Philippine Commercial and International Bank vs. Court of Appeals

• G.R. No. 121413. January 29, 2001. – Philippine Commercial International Bank (Formerly Insular Bank Of Asia And America) Vs. Court Of Appeals And Ford Philippines, Inc. And Citibank,
• G.R. No. 121479. January 29, 2001. – Ford Philippines, Inc., Vs. Court Of Appeals And Citibank, N.A. And Philippine Commercial International Bank.
• G.R. No. 128604. January 29, 2001 – Ford Philippines, Inc., Vs. Citibank, N.A., Philippine Commercial International Bank And The Court Of Appeals.

FACTS:

This case is composed of three consolidated petitions involving several checks, payable to the Bureau of Internal Revenue, but was embezzled allegedly by an organized syndicate.

G.R. Nos. 121413 and 121479

Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41 in favor of the Commissioner of Internal Revenue (BIR/CIR) for payment of manufacturer’s taxes. The Check was deposited to PCIB and was subsequently cleared at the Central Bank.

The check was presented to Citibank, the proceeds of the check was paid to PCIB as collecting or depository bank. However, the proceeds never reached BIR, so plaintiff was compelled to make a second payment. Ford demanded for reimbursement from PCIB

Defendant refused to reimburse plaintiff, and so the latter filed a complaint.  An investigation of NBI revealed that the check was recalled by Godofredo Rivera, the general ledger accountant of Ford. He purportedly needed to hold back the check because there was an error in the computation of the tax due to the Bureau of Internal Revenue (BIR). PCIBank replaced the check with two of its own Managers check. Alleged members of a syndicate deposited the two manager’s checks with Pacific Banking Corporation (PBC).

Ford filed a third party complaint against Rivera and PBC. The case against PBC was dismissed. The case against Rivera was likewise dismissed because summons could not be served. The trial court held Citibank and PCIB jointly and severally liable to Ford.

The Court of Appeals modified the decision of RTC and only held PCIB liable.

G.R. No. 128604

On another case, Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payee’s account only. The checks never reached BIR, so plaintiff was compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank. On investigation of NBI, the modus operandi of the syndicate was discovered.

Gorofredo Rivera made the checks but instead of delivering them to BIR, passed it to Remberto Castro, who was the manager of PCIB San Andres. Castro opened a checking account in the name of a fictitious person “Reynaldo Reyes”. Castro deposited a worthless Bank of America check with the same amount as that issued by Ford. While being routed to the Central Bank for clearing, the worthless check was replaced by the genuine one from Ford.

ISSUE:

Whether or not petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue?

HELD:

G.R. Nos. 121413 and 121479

Since the questioned crossed check was deposited with PCIBank, which claimed to be a depository/collecting bank of the BIR, it had the responsibility to make sure that the check in question is deposited in Payee’s account only.

Indeed, the crossing of the check with the phrase “Payee’s Account Only,” is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee’s account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement “all prior indorsements and/or lack of indorsement guaranteed.”

G.R. No. 128604

PCIB and Citibank are both  negligent in the performance of their duties.

Citibank must likewise answer for the damages incurred by Ford on Citibank Checks Numbers SN-10597 and 16508, because of the contractual relationship existing between the two. Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. On this score, we agree with the respondent court’s ruling.

Thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN-10597 and 16508. Banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence.A bank’s liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment.

Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and diligence find therein, serves to mitigate the banks’ liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As

In the case, there is a defect on the title of the person negotiating the instrument because it was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. The direct perpetrators of the offense, namely the embezzlers belonging to a syndicate, are now fugitives from justice.

On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances.

Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent.

It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an agreement to the contrary, that of principal and agent. A bank which receives such paper for collection is the agent of the payee or holder.