Nego Forgery Cases

7/25/2019 Nego Forgery Cases

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G.R. No. L-53194 March 14, 1988

PHILIPPINE NATIONAL BANK petitioner,

vs.

HON. ROMULO S. UIMPO, Pr!"#$#%& '($&!, )o(r* o+ #r"* I%"*a%c! o+ R#a, Bra%ch /I0, a%$ RAN)IS)O S. GOON

II, respondents.

GAN)A2)O, J.:

On July 3, 1973, Francisco S. Gozon II, who was a depositor o the !aloocan !ity "ranch o the #hilippine $ational "an%, went

to the &an% in his car acco'panied &y his riend (rnesto Santos who' he let in the car while he transacted &usiness in the

&an%. )hen Santos saw that Gozon let his chec% &oo% he too% a chec% therero', illed it up or the a'ount o #*,+++.++,

ored the sinature o Gozon, and thereater he encashed the chec% in the &an% on the sa'e day. -he account o Gozon was

de&ited the said a'ount. pon receipt o the state'ent o account ro' the &an%, Gozon as%ed that the said a'ount o

#*,+++.++ should &e returned to his account as his sinature on the chec% was ored &ut the &an% reused.

pon co'plaint o private respondent on Fe&ruary 1, 197/ (rnesto Santos was apprehended &y the police authorities and uponinvestiation he ad'itted that he stole the chec% o Gozon, ored his sinature and encashed the sa'e with the "an%.

0ence Gozon iled the co'plaint or recovery o the a'ount o #*,+++.++, plus interest, da'aes, attorneys ees and costs

aainst the &an% in the !ourt o First Instance o 2izal. ter the issues were 4oined and the trial on the 'erits ensued, a decision

was rendered on Fe&ruary /, 195+, the dispositive part o which reads as ollows6

)0(2(FO2(, 4ud'ent is here&y rendered in avor o the plainti. -he deendant is here&y conde'ned to

return to plainti the a'ount o #*,+++.++ which it had unlawully withheld ro' the latter, with interest at the

leal rate ro' Septe'&er , 197 until the a'ount is ully delivered. -he deendant is urther conde'ned

to pay plainti the su' o #,+++.++ as attorneys ees and to pay the costs o this suit.

$ot satisied therewith, the &an% now iled this petition or review on certiorari in this !ourt raisin the sole leal issue that 8

-0( !- OF 2(S#O$($- F2$!IS!O GO:O$, II I$ #--I$G 0IS !0(!; "OO; !O$-I$I$G -0(

!0(!; I$ -(

!S( OF -0( ?OSS, -0(2("@ #2(!?I$G 0I> F2O> S(--I$G # -0( (F($S( OF FO2G(2@

O2 )$- +F -0O2I-@ $(2 S(!-IO$ 3 OF -0( $(GO-I"?( I$S-2>($-S ?), !- $O.

3+1

-he petition is devoid o 'erit.

-his !ourt reproduces with approval the disAuisition o the court a quoas ollows6

&an% is &ound to %now the sinatures o i ts custo'ersB and i i t pays a ored chec%, it 'ust &e considered

as 'a%in the pay'ent out o its own unds, and cannot ordinarily chane the a'ount so paid to the account

o the depositor whose na'e was ored CSan !arlos >illin !o. vs. "an% o the #.I., *9 #hil. *9D.

-his rule is a&solutely necessary to the circulation o drats and chec%s, and is &ased upon the presu'ed

nelience o the drawee in ailin to 'eet its o&liation to %now the sinature o its correspondent. ... -here

is nothin ineAuita&le in such a rule. I the paper co'es to the drawee in the reular course o &usiness, and

he, havin the opportunity ascertainin its character, pronounces it to &e valid and pays it, it is not only a

Auestion o pay'ent under 'ista%e, &ut pay'ent in nelect o duty which the co''ercial law places upon

hi', and the result o his nelience 'ust rest upon hi' C1 ?2 19+1, citin 'any cases ound in I

&ayani, supraD.

eendant, however, interposed the deense that it eEercised dilience in accordance with the acceptednor's o &an%in practice when it accepted and paid (Ehi&it . It presented evidence that the chec% had to

pass scrutiny &y a sinature veriier as well as an oicer o the &an%.

co'parison o the sinature C(Ehi&it lD on the ored chec% C(Ehi&it D with plaintis eEe'plar

sinatures C(Ehi&its *$ and *"D ound in the #$" For' 3* would i''ediately show the nelience o

the e'ployees o the deendant &an%. (ven a not too careul co'parison would i''ediately arrest ones

attention and direct it to the raceul lines o plaintis eEe'plar sinatures ound in (Ehi&its * and *".

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-he or'ation o the irst letter F in the eEe'plars, which could &e rearded as artistic, is co'pletely

dierent ro' the way the sa'e letter is or'ed in (Ehi&it l. -hat alone should have alerted a 'ore

careul and prudent sinature veriier.

-he pri'e duty o a &an% is to ascertain the enuineness o the sinature o the drawer or the depositor on the chec% &ein

encashed. 1It is eEpected to use reasona&le &usiness prudence in acceptin and cashin a chec% presented to it.

In this case the indins o acts o the court a quoare conclusive. -he trial court ound that a co'parison o the sinature on the

ored chec% and the sa'ple sinatures o private respondent show 'ar%ed dierences as the raceul lines in the sa'ple

sinature which is co'pletely dierent ro' those o the sinature on the ored chec%. Indeed the $"I handwritin eEpert

(stelita Santiao nes who' the trial court considered to &e an un&iased scientiic eEpert indicated the 'ar%ed dierences

&etween the sinature o private respondent on the sa'ple sinatures and the Auestioned sinature. $otwithstandin the

testi'ony o !ol. Fernandez, witness or petitioner, advancin the opinion that the Auestioned sinature appears to &e enuine,

the trial court &y 'erely eEa'inin the pictorial report presented &y said witness, ound a 'ar%ed dierence in the second c in

Francisco as written on the Auestioned sinature as co'pared to the sa'ple sinatures, and the separation &etween the s and

the c in the Auestioned sinature while they are connected in the sa'ple sinatures.

O&viously, petitioner was nelient in encashin said ored chec% without careully eEa'inin the sinature which shows

'ar%ed variation ro' the enuine sinature o private respondent.

