1. EN BANC G.R. No. L-37467 December 11, 1933 SAN CARLOS MILLING CO., LTD., plaintiff-appellant, vs. and he left the bank and shortly afterwards returned with another check for P1, purporting to be
BANK OF THE PHILIPPINE ISLANDS and CHINA BANKING CORPORATION, defendants-appellees. HULL, signed by Newland Baldwin. Whereupon the money was turned over to Dolores, who took it to
J.: plaintiff's office, where he turned the money over to Wilson and received as his share, P10,000.
Plaintiff corporation, organized under the laws of the Territory of Hawaii, is authorized to engaged in Shortly thereafter the crime was discovered, and upon the defendant bank refusing to credit plaintiff
business in the Philippine Islands, and maintains its main office in these Islands in the City of Manila. with the amount withdrawn by the two forged checks of P200,000 and P1, suit was brought against the
Bank of the Philippine Islands, and finally on the suggestion of the defendant bank, an amended
complaint was filed by plaintiff against both the Bank of the Philippine Islands and the China Banking
The business in the Philippine Islands was in the hands of Alfred D. Cooper, its agent under general
Corporation.
power of attorney with authority of substitution. The principal employee in the Manila office was one
Joseph L. Wilson, to whom had been given a general power of attorney but without power of
substitution. In 1926 Cooper, desiring to go on vacation, gave a general power of attorney to Newland At the trial the China Banking Corporation contended that they had drawn a check to the credit of the
Baldwin and at the same time revoked the power of Wilson relative to the dealings with the Bank of plaintiff company, that the check had been endorsed for deposit, and that as the prior endorsement
the Philippine Islands, one of the banks in Manila in which plaintiff maintained a deposit. had in law been guaranteed by the Bank of the Philippine Islands, when they presented the cashier's
check to it for payment, the China Banking Corporation was absolved even if the endorsement of
Newland Baldwin on the check was a forgery.
About a year thereafter Wilson, conspiring together with one Alfredo Dolores, a messenger-clerk in
plaintiff's Manila office, sent a cable gram in code to the company in Honolulu requesting a telegraphic
transfer to the China Banking Corporation of Manila of $100,00. The money was transferred by cable, The Bank of the Philippine Islands presented many special defenses, but in the main their contentions
and upon its receipt the China Banking Corporation, likewise a bank in which plaintiff maintained a were that they had been guilty of no negligence, that they had dealt with the accredited
deposit, sent an exchange contract to plaintiff corporation offering the sum of P201,000, which was representatives of the company in the due course of business, and that the loss was due to the
then the current rate of exchange. On this contract was forged the name of Newland Baldwin and dishonesty of plaintiff's employees and the negligence of plaintiff's general agent.
typed on the body of the contract was a note:
In plaintiff's Manila office, besides the general agent, Wilson, and Dolores, most of the time there was
Please send us certified check in our favor when transfer is received. employed a woman stenographer and cashier. The agent did not keep in his personal possession either
the code-book or the blank checks of either the Bank of the Philippine Islands or the China Banking
Corporation. Baldwin was authorized to draw checks on either of the depositaries. Wilson could draw
A manager's check on the China Banking Corporation for P201,000 payable to San Carlos Milling
checks in the name of the plaintiff on the China Banking Corporation.
Company or order was receipted for by Dolores. On the same date, September 28, 1927, the manger's
check was deposited with the Bank of the Philippine Islands by the following endorsement:
After trial in which much testimony was taken, the trial court held that the deposit of P201,000 in the
Bank of the Philippine Islands being the result of a forged endorsement, the relation of depositor and
For deposit only with Bank of the Philippine Islands, to credit of account of San Carlos Milling Co., Ltd.
banker did not exist, but the bank was only a gratuitous bailee; that the Bank of the Philippine Islands
acted in good faith in the ordinary course of its business, was not guilty of negligence, and therefore
By (Sgd.) NEWLAND BALDWINFor Agent under article 1902 of the Civil Code which should control the case, plaintiff could not recover; and that
as the cause of loss was the criminal actions of Wilson and Dolores, employees of plaintiff, and as
The endorsement to which the name of Newland Baldwin was affixed was spurious. Newland Baldwin, the agent, had not exercised adequate supervision over plaintiff's Manila office,
therefore plaintiff was guilty of negligence, which ground would likewise defeat recovery.
