252 SCRA 620 – Mercantile Law – Negotiable Instruments Law – Liabilities of Parties – orger! – Collecting "an# $s %rawee "an# The Province of Tarlac Tarlac was disbursing funds to Concepcion Emergency Hospital via checks drawn against its account with the Philippine National Bank (PNB! These checks were drawn payable to the order of Concepcion Emergency Hospital! "austo Pangilinan was the cashier of Concepcion Emergency Hospital in Tarlac Tarlac until his retirement in #$%&! He used to handle checks issued by the provincial government of Tarlac to the said hospital! However' after his retirement' the provincial government still delivered checks to him until its discovery of this irregularity in #$&#! By forging the signature of the chief payee of the hospital (r! )dena Canlas' Pangilinan was able to deposit *+ checks amounting to P,+*k to his account with the )ssociated )ssociated Bank! -hen the province of Tarlac discovered this irregularity' it demanded PNB to reimburse the said amount! PNB in turn demanded )ssociated Bank to reimburse said amount! PNB averred that )ssociated Bank is liable to reimburse because o f its indorsement borne on the face of the checks. &All 'rior en(orsements guarantee( ASS)CIA*+% ASS)CIA*+% "AN,-. ISSUE:
HELD:
-hat are the liabilities of each party/
The checks involved in this case are order instruments!
Liabilit! of Associate( "an# -here the instrument is payable to order at the time of the forgery' such as the checks in this case' the signature of its rightful holder (here' the payee hospital is essential to transfer title to the same instrument! -hen the holder0s indorsement is forged' all parties prior to the forgery may raise the real defense of forgery against all parties subse1uent thereto! ) collecting bank (in this case )ssociated )ssociated Bank where a check is deposited and which indorses the check upon presentment with the drawee bank (PNB' is such an indorser! 2o even if the indorsement on the check deposited by the banks0s client is forged' )ssociated Bank is bound by its warranties as an indorser and cannot set up the defense of forgery as against the PNB!
E3CEPT45N. 4f it can be shown that the drawee bank (PNB unreasonably delayed in notifying the collecting bank ()ssociated Bank of the fact of the forgery so much so that the latter can no longer collect reimbursement from the depositor6forger! Liabilit! of PN" The bank on which a check is drawn' known as the drawee bank (PNB' is under strict liability to pay the check to the order of the payee (Provincial 7overnment of Tarlac! Payment under a forged indorsement is not to the drawer0s order! -hen the drawee bank pays a person other than the payee' it does not comply with the terms of the check and violates its duty to charge its customer0s (the drawer account only for properly payable items! 2ince the drawee bank did not pay a holder or other person entitled to receive payment' it has no right to reimbursement from the drawer! The general rule then is that the drawee bank may not debit the drawer0s account and is not entitled to indemnification from the drawer! The risk of loss must perforce fall on the drawee bank! E3CEPT45N. 4f the drawee bank (PNB can prove a failure by the customer8drawer (Tarlac Province to e9ercise ordinary care that substantially contributed to the making of the forged signature' the drawer is precluded from asserting the forgery! 4n sum' by reason of )ssociated Bank0s indorsement and warranties of prior indorsements as a party after the forgery' it is liable to refund the amount to PNB! The Province of Tarlac can ask reimbursement from PNB because the Province is a party prior to the forgery! Hence' the instrument is inoperative! H5-E:E;' it has been proven that the Provincial 7overnment of Tarlac has been negligent in issuing the checks especially when it continued to deliver the checks to Pangilinan even when he already retired! ue to this contributory negligence' PNB is only ordered to pay <+= of the amount or half of P,+* >! B?T THEN )7)4N' since PNB can pass its loss to )ssociated Bank (by reason of )ssociated Bank0s warranties' PNB can ask the <+= reimbursement from )ssociated Bank! )ssociated Bank can ask reimbursement from Pangilinan but unfortunately in this case' the court did not ac1uire @urisdiction over him! Facts:
Private respondent K.T. Lim was charged with violation of B.P. 22. He moved to quash the Information of the ground that the facts charged did not constitute a felony as B.P. 22 was unconstitutional and that the chec he issued was a memorandum chec which was in the nature of a promissory note! perforce! civil in nature. "udge #itafan! ruling
that B.P. 22 on which the Information was $ased was unconstitutional! issued the questioned %rder quashing the Information. Hence! the appeal. Issue:
ðer a memorandum chec is within the coverage of B.P. 22 Held:
A
memorandum
check
is in the form of an ordinary check, with the word
"memorandum", "memo" or "mem" written across its face, signifying that the maker or drawer engages to pay the bona de holder absolutely, without any condition concerning its presentment. Such a check is an evidence of debt against the drawer, and although may not be intended to be presented, has the same eect as an ordinary check, and if passed to the third person, will be valid in his hands like any other check. A memorandum check comes within the meaning of Sec. 1! of the egotiable #nstruments $aw which denes a check as "a bill of e%change drawn on a bank payable on demand. A memorandum check, upon presentment, is generally accepted by the bank. &ence it does not matter whether the check issued is in the nature of a memorandum as evidence of indebtedness or whether it was issued is partial fulllment of a pre'e%isting obligation, for what the law punishes is the issuance itselfof a bouncing check and not the purpose for which it was issuance. (he mere act of issuing a worthless check, whether as a deposit, as a guarantee, or even as an evidence of a pre' e%isting
debt,
is
malum
prohibitum.
