San Carlos Milling v Bank of PI,
59 Phil. 59, G.R. No. 37467, December 11, 1933
Facts:
The business of the Philippine Islands was in the hands of Alfred D. Cooper, its agent under general power of attorney with authority of substitution. The principal employee in the Manila office was one Joseph L. Wilson, to whom had been given a general power of attorney. In 1926 Cooper, gave a general power of attorney to Newland Baldwin and at the same time revoked the power of Wilson relative to the dealings with the BPI.
Wilson, conspiring together with Alfredo Dolores, a messenger-clerk in plaintiff’s Manila office, sent a cablegram in code to the company in Honolulu requesting a telegraphic transfer to the China Banking Corporation of Manila of $100,000. The money was transferred by cable, and upon its receipt the China Bank, sent an exchange contract to plaintiff corporation offering the sum of P201, 000. On this contract was forged the name of Newland Baldwin.
A manager’s check on the China Bank for P201,000 payable to San Carlos Milling Company or order was receipted for by Dolores. On September 28, 1927, the manager’s check was deposited with the BPI by the following endorsement: "For deposit only with Bank of the Philippine Islands, to credit of account of San Carlos Milling. "By (Sgd.) NEWLAND BALDWIN"
The BPI thereupon credited the current account of plaintiff in the sum of P201,000 and passed the cashier’s check in the ordinary course of business, where it was paid by the China Bank. On the same day the cashier of the BPI received a letter, purporting to be signed by Newland Baldwin, directing that P200,000 in bills of various denominations, named in the letter, be packed for shipment and delivery the next day. The next day, Dolores witnessed the counting and packing of the money, and shortly afterwards returned with the check for the sum of P200,000, purporting to be signed by Newland Baldwin as agent.
Shortly thereafter the crime was discovered, and upon the defendant bank refusing to credit plaintiff with the amount withdrawn by the two forged checks of P200,000 and P1, suit was brought against BPI and China Bank.
At the trial the China Bank contended that they had drawn a check to the credit of the plaintiff company, that the check had been endorsed for deposit, and that as the prior endorsement had in law been guaranteed by the BPI, when they presented the cashier’s check to it for payment, the China Bank was absolved even if the endorsement of Newland Baldwin on the check was a forgery.
BPI presented many special defenses, but in the main their contentions were that they had been guilty of no negligence, that they had dealt with the accredited representatives of the company in the due course of business, and that the loss was due to the dishonesty of plaintiff’s employees and the negligence of plaintiff’s general agent.
Issue:
Whether or not the BPI must be absolved to its obligation to pay the plaintiff for the sum of P200, 001.
Held:
No.
Ratio:
It is an elementary principle of banking that "A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forges." There is no act of the plaintiff that led the Bank of the Philippine Islands astray. If it was in fact lulled into a false sense of security, it was by the effrontery of Dolores, the messenger to whom it entrusted the large sum of money in question.
The signatures of the checks in question being forged, under section 23 of the Negotiable Instruments Law they are not a charge against plaintiff nor are the checks of any value to the defendant. The proximate cause of loss was due to the negligence of the Bank of the Philippine Islands in honoring and cashing the two forged checks.
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