Negotiable Instruments Law

FACTS: The Ministry of Education issued a check drawn against petitioner bank. The payee deposited the questioned check in its savings account with Capitol City Development Bank (Capitol) which in turn deposited the same in its account with respondent bank. After petitioner cleared the check, respondent bank credited Capitol for the amount. However, petitioner returned the check to PBCom and debited the latter’s account for the amount covered by the check because the check number was materially altered. ISSUE(S): Whether or not the alteration of the check number was material to its negotiability. HELD: What was altered is the serial…

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FACTS: The Ministry of Education and Culture issued fifteen checks drawn against respondent bank which accepted them for deposit. After twenty-four hours from submission of the checks to respondent bank for clearing, petitioner bank paid the value of the checks and allowed the withdrawals of the deposits. However, respondent bank returned all the checks without clearing them because their serial numbers were altered. ISSUE(S): Whether or not the alteration of the checks’ serial number was material to their negotiability. HELD: NO. An alteration on the serial number of the check, an item which is not an essential requisite for negotiability,…

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FACTS: To facilitate payment of debts to her suppliers, petitioner draws checks against her checking account with respondent bank as drawee. The checks are prepared and filled up by her trusted bookkeeper of eight years and submitted to petitioner for signature together with corresponding invoice receipts. Petitioner did not make any verification as to the correctness of the returned checks or to the payees’ actual receipt of the checks in payment. She later discovered that in the course of two years her bookkeeper had brought eighty-two checks with forged signatures of the payees to respondent bank which accepted them for…

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FACTS: Some forty-nine checks payable to petitioner were delivered to its collector. The checks bore the forged endorsement of its general manager and were negotiated by its accountant with an electronic store. The checks were deposited with respondent bank: three in the account of the electronic store, one in the account of its manager, and the rest in the personal account of its treasurer. ISSUE(S): Whether or not respondent bank was negligent in clearing and paying the checks with forged signature. HELD: NO. Since the petitioner was not a client of respondent Bank, the latter had no way of ascertaining…

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FACTS: A check was drawn against an account with respondent bank. After it was delivered to the payee, the amount on its face was fraudulently altered and increased. Respondent bank learned of the material alteration in the amount of the check a month after it was paid, and only informed petitioner bank of it two months later. ISSUE(S): Whether or not petitioner as collecting bank is relieved of liability to refund the amount paid by respondent drawee bank. HELD: YES. It is true that when an endorsement is forged, the collecting bank or last endorser, as a general rule, bears…

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FACTS: Under their check discounting agreement Filipinas Orient Finance Corporation (Filipinas Orient) issued four (4) Philippine Bank of Communications (PBCom) crossed checks to Yu Kio, president of Pipe Master Corporation (Pipe Master), in exchange of four (4) Metropolitan Bank and Trust Company (MetroBank) checks. The PBCom checks were payable to Pipe Master and marked “For Payee’s Account Only.” He indorsed and deposited the PBCom checks in his personal accounts with MetroBank and Solid Bank Corporation (Solid Bank) account. PBCom paid MetroBank and Solid Bank the amounts of the checks and the proceeds were credited to Yu Kio’s personal accounts. ISSUE(S):…

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FACTS: By special arrangement with respondent bank (PNB), Metropolitan Waterworks and Sewerage System (MWSS) used personalize checks in drawing from one of its accounts with PNB. MWSS released twenty-three checks which were deposited in the respective accounts of Raul Dizon, Arturo Sison and Antonio Mendoza with different banks. It was later found that the three depositors were all fictitious persons. ISSUE(S): Whether or not petitioner is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law. HELD: YES. The petitioner was using its own personalized checks, instead of the official PNB Commercial blank checks.…

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FACTS: When private respondent went to collect on what she thought were still unpaid accounts, she was informed that six crossed checks payable to her garment shop had already been issued. Further inquiry revealed that the said checks had been deposited with petitioner bank and subsequently paid by it to one of the bank’s “trusted depositors.” ISSUE(S): Whether or not petitioner bank was negligent and therefore liable for the value of the checks. HELD: YES. The possession of check on a forged or unauthorized indorsement is wrongful, and when the money is collected on the check, the bank can be…

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FACTS: A friend took a check from private respondent’s checkbook, forged the latter’s signature, and encashed the check with petitioner bank. Upon receipt of the statement of account from the bank, private respondent asked for reimbursement as his signature on the check was forged but the bank refused. ISSUE(S): Whether or not petitioner bank was negligent in encashing a forged check. HELD: YES. The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or the depositor on the check being encashed. It is expected to use reasonable business prudence in accepting and cashing…

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FACTS: Plaintiff discovered that nine of its checks had been encashed by a certain Sonny D. Santos which turned out to be a fictitious name used by plaintiff’s external auditor. Said auditor voluntarily admitted to have forged the signature of one of plaintiff’s authorized signatories for its current account with defendant bank. ISSUE(S): Whether or not defendant bank was negligent. HELD: YES. Since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance…

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