Republic of the Philippines These consolidated[1] Petitions for Review on Certiorari filed by the Philippine National Bank (PNB)[2]

on Certiorari filed by the Philippine National Bank (PNB)[2] and by the

Supreme Court spouses Cheah Chee Chong and Ofelia Camacho Cheah (spouses Cheah)[3] both assail the August 22, 2005 Decision[4] and
Baguio City December 21, 2005 Resolution[5]of the Court of Appeals (CA) in CA-G.R. CV No. 63948 which declared both parties equally
negligent and, hence, should equally suffer the resulting loss. For its part, PNB questions why it was declared blameworthy
FIRST DIVISION together with its depositors, spouses Cheah, for the amount wrongfully paid the latter, while the spouses Cheah plead that
they be declared entirely faultless.
PHILIPPINE NATIONAL BANK, G.R. No. 170865
Factual Antecedents
Petitioner,
On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina) were having a conversation
in the latters office when Adelinas friend, Filipina Tuazon (Filipina), approached her to ask if she could have Filipinas check
- versus - cleared and encashed for a service fee of 2.5%. The check is Bank of America Check No. 190[6] under the account of
Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales against Bank of America Alhambra Branch
in California, USA, with a face amount of $300,000.00, payable to cash. Because Adelina does not have a dollar account in
SPOUSES CHEAH CHEE CHONG which to deposit the check, she asked Ofelia if she could accommodate Filipinas request since she has a joint dollar savings
account with her Malaysian husband Cheah Chee Chong (Chee Chong) under Account No. 265-705612-2 with PNB
and OFELIA CAMACHO CHEAH, Buendia Branch.
Ofelia agreed.
Respondents.

x--------------------------------x That same day, Ofelia and Adelina went to PNB Buendia Branch. They met with Perfecto Mendiola of the Loans
Department who referred them to PNB Division Chief Alberto Garin (Garin). Garin discussed with them the process of clearing
SPOUSES CHEAH CHEE CHONG G.R. No. 170892 the subject check and they were told that it normally takes 15 days.[7] Assured that the deposit and subsequent clearance of
the check is a normal transaction, Ofelia deposited Filipinas check. PNB then sent it for clearing through its correspondent
and OFELIA CAMACHO CHEAH, bank, Philadelphia National Bank. Five days later, PNB received a credit advice[8] from Philadelphia National Bank that the
proceeds of the subject check had been temporarily credited to PNBs account as of November 6, 1992. On November 16,
Petitioners, Present:
1992, Garin called up Ofelia to inform her that the check had already been cleared.[9] The following day, PNB Buendia
Branch, after deducting the bank charges, credited $299,248.37 to the account of the spouses Cheah.[10] Acting on Adelinas
instruction to withdraw the credited amount, Ofelia that day personally withdrew $180,000.00.[11] Adelina was able to
CORONA, C.J., Chairperson, withdraw the remaining amount the next day after having been authorized by Ofelia.[12] Filipina received all the proceeds.
LEONARDO-DE CASTRO,
In the meantime, the Cable Division of PNB Head Office in Escolta, Manila received on November 16, 1992 a
- versus - BERSAMIN, SWIFT[13] message from Philadelphia National Bank dated November 13, 1992 with Transaction Reference Number (TRN)
46506218, informing PNB of the return of the subject check for insufficient funds.[14] However, the PNB Head Office could not
DEL CASTILLO, and ascertain to which branch/office it should forward the same for proper action. Eventually, PNB Head Office sent Philadelphia
VILLARAMA, JR., JJ. National Bank a SWIFT message informing the latter that SWIFT message with TRN 46506218 has been relayed to PNBs various
divisions/departments but was returned to PNB Head Office as it seemed misrouted. PNB Head Office thus requested for
Philadelphia National Banks advice on said SWIFT messages proper disposition.[15] After a few days, PNB Head Office
ascertained that the SWIFT message was intended for PNB Buendia Branch.
PHILIPPINE NATIONAL BANK, Promulgated:

