PCIB v CA [G.R. No. 121413. January 29, 2001.] PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK
OF ASIA AND AMERICA), petitioner, vs. COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A., respondents.
FACTS:
Ford Philippines drew and issued Citibank Check. No. SN 04867 on October 19, 1977, Citibank Check No. SN 10597 on July 19, 1978 and Citibank Check No. SN-16508 on April 20, 1979, all in favor of the Commissioner of Internal Revenue (CIR) for payment of its percentage taxes. The checks were crossed and deposited with the IBAA, now PCIB, BIR's authorized collecting bank. The first check was cleared containing an indorsement that "all prior indorsements and/or lack of indorsements guaranteed." The same, however, was replaced with two (2) IBAA's managers' checks based on a call and letter request made by Godofredo Rivera, Ford's General Ledger Accountant, on an alleged error in the computation of the tax due without IBAA verifying the authority of Rivera. These manager's checks were later deposited in another bank and misappropriated by the syndicate. The last two checks were cleared by the Citibank but failed to discover that the clearing stamps do not bear any initials. The proceeds of the checks were also illegally diverted or switched by officers of PCIB — members of the syndicate, who eventually encashed them. Ford, which was compelled to pay anew the percentage taxes, sued in two actions for collection against the two banks on January 20, 1983, barely six years from the date the first check was returned to the drawer. The direct perpetrators of the crime are now fugitives from justice.
DECISION OF LOWER COURTS:
1st case:
(1) Trial Court: Citibank and IBAA were jointly and severally liable for the checks (2) CA: only IBAA (PCIB) solely liable for the amount of the first check
2nd case:
(1) Trial Court: absolved PCIB from liability and held that only the Citibank is liable for the checks issued by Ford
(2) Court of Appeals: held both banks liable for negligence in the selection and supervision of their employees resulting in the erroneous encashment of the checks.
ISSUE:
Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? Or has Ford's cause of action already prescribed?
FACTS:
Ford Philippines drew and issued Citibank Check. No. SN 04867 on October 19, 1977, Citibank Check No. SN 10597 on July 19, 1978 and Citibank Check No. SN-16508 on April 20, 1979, all in favor of the Commissioner of Internal Revenue (CIR) for payment of its percentage taxes. The checks were crossed and deposited with the IBAA, now PCIB, BIR's authorized collecting bank. The first check was cleared containing an indorsement that "all prior indorsements and/or lack of indorsements guaranteed." The same, however, was replaced with two (2) IBAA's managers' checks based on a call and letter request made by Godofredo Rivera, Ford's General Ledger Accountant, on an alleged error in the computation of the tax due without IBAA verifying the authority of Rivera. These manager's checks were later deposited in another bank and misappropriated by the syndicate. The last two checks were cleared by the Citibank but failed to discover that the clearing stamps do not bear any initials. The proceeds of the checks were also illegally diverted or switched by officers of PCIB — members of the syndicate, who eventually encashed them. Ford, which was compelled to pay anew the percentage taxes, sued in two actions for collection against the two banks on January 20, 1983, barely six years from the date the first check was returned to the drawer. The direct perpetrators of the crime are now fugitives from justice.
DECISION OF LOWER COURTS:
1st case:
(1) Trial Court: Citibank and IBAA were jointly and severally liable for the checks (2) CA: only IBAA (PCIB) solely liable for the amount of the first check
2nd case:
(1) Trial Court: absolved PCIB from liability and held that only the Citibank is liable for the checks issued by Ford
(2) Court of Appeals: held both banks liable for negligence in the selection and supervision of their employees resulting in the erroneous encashment of the checks.
ISSUE:
Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? Or has Ford's cause of action already prescribed?
RULING:
A. Citibank Check No. SN-04867
FORD
Ford, is guilty of the "imputed contributory negligence" that would defeat its claim for reimbursement, bearing in mind that its employees, Godofredo Rivera and Alexis Marindo, were among the members of the syndicate.
although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the parties.
IBAA/PCIB
As agent of the BIR (the payee of the check), defendant IBAA should receive instructions only from its principal BIR and not from any other person especially so when that person is not known to the defendant. It is very imprudent on the part of the defendant IBAA to just rely on the alleged telephone call of one (Godofredo Rivera and in his signature to the authenticity of such signature considering that the plaintiff is not a client of the defendant IBAA."
Even considering arguendo, that the diversion of the amount of a check payable to the collecting bank in behalf of the designated payee may be allowed, still such diversion must be properly authorized by the payor. Otherwise stated, the diversion can be justified only by proof of authority from the drawer, or that the drawer has clothed his agent with apparent authority to receive the proceeds of such check.
The crossing of the check with the phrase "Payee's Account Only," is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement guaranteed".
PCIBank is liable in the amount corresponding to the proceeds of Citibank Check No. SN-04867.
Citibank
None
B. Citibank Check Numbers SN-10597 and 16508
PCIBank
Section 5 31 of Central Bank Circular No. 580, Series of 1977 provides that any theft affecting items in transit for clearing, shall be for the account of sending bank, which in this case is PCIBank.
Citibank
negligent in the performance of its duties. Citibank failed to establish that its payment of Ford's checks were made in due course and legally in order. In its defense, Citibank claims the genuineness and due execution of said checks, considering that Citibank (1) has no knowledge of any infirmity in the issuance of the checks in question (2) coupled by the fact that said checks were sufficiently funded and (3) the endorsement of the Payee or lack thereof was guaranteed by PCIBank (formerly IBAA), thus, it has the obligation to honor and pay the same.
