GR 170325; (September, 2008) (Digest)
G.R. No. 170325 September 26, 2008
Philippine National Bank, Petitioner, vs. Erlando T. Rodriguez and Norma Rodriguez, Respondents.
FACTS
Respondents-spouses Rodriguez, engaged in a lending business, had a discounting arrangement with PEMSLA, an association of PNB employees. They would rediscount postdated checks issued by PEMSLA to its members. In a fraudulent scheme, certain PEMSLA officers obtained loans in the names of unknowing members. The checks for these loans, with forged endorsements of the named payees, were given to the spouses for rediscounting. In return, the spouses issued their personal checks (Rodriguez checks) payable to those same members and delivered them to a PEMSLA officer. The Rodriguez checks were then deposited by PEMSLA into its own savings account at PNB without any endorsement from the named payees, facilitated by a PNB teller who was also PEMSLA’s treasurer. When PNB discovered the fraud and closed PEMSLA’s account, the PEMSLA checks held by the spouses were dishonored, but the corresponding Rodriguez checks had already been paid by PNB from the spouses’ account.
ISSUE
Whether PNB is liable to the spouses Rodriguez for the value of the checks it paid to PEMSLA’s account without the endorsements of the named payees.
RULING
No, PNB is not liable. The Supreme Court applied the “fictitious payee” rule under the Negotiable Instruments Law. The rule provides that where the payee named in an instrument is a fictitious person or not intended to have any interest in the instrument, the instrument becomes payable to bearer. A bearer instrument is negotiable by mere delivery, and an endorsement is not necessary for its negotiation. The Court found that the spouses, as makers of the checks, never intended for the named payees—the unknowing PEMSLA members—to actually receive the proceeds. The checks were issued as part of a pre-arranged scheme where the spouses knew the proceeds would go directly to PEMSLA. Consequently, the named payees were considered “fictitious,” making the checks bearer instruments. PNB was therefore justified in paying the checks upon mere delivery by PEMSLA, the bearer, without requiring endorsement. The loss must be borne by the party whose acts made the fraud possible—the spouses, who participated in the irregular discounting practice. The Court reversed the lower courts’ decisions and absolved PNB from liability.