In reerence to the alleation o the petitioner that it is the nelience o private respondent that is the cause o the loss which he

suered, the trial court held6

-he act o plainti in leavin his chec%&oo% in the car while he went out or a short while can not &e

considered nelience suicient to eEcuse the deendant &an% ro' its own nelience. It should &e ho'e in

'ind that when deendant let his car, (rnesto Santos, a lon ti'e class'ate and riend re'ained in the

sa'e. eendant could not have &een eEpected to %now that the said (rnesto Santos would re'ove a chec%

ro' his chec%&oo%. Defendant had trust in his classmate and friend. 0e had no reason to suspect that the

latter would &reach that trust .

)e aree.

#rivate respondent trustee (rnesto Santos as a class'ate and a riend. 0e &rouht hi' alon in his car to the &an% and he let

his personal &elonins in the car. Santos however re'oved and stole a chec% ro' his chee% &oo% without the %nowlede and

consent o private respondent. $o dou&t private respondent cannot &e considered nelient under the circu'stances o the

case.

)0(2(FO2(, the petition is IS>ISS( or lac% o 'erit with costs aainst petitioner.

SO O2(2(.

G.R. No. L-4359 Oc*o!r 31, 193

PHILIPPINE NATIONAL BANK,plaintiappellee,

vs.

THE NATIONAL )IT2 BANK O NE6 2ORK, a%$ MOTOR SER0I)E )OMPAN2, IN).,deendants.

MOTOR SER0I)E )OMPAN2, IN).,appellant.

L. D. Lockwood for appellant.

Camus and Delgado for appellee.

RE)TO, J.:

-his case was su&'itted or decision to the court &elow on the ollowin stipulation o acts6

1. -hat plainti is a &an%in corporation oranized and eEistin under and &y virtue o a special act o the #hilippine

?eislature, with oice as principal place o &usiness at the >asonic -e'ple "ld., (scolta, >anila, #. I.B that the

deendant $ational !ity "an% o $ew @or% is a orein &an%in corporation with a &ranch oice duly authorized and

licensed to carry and enae in &an%in &usiness in the #hilippine Islands, with &ranch oice and place o &usiness in

the $ational !ity "an% "ld., !ity o >anila, #. I., and that the deendant >otor Service !o'pany, Inc., is a corporation

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oranized and eEistin under and &y virtue o the eneral corporation law o the #hilippine Islands, with oice and

principal place o &usiness at /+5 2izal venue, !ity o >anila, #. I., enaed in the purchase and sale o auto'o&ile

spare parts and accessories.

. -hat on pril 7 and 9, 1933, an un%nown person or persons neotiated with deendant >otor Service !o'pany, Inc.,

the chec%s 'ar%ed as (Ehi&its and 1, respectively, which are 'ade parts o the stipulation, in pay'ent or

auto'o&ile tires purchased ro' said deendants stores, purportin to have &een issued &y the #anasinan-ransportation !o., Inc. &y J. ?. ;lar, >anaer and -reasurer, aainst the #hilippine $ational "an% and in avor o the

International uto 2epair Shop, or #1//.*+ and #1*.7*B and said chec%s were indorsed &y said un%nown persons in

the 'anner indicated at the &ac% thereo, the >otor Service !o., Inc., &elievin at the ti'e that the sinature o J. ?.

;lar, >anaer and -reasurer o the #anasinan -ransportation !o., Inc., on &oth chec%s were enuine.

3. -he chec%s (Ehi&its and 1 were then indorsed or deposit &y the deendant >otor Service !o'pany, Inc, at the

$ational !ity "an% o $ew @or% and the or'er was accordinly credited with the a'ounts thereo, or #1//.*+ and

#1*.7*.

/. On pril 5 and 1+, 1933, the said chec%s were cleared at the clearin house and the #hilippine $ational "an%

credited the $ational !ity "an% o $ew @or% or the a'ounts thereo, &elievin at the ti'e that the sinatures o the

drawer were enuine, that the payee is an eEistin entity and the endorse'ent at the &ac% thereo reular andenuine.

*. -he #hilippine $ational "an% then ound out that the purported sinatures o J. ?. ;lar, as >anaer and -reasurer o

the #anasinan -ransportation !o'pany, Inc., in said (Ehi&its and 1 were ored when so inor'ed &y the said

!o'pany, and it accordinly de'anded ro' the deendants the rei'&urse'ent o the a'ounts or which it credited

the $ational !ity "an% o $ew @or% at the clearin house and or which the latter credited the >otor Service !o., &ut

the deendants reused, and continue to reuse, to 'a%e such rei'&urse'ents.

H. -he #anasinan -ransportation !o., Inc., o&4ected to have the proceeds o said chec% deducted ro' their deposit.

7. (Ehi&its ", !, , (, F, and G, which were introduced at the trial in the 'unicipal court o >anila and or'in part o

the record o the present case, are ad'itted &y the parties as enuine and are 'ade part o this stipulation as well as(Ehi&it 0 hereto attached and 'ade a part hereo.

pon plaintis 'otion, the case was dis'issed &eore trial as to the deendant $ational !ity "an% o $ew @or%. a decision was

thereater rendered ivin plainti 4ud'ent or the total a'ount o #3H+.*, with interest and costs. Fro' this decision the

instant appeal was ta%en.

"eore us is the preli'inary Auestion o whether the oriinal appeal ta%en &y the plainti ro' the decision o the 'unicipal court

o >anila where this case oriinated, &eca'e perected &ecause o plaintis ailure to attach to the record within 1* days ro'

receipt o notice o said decision, the certiicate o appeal &ond reAuired &y section 7H o the !ode o !ivil #rocedure. It is not

disputed that &oth the appeal doc%et ee and the appeal cash &ond were paid and deposited within the prescri&ed ti'e. -he

issue is whether the 'ere ailure to ile the oicial receipt showin that such deposit was 'ade within the said period is a

suicient round to dis'iss plaintis appeal. -his Auestion was settled &y our decision in the case o "lanco vs."erna&e andlawyers !ooperative #u&lishin !o. Cpae 1/,anteD, and no urther consideration. $o error was co''itted in allowin said

appeal.

)e now pass on to consider and deter'ine the 'ain Auestion presented &y this appeal, na'ely, whether the appellee has the

riht to recover ro' the appellant, under the circu'stances o this case, the value o the chec%s on which the sinatures o the

drawer were ored. -he appellant 'aintains that the Auestion should &e answered in the neative and in support o its

contention appellant advanced various reasons presently to &e eEa'ined careully.

