G.R. No.

133179               March 27, 2008 and accrual of interest is not suspended by it. (Emphasis
supplied.)
ALLIED BANKING CORPORATION, Petitioner,
vs. Same; Proximate Cause; Words and Phrases; Proximate cause
LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and is “that cause, which, in natural and continuous sequence,
PRODUCERS BANK, Respondents. unbroken by any efficient intervening cause, produces the
injury and without which the result would not have
occurred”; To determine the proximate cause of a
controversy, the question that needs to be asked is: If the
(Case Note) event did not happen, would the injury have resulted? If the
answer is NO, then the event is the proximate cause.—
Proximate cause is “that cause, which, in natural and
Banks and Banking; Fundamental and familiar is the doctrine continuous sequence, unbroken by any efficient intervening
that the relationship between a bank and a client is one of cause, produces the injury and without which the result
debtor-creditor.—As to the liability of the parties, we find would not have occurred.” Thus, there is an efficient
that Allied is liable to Lim Sio Wan. Fundamental and familiar supervening event if the event breaks the sequence leading
is the doctrine that the relationship between a bank and a from the cause to the ultimate result. To determine the
client is one of debtor-creditor. Articles 1953 and 1980 of the proximate cause of a controversy, the question that needs to
Civil Code provide: Art. 1953. A person who receives a loan of be asked is: If the event did not happen, would the injury
money or any other fungible thing acquires the ownership have resulted? If the answer is NO, then the event is the
thereof, and is bound to pay to the creditor an equal amount proximate cause.
of the same kind and quality. Art. 1980. Fixed, savings, and
current deposits of money in banks and similar institutions
shall be governed by the provisions concerning simple loan. Same; Negotiable Instruments; Checks; An exception to the
rule that the collecting bank which indorses a check bearing a
forged indorsement and presents it to the drawee bank
Same; Money Market Transactions; Words and Phrases; A guarantees all prior indorsements, including the forged
money market is a market dealing in standardized short-term indorsement itself, and ultimately should be held liable
credit instruments (involving large amounts) where lenders therefor is when the issuance of the check itself was attended
and borrowers do not deal directly with each other but with negligence.—The warranty “that the instrument is
through a middle man or dealer in open market—in a money genuine and in all respects what it purports to be” covers all
market transaction, the investor is a lender who loans his the defects in the instrument affecting the validity thereof,
money to a borrower through a middleman or dealer; The including a forged indorsement. Thus, the last indorser will be
creditor of the bank for her money market placement is liable for the amount indicated in the negotiable instrument
entitled to payment upon her request, or upon the maturity even if a previous indorsement was forged. We held in a line
of the placement, or until the bank is released from its of cases that “a collecting bank which indorses a check
obligation as debtor.—We have ruled in a line of cases that a bearing a forged indorsement and presents it to the drawee
bank deposit is in the nature of a simple loan or mutuum. bank guarantees all prior indorsements, including the forged
More succinctly, in Citibank, N.A. (Formerly First National indorsement itself, and ultimately should be held liable
City Bank) v. Sabeniano, 504 SCRA 378 (2006), this Court ruled therefor.” However, this general rule is subject to
that a money market placement is a simple loan or mutuum. exceptions. One such exception is when the issuance of the
Further, we defined a money market in Cebu International check itself was attended with negligence. Thus, in the cases
Finance Corporation v. Court of Appeals, 316 SCRA 488 cited above where the collecting bank is generally held liable,
(1999), as follows: [A] money market is a market dealing in in two of the cases where the checks were negligently issued,
standardized short-term credit instruments (involving large this Court held the institution issuing the check just as liable
amounts) where lenders and borrowers do not deal directly as or more liable than the collecting bank.
with each other but through a middle man or dealer in open
market. In a money market transaction, the investor is a
lender who loans his money to a borrower through a Same; Same; Same; Given the relative participation of two
middleman or dealer. In the case at bar, the money market banks to the instant case, both banks cannot be adjudged as
transaction between the petitioner and the private equally liable—hence, the 60:40 ratio of the liabilities.—In the
respondent is in the nature of a loan. Lim Sio Wan, as creditor instant case, the trial court correctly found Allied negligent in
of the bank for her money market placement, is entitled to issuing the manager’s check and in transmitting it to Santos
payment upon her request, or upon maturity of the without even a written authorization. In fact, Allied did not
placement, or until the bank is released from its obligation as even ask for the certificate evidencing the money market
debtor. Until any such event, the obligation of Allied to Lim placement or call up Lim Sio Wan at her residence or office to
Sio Wan remains unextinguished. confirm her instructions. Both actions could have prevented
the whole fraudulent transaction from unfolding. Allied’s
negligence must be considered as the proximate cause of the
Same; Same; Payment made by the debtor to a wrong party resulting loss. To reiterate, had Allied exercised the diligence
does not extinguish the obligation as to the creditor, if there due from a financial institution, the check would not have
is no fault or negligence which can be imputed to the latter.— been issued and no loss of funds would have resulted. In fact,
