankswarranty,thedraweebank(ChinaBankinthiscase)would
nothavepaidthevalueofthesubjectcheck.

Petitioner,asthecollectingbankorlastindorser,generallysuffersthelossbecauseithas
the duty to ascertain the genuineness of all prior indorsements considering that the act of
presenting the check for payment to the drawee is an assertion that the party making the
[34]
presentmenthasdoneitsdutytoascertainthegenuinenessofpriorindorsements.

Accordingly, one who credits the proceeds of a check to the account of the indorsing
[35]
payeeisliableinconversiontothenonindorsingpayeefortheentireamountofthecheck.

It bears noting that in petitioners crossclaim against Bitanga, the trial court ordered
Bitanga to return to petitioner the entire value of the check P224,500.00 with interest as
well as damages and cost of suit. Petitioner never questioned this aspect of the trial courts
disposition,yetitnowpraysforthemodificationofitsliabilitytoBAFinancetoonlyonehalf
of said amount. To pander to petitioners supplication would certainly amount to unjust

enrichmentatBAFinancesexpense.Petitionersremedywhichisthereimbursementforthefull
amountofthecheckfromtheperpetratoroftheirregularitylieswithBitanga.

Articles1207and1208oftheCivilCodecannotbeappliedtothepresentcaseasthese
are completely irrelevant. The drawer, Malayan Insurance in this case, issued the check to
answerforanunderlyingcontractualobligation(paymentofinsuranceproceeds).Theobligation
ismerelyreflectedintheinstrumentandwhetherthepayeeswouldjointlyshareintheproceeds
ornotisbesidethepoint.

Moreover,grantingpetitionersappealforpartialliabilitywouldruncountertotheexisting
principlesontheliabilitiesofpartiesonnegotiableinstruments,particularlyonSection68ofthe
NegotiableInstrumentsLawwhichinstructsthatjointpayeeswhoindorsearedeemedtoindorse
[36]
jointly and severally.
Recall that when the maker dishonors the instrument, the holder
[37]
thereof can turn to those secondarily liable the indorser for recovery.
And since the law
explicitly mandates a solidary liability on the part of the joint payees who indorse the
instrument, the holder thereof (assuming the check was further negotiated) can turn to either
BitangaorBAFinanceforfullrecompense.

Respecting petitioners challenge to the award by the appellate court of exemplary


damagestoBAFinance,thesamefails.Contrarytopetitionersclaimthatnomoral,temperate,
[38]
liquidated or compensatory damages were awarded by the trial court,
the RTC did in fact
award compensatory or actual damages of P224,500, the value of the check, plus interest
thereon.

Petitionerargues,however,thatassumingarguendothatcompensatorydamageshadbeen
awarded,thesamecontravenedArticle2232oftheCivilCodewhichprovidesthatincontracts
or quasicontracts, the court may award exemplary damages only if the defendant acted in a
wanton,fraudulent,reckless,oppressive,ormalevolentmanner.Since,sopetitionerconcludes,
there was no finding that it acted in a wanton, fraudulent, reckless, oppressive, or malevolent
[39]
manner,
itisnotliableforexemplarydamages.

The argument fails. To reiterate, petitioners liability is based not on contract or quasi
contract but on quasidelict since there is no preexisting contractual relation between the

[40]
parties.
Article 2231 of the Civil Code, which provides that in quasidelict, exemplary
damages may be granted if the defendant acted with gross negligence, thus applies. For gross
negligenceimpliesawantorabsenceoforfailuretoexerciseevenslightcareordiligence,orthe
[41]
entire absence of care,
evincing a thoughtless disregard of consequences without exerting
[42]
anyefforttoavoidthem.

xxxThelawallowsthegrantofexemplarydamagestosetanexampleforthepublic
good.Thebusinessofabankisaffectedwithpublicinterestthusitmakesaswornprofession
of diligence and meticulousness in giving irreproachable service. For this reason, the bank
shouldguardagainstininjuryattributabletonegligenceorbadfaithonitspart.Theawardof
exemplary damages is proper as a warning to [the petitioner] and all concerned not to
recklessly disregard their obligation to exercise the highest and strictest diligence in serving
[43]
theirdepositors.
(Italicsandunderscoringsupplied)

As for the dismissal by the appellate court of petitioners thirdparty complaint against
MalayanInsurance,thesameiswelltaken.PetitionerbaseditsthirdpartycomplaintonMalayan
Insurances alleged gross negligence in issuing the check payable to both BA Finance and
Bitanga,despitethestipulationinthemortgageandintheinsurancepolicythatliabilityforloss
[44]
shallbepayabletoBAFinance.
MalayanInsurancecountered,however,thatit

x x x paid the amount of P224,500 to BA Finance Corporation and Lamberto Bitanga in


compliancewiththedecisioninthecaseofLambertoBitangaversusMalayanInsuranceCo.,
Inc., Civil Case No. 882802, RTCMakati Br. 132, and affirmed on appeal by the Supreme
[45]
Court[3rdDivision],G.R.no.101964,April8,1992xxx.
(underscoringsupplied)

ItisnotedthatMalayanInsurance,whichstatedthatitwasamatterofcompanypolicyto
issuechecksinthenameoftheinsuredandthefinancingcompany,presentedawitnesstorebut
itssupposednegligence.

