Republic of the
SUPREME COURT
SECOND DIVISION
ALLIED BANKING G.R.
No. 133179
CORPORATION,
Petitioner, Present:
QUISUMBING, J.,
Chairperson,
- versus - CARPIO MORALES,
TINGA,
VELASCO,
JR., and
CHICO-NAZARIO,* JJ.
LIM SIO WAN, METROPOLITAN
BANK AND TRUST CO., and Promulgated:
PRODUCERS BANK,
Respondents. March 27, 2008
x-----------------------------------------------------------------------------------------x
D E C I S I O N
VELASCO, JR., J.:
To ingratiate themselves to their
valued depositors, some banks at times bend over backwards that they
unwittingly expose themselves to great risks.
The Case
This
Petition for Review on Certiorari under Rule 45 seeks to reverse the Court of
Appeals’ (CA’s) Decision promulgated on
The Facts
The
facts as found by the RTC and affirmed by the CA are as follows:
On
On
Later,
Thereafter,
the manager’s check was deposited in the account of Filipinas Cement
Corporation (FCC) at respondent Metropolitan Bank and Trust Co. (Metrobank),[10]
with the forged signature of Lim Sio Wan as indorser.[11]
Earlier,
on
To
clear the check and in compliance with the requirements of the Philippine
Clearing House Corporation (PCHC) Rules and Regulations, Metrobank stamped a
guaranty on the check, which reads: “All prior endorsements and/or lack of
endorsement guaranteed.”[18]
The
check was sent to Allied through the PCHC. Upon the presentment of the check,
Allied funded the check even without checking the authenticity of Lim Sio Wan’s
purported indorsement. Thus, the amount
on the face of the check was credited to the account of FCC.[19]
On
On
When
Lim Sio Wan’s second placement matured on
Consequently,
Lim Sio Wan filed with the RTC a Complaint dated
Allied
filed a third party complaint[27]
against Metrobank and
On
Lim Sio Wan thereafter filed an
amended complaint to include Metrobank as a party-defendant, along with Allied.[33] The
RTC admitted the amended complaint despite the opposition of Metrobank.[34] Consequently,
Allied’s third party complaint against Metrobank was converted into a cross-claim
and the latter’s fourth party complaint against FCC was converted into a third
party complaint.[35]
After
trial, the RTC issued its Decision, holding as follows:
WHEREFORE, judgment is hereby rendered as
follows:
1. Ordering defendant Allied Banking
Corporation to pay plaintiff the amount of P1,158,648.49 plus 12% interest per
annum from
2. Ordering defendant Allied Bank to pay
plaintiff the amount of P100,000.00 by way of moral damages;
3. Ordering defendant Allied Bank to pay
plaintiff the amount of P173,792.20 by way of attorney’s fees; and,
4. Ordering defendant Allied Bank to pay
the costs of suit.
Defendant
Allied Bank’s cross-claim against defendant Metrobank is DISMISSED.
Likewise
defendant Metrobank’s third-party complaint as against Filipinas Cement
Corporation is DISMISSED.
Filipinas
Cement Corporation’s fourth-party complaint against Producer’s Bank is also
DISMISSED.
SO
ORDERED.[36]
The Decision of the Court of Appeals
Allied
appealed to the CA, which in turn issued the assailed Decision on
WHEREFORE,
premises considered, the decision appealed from is MODIFIED. Judgment is
rendered ordering and sentencing defendant-appellant Allied Banking Corporation
to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust
Company forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum
from March 16, 1984 until fully paid. The moral damages, attorney’s fees and
costs of suit adjudged shall likewise be paid by defendant-appellant Allied
Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company
in the same proportion of 60-40. Except as thus modified, the decision appealed
from is AFFIRMED.
SO
ORDERED.[37]
Hence,
Allied filed the instant petition.
The Issues
Allied raises
the following issues for our consideration:
The Honorable Court of Appeals erred in holding that Lim Sio Wan did not authorize [Allied] to pre-terminate the initial placement and to deliver the check to Deborah Santos.
The Honorable Court of Appeals erred in absolving Producers Bank of any liability for the reimbursement of amount adjudged demandable.
The Honorable Court of Appeals erred in holding [Allied] liable to the extent of 60% of amount adjudged demandable in clear disregard to the ultimate liability of Metrobank as guarantor of all endorsement on the check, it being the collecting bank.[38]
The
petition is partly meritorious.
A Question of Fact
Allied
questions the finding of both the trial and appellate courts that Allied was
not authorized to release the proceeds of Lim Sio Wan’s money market placement
to
We
also agree with the CA when it said that it could not disturb the trial court’s
findings on the credibility of witness So inasmuch as it was the trial court
that heard the witness and had the opportunity to observe closely her
deportment and manner of testifying.