The Bank of the Philippine Islands thereupon credited the current account of plaintiff in the sum of
P201,000 and passed the cashier's check in the ordinary course of business through the clearing house, From the decision of the trial court absolving the defendants, plaintiff brings this appeal and makes
where it was paid by the China Banking Corporation. nine assignments of error which we do not deem it necessary to discuss in detail.
On the same day the cashier of the Bank of the Philippine Islands received a letter, purporting to be There is a mild assertion on the part of the defendant bank that the disputed signatures of Newland
signed by Newland Baldwin, directing that P200,000 in bills of various denominations, named in the Baldwin were genuine and that he had been in the habit of signing checks in blank and turning the
letter, be packed for shipment and delivery the next day. The next day, Dolores witnessed the counting checks so signed over to Wilson.
and packing of the money, and shortly afterwards returned with the check for the sum of P200,000,
purporting to be signed by Newland Baldwin as agent. The proof as to the falsity of the questioned signatures of Baldwin places the matter beyond
reasonable doubt, nor is it believed that Baldwin signed checks in blank and turned them over to
Plaintiff had frequently withdrawn currency for shipment to its mill from the Bank of the Philippine Wilson.
Islands but never in so large an amount, and according to the record, never under the sole supervision
of Dolores as the representative of plaintiff. As to the China Banking Corporation, it will be seen that it drew its check payable to the order of
plaintiff and delivered it to plaintiff's agent who was authorized to receive it. A bank that cashes a
Before delivering the money, the bank asked Dolores for P1 to cover the cost of packing the money, check must know to whom it pays. In connection with the cashier's check, this duty was therefore upon

2. the Bank of the Philippine Islands, and the China Banking Corporation was not bound to inspect and A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be
verify all endorsements of the check, even if some of them were also those of depositors in that bank. considered as making the payment out of its own funds, and cannot ordinarily charge the amount so
It had a right to rely upon the endorsement of the Bank of the Philippine Islands when it gave the latter paid to the account of the depositor whose name was forged. (7 C.J., 683.)
bank credit for its own cashier's check. Even if we would treat the China Banking Corporation's
cashier's check the same as the check of a depositor and attempt to apply the doctrines of the Great
There is no act of the plaintiff that led the Bank of the Philippine Islands astray. If it was in fact lulled
Eastern Life Insurance Co. vs. Hongkong & Shanghai Banking Corporation and National Bank (43 Phil.,
into a false sense of security, it was by the effrontery of Dolores, the messenger to whom it entrusted
678), and hold the China Banking Corporation indebted to plaintiff, we would at the same time have to
this large sum of money.
hold that the Bank of the Philippine Islands was indebted to the China Banking Corporation in the same
amount. As, however, the money was in fact paid to plaintiff corporation, we must hold that the China
Banking Corporation is indebted neither to plaintiff nor to the Bank of the Philippine Islands, and the The bank paid out its money because it relied upon the genuineness of the purported signatures of
judgment of the lower court far as it absolves the China Banking Corporation from responsibility is Baldwin. These, they never questioned at the time its employees should have used care. In fact, even
affirmed. today the bank represents that it has a relief that they are genuine signatures.
Returning to the relation between plaintiff and the Bank of the Philippine Islands, we will now consider The signatures to the check being forged, under section 23 of the Negotiable Instruments Law they are
the effect of the deposit of P201,000. It must be noted that this was not a presenting of the check for not a charge against plaintiff nor are the checks of any value to the defendant.
cash payment but for deposit only. It is a matter of general knowledge that most endorsements for
deposit only, are informal. Most are by means of a rubber stamp. The bank would have been justified in It must therefore be held that the proximate cause of loss was due to the negligence of the Bank of the
accepting the check for deposit even with only a typed endorsement. It accepted the check and duly Philippine Islands in honoring and cashing the two forged checks.
credited plaintiff's account with the amount on the face of the check. Plaintiff was not harmed by the
transaction as the only result was the removal of that sum of money from a bank from which Wilson
could have drawn it out in his own name to a bank where Wilson would not have authority to draw The judgment absolving the Bank of the Philippine Islands must therefore be reversed, and a judgment
checks and where funds could only be drawn out by the check of Baldwin. entered in favor of plaintiff-appellant and against the Bank of the Philippine Islands, defendant-
appellee, for the sum of P200,001, with legal interest thereon from December 23,1928, until payment,
together with costs in both instances. So ordered.