[46]
Perforce,itthuswroteacrossedcheckwithjointpayeessoasto

[47]
serve warning that the check was issued for a definite purpose.
Petitioner never ever
disputedtheseassertions.

TheCourttakesexception,however,totheappellatecourtsaffirmanceofthetrialcourts
grantoflegalinterestof12%perannumonthevalueofthecheck.Fortheobligationinthiscase

didnotariseoutofaloanorforbearanceofmoney,goodsorcredit.WhileArticle1980ofthe
CivilCodeprovidesthat:

Fixedsavings,andcurrentdepositsofmoneyinbanksandsimilarinstitutionsshallbe
governedbytheprovisionsconcerningsimpleloan,

saidprovisiondoesnotfindapplicationinthiscasesincethenatureoftherelationshipbetween
BAFinanceandpetitionerisoneofagencywherebypetitioner,ascollectingbank,istocollect
forBAFinancethecorrespondingproceedsfromthecheck.

[48]
Notbeingaloanorforbearance

ofmoney,theinterestshouldbe6%perannumcomputedfromthedateofextrajudicialdemand
onSeptember25,1992untilfinalityofjudgmentand12%perannumfromfinalityofjudgment
[49]
untilpayment,conformablywithEasternShippingLines,Inc.v.CourtofAppeals.

WHEREFORE,theDecisionoftheCourtofAppealsdatedMay18,2007isAFFIRMEDwith
MODIFICATIONinthattherateofinterestonthejudgmentobligationofP224,500shouldbe
6%perannum,computedfromthetimeofextrajudicialdemandonSeptember25,1992untilits
fullpaymentbeforefinalityofjudgmentthereafter,iftheamountadjudgedremainsunpaid,the
interestrateshallbe12%perannumcomputedfromthetimethejudgmentbecomesfinaland
executoryuntilfullysatisfied.
Costsagainstpetitioner.

SOORDERED.

CONCHITACARPIOMORALES
AssociateJustice


WECONCUR:

REYNATOS.PUNO
ChiefJustice
Chairperson

TERESITAJ.LEONARDODECASTRO
LUCASP.BERSAMIN
AssociateJustice
AssociateJustice

MARTINS.VILLARAMA,JR.
AssociateJustice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
abovedecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterofthe
opinionoftheCourtsDivision.

REYNATOS.PUNO
ChiefJustice
[1]
ExhibitA,records,pp.210211.

[2]
ExhibitB,id.at212215.
[3]
Id.at213.
[4]
ExhibitD,id.at217.
[5]
ExhibitD1,ibid.
[6]
ExhibitF,id.at219.
[7]
ExhibitsH,id.at221222.
[8]
Id.at14.
[9]
Id.at4045.
[10]
Id.at43.
[11]
Id.at5363.
[12]
Id.at6061.
[13]
Id.at6972.
[14]
Id.at82.
[15]
Id.at142143OrderofMay23,1994.
[16]
Id.at306.
[17]
G.R.No.89802,May7,1992,208SCRA465.
[18]
Records,p.307.
[19]
CArollo,pp.3940.
[20]
Id.at4041.
[21]
DecisionofMay18,2007,pennedbyCourtofAppealsAssociateJusticeRamonM.Bato,Jr.withtheconcurrenceofAssociate
JusticesAndresB.Reyes,Jr.andJoseC.Mendoza.
[22]
Rollo,pp.1057.
[23]
Id.at2022.
[24]
Id.at2325.
[25]
TSN,May30,1995,pp.78ThetestimonyofJohnAgbayani,vicepresidentofBAFinance,readsasfollows:
QThereafterwhathappenednext,ifyouknow?
AUponfurtherverification,wewereinformedbyMalayanInsuranceCompanythatindeedacheck,acrosscheckwasissued
toBAFinanceCorporationandLambertoBitangaandthecheckwasdeliveredtoLambertoBitanga.

QSo,afterthesaidcheckwasdeliveredtoMr.LambertoBitanga,doyouhaveanyknowledgeMr.witness,ifyouknow,what
happenedtothecheck?
AYes,sir,thecheckwasdepositedintothepersonalaccountofMr.LambertoBitangaonly,withAsianSavingsBankwithout
theknowledgeandendorsementofthejointpayeeofthesaidcheck,whichistheplaintiffhere,BAFinance.
xxxx
We immediately send a formal letter communication to Asian Bank in order to discuss the possibility of reimbursement of
bankingonthepremisethatourcheckwasirregularacceptedfordepositintothepersonalaccountofLambertoBitanga
withoutourendorsement.
[26]
TSN,October18,1995,pp.57.
[27]
Kelly v. Central Bank and Trust Co. (Colo App), 794 P2d 1037, 12 UCCRS2d 1089 Humberto Decorators, Inc. v. Plaza Natl
Bank,180NJSuper170,434A2d618,32UCCRS494Vide:11AmJur2d,BillsandNotes,224,atp.557.
[28]
Beyerv.FirstNatlBank,188Mont208,612P2d1285,29UCCRS563Vide:11AmJur2d,BillsandNotes,224,atp.557.
[29]
Gempesawv.CourtofAppeals,G.R.No.92244,Feb.9,1993,218SCRA682,695.
[30]
PhilippineCommercialInternationalBankv.CourtofAppeals,G.R.No.121413,January29,2001,350SCRA446.