From the factual findings of the trial and appellate courts there would have been no issuance of indorsement had there
that Lim Sio Wan did not authorize the release of her money been no check in the first place. The liability of Allied,
market placement to Santos and the bank had been negligent however, is concurrent with that of Metrobank as the last
in so doing, there is no question that the obligation of Allied indorser of the check. When Metrobank indorsed the check in
to pay Lim Sio Wan had not been extinguished. Art. 1240 of compliance with the PCHC Rules and Regulations without
the Code states that “payment shall be made to the person in verifying the authenticity of Lim Sio Wan’s indorsement and
whose favor the obligation has been constituted, or his when it accepted the check despite the fact that it was cross-
successor in interest, or any person authorized to receive it.” checked payable to payee’s account only, its negligent and
As commented by Arturo Tolentino: Payment made by the cavalier indorsement contributed to the easier release of Lim
debtor to a wrong party does not extinguish the obligation as Sio Wan’s money and perpetuation of the fraud. Given the
to the creditor, if there is no fault or negligence which can be relative participation of Allied and Metrobank to the instant
imputed to the latter. Even when the debtor acted in utmost case, both banks cannot be adjudged as equally liable.
good faith and by mistake as to the person of his creditor, or Hence, the 60:40 ratio of the liabilities of Allied and
through error induced by the fraud of a third person, the Metrobank, as ruled by the CA, must be upheld.
payment to one who is not in fact his creditor, or authorized
to receive such payment, is void, except as provided in
Article 1241. Such payment does not prejudice the creditor, Same; Quasi-Delicts; Art. 2180 of the Civil Code pertains to
the vicarious liability of an employer for quasi-delicts that an
employee has committed—such provision of law does not Deborah Dee Santos who would pick up the check. 5 Lim Sio
apply to civil liability arising from delict.—As to Producers Wan described the appearance of Santos so that So could
Bank, Allied Bank’s argument that Producers Bank must be easily identify her.6
held liable as employer of Santos under Art. 2180 of the Civil
Code is erroneous. Art. 2180 pertains to the vicarious liability Later, Santos arrived at the bank and signed the application
of an employer for quasi-delicts that an employee has form for a manager’s check to be issued. 7 The bank issued
committed. Such provision of law does not apply to civil Manager’s Check No. 035669 for PhP 1,158,648.49,
liability arising from delict. One also cannot apply the representing the proceeds of Lim Sio Wan’s money market
principle of subsidiary liability in Art. 103 of the Revised placement in the name of Lim Sio Wan, as payee. 8 The check
Penal Code in the instant case. Such liability on the part of was cross-checked "For Payee’s Account Only" and given to
the employer for the civil aspect of the criminal act of the Santos.9
employee is based on the conviction of the employee for a
crime. Here, there has been no conviction for any crime. Thereafter, the manager’s check was deposited in the
account of Filipinas Cement Corporation (FCC) at respondent
Same; Unjust Enrichment; Words and Phrases; There is unjust Metropolitan Bank and Trust Co. (Metrobank), 10 with the
enrichment when a person unjustly retains a benefit to the forged signature of Lim Sio Wan as indorser.11
loss of another, or when a person retains money or property
of another against the fundamental principles of justice, Earlier, on September 21, 1983, FCC had deposited a money
equity and good conscience.—As to the claim that there was market placement for PhP 2 million with respondent
unjust enrichment on the part of Producers Bank, the same is Producers Bank. Santos was the money market trader assigned
correct. Allied correctly claims in its petition that Producers to handle FCC’s account.12 Such deposit is evidenced by
Bank should reimburse Allied for whatever judgment that may Official Receipt No. 31756813 and a Letter dated September
be rendered against it pursuant to Art. 22 of the Civil Code, 21, 1983 of Santos addressed to Angie Lazo of FCC,
which provides: “Every person who through an act of acknowledging receipt of the placement.14 The placement
performance by another, or any other means, acquires or matured on October 25, 1983 and was rolled-over until
comes into possession of something at the expense of the December 5, 1983 as evidenced by a Letter dated October 25,
latter without just cause or legal ground, shall return the 1983.15 When the placement matured, FCC demanded the
same to him.” The above provision of law was clarified in payment of the proceeds of the placement. 16 On December 5,
Reyes v. Lim, 408 SCRA 560 (2003), where we ruled that 1983, the same date that So received the phone call
“[t]here is unjust enrichment when a person unjustly retains a instructing her to pre-terminate Lim Sio Wan’s placement,
benefit to the loss of another, or when a person retains the manager’s check in the name of Lim Sio Wan was
money or property of another against the fundamental deposited in the account of FCC, purportedly representing the
principles of justice, equity and good conscience.” In Tamio proceeds of FCC’s money market placement with Producers
v. Ticson, 443 SCRA 44 (2004), we further clarified the Bank.17 In other words, the Allied check was deposited with
principle of unjust enrichment, thus: “Under Article 22 of the Metrobank in the account of FCC as Producers Bank’s payment
Civil Code, there is unjust enrichment when (1) a person is of its obligation to FCC.
unjustly benefited, and (2) such benefit is derived at the
expense of or with damages to another.” Allied Banking
Corporation vs. Lim Sio Wan, 549 SCRA 504, G.R. No. 133179 To clear the check and in compliance with the requirements
March 27, 2008 of the Philippine Clearing House Corporation (PCHC) Rules and
Regulations, Metrobank stamped a guaranty on the check,
which reads: "All prior endorsements and/or lack of
DECISION endorsement guaranteed."18