Unless the trial court had plainly overlooked facts of substance or
value, which, if considered, might affect the result of the case,[40] we find it best to defer to the
trial court on matters pertaining to credibility of witnesses.
Additionally,
this Court has held that the matter of negligence is also a factual question.[41] Thus, the finding of the RTC, affirmed by the
CA, that the respective parties were negligent in the exercise of their
obligations is also conclusive upon this Court.
The Liability of the Parties
As
to the liability of the parties, we find that Allied is liable to Lim Sio Wan. Fundamental and familiar is the doctrine that
the relationship between a bank and a client is one of debtor-creditor.
Articles
1953 and 1980 of the Civil Code provide:
Art.
1953. A person who receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality.
Art. 1980. Fixed, savings, and current
deposits of money in banks and similar institutions shall be governed by the
provisions concerning simple loan.
Thus, we have
ruled in a line of cases that a bank deposit is in the nature of a simple loan
or mutuum.[42]
More succinctly, in Citibank, N.A. (Formerly First National City Bank) v.
Sabeniano, this Court ruled that a money market placement is a simple loan
or mutuum.[43] Further, we defined a money market in Cebu International Finance Corporation v.
Court of Appeals, as follows:
[A] money market is a market dealing in standardized short-term
credit instruments (involving large amounts) where lenders and borrowers do
not deal directly with each other but through a middle man or dealer in open
market. In a money market transaction, the investor is a lender who loans his
money to a borrower through a middleman or dealer.
In the
case at bar, the money market transaction between the petitioner and the
private respondent is in the nature of a loan.[44]
Lim Sio Wan, as creditor of the bank for
her money market placement, is entitled to payment upon her request, or upon
maturity of the placement, or until the bank is released from its obligation as
debtor. Until any such event, the obligation
of Allied to Lim Sio Wan remains unextinguished.
Art. 1231 of the Civil Code enumerates the
instances when obligations are considered extinguished, thus:
Art.
1231. Obligations are extinguished:
(1)
By payment or performance;
(2)
By the loss of
the thing due;
(3)
By the
condonation or remission of the debt;
(4)
By the confusion
or merger of the rights of creditor and debtor;
(5)
By compensation;
(6)
By novation.
Other
causes of extinguishment of obligations, such as annulment, rescission,
fulfillment of a resolutory condition, and prescription, are governed elsewhere
in this Code. (Emphasis supplied.)
From the factual findings of the trial and
appellate courts that Lim Sio Wan did not authorize the release of her money
market placement to Santos and the bank had been negligent in so doing, there
is no question that the obligation of Allied to pay Lim Sio Wan had not been
extinguished. Art. 1240 of the Code states
that “payment shall be made to the person in whose favor the obligation has
been constituted, or his successor in interest, or any person authorized to
receive it.” As commented by Arturo
Tolentino:
Payment
made by the debtor to a wrong party does not extinguish the obligation as to
the creditor, if there is no fault or negligence which can be imputed to the
latter. Even when the debtor acted in
utmost good faith and by mistake as to the person of his creditor, or through
error induced by the fraud of a third person, the payment to one who is not in
fact his creditor, or authorized to receive such payment, is void, except as
provided in Article 1241. Such payment
does not prejudice the creditor, and accrual of interest is not suspended by
it.[45] (Emphasis
supplied.)
Since
there was no effective payment of Lim Sio Wan’s money market placement, the
bank still has an obligation to pay her at six percent (6%) interest from
We
cannot, however, say outright that Allied is solely liable to Lim Sio Wan.
Allied
claims that Metrobank is the proximate cause of the loss of Lim Sio Wan’s money. It points out that Metrobank guaranteed all
prior indorsements inscribed on the manager’s check, and without Metrobank’s
guarantee, the present controversy would never have occurred. According to Allied:
Failure on the part of the collecting bank to ensure that the proceeds of the check is paid to the proper party is, aside from being an efficient intervening cause, also the last negligent act, x x x contributory to the injury caused in the present case, which thereby leads to the conclusion that it is the collecting bank, Metrobank that is the proximate cause of the alleged loss of the plaintiff in the instant case.[46]
We are not persuaded.
Proximate
cause is “that cause, which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury and without which the
result would not have occurred.”[47] Thus, there is an efficient supervening event
if the event breaks the sequence leading from the cause to the ultimate
result. To determine the proximate cause
of a controversy, the question that needs to be asked is: If the event did not happen, would the injury
have resulted? If the answer is NO, then
the event is the proximate cause.
