Areza vs. Express Savings Bank

Areza vs. Express Savings Bank

(G.R. No. 176697, September 10, 2014)

Doctrines: A depositary/collecting bank where a check is deposited, and which endorses the check upon presentment with the drawee bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants “that the instrument is genuine and in all respects what it purports to be; that he has good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his endorsement valid and subsisting.”

It is well-settled that the relationship of the depositors and the Bank or similar institution is that of creditor-debtor. Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties.

Facts: Petitioners received an order for the purchase of a motor vehicle from Gerry Mambuay where the latter paid petitioners with nine (9) Philippine Veterans Affairs Office (PVAO) checks payable to different payees and drawn against the Philippine Veterans Bank (drawee), each valued at Two Hundred Thousand Pesos (₱200,000.00). Petitioners deposited the said checks in their savings account with the Express Savings Bank which, in turn, deposited the checks with its depositary bank, Equitable-PCI Bank and the latter presented the checks to the drawee, the Philippine Veterans Bank, which honored the checks. However, the subject checks were returned by PVAO to the drawee on the ground that the amount on the face of the checks was altered from the original amount of ₱4,000.00 to ₱200,000.00. After informing Express Savings Bank that the drawee dishonored the checks, Equitable-PCI Bank debited the deposit account of ESB in the amount of P1.8M. Express Savings Bank then withdrew the amount of P1.8M representing the returned checks from petitioners saving account.

Issue: Whether or not Express Savings Bank had the right to debit ₱1,800,000.00 from petitioners’ accounts.

Held: No, Express Savings Bank cannot debit the savings account of petitioners. A depositary/collecting bank where a check is deposited, and which endorses the check upon presentment with the drawee bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants “that the instrument is genuine and in all respects what it purports to be; that he has good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his endorsement valid and subsisting.” As collecting bank, Express Savings Bank is liable for the amount of the materially altered checks. It cannot further pass the liability back to the petitioners absent any showing in the negligence on the part of the petitioners which substantially contributed to the loss from alteration.