Negotiable Instruments Case Digest: Allied Banking Corp. v. Lim Sio Wan (2008)

G.R. No. 133179 March 27, 2008

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)

FACTS:

Lim Sio Wan (deposited 1st money market) > Allied Bank > (pre-terminated and withdrawn) Santos > (through forged indorsement of Lim Sio Wan deposited in FCC account) Metrobank > (release in exchange of undertaking of reimbursement) FCC > (through Santos, as officer of Producers bank, deposited money market) Producers Bank

September 21, 1983: FCC had deposited a money market placement for P 2M with Producers Bank

Santos was the money market trader assigned to handle FCC’s account

Such deposit is evidenced by Official Receipt and a Letter

When the placement matured, FCC demanded the payment of the proceeds of the placement

November 14, 1983: Lim Sio Wan deposited with Allied Banking Corporation (Allied) a money market placement of P 1,152,597.35 for a term of 31 days

December 5, 1983: a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and instructed the latter to pre-terminate Lim Sio Wan’s money market placement, to issue a manager’s check representing the proceeds of the placement, and to give the check to Deborah Dee Santos who would pick up the check. Lim Sio Wan described the appearance of Santos

Santos arrived at the bank and signed the application form for a manager’s check to be issued

The bank issued Manager’s Check representing the proceeds of Lim Sio Wan’s money market placement in the name of Lim Sio Wan, as payee, cross-checked "For Payee’s Account Only" and given to Santos

Allied manager’s check was deposited in the account of Filipinas Cement Corporation (FCC) at Metropolitan Bank and Trust Co. (Metrobank), with the forged signature of Lim Sio Wan as indorser

Metrobank stamped a guaranty on the check, which reads: "All prior endorsements and/or lack of endorsement guaranteed."

Upon the presentment of the check, Allied funded the check even without checking the authenticity of Lim Sio Wan’s purported indorsement.

amount on the face of the check was credited to the account of FCC

December 9, 1983: Lim Sio Wan deposited with Allied a second money market placement to mature on January 9, 1984

December 14, 1983: upon the maturity date of the first money market placement, Lim Sio Wan went to Allied to withdraw it. She was then informed that the placement had been pre-terminated upon her instructions which she denied

Lim Sio Wan filed with the RTC against Allied to recover the proceeds of her first money market placement

Allied filed a third party complaint against Metrobank and Santos

Metrobank filed a fourth party complainagainst FCC

FCC for its part filed a fifth party complaint against Producers Bank.

Summonses were duly served upon all the parties except for Santos, who was no longer connected with Producers Bank

May 15, 1984: Allied informed Metrobank that the signature on the check was forged

Metrobank withheld the amount represented by the check from FCC.

Metrobank agreed to release the amount to FCC after the FCC executed an undertaking, promising to indemnify Metrobank in case it was made to reimburse the amount

Lim Sio Wan thereafter filed an amended complaint to include Metrobank as a party-defendant, along with Allied.

RTC : Allied Bank to pay Lim Sio Wan plus damages and atty. fees

Allied Bank’s cross-claim against Metrobank is DISMISSED.

Metrobank’s third-party complaint as against Filipinas Cement Corporation is DISMISSED

Filipinas Cement Corporation’s fourth-party complaint against Producer’s Bank is DISMISSED

CA: Modified. Allied Banking Corporation to pay 60% and Metropolitan Bank and Trust Company 40%

ISSUE: W/N Allied should be solely liable to Lim Sio Wan.

HELD: YES. CA affirmed. Modified Porudcers Bank to reimburse Allied and Metrobank.

Articles 1953 and 1980 of the Civil Code

Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.

Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.

bank deposit is in the nature of a simple loan or mutuum

money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer.

Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment upon her request, or upon maturity of the placement, or until the bank is released from its obligation as debtor

GR: collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor

EX: when the issuance of the check itself was attended with negligence.

Allied negligent in issuing the manager’s check and in transmitting it to Santos without even a written authorization

Allied did not even ask for the certificate evidencing the money market placement or call up Lim Sio Wan at her residence or office to confirm her instructions.

Allied’s negligence must be considered as the proximate cause of the resulting loss.

When Metrobank indorsed the check without verifying the authenticity of Lim Sio Wan’s indorsement and when it accepted the check despite the fact that it was cross-checked payable to payee’s account only

contributed to the easier release of Lim Sio Wan’s money and perpetuation of the fraud

Given the relative participation of Allied and Metrobank to the instant case, both banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank, as ruled by the CA, must be upheld.

FCC, having no participation in the negotiation of the check and in the forgery of Lim Sio Wan’s indorsement, can raise the real defense of forgery as against both banks