In
the instant case, Allied avers that even if it had not issued the check
payment, the money represented by the check would still be lost because of
Metrobank’s negligence in indorsing the check without verifying the genuineness
of the indorsement thereon.
Section 66 in relation to Sec. 65 of
the Negotiable Instruments Law provides:
Section
66. Liability of general indorser.—Every
indorser who indorses without qualification, warrants to all subsequent holders
in due course;
a) The
matters and things mentioned in subdivisions (a), (b) and (c) of the next
preceding section; and
b) That the instrument is at the time of his
indorsement valid and subsisting;
And in addition, he engages that on due
presentment, it shall be accepted or paid, or both, as the case may be
according to its tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to the
holder, or to any subsequent indorser who may be compelled to pay it.
Section 65. Warranty where negotiation by delivery, so forth.—Every person negotiating
an instrument by delivery or by a qualified indorsement, warrants:
a)
That the instrument is genuine and in all
respects what it purports to be;
b) That he has a good title of it;
c) That all prior parties had capacity to
contract;
d) That he has no knowledge of any fact which
would impair the validity of the instrument or render it valueless.
But when the negotiation is by delivery only,
the warranty extends in favor of no holder other than the immediate transferee.
The provisions of subdivision (c) of this
section do not apply to persons negotiating public or corporation securities,
other than bills and notes. (Emphasis
supplied.)
The
warranty “that the instrument is genuine and in all respects what it purports
to be” covers all the defects in the instrument affecting the validity thereof,
including a forged indorsement. Thus,
the last indorser will be liable for the amount indicated in the negotiable
instrument even if a previous indorsement was forged. We held in a line of cases that “a collecting
bank which indorses a check bearing a forged indorsement and presents it to the
drawee bank guarantees all prior indorsements, including the forged indorsement
itself, and ultimately should be held liable therefor.”[48]
However,
this general rule is subject to exceptions. One such exception is when the
issuance of the check itself was attended with negligence. Thus, in the cases
cited above where the collecting bank is generally held liable, in two of the
cases where the checks were negligently issued, this Court held the institution
issuing the check just as liable as or more liable than the collecting
bank.
In
isolated cases where the checks were deposited in an account other than that of
the payees on the strength of forged indorsements, we held the collecting bank
solely liable for the whole amount of the checks involved for having indorsed
the same. In Republic Bank v. Ebrada,[49]
the check was properly issued by the Bureau of Treasury. While in Banco de Oro Savings and Mortgage Bank (Banco
de Oro) v. Equitable Banking Corporation,[50]
Banco de Oro admittedly issued the checks in the name of the correct
payees. And in Traders Royal Bank v. Radio Philippines Network, Inc.,[51]
the checks were issued at the request of Radio Philippines Network, Inc. from
Traders Royal Bank.
However,
in Bank of the Philippine Islands v.
Court of Appeals, we said
that the drawee bank is liable for 60% of the amount on the face of the
negotiable instrument and the collecting bank is liable for 40%. We also noted the relative negligence
exhibited by two banks, to wit:
Both
banks were negligent in the selection and supervision of their employees
resulting in the encashment of the forged checks by an impostor. Both banks
were not able to overcome the presumption of negligence in the selection and
supervision of their employees. It was the gross negligence of the employees of
both banks which resulted in the fraud and the subsequent loss. While it is
true that petitioner BPI’s negligence may have been the proximate cause of the
loss, respondent CBC’s negligence contributed equally to the success of
the impostor in encashing the proceeds of the forged checks. Under these
circumstances, we apply Article 2179 of the Civil Code to the effect that while
respondent CBC may recover its losses, such losses are subject to mitigation by
the courts. (See Phoenix Construction Inc. v. Intermediate Appellate
Courts, 148 SCRA 353 [1987]).
Considering
the comparative negligence of the two (2) banks, we rule that the demands of
substantial justice are satisfied by allocating the loss of P2,413,215.16 and
the costs of the arbitration proceeding in the amount of P7,250.00 and the cost
of litigation on a 60-40 ratio.[52]
Similarly, we ruled in Associated Bank v. Court of Appeals that the issuing institution and the
collecting bank should equally share the liability for the loss of amount
represented by the checks concerned due to the negligence of both parties:
The Court finds as reasonable, the proportionate sharing
of fifty percent-fifty percent (50%-50%). Due to the negligence of the Province
of Tarlac in releasing the checks to an unauthorized person (Fausto
Pangilinan), in allowing the retired hospital cashier to receive the checks for
the payee hospital for a period close to three years and in not properly
ascertaining why the retired hospital cashier was collecting checks for the
payee hospital in addition to the hospital’s real cashier, respondent Province
contributed to the loss amounting to P203,300.00 and shall be liable to the PNB
for fifty (50%) percent thereof. In effect, the
The
collecting bank, Associated Bank, shall be liable to PNB for fifty (50%)
percent of P203,300.00. It is liable on its warranties as indorser of the
checks which were deposited by Fausto Pangilinan, having guaranteed the
genuineness of all prior indorsements, including that of the chief of the payee
hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to
ascertain the genuineness of the payee’s indorsement.[53]
A
reading of the facts of the two immediately preceding cases would reveal that
the reason why the bank or institution which issued the check was held
partially liable for the amount of the check was because of the negligence of
these parties which resulted in the issuance of the checks.
