Case Digest_Lim Sio Wan

3HR2

OCUMIN, Rochelle RONQUILLO, Marc Jayson SARMIENTO, Errol TACUS, Mitch Daryll ZAMUDIO, Honey Laureen

Allied Banking Corp. v. Lim Sio Wan (549 SCRA 504) FACTS FCC had deposited a money market placement with Producers Bank. Deborah Dee Santos was the money market trader assigned to handle FCC’s account. When the placement matured, FCC demanded the payment of the proceeds of the placement. November 14, 1983, Lim Sio Wan deposited with Allied Banking Corporation (Allied) a money market placement for a term of 31 days. December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and instructed the latter to pre-terminate Lim Sio Wan’s money market placement, to issue a manager’s check and to give the check to Santos who would pick up the check. Lim Sio Wan described the appearance of Santos. Santos arrived at the bank and signed the application form for a manager’s check to be issued. The bank issued Manager’s Check in the name of Lim Sio Wan, as payee, crosschecked "For Payee’s Account Only" and given to Santos. Allied manager’s check was deposited in the account of Filipinas Cement Corporation (FCC) at Metropolitan Bank and Trust Co. (Metrobank), with the forged signature of Lim Sio Wan as indorser. Metrobank stamped a guaranty on the check, which reads: "All prior endorsements and/or lack of endorsement guaranteed." Upon the presentment of the check, Allied funded the check even without checking the authenticity of Lim Sio Wan’s purported indorsement. December 9, 1983, Lim Sio Wan deposited with Allied a second money market placement to mature on January 9, 1984. December 14, 1983, upon the maturity date of the first money market placement, Lim Sio Wan went to Allied to withdraw it. She was then informed that the placement had been pre-terminated upon her instructions which she denied. Lim Sio Wan filed with the RTC against Allied to recover the proceeds of her first money market placement. May 15, 1984, Allied informed Metrobank that the signature on the check was forged. Metrobank withheld the amount represented by the check from FCC. Lim Sio Wan thereafter filed an amended complaint to include Metrobank as a party-defendant, along with Allied.

ISSUE Can a drawee bank be held liable together with a collecting bank for a forged indorsement even if it was latter that stamped the guarantee on all prior indorsements?

RULING Yes. The institution issuing the check is just as liable as or more liable than the collecting bank. The warranty “that the instrument is genuine and in all respects what it purports to be” covers all the defects in the instrument affecting the validity thereof, including a forged signature. Allied bank was negligent in issuing the manager’s check in transmitting it to Santos without written authorization. Moreover, Metrobank indorsed the check without verifying the authenticity of Lim Sio Wan’s indorsement despite the fact that it was cross-checked payable to payee’s account. Since Filipinas Cement Corporation (FCC) was not part of any negotiation stage, it will not be held liable. Lastly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan since the proceeds was deposited in Producer’s Bank account in Metrobank without any justification.

3HR2

OCUMIN, Rochelle RONQUILLO, Marc Jayson SARMIENTO, Errol TACUS, Mitch Daryll ZAMUDIO, Honey Laureen

Allied Banking Corp. v. Lim Sio Wan (549 SCRA 504) FACTS Lim Sio Wan deposited a money market placement in Allied Bank. Before its maturity, an impostor call an Allied officer instructing her to pre-terminate Lim SioWan’s money market placement and to issue a manager’s check which will be picked up by Santos. The check was issued to Santos and deposited in the account of Filipinas Cement Corporation (FCC) at Metrobank with Wan’s forged signature as indorser. The deposit was said to be the Producer Bank’s payment of its obligation to FCC. Upon the maturity date of the money market placement, Wan went to Allied bank to withdraw it. Allied refused to pay her, thus, she filed a complaint.

ISSUE Can a drawee bank be held liable together with a collecting bank for a forged indorsement even if it was latter that stamped the guarantee on all prior indorsements?

RULING Yes. The institution issuing the check is just as liable as or more liable than the collecting bank. The warranty “that the instrument is genuine and in all respects what it purports to be” covers all the defects in the instrument affecting the validity thereof, including a forged signature. Allied bank was negligent in issuing the manager’s check in transmitting it to Santos without written authorization. Moreover, Metrobank indorsed the check without verifying the authenticity of Lim Sio Wan’s indorsement despite the fact that it was cross-checked payable to payee’s account. Since Filipinas Cement Corporation (FCC) was not part of any negotiation stage, it will not be held liable. Lastly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan since the proceeds was deposited in Producer’s Bank account in Metrobank without any justification.