I. It is contended, irst o all, that the pay'ent o the chec%s in Auestion 'ade &y the drawee &an% constitutes an acceptance,

and, conseAuently, the case should &e overned &y the provisions o section H o the $eotia&le Instru'ents ?aw, which says6

S(!. H. Liability of acceptor. 8-he acceptor &y acceptin the instru'ent enaes that he will pay it accordin to thetenor o his acceptanceB and ad'its6

CaD -he eEistence o the drawer, the enuineness o his sinature, and his capacity and authority to draw the

instru'entB and

CbD -he eEistence o the payee and his then capacity to indorse.

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-his contention is without 'erit. chec% is a &ill o eEchane paya&le on de'and and only the rules overnin &ills o eEchane

paya&le on de'and are applica&le to it, accordin to section 15* o the $eotia&le Instru'ents ?aw. In view o the act that

acceptance is a step unnecessary, in so ar as &ills o eEchane paya&le on de'and are concerned Csec. 1/3D, it ollows that the

provisions relative to acceptance are without application to chec%s. cceptance i'plies, in eect, su&seAuent neotiation o the

instru'ent, which is not true in case o the pay'ent o a chec% &ecause ro' the 'o'ent a chec% is paid it is withdrawn ro'

circulation. -he warranty esta&lished &y section H, is in avor o holders o the instru'ent ater its acceptance. )hen the drawee

&an% cashes or pays a chec%, the cycle o neotiation is ter'inated, and it is illoical thereater to spea% o su&seAuent holderswho can invo%e the warranty provided in section H aainst the drawee. >oreover, accordin to section 191, acceptance

'eans an acceptance co'pleted &y delivery or notiication and this concept is entirely inco'pati&le with pay'ent, &ecause

when pay'ent is 'ade the chec% is retained &y the &an%, and there is no such thin as delivery or notiication to the party

receivin the pay'ent. !hec%s are not to &e accepted, &ut presented at once or pay'ent. C1 "ouviers ?aw ictionary, /7H.D

-here can &e no such thin as acceptance in the ordinary sense o the ter'. chec% &ein paya&le i''ediately and on

de'and, the &an% can ulill its duty to the depositor only &y payin the a'ount de'anded. -he holder has no riht to de'and

ro' the &an% anythin &ut pay'ent o the chec%, and the &an% has no riht, as aainst the drawer, to do anythin &ut pay it. C*

2. !. ?., p. *1H, par. 35.D chec% is not an instru'ent which in the ordinary course o &usiness calls or acceptance. -he holder

can never clai' acceptance as his leal riht. 0e can present or pay'ent, and only or pay'ent. C1 >orse on "an%s and

"an%in, Hth ed., pp. 595, 599.D

-here is, however, nothin in the law or in, &usiness practice aainst the presentation o chec%s or acceptance, &eore they arepaid, in which case we have a certiication eAuivalent to acceptance accordin to section 157, which provides that where a

chec% is certiied &y the &an% on which it is drawn, the certiication is eAuivalent to an acceptance, and it is then that the

warranty under section H eEists. -his certiication or acceptance consists in the siniication &y the drawee o his assent to the

order o the drawer, which 'ust not eEpress that the drawee will peror' his pro'ise &y any other 'eans than the pay'ent o

'oney. CSec. 13.D )hen the holder o a chec% procures it to &e accepted or certiied, the drawer and all indorsers are

dischared ro' lia&ility thereon Csec. 155D, and then the chec% operates as an assin'ent o a part o the unds to the credit o

the drawer with the &an%. CSec. 159.D -here is nothin in the nature o the chec% which intrinsically precludes its acceptance, in

li%e 'anner and with li%e eect as a &ill o eEchane or drat 'ay &e accepted. -he &an% 'ay accept i it choosesB and it is

reAuently induced &y convenience, &y the eEiencies o &usiness, or &y the desire to o&lie custo'ers, voluntarily to incur the

o&liation. -he act &y which the &an% places itsel under o&liation to pay to the holder the su' called or &y a chec% 'ust &e the

eEpressed pro'ise or underta%in o the &an% siniyin its intent to assu'e the o&liation, or so'e act ro' which the law will

i'peratively i'ply such valid pro'ise or underta%in. -he 'ost ordinary or' which such an act assu'es is the acceptance &y

the &an% o the chec%, or, as it is perhaps 'ore oten called, the certiyin o the chec%. C1 >orse on "an%s and "an%in, pp. 595,599B * 2. !. ?., p. *+.D

$o dou&t a &an% 'ay &y an uneAuivocal pro'ise in writin 'a%e itsel lia&le in any event to pay the chec% upon de'and, &ut this

is not an acceptance o the chec% in the true sense o that ter'. lthouh a chec% does not call or acceptance, and the holder

can present it only or pay'ent, the certiication o chec%s is a 'eans in constant and eEtensive use in the &usiness o &an%in,

and its eects and conseAuences are reulated &y the law 'erchant. !hec%s drawn upon &an%s or &an%ers, thus 'ar%ed and

certiied, enter larely into the co''ercial and inancial transactions o the countryB they pass ro' hand to hand, in the pay'ent

o de&ts, the purchase o property, and in the transer o &alances ro' one house and one &an% to another. In the reat

co''ercial centers, they 'a%e up no inconsidera&le portion o the circulation, and thus peror' a useul, valua&le, and an

al'ost indispensa&le oice. -he purpose o procurin a chec% to &e certiied is to i'part strenth and credit to the paper &y

o&tainin an ac%nowled'ent ro' the certiyin &an% that the drawer has unds therein suicient to cover the chec% and

securin the enae'ent o the &an% that the chec% will &e paid upon presentation. certiied chec% has a distinctive characteras a species o co''ercial paper, and peror's i'portant unctions in &an%in and co''ercial &usiness. When a check is

certified, it ceases to possess the character, or to perform the functions, of a check, and represents so much money on deposit,

payable to the holder on demand.-he chec% &eco'es a &asis o credit 8 an easy 'ode o passin 'oney ro' hand to hand,

and answers the purposes o 'oney. C* 2. !. ?., pp. *1H, *17.D lwphi.n!t

ll the authorities, &oth (nlish and 'erican, hold that a chec% 'ay &e accepted, thouh acceptance is not usual. "y the law

