THIRD DIVISION against JMC's current account but were, for

some reason, not covered by any official

G.R. No. 235511, June 20, 2018 receipt from Jardine or Premiere. The
subject checks, which are all crossed checks
METROPOLITAN BANK AND TRUST and amounting to P1,481,292.00 in total,
COMPANY, Petitioner, v. JUNNEL'S are as follows:
MARKETING CORPORATION,
PURIFICACION DELIZO, AND BANK OF Checks Payable to the Order of Jardine:
COMMERCE, Respondents.
1. Check No. 3010048953 - issued on 11
G.R. No. 235565, June 20, 2018 October 1998 in the amount of
P181,440.00
BANK OF
COMMERCE, Petitioner, v. JUNNEL'S 2. Check No. 3010048955 - issued on 24
MARKETING CORPORATION, October 1998 in the amount of
PURIFICACION DELIZO, AND P195,840.00
METROPOLITAN BANK AND TRUST
COMPANY, Respondents. 3. Check No. 3010069098 - issued on 18
May 1999 in the amount of
DECISION P58,164.56

VELASCO JR., J.: 4. Check No. 3010069099 - issued on 18

May 1999 in the amount of
At bench are two appeals1 assailing the P44,651.52
Decision2 dated 22 March 2017 and
Resolution3 dated 19 October 2017 of the 5. Check No. 3010049551 - issued on 25
Court of Appeals (CA) in CA-G.R. CV No. May 1999 in the amount of
102462. The first appeal was filed by the P103,680.00
Metropolitan Bank and Trust Company
(Metrobank), while the second by the Bank 6. Check No. 3010049550 - issued on 30
of Commerce (Bankcom). May 1999 in the amount of
P103,680.00
The facts are as follows:
7. Check No. 3010048954 - issued on 29
Respondent Junnel's Marketing Corporation December 1998 in the amount of
(JMC) is a domestic corporation engaged in P195,840.00
the business of selling wines and liquors. It
has a current account with Metrobank 4 from Checks Payable to the Order of Premiere:
which it draws checks to pay its different
suppliers. Among JMC's suppliers are Jardine 1. Check No. 3010049149 - issued on 9
Wines and Spirits (Jardine) and Premiere December 1998 in the amount of
Wines (Premiere). P136,220.00

In 2000, during an audit of its financial 2. Check No. 3010049148 - issued on 16

records,5 JMC discovered an anomaly December 1998 in the amount of
involving eleven (11) checks (subject P136,220.00
checks) it had issued to the orders of Jardine
and Premiere on various dates between 3. Check No. 3010049410 - issued on 18
October 1998 to May 1999. As it was, the April 1999 in the amount of
subject checks had already been charged P189,336.00.
 4. Check No. 3010049150 - issued on 27
November 1998 in the amount of
P136,220.00
Examination of the dorsal portion of the
subject checks revealed that all had been
deposited with Bankcom, Dau branch, under
Account No. 0015-32987-7.6 Upon inquiring
with Jardine and Premiere, however, JMC
was able to confirm that neither of the said
suppliers owns Bankcom Account No. 0015-
32987-7.
Meanwhile, on 30 April 2000, respondent
Purificacion Delizo (Delizo), a former
accountant of JMC, executed a handwritten
letter7 addressed to one Nelvia Yusi,
President of JMC. In the said letter, Delizo
confessed that, during her time as an
accountant for JMC, she stole several
company checks drawn against JMC's
current account. She professed that the said
checks were never given to the named
payees but were forwarded by her to one
Lita Bituin (Bituin). Delizo further admitted
that she, Bituin and an unknown bank
manager colluded to cause the deposit and
encashing of the stolen checks and shared in
the proceeds thereof.
JMC surmised that the subject checks are
among the checks purportedly stolen by
Delizo.
On 28 January 2002, JMC filed before the
Regional Trial Court (RTC) of Pasay City a
complaint for sum of money 8 against Delizo,
Bankcom and Metrobank. The complaint was
raffled to Branch 115 and was docketed as
Civil Case No. 02-0193.
In its complaint, JMC alleged that the
wrongful conversion of the subject checks
was caused by a combination of the
"tortious and felonious" scheme of Delizo
and the "negligent and unlawful acts" of
Bankcom and Metrobank, to wit:9
1. Delizo, by her own admission, stole
the company checks of JMC. Among
these checks, as confirmed by JMC's
audit, are the subject checks.
2. After stealing the subject checks,
Delizo and her accomplices, Bituin and
an unknown bank manager, caused
the subject checks to be deposited in
Bankcom, Dau branch, under Account
No. 0015-32987-7. Bankcom, on the
other hand, negligently accepted the
subject checks for deposit under the
said account despite the fact that they
are crossed checks payable to the
orders of Jardine and Premiere and
neither of them owns the concerned
account.
3. Thereafter, Bankcom presented the
subject checks for payment to
Metrobank which, also in negligence,
decided to honor the said checks even
though Bankcom Account No. 0015-
32987-7 belongs to neither Jardine nor
Premiere.
On the basis of the foregoing averments,
JMC prayed that Delizo, Bankcom and
Metrobank be held solidarily liable in its
favor for the amount of the subject checks.
Delizo, Bankcom and Metrobank filed their
individual answers denying
10
liability. Incorporated in Metrobank's
answer, moreover, is a cross-claim against
Bankcom and Delizo wherein Metrobank
asks for the right to be reimbursed in the
event it is ordered liable in favor of JMC. 11
On 28 May 2013, the RTC rendered a
decision12 holding both Bankcom and
Metrobank liable to JMC-on a 2/3 to 1/3
ratio, respectively-for the amount of subject
checks plus interest as well as attorney's
fees, but absolving Delizo from any
13
liability. The trial court, in the same
decision, also dismissed Metrobank's cross-
claim against Bankcom. The dispositive
portion of the decision reads:14
WHEREFORE, judgment is rendered against
defendants [Bankcom] and [Metrobank] for
the total value of the 11 checks. [Bankcom]
and Metrobank are adjudged solidarily liable a. Bankcom accepted the subject
to pay [JMC] at the ratios of 2/3 and 1/3, checks for deposit under Account
respectively: No. 0015-32987-7, endorsed
them and sent them for
1. The actual loss of P 1,481,292 including clearance with the Philippine
6% legal interest from the filing of the Clearing House Corporation
complaint; (PCHC). Bankcom did all these
despite the fact that the subject
2. Plus 12% interest on the principal of P checks were ll crossed checks
1,481,292 including 6% interest on the and that Account No. 0015-
principal, from the date this Decision 32987-7 neither belongs to
becomes final and executory; Jardine nor Premiere-the payees
named in the subject checks. In
3. The attorney's fees of 15% of the total of this regard, Bankcom was clearly
number one and two above; negligent.

4. Costs against [Bankcom] and Metrobank. b. Metrobank, on the other hand, is

also negligent for its failure to
Metrobank's cross-claim against [Bankcom] scrutinize the subject checks
is DISMISSED, both being negligent. before clearing and honoring
them. Had Metrobank done so, it
SO ORDERED. would have noticed that
The RTC's decision was hinged on the Bankcom's ID band stamped at
following findings:15 the back of the subject checks
did not contain any initials and
1. The subject checks were complete and are, therefore, defective. In this
not forged. They were, however, regard, Metrobank was remiss in
stolen by unknown malefactors and its duty to ensure that the
were wrongfully encashed due to the subject checks are paid only to
negligence of Bankcom and the named payees.
Metrobank.