Plaintiff in its letter of December 23, 1928, to the Bank of the Philippine Islands said in part:
". . . we now leave to demand that you pay over to us the entire amount of said manager's check of
two hundred one thousand (P201,000) pesos, together with interest thereon at the agreed rate of 3 ½
per cent per annum on daily balances of our credit in account current with your bank to this date. In
the event of your refusal to pay, we shall claim interest at the legal rate of 6 per cent from and after
the date of this demand inasmuch as we desire to withdraw and make use of the money." Such
language might well be treated as a ratification of the deposit.
The contention of the bank that it was a gratuitous bailee is without merit. In the first place, it is
absolutely contrary to what the bank did. It did not take it up as a separate account but it transferred
the credit to plaintiff's current account as a depositor of that bank. Furthermore, banks are not
gratuitous bailees of the funds deposited with them by their customers. Banks are run for gain, and
they solicit deposits in order that they can use the money for that very purpose. In this case the action
was neither gratuitous nor was it a bailment.
On the other hand, we cannot agree with the theory of plaintiff that the Bank of the Philippine Islands
was an intermeddling bank. In the many cases cited by plaintiff where the bank that cashed the forged
endorsement was held as an intermeddler, in none was the claimant a regular depositor of the bank,
nor in any of the cases cited, was the endorsement for deposit only. It is therefore clear that the
relation of plaintiff with the Bank of the Philippine Islands in regard to this item of P201,000 was that of
depositor and banker, creditor and debtor.
We now come to consider the legal effect of payment by the bank to Dolores of the sum of P201,000,
on two checks on which the name of Baldwin was forged as drawer. As above stated, the fact that
these signatures were forged is beyond question. It is an elementary principle both of banking and of
the Negotiable Instruments Law that —

3. EN BANC G.R. No. L-15894 January 30, 1964 REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs.
2159668 Virginia Salem de Marcelino 11-13-52 16
EQUITABLE BANKING CORPORATION, defendant-appellee.
2159692 Brigida San Luis de Santos 9-15-52 13
-----------------------------
2159673 Silva Sanches de Apolinario 10-14-52 14
G.R. No. L-15894 January 30, 196 REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs.THE
BANK OF THE PHILIPPINE ISLANDS, defendant-appellee, CORPORATION DE LOS P. DOMINICOS DE 2159667 Francisca Gomez de Galvez 10-12-52 16
FILIPINAS, third-party-defendant-appellee. CONCEPCION, J.:
2451448 Gaudencia Ruiz Alvarez 7- 1-52 12
Appeal from a decision of the Court of First Instance of Manila dismissing the complaints and the third- 2132653 Anastacia Capili Trinidad 6-25-52 8
party complaints in the above entitled cases, without special pronouncement as to costs. The cases are
before us, only questions of law being raised in the appeal, apart from the fact that the amount 2468979 Monica Anselmo de Pascua 7- 1-52 13
involved in G.R. No. L-16895 exceeds P200,000, and that the evidence introduced therein is the same
evidence in G.R. No. L-15894. 2468944 Rosalia Manalo de Nazario 7-10-52 14
The Republic of the Philippines, hereinafter referred to as the Government, seeks to recover: (1) from 2159682 Luisa Santos de Arellano 11-18-52 16
the Equitable Banking Corporation — hereinafter referred to as the Equitable Bank — in case G.R. No.
