METROPOLITAN BANK and TRUST COMPANY, petitioner,

vs.
THE FIRST NATIONAL CITY BANK and THE COURT OF APPEALS

Metrobank v. FNCB, 1982

Facts:

On August 25, 1964, a check payable for P50,000.00 to CASH drawn by

JoaquinCunanan and Co. on FNCB was deposited with the Metrobank by a certain
Salvador Sales. The check was cleared by FNCB the same day and the amount
credited to his depositwith Metro Bank. Sales withdrew his total deposit with Metro
Bank and the withdrawal of the balancewas allowed only when FNCB, upon
verification made by Metrobank of the regularity andgenuineness of the check
deposit, assured Metrobank that the fast movement of theaccount was "not unusual."
Subsequently, FNCB returned the cancelled check to drawer Joaquin Cunanan andCo.
and the company notified FNCB that the check had been altered, the actual amount
of P50.00 having been raised to P50,000.00, and the name of the payee, Manila Polo
Club,having been superimposed with the word CASH. FNCB notified Metro Bank of
the alteration on September 4, 1964. When Metro Bank refused to reimburse FNCB
for the amount of P50,000.00, it filedan action for recovery of the amount with the
Court of First Instance of Manila

Issue:Which bank is liable for the payment of the altered check, the drawee bank
(FNCB) or thecollecting bank (Metrobank)?

Ruling:The drawee bank is liable. Under Central Bank Circular No. 9 as amended by
Circular No. 138 andCircular No. 169, , the drawee bank receiving the check for
clearing from the Central BankClearing House must return the check to the collecting
bank within the 24-hour period if thecheck is defective for any reason.In this case, the
check was not returned to Metro Bank in accordance with the 24-hourclearing house
period, but was cleared by FNCB. Failure of FNCB, therefore, to call theattention of
Metro Bank to the alteration of the check in question until after the lapse of nine days,
negates whatever right it might have had against Metro Bank in the light of thesaid
Central Bank Circular. Its remedy lies not against Metro Bank, but against the
partyresponsible for the changing the name of the payee and the amount on the face of
thecheck.

Republic Bank vs. CA

GR 42725, 22 April 1991

Facts: San Miguel Corporation issued a dividend check for P240 in favor of J.
Roberto Delgado, a stockholder. Delgado altered the amount of the check to P9,240.
The check was indorsed and deposited by Delgado with Republic Bank. Republic
Bank endorsed the check to First National City Bank (FNCB), the drawee bank, by
stamping on the back of the check “all prior and / or lack of indorsements guaranteed.
Relying on the endorsement, FNCB paid the amount to Republic Bank. Later on, San
Miguel informed FNCB of the material alteration of the amount. FNCB recredited the
amount to San Miguel’s account, and demanded refund from Republic Bank.
Republic Bank refused. Hence, the present action.

Issue: Who shall bear the loss resulting from the altered check?.

Held: When an indorsement is forged, the collecting bank or last indorser, as a general
rule, bears the loss. But the unqualified indorsement of the collecting bank on the
check should be read together with the 24-hour regulation on clearing house
operation. Thus, when the drawee bank fails to return a forged or altered check to the
collecting bank within the 24-hour clearing period (as provided by Section 4c of
Central Bank Circular 9, as amended), the collecting bank is absolved from liability.
The drawee bank, FNCB, should bear the loss for the payment of the altered check for
its failure to detect and warn Republic Bank of the fraudulent character of the check
within the 24-hour clearing house rule.