VELASCO, JR., J.: The check was sent to Allied through the PCHC. Upon the
presentment of the check, Allied funded the check even
To ingratiate themselves to their valued depositors, some without checking the authenticity of Lim Sio Wan’s purported
banks at times bend over backwards that they unwittingly indorsement. Thus, the amount on the face of the check was
expose themselves to great risks. credited to the account of FCC.19

The Case On December 9, 1983, Lim Sio Wan deposited with Allied a
second money market placement to mature on January 9,
This Petition for Review on Certiorari under Rule 45 seeks to 1984.20
reverse the Court of Appeals’ (CA’s) Decision promulgated on
March 18, 19981 in CA-G.R. CV No. 46290 entitled Lim Sio Wan On December 14, 1983, upon the maturity date of the first
v. Allied Banking Corporation, et al. The CA Decision modified money market placement, Lim Sio Wan went to Allied to
the Decision dated November 15, 1993 2 of the Regional Trial withdraw it.21 She was then informed that the placement had
Court (RTC), Branch 63 in Makati City rendered in Civil Case been pre-terminated upon her instructions. She denied giving
No. 6757. any instructions and receiving the proceeds thereof. She
desisted from further complaints when she was assured by the
The Facts bank’s manager that her money would be recovered.22

The facts as found by the RTC and affirmed by the CA are as When Lim Sio Wan’s second placement matured on January 9,
follows: 1984, So called Lim Sio Wan to ask for the latter’s instructions
on the second placement. Lim Sio Wan instructed So to roll-
On November 14, 1983, respondent Lim Sio Wan deposited over the placement for another 30 days. 23 On January 24,
with petitioner Allied Banking Corporation (Allied) at its 1984, Lim Sio Wan, realizing that the promise that her money
Quintin Paredes Branch in Manila a money market placement would be recovered would not materialize, sent a demand
of PhP 1,152,597.35 for a term of 31 days to mature on letter to Allied asking for the payment of the first
December 15, 1983, 3 as evidenced by Provisional Receipt No. placement.24 Allied refused to pay Lim Sio Wan, claiming that
1356 dated November 14, 1983.4 the latter had authorized the pre-termination of the
placement and its subsequent release to Santos.25
On December 5, 1983, a person claiming to be Lim Sio Wan
called up Cristina So, an officer of Allied, and instructed the Consequently, Lim Sio Wan filed with the RTC a Complaint
latter to pre-terminate Lim Sio Wan’s money market dated February 13, 198426 docketed as Civil Case No. 6757
placement, to issue a manager’s check representing the against Allied to recover the proceeds of her first money
proceeds of the placement, and to give the check to one
market placement. Sometime in February 1984, she withdrew SO ORDERED.37
her second placement from Allied.
Hence, Allied filed the instant petition.
Allied filed a third party complaint27 against Metrobank and
Santos. In turn, Metrobank filed a fourth party The Issues
complaint28 against FCC. FCC for its part filed a fifth party
complaint29 against Producers Bank. Summonses were duly Allied raises the following issues for our consideration:
served upon all the parties except for Santos, who was no
longer connected with Producers Bank.30
The Honorable Court of Appeals erred in holding that Lim Sio
Wan did not authorize [Allied] to pre-terminate the initial
On May 15, 1984, or more than six (6) months after funding placement and to deliver the check to Deborah Santos.
the check, Allied informed Metrobank that the signature on
the check was forged.31 Thus, Metrobank withheld the amount
represented by the check from FCC. Later on, Metrobank The Honorable Court of Appeals erred in absolving Producers
agreed to release the amount to FCC after the latter Bank of any liability for the reimbursement of amount
executed an Undertaking, promising to indemnify Metrobank adjudged demandable.
in case it was made to reimburse the amount.32
The Honorable Court of Appeals erred in holding [Allied]
Lim Sio Wan thereafter filed an amended complaint to include liable to the extent of 60% of amount adjudged demandable
Metrobank as a party-defendant, along with Allied. 33 The RTC in clear disregard to the ultimate liability of Metrobank as
admitted the amended complaint despite the opposition of guarantor of all endorsement on the check, it being the
Metrobank.34 Consequently, Allied’s third party complaint collecting bank.38
against Metrobank was converted into a cross-claim and the
latter’s fourth party complaint against FCC was converted The petition is partly meritorious.
into a third party complaint.35
A Question of Fact
After trial, the RTC issued its Decision, holding as follows:
Allied questions the finding of both the trial and appellate
WHEREFORE, judgment is hereby rendered as follows: courts that Allied was not authorized to release the proceeds
of Lim Sio Wan’s money market placement to Santos. Allied
1. Ordering defendant Allied Banking Corporation to clearly raises a question of fact. When the CA affirms the
pay plaintiff the amount of P1,158,648.49 plus 12% findings of fact of the RTC, the factual findings of both courts
interest per annum from March 16, 1984 until fully are binding on this Court.39
paid;
We also agree with the CA when it said that it could not
2. Ordering defendant Allied Bank to pay plaintiff the disturb the trial court’s findings on the credibility of witness
amount of P100,000.00 by way of moral damages; So inasmuch as it was the trial court that heard the witness
and had the opportunity to observe closely her deportment
and manner of testifying. Unless the trial court had plainly
3. Ordering defendant Allied Bank to pay plaintiff the overlooked facts of substance or value, which, if considered,
amount of P173,792.20 by way of attorney’s fees; might affect the result of the case, 40 we find it best to defer
and, to the trial court on matters pertaining to credibility of
witnesses.
4. Ordering defendant Allied Bank to pay the costs of
suit. Additionally, this Court has held that the matter of negligence
is also a factual question. 41 Thus, the finding of the RTC,
Defendant Allied Bank’s cross-claim against defendant affirmed by the CA, that the respective parties were
Metrobank is DISMISSED. negligent in the exercise of their obligations is also conclusive
upon this Court.
Likewise defendant Metrobank’s third-party complaint as
against Filipinas Cement Corporation is DISMISSED. The Liability of the Parties

Filipinas Cement Corporation’s fourth-party complaint against As to the liability of the parties, we find that Allied is liable
Producer’s Bank is also DISMISSED. to Lim Sio Wan. Fundamental and familiar is the doctrine that
the relationship between a bank and a client is one of debtor-
SO ORDERED.36 creditor.