[31]
AssociatedBankv.CourtofAppeals,322Phil.677,697(1996).
[32]
Section17ofthePhilippineClearingHouseCorporationRulesstatesthat:BANKGUARANTEE.Allchecksclearedthroughthe
PCHCshallbeartheguaranteeaffixedtheretobythePresentingBank/Branchwhichshallreadasfollows:Clearedthruthe
PhilippineClearingHouseCorporation.Allpriorendorsementsand/orlackofendorsementguaranteed.
[33]
BancodeOrov.EquitableBankingCorp.,241Phil.187,196197(1988).
[34]
Sections65and66oftheNegotiableInstrumentsLawstatethat:
Sec.65.Everypersonnegotiatinganinstrumentbydeliveryorbyaqualifiedindorsementwarrants:
(a)Thattheinstrumentisgenuineandinallrespectswhatitpurportstobe
(b)Thathehasgoodtitletoit
(c)Thatallpriorpartieshadcapacitytocontract
(d)Thathehasnoknowledgeofanyfactwhichwouldimpairthevalidityoftheinstrumentorrenderitvalueless.
Butwhenthenegotiationisbydeliveryonly,thewarrantyextendsinfavorofnoholderotherthantheimmediatetransferee.
Theprovisionsofsubdivision(c)ofthissectiondonotapplytoapersonnegotiatingpublicorcorporationsecuritiesotherthan
billsandnotes.

Sec.66.Liabilityofgeneralindorser.Everyindorserwhoindorseswithoutqualification,warrantstoallsubsequentholdersin
duecourse:
(a)Themattersandthingsmentionedinsubdivisions(a),(b),and(c)ofthenextprecedingsectionand
(b)Thattheinstrumentis,atthetimeofhisindorsement,validandsubsisting
Andinaddition,heengagesthat,onduepresentment,itshallbeacceptedorpaid,orboth,asthecasemaybe,accordingtoits
tenor,andthatifitbedishonoredandthenecessaryproceedingsondishonorbedulytaken,hewillpaytheamountthereofto
theholder,ortoanysubsequentindorserwhomaybecompelledtopayit.

[35]
VidePeoplesNat.Bankv.AmericanFidelityFireIns.Co.,39Md.App.614,386A.2d1254,24U.C.C.Rep.Serv.362(1978)
MiddleStatesLeasingCorp.v.ManufacturersHanoverTrustCo.,62A.D.2d273,404N.Y.S.2d846,23U.C.C.Rep.Serv.
1215(1stDep't1978)Vide11AmJur2d,BillsandNotes,225,atp.557.
[36]
Sec.68.Orderinwhichindorsersareliable.Asrespectoneanother,indorsersareliableprimafacieintheorderinwhichthey
indorsebutevidenceisadmissibletoshowthat,asbetweenoramongthemselves,theyhaveagreedotherwise.Jointpayeesor
jointindorseeswhoindorsearedeemedtoindorsejointlyandseverally.
[37]
Section66oftheNIL,supranote35.
[38]
Rollo,pp.4647.
[39]
Id.at47.
[40]
Article 2176 of the Civil Code states: Whoever by act or omission causes damage to another, there being fault or
negligence,isobligedtopayforthedamagedone.Suchfaultornegligence,ifthereisnopreexistingcontractual
relationbetweenthepartiesiscalledaquasidelictandisgovernedbytheprovisionsofthisChapter.
[41]
AcebedoOpticalv.NationalLaborRelationsCommission,G.R.No.150171,July17,2007,527SCRA655,675.
[42]
Ibid.
[43]
BPIFamilyBankv.Buenaventura,G.R.No.148196,Septenber30,2005,471SCRA431,445.
[44]
Viderecords,p.82rollo,p.50.
[45]
Id.at100101.
[46]
TestimonyofMichaelYap,MalayanInsurancesfirstvicepresident.
[47]
VideBataanCigarandCigaretteFactoryv.CourtofAppeals,G.R.No.93048,March3,1994,230SCRA643,648649,where
theCourtheldthatcrossingofchecksshouldputtheholderoninquiryanduponhimorherdevolvesthedutytoascertainthe
indorsers title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross
negligence amounting to legal absence of good faith, contrary to Section 52 (c) of the Negotiable Instruments Law.
(Underscoringsupplied)
[48]
JaiAlaiCorp.ofthePhils.v.BPI,G.R.No.L29432,August6,1975,66SCRA29,34.
[49]
G.R.No.97412,July12,1994,234SCRA78.

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