Case Digest (G.R. No. 107382) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Associated Bank v. Hon. Court of Appeals and Philippine National Bank, G.R. No. 107382, January 31, 1996, the Province of Tarlac maintained a current account with the Philippine National Bank (PNB), from which it issued thirty allotment checks worth ₱203,300.00 in favor of the Concepcion Emergency Hospital. These checks required the signatures of the Provincial Treasurer and countersignature of either the Provincial Auditor or the Sangguniang Bayan Secretary. After the hospital’s cashier, Fausto Pangilinan, retired in February 1978, he nevertheless collected several checks from the Provincial Treasurer’s office, presented them at Associated Bank, and—despite bearing forged endorsements of Dr. Adena Canlas, the hospital chief—had them deposited into his personal savings account. Associated Bank indorsed the checks with the stamp “All prior endorsements guaranteed,” and PNB, as drawee bank, paid them upon presentment. When post‐audit in January 1981 uncovered the irregular enca Case Digest (G.R. No. 107382) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Account Arrangement
- Province of Tarlac maintained a current account with Philippine National Bank (PNB) Tarlac Branch for provincial funds.
- Allotment checks for Concepcion Emergency Hospital were drawn by the Provincial Treasurer, countersigned by the Provincial Auditor or Sangguniang Bayan Secretary, and released to the hospital’s administrative officer/cashier.
- Forgery and Negotiation of Checks
- Fausto Pangilinan, retired hospital cashier and administrative officer as of February 28, 1978, fraudulently obtained 30 allotment checks totaling ₱203,300.00 between January 17, 1978 and February 10, 1981.
- He forged the signature of Dr. Adena Canlas (Chief of Concepcion Emergency Hospital) on each check, deposited them into his personal savings account with Associated Bank, and withdrew the proceeds.
- Associated Bank stamped the checks “All prior endorsements guaranteed,” thereby indorsing them when presenting to PNB for payment.
- Procedural History
- Discovery and Demand
- January 1981 post-audit revealed missing hospital checks.
- February 19, 1981: Provincial Treasurer demanded PNB return cleared checks; PNB later demanded reimbursement from Associated Bank (May 15, 1981).
- Trial Court Ruling (March 21, 1988)
- Ordered PNB to reimburse Province ₱203,300.00 with legal interest from March 20, 1981.
- Ordered Associated Bank to reimburse PNB ₱203,300.00 with legal interest from March 20, 1981.
- Dismissed claims against Dr. Canlas and Fausto Pangilinan.
- Court of Appeals Decision (September 30, 1992)
- Affirmed the trial court decision in toto.
- Consolidated Petitions to the Supreme Court by PNB (G.R. No. 107612) and Associated Bank (G.R. No. 107382).
Issues:
- Primary Issue
- Who bears the loss when checks bearing forged payee indorsements are paid: the drawer (Province), drawee bank (PNB), or collecting bank (Associated Bank)?
- Did negligence by the Province or PNB affect their liability or right to recover?
- Secondary Issues
- Whether the Philippine Clearing House Rules (Sec. 23) or Central Bank Circular No. 580 governs return of items with forged endorsements.
- Whether PNB is estopped from denying its guarantee of prior indorsements after paying the forged checks.
- Whether liability should be directly imposed on Associated Bank to the Province or routed through PNB (avoiding circuity).
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)