The Decision of the Court of Appeals Articles 1953 and 1980 of the Civil Code provide:

Allied appealed to the CA, which in turn issued the assailed Art. 1953. A person who receives a loan of money or any other
Decision on March 18, 1998, modifying the RTC Decision, as fungible thing acquires the ownership thereof, and is bound
follows: to pay to the creditor an equal amount of the same kind and
quality.
WHEREFORE, premises considered, the decision appealed
from is MODIFIED. Judgment is rendered ordering and Art. 1980. Fixed, savings, and current deposits of money in
sentencing defendant-appellant Allied Banking Corporation to banks and similar institutions shall be governed by the
pay sixty (60%) percent and defendant-appellee Metropolitan provisions concerning simple loan.
Bank and Trust Company forty (40%) of the amount of
P1,158,648.49 plus 12% interest per annum from March 16, Thus, we have ruled in a line of cases that a bank deposit is in
1984 until fully paid. The moral damages, attorney’s fees and the nature of a simple loan or mutuum.42 More succinctly, in
costs of suit adjudged shall likewise be paid by defendant- Citibank, N.A. (Formerly First National City Bank) v.
appellant Allied Banking Corporation and defendant-appellee Sabeniano, this Court ruled that a money market placement is
Metropolitan Bank and Trust Company in the same proportion a simple loan or mutuum.43 Further, we defined a money
of 60-40. Except as thus modified, the decision appealed from market in Cebu International Finance Corporation v. Court of
is AFFIRMED. Appeals, as follows:
[A] money market is a market dealing in standardized short- Failure on the part of the collecting bank to ensure that the
term credit instruments (involving large amounts) where proceeds of the check is paid to the proper party is, aside
lenders and borrowers do not deal directly with each other from being an efficient intervening cause, also the last
but through a middle man or dealer in open market. In a negligent act, x x x contributory to the injury caused in the
money market transaction, the investor is a lender who loans present case, which thereby leads to the conclusion that it is
his money to a borrower through a middleman or dealer. the collecting bank, Metrobank that is the proximate cause of
the alleged loss of the plaintiff in the instant case. 46
In the case at bar, the money market transaction between the
petitioner and the private respondent is in the nature of a We are not persuaded.
loan.44
Proximate cause is "that cause, which, in natural and
Lim Sio Wan, as creditor of the bank for her money market continuous sequence, unbroken by any efficient intervening
placement, is entitled to payment upon her request, or upon cause, produces the injury and without which the result
maturity of the placement, or until the bank is released from would not have occurred."47 Thus, there is an efficient
its obligation as debtor. Until any such event, the obligation supervening event if the event breaks the sequence leading
of Allied to Lim Sio Wan remains unextinguished. from the cause to the ultimate result. To determine the
proximate cause of a controversy, the question that needs to
Art. 1231 of the Civil Code enumerates the instances when be asked is: If the event did not happen, would the injury
obligations are considered extinguished, thus: have resulted? If the answer is NO, then the event is the
proximate cause.
Art. 1231. Obligations are extinguished:
In the instant case, Allied avers that even if it had not issued
(1) By payment or performance; the check payment, the money represented by the check
would still be lost because of Metrobank’s negligence in
indorsing the check without verifying the genuineness of the
(2) By the loss of the thing due; indorsement thereon.

(3) By the condonation or remission of the debt; Section 66 in relation to Sec. 65 of the Negotiable Instruments
Law provides:
(4) By the confusion or merger of the rights of
creditor and debtor; Section 66. Liability of general indorser.—Every indorser who
indorses without qualification, warrants to all subsequent
(5) By compensation; holders in due course;