2. Delizo's complicity in the acquisition In view of the comparative

and negotiation of the subject checks negligence of Bankcom and
was not proven. No direct evidence Metrobank, they should be held liable
linking Delizo to the deeds was to JMC, on a 2/3 to 1/3 ratio,
presented. Moreover, Delizo's respectively, for the amount of subject
supposed handwritten confession must checks plus interest.
be discredited for being made under
duress, intimidation and threat. It was Bankcom and Metrobank filed their
established during trial that Delizo was respective appeals with the CA.
only forced by Yusi to confess about
the missing checks and to execute the On 22 March 2017, the CA rendered its
handwritten confession. Hence, Delizo decision16 affirming, albeit with modification,
must be absolved from any liability. the decision of the RTC. The disposition of
the decision reads:17
3. The involvement of Bankcom and WHEREFORE, the Decision dated 28 May
Metrobank on the wrongful 2013 of the [RTC] in Civil Case NO. 02-0193
encashment of the subject checks, is AFFIRMED with MODIFICATION in that:
however, were clearly established: (a) the award of attorney's fees is DELETED;
and (b) [Bankcom] and [Metrobank] are
ordered to pay interest at the rate of 12%
per annum on the principal of P 1,481,292
including 6% interest on the principal, from
the date of the Decision (28 May 2013) until
June 2013 and 6% per annum from 1 July
2013 until full satisfaction. The Decision is
affirmed in all other respects.
SO ORDERED.
The CA agreed with the RTC that Bankcom
and Metrobank should be held liable to JMC,
on a 2/3 to 1/3 ratio, respectively, for the
amount of subject checks. The appellate
court, however, differed with the trial court
with respect to the basis of Metrobank's
liability. According to the CA, Metrobank's
negligence consisted, not in its inability to
notice that Bankcom's ID band does not
contain any initials, but in its failure to
ascertain that only four (4) out of the 11
subject checks were stamped by Bankcom
with the express guarantees "ALL PRIOR
ENDORSEMENTS AND/OR LACK OF
ENDORSEMENT GUARANTEED" and "NON-
NEGOTIABLE" as required by Section 17 of
the PCHC Rules and Regulations.18
The CA also sustained the ruling of the RTC
anent the absolution of Delizo and the
dismissal of Metrobank's cross-claim.
Finally, the CA modified the rate of interest
due on the amount of the subject checks
that was fixed by the RTC and also deleted
the RTC's award of attorney's fees in favor
of JMC.19
Bankcom and Metrobank filed their motions
for reconsideration, but the CA remained
steadfast. Hence the present consolidated
appeals.
Both Metrobank and Bankcom pray for
absolution but they differ in the arguments
they raise in support of their prayer:20
1. Metrobank posits that it should be
absolved because it had exercised
absolute diligence in verifying the
genuineness of the subject checks.
Metrobank argues that the RTC erred
in holding it negligent on its failure to
ascertain that only four (4) out of the
11 subject checks were stamped with
Bankcom's express guarantees.
Metrobank claims that while Section
17 of the PCHC Rules and Regulations
does require all checks cleared
through the PCHC to contain the
collecting bank's express guarantees,
the same provision precludes it, as a
drawee bank, to return any checks
presented to it for payment just
because the same does not contain
such express guarantees "for as long
as there is evidence appearing on the
cheque itself that the same had been
deposited with the [collecting] [b]ank
e.g., PCHC machine sprayed tracer/ID
band." In this regard, Metrobank
points out that all the subject checks
had been stamped in their dorsal
portion with PCHC's tracer ID for
Bankcom.
Metrobank submits that, under the
circumstances, it should be Bankcom-
as the last indorser of the subject
checks-that should bear the loss and
be held solely liable to JMC.
2. Bankcom, on the other hand, argues
that it should be absolved because it
was never a party to the wrongful
encashment of the subject checks. It
claims that Account No. 0015-32987-7
does not exist in its system and,
therefore, denies that the subject
checks were ever deposited with it.
Bankcom proffers the view that it is
JMC that should bear the loss of the
subject checks. Bankcom argues that
it was JMC's faulty accounting
procedures which led to the subject
checks being stolen and
misappropriated.
Our Ruling
The consolidated appeals must be denied as
neither Metrobank nor Bankcom are entitled
to absolution.
Be that as it may, there is a need to modify
the decision of the CA and the RTC with
respect to the manner by which Metrobank
and Bankcom are held liable under the
circumstances. Instead of holding both
Metrobank and Bankcom liable to JMC in
accordance with a fixed ratio, we find that
the two banks should have been
ordered sequentially liable for the entire
amount of the subject checks pursuant to
the seminal case of Bank of America v.
Associated Citizens Bank.21
Accordingly, we rule: (1) Metrobank liable to
return to JMC the entire amount of the
subject checks plus interest and (2)
Bankcom liable to reimburse Metrobank the
same amount plus interest.
The Rule on Sequence of Recovery in
Cases of Unauthorized Payment of
Checks; The Case of Bank of America
The instant case involves the unauthorized
payment of valid checks, i.e., the payment
of checks to persons other than the payee
named therein or his order. The subject
checks herein are considered valid because
they are complete and bear genuine
signatures.
Bank of America is the leading jurisprudence
that illustrates the respective liabilities of a
collecting bank and a drawee bank in cases
of unauthorized payment of valid checks.
Notably, the facts of Bank Americaare
parallel to the facts of the present case.
Both Bank of America and the present case
involved crossed checks payable to the
order of a specified payee that
were deposited in a collecting bank
under an account not belonging to the
payee or his indorsee but which, upon
presentment, were subsequently honored
by the drawee bank, thus:
1. Bank of America involved four (4)
crossed checks drawn against the
Bank of America (the drawee bank)
and made payable to the order of a
Miller Offset Press, Inc. (the
designated payee). These checks were
then deposited to the Associated
Citizens Bank (the collecting bank)
under a joint bank account of one
Ching Uy Seng and a certain Uy Chung
Guan Seng (an account that does not
belong to the payee or its indorsee).
The checks were then presented to the
Bank of America, which honored it,
resulting to loss on the part of BA
Finance Corporation (the drawer.)
2. The instant case involves eleven (11)
crossed checks that were drawn
against Metrobank (the drawee bank)
and made payable to the orders of
Jardine and Premiere (the designated
payees). These checks were deposited
with Bankcom (the collecting bank)
under Account No. 0015-32987-7 (an
account that does not belong to either
payee or their indorsees). The checks
were then presented to Metrobank,
which honored it, resulting to loss on
the part of JMC (the drawer.)
Bank of America held that, in cases involving
the unauthorized payment of valid
checks, the drawee bank becomes liable
to the drawer for the amount of the
checks but the drawee bank, in turn,
can seek reimbursement from the
collecting bank. The rationale of this rule
on sequence of recovery lies in the very
basis and nature of the liability of a drawee
bank and a collecting bank in said cases. As
the recent case of BDO Unibank v.
Lao22 explains:
The liability of the drawee bank is based on
its contract with the drawer and its duty to
charge to the latter's accounts only those
payables authorized by him. A drawee bank
is under strict liability to pay the check only
to the payee or to the payee's order. When
the drawee bank pays a person other than
the payee named in the check, it does not
comply with the terms of the check and
violates its duty to charge the drawer's
account only for properly payable items.
On the other hand, the liability of the
collecting bank is anchored on its guarantees
as the last endorser of the check. Under
Section 66 of the Negotiable Instruments
Law, an endorser warrants "that the
instrument is genuine and in all respects
what it purports to be; that he has good title
to it; that all prior parties had capacity to
contract; and that the instrument is at the
time of his endorsement valid and
subsisting."
It has been repeatedly held that in check
transactions, the collecting bank 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. If any of the warranties
made by the collecting bank turns out to be
false, then the drawee bank may recover
from it up to the amount of the check.
(Citations omitted).
This rule should have been applied to the
case at bench.
Metrobank is Liable to JMC
Metrobank, as drawee bank, is liable to
return to JMC the amount of the subject
checks.
A drawee bank is contractually obligated to
follow the explicit instructions of its drawer-
clients when paying checks issued by
them.23 The drawer's instructions-including
the designation of the payee or to whom the
check should be paid-are reflected on the
face and by the terms thereof.24 When a
drawee bank pays a person other than the
payee named on the check, it essentially
commits a breach of its obligation and
renders the payment it made
25
unauthorized. In such cases and under
normal circumstances, the drawee bank may
be held liable to the drawer for the amount
charged against the latter's account.26
The liability of the drawee bank to the
drawer in cases of unauthorized payment of
checks has been regarded in jurispn1dence
to be strict by nature.27 This means that
once an unauthorized payment on a check
has been made, the resulting liability of the
drawee bank to the drawer for such
payment attaches even if the former had
acted merely upon the guarantees of a
collecting bank.28 Indeed, it is only when
the unauthorized payment of a check had
been caused or was attended by the fault or
negligence of the drawer himself can the
drawee bank be excused, whether wholly or
partially, from being held liable to the
drawer for the said payment.29
In the present case, it is apparent that
Metrobank had breached JMC's instructions
when it paid the value of the subject checks
to Bankcom for the benefit of a certain
Account No. 0015-32987-7. The payment to
Account No. 0015-32987-7 was
unauthorized as it was established that the
said account does not belong to Jardine or
Premiere, the payees of the subject checks,
or to their indorsees. In addition, causal or
concurring negligence on the part of JMC
had not been proven. Under such
circumstances, Metrobank is clearly liable to
return to JMC the amount of the subject
checks.
Metrobank's insistence that it should be
absolved for it merely complied with Section
17 of the PCHC Rules and Regulations and
thereby only relied upon the concomitant
guarantees of Bankcom when it paid the
subject checks, cannot stand insofar as JMC
is concerned. In Bank of America, we
rejected a similar argument interposed by a
drawee bank (Bank of America) precisely on
the ground of the latter's strict liability to its
drawer (BA-Finance) viz:30
Bank of America denies liability for paying
the amount of the four checks issued by BA-
Finance to Miller, alleging that it (Bank of
America) relied on the stamps made by
Associated Bank stating that all prior
endorsement and/or lack of
endorsement guaranteed, through
which Associated Bank assumed the
liability of a general endorser under Section
66 of the Negotiable Instruments Law.
Moreover, Bank of America contends that
the proximate cause of BA-Finances
injury, if any, is the gross negligence of
Associated Bank which allowed Ching Uy
Seng (Robert Ching) to deposit the four
checks issued to Miller in the personal joint
bank account of Ching Uy Seng and Uy
Chung Guan Seng.
We are not convinced.
The bank on which a check is drawn,
known as the drawee bank, is under
strict liability, based on the contract
between the bank and its customer
(drawer), to pay the check only to the
payee or the payee's order. x x x.
x x x x
In this case, the four checks were drawn by
BA-Finance and made payable to the Order
of Miller Offset Press, Inc. The checks were
also crossed and issued For Payee's Account
Only. Clearly, the drawer intended the check
for deposit only by Miller Offset Press, Inc. in
the latter's bank account. Thus, when a
person other than Miller, i.e., Ching Uy
Seng, a.k.a. Robert Ching, presented
and deposited the checks in his own
personal account (Ching Uy Sengs joint
account with Uy Chung Guan Seng), and
the drawee bank, Bank of America, paid
the value of the checks and charged BA-
Finances account therefor, the drawee
Bank of America is deemed to have
violated the instructions of the drawer,
and therefore, is liable for the amount
charged to the drawer's
account (Citations omitted. Emphasis
supplied).
Accordingly, we find Metrobank liable to
return to JMC the amount of the subject
checks.
Bankcom is Liable to Metrobank
While Metrobank's reliance upon the
guarantees of Bankcom does not excuse it
from being liable to JMC, such reliance does
enable Metrobank to seek reimbursement
from Bankcom-the collecting bank.
A collecting or presenting bank-i.e., the
bank that receives a check for deposit and
that presents the same to the drawee bank
for payment-is an indorser of such
check.31 When a collecting bank presents a
check to the drawee bank for payment, the
former thereby assumes the same
warranties assumed by an indorser of a
negotiable instrument pursuant to Section
66 of the Negotiable Instruments Law. These
warranties are: (1) that the instrument is
genuine and in all respects what it purports
to be; (2) that the indorser has good title to
it; (3) that all prior parties had capacity to
contract; and (4) that the instrument is, at
the time of the indorsement, valid and
subsisting.32 If any of the foregoing
warranties turns out to be false, a collecting
hank becomes liable to the drawee bank for
payments made under such false warranty.
Here, it is clear that Bankcom had assumed
the warranties of an indorser when it
forwarded the subject checks to PCHC for
presentment to Metrobank. By such
presentment, Bankcom effectively
guaranteed to Metrobank that the subject
checks had been deposited with it to an
