G.R. No. 156294 November 29, 2006
Lessons Applicable: Right of the holder (Negotiable Instruments Law)
FACTS:
- Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head Office
- Dr. Don Zapanta of the Ade Medical Group drew a foreign check of $7,500 against the drawee bank Wilshire Center Bank, LA, California payable to Eva Alviar (Alviar), Gonzales mother.
- Alviar then endorsed this check.
- Since RCBC gives special accommodations to its employees to receive the check’s value w/o awaiting the clearing period, Gonzales presented the foreign check to Olivia Gomez, the RCBC’s Head of Retail Banking
- Olivia Gomez requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to the early encashment of the check and signed the check but indicated thereon her authority of "up to
P17,500.00 only". - Carlos Ramos signed it with an "ok" annotation.
- Presented the check to Rolando Zornosa, Supervisor of the Remittance section of the Foreign Department of the RCBC Head Office, who after scrutinizing the entries and signatures authorized its encashment.
- Gonzales received its peso equivalent P155,270.85
- RCBC tried to collect through its correspondent bank, the First Interstate Bank of California but it was dishonored the check because:
- "END. IRREG" or irregular indorsemen
- "account closed"
- Unable to collect, RCBC demanded from Gonzales
- November 27, 1987: Through letter Gonzales agreed that the payment be made thru salary deduction.
- October 1987: deductions started
- March 7, 1988: RCBC sent a demand letter to Alviar for the payment but she did not respond
- June 16, 1988: a letter was sent to Gonzales reminding her of her liability as an indorser
- July 1988: Gonzales resigned from RCBC paying only
P12,822.20 covering 10 months - RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa Alviar-Gonzales and the latter’s husband Gino Gonzales
- CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva Theresa Alviar-Gonzales as guarantor
ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable as general endorsers
HELD: NO. CA REVERSED. RCBC reimburse Gonzales
- Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all subsequent holders in due course
- The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section;
(b) That he has a good title to it
(c) That all prior parties had capacity to contract
(c) That all prior parties had capacity to contract
2. That the instrument is, at the time of his indorsement, valid and subsisting
- In addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it
- Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of subsequent endorsers extend only to the state of the instrument at the time of their endorsements,
- This provision cannot be used by the party which introduced a defect on the instrument (RCBC) w/c qualifiedly endorsed it
- Had it not been for the qualified endorsement "up to
P17,500.00 only" of Olivia Gomez, who is the employee of RCBC, there would have been no reason for the dishonor of the check - The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for "irregular endorsement" must not be the irregular endorser himself who gave cause for the dishonor.
- Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the instrument defective and later claim from prior endorsers who have no knowledge or participation in causing or introducing said defect to the instrument, which thereby caused its dishonor.