(6) By novation. a) The matters and things mentioned in subdivisions

(a), (b) and (c) of the next preceding section; and
Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory condition, b) That the instrument is at the time of his
and prescription, are governed elsewhere in this Code. indorsement valid and subsisting;
(Emphasis supplied.)
And in addition, he engages that on due presentment, it shall
From the factual findings of the trial and appellate courts be accepted or paid, or both, as the case may be according to
that Lim Sio Wan did not authorize the release of her money its tenor, and that if it be dishonored, and the necessary
market placement to Santos and the bank had been negligent proceedings on dishonor be duly taken, he will pay the
in so doing, there is no question that the obligation of Allied amount thereof to the holder, or to any subsequent indorser
to pay Lim Sio Wan had not been extinguished. Art. 1240 of who may be compelled to pay it.
the Code states that "payment shall be made to the person in
whose favor the obligation has been constituted, or his Section 65. Warranty where negotiation by delivery, so forth.
successor in interest, or any person authorized to receive it." —Every person negotiating an instrument by delivery or by a
As commented by Arturo Tolentino: qualified indorsement, warrants:

Payment made by the debtor to a wrong party does not a) That the instrument is genuine and in all respects
extinguish the obligation as to the creditor, if there is no what it purports to be;
fault or negligence which can be imputed to the latter. Even
when the debtor acted in utmost good faith and by mistake as
to the person of his creditor, or through error induced by the b) That he has a good title of it;
fraud of a third person, the payment to one who is not in fact
his creditor, or authorized to receive such payment, is void, c) That all prior parties had capacity to contract;
except as provided in Article 1241. Such payment does not
prejudice the creditor, and accrual of interest is not d) That he has no knowledge of any fact which would
suspended by it.45 (Emphasis supplied.) impair the validity of the instrument or render it
valueless.
Since there was no effective payment of Lim Sio Wan’s money
market placement, the bank still has an obligation to pay her But when the negotiation is by delivery only, the warranty
at six percent (6%) interest from March 16, 1984 until the extends in favor of no holder other than the immediate
payment thereof. transferee.