account that has good title to the same. This
guaranty, however, is a complete falsity
because the subject checks were, in truth,
deposited to an account that neither belongs
to the payees of the subject checks nor to
their indorsees. Hence, as the subject
checks were paid under Bankcom's false
guaranty, the latter-as collecting bank-
stands liable to return the value of such
checks to Metrobank.
Bankcom's assertion that it should be
absolved as the subject checks were
allegedly never deposited with it must fail.
Such allegation is readily disproved by the
fact that the subject checks all contained, at
their dorsal side, a stamp bearing Bankcom's
tracer/ID band.33 Under the PCHC Rules and
Regulations, the stamped tracer/ID band of
Bankcom signifies that the checks had been
deposited with it and that Bankcom indorsed
the said checks and sent them to PCHC.34 As
observed by the RTC:35
Record shows that the pieces of evidence
presented by [JMC], particularly the 11
subject checks were endorsed and were
allowed to be encashed by [Bankcom], as
indicated in the dorsal portion of the checks
where [PCHC] machine's tracer, or the ID
band of [Bankcom] was stamped. And this
stamped tracer ID band of [Bankcom]
signifies that [Bankcom] certified that the
checks were deposited to [Bankcom] and
[Bankcom] endorsed these checks and sent
them to PCHC.
Neither do we find the liability of Bankcom
to be affected by the fact that only four (4)
out of the eleven (11) subject checks were
actually stamped with the guarantees "ALL
PRIOR ENDORSEMENTS AND/OR LACK OF
ENDORSEMENT GUARANTEED" and "NON-
NEGOTIABLE" as required under Section 17
of the PCHC Rules and Regulations. The
stamping of such guarantees is not
necessary to fix the liability of Bankcom as
an indorser for all the subject checks.
To begin with, jurisprudence has it that a
collecting bank's mere act of presenting a
check for payment to the drawee bank is
itself an assertion, on the part of the former,
that it had done its duty to ascertain the
validity of prior indorsements. Hence,
in Banco De Oro v. Equitable Banking
Corporation,36 we stated:
Apropos the matter of forgery in
endorsements, this Court has presently
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. This is laid down in the
case of PNB v. National City Bank. (Citations
omitted. Emphasis supplied).
More than such pronouncement, however,
Section 17 of the PCHC Rules and
Regulations expressly provides that checks
"cleared through the PCHC" that do not bear
the mentioned guarantees shall nonetheless
"be deemed guaranteed by the [collecting
bank] as to all prior endorsements and/or
lack of endorsement" such that "no drawee
bank shall return any [check] received by it
through clearing by reason only of the
absence or lack of such guarantee ... as long
as there is evidence appearing on the
[check] itself that the same had been
deposited with the [collecting bank] x x x."
The full provision reads:
Sec. 17. Bank Guarantee. All checks cleared
through the PCHC shall bear the guarantee
affixed thereto by the Presenting
Bank/Branch which shall read as follows:
Cleared thru the Philippine Clearing House
Corporation all prior endorsements and/or
lack of endorsement guaranteed NAME OF
BANK/BRANCH BRSTN (Date of
Clearing). Checks to which said
guarantee has not been affixed shall,
nevertheless, be deemed guaranteed by
the Presenting Bank as to all prior
endorsement and/or lack of
endorsement.
No drawee bank shall return any cheque
received by it through clearing by
reason only of the absence or lack of
such guarantee stamped at the back of
said cheque, for as long as there is
evidence appearing on the cheque itself
that the same had been deposited with
the Presenting Bank, e.g. PCHC machine
sprayed tracer/ID band. (Emphasis
supplied)
In the present case, all the subject checks
have been transmitted by Bankcom to the
PCHC for clearing and presentment to
Metrobank. As earlier adverted to, all of the
said checks also bear the PCHC machine
sprayed tracer/ID band of Bankcom. Such
circumstances, pursuant to prevailing
banking practices as laid out under the PCHC
Rules and Regulations, are enough to fix the
liability of Bankcom as an indorser of the
subject checks even sans the stamp "ALL
PRIOR ENDORSEMENTS AND/OR LACK OF
ENDORSEMENT GUARANTEED" and "NON--
NEGOTIABLE." As the stamping of such
guarantees are not required before the
warranties of an indorser could attach
against Bankcom, we find the latter liable to
reimburse Metrobank the value of all the
subject checks.
Recourse of Bankcom
The sequence of recovery in cases of
unauthorized payment of checks, however,
does not ordinarily stop with the collecting
bank. In the event that it is made to
reimburse the drawee bank, the collecting
bank can seek similar reimbursement from
the very persons who caused the checks to
be deposited and received the unauthorized
payments.37 Such persons are the
ones ultimately liable for the unauthorized
payments and their liability rests on their
absolute lack of valid title to the checks that
they were able to encash.
Verily, Bankcom ought to have a right of
recourse against the persons that caused the
anomalous deposit of the subject checks and
received payments therefor. Unfortunately-
as none of such persons were impleaded in
the case before us-no pronouncement as to
this matter can be made in favor of
Bankcom.
At this juncture, we express our concurrence
to the absolution of Delizo. The RTC and the
CA were uniform in their finding that the
participation of Delizo-as the supposed thief
of the subject checks-had not been
established in this case. We reviewed the
evidence on hand and saw no cogent reason
to deviate from this factual finding.
Doctrine of Comparative Negligence
Does Not Apply to the Instant Case
Instead of applying the rule on the sequence
of recovery to the case at bench, the RTC
and the CA held both Metrobank and
Bankcom liable to JMC in accordance with a
fixed ratio. In so doing, the RTC and the CA
seemingly relied on the doctrine of
comparative negligence38 as applied in the
cases of Bank of the Philippine Islands v.
Court of Appeals39 and Allied Banking
40
Corporation v. Lio Sim Wan. In both cases,
the Court held the drawee bank and
collecting bank liable for the wrongful
encashment of checks under a 60% and
40% ratio.
It must be emphasized, however, that the
factual contexts of Bank of the Philippine
Islands and Allied Banking Corporation are
starkly different from the instant case:
1. Bank of the Philippine
Islands involved two (2) cashier's
checks issued by the Bank of the Philippine
Islands (BPI) in favor of a certain Eligia
Fernando (Eligia). The checks are supposed
to represent the proceeds of a pre-
terminated money market placement of
Eligia with BPI. BPI issued the checks upon
the mere phone request of a person who
introduced herself as Eligia. The checks were
subsequently deposited with the China
Banking Corporation (CBC) under an account
that was opened by a person who identified
herself as Eligia. This person thereafter
encashed the checks.
It was later established, however, that Eligia
never requested the pre-termination of her
money market placement nor opened an
account with the CBC. It was an impostor
who did so.
2. Allied Banking Corporation, on the other
hand, involved a manager's check issued
by the Allied Banking Corporation (ABC) in
favor of a certain Lim Sio Wan (Lim). The
check is supposed to represent the proceeds
of a pre-terminated money market
placement of Lim with ABC. ABC issued the
checks upon the mere phone request of a
person who introduced herself as Lim. The
checks, now bearing an indorsement of Lim,
were then deposited with the Metrobank
under the account of a certain Filipinas
Cement Corporation. The checks were
eventually encashed.
It was later established, however, that Lim
never requested the pre-termination of his
money market placement and that his
indorsement in the check was forged.
A glaring peculiarity in the cases of Bank of
the Philippine Islands and Allied Banking
Corporation is that the drawee bank-
which is essentially also the drawer in
the scenario-is not only guilty of
wrongfully paying a check but also of
negligence in issuing such check.
Indeed, this is the very reason why the
drawee bank in the two cases were
adjudged co-liable with the collecting bank
under a fixed ratio and the former was not
allowed to claim reimbursement from the
latter.41 The drawee bank cannot claim that
its participation in the wrongful payment of a
check was merely limited to its reliance on
the guarantees of the collecting bank. In
other words, the drawee bank was held
liable in its own right because it was the one
that negligently issued the checks in the first
place.
That, however, is clearly not the situation in
the case at bench. Here, no negligence
similar to that committed by the drawee
banks in Bank of the Philippine
Islands and Allied Banking Corporation-
whether in type or in magnitude-can be
attributed to Metrobank. Metrobank, though
guilty of the unauthorized check payments,
only acted upon the guarantees deemed
made by Bankcom under prevailing banking
practices. While Metrobank's reliance upon
the guarantees of Bankcom did not excuse it
from being answerable to JMC, such reliance
does enable Metrobank to seek
reimbursement from Bankcom on the
ground of the breach in the latter's
warranties as a collecting bank. Under such
circumstances, we cannot deny Metrobank's
right to seek reimbursement from Bankcom.
Hence, given the differences in the factual
milieu between this case on one hand arid
the cases of Bank of the Philippine
Islands and Allied Banking Corporation on
the other, we find that the doctrine of
comparative negligence cannot be applied so
as to apportion the respective liabilities of
Metrobank and Bankcom. The liabilities of
Metrobank and Bankcom, as already
discussed in length, must be governed by
the rule on sequential recovery pursuant
to Bank of America.
Interests
As a final matter, we also saw it fit to
impose legal interest upon the respective
principal liabilities of Metrobank and
Bankcom.
In Nacar v. Gallery Frames,42 wlaid out the
following guidelines for the imposition and
computation of legal interests:
To recapitulate and for future guidance, the
guidelines laid down in the case of Eastern
Shipping Lines are accordingly modified to
embody BSP MB Circular No. 799, as
follows:
I. When an obligation, regardless of its
source, i.e., law, contracts, quasicontracts,
delicts or quasi-delicts is breached, the
contravener can be held liable for damages.
The provisions under Title XVIII on
"Damages" of the Civil Code govern in
determining the measure of recoverable
damages.
II. With regard particularly to an award of
interest in the concept of actual and
compensatory damages, the rate of interest,
as well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached,
and it consists in the payment of a
sum of money, i.e., a loan or
forbearance of money, the interest
due should be that which may
have been stipulated in writing.
Furthermore, the interest due shall
itself earn legal interest from the
time it is judicially demanded.In
the absence of stipulation, the rate of
 interest shall be 6% per annum to be
computed from default, i.e., from
judicial or extrajudicial demand under
and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not
constituting a loan or forbearance
of money, is breached, an interest
on the amount of damages
awarded may be imposed at the
discretion of the court at the rate
of 6% per annum. No interest,
however, shall be adjudged on
unliquidated claims or damages,
except when or until the demand can
be established with reasonable
certainty. Accordingly, where the
demand is established with
reasonable certainty, the interest
shall begin to run from the time
the claim is made judicially or
extrajudicially (Art. 1169, Civil
Code), but when such certainty
cannot be so reasonably established at
the time the demand is made, the
interest shall begin to run only from
the date the judgment of the court is
made (at which time the quantification
of damages may be deemed to have
been reasonably ascertained). The
actual base for the computation of
legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court
awarding a sum of money
becomes final and executory, the
rate of legal interest, whether the
case falls under paragraph 1 or
paragraph 2, above, shall be 6%
per annum from such finality until
its satisfaction, this interim period
being deemed to be by then an
equivalent to a forbearance of
credit.
And, in addition to the above,
judgments that have become final and
executory prior to July 1, 2013, shall
not be disturbed and shall continue to
be implemented applying the rate of
interest fixed therein. (Citations
omitted. Emphasis supplied).
Applying the foregoing guidelines to the case
at bench, we fix the legal interests due
against Metrobank and Bankcom thusly:
1. The liability of Metrobank to JMC
consists in returning the amount it
charged against JMC's current account.
Current accounts, like all bank
deposits, are considered under the law
as loans.43Normally, current accounts
are interest-bearing by express
contract. However, the actual interest
rate, if any, for the current account
opened by JMC with Metrobank was
not given in evidence.44
Under these circumstances, we find it
proper to subject Metrobank's principal
liability to JMC to a legal interest of
6% per annum from 28 January 2002
until full satisfaction.45 The date 28
January 2002 is the date when JMC
filed its complaint with the RTC.
2. The liability of Bankcom to Metrobank,
on the other hand, consists in
returning the amount it was paid by
Metrobank. This stems from a breach
by Bankcom of its warranties as a
collecting bank.
Accordingly, we find it proper to
subject Bankcom's principal liability to
Metrobank to a legal interest of 6%
per annum from 5 March 2003 until
full satisfaction.46 The date 5 March
2003 is the date when Metrobank filed
its answer with cross-claim against
Bankcom.
WHEREFORE, the consolidated appeals
are DENIED. The Decision dated 22 March
2017 and Resolution dated 19 October 2017
of the Court of Appeals (CA) in CA-G.R. CV
No. 102462 are herein MODIFIEDwith
respect to the individual liabilities of the
Metropolitan Bank and Trust Company and
the Bank of Commerce, as follows: Sirs / Mesdames:

