FACTS:

RPN,  IBC  and  BBC  were  all  assessed  for  tax  by  the  BIR.    To  pay  the assessed taxes, they bought manager’s checks from petitioner bank.  None of  these  checks  were  paid  to  the  BIR.    They  were  found  to  have  been deposited in the account of a third person in Security Bank.  As the taxes remained unpaid, the BIR issued a levy, distraint and garnishment against the  three  networks.    An  action  was  filed  wherein  it  was  decided  that  the networks should be reimbursed for the amounts of the checks by petitioner bank and the latter in turn, must be reimbursed by Security Bank.  In the appellate  court,  it  was  held  that  Traders  Bank  should  be  the  only  bank liable.   
 

HELD:

Petitioner ought to have known that where a check is drawn payable to the order of one person and is presented for payment by another and purports upon its face to have been duly indorsed by the payee of the check, it is the  primary  duty  of  the  petitioner  to  know  that  the  check  was  duly indorsed by the original payee, and it pays the amount of the check to the third person, who has forged the signature of the payee, the loss falls upon the petitioner who cashed the check.  Its only remedy is against the person
to whom it paid the money.
 
It should be further noted that one of the checks was a crossed check.  The crossing  of  the  check  should  have  put  petitioner  on  guard;  it  was  duty-bound  to  ascertain  the  indorser’s  title  to  the  check  or  the  nature  of  his possession.