FACTS:

Citytrust Banking Corporation (Citytrust) held a demand deposit account with the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas. Citytrust provided the bank with names and signatures of authorized officers and roving tellers. One of the authorized roving tellers was Rounceval Flores (Flores). On July 15, 1977, Flores presented two Citytrust checks to the bank's Senior Teller Iluminada dela Cruz for payment. The checks were certified, verified, and approved by the bank's departments, and the respective amounts were debited from Citytrust's account.

A year and nine months later, Citytrust demanded the bank to restore the amounts covered by the checks, claiming that the checks were already cancelled as they were stolen. Citytrust filed a complaint for estafa against Flores and a separate complaint for recovery of sum of money with damages against the bank. The trial court found both parties negligent and held them equally liable for the loss. The Court of Appeals affirmed the trial court's decision, ruling that both parties contributed equally to the fraudulent encashment.

The bank appealed, arguing that Citytrust is bound by Flores' actions as an authorized roving teller and that it was not negligent in releasing the proceeds to Flores despite the failure to properly verify his signature. The bank also contended that it cannot be sued and that Citytrust's reservation of a separate civil action against Flores precludes it from filing a civil action against the bank.

ISSUES:

1. Whether the petitioner is liable for encashing the checks with the forged signature of "Rosauro C. Cayabyab."

2. Whether the court erred in holding both parties equally liable for the loss.

RULING:

1. The petitioner is liable for encashing the checks with the forged signature of "Rosauro C. Cayabyab." The petitioner failed to verify the signature of Citytrust's authorized agent to receive payment, thus contributing to the fraudulent encashment of the checks.

2. The court did not err in holding both parties equally liable for the loss. Both Citytrust and the petitioner were found negligent. Pursuant to Article 2179 of the Civil Code, both parties should equally share the loss.

PRINCIPLES:

• The drawer of a check has a duty to exercise reasonable care and prudence in issuing the check, including verifying the authenticity of the indorsement or signature. Failure to do so may render the drawer liable for the fraudulent encashment of the check.

• Negligence on the part of both parties may result in them being equally liable for the loss. Under Article 2179 of the Civil Code, when the law or the contract does not state the degree of diligence required, the degree of diligence shall be that which is expected of a good father of a family.