L-15894, the sum of P17,100, representing the aggregate value of four (4) treasury warrants — 2159669 Leticia Moreno de Ocampo 11-16-52 15
hereinafter referred to as warrants — paid to said bank by the Treasurer of the Philippines —
hereinafter referred to as the Treasurer — thru the Clearing Office of the Central Bank of the 2159670 Juana Castro de Jesus 10-12-52 16
Philippines; and (2) from the Bank of the Philippine Islands — hereinafter referred to as the PI Bank —
in G.R. No. L-15895, the total sum of P342,767.63, representing the aggregate value of twenty-four (24) 2159671 Antonia Sison de Mauricio 9- 9-52 12
warrants similarly paid by the Treasurer to the PI Bank. These claims for refund are based upon a
common ground — although said twenty-eight (28) warrants were executed on genuine government 2159660 Rosario Pilapil de Rodrigo 9- 4-52 13
forms, the signature thereon of the drawing office and that of the representative of the Auditor
General in that office are forged. 2169658 Mauricia Sison de Angeles 9-12-52 15
It is not disputed that from July to December 1952, the Corporacion de los Padres Dominicos — 2159686 Lucia Angeles de Natalio 9-12-52 12
hereinafter referred to as the Corporacion — had acquired the twenty-four (24) treasury warrants
involved in case G.R. No. L-15895 by accommodating its former trusted employee — one Jacinto 2468977 Nicolasa Alvares Jaranilla 7- 2-52 15
Carranza — who asked the Corporacion to cash the warrants, alleging that it was difficult to do so
directly with the Government and that his wife expected a sort of commission for the encashment; that 2468978 Maria Antonio de los Reyes 7- 2-52 14
the Corporacion acceded to Carranza's request, provided that the warrants would first be deposited
with PI Bank, and that actual payment of the value of the warrants would be made only after the same 2159659 Je Jastive de Fernandez 8-16-52 14
had been duly accepted and cleared by the Treasurer and the proceeds thereof duly credited to the
account of the Corporacion in the PI Bank; that the warrants were, accordingly, deposited by the 2159656 Gregoria Pascual de Lira 8-15-52 12
Corporacion with said bank, which accepted them "subject to collection only"; that when the warrants
were deposited with the PI Bank, each bore the indorsement of the respective payees and that of the 2159666 Luisa Dancel de Mendoza 10-11-52 16
Corporation; that, subsequently, the PI Bank presented the warrants for payment to the drawee and that, accordingly, the PI Bank credited the proceeds of said warrants to the Corporation, which, in
thereof — the Government — thru the Clearing Office of the Central Bank — hereinafter referred to as turn, withdrew said proceeds by means of its own checks and eventually paid the corresponding
the Clearing Office; that after being cleared, the warrants were paid by the Treasurer as follows: amounts to Jacinto Carranza. On December 23, 1952, the Treasurer returned three (3) of said warrants
(Nos. 2159659, 2159656, and 2159666) to the Central Bank, and demanded, on the ground that they
had been forged, that the value thereof be charged against the accounts of the PI Bank in the Clearing
T/W No. Payee Date ISSUED Office and credited back to the demand deposit of the Bureau of the Treasury, hereinafter referred to
as the Treasury. Four (4) days later, two (2) more warrants (Nos. 2468977 and 2468978), and, finally,
2132655 Marcela Antonio Domingo 6-18-52 on January 16, 1953, the remaining nineteen (19) warrants were returned by the Treasury to the
Central Bank for the same reason and with the same demand. The Central Bank in turn referred said
2132650 Gregoria Santos Castro 6-23-52 warrants, together with the letters of demand of the Treasurer, for appropriate action to the PI Bank,
which opposed the return of the warrants or to have the value thereof charged against its account in
2468943 Josefa Castro de Villanueva 10-34-52 the Clearing Office and requested the Central Bank to return the warrants to the Treasurer.
2159698 Anacleta Santos de Angeles 10-18-52

4. The records of G.R. No. L-15894 show that the four (4) warrants involved therein were deposited with Central Bank are both agencies of the Government.
