PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. CA - G.R. No. 121413

PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. CA

and FORD PHILIPPINES, INC. and CITIBANK, N.A.

G.R. No. 121413          January 29, 2001

Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as payments of its taxes, through the depository bank Insular Bank of Asia and America (later PCIBank). Proceeds of the checks were never received by the Commissioner, but were encashed and diverted to the accounts of members of a syndicate, to which Ford’s General Ledger Accountant Godofredo Rivera belongs. Upon demand of the Commissioner anew, Ford was forced to make second payment of its taxes. Thus, Ford instituted actions to recover the amounts from the collecting (depository) and drawee banks.

Issue: Whether or not Ford has the right to recover from the collecting bank (PCI Bank) and/or the drawee bank (Citibank) the value of the checks.

Held: The mere fact that forgery was committed by a drawer-payor’s confidential employee or agent, who by virtue of his position had unusual facilities to perpetrate the fraud and imposing the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. The rule applies to checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession.

In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. Furthermore, PCIBank’s clearing stamp which guarantees prior or lack of indorsements render PCIBank liable as it allowed Citibank without any other option but to pay the checks. PCIBank, being a depository / collecting bank of the BIR, had the responsibility to make sure that the crossed checks were deposited in “Payee’s account only” as found in the instrument.

In GR 128604, on the other hand, the switching operation involving the checks, while in transit for clearing, were the clandestine or hidden actuations performed by the members of the syndicate in their own personal, covert and private capacity; without the knowledge nor official or conscious participation of PCIBank in the process of embezzlement. Central Bank Circular 580 (1977), however, provide d that any theft affecting items in transit for clearing are for the account of the sending bank (herein PCIBank). Still, Citibank was likewise negligent in the performance of its duties as it failed to establish its payment of Ford’s checks were made in due course and legally in order. The fact that drawee bank did not discover the irregularity seasonably constitutes negligence in carrying out the bank’s duty to its depositors.