'erchant, the certiicate o the &an% that a chec% is ood is eAuivalent to acceptance. It i'plies that the chec% is drawn upon

suicient unds in the hands o the drawee, that they have &een set apart or its satisaction, and that they shall &e so applied

whenever the chec% is presented or pay'ent. It is an underta%in that the chec% is ood then, and shall continue ood, and this

aree'ent is as &indin on the &an% as its notes o circulation, a certiicate o deposit paya&le to the order o the depositor, or

any other o&liation it can assu'e. -he o&4ect o certiyin a chec%, as reards &oth parties is to ena&le the holder to use it as

'oney. -he transeree ta%es it with the sa'e readiness and sense o security that he would ta%e the notes o the &an%. It isavaila&le also to hi' or all the purposes o 'oney. -hus it continues to peror' its i'portant unctions until in the course o

&usiness it oes &ac% to the &an% or rede'ption, and is eEtinuished &y pay'ent. It cannot &e dou&ted that the certiyin &an%

intended these conseAuences, and it is lia&le accordinly. -o hold otherwise would render these i'portant securities only a snare

and a delusion. &an% incurs no reater ris% in certiyin a chec% than in ivin a certiicate o deposit. In wellreulated &an%s

the practice is at once to chare the chec% to the account o the drawer, to credit it in a certiied chec% account, and, when the

chec% is paid, to de&it that account with the a'ount. $othin can &e si'pler or saer than this process. C>erchants

"an% vs.States "an%, 1+ )all., H+/, at p. H/7B 19 ?aw. ed., 1++5, 1+19.D

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Ordinarily the acceptance or certiication o a chec% is peror'ed and evidenced &y so'e word or 'ar%, usually the words

ood, certiied or accepted written upon the chec% &y the &an%er or &an% oicer. C1 >orse, "an%s and "an%in, 91*B 1

"ouviers ?aw ictionary, /7H.D -he &an% virtually says, that chec% is oodB we have the 'oney o the drawer here ready to pay

it. )e will pay it now i you will receive it. -he holder says, $o, I will not ta%e the 'oneyB you 'ay certiy the chec% and retain the

'oney or 'e until this chec% is presented. -he law will not per'it a chec%, when due, to &e thus presented, and the 'oney to

&e let with the &an% or the acco''odation o the holder without discharin the drawer. -he 'oney &ein due and the chec%

presented, it is his own ault i the holder declines to receive the pay, and or his own convenience has the 'oney appropriated tothat chec% su&4ect to its uture present'ent at any ti'e within the statute o li'itations. C1 >orse on "an%s and "an%in, p. 9+.D

-he theory o the appellant and o the decisions on which it relies to support its view is vitiated &y the act that they ta%e the word

acceptance in its ordinary 'eanin and not in the technical sense in which it is used in the $eotia&le Instru'ents ?aw.

ppellant says that when pay'ent is 'ade, such pay'ent a'ounts to an acceptance, &ecause he who pays accepts. -his is

true in co''on parlance &ut acceptance in leal conte'plation. -he word acceptance has a peculiar 'eanin in the

$eotia&le Instru'ents ?aw, and, as has &een a&ove stated, in the instant case there was pay'ent &ut no acceptatance, or what

is eAuivalent to acceptance, certiication.

)ith ew eEceptions, the weiht o authority is to the eect that pay'ent neither includes nor i'plies acceptance.

In $ational "an% vs.First $ational "an% C191+1, 1/1 >o. pp., 719B 1* S. )., *13D, the court as%s, i a 'ere pro'ise to pay achec% is &indin on a &an%, why should not the a&solute pay'ent o the chec% have the sa'e eect In response, it is su&'itted

that the two thins, 8 that is acceptance and pay'ent, 8 are entirely dierent. I the drawee accepts the paper ater seein it,

and then per'its it to o into circulation as enuine, on all the principles o estoppel, he ouht to &e prevented ro' settin up

orery to deeat lia&ility to one who has ta%en the paper on the aith o the acceptance, or certiication. On the other hand, 'ere

pay'ent o the paper at the ter'ination o its course does not act as an estoppel. -he atte'pt to state a eneral rule coverin

&oth acceptance and pay'ent is responsi&le or a lare part o the conlictin aru'ents which have &een advanced &y the

courts with respect to the rule. Cnnotation at 1 . ?. 2., 1+9+ 191K.D

In First $ational "an% vs."rule $ational "an% C1917K, 1 . ?. 2., 1+79, 1+5*D, the court said6

)e are o the opinion that pay'ent is not acceptance. cceptance, as deined &y section 131, cannot &e conounded

with pay'ent. . . .

cceptance, certiication, or pay'ent o a chec%, &y the eEpress lanuae o the statute, dischares the lia&ility only o

the persons na'ed in the statute, to wit, the drawer and all indorsers, and the contract o indorse'ent &y the

neotiator i the chec% is dischared &y acceptance, certiication, or pay'ent. "ut clearly the statute does not say that

the contract o warranty o the neotiator, created &y section H*, is dischared &y these acts.

-he rule supported &y the 'a4ority o the cases C1/ . ?. 2. 7H/D, that pay'ent o a chec% on a ored or unauthorized

indorse'ent o the payees na'e, and charin the sa'e to the drawers account, do not a'ount to an acceptance so as to

'a%e the &an% lia&le to the payee, is supported &y all o the recent cases in which the Auestion is considered. C!ases cited,

nnotation at H9 . ?. 2., 1+7H, 1+77 193+K.D

>erely sta'pin a chec% #aid upon its pay'ent on a ored or unauthorized indorse'ent is not an acceptance thereo so as torender the drawee &an% lia&le to the true payee. Cnderson vs.-aco'a $ational "an% 195K, 1/H )ash., *+B H/ #ac., 5B

nnotation at H9 . ?. 2., 1+77, 193+K.D

In State "an% o !hicao vs.>id!ity -rust L Savins "an% C1 . ?. 2., 959, 991, 99D, the court said6