In
the instant case, the trial court correctly found Allied negligent in issuing
the manager’s check and in transmitting it to
To
reiterate, had Allied exercised the diligence due from a financial institution,
the check would not have been issued and no loss of funds would have resulted.
In fact, there would have been no issuance of indorsement had there been no
check in the first place.
The
liability of Allied, however, is concurrent with that of Metrobank as the last
indorser of the check. When Metrobank
indorsed the check in compliance with the PCHC Rules and Regulations[55]
without verifying the authenticity of Lim Sio Wan’s indorsement and when it
accepted the check despite the fact that it was cross-checked payable to
payee’s account only,[56]
its negligent and cavalier indorsement contributed to the easier release of Lim
Sio Wan’s money and perpetuation of the fraud. Given the relative participation
of Allied and Metrobank to the instant case, both banks cannot be adjudged as
equally liable. Hence, the 60:40 ratio of the liabilities of Allied and
Metrobank, as ruled by the CA, must be upheld.
FCC,
having no participation in the negotiation of the check and in the forgery of Lim
Sio Wan’s indorsement, can raise the real defense of forgery as against both
banks.[57]
As to Producers Bank, Allied Bank’s
argument that Producers Bank must be held liable as employer of
One also cannot apply the principle
of subsidiary liability in Art. 103 of the Revised Penal Code in the instant
case. Such liability on the part of the employer for the civil aspect of the
criminal act of the employee is based on the conviction of the employee for a
crime. Here, there has been no conviction for any crime.
As to the claim that there was unjust
enrichment on the part of Producers Bank, the same is correct. Allied correctly
claims in its petition that Producers Bank should reimburse Allied for whatever
judgment that may be rendered against it pursuant to Art. 22 of the Civil Code,
which provides: “Every person who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense
of the latter without just cause or legal ground, shall return the same to
him.”
The above
provision of law was clarified in Reyes
v. Lim, where we ruled
that “[t]here is unjust enrichment when a person unjustly retains a benefit to
the loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good conscience.”[58]
In Tamio v. Ticson, we further clarified
the principle of unjust enrichment, thus: “Under Article 22 of the Civil Code, there is unjust
enrichment when (1) a person is unjustly benefited, and (2) such benefit is
derived at the expense of or with damages to another.”[59]
In the
instant case, Lim Sio Wan’s money market placement in Allied Bank was
pre-terminated and withdrawn without her consent. Moreover, the proceeds of the
placement were deposited in Producers Bank’s account in Metrobank without any
justification. In other words, there is no reason that the proceeds of Lim Sio Wans’
placement should be deposited in FCC’s account purportedly as payment for FCC’s
money market placement and interest in Producers Bank. With such payment,
Producers Bank’s indebtedness to FCC was extinguished, thereby benefitting the
former. Clearly, Producers Bank was unjustly enriched at the expense of Lim Sio
Wan. Based on the facts and circumstances of the case, Producers Bank should
reimburse Allied and Metrobank for the amounts the two latter banks are ordered
to pay Lim Sio Wan.
It cannot
be validly claimed that FCC, and not Producers Bank, should be considered as
having been unjustly enriched. It must be remembered that FCC’s money market
placement with Producers Bank was already due and demandable; thus, Producers
Bank’s payment thereof was justified. FCC was entitled to such payment. As
earlier stated, the fact that the indorsement on the check was forged cannot be
raised against FCC which was not a
part in any stage of the negotiation of the check. FCC was not unjustly
enriched.
From the facts of the instant case, we
see that
Clearly,
Producers Bank must be held liable to Allied and Metrobank for the amount of
the check plus 12% interest per annum, moral damages, attorney’s fees, and
costs of suit which Allied and Metrobank are adjudged to pay Lim Sio Wan based
on a proportion of 60:40.