1. The Metropolitan Bank and Trust
Company is adjudged liable to pay
respondent Junnel's Marketing
Corporation the following:
a. The principal amount of
1,481,292.00, and
b. Interest on the said principal at
the rate of 6% per annum from
28 January 2002 until full
satisfaction.
Please take notice that on June 20, 2018 a
Decision, copy attached hereto, was
rendered by the Supreme Court in the
above-entitled cases, the original of which
was received by this Office on July 2, 2018
P at 1:38 p.m.
Very truly yours,
(SGD)
WILFREDO V. LAPITAN
Division Clerk of Court

2. The Bank of Commerce is adjudged

liable to pay the Metropolitan Bank
and Trust Company the following:

a. The principal amount of P

1,481,292.00, and

b. Interest on the said principal at

the rate of 6% per annum from
5 March 2003 until full
satisfaction.

Other findings and pronouncements of the

Court of Appeals in its Decision dated 22
March 2017 and Resolution dated 19
October 2017 in CA-G.R. CV No. 102462
that are not contrary to this Decision
are AFFIRMED.

Costs against the Metropolitan Bank and

Trust Company and the Bank of Commerce.

SO ORDERED.

Leonen, Martires, and Gesmundo, JJ.,

concur.
Bersamin, J., on leave.

July 2, 2018

NOTICE OF JUDGMENT
THIRD DIVISION
G.R. No. 184513, March 09, 2016
DESIGNER BASKETS,
INC., Petitioner, v. AIR SEA TRANSPORT,
INC. AND ASIA CARGO CONTAINER
LINES, INC., Respondents.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 of
the August 16, 2007 Decision 2 and
3
September 2, 2008 Resolution of the Court
of Appeals (CA) in CA-G.R. CV No. 79790,
absolving respondents Air Sea Transport,
Inc. (ASTI) and Asia Cargo Container Lines,
Inc. (ACCLI) from liability in the complaint
for sum of money and damages filed by
petitioner Designer Baskets, Inc. (DBI).
The Facts
DBI is a domestic corporation engaged in
the production of housewares and handicraft
items for export.4Sometime in October 1995,
Ambiente, a foreign-based company,
5
ordered from DBI 223 cartons of assorted
wooden items (the shipment).6 The
shipment was worth Twelve Thousand Five
Hundred Ninety and Eighty-Seven Dollars
(US$12,590.87) and payable through
telegraphic transfer.7 Ambiente designated
ACCLI as the forwarding agent that will ship
out its order from the Philippines to the
United States (US). ACCLI is a domestic
corporation acting as agent of ASTI, a US
based corporation engaged in carrier
transport business, in the Philippines. 8
On January 7, 1996, DBI delivered the
shipment to ACCLI for sea transport from
Manila and delivery to Ambiente at 8306
Wilshire Blvd., Suite 1239, Beverly Hills,
California. To acknowledge receipt and to
serve as the contract of sea carriage, ACCLI
issued to DBI triplicate copies of ASTI Bill of
Lading No. AC/MLLA601317.9 DBI retained
possession of the originals of the bills of
lading pending the payment of the goods by
Ambiente.10
On January 23, 1996, Ambiente and ASTI
entered into an Indemnity Agreement
(Agreement).11 Under the Agreement,
Ambiente obligated ASTI to deliver the
shipment to it or to its order "without the
surrender of the relevant bill(s) of lading due
to the non-arrival or loss thereof." 12 In
exchange, Ambiente undertook to indemnify
and hold ASTI and its agent free from any
liability as a result of the release of the
shipment.13 Thereafter, ASTI released the
shipment to Ambiente without the
knowledge of DBI, and without it receiving
payment for the total cost of the shipment.14
DBI then made several demands to
Ambiente for the payment of the shipment,
but to no avail. Thus, on October 7, 1996,
DBI filed the Original Complaint against
ASTI, ACCLI and ACCLFs incorporators-
stockholders15 for the payment of the value
of the shipment in the amount of
US$12,590.87 or Three Hundred Thirty-
Three and Six Flundred Fifty-Eight Pesos
(P333,658.00), plus interest at the legal rate
from January 22, 1996, exemplary damages,
attorney's fees and cost of suit.16
In its Original Complaint, DBI claimed that
under Bill of Lading Number
AC/MLLA601317, ASTI and/or ACCLI is "to
release and deliver the cargo/shipment to
the consignee, x x x, only after the original
copy or copies of [the] Bill of Lading is or are
surrendered to them; otherwise, they
become liable to the shipper for the value of
the shipment."17 DBI also averred that ACCLI
should be jointly and severally liable with its
co-defendants because ACCLI failed to
register ASTI as a foreign corporation doing
business in the Philippines. In addition,
ACCLI failed to secure a license to act as
agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and
ACCLI's incorporators-stockholders filed a
Motion to Dismiss.19They argued that: (a)
they are not the real parties-in-interest in
the action because the cargo was delivered
and accepted by Ambiente. The case,
therefore, was a simple case of nonpayment
of the buyer; (b) relative to the
incorporators-stockholders of ACCLI,
piercing the corporate veil is misplaced; (c)
contrary to the allegation of DBI, the bill of
lading covering the shipment does not
contain a proviso exposing ASTI to liability in
case the shipment is released without the
surrender of the bill of lading; and (d) the
Original Complaint did not attach a
certificate of non-forum shopping. 20
DBI filed an Opposition to the Motion to
Dismiss,21 asserting that ASTI and ACCLI
failed to exercise the required extraordinary
diligence when they allowed the cargoes to
be withdrawn by the consignee without the
surrender of the original bill of lading. ASTI,
ACCLI, and ACCLI's incorporators-
stockholders countered that it is DBI who
failed to exercise extraordinary diligence in
protecting its own interest. They averred
that whether or not the buyer-consignee
pays the seller is already outside of their
concern.22
Before the trial court could resolve the
motion to dismiss, DBI filed an Amended
Complaint23 impleading Ambiente as a new
defendant and praying that it be held
solidarity liable with ASTI, ACCLI, and
ACCLFs incorporators-stockholders for the
payment of the value of the shipment. DBI
alleged that it received reliable information
that the shipment was released merely on
the basis of a company guaranty of
Ambiente.24 Further, DBI asserted that
ACCLI's incorporators-stockholders have not
yet fully paid their stock subscriptions; thus,
"under the circumstance of [the] case," they
should be held liable to the extent of the
balance of their subscriptions.25cralawred
26
In their Answer, ASTI, ACCLI, and ACCLI's
incorporators-stockholders countered that
DBI has no cause of action against ACCLI
and its incorporators-stockholders because
the Amended Complaint, on its face, is for
collection of sum of money by an unpaid
seller against a buyer. DBI did not allege
any act of the incorporators-stockholders
which would constitute as a ground for
piercing the veil of corporate fiction. 27ACCLI
also reiterated that there is no stipulation in
the bill of lading restrictively subjecting the
release of the cargo only upon the
presentation of the original bill of lading. 28 It
regarded the issue of ASTI's lack of license
to do business in the Philippines as "entirely
foreign and irrelevant to the issue of liability
for breach of contract" between DBI and
Ambiente. It stated that the purpose of
requiring a license (to do business in the
Philippines) is to subject the foreign
corporation to the jurisdiction of Philippine
courts.29
On July 22, 1997, the trial court directed the
service of summons to Ambiente through
the Department of Trade and Industry. 30 The
summons was served on October 6,
199731 and December 18, 1997.32Ambiente
failed to file an Answer. Hence, DBI moved
to declare Ambiente in default, which the
trial court granted in its Order dated
September 15, 1998.33
The Ruling of the Trial Court
In a Decision34 dated July 25, 2003, the trial
court found ASTI, ACCLI, and Ambiente
solidarity liable to DBI for the value of the
shipment. It awarded DBI the following:
1. US$12,590.87, or the equivalent of
[P]333,658.00 at the time of the
shipment, plus 12% interest per
annum from 07 January 1996 until the
same is fully paid;
2. [P]50,000.00 in exemplary damages;
3. [P]47,000.00 as and for attorney's
fees; and,
4. [P]10,000.00 as cost of suit.35
The trial court declared that the liability of
Ambiente is "very clear." As the buyer, it has
an obligation to pay for the value of the
shipment. The trial court noted that "[the
case] is a simple sale transaction which had
been perfected especially since delivery had
already been effected and with only the
payment for the shipment remaining left to
be done."36
With respect to ASTI, the trial court held
that as a common carrier, ASTI is bound to
observe extraordinary diligence in the
vigilance over the goods. However, ASTI
was remiss in its duty when it allowed the
unwarranted release of the shipment to
Ambiente.37 The trial court found that the
damages suffered by DBI was due to ASTI's
release of the merchandise despite the non-
presentation of the bill of lading. That ASTI
entered into an Agreement with Ambiente to
release the shipment without the surrender
of the bill of lading is of no moment. 38 The
Agreement cannot save ASTI from liability
because in entering into such, it violated the
law, the terms of the bill of lading and the
right of DBI over the goods. 39
The trial court also added that the
Agreement only involved Ambiente and
ASTI. Since DBI is not privy to the
Agreement, it is not bound by its
terms.40cralawred
The trial court found that ACCLI "has not
done enough to prevent the defendants
Ambiente and [ASTI] from agreeing among
themselves the release of the goods in total
disregard of [DBFs] rights and in
contravention of the country's civil and
commercial laws."41 As the forwarding agent,
ACCLI was "well aware that the goods
cannot be delivered to the defendant
Ambiente since [DBI] retained possession of
the originals of the bill of
lading."42 Consequently, the trial court held
ACCLI solidarily liable with ASTI.
As regards ACCLFs incorporators-
stockholders, the trial court absolved them
from liability. The trial court ruled that the
participation of ACCLFs incorporators-
stockholders in the release of the cargo is
not as direct as that of ACCLI. 43
DBI, ASTI and ACCLI appealed to the CA. On
one hand, DBI took issue with the order of
the trial court awarding the value of the
shipment in Philippine Pesos instead of US
Dollars. It also alleged that even assuming
that the shipment may be paid in Philippine
Pesos, the trial court erred in pegging its
value at the exchange rate prevailing at the
time of the shipment, rather than at the
exchange rate prevailing at the time of
payment.44
On the other hand, ASTI and ACCLI
questioned the trial court's decision finding
them solidarily liable with DBI for the value
of the shipment. They also assailed the trial
court's award of interest, exemplary
damages, attorney's fees and cost of suit in
DBFs favor.45
The Ruling of the Court of Appeals
The CA affirmed the trial court's finding that
Ambiente is liable to DBI, but absolved ASTI
and ACCLI from liability. The CA found that
the pivotal issue is whether the law requires
that the bill of lading be surrendered by the
buyer/consignee before the carrier can
release the goods to the former. It then
answered the question in the negative, thus:
There is nothing in the applicable laws
that require the surrender of bills of
lading before the goods may be
released to the buyer/consignee. In fact,
Article 353 of the Code of Commerce
suggests a contrary conclusion, viz —
