FACTS:

The petitioner filed a complaint for damages against the respondents Citibank, N.A. and Associated Bank, alleging that he purchased a manager's check from Citibank in the amount of P1,545,000 payable to Frank Tan. However, he later learned that the check was deposited with Associated Bank to the account of Julius Dizon, without any endorsement from Frank Tan. The petitioner demanded payment or reimbursement from the respondents, but they refused to comply. The petitioner amended his complaint to include Frank Tan as an additional defendant, claiming that the check was purchased as a demand loan to Tan. Associated Bank argued that the petitioner was not the real party-in-interest and that the proceeds of the check were credited to Frank Tan's account. Citibank contended that it paid the check in due course and was not responsible for verifying the genuineness of the payee's signature. The trial court declared Frank Tan in default and ruled in favor of the petitioner only against Tan. The complaints against the banks were dismissed. The appellate court affirmed the decision, prompting the petitioner to file a petition for review with the Supreme Court.

ISSUES:

1. Whether Citibank and Associated Bank are liable to petitioner for the encashment of Citibank Manager's Check No. 20-015301 by Julius Dizon.

2. Whether Frank Tan and Julius Dizon are the same person.

3. Whether the identity of Frank Tan as Julius Dizon was known only to Associated Bank and was not binding on petitioner.

RULING:

1. The Court denied the petition. The Court of Appeals correctly affirmed the decision of the trial court that dismissed the complaint against Citibank and Associated Bank. The preponderance of evidence supports the claim of petitioner against Frank Tan only, and not against the respondent banks.

PRINCIPLES:

• A holder not in due course cannot acquire rights better than those of his transferor. One who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter. (Section 58, Negotiable Instruments Law)

• The holder of a negotiable instrument may be liable on the instrument to a holder in due course even if he derived his title from a holder not in due course. (Section 59, Negotiable Instruments Law)

• The indorsement of a check cannot be established through mere preponderance of evidence. The cancellation of the checks and the lack of confirmation demand that the indorsement be proved under standards more exacting than the preponderance of evidence required for civil cases. (Associated Bank v. Gallego, 438 Phil. 152, 165-166 (2002))