the Equitable Bank by persons known thereto as its depositors or customers, namely, Robert Wong, Lu
Chill Kau and Chung Ching; that, in due course, the Equitable Bank cleared said warrants, thru the
At any rate, the aforementioned twenty-eight (28) warrants were cleared and paid by the Treasurer, in
Clearing Office, then collected the corresponding amounts from the Treasurer and thereafter credited
view which the PI Bank and the Equitable Bank credited the corresponding amounts to the respective
said amounts to the accounts of the respective depositors; that on January 15, 1958, the Treasurer
depositors of the warrants and then honored their checks for said amounts. Thus, the Treasury had not
notified the Equitable Bank of the alleged defect of said warrants and demanded reimbursement of the
only been negligent in clearing its own warrants, but had, also, thereby induced the PI Bank and the
amounts thereof; and that this demand was rejected by the Equitable Bank. Hence, the institution of
Equitable Bank to pay the amounts thereof to said depositors. The gross nature of the negligence of
G.R. No. L-15895 (Civil Case No. 19599 of the Court of First Instance of Manila), against the PI Bank, for
the Treasury becomes more apparent when we consider that each one of the twenty-four (24)
the recovery of P342,767.63, and of G.R. No. L-15894 (Civil Case No. 19600 of the Court of First
warrants involve in G.R. No. L-15895 was for over P5,000, and, hence; beyond the authority of the
Instance of Manila), against the Equitable Bank for, the recovery of P17,100.00.
auditor of the Treasury — whose signature thereon had been forged — to approve. In other words, the
irregularity of said warrants was apparent the face thereof, from the viewpoint of the Treasury.
Upon leave of the lower court, the PI Bank filed a third-party complaint against the Corporacion. In G.R. Moreover, the same had not advertised the loss of genuine forms of its warrants. Neither had the PI
No. L-15895, and the Equitable Bank filed a similar complaint against, Robert Wong, Lu Chill Kau and Bank nor the Equitable Bank been informed of any irregularity in connection with any of the warrants
Chung Ching in G.R. No. L-15894, for whatever reimbursements the PI Bank and the Equitable Bank involved in these two (2) cases, until after December 23, 1952, — or after the warrants had been
may respectively be sentenced to make to the Government. By agreement of the parties, the two (2) cleared and honored — when the Treasury gave notice of the forgeries adverted to above. As a
cases were jointly heard, and after appropriate proceedings, the lower court rendered the decision consequence, the loss of the amounts thereof is mainly imputable to acts and omissions of the
adverted to above. 1äwphï1.ñët Treasury, for which the PI Bank and the Equitable Bank should not and cannot be penalized.
The clearing of the aforementioned twenty-eight (28) warrants thru the Clearing Office was made Where a loss, which must be borne by one of two parties alike innocent of forgery, can be traced to the
pursuant to the "24-hour clearing house rule", which had been adopted by the Central Bank in a neglect or fault of either, it is reasonable that it would be borne by him, even if innocent of any
conference with representatives and officials of the different banking institutions in the Philippines. intentional fraud, through whose means it has succeeded, (Phil. National Bank v. National City Bank of
The rule is embodied in Section 4, subsection (c) of Circular No. 9 of the Central Bank, dated February New York, 63 Phil. 711, 723.)
17, 1949 (Exhibit B), as amended by the letter of the Governor of the Central Bank, dated June 4, 1949
(Exhibit D), reading:
Generally, where a drawee bank otherwise would have a right of recovery against a collecting or
indorsing bank for its payment of a forged check its action will be barred if it is guilty of an
Items which should be returned for any reason whatsoever shall be returned directly to the bank, unreasonable delay in discovering the forgery and in giving notice? thereof. (C.J.S. 769-700.).
institution or entity from which the item was received. For this purpose, the Receipt for Returned
Checks (Cash Form No. 9) should be used. The original and duplicate copies of said Receipt shall be
Where defendant bank, on presentation to it on September 2, of forged check drawn on another bank,
given to the bank, institution or entity which returned the items and the triplicate copy should be
paid part of amount to presenter, drawee paying check through clearing house on said day, held that
retained by the bank, institution or entity whose demand is being returned. At the following clearing,
the latter, not giving notice of forgery until December 5, could not hold defendant for amount so paid.
the original of the Receipt for returned Checks shall be presented through the Clearing Office as a
(First State Bank & Trust Co. v. First Nat. Bank, 145 N. E. 382, 314 Ill. 269, affirming 234 Ill. App. 39.)
demand against the bank, institution or entity whose item has been returned. Nothing in this section
shall prevent the resumed items from being settled by direct reimbursement to the bank, institution or
entity returning the items. All items cleared at 11:00 o'clock a.m. shall be returned not later than 2:00 WHEREFORE, the decision appealed from is hereby affirmed, without special pronouncement as to
o'clock p.m. on the same day and all items cleared at 3:00 o'clock p.m. shall be returned not later than costs. It is so ordered.
