PCIB v.

CA
Facts: This case is composed of three consolidated petitions involving several checks, payable to the Bureau of Internal Revenue, but as embe!!led allegedly by an organi!ed syndicate. I. G. R. Nos. 121413 and 121479 "n "ctober #$, #$%%, plaintiff &ord issued a Citibank check amounting to P',%'(,##'.'# in favor of the Commissioner of Internal Revenue for the payment of manufacturer)s ta*es. The check as deposited ith defendant IBAA +no PCIB,, subse-uently cleared the the Central Bank, and paid by Citibank to IBAA. The proceeds never reached BIR, so plaintiff as compelled to make a second payment. .efendant refused to reimburse plaintiff, and so the latter filed a complaint. An investigation revealed that the check as recalled by /odofredo Rivera, the general ledger accountant of &ord, and as replaced by a manager)s check. Alleged members of a syndicate deposited the t o manager)s checks ith Pacific Banking Corporation. &ord filed a third party complaint against Rivera and PBC. The case against PBC as dismissed. The case against Rivera as like ise dismissed because summons could not be served. The trial court held Citibank and PCIB 0ointly and severally liable to &ord, but the Court of Appeals only held PCIB liable. II. G. R. No. 128604 &ord dre t o checks in favor of the Commissioner of Internal Revenue, amounting to P1,21#,%3(.4% and P(,4##,1$#.%4. Both are crossed checks payable to payee)s account only. The checks never reached BIR, so plaintiff as compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank. "n investigation of 5BI, the modus operandi as discovered. /orofredo Rivera made the checks but instead of delivering them to BIR, passed it to Castro, ho as the manager of PCIB 6an Andres. Castro opened a checking account in the name of a fictitious person 7Reynaldo Reyes8. Castro deposited a orthless Bank of America check ith the same amount as that issued by &ord. 9hile being routed to the Central Bank for clearing, the orthless check as replaced by the genuine one from &ord. The trial court absolved PCIB and held Citibank liable, in toto by the Court of Appeals. Issues: +#, 9hether there is contributory negligence on the part of &ord +:, ;as petitioner &ord the right to recover from the collecting bank +PCIBank, and the dra ee bank +Citibank, the value of the checks intended as payment to the Commissioner of Internal Revenue< hich decision as affirmed

Held: +:, The general rule is that if the master is in0ured by the negligence of a third person and by the concuring contributory negligence of his o n servant or agent, the latter=s negligence is imputed to his superior and ill defeat the superior=s action against the third person, asuming, of course that the contributory negligence as the proximate cause of the in0ury of hich complaint is made. As defined, pro*imate cause is that hich, in the natural and continuous se-uence, unbroken by any efficient, intervening cause produces the in0ury and ithout the result ould not have occurred. It appears that although the employees of &ord initiated the transactions attributable to an organi!ed syndicate, in our vie , their actions ere not the pro*imate cause of encashing the checks payable to the CIR. The degree of &ord=s negligence, if any, could not be characteri!ed as the pro*imate cause of the in0ury to the parties. The mere fact that the forgery as committed by a dra er>payor=s confidential employee or agent, ho by virtue of his position had unusual facilities for perpertrating the fraud and imposing the forged paper upon the bank, does notentitle the bank toshift the loss to the dra er>payor, in the absence of some circumstance raising estoppel against the dra er. This rule like ise applies to the checks fraudulently negotiated or diverted by the confidential employees ho hold them in their possession. +:, 9e have to scrutini!e, separately, PCIBank=s share of negligence hen the syndicate achieved its ultimate agenda of stealing the proceeds of these checks. a. /. R. 5os. #:#'#4 and #:#'%$ "n record, PCIBank failed to verify the authority of ?r. Rivera to negotiate the checks. The neglect of PCIBank employees to verify hether his letter re-uesting for the replacement of the Citibank Check 5o. 65>3'2(% as duly authori!ed, sho ed lack of care and prudence re-uired in the circumstances. &urthermore, it as admitted that PCIBank is authori!ed to collect the payment of ta*payers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the un arranted instructions given by the payor or its agent. It is a ell>settled rule that the relationship bet een the payee or holder of commercial paper and the bank to hich it is sent for collection is, in the absence of an argreement to the contrary, that of principal and agent. A bank hich receives such paper for collection is the agent of the payee or holder. Indeed, the crossing of the check ith the phrase @Payee=s Account "nly,@ is a arning 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, hich is bound to scrutini!e the check and to kno its depositors before it could make the clearing indorsement @all prior indorsements andAor lack of indorsement guaranteed@. Bastly, banking business re-uires that the one ho first cashes and negotiates the check must take some precautions to learn hether or not it is genuine. And if the one cashing the check through indifference or other circumstance assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the check from the dra ee hose sole fault as that it did not discover the forgery or the

defect in the title of the person negotiating the instrument before paying the check. &or this reason, a bank hich cashes a check dra n upon another bank, ithout re-uiring proof as to the identity of persons presenting it, or making in-uiries ith regard to them, cannot hold the proceeds against the dra ee hen the proceeds of the checks ere after ards diverted to the hands of a third party. In such cases the dra ee bank has a right to believe that the cashing bank +or the collecting bank, had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one ho encashed a check hich had been forged or diverted and in turn received payment thereon from the dra ee, is guilty of negligence hich pro*imately contributed to the success of the fraud practiced on the dra ee bank. The latter may recover from the holder the money paid on the check. b. /. R. 5o. #:2(3' In this case, there as no evidence presented confirming the conscious participation of PCIBank in the embe!!lement. As a general rule, ho ever, a banking corporation is liable for the rongful or tortuous acts and declarations of its officers or agents ithin the course and scope of their employment. A bank ill be held liable for the negligence of its officers or agents hen acting ithin 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 hich malice is an essential element. In this case, e find a situation here the PCIBank appears also to be the victim of the scheme hatched by a syndicate in hich its o n management employees had participated. But in this case, responsibility for negligence does not lie on PCIBank=s shoulders alone. Citibank failed to notice and verify the absence of the clearing stamps. &or this reason, Citibank had indeed failed to perform hat as incumbent upon it, hich is to ensure that the amount of the checks should be paid only to its designated payee. The point is that as a business affected ith public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors ith meticulous care, al ays having in mind the fiduciary nature of their relationship. Thus, invoking the doctrine of comparative negligence, e are of the vie that both PCIBank and Citibank failed in their respective obligations and both ere negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check 5os. 65 #31$% A5. #(132. Thus, e are constrained to hold them e-ually liable for the loss of the proceeds of said checks issued by &ord in favor of the CIR.