Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corp. [G.R. No. 74917. January 20, 1988]

24 Mar


Equitable Bank drew six crossed manager’s check payable to certain member establishments of Visa Card. Subsequently, the checks were deposited with Banco De Oro (BDO) to the credit of its depositor. Following normal procedures and after stamping at the back of the checks the usual endorsements,BDOsent the checks for clearing through the Philippine Clearing House Corporation (PCHC). Accordingly, Equitable Banking paid the checks; its clearing account was debited for the value of the checks and BDO’s clearing account was credited for the same amount. Thereafter, Equitable Banking discovered that the endorsements appearing at the back of the checks and purporting to be that of the payees were forged and/or unauthorized or otherwise belong to persons other than the payees.Equitable Banking presented the checks directly to BDO for the purpose of claiming reimbursement from the latter. However, BDO refused to accept such direct presentation and to reimburse Equitable Banking for the value of the checks.


(a) Whether or not BDO is estopped from claiming that checks under consideration are non-negotiable instruments.

(b) Whether or not BDO can escape liability by reasons of forgery.

(c) Whether or not only negotiable checks are within the jurisdiction of PCHC.



(a) YES. BDO having stamped its guarantee of “all prior endorsements and/or lack of endorsements” is now estopped from claiming that the checks under consideration are not negotiable instruments. The checks were accepted for deposit by the petitioner stamping thereon its guarantee, in order that it can clear the said checks with the respondent bank. By such deliberate and positive attitude of the petitioner it has for all legal intents and purposes treated the said cheeks as negotiable instruments and accordingly assumed the warranty of the endorser when it stamped its guarantee of prior endorsements at the back of the checks. It led the said respondent to believe that it was acting as endorser of the checks and on the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks are not negotiable instrument.

(b) NO. A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be a forged endorsement. Whenever any bank treats the signature at the back of the checks as endorsements and thus logically guarantees the same as such there can be no doubt said bank has considered the checks as negotiable.The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements.

(c)  NO. PCHC’s jurisdiction is not limited to negotiable checks only. The term check as used in the said Articles of Incorporation of PCHC can only connote checks in general use in commercial and business activities. Thus, no distinction. Ubi lex non distinguit, nec nos distinguere debemus. Checks are used between banks and bankers and their customers, and are designed to facilitate banking operations. It is of the essence to be payable on demand, because the contract between the banker and the customer is that the money is needed on demand.


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