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The case involves a dispute over a check issued by the Province of Tarlac to pay for its purchases of palay from farmers. The check was drawn against the Philippine National Bank (PNB) Tarlac Branch and was payable to cash or bearer. However, before it could be delivered to the payee, it was stolen by an employee of the Provincial Treasurer's Office and was subsequently encashed at Associated Bank (AB) Cabanatuan Branch after forging the signature of the Provincial Treasurer.

The Province of Tarlac filed a complaint against PNB and AB for recovery of the amount of the check plus damages. The trial court ruled in favor of the Province and ordered PNB and AB to pay jointly and severally 50% each of the amount of the check plus interest and attorney's fees. The Court of Appeals affirmed this decision.

On appeal to the Supreme Court, AB argued that it was not liable as a collecting bank because it exercised due diligence in verifying the genuineness of all prior endorsements before cashing the check. It also claimed that PNB was solely liable as a drawee bank for failing to detect the forgery.

The Supreme Court denied AB's petition and modified the trial court's decision. It held that both PNB and AB were negligent in their respective duties as drawee bank and collecting bank, and thus they should share equally in bearing 50% each of
the loss suffered by
the Province¹².

Source: 07/03/2023(1) G.R. No. 107382/G.R. No. 107612 January 31, 1996 - Lawphil. https://lawphil.net/judjuris/juri1996/jan1996/gr_107382_1996.html Accessed 07/03/2023.
(2) G.R. Nos. 107382 & 107612 January 31, 1996 - ChanRobles. https://www.chanrobles.com/cralaw/1996januarydecisions.php?id=52 Accessed 07/03/2023.
(3) Negotiable Instruments Case Digest: Associated Bank v. CA (1996). http://www.philippinelegalguide.com/2011/08/negotiable-instruments-case-digest_1110.html Accessed 07/03/2023.

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