"Art. 353. After the contract has been
complied with, the bill of lading which the
carrier has issued shall be returned to him,
and by virtue of the exchange of this title
with the thing transported, the respective
obligations shall be considered canceled xxx
In case the consignee, upon receiving the
goods, cannot return the bill of lading
subscribed by the carrier because of its loss
or of any other cause, he must give the
latter a receipt for the goods delivered, this
receipt producing the same effects as the
return of the bill of lading."
The clear import of the above article is that
the surrender of the bill of lading is not an
absolute and mandatory requirement for the
release of the goods to the consignee. The
fact that the carrier is given the
alternative option to simply require a
receipt for the goods delivered suggests
that the surrender of the bill of lading
may be dispensed with when it cannot
be produced by the consignee for
whatever cause.46 (Emphasis supplied.)
The CA stressed that DBI failed to present
evidence to prove its assertion that the
surrender of the bill of lading upon delivery
of the goods is a common mercantile
practice.47 Further, even assuming that such
practice exists, it cannot prevail over law
and jurisprudence.48
As for ASTI, the CA explained that its only
obligation as a common carrier was to
deliver the shipment in good condition. It did
not include looking beyond the details of the
transaction between the seller and the
consignee, or more particularly, ascertaining
the payment of the goods by the buyer
Ambiente.49
Since the agency between ASTI and ACCLI
was established and not disputed by any of
the parties, neither can ACCLI, as a mere
agent of ASTI, be held liable. This must be
so in the absence of evidence that the agent
exceeded its authority.50
The CA, thus, ruled:
WHEREFORE, in view of the foregoing, the
Decision dated July 25, 2003 of Branch 255
of the Regional Trial court of Las [Piñas] City
in Civil Case No. LP-96-0235 is
hereby AFFIRMED with the
following MODIFICATIONS:
1. Defendants-appellants Air Sea
Transport, Inc. and Asia Cargo
Container Lines, Inc. are
hereby ABSOLVED from all liabilities;
2. The actual damages to be paid by
defendant Ambiente shall be in the
amount of US$12,590.87. Defendant
Ambiente's liability may be paid in
Philippine currency, computed at the
exchange rate prevailing at the time of
payment;51 and
3. The rate of interest to be imposed on
the total amount of US$12,590.87
shall be 6% per annum computed
from the filing of the complaint on
October 7, 1996 until the finality of
this decision. After this decision
becomes final and executory, the
applicable rate shall be 12% per
annum until its full satisfaction.
SO ORDERED.52ChanRoblesVirtualawlibrary
Hence, this petition for review, which raises
the sole issue of whether ASTI and ACCLI
may be held solidarily liable to DBI for the
value of the shipment.
Our Ruling
We deny the petition.
A common carrier may release the
goods to the consignee even without
the surrender of the hill of lading.
This case presents an instance where an
unpaid seller sues not only the buyer, but
the carrier and the carrier's agent as well,
for the payment of the value of the goods
sold. The basis for ASTI and ACCLI's liability,
as pleaded by DBI, is the bill of lading
covering the shipment.
A bill of lading is defined as "a written
acknowledgment of the receipt of goods and
an agreement to transport and to deliver
them at a specified place to a person named
or on his order."53 It may also be defined as
an instrument in writing, signed by a carrier
or his agent, describing the freight so as to
identify it, stating the name of the
consignor, the terms of the contract of
carriage, and agreeing or directing that the
freight be delivered to bearer, to order or to
a specified person at a specified place. 54
Under Article 350 of the Code of Commerce,
"the shipper as well as the carrier of the
merchandise or goods may mutually demand
that a bill of lading be made." A bill of
lading, when issued by the carrier to the
shipper, is the legal evidence of the contract
of carriage between the former and the
latter. It defines the rights and liabilities of
the parties in reference to the contract of
carriage. The stipulations in the bill of lading
are valid and binding unless they are
contrary to law, morals, customs, public
order or public policy.55
Here, ACCLI, as agent of ASTI, issued Bill of
Lading No. AC/MLLA601317 to DBI. This bill
of lading governs the rights, obligations and
liabilities of DBI and ASTI. DBI claims that
Bill of Lading No. AC/MLLA601317 contains a
provision stating that ASTI and ACCLI are
"to release and deliver the cargo/shipment
to the consignee, x x x, only after the
original copy or copies of the said Bill of
Lading is or are surrendered to them;
otherwise they become liable to [DBI] for
the value of the shipment." 56Quite tellingly,
however, DBI does not point or refer to any
specific clause or provision on the bill of
lading supporting this claim. The language of
the bill of lading shows no such requirement.
What the bill of lading provides on its face
is:
Received by the Carrier in apparent good
order and condition unless otherwise
indicated hereon, the Container(s) and/or
goods hereinafter mentioned to be
transported and/or otherwise forwarded
from the Place of Receipt to the intended
Place of Delivery upon and [subject] to all
the terms and conditions appearing on the
face and back of this Bill of Lading. If
required by the Carrier this Bill of
Lading duly endorsed must be
surrendered in exchange for the Goods
of delivery order.57 (Emphasis supplied.)
There is no obligation, therefore, on the part
of ASTI and ACCLI to release the goods only
upon the surrender of the original bill of
lading.
Further, a carrier is allowed by law to
release the goods to the consignee even
without the latter's surrender of the bill of
lading. The third paragraph of Article 353 of
the Code of Commerce is enlightening:
Article 353. The legal evidence of the
contract between the shipper and the carrier
shall be the bills of lading, by the contents of
which the disputes which may arise
regarding their execution and performance
shall be decided, no exceptions being
admissible other than those of falsity and
material error in the drafting.
After the contract has been complied with,
the bill of lading which the carrier has issued
shall be returned to him, and by virtue of
the exchange of this title with the thing
transported, the respective obligations and
actions shall be considered cancelled, unless
in the same act the claim which the parties
may wish to reserve be reduced to writing,
with the exception of that provided for in
Article 366.
In case the consignee, upon receiving
the goods, cannot return the bill of
lading subscribed by the carrier,
because of its loss or any other cause,
he must give the latter a receipt for the
goods delivered, this receipt producing
the same effects as the return of the bill
of lading. (Emphasis supplied.)
The general rule is that upon receipt of the
goods, the consignee surrenders the bill of
lading to the carrier and their respective
obligations are considered canceled. The
law, however, provides two exceptions
where the goods may be released without
the surrender of the bill of lading because
the consignee can no longer return it. These
exceptions are when the bill of lading gets
lost or for other cause. In either case, the
consignee must issue a receipt to the carrier
upon the release of the goods. Such receipt
shall produce the same effect as the
surrender of the bill of lading.
We have already ruled that the non-
surrender of the original bill of lading does
not violate the carrier's duty of extraordinary
diligence over the goods.58 In Republic v.
Lorenzo Shipping Corporation,59 we found
that the carrier exercised extraordinary
diligence when it released the shipment to
the consignee, not upon the surrender of the
original bill of lading, but upon signing the
delivery receipts and surrender of the
certified true copies of the bills of lading.
Thus, we held that the surrender of the
original bill of lading is not a condition
precedent for a common carrier to be
discharged of its contractual obligation.
Under special circumstances, we did not
even require presentation of any form of
receipt by the consignee, in lieu of the
original bill of lading, for the release of the
goods. In Macam v. Court of Appeals,60 we
absolved the carrier from liability for
releasing the goods to the consignee without
the bills of lading despite this provision on
the bills of lading:
"One of the Bills of Lading must be
surrendered duly endorsed in exchange for
the goods or delivery order."61 (Citations
omitted.)
In clearing the carrier from liability, we took
into consideration that the shipper sent a
telex to the carrier after the goods were
shipped. The telex instructed the carrier to
deliver the goods without need of presenting
the bill of lading and bank guarantee per the
shipper's request since "for prepaid shipt ofrt
charges already fully paid our end x x
x."62 We also noted the usual practice of the
shipper to request the shipping lines to
immediately release perishable cargoes
through telephone calls.
Also, in Eastern Shipping Lines v. Court of
Appeals,63 we absolved the carrier from
liability for releasing the goods to the
supposed consignee, Consolidated Mines,
Inc. (CMI), on the basis of an Undertaking
for Delivery of Cargo but without the
surrender of the original bill of lading
presented by CMI. Similar to the factual
circumstance in this case, the Undertaking
in Eastern Shipping Lines guaranteed to hold
the carrier "harmless from all demands,
claiming liabilities, actions and
64
expenses." Though the central issue in that
case was who the consignee was in the bill
of lading, it is noteworthy how we gave
weight to the Undertaking in ruling in favor
of the carrier:
But assuming that CMI may not be
considered consignee, the petitioner cannot
be faulted for releasing the goods to CMI
under the circumstances, due to its lack of
knowledge as to who was the real consignee
in view of CMI's strong representations and
letter of undertaking wherein it stated that
the bill of lading would be presented later.
This is precisely the situation covered by the
last paragraph of Art. 353 of the [Code of
Commerce] to wit:
"If in case of loss or for any other reason
whatsoever, the consignee cannot return
upon receiving the merchandise the bill of
lading subscribed by the carrier, he shall
give said carrier a receipt of the goods
delivered this receipt producing the same
effects as the return of the bill of
lading."65ChanRoblesVirtualawlibrary
Clearly, law and jurisprudence is settled that
the surrender of the original bill of lading is
not absolute; that in case of loss or any
other cause, a common carrier may release
the goods to the consignee even without it.
Here, Ambiente could not produce the bill of
lading covering the shipment not because it
was lost, but for another cause: the bill of
lading was retained by DBI pending
Ambiente's full payment of the shipment.
Ambiente and ASTI then entered into an
Indemnity Agreement, wherein the former
asked the latter to release the shipment
even without the surrender of the bill of
lading. The execution of this Agreement, and
the undisputed fact that the shipment was
released to Ambiente pursuant to it, to our
mind, operates as a receipt in substantial
compliance with the last paragraph of Article
353 of the Code of Commerce.

