8/12/2019 NEGO 33 San Carlos Milling v. BPI

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Negotiable Instruments Section 23 Forged Signature of Drawer

SAN CARLOS MILLING v. BPI

G.R. No. 37467 December 11, 1933

This is an appeal from the judgement of the CFI of Manila absolving BPI.

Facts- San Carlos Milling is a corporation organized under the laws of Hawaii, which is authorised to engagein business in the Philippines. Its main office is in Manila.

- Alfred D. Cooper is the agent of the corporation who handles the business in the Philippines. He hasgeneral power of attorney with authority of substitution.

- Joseph Wilson is the principal employee in the Manila office with the same powers except for theauthority of substitution. His authority to deal with BPI was revoked by Cooper when he decided to goon vacation.*

- Newland Baldwin was given the general power of attorney when Cooper decided to go on vacation.*- A year after, Wilson conspired with a messenger from the Manila office, Dolores, to steal money by

forging Baldwins signature.

He requested for $100,000 from the Honolulu office, which was transferred by cable to ChinaBank, another bank San Carlos Milling maintained a deposit in.

China Bank sent an exchange contract to San Carlos Milling offering PhP201,000, which wasthe current exchange rate. Baldwins signature was forged in said contract.

Dolores received a check from China Bank payable to San Carlos Milling Company or order inthe amount of PhP201,000. This was deposited to BPI on the same day.

BPI accepted the check and credited it to San Carlos account.

BPI received a request purportedly signed by Baldwin requesting that the PhP200,000 be packedfor shipment and delivery the next day. It should be in bills of various denominations.

- Packing and shipping of money was normal for San Carlos but never in this largeamount nor under the sole supervision of Dolores.

Money was turned over to Dolores, who gave it to Wilson. Dolores then received his share ofPhP10,000.

- San Carlos Milling sued BPI after the discovery of the crime. On the suggestion of BPI, the complaint

was amended to include China Bank.- China Bank contended that BPI guaranteed the check when they presented it to BPI for payment. China

Bank was absolved.- RTC also absolved BPI, finding them guilty of NO NEGLIGENCE. The loss was due to the dishonesty

of the plaintiffs employees and negligence of its agent, Baldwin.

Issue

Whether or not San Carlos Milling may recover the sum of PhP201,000 from BPI.

Held

Yes. The fact that these signatures were forged is beyond question. It is an elementary principle both ofbanking and of the Negotiable Instruments Law 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 forged.

There is no act of the plaintiff that led the Bank of the Philippine Islands astray. The bank paid out its moneybecause it relied upon the genuineness of the purported signatures of Baldwin. The signatures to the checksbeing forged, under section 23 of the Negotiable Instruments Law they are not a charge against plaintiff norare the checks of any value to the defendant. It must therefore be held that the proximate cause of loss wasdue to the negligence of the Bank of the Philippine Islands in honoring and cashing the two forged checks.

The judgment absolving the Bank of the Philippine Islands must therefore be reversed, and a judgmententered in favor of plaintiff- appellant and against the Bank of the Philippine Islands, defendant- appellee, forthe sum of P200,001, with legal interest thereon from December 23, 1928, until payment, together with costsin both instances. So ordered.

*this happened at the same time