Facts:
Spouses
Rodriguez maintained a savings and demand/checking accounts with petitioners
Philippines National Bank (PNB). They were engaged in the informal lending
business and had a discounting arrangement with the Philnabank Employees
Savings and Loan Association (PEMSLA), an association of PNB employees, which
likewise maintained current and savings accounts with petitioner bank. PEMSLA
regularly granted loans to its members. Spouses Rodriguez would rediscount the
postdated checks issued to members whenever the association was short of funds.
As was customary, the spouses would replace the postdated checks with their own
checks issued in the name of the members.
It was
PEMSLA’s policy not to approve applications for loans of members with
outstanding debts. To subvert this policy, some PEMSLA officers devised a
scheme to obtain additional loans despite their outstanding loan accounts. They
took out loans in the names of unknowing members, without the knowledge or
consent of the latter. The PEMSLA checks issued for these loans were then given
to the spouses for rediscounting. The officers carried this out by forging the
indorsement of the named payees in the checks. In return, the spouses issued
their personal checks (Rodriguez checks) in the name of the members and
delivered the checks to an officer of PEMSLA. The PEMSLA checks, on the other
hand, were deposited by the spouses to their account. Meanwhile, the Rodriguez
checks were deposited directly by PEMSLA to its savings account without any
indorsement from the named payees. This usual irregular procedure is made
possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA
and bank teller in the PNB Branch.
The
spouses issued 69 checks, in the total amount of P2,345,804.00,
payable to 47 members of PEMSLA. After finding out such fraudulent act, PNB
closed the current account of PEMSLA. As a result, the PEMSLA checks deposited
by the spouses were returned or dishonored for the reason “Account Closed.” The
corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA
savings account. The amounts were duly debited from the Rodriguez account.
Thus, because the PEMSLA checks given as payment were returned, spouses
Rodriguez incurred losses from the rediscounting transactions. Spouses
Rodriguez sued PEMSLA and PNB. They contended that because PNB credited the
checks to the PEMSLA account even without indorsements, PNB violated its
contractual obligation to them as depositors. PNB paid the wrong payees; hence,
it should bear the loss. Trial court ruled in favor of spouses and ordered PNB
to pay. CA affirmed the decision. Hence this petition
Issue:
1.
Whether
or not the 69 checks are payable to order.
2.
Whether
or not PNB is liable.
Ruling:
1.
Yes.
As a rule, when the payee is
fictitious or not intended to be the true recipient of the proceeds, the check
is considered as bearer instrument. A check is a bill of exchange drawn on a
bank payable on demand. It is either an order or bearer instrument (Section 8
and 9 of the NIL).
The
distinction between bearer and order instruments lies in their manner of
negotiation. Under Section 30 of the NIL, an order instrument requires an
indorsement from the payee or holder before it may be validly negotiated. A
bearer instrument, on the other hand, does not require an indorsement to be
validly negotiated. It is negotiable by mere delivery.
A check
that is payable to a specified payee is an order instrument. However, under
Section 9(c) of the NIL, a check payable to a specified payee may nevertheless
be considered as a bearer instrument if it is payable to the order of a
fictitious or non-existing person, and such fact is known to the person making
it so payable.
US
jurisprudence yields that an actual, existing, and living payee may also be
fictitious if the maker of the check did not intend for the payee to in fact
receive the proceeds of the check and the check is a bearer instrument. The
bank, as drawee, was authorized to make payment to the bearer of the check,
regardless of whether prior indorsements were genuine or not.
In a
fictitious-payee situation, the drawee bank is absolved from liability and the
drawer bears the loss. The underlying theory is that one cannot expect a
fictitious payee to negotiate the check by placing his indorsement thereon.
2.
Yes.
However, there is a commercial bad faith exception to
the fictitious-payee rule. A showing of commercial bad faith on the part of the
drawee bank, or any transferee of the check for that matter, will work to strip
it of this defense. The exception will cause it to bear the loss. Commercial
bad faith is present if the transferee of the check acts dishonestly, and is a
party to the fraudulent scheme.
For the fictitious-payee rule
to be available
as a defense,
PNB must show that
the makers did
not intend for
the named payees to be part of the transaction involving the checks. At
most, the banks thesis shows that the payees did not have knowledge of the
existence of the checks. This lack of knowledge on the part of the payees,
however, was not tantamount to a lack
of intention on
the part of
respondents-spouses that the
payees would not receive
the checks proceeds.
Considering that
respondents-spouses were transacting
with PEMSLA and
not the individual payees, it is
understandable that they relied on the information given by the officers of
PEMSLA that the payees would be receiving the checks.
Respondents-spouses were the banks depositors. The
checks were drawn against respondents-spouses accounts. PNB, as the drawee
bank, had the responsibility to ascertain the regularity of the indorsements,
and the genuineness of the signatures on the checks before accepting them for
deposit. Lastly, PNB was obligated to pay the checks in strict accordance with
the instructions of the drawers. Petitioner miserably failed to discharge this
burden.
Bank that has
been remiss in
its duty must
suffer the consequences
of its negligence.
Being issued to named payees, PNB was duty-bound by law and
by banking rules and procedure to require that the checks be properly indorsed
before accepting them for deposit and payment. In fine, PNB should be held
liable for the amounts of the checks.
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