GR 177526; (July, 2008) (Digest)
G.R. No. 177526 ; July 3, 2008
PHILIPPINE SAVINGS BANK, petitioner, vs. CHOWKING FOOD CORPORATION, respondent.
FACTS
Respondent Chowking Food Corporation received five checks from Joe Kuan Food Corporation, drawn against petitioner Philippine Savings Bank (PSBank). Chowking’s acting accounting manager, Rino T. Manzano, endorsed and encashed these checks over the counter at PSBank’s Bustos branch. The branch head, Erlinda Santos, honored the checks despite only Manzano’s endorsement, contrary to the corporation’s usual requirement of multiple authorized signatures. Manzano subsequently absconded with the proceeds.
Chowking demanded reimbursement from PSBank, which refused. Chowking filed a complaint for sum of money. The Regional Trial Court initially ruled in favor of Chowking but, upon reconsideration, reversed itself, holding that Chowking’s own negligence in allowing Manzano to handle the checks was the proximate cause of the loss. The Court of Appeals reinstated the original RTC decision, holding PSBank and Santos liable, prompting PSBank’s petition to the Supreme Court.
ISSUE
Whether Philippine Savings Bank is liable to reimburse Chowking for the value of the checks encashed by its unfaithful employee.
RULING
Yes, PSBank is liable. The Supreme Court denied the petition, affirming the CA decision. The legal logic centers on the comparative negligence of the parties and the higher degree of diligence required of banks. While Chowking was negligent in entrusting the checks to Manzano, this negligence was only a remote cause. The proximate cause of the loss was PSBank’s failure to exercise the high degree of diligence required in its operations.
As a banking institution, PSBank is bound by extraordinary diligence in handling its clients’ transactions. By honoring the checks with only a single endorsement, contrary to the corporation’s established procedure which required multiple signatures, the bank’s employee, Santos, acted negligently. This negligence directly facilitated the fraud. Applying the principle that where one of two innocent parties must suffer due to the fraud of a third, the loss must be borne by the party whose negligence made the fraud possible, the Court held PSBank primarily liable. The bank’s internal failure to verify the authenticity and completeness of the endorsements was the proximate and efficient cause that permitted the misappropriation. Thus, PSBank’s liability stands.