Westmont Bank v.
Ong 375 SCRA 212
This is a petition ordering the petitioner to pay respondent P1, 754,787.50
plus twelve percent (12%) interest per annum from the date of the first
extrajudicial demand, plus damages.
Facts:
Respondent Eugene Ong maintained a current account with petitioner,
formerly the Associated Banking Corporation, but now known as Westmont Bank.
Sometime in May 1976, he sold certain shares of stocks through Island Securities
Corporation. To pay Ong, Island Securities purchased two Pacific Banking
Corporation manager’s checks, both dated May 4, 1976, issued in the name of
Eugene Ong as payee. Before Ong could get hold of the checks, his friend Paciano
Tanlimco got hold of them, forged Ong’s signature and deposited these with
petitioner, where Tanlimco was also a depositor. Even though Ong’s specimen
signature was on file, petitioner accepted and credited both checks to the account
of Tanlimco, without verifying the ‘signature indorsements’ appearing at the back
thereof. Tanlimco then immediately withdrew the money and absconded.
Instead of going straight to the bank to stop or question the payment, Ong
first sought the help of Tanlimco’s family to recover the amount. Later, he reported
the incident to the Central Bank, which like the first effort, unfortunately proved
futile. On October 7, 1977, about five months from discovery of the fraud, did Ong
cry foul and demanded in his complaint that petitioner pay the value of the two
checks from the bank on whose gross negligence he imputed his loss. In his suit, he
insisted that he did not "deliver, negotiate, endorse or transfer to any person or
entity" the subject checks issued to him and asserted that the signatures on the
back were spurious.
The bank did not present evidence to the contrary, but simply contended that
since plaintiff Ong claimed to have never received the originals of the two checks in
question from Island Securities, much less to have authorized Tanlimco to receive
the same, he never acquired ownership of these checks. Thus, he had no legal
personality to sue as he is not a real party in interest. The bank then filed a
demurrer to evidence which was denied.
On February 8, 1989, after trial on the merits, the Regional Trial Court of
Manila, Branch 38, rendered a decision, the court hereby renders judgment for the
plaintiff and against the defendant, and orders the defendant to pay the plaintiff:
1. The sum of P1,754,787.50 representing the total face value of the two
checks in question, exhibits "A" and "B", respectively, with interest thereon at the
legal rate of twelve percent (12%) per annum computed from October 7, 1977 (the
date of the first extrajudicial demand) up to and until the same shall have been
paid in full;
2. Moral damages in the amount of P250,000.00;
3. Exemplary or corrective damages in the sum of P100,000.00 by way of
example or correction for the public good;
4. Attorney’s fees of P50,000.00 and costs of suit.
Defendant’s counterclaims are dismissed for lack of merit.
ISSUE: Whether or not, respondent Ong has a cause of action against petitioner
Westmont bank.
RULING: Yes, Under Section 23 of the Negotiable Instruments Law:
When a signature is forged or made without the authority of the person
whose signature it purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof against
any party thereto, can be acquired through or under such signature, unless the
party against whom it is sought to enforce such right is precluded from setting up
the forgery or want of authority.
Since the signature of the payee, in the case at bar, was forged to make it
appear that he had made an indorsement in favor of the forger, such signature
should be deemed as inoperative and ineffectual. Petitioner, as the collecting bank,
grossly erred in making payment by virtue of said forged signature. The payee,
herein respondent, should therefore be allowed to recover from the collecting bank.
The collecting bank is liable to the payee and must bear the loss because it is
its legal duty to ascertain that the payee’s endorsement was genuine before
cashing the check. As a general rule, a bank or corporation who has obtained
possession of a check upon an unauthorized or forged indorsement of the payee’s
signature and who collects the amount of the check from the drawee, is liable for
the proceeds thereof to the payee or other owner, notwithstanding that the amount
has been paid to the person from whom the check was obtained.
The theory of the rule is that the possession of the check on the forged or
unauthorized indorsement is wrongful, and when the money had been collected on
the check, the bank or other person or corporation can be held as for moneys had
and received, and the proceeds are held for the rightful owners who may recover
them. The position of the bank taking the check on the forged or unauthorized
indorsement is the same as if it had taken the check and collected the money
without indorsement at all and the act of the bank amounts to conversion of the
check.
In this case, petitioner could not escape liability for its negligent acts.
Admittedly, respondent Eugene Ong at the time the fraudulent transaction took
place was a depositor of petitioner bank. Banks are engaged in a business
impressed with public interest, and it is their duty to protect in return their many
clients and depositors who transact business with them. They have the obligation to
treat their client’s account meticulously and with the highest degree of care,
considering the fiduciary nature of their relationship. The diligence required of
banks, therefore, is more than that of a good father of a family. In the present
case, petitioner was held to be grossly negligent in performing its duties.