We cannot, however, say outright that Allied is solely liable The provisions of subdivision (c) of this section do not apply
to Lim Sio Wan. to persons negotiating public or corporation securities, other
than bills and notes. (Emphasis supplied.)
Allied claims that Metrobank is the proximate cause of the
loss of Lim Sio Wan’s money. It points out that Metrobank The warranty "that the instrument is genuine and in all
guaranteed all prior indorsements inscribed on the manager’s respects what it purports to be" covers all the defects in the
check, and without Metrobank’s guarantee, the present instrument affecting the validity thereof, including a forged
controversy would never have occurred. According to Allied: indorsement. Thus, the last indorser will be liable for the
amount indicated in the negotiable instrument even if a The collecting bank, Associated Bank, shall be liable to PNB
previous indorsement was forged. We held in a line of cases for fifty (50%) percent of P203,300.00. It is liable on its
that "a collecting bank which indorses a check bearing a warranties as indorser of the checks which were deposited by
forged indorsement and presents it to the drawee bank Fausto Pangilinan, having guaranteed the genuineness of all
guarantees all prior indorsements, including the forged prior indorsements, including that of the chief of the payee
indorsement itself, and ultimately should be held liable hospital, Dr. Adena Canlas. Associated Bank was also remiss in
therefor."48 its duty to ascertain the genuineness of the payee’s
indorsement.53
However, this general rule is subject to exceptions. One such
exception is when the issuance of the check itself was A reading of the facts of the two immediately preceding cases
attended with negligence. Thus, in the cases cited above would reveal that the reason why the bank or institution
where the collecting bank is generally held liable, in two of which issued the check was held partially liable for the
the cases where the checks were negligently issued, this amount of the check was because of the negligence of these
Court held the institution issuing the check just as liable as or parties which resulted in the issuance of the checks.
more liable than the collecting bank.
In the instant case, the trial court correctly found Allied
In isolated cases where the checks were deposited in an negligent in issuing the manager’s check and in transmitting it
account other than that of the payees on the strength of to Santos without even a written authorization. 54 In fact,
forged indorsements, we held the collecting bank solely liable Allied did not even ask for the certificate evidencing the
for the whole amount of the checks involved for having money market placement or call up Lim Sio Wan at her
indorsed the same. In Republic Bank v. Ebrada, 49 the check residence or office to confirm her instructions. Both actions
was properly issued by the Bureau of Treasury. While in Banco could have prevented the whole fraudulent transaction from
de Oro Savings and Mortgage Bank (Banco de Oro) v. Equitable unfolding. Allied’s negligence must be considered as the
Banking Corporation,50 Banco de Oro admittedly issued the proximate cause of the resulting loss.
checks in the name of the correct payees. And in Traders
Royal Bank v. Radio Philippines Network, Inc., 51 the checks To reiterate, had Allied exercised the diligence due from a
were issued at the request of Radio Philippines Network, Inc. financial institution, the check would not have been issued
from Traders Royal Bank.1avvphi1 and no loss of funds would have resulted. In fact, there would
have been no issuance of indorsement had there been no
However, in Bank of the Philippine Islands v. Court of check in the first place.
Appeals, we said that the drawee bank is liable for 60% of the
amount on the face of the negotiable instrument and the The liability of Allied, however, is concurrent with that of
collecting bank is liable for 40%. We also noted the relative Metrobank as the last indorser of the check. When Metrobank
negligence exhibited by two banks, to wit: indorsed the check in compliance with the PCHC Rules and
Regulations55 without verifying the authenticity of Lim Sio
