WESTMONT BANK V.

ONG
373 SCRA 212
QUISUMBING, J.
FACTS:
Ong was supposed to be the payee of the checks issued by Island Securities. Ong has a
current account with petitioner bank. He opted to sell his shares of stock through Island
Securities. The company issued checks in favor of Ong but the latter wasn't able to receive any.
Tamlinco, a friend of Ong, got hold of the checks, forged Ong’s signatures and deposited the
checks in Tamlinco’s account with Westmont Bank. Ong then sought to collect the money from
Tamlinco’s family first before filing a complaint with the Central Bank. As his efforts were futile
to recover his money, he filed an action against the petitioner. The trial and appellate court
decided in favor of Ong.
ISSUE:
1. Was the instrument valid and operative against Ong?
2. Can Ong collect the money he lost directly from the bank?
HELD:
1. Yes, since the signature of the payee was forged, such signature should be deemed
inoperative and ineffectual. Petitioner, as the collecting bank, grossly erred in making
payment by virtue of said forged signature.

2. Yes, the payee should be allowed to collect from the collecting bank as Westmont Bank
Grossly erred in making a payment because of said forged signature
It should be liable for the loss because it is the bank’s legal duty to ascertain that the payee’s
endorsement was genuine before cashing the check. As a general rule, a bank or corporation who
has obtained possession of a check with an unauthorized or forged indorsement of the payee’s
signature and who collects the amount of the check other from the drawee, is liable for the
proceeds thereof to the payee or the other owner, notwithstanding that the amount has been paid
to the person from whom the check was obtained.
Ong act of directly collecting the loss from the Bank is also valid according to the Doctrine
of Desirable Short Cut.

Agro Conglomerates Inc. V. CA

G.R. No. 117660, December 18, 2000
QUISUMBING, J.

FACTS:
 Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to Wonderland Food Industries, Inc
(Wonderland). On July 19, 1982, Agro and Wonderland and Regent Savings & Loan Bank
(Regent) amended the arrangement. Now, Agro would secure a loan in the name of Agro
Conglomerates Inc. for the total amount of the initial payments, while the settlement of loan
would be assumed by Wonderland
Agro made several promissory notes, payable to Regent in favor of Wonderland; hence, a
subsidiary contract of suretyship had taken effect since Agro signed the promissory notes as
maker and accommodation party for the benefit of Wonderland. Regent then released the
proceeds of the loan to Agro who failed to meet their obligations as they fell due.
ISSUE: Is Agro liable to the instrument even as an accommodation party?
HELD: YES
There was no contract of sale that materialized. The original agreement was changed
through an addendum, that Agro would instead secure a loan and the settlement of the same
would be shouldered by Wonderland; thus, the contract of surety was extinguished by the
rescission of the contract.
Accommodation party is a person who has signed the instrument as maker, acceptor and,
indorser without receiving value therefor for the purpose of lending his name to some other
person is liable on the instrument to a holder for value, notwithstanding such holder at the time
of taking the instrument knew (the signatory) to be an accommodation party.
He has the right, after paying the holder, to obtain reimbursement from the party
accommodated, since the relation between them has in effect become one of principal and surety,
the accommodation party being the surety. The surety’s liability to the creditor or promisee is
directly and equally bound with the principal and the creditor may proceed against any one of the
solidary debtors.
Agro had no legal or just ground to retain the proceeds of the loan at the expense of
Wonderland. Neither could Agro excuse themselves and hold Wonderland still liable to pay the
loan upon the rescission of their sales contract and if Agro sustained damages as a result of the
rescission, they should have impleaded Wonderland and asked damages. Agro is duty-bound
under the law to pay the claims of Regent from whom they had obtained the loan proceeds.