Respondent. April 25, 2012 PNB Buendia Branch learned about the bounced check when it received on November 20, 1992 a debit
advice,[16] followed by a letter[17] on November 24, 1992, from Philadelphia National Bank to which the November 13, 1992
x-------------------------------------------------------------------x SWIFT message was attached. Informed about the bounced check and upon demand by PNB Buendia Branch to return the
money withdrawn, Ofelia immediately contacted Filipina to get the money back. But the latter told her that all the money
DECISION had already been given to several people who asked for the checks encashment. In their effort to recover the money,
spouses Cheah then sought the help of the National Bureau of Investigation. Said agencys Anti-Fraud and Action Division was
DEL CASTILLO, J.: later able to apprehend some of the beneficiaries of the proceeds of the check and recover from them $20,000.00. Criminal
charges were then filed against these suspect beneficiaries.[18]
Law favoreth diligence, and therefore, hateth folly and negligence.Wingates Maxim.
Meanwhile, the spouses Cheah have been constantly meeting with the bank officials to discuss matters regarding
In doing a friend a favor to help the latters friend collect the proceeds of a foreign check, a woman deposited the the incident and the recovery of the value of the check while the cases against the alleged perpetrators remain
check in her and her husbands dollar account. The local bank accepted the check for collection and immediately credited pending. Chee Chong in the end signed a PNB drafted[19] letter[20] which states that the spouses Cheah are offering their
the proceeds thereof to said spouses account even before the lapse of the clearing period. And just when the money had condominium units as collaterals for the amount withdrawn. Under this setup, the amount withdrawn would be treated as a
been withdrawn and distributed among different beneficiaries, it was discovered that all along, to the horror of the woman loan account with deferred interest while the spouses try to recover the money from those who defrauded them. Apparently,
whose intention to accommodate a friends friend backfired, she and her Chee Chong signed the letter after the Vice President and Manager of PNB Buendia Branch, Erwin Asperilla (Asperilla), asked
bank had dealt with a rubber check. the spouses Cheah to help him and the other bank officers as they were in danger of losing their jobs because of the

Banking Cases pg. 1

incident. Asperilla likewise assured the spouses Cheah that the letter was a mere formality and that the mortgage will be While the CA recognized the spouses Cheah as victims of a scam who nevertheless have to suffer the
disregarded once PNB receives its claim for indemnity from Philadelphia National Bank. consequences of Ofelias lack of care and prudence in immediately trusting a stranger, the appellate court did not hold PNB
scot-free. It ruled in its August 22, 2005 Decision,[30] viz:
Although some of the officers of PNB were amenable to the proposal,[21] the same did not
materialize. Subsequently, PNB sent a demand letter to spouses Cheah for the return of the amount of the check,[22] froze their As both parties were equally negligent, it is but right and just that both parties should equally
peso and dollar deposits in the amounts of P275,166.80 and $893.46,[23] and filed a complaint[24] against them for Sum of suffer and shoulder the loss. The scam would not have been possible without the negligence of both
Money with Branch 50 of the Regional Trial Court (RTC) of Manila, docketed as Civil Case No. 94-71022. In said complaint, PNB parties. As earlier stated, the complaint of PNB cannot be dismissed because the Cheah spouses were
demanded payment of around P8,202,220.44, plus interests[25] and attorneys fees, from the spouses Cheah. negligent and Ms. Cheah took an active part in the deposit of the check and the withdrawal of the
subject amounts.On the other hand, the Cheah spouses cannot entirely bear the loss because PNB
As their main defense, the spouses Cheah claimed that the proximate cause of PNBs injury was its own negligence allowed her to withdraw without waiting for the clearance of the check. The remedy of the parties is to
of paying a US dollar denominated check go after those who perpetrated, and benefited from, the scam.
without waiting for the 15-day clearing period, in violation of its bank practice as mandated by its own bank circular, i.e., PNB WHEREFORE, the May 20, 1999 Decision of the Regional Trial Court, Branch 5, Manila, in Civil
General Circular No. 52-101/88.[26] Because of this, spouses Cheah averred that PNB is barred from claiming what it had Case No. 94-71022, is hereby REVERSED and SET ASIDE and another one entered DECLARING both
lost. They further averred that it is unjust for them to pay back the amount disbursed as they never really benefited parties equally negligent and should suffer and shoulder the loss.
therefrom. As counterclaim, they prayed for the return of their frozen deposits, the recoupment of P400,000.00 representing
the amount they had so far spent in recovering the value of the check, and payment of moral and exemplary damages, as Accordingly, PNB is hereby ordered to credit to the peso and dollar accounts of the Cheah spouses the
well as attorneys fees. amount due to them.