A memorandum check may carry with it the understanding that it is not be presented at the bank but will be redeemed by the maker himself when the loan fall due. &owever, with the promulgation of ).*. ++, such understanding or private arrangement may no longer prevail to e%empt it from penal sanction imposed by the law. (o reuire that the agreement surrounding the issuance of check be rst looked into and thereafter e%empt such issuance from the punitive provision of ).*. ++ on the basis of such agreement or understanding would frustrate the very purpose for which the law was enacted - to stem the proliferation of unfunded checks. After having eectively reduced the incidence of worthless checks changing hands, the country will once again e%perience the limitless circulation of bouncing checks in the guise of memorandum checks if such checks will be considered e%empt from the operation of ).*. ++. #t is common practice in commercial transactions to reuire debtors to issue checks on which creditors must rely
as guarantee of payment. (o determine the reasons for which checks are issued, or the terms and conditions for their issuance, will greatly erode the faith the public responses in the stability and commercial value of checks as currency substitutes, and bring about havoc in trade and in banking communities. (People vs. Judge Nitafan, G.R. No.
75954, October , !99"
Auis -ong is a collector of Aimtong Press' 4nc!' a company which prints calendars! -ong was assigned to collect check payments from AP40 clients! 5ne time' si9 of AP40s clients were not able to give the check payments to -ong! -ong then made arrangements with AP4 so that for the meantime' -ong can use his personal checks to guarantee the calendar orders of the AP40s clients! AP4 however has a policy of not accepting personal checks of its agents! AP4 instead proposed that the personal checks should be used to cover -ong0s debt with AP4 which arose from unremitted checks by -ong in the past! -ong agreed! 2o he issued checks dated ecember *+' #$&
HELD:
-hether or not -ong is guilty of the crime charged!
es! -ong is guilty of violating BP ,,! The elements of violation of BP ,, pertinent
to this case are. #! The making' drawing and issuance of any check to app ly for account or for valueF
,! The knowledge of the maker' drawer' or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentmentF and *! The subse1uent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer' without any valid cause' ordered the bank to stop payment! ?nder the second element' the presumption of knowledge of the insufficiency arises if the check is presented within $+ days from the date of issue of the check! This presumption is lost' as in the case at bar' by failure of AP4 to present it within $+ days! But this does not mean that the second element was not attendant with respect to -ong! The presumption is lost but lack of knowledge can still be proven' AP4 did not deposit the checks because of the reassurance of -ong that he would issue new checks! ?pon his failure to do so' AP4 was constrained to deposit the said checks! )fter the checks were dishonored' -ong was duly notified of such fact but failed to make arrangements for full payment within five (< banking days thereof! There is' on record' sufficient evidence that -ong had knowledge of the insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks! The 2upreme Court also noted that under 2ection #& of the Negotiable 4nstruments Aaw' Da check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the e9tent of the loss caused by the delay! By current banking practice' a check becomes stale after more than si9 ( months' or #&+ days! AP4 deposited the checks #<% days after the date of the check! Hence said checks cannot be considered stale!
