PCIB V.

CA

350 SCRA 446

FACTS:
Ford Philippines filed actions to recover from the drawee bank Citibank and
collecting bank PCIB the value of several checks payable to the Commissioner of Internal
Revenue which were embezzled allegedly by an
organized syndicate. What prompted this action was the drawing of a
check by Ford, which it deposited to PCIB as payment and was debited from their Citibank
account. It later on found out that the payment wasn’t
received by the Commissioner. Meanwhile, according to the NBI report, one of the checks issued
by petitioner was withdrawn from PCIB for alleged mistake in the amount to be paid. This was replaced
with manager’s check by PCIB, which were allegedly stolen by the syndicate and deposited in their
own account.

The trial court decided in favor of Ford.

ISSUE:
Has Ford the right to recover the value of the checks intended as payment to CIR?

HELD:
The checks were drawn against the drawee bank but the title of the person negotiating the same was
allegedly defective because the instrument was
obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the
payee. It was established that instead paying the
Commissioner, the checks were diverted and encashed for the eventual distribution among
members of the syndicate.

Pursuant to this, it is vital to show that the negotiation is made by the perpetrator in breach of
faith amounting to fraud. The person negotiating the checks must have gone beyond the authority
given by his principal. If the principal could prove that there was no negligence in the performance
of his duties, he may set up the personal defense to escape liability and recover from other
parties who, through their own negligence, allowed the commission of the crime.

It should be resolved if Ford is guilty of the imputed contributory negligence that would defeat its
claim for reimbursement, bearing in mind that its employees were among the members of the
syndicate. It appears although the employees of Ford initiated the transactions attributable to
the organized syndicate, their actions were not the proximate cause of
encashing the checks payable to CIR. The degree of Ford’s negligence
couldn’t be characterized as the
proximate cause of the injury to parties. The mere fact that the forgery was committed by a d
rawer-payor’s confidential employee or agent, who by virtue of his position had unusual facilities for
perpetrating the fraud and imposing the forged paper upon the bank, doesn’t entitle the bank to shift
the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer.

Note: not only PCIB but also Citibank is responsible for negligence. Citibank was negligent in the
performance of its duties as a drawee
bank. It failed to establish its payments of Ford’s checks were made in due course and legally in
order.