Ruling of the Regional Trial Court SO ORDERED.[31]

The RTC ruled in PNBs favor. The dispositive portion of its Decision[27] dated May 20, 1999 reads:
In so ruling, the CA ratiocinated that PNB Buendia Branchs non-receipt of the SWIFT message from Philadelphia National Bank
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Philippine within the 15-day clearing period is not an acceptable excuse.Applying the last clear chance doctrine, the CA held that PNB
National Bank [and] against defendants Mr. Cheah Chee Chong and Ms. Ofelia Camacho Cheah, had the last clear opportunity to avoid the impending loss of the money and yet, it glaringly exhibited its negligence in
ordering the latter to pay jointly and severally the herein plaintiffs bank the amount: allowing the withdrawal of funds without exhausting the 15-day clearing period which has always been a standard banking
practice as testified to by PNBs own officers, and as provided in its own General Circular No. 52/101/88. To the CA, PNB
1. of US$298,950.25 or its peso equivalent based on Central Bank Exchange Rate cannot claim from spouses Cheah even if the latter are accommodation parties under the law as the banks own
prevailing at the time the proceeds of the BA Check No. 190 were withdrawn or the prevailing Central negligence is the proximate cause of the damage it sustained. Nevertheless, it also found Ofelia guilty of contributory
Bank Rate at the time the amount is to be reimbursed by the defendants to plaintiff or whatever is negligence. Thus, both parties should be made equally responsible for the resulting loss.
lower. This is without prejudice however, to the rights of the defendants (accommodating parties) to go
against the group of Adelina Guarin, Atty. Eduardo Rosales, Filipina Tuazon, etc., (Beneficiaries- Both parties filed their respective Motions for Reconsideration[32] but same were denied in a Resolution[33] dated
accommodated parties) who are privy to the defendants. December 21, 2005.

No pronouncement as to costs. Hence, these Petitions for Review on Certiorari.

No other award of damages for non[e] has been proven. Our Ruling

SO ORDERED.[28] The petitions for review lack merit. Hence, we affirm the ruling of the CA.
PNBs act of releasing the proceeds of the check prior to the
lapse of the 15-day clearing period was the proximate cause
The RTC held that spouses Cheah were guilty of contributory negligence. of the loss.
Because Ofelia trusted a friends friend whom she did not know and considering the amount of the check made payable to
cash, the RTC opined that Ofelia showed lack of vigilance in her dealings. She should have exercised due care by
investigating the negotiability of the check and the identity of the drawer. While the court found that the proximate cause of Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening
the wrongful payment of the check was PNBs negligence in not observing the 15-day guarantee period rule, it ruled that cause, produces the injury and without which the result would not have occurred. x x x To determine the proximate cause of
spouses Cheah still cannot escape liability to reimburse PNB the value of the check as an accommodation party pursuant to a controversy, the question that needs to be asked is: If the event did not happen, would the injury have resulted? If the
Section 29 of the Negotiable Instruments Law.[29] It likewise applied the principle of solutio indebiti under the Civil Code. With answer is no, then the event is the proximate cause.[34]
regard to the award of other forms of damages, the RTC held that each party must suffer the consequences of their own
acts and thus left both parties as they are. Here, while PNB highlights Ofelias fault in accommodating a strangers check and depositing it to the bank, it
remains mum in its release of the proceeds thereof without exhausting the 15-day clearing period, an act which
Unwilling to accept the judgment, the spouses Cheah appealed to the CA. contravened established banking rules and practice.

Ruling of the Court of Appeals It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking days. As declared by
Josephine Estella, the Administrative Service Officer who was the banks Remittance Examiner, what was unusual in the
processing of the check was that the lapse of 15 banking days was not observed.[35] Even PNBs agreement with Philadelphia
National Bank[36] regarding the rules on the collection of the proceeds of US dollar checks refers to business/ banking

