157 SCRA 189 (1988)

FACTS:

Plaintiff drew six crossed Manager’s and payable to certain member establishments of Visa Card. Subsequently, the Checks were deposited with the defendant to the credit of its depositor, a certain Aida Trencio. Following normal procedures, and after stamping at the back of the Checks the usual endorsements. All prior and/or lack of endorsement guaranteed the defendant sent the checks for clearing through the Philippine Clearing House Corporation (PCHC).

Accordingly, plaintiff paid the Checks; its clearing account was debited for the value of the Checks and defendant’s clearing account was credited for the same amount, Thereafter, plaintiff discovered that the endorsements appearing at the back of the Checks and purporting to be that of the payees were forged and/or unauthorized or otherwise belong to persons other than the payees. Pursuant to the PCHC Clearing Rules and Regulations, plaintiff presented the Checks directly to the defendant for the purpose of claiming reimbursement from the latter.

However, defendant refused to accept such direct presentation and to reimburse the plaintiff for the value of the Checks; hence, this case.

ISSUE:

Whether or not the petitioner can escape liability by reason of forgery.

RULING:

No. A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be a forged endorsement. Whenever any bank treats the signature at the back of the checks as endorsements and thus logically guarantees the same as such there can be no doubt said bank has considered the checks as negotiable.

Apropos the matter of forgery in endorsements, this Court has succinctly emphasized that the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements.

Section 66 of the Negotiable Instruments ordains that:

Every indorser who indorse without qualification, warrants to all subsequent holders in due course’ (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has good title to it; (c) that all prior parties have capacity to contract; and (d) that the instrument is at the time of his indorsement valid and subsisting.

Thus we hold that while the drawer generally owes no duty of diligence to the collecting bank, the law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the purpose of determining their genuineness and regularity. The collecting bank being primarily engaged in banking holds itself out to the public as the expert and the law holds it to a high standard of conduct.

*Case digest by Stephanie C. Castillo, JD-IV, Andres Bonifacio College, SY: 2019-2020