by Norleah Arimao



Gonzales was an employee of Rizal Commercial Banking Corporation (or RCBC) as New Accounts Clerk in the Retail Banking Department at its Head Office.


A foreign check in the amount of $7,500 was drawn by Dr. Don Zapanta of the Ade Medical Group... payable to Gonzales' mother,... defendant Eva Alviar (or Alviar).

Alviar then endorsed this check.

Gonzales presented the foreign check to Olivia Gomez, the RCBC's Head of

Retail Banking

Olivia Gomez req... queste... d Gonzales to endorse it... which she did. O... livia Gomez then acquiesced to the early encashment of the check and signed the check but indicated thereon her authority of "up to P17,500.00 only"

0.00 only"

Olivia Gomez... directed Gonzales to present the check to RCBC employee Carlos Ramos

Carlos Ramos also signed it with an "ok" annotation

Gonzales presented the check to Rolando Zornosa, Supervisor of the

Remittance section of the Foreign Department of the RCBC Head Office, who after scrutinizing the entries and signatures therein

Gonzales presented the check to Rolando Zornosa, Supervisor of the

Remittance section of the Foreign Department of the RCBC Head Office,... who after scrutinizing the entries and signatures therein... who after scrutinizing the entries and signatures therein... authorized its encashment.

Gonzales then received its peso equivalent of P155,270.85.

Gonzales then received its peso equivalent of P155,270.85.

RCBC then tried to collect the amount of the check with the drawee bank... through its correspondent bank, the First Interstate Bank of California, on two occasions dishonored the check because of "END. IRREG" or irregular indorsement.

check was returned due to "account closed"

RCBC again sent the... check to the drawee bank, but this time the c

RCBC demanded from Gonzales the payment of the peso equivalent of the check that she received. Gonzales settled the matter by agreeing that payment be made thru salary... deduction. This temporary arrangement for salary deductions was communicated by Gonzales to RCBC through a letter dated November 27, 1987... deductions was implemented starting October 1987. On March 7, 1988 RCBC sent a demand letter to Alviar for the payment of her obligation but this fell on deaf ears as RCBC did not receive any response from Alviar.

a letter was sent to Gonzales reminding her of her liability as an indorser of the subject check and that for her to avoid litigation she has to fulfill her commitment to settle her obligation

On July

1988 Gonzales resigned from RCBC. What had been deducted from her salary was only P12,822.20 covering ten months.

RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa Alviar-Gonzales and the latter's husband Gino Gonzales.

the RTC... held two of the three defendants liable... judgment... rendered for plaintiff and as against defendant EVA. P. ALVIAR as principal debtor and defendants MELVA THERESA ALVIAR GONZLAES... as guarantor... the CA... affirmed the RTC judgment.


CA erred



The foreign drawee bank, Wilshire Center Bank N.A., refused to pay the bearer of this dollar-check drawn by Don Zapanta because of the defect introduced by RCBC, through its employee, Olivia Gomez. It is, therefore, a useless piece of paper if returned in that state to its... original payee, Eva Alviar.

There is no doubt in the mind of the Court that a subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith. Eva Alviar's and the petitioner's liability to subsequent holders of the foreign check is... governed by the Negotiable Instruments Law

Sec. 66. Liability of general indorser.

Under Section 66, the warranties for which Alviar and Gonzales are liable as general endorsers in favor of subsequent endorsers extend only to the state of the instrument at the time of their endorsements, specifically, that the instrument is genuine and in all respects what it... purports to be; that they have good title thereto; that all prior parties had capacity to contract; and that the instrument, at the time of their endorsements, is valid and subsisting. This provision, however, cannot be used by the party which... introduced a defect on the instrument, such as respondent RCBC in this case, which qualifiedly endorsed the same, to hold prior endorsers liable on the instrument because it results in the absurd situation whereby a subsequent party may render an instrument useless and inutile... and let innocent parties bear the loss while he himself gets away scot-free.

It cannot be over-stressed that had it not been for the qualified endorsement ("up to P17,500.00 only") of Olivia Gomez, who is the employee of RCBC, there would have been no reason for the dishonor of... the check, and full payment by drawee bank therefor would have taken place as a matter of course.

RCBC, which caused the dishonor of the check upon presentment to the drawee bank, through the qualified endorsement of its employee, Olivia Gomez, cannot hold prior endorsers, Alviar and Gonzales in this case, liable on the instrument.


The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for "irregular endorsement" must not be the irregular endorser himself who gave cause for the dishonor. Otherwise, a clear injustice results when any subsequent... party to the instrument may simply make the instrument defective and later claim from prior endorsers who have no knowledge or participation in causing or introducing said defect to the instrument, which thereby caused its dishonor.

Moreover, it is a well-established principle in law that as between two parties, he who, by his acts, caused the loss shall bear the same.[5] RCBC, in this instance, should therefore bear the loss.

Section 66 of the Negotiable Instruments Law which further states that the general endorser additionally engages that, on due presentment, the instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored and the... necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent endorser who may be compelled to pay it, must be read in the light of the rule in equity requiring that those who come to court should come with clean... hands.