Articles 1733, 1734, and 1735 of the
Civil Code are not applicable.
DBI, however, challenges the Agreement,
arguing that the carrier released the goods
pursuant to it, notwithstanding the carrier's
knowledge that the bill of lading should first
be surrendered. As such, DBI claims that
ASTI and ACCLI are liable for damages
because they failed to exercise extraordinary
diligence in the vigilance over the goods
pursuant to Articles 1733, 1734, and 1735
of the Civil Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil
Code are not applicable in this case. The
Articles state:
Article 1733. Common carriers, from the
nature of their business and for reasons of
public policy, are bound to observe
extraordinary diligence in the vigilance over
the goods and for the safety of the
passengers transported by them, according
to all the circumstances of each case.
Such extraordinary diligence in vigilance
over the goods is further expressed in
Articles 1734, 1735, and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for
the safety of the passengers is further set
forth in Articles 1755 and 1756.
Article 1734. Common carriers are
responsible for the loss, destruction, or
deterioration of the goods, unless the same
is due to any of the following causes only:
the packing or in the containers;
(5) Order or act of competent public
authority.
Article 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost,
destroyed or deteriorated, common carriers
are presumed to have been at fault or to
have acted negligently, unless they prove
that they observed extraordinary diligence
as required in Article 1733.
Articles 1733, 1734, and 1735 speak of the
common carrier's responsibility over
the goods. They refer to the general liability
of common carriers in case of loss,
destruction or deterioration of goods and
the presumption of negligence against them.
This responsibility or duty of the common
carrier lasts from the time the goods are
unconditionally placed in the possession of,
and received by the carrier for
transportation, until the same are delivered,
actually or constructively, by the carrier to
the consignee, or to the person who has a
right to receive them.67 It is, in fact,
undisputed that the goods were timely
delivered to the proper consignee or to the
one who was authorized to receive them.
DBFs only cause of action against ASTI and
ACCLI is the release of the goods to
Ambiente without the surrender of the bill of
lading, purportedly in violation of the terms
of the bill of lading. We have already found
that Bill of Lading No. AC/MLLA601317 does
not contain such express prohibition.
Without any prohibition, therefore, the
carrier had no obligation to withhold release
of the goods. Articles 1733, 1734, and 1735
do not give ASTI any such obligation.

