SC rules banks not liable for dishonored checks

Are banks liable for damages, lawyers’ fees and litigation costs when they dishonor checks with depositors’ signatures which are different from those kept on the files of the banks?

No, the Supreme Court (SC) said in a recent resolution that dismissed the petition of Bulacan Integrated Wood Industries Corp. (BIWICO) against the decision of the Court of Appeals (CA) in favor of Union Bank of the Philippines (Union Bank).

The CA’s 2012 decision reversed the 2009 ruling of the Valenzuela City regional trial court (RTC) which ordered Union Bank to pay BIWICO P500,000 in temperate damages, P200,000 in exemplary damages and the costs of litigation, including attorney’s fees.

The trial court ordered the payment of damages after Union Bank dishonored BIWICO’s two checks whose depositors’ signatures on them differed from those on file with the bank.

“In dishonoring the subject checks, herein respondent (Union Bank) has been mindful of its fiduciary duty by observing the proper procedures and protocols when it noticed that the signatures therein and those in their files substantially differed,” the SC said.

“The Court notes that the respondent also exerted considerable effort to secure the signatures of the petitioner’s (BIWICO) signatories by going to the latter’s office on several occasions,” it stressed.

“Thus, We cannot fault the respondent from refusing to acknowledge the returned signature cards as they were not signed in the presence of the bank’s representative,” it said.

“It should be emphasized that part of the responsibility of respondent is to know its clients. Certainly, it cannot just honor signed cards without verifying the persons behind the signatures,” it also said.

“WHEREFORE, We DENY the petition; AFFIRM the decision promulgated December 5, 2012 and resolution dated April 29, 2013 of the Court of Appeals in Ca-GR CV No. 95277; and ORDER the petitioner to pay the costs of suit,” the SC ruled.

Case records at the CA showed that on July 3, 1997, BIWICO opened a checking account with the Valenzuela City branch of Union Bank with an initial deposit of P300,000. BIWICO submitted its Articles of Incorporation, its By-Laws, and the amended Articles of Incorporation.

To verify BIWICO’s signatories in the account, Union Bank asked the depositor’s representatives to fill up the blank specimen signature cards.

Instead of filling up the specimen signature cards on the day of the opening of the account, BIWICO promised to submit the cards on another day, with the secretary’s certificate attesting to the authority of the signatories and the authenticity of their signatures.

Days and months passed without BIWICO submitting its specimen signature cards or its secretary's certificate to Union Bank.

On Dec. 2, 1997, BIWICO issued its first check for ₱100,000 payable to a certain Jorge Salazar. The check was signed by BIWICO’s vice president Baltazar Sy and corporate secretary Rosalinda Sy.

When the check was presented for encashment, Union Bank did not find specimen signature cards on its file to compare the signatures on the check.

The bank then compared the signatures on the check with those on the documents submitted by BIWICO when it opened its account.

When the bank found that the signatures differed, it sent its marketing assistant to BIWICO for the filling up of the signature specimen cards. However, BIWICO’s corporate secretary told Union Bank’s representatives to just leave the cards with her because the signatories were not in the office.

The Union Bank representative warned BIWICO’s corporate secretary that without the specimen signature cards, the check for P100,000 would be dishonored because the signatures on the corporate documents of BIWICO “varied greatly from the signatures on the check.”

BIWICO sent the specimen signature cards to Union Bank but since the cards were not filled up in the presence of any bank officer, the bank again compared the signatures on the cards with the signatures on the corporate documents. The signatures again differed.

To resolve the issue, Union Bank called up BIWICO’s corporate secretary and asked her to submit two valid identification cards for each of BIWICO’s signatories. The identification cards were not submitted.

Since the signatures on the check presented for encashment differed from those on the signature cards, also differed from those on the corporate documents, the signature cards were not signed in the presence of a bank officer, and the required identification cards of the signatories were not submitted, Union bank dishonored the ₱100,000 check.

On Dec. 5, 1997, Union Bank officers went to BIWICO’s offices for the filling up of the specimen signature cards. Again, BIWICO

did not fill up the cards in the presence of bank officers who returned to the bank with the cards and the secretary’s certificate.

Bur since the cards were signed not in the presence of the bank officers and no identification cards of the signatories were submitted, the bank could not use the cards for signature verification.

On the same day, BIWICO issued another check to close its account with Union Bank and deposited the check with another bank. But since the signatures on the check could not be verified in the absence

of specimen signature cards, Union Bank dishonored the second check.

On Dec. 15, 1997, BIWICO sent a demand letter to Union Bank for the release of its funds. When the bank did not release its money, BIWICO filed a case against Union Bank with the Valenzuela City RTC.

The RTC ruled in favor BIWICO and ordered the payment of damages against Union Bank.

On appeal, the CA reversed the trial court and ordered Union Bank to release BIWICO’s bank deposits. The case was elevated by BIWICO to the SC which dismissed its appeal.