-he deendant in error contends that the pay'ent o the chec% shows acceptance &y the &an%, urin that there can &e no 'ore

deinite act &y the &an% upon which a chec% has &een drawn, showin acceptance than the pay'ent o the chec%. Section 15/ o

the $eotia&le Instru'ents ct Csec. +D provides that the provisions o the act applica&le to &ills o eEchane apply to a chec%,

and section 131 Csec. 1/9D, that the acceptance o a &ill 'ust &e in writin sined &y the drawee. #ay'ent is the inal act which

eEtinuishes a &ill. cceptance is a pro'ise to pay in the uture and continues the lie o the &ill. It was held in the First $ational

"an% vs.)hit'an C9/ . S., 3/3B / ?. ed., 9D, that pay'ent o a chec% upon a ored indorse'ent did not operate as an

acceptance in avor o the true owner. -he contrary was held in #ic%le vs.>use CFic%le vs.#eoples $at. "an%, 55 -enn., 35+B 7?.2.., 93B 17 '. St. 2ep., 9++B 1 S. )., 919D, and Seventh $ational "an% vs.!oo% C73 #a., /53B 13 '. 2ep., 7*1D at a ti'e

when the $eotia&le Instru'ents ct was not in orce in those states. -he opinion o the Supre'e !ourt o the nited States

see's 'ore loical, and the provision o the $eotia&le Instru'ents ct now reAuire an acceptance to &e in writin. nder this

statute the pay'ent o a chec% on a ored indorse'ent, sta'pin it paid, and charin it to the account o the drawer, do not

constitute an acceptance o the chec% or create a lia&ility o the &an% to the true holder or the payee. C(lyria Sav. L "%.

!o. vs.)al%er "in !o., 9 Ohio St., /+HB ?. 2. ., 191H, /33B 111 $. (., 1/7B nn. !as. 1917, 1+**B "alti'ore L O. 2.

!o. vs.First $ational "an%, 1+ Ma., 7*3B /7 S. (., 537B State "an% o !hicao vs.>id!ity -rust L Savins "an% 1 . ?. 2.,

pp. 959, 991, 99.D

5


6/93

"eore drawees acceptance o chec% there is no privity o contract &etween drawee and payee. rawees pay'ent o chec% on

unauthorized indorse'ent does not constitute acceptance o chec%. CSinclair 2einin !o. vs.>oultrie "an%in !o., 1H* S. (.,

5H+ 193K.D

-he reat weiht o authority is to the eect that the pay'ent o a chec% upon a ored or unauthorized indorse'ent and the

sta'pin o it paid does not constitute an acceptance. Ca%ota 2adio pparatus !o. vs.First $at. "an% o 2apid !ity, // $.

)., 3*1, 3* 193K.D

#ay'ent o the chec%, cashin it on present'ent is not acceptance. CSouth "oston -rust !o. vs.?evin, /9 >ass., /*, /5, /9B

1/3 $. (., 51HB "loc%er, Shepard !o. vs.Granite -rust !o'pany, 157 >e., *3, */ 1933K.D

In 2auch vs."an%ers $ational "an% o !hicao C1/3 Ill. pp., H*, H3H, H37 19+5KD, the lanuae o the decision was as ollows6

. . . -he plaintis say that this acceptance was 'ade &y the very unauthorized pay'ents o which they co'plain. -his

suestion does not see' orceul to us. It is the contention which was 'ade &eore the Supre'e !ourt o the nited

States in First $ational "an% vs.)hit'an C9/ . S., 3/3D, and repudiated &y that court. -he lanuae o the opinion in

that case is so apt in the present case that we Auote it6

It is urther contended that such an acceptance o a chec% as creates a privity &etween the payee and the &an% isesta&lished &y the pay'ent o the a'ount o this chec% in the 'anner descri&ed. -his aru'ent is &ased upon the

erroneous assu'ption that the &an% has paid this chec%. I this were true, it would have dischared all o its duty, and

there would &e an end to the clai' aainst it. -he &an% supposed that it had paid the chec%, &ut this was an error. -he

'oney it paid was upon a pretended and not a real indorse'ent o the na'e o the payee. . . . )e cannot reconize

the aru'ent that pay'ent o the a'ount o the chec% or siht drat under such circu'stances a'ounts to an

acceptance creatin a privity o contract with the real owner.

It is diicult to construe a pay'ent as an acceptance under any circu'stances. . . . &an%er or individual 'ay &e

ready to 'a%e actual pay'ent o a chec% or drat when presented, while unwillin to 'a%e a pro'ise to pay at a uture

ti'e. >any, on the other hand, are 'ore ready to pro'ise to pay than to 'eet the pro'ise when reAuired. -he

dierence &etween the transactions is essential and inherent.

nd in )har vs.Seattle $ational "an% C/ #ac. dKD, 1+, 13 1933KD6

It is the rule that pay'ent o a chec% on unauthorized or ored indorse'ent does not operate as an acceptance o the

chec% so as to authorize an action &y the real owner to recover its a'ount ro' the drawee &an%. C>ichie on "an%s

and "an%in, vol. *, sec. 75, p. *1.D ull list o the authorities supportin the rule will &e ound in a ootnote to the

oreoin citation. C"ee also, Federal ?and "an% vs.!ollins, 1*H >iss., 593B 17 So., *7+B H9 . ?. 2., 1+H5.D

In a very recent case, Federal ?and "an% vs.!ollins CH9 . ?. 2., 1+H5, 1+71+7/D, this Auestion was discussed at considera&le

lenth. -he court said6

In the liht o the irst o these statutes, counsel or appellant is orced to stand upon the narrow lede that the pay'ent o the

chec% &y the two &an%s will constitute an acceptance. -he drawee &an% si'ply 'ar%ed it paid and did not write anythin elseeEcept the date. -he &an% irst payin the chec%, the !o''ercial $ational "an% and -rust !o'pany, si'ply wrote its na'e as

indorser and passed the chec% on to the drawee &an%B does this constitute an acceptance -he precise Auestion has not &een

presented to this court or decision. )ithout reerence to authorities in other 4urisdictions it would appear that the drawee &an%

had never written its na'e across the paper and thereore, under the strict ter's o the statute, could not &e &ound as an

acceptorB in the second place, it does not appear to us to &e illoical and unsound to say that the pay'ent o a chec% &y the

drawee, and the sta'pin o it paid, is eAuivalent to the sa'e thin as the acceptance o a chec%B however, there is a variety o

opinions in the various 4urisdictions on this Auestion. !ounsel correctly states that the theory upon which the nu'erous courts