8:30 a.m. of the following business day, except for items cleared on Saturday which may be returned
not later than 3:30 a.m. of the following day. (Emphasis supplied.)
The Government maintains that it is not bound by this rule because: (1) the Treasury is not a bank; and
(2) the Treasurer has objected to the application of said rule to his office. This contention, however,
untenable for, admittedly, the Treasury is a member of the aforementioned Clearing Office and Exh. A
clearly shows that the former "has agreed to clear its clearable items through" the latter "subject to
the rules and regulations of the Central Bank." Besides, the above quoted rule applies not only to
banks, but, also, to the institutions and entities therein alluded to. Then too, the opposition of the
Treasurer to the "24-hour clearing house rule" is not sufficient to exempt the Treasury from the
operation thereof. Upon the other hand, said opposition is predicated upon the allegation that it is
physically impossible for the Treasury to check and verify the genuineness of treasury warrants within
twenty-four (24) hours, because, during 1952 said office used to receive daily from 3,000 to 4,000
warrants which, considering its very limited personnel at that time, would have required one (1) or two
(2) months clear. This claim is belied, however, by the statements the Treasurer, Exhibits 38 and 38-A
to 38-C, showing that on September 15, 23 and 24 and November 25, 1952, his office had cleared
1,618, 2,851, 1,742 and 2,360 warrant respectively. Moreover, if the rule was unwise, the Treasurer
could have secured the proper remedy through the President of the Philippines, since the Treasury and

5. FIRST DIVISION G.R. No. 88866 February 18, 1991 METROPOLITAN BANK & TRUST COMPANY, P1,754,089.00 and to reinstate and credit to such account such amount existing before the debit was
Petitioner, vs. COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, made including the amount of P812,033.37 in favor of defendant Golden Savings and Loan Association,
MAGNO CASTILLO and GLORIA CASTILLO, Respondents. CRUZ, J.: Inc. and thereafter, to allow defendant Golden Savings and Loan Association, Inc. to withdraw the
amount outstanding thereon before the debit;
This case, for all its seeming complexity, turns on a simple question of negligence. The facts, pruned of
all non-essentials, are easily told. 4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc. attorney's fees
and expenses of litigation in the amount of P200,000.00.
The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philippines
and even abroad. Golden Savings and Loan Association was, at the time these events happened, 5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo attorney's fees
operating in Calapan, Mindoro, with the other private respondents as its principal officers. and expenses of litigation in the amount of P100,000.00.
In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over SO ORDERED.
a period of two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn
by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and On appeal to the respondent court, 6 the decision was affirmed, prompting Metrobank to file this
countersigned by its Auditor. Six of these were directly payable to Gomez while the others appeared to petition for review on the following grounds:
have been indorsed by their respective payees, followed by Gomez as second indorser. 1
1. Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms
On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by and conditions on the deposit slips allowing Metrobank to charge back any amount erroneously
Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 in the credited.
Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the
principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. 2
(a) Metrobank's right to charge back is not limited to instances where the checks or treasury warrants
are forged or unauthorized.
More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to
ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile
(b) Until such time as Metrobank is actually paid, its obligation is that of a mere collecting agent which
not allowed to withdraw from his account. Later, however, "exasperated" over Gloria's repeated
cannot be held liable for its failure to collect on the warrants.
inquiries and also as an accommodation for a "valued client," the petitioner says it finally decided to
allow Golden Savings to withdraw from the proceeds of thewarrants. 3 The first withdrawal was made
on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979, in the amount of 2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank is made to
P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal was pay for warrants already dishonored, thereby perpetuating the fraud committed by Eduardo Gomez.
P968.000.00. 4
3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings,
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, the latter should bear the loss.
eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared
warrants. The last withdrawal was made on July 16, 1979. 4. Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are not
negotiable instruments.
On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by
the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it The petition has no merit.
had previously withdrawn, to make up the deficit in its account.
