G.R. No.

156294 November 29, 2006

MELVA THERESA ALVIAR GONZALES, Petitioner,

vs.

RIZAL COMMERCIAL BANKING CORPORATION, Respondent.

FACTS:

A foreign check worth $7,500 was drawn in favor of Gonzales' mother, Eva Alviar. Gonzales is an
employee of RCBC and because of this, the check is allowed to be encashed without the necessary
clearing period.

Olivia Gomez, head of RCBC's retail banking acquiesced the early encashment and signed the check but
"only up to PhP17,500". The check was presented to another RCBC employee, Carlos Ramos, and signed
it with an "OK" annotation.

In turn, the check was presented to Rolando Zornosa, supervisor of the remittance section who
authorized its encashment to its peso equivalent of PhP155,270.85.

However, when RCBC wanted to collect from the foreign drawee bank, it was dishonored because of
irregular indorsement and ultimately, because the account was closed. RCBC demanded to get the
money back from Gonzales who settled the matter through her salary deduction where RCBC got
P12,822.20.

RCBC filed a case against the other parties, namely Alviar, Alviar-Gonzales and latter's husband Gino
Gonzales in the RTC which held that Alviar and Alviar-Gonzales liable. The CA affirmed. Hence the
petition.

ISSUE: Whether or not Eva Alviar and Melva Theresa Alviar-Gonzales are liable as general endorsers?

HELD: NO.

Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all
subsequent holders in due course

The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section;

(a) That the instrument is genuine and in all respects what it purports to be

(b) That he has a good title to it

(c) That all prior parties had capacity to contract

Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of
subsequent endorsers extend only to the state of the instrument at the time of their endorsements.

HOWEVER, this provision cannot be used by the party which introduced a defect on the instrument
(RCBC through Olivia Gomez) which qualifiedly endorsed it.

Had it not been for the qualified endorsement "up to P17,500.00 only" of Olivia Gomez, who is the
employee of RCBC, there would have been no reason for the dishonor of the check.

RCBC, which caused the dishonor of the check upon presentment to the drawee bank, through the
qualified endorsement of its employee, Olivia Gomez, cannot hold prior endorsers, Alviar and Gonzales
in this case, liable on the instrument.

Moreover, it is a well-established principle in law that as between two parties, he who, by his acts,
caused the loss shall bear the same. RCBC, in this instance, should therefore bear the loss.