G.R. No. L-74917. January 20, 1988.
BANCO DE ORO SAVINGS AND MORTGAGE BANK, petitioner, vs. EQUITABLE BANKING CORPORATION, PHILIPPINE CLEARING HOUSE CORPORATION, AND REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH XCII (92), respondents.

FACTS

Equitable Banking Corporation (EBC) drew six crossed manager’s checks, payable to Visa Card member establishments, with an aggregate amount of P45,982.23. These checks were subsequently deposited with Banco de Oro Savings and Mortgage Bank (BDO) to the credit of its depositor, Aida Trencio. BDO, after stamping the requisite endorsements, sent the checks for clearing through the Philippine Clearing House Corporation (PCHC). EBC paid the checks, debiting its clearing account and crediting BDO’s account accordingly. EBC later discovered that the endorsements on the checks were forged or unauthorized. Pursuant to PCHC Clearing Rules, EBC directly presented the checks to BDO for reimbursement, but BDO refused.
The dispute was submitted to PCHC arbitration, where the arbiter ruled in favor of EBC, ordering BDO to reimburse the amount with interest and attorney’s fees. The PCHC Board of Directors affirmed this decision. BDO then filed a petition for review with the Regional Trial Court (RTC) of Quezon City, which affirmed the PCHC decision in toto. BDO elevated the case to the Supreme Court via petition for review on certiorari.

ISSUE

The primary issues were: (1) whether the PCHC had jurisdiction over the dispute involving the checks; (2) whether the crossed checks were non-negotiable and thus outside PCHC’s ambit; and (3) whether BDO, as the collecting bank, was liable for the amount paid on the checks with forged endorsements.

RULING

The Supreme Court dismissed the petition, affirming the RTC and PCHC decisions. The Court held that the PCHC had jurisdiction over the dispute. The PCHC Clearing Rules and its Articles of Incorporation refer broadly to “checks” without distinction as to their negotiability. The Court emphasized that where the law or rules do not distinguish, courts should not distinguish. The checks in question, being crossed checks, are recognized instruments in commercial and banking practice, and their clearing falls within the PCHC’s function of facilitating check processing and settlement among member banks.
On the matter of liability, the Court applied established principles under the Negotiable Instruments Law and banking jurisprudence. A crossed check, marked with two parallel lines on its face, is payable only to a bank or through a bank. It is a warning that the check should be deposited only to the payee’s account. By accepting the crossed checks for deposit from a person other than the named payee and guaranteeing all prior endorsements, BDO, as the collecting bank, warranted the genuineness of those endorsements. Since the endorsements were forged, BDO breached its warranty and was liable to EBC, the drawee bank. The Court found BDO negligent for failing to exercise due diligence in ascertaining the legitimacy of the endorsements on the crossed checks, thereby assuming the risk of loss. The award of interest and attorney’s fees was upheld as justified due to BDO’s unwarranted refusal to reimburse EBC.