From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in
The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of giving Golden Savings the impression that the treasury warrants had been cleared and that,
Mindoro. 5 After trial, judgment was rendered in favor of Golden Savings, which, however, filed a consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it.
motion for reconsideration even as Metrobank filed its notice of appeal. On November 4, 1986, the Without such assurance, Golden Savings would not have allowed the withdrawals; with such
lower court modified its decision thus: assurance, there was no reason not to allow the withdrawal. Indeed, Golden Savings might even have
incurred liability for its refusal to return the money that to all appearances belonged to the depositor,
ACCORDINGLY, judgment is hereby rendered: who could therefore withdraw it any time and for any reason he saw fit.
1. Dismissing the complaint with costs against the plaintiff; It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to
its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank
to determine the validity of the warrants through its own services. The proceeds of the warrants were
2. Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and Loan
withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own
Association, Inc. and defendant Spouses Magno Castillo and Lucia Castillo;
deposit. 7 It was only when Metrobank gave the go-signal that Gomez was finally allowed by Golden
Savings to withdraw them from his own account.
3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of

6. The argument of Metrobank that Golden Savings should have exercised more care in checking the Art. 1909. - The agent is responsible not only for fraud, but also for negligence, which shall be judged
personal circumstances of Gomez before accepting his deposit does not hold water. It was Gomez who 'with more or less rigor by the courts, according to whether the agency was or was not for a
was entrusting the warrants, not Golden Savings that was extending him a loan; and moreover, the compensation.
treasury warrants were subject to clearing, pending which the depositor could not withdraw its
proceeds. There was no question of Gomez's identity or of the genuineness of his signature as checked The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the
by Golden Savings. In fact, the treasury warrants were dishonored allegedly because of the forgery of clearance given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the
the signatures of the drawers, not of Gomez as payee or indorser. Under the circumstances, it is clear proceeds of the treasury warrants he had deposited Metrobank misled Golden Savings. There may
that Golden Savings acted with due care and diligence and cannot be faulted for the withdrawals it have been no express clearance, as Metrobank insists (although this is refuted by Golden Savings) but
allowed Gomez to make. in any case that clearance could be implied from its allowing Golden Savings to withdraw from its
account not only once or even twice but three times. The total withdrawal was in excess of its original
By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling - balance before the treasury warrants were deposited, which only added to its belief that the treasury
more than one and a half million pesos (and this was 1979). There was no reason why it should not warrants had indeed been cleared.
have waited until the treasury warrants had been cleared; it would not have lost a single centavo by
waiting. Yet, despite the lack of such clearance - and notwithstanding that it had not received a single Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any
centavo from the proceeds of the treasury warrants, as it now repeatedly stresses - it allowed Golden reason is not acceptable. Any reason does not mean no reason at all. Otherwise, there would have
Savings to withdraw - not once, not twice, but thrice - from the uncleared treasury warrants in the total been no need at all for Golden Savings to deposit the treasury warrants with it for clearance. There
amount of P968,000.00 would have been no need for it to wait until the warrants had been cleared before paying the proceeds
thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests, is not binding for
Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and being arbitrary and unconscionable. And it becomes more so in the case at bar when it is considered
it also wanted to "accommodate" a valued client. It "presumed" that the warrants had been cleared that the supposed dishonor of the warrants was not communicated to Golden Savings before it made
simply because of "the lapse of one week." 8 For a bank with its long experience, this explanation is its own payment to Gomez.
unbelievably naive.
The belated notification aggravated the petitioner's earlier negligence in giving express or at least
And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal implied clearance to the treasury warrants and allowing payments therefrom to Golden Savings. But
side of the deposit slips through which the treasury warrants were deposited by Golden Savings with that is not all. On top of this, the supposed reason for the dishonor, to wit, the forgery of the signatures
its Calapan branch. The conditions read as follows: of the general manager and the auditor of the drawer corporation, has not been established. 9 This was
the finding of the lower courts which we see no reason to disturb. And as we said in MWSS v. Court of
Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting Appeals: 10
agent, assuming no responsibility beyond care in selecting correspondents, and until such time as actual
payment shall have come into possession of this bank, the right is reserved to charge back to the Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be established by clear,
depositor's account any amount previously credited, whether or not such item is returned. This also positive and convincing evidence. This was not done in the present case.
applies to checks drawn on local banks and bankers and their branches as well as on this bank, which
are unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason. A no less important consideration is the circumstance that the treasury warrants in question are not
(Emphasis supplied.) negotiable instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and
this is of equal significance, it is indicated that they are payable from a particular fund, to wit, Fund
According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent 501.
for Golden Savings and give it the right to "charge back to the depositor's account any amount
previously credited, whether or not such item is returned. This also applies to checks ". . . which are The following sections of the Negotiable Instruments Law, especially the underscored parts, are
unpaid due to insufficiency of funds, forgery, unauthorized overdraft of any other reason." It is claimed pertinent:
that the said conditions are in the nature of contractual stipulations and became binding on Golden
Savings when Gloria Castillo, as its Cashier, signed the deposit slips.
