PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR

BANK OF ASIA AND AMERICA) vs. COURT OF APPEALS and FORD

PHILIPPINES, INC. and CITIBANK, N.A.
G.R. No. 121413

Facts:

 Ford Philippines (Ford) maintained with Citibank a checking account

 Ford then issued a check amounting to P 4,746,114.41 for its tax payments for the last
quarter of 1979.
 The check was presented to Philippine Commercial International Bank (PCIB) as an
authorized collector of the Bureau of Internal Revenue.
 The check was crossed check and named to The BIR.
 The amount of the check however was not deposited in favour of the account of BIR
which forced Ford to write a new check of the same amount for payment of the same.
 Ford then filed an action for recovery of the sum against Citibank and (PCIB).
 It was later discovered that the check and amount was lost due to a syndicate formed by
employees of Ford and PCIB, two more checks, in 1978 and 1979, of Ford were lost this
way amounting to P12,163,298.10.
 Citibank contends that Ford was negligent in selecting and supervising their employees
thus had contributory negligence for the loss of the amount.
 PCIB contends that Ford’s right to file the action has prescribed for filing the action only
in 1983.
 The trial court found both solidarily liable, while the CA modified the decision stating
that only PCIB is liable.
Issues:
1) Whether or not Citibank and PCIB are solidarily liable for reimbursing Ford.
2) Whether or not Ford’s right to recover has prescribed.
Held:
1) For the first check it was found that PCIB allowed the Ford to employee to recall such
check and replace it in turn with two of its Manager’s Checks which allowed the
syndicate to encash the amount even though the check was crossed checked to the
name of BIR. When a check is crossed check it is the duty of the bank to ensure that
such check and its proceeds would only be deposited to the account in which it was
intended for, by allowing its substitution to two Manager’s Chekcks, PCIB was solely
negligent for the loss of the proceeds of the check. Thus,
PCIB is solely liable for the amount of the first check.
 The subsequent checks, however were intercepted during the clearing process by the
syndicate and replaced with worthless checks. Citibank has contributed negligence as it
failed to ensure that such checks were in fact cleared and that it broke its trust with
Ford for allowing the money of the same to be lost through the syndicate. PCIB is
negligent as it did not ensure that the crossed checks were deposited straight to the
account foe which it was intended, and that it was two of their employees that led to
the checks interception. Thus, Citibank and PCIB are both liable on equal shares for the
amount of the proceeds of the lost two checks.

2) In Philippine law the prescription period for written contracts is ten years. The
prescription period in these cases is counted once the check that has gone through
clearing is returned to the drawer, usually a month later in the bank statements. Since
the first check was returned to Ford on December 29, 1977 and the action was filed on
1983, barely six years have passed. Thus, the action has not prescribed.