hold that the pay'ent o a chec% creates privity &etween the holder o the chec% and the drawee &an% is tanta'ount to a pro

tanto assin'ent o that part o the unds. It is 'ost easily understood how the pay'ent o the chec%, when not authorized to &e

done &y the drawee &an%, 'iht under such circu'stances create lia&ility on the part o the drawee to the drawer. !ounsel cites

the case o #ic%le vs.>use C55 -enn, 35+B 1 S. )., 919B 7 ?. 2. ., 93B 17 '. St. 2ep., 9++D, wherein Jude ?urton held that

the acceptance o a chec% was necessary in order to ive the holder thereo a riht o action thereon aainst the &an%, andurther held in a case si'ilar to this, so ar as this Auestion is concerned, that the acceptance o a chec% so as to ive a riht o

action to the payee is inerred ro' the retention o the chec% &y the &an% and its su&seAuent chare o the a'ount to the

drawer, althouh it was presented &y, and pay'ent 'ade, an unauthorized person. Jude ?urton cited the case o $ational "an%

o the 2epu&lic vs.>illard C1+ )all., 1*B 19 ?. ed., 597D, wherein the Supre'e !ourt o the nited States, not havin such a

case &eore it, threw out the suestion that, i it was shown that a &an% had chared the chec% on its &oo%s aainst the drawer

and 'ade settle'ent with the drawee that the holder could recover on account o 'oney had and received, invo%in the rule o

4ustice and airness, it 'iht &e said there was an i'pl ied pro'ise to the holder to pay it on de'and. C "ee$ational "an% o the

2epu&lic vs.>illard, 1+ )all. 77 . S.K, 1*B 19 ?. ed., 599.D -he -ennessee court then arued that it would &e ineAuita&le and

6


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unconsciona&le or the owner and payee o the chec% to &e li'ited to an action aainst an insolvent drawer and 'iht there&y

lose the de&t. -hey reconized the leal principle that there is no privity &etween the drawer &an% and the holder, or payee, o

the chec%, and proceeded to hold that no particular %ind o writin was necessary to constitute an acceptance and that it &eca'e

a Auestion o act, and the &an% &eca'e lia&le when it sta'ped it paid and chared it to the account o the drawer, and cites, in

support o its opinion, Seventh $ational "an% vs.!oo% C73 #a., /53B 13 '. 2ep., 7*1DB Saylor vs."ushon C1++ #a., 3B /* '.

2ep., 3*3DB and ode vs."an% C+ Ohio St., 3/B * '. 2ep., H/5D.

-his decision was in 159+, prior to the enact'ent o the $eotia&le Instru'ents ?aw &y the State o -ennessee.

0owever, in this case Jude Snodrass points out that the >illard case, supra, was dicta. -he ode case, ro' the

Ohio court, held eEactly as the -ennessee court, &ut su&seAuently in the case o (lyria "an% vs.)al%er "in !o. C9

Ohio St., /+HB 111 $. (., 1/7B ?. 2. . 191H, /33B nn. !as. 1917, 1+**D, the court held to the contrary, called

attention to the act that the ode case was no loner the law, and proceeded to announce that, whatever 'iht have

&een the law &eore the passae o the $eotia&le Instru'ent ct in that state, it was no loner the lawB that the rule

announced in the ode case had &een discarded. -he court, in the latter case, eEpressed its dou&ts that the courts

o -ennessee and #ennsylvania would adhere to the rule announced in the #ic%le case, Auoted supra, in the ace o

the $eotia&le Instru'ent ?aw. Su&seAuent to the >illard case, the Supre'e !ourt o the nited States, in the case o

First $ational "an% o )ashinton vs.)hit'an C9/ . S., 3/3, 3/7B / ?. ed., 9D, where the &an%, without any

%nowlede that the indorse'ent o the payee was unauthorized, paid the chec%, and it was contended that &y the

pay'ent the privity o contract eEistin &etween the drawer and drawee was i'parted to the payee, said6

It is urther contended that such an acceptance o the chec% as creates a privity &etween the payee and the &an% is

esta&lished &y the pay'ent o the a'ount o this chec% in the 'anner descri&ed. -his aru'ent is &ased upon the

erroneous assu'ption that the &an% has paid this chec%. I this were true, it would have dischared all o its duty, and

there would &e an end o the clai' aainst it. -he &an% supposed that it had paid the chec%B &ut this was an error. -he

'oney it paid was upon a pretended and not a real indorse'ent o the na'e o the payee. -he real indorse'ent o the

payee was as necessary to a valid pay'ent as the real sinature o the drawerB and in law the chec% re'ains unpaid.

Its pretended pay'ent did not di'inish the unds o the drawer in the &an%, or put 'oney in the poc%et o the person

entitled to the pay'ent. -he state o the account was the sa'e ater the pretended pay'ent as it was &eore.

)e cannot reconize the aru'ent that a pay'ent o the a'ount o a chec% or siht drat under such circu'stances

a'ounts to an acceptance, creatin a privity o contract with the real owner. It is diicult to construe a pay'ent as an

acceptance under any circu'stances. -he two thins are essentially dierent. One is a pro'ise to peror' an act, the

other an actual peror'ance. &an%er or an individual 'ay &e ready to 'a%e actual pay'ent o a chec% or drat when

presented, while unwillin to 'a%e a pro'ise to pay at a uture ti'e. >any, on the other hand, are 'ore ready to

pro'ise to pay than to 'eet the pro'ise when reAuired. -he dierence &etween the transactions is essential and

inherent.

!ounsel or the appellant cite other cases holdin that the sta'pin o the chec% paid and the charin o the a'ount

thereo to the drawer constituted an acceptance, &ut we are o opinion that none o these cases cited hold that it is in

co'pliance with the $eotia&le Instru'ents ctB payin the chec% and sta'pin sa'e is not the eAuivalent o

acceptin the chec% in writin sined &y the drawee. -he cases holdin that pay'ent as indicated a&ove constituted

acceptance were rendered prior to the adoption o the $eotia&le Instru'ents ct in the particular state, and these

decisions are divided into two classes6 the one holdin that the chec% delivered &y the drawer to the holder and

presented to the &an% or drawee constitutes an assin'ent pro tantoB the other holdin that the pay'ent o the chec%and the charin o sa'e to the drawee althouh paid to an unauthorized person creates privity o contract &etween

the holder and the drawee &an%.

