REPUBLIC BANK VS. EBRADA Jai-Alai Corp. of the Phil. vs. Bank of the Phil.

Islands FACTS: Petitioner deposited 10 checks in its current account with BPI. The checks which were acquired by petitioner from Ramirez, a sales agent of the Inter-Island Gas were all payable to Inter-Island Gas Service, Inc. or order. After the checks had been submitted to Inter-bank clearing, Inter-Island Gas discovered that all the indorsements made on the checks purportedly by its cashiers were forgeries. BPI thus debited the value of the checks against petitioner's current account and forwarded to the latter the checks containing the forged indorsements which petitioner refused to accept. ISSUE: Whether BPI had the right to debit from petitioner's current account the value of the checks with the forged indorsements. RULING: BPI acted within legal bounds when it debited the petitioner's account. Having indorsed the checks to respondent bank, petitioner is deemed to have given the warranty prescribed in Section 66 of the NIL that every single one of those checks "is genuine and in all respects what it purports to be." Respondent which relied upon the petitioner's warranty should not be held liable for the resulting loss. **The depositor of a check as indorser warrants that it is genuine and in all respects what it purports to be. Having indorsed the checks to respondent bank, petitioner is deemed to have given the warranty prescribed in Section 66 of the NIL that every single one of those checks " is genuine and in all respects what it purports to be." FACTS: Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta Branch). The Bureau of Treasury, which issued the check advised the bank that the alleged indorsement of the check by one Martin Lorenzo was a forgery as the latter has been dead since 14 July 1952; and requested that it be refunded he sum deducted from its account. The bank refunded the amount to the Bureau and demanded upon Ebrada the sum in question, who refused. Hence, the present action. ISSUE: Whether the bank can recover from the last indorser. HELD: According to Section 23 of the Negotiable Instruments Law, where the signature on a negotiable instrument is forged, the negotiation of the check is without force or effect. However, following the ruling in Beam vs. Farrel (US case), where a check has several indorsements on it, only the negotiation based on the forged or unauthorized signature which is inoperative. The last indorser, Ebrada, was duty-bound to ascertain whether the check was genuine before presenting it to the bank for payment. Her failure to do so makes her liable for the loss and the Bank may recover from her the money she received for the check. Had she performed her duty, the forgery would have been detected and fraud defeated. Even if she turned over the amount to Dominguez immediately after receiving the cash proceeds of the check, she is liable as an accommodation party under Section 29 of the Negotiable Instruments Law. MWSS VS. CA Metropolitan Waterworks and Sewerage System (MWSS) had an account with PNB. When it was still called NAWASA, MWSS made a special arrangement with PNB so that it may have personalized checks to be printed Mesina Enterprises. These personalized checks are the ones being used by MWSS in its business transactions.

From March to May 1969, MWSS issued 23 checks to various payees in the aggregate amount of P320,636.26. During the same months, another set of 23 checks containing the same check numbers earlier issued were forged. The aggregate amount of the forged checks amounted to P3,457,903.00. This amount was distributed to the bank accounts of three persons: Arturo Sison, Antonio Mendoza, and Raul Dizon. MWSS then demanded PNB to restore the amount of P3,457,903.00. PNB refused. The trial court ruled in favor of MWSS but the Court of Appeals reversed the trial courts decision. ISSUE: Whether or not PNB should restore the said amount. HELD: No. MWSS is precluded from setting up the defense of forgery. It has been proven that MWSS has been negligent in supervising the printing of its personalized checks. It failed to provide security measures and coordinate the same with PNB. Further, the signatures in the forged checks appear to be genuine as reported by the National Bureau of Investigation so much so that the MWSS itself cannot tell the difference between the forged signature and the genuine one. The records likewise show that MWSS failed to provide appropriate security measures over its own records thereby laying confidential records open to unauthorized persons. Even if the twenty-three (23) checks in question are considered forgeries, considering the MWSSs gross negligence, it is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law. The Supreme Court further emphasized that forgery cannot be presumed. It must be established by clear, positive, and convincing evidence. This was not done in the present case. Banco De Oro v. Equitable Bank Facts: Banco De Oro drew six crossed Manager's check payable to certain member establishments of Visa Card. The Checks were deposited with Equitable Bank to the credit of its depositor, a certain Aida Trencio. 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). Banco De