Both banks were negligent in the selection and supervision of Wan’s indorsement and when it accepted the check despite
their employees resulting in the encashment of the forged the fact that it was cross-checked payable to payee’s account
checks by an impostor. Both banks were not able to overcome only,56 its negligent and cavalier indorsement contributed to
the presumption of negligence in the selection and the easier release of Lim Sio Wan’s money and perpetuation
supervision of their employees. It was the gross negligence of of the fraud. Given the relative participation of Allied and
the employees of both banks which resulted in the fraud and Metrobank to the instant case, both banks cannot be
the subsequent loss. While it is true that petitioner BPI’s adjudged as equally liable. Hence, the 60:40 ratio of the
negligence may have been the proximate cause of the loss, liabilities of Allied and Metrobank, as ruled by the CA, must
respondent CBC’s negligence contributed equally to the be upheld.
success of the impostor in encashing the proceeds of the
forged checks. Under these circumstances, we apply Article FCC, having no participation in the negotiation of the check
2179 of the Civil Code to the effect that while respondent and in the forgery of Lim Sio Wan’s indorsement, can raise
CBC may recover its losses, such losses are subject to the real defense of forgery as against both banks. 57
mitigation by the courts. (See Phoenix Construction Inc. v.
Intermediate Appellate Courts, 148 SCRA 353 [1987]). As to Producers Bank, Allied Bank’s argument that Producers
Bank must be held liable as employer of Santos under Art.
Considering the comparative negligence of the two (2) banks, 2180 of the Civil Code is erroneous. Art. 2180 pertains to the
we rule that the demands of substantial justice are satisfied vicarious liability of an employer for quasi-delicts that an
by allocating the loss of P2,413,215.16 and the costs of the employee has committed. Such provision of law does not
arbitration proceeding in the amount of P7,250.00 and the apply to civil liability arising from delict.
cost of litigation on a 60-40 ratio.52
One also cannot apply the principle of subsidiary liability in
Similarly, we ruled in Associated Bank v. Court of Appeals Art. 103 of the Revised Penal Code in the instant case. Such
that the issuing institution and the collecting bank should liability on the part of the employer for the civil aspect of the
equally share the liability for the loss of amount represented criminal act of the employee is based on the conviction of the
by the checks concerned due to the negligence of both employee for a crime. Here, there has been no conviction for
parties: any crime.

The Court finds as reasonable, the proportionate sharing of As to the claim that there was unjust enrichment on the part
fifty percent-fifty percent (50%-50%). Due to the negligence of Producers Bank, the same is correct. Allied correctly claims
of the Province of Tarlac in releasing the checks to an in its petition that Producers Bank should reimburse Allied for
unauthorized person (Fausto Pangilinan), in allowing the whatever judgment that may be rendered against it pursuant
retired hospital cashier to receive the checks for the payee to Art. 22 of the Civil Code, which provides: "Every person
hospital for a period close to three years and in not properly who through an act of performance by another, or any other
ascertaining why the retired hospital cashier was collecting means, acquires or comes into possession of something at the
checks for the payee hospital in addition to the hospital’s real expense of the latter without just cause or legal ground, shall
cashier, respondent Province contributed to the loss return the same to him."1avvphi1
amounting to P203,300.00 and shall be liable to the PNB for
fifty (50%) percent thereof. In effect, the Province of Tarlac The above provision of law was clarified in Reyes v. Lim,
can only recover fifty percent (50%) of P203,300.00 from PNB. where we ruled that "[t]here is unjust enrichment when a
person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against SO ORDERED.
the fundamental principles of justice, equity and good
conscience."58 Footnotes