)e have already seen that our own court has repudiated the assin'ent pro tantotheory, and since the adoption o

the $eotia&le Instru'ent ct &y this state we are co'pelled to say that pay'ent o a chec% is not eAuivalent to

acceptin a chec% in writin and sinin the na'e o the acceptor thereon. #ay'ent o the chec% and the charin o

sa'e to the drawer does not constitute an acceptance. #ay'ent o the chec% is the end o the voyaeB acceptance o

the chec% is to uel the vessel and strenthen it or continued operation on the co''ercial sea. )hat we have said

applies to the holder and not to the drawer o the chec%. On this Auestion we conclude that the eneral rule is that an

action cannot &e 'aintained &y a payee o the chec% aainst the &an% on which is draw unless the chec% has &een

certiied or accepted &y the &an% in co'pliance with the statute, even thouh at the ti'e the chec% is that an action

cannot &e 'aintained &y a payee o the drawer o the chec% out o which the chec% is leally paya&leB and that thepay'ent o the chec% &y the &an% on which it is drawn, even thouh paid on the unauthorized indorse'ent o the na'e

o the holder Cwithout notice o the deect &y the &an%D, does not constitute a certiication thereo, neither is it an

acceptance thereoB and without acceptance or certiication, as provided &y statute, there is no privity o contract

&etween the drawee &an% and the payee, or holder o the chec%. $either is there an assin'ent pro tantoo the unds

where the chec% is not drawn on a particular und, or does not show on its ace that it is an assin'ent o a particular

und. -he a&ove rule as stated see's to have &een the rule in the 'a4ority o the states even &eore the passae o

the unior' $eotia&le Instru'ents ct in the several states.

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-he decision in the case o First $ational "an% vs."an% o !ottae Grove C*9 Or., 355D, which appellant cites in its &rie Cpp. 1,

13 D has &een eEpressly overruled &y the Supre'e !ourt o >assachusetts in South "oston -rust !o. vs.?evin C1/3 $. (., 51H,

517D, in the ollowin lanuae6

In First $ational "an% vs."an% o !ottae Grove C*9 Or., 355B 117 #ac., 93, 9H, at pae 39HD, it was said6 -he

pay'ent o a &ill or chec% &y the drawee a'ounts to 'ore than an acceptance. -he rule, holdin that such a pay'ent

has all the eicacy o an acceptance, is ounded upon the principle that the reater includes the less. )e are una&leto aree with this state'ent as there is no si'ilarity &etween acceptance and pay'entB pay'ent dischares the

instru'ent, and no one else is eEpected to advance anythin on the aith o itB acceptance, conte'plates urther

circulation, induced &y the act o acceptance. -he rule that the acceptor 'ade certain ad'issions which will inure to

the &eneit o su&seAuent holders, has no applica&ility to pay'ent o the instru'ent where su&seAuent holders can

never eEist.

II. -he old doctrine that a &an% was &ound to %now its correspondents sinature and that a drawee could not recover 'oney paid

upon a orery o the drawers na'e, &ecause it was said, the drawee was nelient not to %now the orery and it 'ust &ear the

conseAuence o its nelience, is ast adin into the 'isty past, where it &elons. It was ounded in 'isconception o the

unda'ental principles o law and co''on sense. C >orse, "an%s and "an%in, p. 1+31.D

So'e o the cases carried the rule to its urthest li'it and held that under no circu'stances CeEcept, o course, where thepurchaser o the &ill has participated in the raud upon the draweeD would the drawee &e allowed to recover &an% 'oney paid

under a 'ista%e o act upon a &ill o eEchane to which the na'e o the drawer had &een ored. -his doctrine has &een reely

criticized &y the e'inent authorities, as a rule too avora&le to the holder, not the 'ost air, nor &est calculated to eectuate

4ustice &etween the drawee and the drawer. C* 2.!.?., p. **H.D

-he old rule which was oriinally announced &y ?ord >ansield in the leadin case o #rice vs.$eal C3 "urr., 13*/D, elicited the

ollowin co''ent ro' Justice 0ol'es, then !hie Justice o the Supre'e !ourt o >assachusetts, in the case o edha'

$ational "an% vs.(verett $ational "an% C177 >ass., 39D. #ro&a&ly the rule was adopted ro' an i'pression o convenience

rather than or any 'ore acade'ic reasonB or perhaps we 'ay say that ?ord >ansield too% the case out o the doctrine as to

pay'ents under a 'ista%e o act &y the assu'ption that a holder who si'ply presents neotia&le paper or pay'ent 'a%es no

representation as to the sinature, and that the drawee pays at his peril.

Such was the reaction that ollowed ?ord >ansields rule which Justice Story o the nited States Supre'e adopted in the case

o "an% o nited States vs. Georia C1+ )heat., 333D, that in ". ". Ford L !o. vs.#eoples "an% o Orane&ur C7/ S. !., 15+D,

it was held that an unrestricted indorse'ent o a drat and presentation to the drawee is a representation that the sinature o

the drawer is enuine, and in ?is&on First $ational "an% vs.)ynd'ere "an% C1* $. ., 99D, it was also held that the drawee

o a ored chec% who has paid the sa'e without detectin the orery, 'ay upon discovery o the orery, recover the 'oney

paid ro' the party who received the 'oney, even thouh the latter was a ood aith holder, provided the latter has not &een

'isled or pre4udiced &y the drawees ailure to detect the orery.

aniel, in his treatise on $eotia&le Instru'ents, has the ollowin to say6

In all the cases which hold the drawee a&solutely estoppel &y acceptance or pay'ent ro' denyin enuineness o the drawers

na'e, the loss is thrown upon hi' on the round o nelience on his part in acceptin or payin, until he has ascertained the&ill to &e enuine. "ut the holder has preceded hi' in nelience, &y hi'sel not ascertainin the true character o the paper

&eore he received it, or presented it or acceptance or pay'ent. nd althouh, as a eneral rule, the drawee is 'ore li%ely to