Oro paid the Checks and its clearing account was debited for the value of the Checks and Equitable Bank clearing account was credited for the same amount. Thereafter, Banco De Oro 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. Banco De Oro presented the Checks directly to Equitable Bank for the purpose of claiming reimbursement from the latter. However, defendant refused to accept such direct presentation and to reimburse Banco De Oro for the value of the Checks. Hence, this case. Issue: Whether Banco De Oro could collect reimbursement from Equitable Bank. Ruling: Yes. The petitioner having stamped its guarantee of "all prior endorsements and/or lack of endorsements" is now estopped from claiming that the checks under consideration are not negotiable instruments. It led the said respondent to believe that it was acting as endorser of the checks and on the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks are not negotiable instrument. 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. 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. 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. GEMPESAW VS. CA FACTS: Natividad Gempesaw issued checks, prepared by her bookkeeper, a total of 82 checks in favor of several supplies. Most of the checks for amounts in excess of actual obligations as shown in their corresponding invoices. It was only after the lapse of more than 2 years did she discovered the fraudulent manipulations of her bookkeeper. It was also learned that the indorsements of the payee were forged, and the checks were brought to the chief accountant of Philippine Bank of Commerce (the Drawee Bank, Buendia Branch) who deposited them in the accounts of Alfredo Romero and Benito Lam. Gempesaw made demand upon the bank to credit the amount charged due the checks. The bank refused. Hence, the present action. ISSUE: Who shall bear the loss resulting from the forged indorsements. HELD: As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawers account for the amount of said check. An exception to the rule is where the drawer is guilty of such negligence which causes the bank to honor such checks. Gempesaw did not exercise prudence in taking steps that a careful and prudent businessman would take in circumstances to discover discrepancies in her account. Her negligence was the proximate cause of her loss, and under Section 23 of the Negotiable Instruments Law, is precluded from using forgery as a defense. On the other hand, the banking rule banning acceptance of checks for deposit or cash payment with more than one indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it invalidate the negotiation or transfer of said checks. The only kind of indorsement which stops the further negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation

thereof, pursuant to Section 36 of the Negotiable Instruments Law. In light of any case not provided for in the Act that is to be governed by the provisions of existing legislation, pursuant to Section 196 of the Negotiable Instruments Law, the bank may be held liable for damages in accordance with Article 1170 of the Civil Code. The drawee bank, in its failure to discover the fraud committed by its employee and in contravention banking rules in allowing a chief accountant to deposit the checks bearing second indorsements, was adjudged liable to share the loss with Gempesaw on a 50:50 ratio. Associated Bank vs. Court of Appeals Facts: On or about 16 September 1975 Associated Banking Corporation and Citizens Bank and Trust Company merged to form just one banking corporation known as Associated Citizens Bank, the surviving bank. The 16 September 1975 Agreement of Merger, which Associated Banking Corporation (ABC) and Citizens Bank and Trust Company (CBTC) entered into, provided that its effectivity "shall, for all intents and purposes, be the date when the necessary papers to carry out this [m]erger shall have been approved by the Securities and Exchange Commission." As to the transfer of the properties of CBTC to ABC, the agreement provides that "Upon effective date of the Merger, all rights, privileges, powers, immunities, franchises, assets and property of [CBTC], whether real, personal or mixed, and including [CBTC's] goodwill and tradename, and all debts due to [CBTC] on whatever act, and all other things in action belonging to [CBTC] as of the effective date of the [m]erger shall be vested in [ABC], the SURVIVING BANK, without need of further act or deed, unless by express requirements of law or of a government agency, any separate or specific deed of conveyance to legally effect the transfer or assignment of any kind of property [or] asset is required, in which case such document or deed shall be executed accordingly; and all property, rights, privileges, powers, immunities, franchises and all appointments, designations and nominations, and all other rights and interests of [CBTC] as

trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, trustee of estates of persons mentally ill and in every other fiduciary capacity, and all and every other interest of [CBTC] shall thereafter be effectually the property of [ABC] as they were of [CBTC], and title to any real estate, whether by deed or otherwise, vested in [CBTC] shall not revert or be in any way impaired by reason thereof; provided, however, that all rights of creditors and all liens upon any property of [CBTC] shall be preserved and unimpaired and all debts, liabilities, obligations, duties and undertakings of [CBTC], whether contractual or otherwise, expressed or implied, actual or contingent, shall henceforth attach to [ABC] which shall be responsible therefor and may be enforced against [ABC] to the same extent as if the same debts liabilities, obligations, duties and undertakings have been originally incurred or contracted by [ABC], subject, however, to all rights, privileges, defenses, setoffs and counterclaims which [CBTC] has or might have and which shall pertain to [ABC]. On or about 10 March 1981, the Associated Citizens Bank changed its corporate name to Associated Bank by virtue of the Amended Articles of Incorporation. On 7 September 1977, Lorenzo Sarmiento Jr. executed in favor of Associated Bank a promissory note whereby the former undertook to pay the latter the sum of P2,500,000.00 payable on or before 6 March 1978. As per said promissory note, Sarmiento agreed to pay interest at 14% per annum, 3% per annum in the form of liquidated damages, compounded interests, and attorney's fees, in case of litigation equivalent to 10% of the amount due. Sarmiento, to date, still owed Associated Bank the amount of P2,250,000.00 exclusive of interest and other charges. Despite repeated demands the defendant failed to pay the amount due. Sarmiento denied the charges. On 22 May 1986, Sarmiento was declared as if in default for failure to appear at the Pre-Trial Conference despite due notice. A Motion to Lift Order of Default and/or Reconsideration of Order dated 22 May 1986 was filed by Sarmiento's counsel which was denied by the Court in an order dated 16 September 1986 and

Associated Bank was allowed to present its evidence before the Court ex-parte on 16 October 1986. Based on the evidence presented by the bank, the trial court ordered Sarmiento to pay the bank his remaining balance plus interests and attorney's fees. Sarmiento appealed. The Court of Appeals (in CA-GR CV 26465) promulgated on 30 January 1996 a decision which reversed and set aside the 17 October 1986 Decision in Civil Case 85-32243, promulgated by the Regional Trial Court of Manila, Branch 48; and thus dismissing the complaint. The bank filed the petition for review. Issue: Whether In a merger, the surviving corporation have a right to enforce a contract entered into by the absorbed company subsequent to the date of the merger agreement, but prior to the issuance of a certificate of merger by the Securities and Exchange Commission. Held: Ordinarily, in the merger of two or more existing corporations, one of the combining corporations survives and continues the combined business, while the rest are dissolved and all their rights, properties and liabilities are acquired by the surviving corporation. Although there is a dissolution of the absorbed corporations, there is no winding up of their affairs or liquidation of their assets, because the surviving corporation automatically acquires all their rights, privileges and powers, as well as their liabilities. The merger, however, does not become effective upon the mere agreement of the constituent corporations. The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code requires the approval by the Securities and Exchange Commission (SEC) of the articles of merger which, in turn, must have been duly approved by a majority of the respective stockholders of the constituent corporations. The same provision further states that the merger shall be effective only upon the issuance by the SEC of a certificate of merger. The effectivity date of the merger is crucial for determining when the merged or absorbed corporation ceases to exist; and when its rights, privileges, properties as well as liabilities pass on to the surviving corporation. The agreement, as a clause, provided that "Upon the effective date of the