WHEREFORE, the petition is PARTLY GRANTED. The March 18, 1998 CA Decision in CA-G.R. CV
No. 46290 and the November 15, 1993 RTC Decision in Civil Case No. 6757 are AFFIRMED with MODIFICATION.
Thus, the
CA Decision is AFFIRMED, the fallo of which is reproduced, as
follows:
WHEREFORE,
premises considered, the decision appealed from is MODIFIED. Judgment is
rendered ordering and sentencing defendant-appellant Allied Banking Corporation
to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust
Company forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum
from March 16, 1984 until fully paid. The moral damages, attorney’s fees and
costs of suit adjudged shall likewise be paid by defendant-appellant Allied
Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company
in the same proportion of 60-40. Except as thus modified, the decision appealed
from is AFFIRMED.
SO ORDERED.
Additionally
and by way of MODIFICATION, Producers Bank is hereby ordered to
pay Allied and Metrobank the aforementioned amounts. The liabilities of the
parties are concurrent and independent of each other.
SO ORDERED.
PRESBITERO
J. VELASCO, JR.
Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES DANTE O. TINGA
Associate
Justice Associate
Justice
MINITA V. CHICO-NAZARIO
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate
Justice
Chairperson
C E R T I F
I C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
* Additional member as per Special Order No.
494 dated
[1] Rollo, pp. 52-72. Penned by Associate Justice Eduardo G. Montenegro (Chairperson) and concurred in by Associate Justices Salvador J. Valdez, Jr. and Rodrigo V. Cosico.
[2]
[3]
Records, p. 1294. TSN,
[4] Exhibit “A,” Exhibits Folder, p. 3.
[5] Records, pp. 1294-1295. TSN, February 27, 1991, pp. 5-6.
[6]
[7]
[8]
[9] Exhibit “K,” “3-Allied,” Exhibits Folder.
[10] Records, p. 1164. TSN, December 12, 1986, p. 30.
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18] Exhibit “3-B,” Exhibits Folder, p. 1.
[19] Records,
pp. 1308-1309. TSN, August 3, 1992, pp.
6-7.
[20]
[21]
[22]
[23]
[24] Exhibit “F,” Exhibits Folder, p. 7.
[25] Records, p. 1171a. TSN, December 12, 1986, p. 46.
[26]
[27]
[28]
[29]
[30]
[31] Rollo, p. 216.
[32]
[33] Records, pp. 262-269.
[34]
[35]
[38] Rollo, pp. 28-29.
[39] Uy v. Court of Appeals, G.R. No. 109197, 21 June 2001, 359 SCRA 262, 269.
[40] Rollo, pp. 60-61.
[42] Integrated Realty Corp. v. Philippine
National Bank, No. L-60705, June 28, 1989, 174 SCRA 295, 309; Serrano v. Central Bank of the
[45] 4
A.M. Tolentino, Commentaries and
Jurisprudence on the Civil Code of the
[46] Rollo, p. 41.
[47] A.B. Decano, Notes on Torts and Damages 43 (1996).
[48] Traders Royal Bank v. Radio Philippines
Network, Inc., G.R. No. 138510, October 10, 2002, 390 SCRA 608, 617; Associated Bank v. Court of Appeals,
G.R. No. 107382, January 31, 1996, 252 SCRA 620, 633; Bank of the Philippine Islands v. Court of Appeals, G.R. No. 102383, November 26, 1992, 216
SCRA 51, 63; Banco de Oro Savings and
Mortgage Bank v. Equitable Banking Corporation, G.R. No. 74917, January 20,
1988, 157 SCRA 188, 198; Republic Bank v.
Ebrada, No. L-40796,
[49] Supra.
[50] Supra.
[51] Supra.
[54] Rollo, pp. 79-80.
[55] Sec. 17 of the PCHC Rules and Regulations provides:
Sec. 17.—Bank Guarantee. All
checks cleared through the PCHC shall bear the guarantee affixed thereto by the
Presenting Bank/Branch which shall read as follows:
Cleared thru the Philippine
Clearing House Corporation all prior endorsements and/or lack of endorsement
guaranteed NAME OF BANK/BRANCH BRSTN (Date of Clearing).
Checks to which said guarantee has not been affixed shall, nevertheless, be deemed guaranteed by the Presenting Bank as to all prior endorsement and/or lack of endorsement.
[56] Associated Bank v. Court of Appeals, G.R. No. 89802, May 7, 1992, 208 SCRA 465, 469.
[57] Negotiable Instruments Law, Sec. 23.
[58] G.R. No. 134241, August 11, 2003, 408 SCRA 560, 570.
[59] G.R. No. 154895, November 18, 2004, 443
SCRA 44, 53.
[60] Supra note 30.