Banking Cases pg. 2

days. Ofelia deposited the subject check on November 4, 1992. Hence, the 15thbanking day from the date of said deposit cleared after only eight banking days from the time it was deposited or contrary to what Garin told her that clearing takes 15
should fall on November 25, 1992. However, what happened was that PNB Buendia Branch, upon calling up Ofelia that the days should have already put Ofelia on guard. She should have first verified the regularity of such hasty clearance
check had been cleared, allowed the proceeds thereof to be withdrawn on November 17 and 18, 1992, a week before the considering that if something goes wrong with the transaction, it is she and her husband who would be put at risk and not the
lapse of the standard 15-day clearing period. accommodated party. However, Ofelia chose to ignore the same and instead actively participated in immediately
withdrawing the proceeds of the check. Thus, we are one with the CA in ruling that Ofelias prior consultation with PNB officers
This Court already held that the payment of the amounts of checks without previously clearing them with the is not enough to totally absolve her of any liability. In the first place, she should have shunned any participation in that
drawee bank especially so where the drawee bank is a foreign bank and the amounts involved were large is contrary to palpably shady transaction.
normal or ordinary banking practice.[37] Also, in Associated Bank v. Tan,[38] wherein the bank allowed the withdrawal of the
value of a check prior to its clearing, we said that [b]efore the check shall have been cleared for deposit, the collecting bank In any case, the complaint against the spouses Cheah could not be dismissed. As PNBs client, Ofelia was the one
can only assume at its own risk x x x that the check would be cleared and paid out. The delay in the receipt by PNB Buendia who dealt with PNB and negotiated the check such that its value was credited in her and her husbands account. Being the
Branch of the November 13, 1992 SWIFT message notifying it of the dishonor of the subject check is of no moment, because ones in privity with PNB, the spouses Cheah are therefore the persons who should return to PNB the money released to them.
had PNB Buendia Branch waited for the expiration of the clearing period and had never released during that time the
proceeds of the check, it would have already been duly notified of its dishonor. Clearly, PNBs disregard of its preventive and All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are equally negligent and
protective measure against the possibility of being victimized by bad checks had brought upon itself the injury of losing a should therefore equally suffer the loss. The two must both bear the consequences of their mistakes.
significant amount of money.
WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R. No. 170865 and in G.R. No. 170892
It bears stressing that the diligence required of banks is more than that of a Roman pater familias or a good father are both DENIED. The assailed August 22, 2005 Decision and December 21, 2005 Resolution of the Court of Appeals in CA-G.R.
of a family. The highest degree of diligence is expected.[39] PNB miserably failed to do its duty of exercising extraordinary CV No. 63948 are hereby AFFIRMED in toto.
diligence and reasonable business prudence. The disregard of its own banking policy amounts to gross negligence, which
the law defines as negligence characterized by the want of even slight care, acting or omitting to act in a situation where SO ORDERED.
there is duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to consequences in so far as
other persons may be affected.[40] With regard to collection or encashment of checks, suffice it to say that the law imposes on
the collecting bank the duty to scrutinize diligently the checks deposited with it for the purpose of determining their
genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public as the
expert on this field, and the law thus holds it to a high standard of conduct.[41] A bank is expected to be an expert in banking
procedures and it has the necessary means to ascertain whether a check, local or foreign, is sufficiently funded.

Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle of solutio indebiti, which is laid
down in Article 2154 of the Civil Code:[42]

Art. 2154. If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises.

[T]he indispensable requisites of the juridical relation known as solutio indebiti, are, (a) that he who paid was not
under obligation to do so; and (b) that the payment was made by reason of an essential mistake of fact.[43]

In the case at bench, PNB cannot recover the proceeds of the check under the principle it invokes. In the first
place, the gross negligence of PNB, as earlier discussed, can never be equated with a mere mistake of fact, which must be
something excusable and which requires the exercise of prudence. No recovery is due if the mistake done is one of gross
negligence.

The spouses Cheah are guilty of contributory negligence and

are bound to share the loss with the bank

Contributory negligence is conduct on the part of the injured party,

contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform
for his own protection.[44]

The CA found Ofelias credulousness blameworthy. We agree. Indeed, Ofelia failed to observe caution in giving her
full trust in accommodating a complete stranger and this led her and her husband to be swindled. Considering that Filipina
was not personally known to her and the amount of the foreign check to be encashed was $300,000.00, a higher degree of
care is expected of Ofelia which she, however, failed to exercise under the circumstances. Another circumstance which
should have goaded Ofelia to be more circumspect in her dealings was when a bank officer called her up to inform that the
Bank of America check has already been cleared way earlier than the 15-day clearing period. The fact that the check was

Banking Cases pg. 3