(1) Flood, storm, earthquake, lightning, or The applicable provision instead is Article
other natural disaster or calamity; 353 of the Code of Commerce, which we
have previously discussed. To reiterate, the
(2) Act of the public enemy in war, whether Article allows the release of the goods to the
international or civil; consignee even without his surrender of the
original bill of lading. In such case, the duty
(3) Act or omission of the shipper or owner of the carrier to exercise extraordinary
of the goods; diligence is not violated. Nothing, therefore,
prevented the consignee and the carrier to
(4) The character of the goods or defects in enter into an indemnity agreement of the
same nature as the one they entered here.
No law or public policy is contravened upon
its execution.
Article 1503 of the Civil Code does not
apply to contracts for carriage of goods.
In its petition, DBI continues to assert the
wrong application of Article 353 of the Code
of Commerce to its Amended Complaint. It
alleges that the third paragraph of Article
1503 of the Civil Code is the applicable
provision because: (a) Article 1503 is a
special provision that deals particularly with
the situation of the seller retaining the bill of
lading; and (b) Article 1503 is a law which is
later in point of time to Article 353 of the
Code of Commerce.68 DBI posits that being a
special provision, Article 1503 of the Civil
Code should prevail over Article 353 of the
Code of Commerce, a general provision that
makes no reference to the seller retaining
the bill of lading.69
DBFs assertion is untenable. Article 1503 is
an exception to the general presumption
provided in the first paragraph of Article
1523, which reads:
Article 1523. Where, in pursuance of a
contract of sale, the seller is authorized
or required to send the goods to the
buyer, delivery of the goods to a carrier,
whether named by the buyer or not, for
the purpose of transmission to the
buyer is deemed to be a delivery of the
goods to the buyer, except in the cases
provided for in Articles 1503, first,
second and third paragraphs, or unless
a contrary intent appears.
Unless otherwise authorized by the buyer,
the seller must make such contract with the
carrier on behalf of the buyer as may be
reasonable, having regard to the nature of
the goods and the other circumstances of
the case. If the seller omit so to do, and the
goods are lost or damaged in the course of
transit, the buyer may decline to treat the
delivery to the carrier as a delivery to
himself, or may hold the seller responsible in
damages.
Unless otherwise agreed, where goods are
sent by the seller to the buyer under
circumstances in which the seller knows or
ought to know that it is usual to insure, the
seller must give such notice to the buyer as
may enable him to insure them during their
transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk
during such transit. (Emphasis supplied.)
Article 1503, on the other hand, provides:
Article 1503. When there is a contract
of sale of specific goods, the seller may,
by the terms of the contract, reserve the
right of possession or ownership in the
goods until certain conditions have been
fulfilled. The right of possession or
ownership may be thus reserved
notwithstanding the delivery of the goods to
the buyer or to a carrier or other bailee for
the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller
or his agent, or to the order of the seller or
of his agent, the seller thereby reserves the
ownership in the goods. But, if except for
the form of the bill of lading, the ownership
would have passed to the buyer on shipment
of the goods, the seller's property in the
goods shall be deemed to be only for the
purpose of securing performance by the
buyer of his obligations under the contract.
Where goods are shipped, and by the
bill of lading the goods are deliverable
to order of the buyer or of his agent,
but possession of the bill of lading is
retained by the seller or his agent, the
seller thereby reserves a right to the
possession of the goods as against the
buyer.
Where the seller of goods draws on the
buyer for the price and transmits the bill of
exchange and bill of lading together to the
buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no
added right thereby. If, however, the bill of
lading provides that the goods are
deliverable to the buyer or to the order of
the buyer, or is indorsed in blank, or to the
buyer by the consignee named therein, one
who purchases in good faith, for value, the
bill of lading, or goods from the buyer will
obtain the ownership in the goods, although
the bill of exchange has not been honored,
provided that such purchaser has received
delivery of the bill of lading indorsed by the
consignee named therein, or of the goods,
without notice of the facts making the
transfer wrongful. (Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a
contract of sale between a seller and a
buyer. In particular, they refer to who
between the seller and the buyer has the
right of possession or ownership over the
goods subject of the sale. Articles 1523 and
1503 do not apply to a contract of carriage
between the shipper and the common
carrier. The third paragraph of Article 1503,
upon which DBI relies, does not oblige the
common carrier to withhold delivery of the
goods in the event that the bill of lading is
retained by the seller. Rather, it only gives
the seller a better right to the possession of
the goods as against the mere inchoate right
of the buyer. Thus, Articles 1523 and 1503
find no application here. The case before us
does not involve an action where the seller
asserts ownership over the goods as against
the buyer. Instead, we are confronted with a
complaint for sum of money and damages
filed by the seller against the buyer and the
common carrier due to the non-payment of
the goods by the buyer, and the release of
the goods by the carrier despite non-
surrender of the bill of lading. A contract of
sale is separate and distinct from a contract
of carriage. They involve different parties,
different rights, different obligations and
liabilities. Thus, we quote with approval the
ruling of the CA, to wit:
On the third assigned error, [w]e rule for the
defendants-appellants [ASTI and
ACCLI]. They are correct in arguing that
the nature of their obligation with
plaintiff [DBI] is separate and distinct
from the transaction of the latter with
defendant Ambiente. As carrier of the
goods transported by plaintiff, its
obligation is simply to ensure that such
goods are delivered on time and in good
condition. In the case [Macam v. Court of
Appeals], the Supreme Court emphasized
that "the extraordinary responsibility of the
common carriers lasts until actual or
constructive delivery of the cargoes to the
consignee or to the person who has the right
to receive them." x x x
It is therefore clear that the moment
the carrier has delivered the subject
goods, its responsibility ceases to exist
and it is thereby freed from all the
liabilities arising from the transaction.
Any question regarding the payment of
the buyer to the seller is no longer the
concern of the carrier. This easily debunks
plaintiffs theory of joint liability. 70 x x x
(Emphasis supplied; citations omitted.)
The contract between DBI and ASTI is a
contract of carriage of goods; hence, ASTI's
liability should be pursuant to that contract
and the law on transportation of goods. Not
being a party to the contract of sale between
DBI and Ambiente, ASTI cannot be held
liable for the payment of the value of the
goods sold. In this regard, we cite Loadstar
Shipping Company, Incorporated v. Malayan
Insurance Company, Incorporated,71 thus:
Malayan opposed the petitioners' invocation
of the Philex-PASAR purchase agreement,
stating that the contract involved in this
case is a contract of affreightment between
the petitioners and PASAR, not the
agreement between Philex and PASAR,
which was a contract for the sale of copper
concentrates.
On this score, the Court agrees with Malayan
that contrary to the trial court's disquisition,
the petitioners cannot validly invoke the
penalty clause under the Philex-PASAR
purchase agreement, where penalties are to
be imposed by the buyer PASAR against the
seller Philex if some elements exceeding the
agreed limitations are found on the copper
concentrates upon delivery. The
petitioners are not privy to the contract
of sale of the copper concentrates. The
contract between PASAR and the
petitioners is a contract of carriage of
goods and not a contract of sale.
Therefore, the petitioners and PASAR
are bound by the laws on transportation
of goods and their contract of
affreightment. Since the Contract of
Affreightment between the petitioners and
PASAR is silent as regards the computation
of damages, whereas the bill of lading
presented before the trial court is
undecipherable, the New Civil Code and the
Code of Commerce shall govern the contract
between the parties.72 (Emphasis supplied;
citations omitted.)
In view of the foregoing, we hold that under
Bill of Lading No. AC/MLLA601317 and the
pertinent law and jurisprudence, ASTI and
ACCLI are not liable to DBI. We sustain the
finding of the CA that only Ambiente, as the
buyer of the goods, has the obligation to pay
for the value of the shipment. However, in
view of our ruling in Nacar v. Gallery
Frames,73 we modify the legal rate of
interest imposed by the CA. Instead of 12%
per annum from the finality of this judgment
until its full satisfaction, the rate of interest
shall only be 6% per annum.chanrobleslaw

WHEREFORE, the petition is DENIED for

lack of merit. The August 16, 2007 Decision
and the September 2, 2008 Resolution of
the Court of Appeals in CA-G.R. CV No.
79790 are hereby AFFIRMEDwith
the MODIFICATION that from the finality
of this decision until its full satisfaction, the
applicable rate of interest shall be 6% per
annum.