In Tamio v. Ticson, we further clarified the principle of unjust 55

 Sec. 17 of the PCHC Rules and Regulations provides:
enrichment, thus: "Under Article 22 of the Civil Code, there is
unjust enrichment when (1) a person is unjustly benefited, Sec. 17.—Bank Guarantee. All checks cleared
and (2) such benefit is derived at the expense of or with through the PCHC shall bear the guarantee
damages to another."59 affixed thereto by the Presenting
Bank/Branch which shall read as follows:
In the instant case, Lim Sio Wan’s money market placement in
Allied Bank was pre-terminated and withdrawn without her Cleared thru the Philippine Clearing House
consent. Moreover, the proceeds of the placement were Corporation all prior endorsements and/or
deposited in Producers Bank’s account in Metrobank without lack of endorsement guaranteed NAME OF
any justification. In other words, there is no reason that the BANK/BRANCH BRSTN (Date of Clearing).
proceeds of Lim Sio Wans’ placement should be deposited in
FCC’s account purportedly as payment for FCC’s money
market placement and interest in Producers Checks to which said guarantee has not been affixed shall,
Bank.lavvphil With such payment, Producers Bank’s nevertheless, be deemed guaranteed by the Presenting Bank
indebtedness to FCC was extinguished, thereby benefitting as to all prior endorsement and/or lack of endorsement.
the former. Clearly, Producers Bank was unjustly enriched at
the expense of Lim Sio Wan. Based on the facts and
circumstances of the case, Producers Bank should reimburse
Allied and Metrobank for the amounts the two latter banks
are ordered to pay Lim Sio Wan.

It cannot be validly claimed that FCC, and not Producers

Bank, should be considered as having been unjustly enriched.
It must be remembered that FCC’s money market placement
with Producers Bank was already due and demandable; thus,
Producers Bank’s payment thereof was justified. FCC was
entitled to such payment. As earlier stated, the fact that the
indorsement on the check was forged cannot be raised against
FCC which was not a part in any stage of the negotiation of
the check. FCC was not unjustly enriched.

From the facts of the instant case, we see that Santos could
be the architect of the entire controversy. Unfortunately,
since summons had not been served on Santos, the courts
have not acquired jurisdiction over her. 60 We, therefore,
cannot ascribe to her liability in the instant case.

Clearly, Producers Bank must be held liable to Allied and

Metrobank for the amount of the check plus 12% interest per
annum, moral damages, attorney’s fees, and costs of suit
which Allied and Metrobank are adjudged to pay Lim Sio Wan
based on a proportion of 60:40.

WHEREFORE, the petition is PARTLY GRANTED. The March 18,

1998 CA Decision in CA-G.R. CV No. 46290 and the November
15, 1993 RTC Decision in Civil Case No. 6757 are AFFIRMED
with MODIFICATION.

Thus, the CA Decision is AFFIRMED, the fallo of which is

reproduced, as follows:

WHEREFORE, premises considered, the decision appealed

from is MODIFIED. Judgment is rendered ordering and
sentencing defendant-appellant Allied Banking Corporation to
pay sixty (60%) percent and defendant-appellee Metropolitan
Bank and Trust Company forty (40%) of the amount of
P1,158,648.49 plus 12% interest per annum from March 16,
1984 until fully paid. The moral damages, attorney’s fees and
costs of suit adjudged shall likewise be paid by defendant-
appellant Allied Banking Corporation and defendant-appellee
Metropolitan Bank and Trust Company in the same proportion
of 60-40. Except as thus modified, the decision appealed from
is AFFIRMED.

SO ORDERED.

Additionally and by way of MODIFICATION, Producers Bank is

hereby ordered to pay Allied and Metrobank the
aforementioned amounts. The liabilities of the parties are
concurrent and independent of each other.