Sec. 1. - Form of negotiable instruments. - An instrument to be negotiable must conform to the
following requirements:
Doubt may be expressed about the binding force of the conditions, considering that they have
apparently been imposed by the bank unilaterally, without the consent of the depositor. Indeed, it
(a) It must be in writing and signed by the maker or drawer;
could be argued that the depositor, in signing the deposit slip, does so only to identify himself and not
to agree to the conditions set forth in the given permit at the back of the deposit slip. We do not have
to rule on this matter at this time. At any rate, the Court feels that even if the deposit slip were (b) Must contain an unconditional promise or order to pay a sum certain in money;
considered a contract, the petitioner could still not validly disclaim responsibility thereunder in the
light of the circumstances of this case. (c) Must be payable on demand, or at a fixed or determinable future time;
In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be (d) Must be payable to order or to bearer; and
suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On the
contrary, Article 1909 of the Civil Code clearly provides that - (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein

7. with reasonable certainty. consequences of its own negligence. But the balance of P586,589.00 should be debited to Golden
Savings, as obviously Gomez can no longer be permitted to withdraw this amount from his deposit
xxx xxx xxx because of the dishonor of the warrants. Gomez has in fact disappeared. To also credit the balance to
Golden Savings would unduly enrich it at the expense of Metrobank, let alone the fact that it has
already been informed of the dishonor of the treasury warrants.
Sec. 3. When promise is unconditional. - An unqualified order or promise to pay is unconditional within
the meaning of this Act though coupled with -
WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the
dispositive portion of the judgment of the lower court shall be reworded as follows:
(a) An indication of a particular fund out of which reimbursement is to be made or a particular account
to be debited with the amount; or
3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing
defendant Golden Savings & Loan Association, Inc. to withdraw the amount outstanding thereon, if
(b) A statement of the transaction which gives rise to the instrument judgment.
any, after the debit.
But an order or promise to pay out of a particular fund is not unconditional.
SO ORDERED.
The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes
the order or promise to pay "not unconditional" and the warrants themselves non-negotiable. There
should be no question that the exception on Section 3 of the Negotiable Instruments Law is applicable
in the case at bar. This conclusion conforms to Abubakar vs. Auditor General 11 where the Court held:
The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is
entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury
warrant is not within the scope of the negotiable instrument law. For one thing, the document bearing
on its face the words "payable from the appropriation for food administration, is actually an Order for
payment out of "a particular fund," and is not unconditional and does not fulfill one of the essential
requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable
Instruments Law).
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that
they were "genuine and in all respects what they purport to be," in accordance with Section 66 of the
Negotiable Instruments Law. The simple reason is that this law is not applicable to the non-negotiable
treasury warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing
the genuineness of the warrants but merely to deposit them with Metrobank for clearing. It was in fact
Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior
indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan
Branch."
The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands, 12 but we feel
this case is inapplicable to the present controversy. That case involved checks whereas this case
involves treasury warrants. Golden Savings never represented that the warrants were negotiable but
signed them only for the purpose of depositing them for clearance. Also, the fact of forgery was proved
in that case but not in the case before us. Finally, the Court found the Jai Alai Corporation negligent in
accepting the checks without question from one Antonio Ramirez notwithstanding that the payee was
the Inter-Island Gas Services, Inc. and it did not appear that he was authorized to indorse it. No similar
negligence can be imputed to Golden Savings.
We find the challenged decision to be basically correct. However, we will have to amend it insofar as it
directs the petitioner to credit Golden Savings with the full amount of the treasury checks deposited to
its account.
The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was
allowed to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor. The amount
he has withdrawn must be charged not to Golden Savings but to Metrobank, which must bear the