G.R. No. 42725, 22 April 1991, 196 SCRA 100
San Miguel Corporation (SMC), drew a dividend check for P240, Philippine currency, on its account in the respondent First National City Bank (“FNCB”) in favor of J. Roberto C. Delgado, a stockholder. After the check had been delivered to Delgado, the amount on its face was fraudulently and without authority of the drawer, SMC, altered by increasing it from P240 to P9,240. The check was indorsed and deposited on March 14, 1966 by Delgado in his account with the petitioner Republic Bank (“Republic”).
Republic accepted the check for deposit without ascertaining its genuineness and regularity. Later, Republic endorsed the check to FNCB by stamping on the back of the check “all prior and/or lack of indorsement guaranteed” and presented it to FNCB for payment through the Central Bank Clearing House. Believing the check was genuine, and relying on the guaranty and endorsement of Republic appearing on the back of the check, FNCB paid to Republic.
SMC notified FNCB of the material alteration in the amount of the check in question. FNCB lost no time in recrediting P9,240 to SMC. FNCB informed Republic in writing of the alteration and the forgery of the endorsement of J. Roberto C. Delgado. By then, Delgado had already withdrawn his account from Republic.
FNCB demanded that Republic refund on the basis of the latter’s endorsement and guaranty. Republic refused, claiming there was delay in giving it notice of the alteration; that it was not guilty of negligence; that it was the drawer’s (SMC’s) fault in drawing the check in such a way as to permit the insertion of numerals increasing the amount; that FNCB, as drawee, was absolved of any liability to the drawer (SMC), thus, FNCB had no right of recourse against Republic.
The trial court rendered judgment ordering Republic to pay to FNCB with 6% interest per annum until fully paid, which was affirmed by the CA with modifications.
Whether Republic, as the collecting bank, is protected, by the 24-hour clearing house rule, found in CB Circular No. 9, as amended, from liability to refund the amount paid by FNCB, as drawee of the SMC dividend check?
The 24-hour clearing house rule is a valid rule applicable to commercial banks (Republic v. Equitable Banking Corporation, 10 SCRA 8 ; Metropolitan Bank & Trust Co. v. First National City Bank, 118 SCRA 537). It is true that when an endorsement is forged, the collecting bank or last endorser, as a general rule, bears the loss. But the unqualified endorsement of the collecting bank on the check should be read together with the 24-hour regulation on clearing house operation (Metropolitan Bank & Trust Co. v. First National City Bank, supra).
Thus, when the drawee bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing period, the collecting bank is absolved from liability. Unless an alteration is attributable to the fault or negligence of the drawer himself, such as when he leaves spaces on the check which would allow the fraudulent insertion of additional numerals in the amount appearing thereon, the remedy of the drawee bank that negligently clears a forged and/or honor altered check for payment is against the party responsible for the forgery or alteration, otherwise, it bears the loss.
It may not charge the amount so paid to the account of the drawer, if the latter was free from blame, nor recover it from the collecting bank is the latter made payment after proper clearance from the drawee.
Every bank that issues checks for the use of its customers should know whether or not the drawer’s signature thereon is genuine, whether there are sufficient funds in the drawers account to cover checks issued, and it should be able to detect alterations, erasures, superimpositions or intercalations thereon, for these instruments are prepared, printed and issued by itself, it has control of the drawer’s account, and it is supposed to be familiar with the drawer’s signature. It should possess appropriate detecting devices for uncovering forgeries and/or alterations on these instruments.
Unless an alteration is attributable to the fault or negligence of the drawer himself, such as when he leaves spaces on the check which would allow the fraudulent insertion of additional numerals in the amount appearing thereon, the remedy of the drawee bank that negligently clears a forged and/or altered check for payment is against the party responsible for the forgery or alteration (Hongkong & Shanghai Banking Corp. v. People’s Bank & Trust Co., 35 SCRA 140), otherwise, it bears the loss.
It may not charge the amount so paid to the account of the drawer, if the latter was free from blame, nor recover it from the collecting bank if the latter made payment after proper clearance from the drawee.
“Where a loss, which must be borne by one of two parties alike innocent of forgery, can be traced to the neglect or fault of either, it is reasonable that it would be borne by him, even if innocent of any intentional fraud, through whose means it has succeeded. (Phil. National Bank v. National City Bank of New York, 63 Phil. 711, 733.)”
*Case digest by Nikki P. Ebillo, JD-4, Andres Bonifacio Law School, SY 2019-2020