[m]erger, all references to [CBTC] in any deed, documents, or other papers of whatever kind or nature and wherever found shall be deemed for all intents and purposes, references to [ABC], the SURVIVING BANK, as if such references were direct references to [ABC]." The fact that the promissory note was executed after the effectivity date of the merger does not militate against the bank. The agreement itself clearly provides that all contracts irrespective of the date of execution entered into in the name of CBTC shall be understood as pertaining to the surviving bank, Associated Bank. Since, in contrast to the earlier aforequoted provision, the latter clause no longer specifically refers only to contracts existing at the time of the merger, no distinction should be made. The clause must have been deliberately included in the agreement in order to protect the interests of the combining banks; specifically, to avoid giving the merger agreement a farcical interpretation aimed at evading fulfillment of a due obligation. Thus, although the subject promissory note names CBTC as the payee, the reference to CBTC in the note shall be construed, under the very provisions of the merger agreement, as a reference to Associated Bank, "as if such reference [was a] direct reference to" the latter "for all intents and purposes." Metrobank v. FNCB, Facts: On August 25, 1964, a check payable for P50,000.00 to CASH drawn by Joaquin Cunanan and Co. on FNCB was deposited with the Metrobank by a certain Salvador Sales. The check was cleared by FNCB the same day and the amount credited to his deposit with Metro Bank. Sales withdrew his total deposit with Metro Bank and the withdrawal of the balance was allowed only when FNCB, upon verification made by Metrobank of the regularity and genuineness of the check deposit, assured Metrobank that the fast movement of the account was "not unusual." Subsequently, FNCB returned the cancelled check to drawer Joaquin Cunanan and Co. and the company notified FNCB that the check had been altered, the actual amount of P50.00 having been raised to P50,000.00, and the name of the payee, Manila Polo Club, having been superimposed with the

word CASH. FNCB notified Metro Bank of the alteration on September 4, 1964. When Metro Bank refused to reimburse FNCB for the amount of P50,000.00, it filed an action for recovery of the amount with the Court of First Instance of Manila. After trial, the Trial Court rendered judgment ordering Metro Bank to reimburse FNCB the amount of P50,000.00. On appeal, the Court of Appeals affirmed the decision. Hence, the present petition. Issue: Which bank is liable for the payment of the altered check, the drawee bank (FNCB) or the collecting bank (Metrobank)? Ruling: The drawee bank. Under Central Bank Circular No. 9 as amended by Circular No. 138 and Circular No. 169, , the drawee bank receiving the check for clearing from the Central Bank Clearing House must return the check to the collecting bank within the 24-hour period if the check is defective for any reason. In this case, the check was not returned to Metro Bank in accordance with the 24-hour clearing house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the attention of Metro Bank to the alteration of the check in question until after the lapse of nine days, negates whatever right it might have had against Metro Bank in the light of the said Central Bank Circular. Its remedy lies not against Metro Bank, but against the party responsible for the changing the name of the payee and the amount on the face of the check. Neither does the indorsement of Metrobank make it liable. The indorsement itself is very clear when it begins with words 'For clearance, clearing office. In other words, such an indorsement must be read together with the 24-hour regulation on clearing House Operations of the Central Bank. Once that 24-hour period is over, the liability on such an indorsement has ceased. Ilusorio vs. Bildner Facts: Erlinda Kalaw and Potenciano Ilusorio contracted matrimony and lived together for a period of thirty years. Out of their marriage, the spouses had six children. In 1972, they

separated from bed and board for undisclosed reasons. Potenciano lived in Makati when he was in Manila and in Ilusorio penthouse when he was in Baguio City. On the other hand, Erlinda lived in Antipolo City. When Potenciano arrived from United States and lived with Erlinda in Antipolo City for five months. The children, Sylvia and Lin, alleged that their mother overdosed their father with an antidepressant drug which the latters health deteriorated. Erlinda filed with RTC of Antipolo City a petition for guardianship over the person and property of her husband due to the latters advanced age, frail health, poor eyesight and impaired judgment. Potenciano did not return to Antipolo City and instead lived in a condominium in Makati City after attending a corporate meeting in Baguio City. With these, Erlinda filed with CA a petition for habeas corpus to have custody of her husband and also for the reason that respondent refused petitioners demands to see and visit her husband and prohibiting Potenciano from living with her in Antipolo City. Issue: Whether or not Erlinda Ilusorio may secure a writ of habeas corpus to compel her husband to live with her in conjugal bliss. Ruling: The essential object and purpose of the writ of habeas corpus is to inquire into all manner of involuntary restraint, and to relieve a person therefrom if such restraint is illegal. To justify the grant of the petition, the restraint of liberty must be an illegal and involuntary deprivation of freedom of action. The illegal restraint of liberty must be actual and effective, not merely nominal or moral. No court is empowered as a judicial authority to compel a husband to live with his wife. Coverture cannot be enforced by compulsion of a writ of habeas corpus carried out by sheriffs or by any other mesne process. That is a matter beyond judicial

authority and is best left to the man and womans free choice. Therefore, a petition for writ of habeas corpus is denied