G.R. No. 227005 - BDO Unibank, Inc. vs. Lao

Engr. Selwyn S. Lao (Lao), doing business under the names "Selwyn F. Lao Construction" and being majority stockholder of Wing An Construction and Development Corporation (Wing An), filed a complaint for collection of sum of money.
Lao entered into a transaction with Everlink Pacific Ventures, Inc. (Everlink) represented by Wu Hsieh a.k.a. George Wu (Wu), whereby Everlink would supply him with "HCG sanitary wares."
Lao issued two Equitable crossed checks payable to Everlink: Check No. 0127-242249 for ₱273,300.00 and Check No. 0127-242250 for ₱336,500.00 as down payment.
After encashment of the checks, Everlink failed to deliver the goods. Lao later discovered that the checks were deposited into two different accounts at International Exchange Bank (now Union Bank of the Philippines), one belonging to Wu and another to New Wave Plastic (New Wave), represented by Willy Antiporda (Antiporda).

Lao filed a complaint against Everlink, Wu, and Equitable Banking Corporation (now Banco de Oro Unibank - BDO) for negligence in allowing the encashment of the checks. He later withdrew the complaint against Everlink when it ceased to exist.
BDO asserted it had no obligation to ascertain ownership of accounts in which checks were deposited, that they merely examined genuineness of the drawer’s signatures and the availability of funds.
Lao amended his complaint to include Union Bank as a defendant for permitting the deposit of crossed checks into accounts other than the payee's account, which violated banking procedures.
Union Bank contended that one check was deposited properly in Everlink’s account, and the other (Check No. 0127-242250) was validly negotiated to New Wave, including endorsements and deposit procedures according to their practices.

BDO witnesses testified that the checks were paid properly, with genuine signatures and sufficient funds. Upon complaint from Wing An, BDO requested Union Bank to refund the amount after learning that the proceeds were not credited to Everlink.
Union Bank’s witness confirmed the first check’s proceeds were credited to Everlink, but the second check’s proceeds were credited to New Wave under a “Second Endorsement Agreement” signed by Antiporda.
The court noted that Check No. 0127-242250 was crossed generally (no specific bank indicated), and there was no endorsement from Everlink to New Wave.

RTC absolved BDO from liability, ruling that BDO properly discharged its duties as drawee bank.
RTC found Union Bank negligent for allowing the encashment of Check No. 0127-242250 to New Wave’s account without proper endorsement, awarding Lao ₱336,500.00 plus moral damages, exemplary damages, and attorney’s fees against Union Bank.
RTC dismissed complaints against Equitable Bank (BDO) and Wu.

The CA affirmed the RTC decision with modification, ordering BDO to pay Lao ₱336,500.00 with legal interest and Union Bank to reimburse BDO.
The CA deleted the award for damages and attorney’s fees.
CA held BDO liable for violating its duty to charge only authorized payables to the drawer’s account.
BDO filed a motion for partial reconsideration, asserting the RTC decision was final as to it and that Lao should pursue recovery only from Union Bank.
The CA denied the motion, reiterating BDO’s liability and the sequence of recovery among banks.

BDO contended the CA erred in adjudging it liable since it was not a party to the appeal and the RTC decision absolving it had attained finality.
Lao argued no error existed in the CA ruling as the issue was intertwined with the principal matter and the sequence of recovery applied.
Union Bank did not comment on the petition.

Whether the Court of Appeals erred in ruling that BDO was liable to Lao for the amount of Check No. 0127-242250 despite the RTC’s dismissal of the complaint against BDO and despite BDO not being a party to the appeal.

Whether the rule on the sequence of recovery among drawee bank and collecting bank applies in this case, mandating BDO to pay Lao and then recover from Union Bank.

Whether Lao may recover directly from Union Bank despite BDO's non-inclusion in the appeal and prior dismissal of BDO’s liability at the RTC.