As the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. It failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee.
Invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 and 16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR. Time and again, we have stressed that banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence. A bank's liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment. Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees.
The relationship between a holder of a commercial paper and the bank to which it is sent for collection is that of a principal and an agent and the diversion of the amount of the check is justified only by proof of authority from the drawer; that in crossed checks, the collecting bank is bound to scrutinize the check and know its depositors before clearing indorsement; that as a general rule, banks are liable for wrongful or tortuous acts of its agents within the scope and in the course of their employment; that failure of the drawee bank to seasonably discover irregularity in the checks constitutes negligence and renders the bank liable for loss of proceeds of the checks; that an action upon a check prescribes in ten (10) years; and that the contributory negligence of the drawer shall reduce the damages he may recover against the collecting bank.
Since a master may be held for his servant's wrongful act, the law imputes to the master the act of the servant, and if that act is negligent or wrongful and proximately results in injury to a third person, the negligence or wrongful conduct is the negligence or wrongful conduct of the master, for which he is liable. The general rule is that if the master is injured by the negligence of a third person and by the concurring contributory negligence of his own servant or agent, the latter's negligence is imputed to his superior and will defeat the superior's action against the third person, assuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made.
Given these circumstances, the mere fact that the forgery was committed 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, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession.
As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds these officers or agents were enabled to perpetrate in the apparent course of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. For the general rule is that a bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority. And if an officer or employee of a bank, in his official capacity, receives money to satisfy an evidence of indebtedness lodged with his bank for collection, the bank is liable for his misappropriation of such sum.
A. Citibank Check No. SN-04867
FORD
Ford, is guilty of the "imputed contributory negligence" that would defeat its claim for reimbursement, bearing in mind that its employees, Godofredo Rivera and Alexis Marindo, were among the members of the syndicate.
although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the parties.
IBAA/PCIB
As agent of the BIR (the payee of the check), defendant IBAA should receive instructions only from its principal BIR and not from any other person especially so when that person is not known to the defendant. It is very imprudent on the part of the defendant IBAA to just rely on the alleged telephone call of one (Godofredo Rivera and in his signature to the authenticity of such signature considering that the plaintiff is not a client of the defendant IBAA."
Even considering arguendo, that the diversion of the amount of a check payable to the collecting bank in behalf of the designated payee may be allowed, still such diversion must be properly authorized by the payor. Otherwise stated, the diversion can be justified only by proof of authority from the drawer, or that the drawer has clothed his agent with apparent authority to receive the proceeds of such check.
The crossing of the check with the phrase "Payee's Account Only," is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement guaranteed".
PCIBank is liable in the amount corresponding to the proceeds of Citibank Check No. SN-04867.
Citibank
None
B. Citibank Check Numbers SN-10597 and 16508
PCIBank
Section 5 31 of Central Bank Circular No. 580, Series of 1977 provides that any theft affecting items in transit for clearing, shall be for the account of sending bank, which in this case is PCIBank.
Citibank
negligent in the performance of its duties. Citibank failed to establish that its payment of Ford's checks were made in due course and legally in order. In its defense, Citibank claims the genuineness and due execution of said checks, considering that Citibank (1) has no knowledge of any infirmity in the issuance of the checks in question (2) coupled by the fact that said checks were sufficiently funded and (3) the endorsement of the Payee or lack thereof was guaranteed by PCIBank (formerly IBAA), thus, it has the obligation to honor and pay the same.
As the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. It failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee.
Invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 and 16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR. Time and again, we have stressed that banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence. A bank's liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment. Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees.
The relationship between a holder of a commercial paper and the bank to which it is sent for collection is that of a principal and an agent and the diversion of the amount of the check is justified only by proof of authority from the drawer; that in crossed checks, the collecting bank is bound to scrutinize the check and know its depositors before clearing indorsement; that as a general rule, banks are liable for wrongful or tortuous acts of its agents within the scope and in the course of their employment; that failure of the drawee bank to seasonably discover irregularity in the checks constitutes negligence and renders the bank liable for loss of proceeds of the checks; that an action upon a check prescribes in ten (10) years; and that the contributory negligence of the drawer shall reduce the damages he may recover against the collecting bank.
Since a master may be held for his servant's wrongful act, the law imputes to the master the act of the servant, and if that act is negligent or wrongful and proximately results in injury to a third person, the negligence or wrongful conduct is the negligence or wrongful conduct of the master, for which he is liable. The general rule is that if the master is injured by the negligence of a third person and by the concurring contributory negligence of his own servant or agent, the latter's negligence is imputed to his superior and will defeat the superior's action against the third person, assuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made.
Given these circumstances, the mere fact that the forgery was committed 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, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession.
As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds these officers or agents were enabled to perpetrate in the apparent course of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. For the general rule is that a bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority. And if an officer or employee of a bank, in his official capacity, receives money to satisfy an evidence of indebtedness lodged with his bank for collection, the bank is liable for his misappropriation of such sum.
CONTRIBUTORY NEGLIGENCE OF PLAINTIFF SHALL REDUCE DAMAGES HE MAY RECOVER. — Finally, we also find that Ford
is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of
account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in
the exercise of due care and diligence find therein, serves to mitigate the banks' liability by reducing the award of interest from twelve
percent (12%) to six percent (6%) per annum. As provided in Article 1172 of the Civil Code of the Philippines, responsibility arising from
negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts,
according to the circumstances. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may
recover.
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