SO ORDERED.cralawlawlibrary

Velasco, Jr., (Chairperson), Peralta, Perez,

and Reyes, JJ., concur.
SECOND DIVISION
G.R. No. 228807, February 11, 2019
CARLITO B. LINSANGAN, PETITIONER,
v. PHILIPPINE DEPOSIT INSURANCE
CORPORATION, RESPONDENT.
DECISION
J. REYES, JR., J.:
Assailed in this petition for review
on certiorari are the March 31, 2016
Decision1 and the December 19, 2016
Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 137172 which affirmed the
Philippine Deposit Insurance Corporation's
(PDIC's) denial of petitioner Carlito B.
Linsangan's (petitioner's) deposit insurance
claim on July 12, 2013.
The Antecedents
In a Resolution dated May 23, 2013, the
Monetary Board (MB) of the Bangko Sentral
ng Pilipinas (BSP) ordered the closure of the
Cooperative Rural Bank of Bulacan, Inc.
(CRBBI) and placed it under PDIC's
receivership. PDIC took over CRBBI's assets
and affairs and examined its records in order
to determine the insured deposits.
Petitioner filed a claim for payment of
deposit insurance for his Special Incentive
Savings Account (SISA) No. 00-44-10750-9,
which had a balance of P400,000.00 at the
time of CRBBI's closure.
Upon investigation, PDIC found that
petitioner's account originated from the
account of "Cornelio Linsangan or Ligaya
Linsangan" (source account) with an opening
balance of P1,531,993.42. On December 13,
2012, the source account was closed and its
balance of P1,544,081.48 was transferred
and distributed to four accounts.
PDIC then conducted a tracing of
relationship for the purpose of determining
beneficial ownership of accounts and it
discovered that petitioner is not a qualified
relative3 of Cornelio Linsangan and Ligaya
Linsangan (Cornelio and Ligaya).
Consequently, pursuant to the provisions of
PDIC Regulatory Issuance No. 2009-03, par.
V, petitioner's account was consolidated with
the other legitimate deposits of Cornelio and
Ligaya for purposes of computing the
insurable deposit. PDIC considered the
source account holders Cornelio and Ligaya
as the real owners of the four resulting
accounts. Thus, they were only entitled to
the maximum deposit insurance of
P500,000.00.
On July 12, 2013, PDIC denied petitioner's
claim. Then, on August 6, 2014, it also
denied petitioner's request for
reconsideration. The PDIC ruled that under
PDIC Regulatory Issuance No. 2009-03, the
transferee is considered the beneficial owner
of the deposit provided that (a) the transfer
is for valid consideration as shown by the
documents supporting the transfer which
should be in the custody of the bank upon
takeover by PDIC; or (b) he/she is a
qualified relative of the transferor. It held
that CRBBI was not furnished a copy of any
document which could prove the transfer of
the deposit from the transferors to
petitioner. The PDIC added that the
documents which petitioner submitted did
not show that he is a relative of documents
which petitioner submitted did not show that
he is a relative of Cornelio and Ligaya within
the second degree of consanguinity or
affinity. It concluded that the transferors
should be considered the beneficial owners
of the transferred deposit.
Aggrieved, petitioner filed a petition
for certiorari before the CA.
The CA Ruling
In a Decision dated March 31, 2016, the CA
ruled that the PDIC did not act with grave
abuse of discretion because it merely
followed the applicable law in determining
whether petitioner's account was insurable
or not. It noted that both petitioner and the
transferor failed to provide CRBBI of the
details regarding the splitting of deposit and
the circumstances behind such transfer. The
appellate court declared that PDIC had
sufficient reason to doubt the validity of the
splitting of accounts and subject them to
scrutiny as there were indicators that the
source account was divided and distributed
to newly-opened and existing accounts to
make them covered under the PDIC
insurance. It held that PDIC's denial of
insurance deposit does not invalidate the
alleged donation, nor will it result in the total
non-payment of said deposit because the
latter may still be paid from the assets of
CRBBI. Thus, it disposed:
WHEREFORE, the Petition for Certiorari [is]
hereby DENIED for lack of merit.
Accordingly, the denial of Carlito B.
Linsangan's claim for Deposit Insurance
from the Philippine Deposit Insurance
[Corporation] is hereby AFFIRMED.
SO ORDERED.4
Petitioner moved for reconsideration, but the
same was denied by the CA in a Resolution
dated December 19, 2016. Hence, this
petition for review on certiorari wherein
petitioner assails the denial of his deposit
insurance claim.
Petitioner argues that the transfer of funds
to his account is not deposit splitting
because the transfer took place more than
120 days prior to the closure of the bank;
that as stated in PDIC Regulatory Issuance
No. 2009-03, splitting of deposits occurs
whenever an account is broken down and
transferred into two or more accounts in the
name/s of natural or juridical person/s or
entity/entities who have no beneficial
ownership on transferred deposits in their
names within 120 days immediately
preceding or during bank-declared bank
holiday, or immediately preceding a closure
order issued by the MB of the BSP; and that
he was not informed of the requirement that
the documents proving transfer must be in
the records of the bank at the time of its
closure.5
In its Comment,6 respondent counters that
the joint account of Cornelio and Ligaya was
split and transferred to different persons,
thus, the provisions of PDIC Regulatory
Issuance No. 2009-03, which was published
in the Philippine Star on October 10, 2009,
find application in determining the beneficial
ownership of the resulting deposit accounts;
that the alleged donation was not supported
by documents evidencing transfer of account
in the records of the bank; and that there is
no premium if the splitting of deposit was
done within 120 days preceding a bank
closure, because if an account was split prior
to the 120-day period, PDIC Regulatory
Issuance No. 2009-03 steps in and
determines the beneficial ownership of the
resulting accounts, whereas, if the splitting
of deposit was made within 120 days
preceding the bank closure, the act is a
criminal offense and the director, officer,
employee, or agent of the bank who
facilitated the splitting would be held liable.
In his Reply,7 petitioner contends that the
bank failed to inform him of PDIC Regulatory
Issuance No. 2009-03, thus, the provisions
thereof are not binding upon him; that
requiring the submission of transfer
documents prior to the takeover by PDIC of
the bank violates his constitutional right
against deprivation of property without due
process; and that demanding the transfer
documents to be kept in a particular location
adds another requisite for the validity of
donation.
The Court's Ruling
The petition lacks merit.
The PDIC was created by Republic Act (R.A.)
No. 35918 on June 22, 1963 as an insurer of
deposits in all banks entitled to the benefits
of insurance under the PDIC Charter to
promote and safeguard the interests of the
depositing public by way of providing
permanent and continuing insurance
coverage of all insured deposits.9
Based on its charter, the PDIC has the duty
to grant or deny claims for deposit
insurance. "The term 'insured deposit'
means the amount due to any bona
fide depositor for legitimate deposits in an
insured bank net of any obligation of the
depositor to the insured bank as of the date
of closure, but not to exceed Five Hundred
Thousand Pesos (P500,000.00). x x x In
determining such amount due to any
depositor, there shall be added together all
deposits in the bank maintained in the same
right and capacity for his benefit either in his
own name or in the names of others." 10 To
determine beneficial ownership of legitimate
deposits which are entitled to deposit
insurance, the provisions of PDIC Regulatory
Issuance No. 2009-03 provides:
III. Determination of Beneficial Ownership of
Legitimate Deposits
1. In determining the depositor
entitled to insured deposit
payable by the PDIC, the
registered owner/holder of a
Legitimate Deposit in the books
of the issuing bank shall be
recognized as the depositor
entitled to deposit insurance,
except as otherwise provided by
this Issuance.
2. Where the records of the bank
show that one or several deposit
accounts in the name of one or
several other persons or entities
are maintained in the same right
and capacity for the benefit of a
depositor, PDIC shall recognize
said depositor as the beneficial
owner of the account/s entitled
to deposit insurance.
3. Where a deposit account/s with
an outstanding balance of more
than the maximum deposit
insurance coverage is/are
broken up and transferred to
one or more account/s, PDIC
shall recognize the transferor as
the beneficial owner of the
resulting deposit accounts
entitled to deposit insurance,
unless the transferee/s can
prove that:
a. The break-up and transfer of Legitimate
Deposit was made under all of the
following conditions:
i. The break-up and transfer of
Legitimate Deposit to the transferee
is for a Valid Consideration;
ii. The details or information for the
transfer, which establish the
validity of the transfer from the
transferor to the transferee, are
contained in any of the Deposit
Account Records of the bank; and
iii. Copies of documents, which show
the details or information for the
transfer, such as[,] but not limited
to[,] contracts, agreements, board
resolutions, orders of the courts or
of competent government
body/agency, are in the custody or
possession of the bank upon
takeover by PDIC.
b. He/she is a Qualified Relative of the
transferor, in which case PDIC shall
recognize the transferee as the beneficial
owner of the resulting deposit accounts.
Relationship shall be proven by relevant
documents such as, but not limited to,
birth certificates and marriage
certificates.
II. Definition of Terms
xxxx
f. Qualified Relative - means a relative within
the second degree of consanguinity or
affinity.
Petitioner, however, argues that the
foregoing provisions are not applicable to
him because the transfer did not occur
within 120 days immediately preceding bank
closure as stated in PDIC Regulatory
Issuance No. 2009-03, viz.:
IV. Deposit Splitting
xxxx
3. Elements. The elements of
Deposit Splitting are as follows:
a. Existence of source
account/s in a bank with a
balance or aggregate
balance of more than the
MDIC;
b. There is a break up and
transfer of said account/s
into two or more existing
or new accounts in the
name of another person/s
or entity/entities;
c. The transferee/s have no
Beneficial Ownership over
the transferred funds; and
d. Transfer occurred within
120 days immediately
preceding or during a
bank-declared bank
holiday, or immediately
preceding bank closure.
4. The PDIC shall deem that there
exists Deposit Splitting for the
purpose of availing of the
maximum deposit insurance
coverage when all of these
elements are present.
5. The bank, its directors, officers,
employees, or agents are
prohibited from and shall not in
any way participate or aid in, or
otherwise abet Deposit Splitting
activities as herein defined, nor
shall they promote or encourage
the commission of Deposit
Splitting among the bank's
depositors. The approval by a
bank officer or employee of a
transaction resulting to Deposit
Splitting shall be prima
facie evidence of participation in
Deposit Splitting activities.
Petitioner's argument is erroneous. In
deposit splitting, there is a presumption that
the transferees have no beneficial ownership
considering that the source account, which
exceeded the maximum deposit insurance
coverage, was split into two or more
accounts within 120 days immediately
preceding bank closure. On the other hand,
in cases wherein the transfer into two or
more accounts occurred before the 120-day
period, the PDIC does not discount the
possibility that there may have been a
transfer for valid consideration, but in the
absence of transfer documents found in the
records of the bank at the time of closure,
the presumption arises that the source
account remained with the transferor.
Consequently, even if the transfer into
different accounts was not made within 120
days immediately preceding bank closure,
the grant of deposit insurance to an account
found to have originated from another
deposit is not automatic because the
transferee still has to prove that the transfer
was for a valid consideration through
documents kept in the custody of the bank.
In this case, even assuming that Cornelio
donated the amount contained in the subject
savings account to petitioner, not one
document evidencing the alleged donation is
in the custody or possession of the bank
upon takeover by PDIC. Thus, the PDIC
properly relied on the records of the bank
which showed that Cornelio's accounts
remained in his name and for his account.
Moreover, even if the Court disregards the
submission of transfer documents, petitioner
could not be considered the beneficial owner
of the resulting deposit account because he
is not a qualified relative of the transferor.
Being the son of Cornelio's cousin, petitioner
is already a fifth degree relative of the
transferor,11 far from the requirement that
the transferee must be a relative within the
second degree of consanguinity or affinity.

As regards petitioner's contention that the

provisions of PDIC Regulatory Issuance No.
2009-03 do not apply to him because he
was not personally notified of the contents
thereof by CRBBI, the same deserves scant
consideration. Ignorantia legis non
excusat remains a valid dictum. Here, it is
settled that PDIC Regulatory Issuance No.
2009-03 was published in a newspaper of
general circulation. Hence, the publication
operated as constructive notice to all owners
of bank deposits. Personal notice to all
citizens of promulgated laws and regulations
is not required.

Considering the above disquisitions, it is

sufficiently established that the PDIC did not
commit any grave abuse of discretion in
denying petitioner's claim for deposit
insurance.

WHEREFORE, the petition is DENIED. The

March 31, 2016 Decision and the December
19, 2016 Resolution of the Court of Appeals
in CA-G.R. SP No. 137172 are AFFIRMED.

SO ORDERED.

Carpio, Senior Associate Justice

(Chairperson), Perlas-Bernabe, Caguioa,
and Hernando,*JJ., concur.