%now the drawers handwritin than a straner is, i he is in act deceived as to its enuineness, we do not perceive that he

should suer 'ore deeply &y 'ista%e than a straner, who, without %nowin the handwritin, has ta%en the paper without

previously ascertainin its enuineness. nd the 'ista%e o the drawee should always &e allowed to &e corrected, unless the

holder, actin upon aith and conidence induced &y his honorin the drat, would &e placed in a worse position &y accordin

such privilee to hi'. -his view has &een applied in a well considered case, and is inti'idated in anotherB and is orci&ly

presented &y >r. !hitty, who says it is oin a reat way to chare the acceptor with %nowlede o his correspondents

handwritin, unless so'e bona fideholder has purchased the paper on the aith o such an act. $elience in 'a%in pay'ent

under a 'ista%e o act is not now dee'ed a &ar to recovery o it, and we do not see why any eEception should &e 'ade to the

principle, which would apply as well as to release an o&liation not consu''ated &y pay'ent. C Mol. , Hth edition, pp. 1*37

1*39.D

III. "ut now the rule is perectly well settled that in deter'inin the relative rihts o a drawee who, under a 'ista%e o act, has

paid, and a holder who has received such pay'ent, upon a chec% to which the na'e o the drawer has &een ored, it is only air

to consider the Auestion o dilience or nelience o the parties in respect thereto. C)oods and >alone vs.!olony "an% 19+K,

*H ?. 2. ., 99, 93.D -he responsi&ility o the drawee who pays a ored chec%, or the enuineness o the drawers sinature,

is a&solute only in avor o one who has not, &y his own ault or nelience, contri&uted to the success o the raud or to 'islead

the drawee. C$ational "an% o 'erica vs."ans, 1+H >ass., //1B 5 '. 2ep., 3/9B )oods and >alone vs.!olony "an%, supraB

e Feriet vs."an% o 'erica, 3 ?a. nn., 31+B ". ". Ford L !o. vs.#eoples "an% o Orane&ur, 7/ S. !., 15+B 1+ ?. 2. . $.

8


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S.K, H3.D I it appears that the one to who' pay'ent was 'ade was not an innocent suerer, &ut was uilty o nelience in not

doin so'ethin, which plain duty de'anded, and which, i it had &een done, would have avoided entailin loss on any one, he

is not entitled to retain the 'oneys paid throuh a 'ista%e on the part o the drawee &an%. CFirst $at. "an% o anvers vs.First

$at. "an% o Sale', 1*1 >ass., 5+B / $. (., //B 1 . S. 2., /*+B First $at. "an% o Orleans vs.State "an% o l'a, $e&.,

7H9B 3H $. )., 59B 3 . S. 2., 9/B 'erican (Ep. !o. vs.State $at. "an%, 7 O%la., 5/B 113 #ac., 711B 33 ?. 2. . $. S.K, 155B

". ". Ford L !o. vs.#eoples "an% o Orane&ur, 7/ S. !., 15+B */ S. (., +/B 11/ . S. 2., 95HB 7 nn. !as., 7//B 1+ ?. 2. .

$. S.K, H3B #eoples "an% vs.Fran%lin "an%, 55 -enn. 99B 1 S. )., 71HB 17 . S. 2.D 55/B H ?. 2. ., 7/B !anadian "an% o!o''erce vs."inha', 3+ )ash., /5/B 71 #ac., /3B H+ ?. 2. ., 9**.D In other words, to entitle the holder o a ored chec% to

retain the 'oney o&tained he 'ust &e a&le to show that the whole responsi&ility o deter'inin the validity o the sinature was

upon the drawee, and that the nelience o such drawee was not lessened &y any ailure o any precaution which, ro' his

i'plied assertion in presentin the chec% as a suicient voucher, the drawee had the riht to &elieve he had ta%en. C(llis vs.Ohio

?ie Insurance L -rust !o., / Ohio St., H5B 2ouvant vs."an%, H3 -eE., H1+B "an% vs.2ic%er, 71 Ill., /9B First $ational "an% o

anvers vs.First $at. "an% o Sale', / $. (., //, /*B ". ". Ford L !o. vs.#eoples "an% o Orane&ur, supra.D -he recovery

is per'itted in such case, &ecause, althouh the drawee was constructively nelient in ailin to detect the orery, yet i the

purchaser had peror'ed his duty, the orery would in all pro&a&ility have &een detected and the raud deeated. CFirst $ational

"an% o ?is&on vs."an% o )ynd'ere, 1* $. ., +9B 1+ ?. 2. . $. S.K, /9.D In the a&sence o actual ault on the part o the

drawee, his constructive ault in not %nowin the sinature o the drawer and detectin the orery will not preclude his recovery

ro' one who too% the chec% under circu'stances o suspicion without proper precaution, or whose conduct has &een such as to

'islead the drawee or induce hi' to pay the chec% without the usual scrutiny or other precautions aainst 'ista%e or raud.

C$ational "an% o 'erica vs."ans, supraB First $ational "an% vs. Indiana $ational "an%, 3+ $. (., 5+551+B )oods and

>alone vs.!olony "an%, supraB First $ational "an% o anvers vs.First $at. "an% o Sale', 1*1 >ass., 5+.D )here a loss,

which 'ust &e &orne &y one o two parties ali%e innocent o orery, can &e traced to the nelect or ault o either, it is

unreasona&le that it would &e &orne &y hi', even i innocent o any intentional raud, throuh whose 'eans it has succeeded.

CGloucester "an% vs.Sale' "an%, 17 >ass., 33B First $at. "an% o anvers vs.First $ational "an% o Sale', supraB ". ". Ford

L !o. vs.#eoples "an% o Orane&ur, supra.D ain i the indorser is uilty o nelience in receivin and payin the chec% or

drat, or has reason to &elieve that the instru'ent is not enuine, &ut ails to inor' the drawee o his suspicions the indorser

accordin to the reasonin o so'e courts will &e held lia&le to the drawee upon his i'plied warranty that the instru'ent is

enuine. C". ". Ford L !o. vs.#eoples "an% o Orane&ur, supraB $ew&erry Sav. "an% vs."an% o !olu'&ia, 93 S. !., 9/B

35 ?. 2. . $. SK, 1++.D >ost o the courts now aree that one who purchases a chec% or drat is &ound to satisy hi'sel that

the paper is enuineB and that &y indorsin it or presentin it or pay'ent or puttin it into circulation &eore presentation he

i'pliedly asserts that he has peror'ed his duty, the drawee, who has, without actual nelience on his part, paid the ored

de'and, 'ay recover the 'oney paid ro' such nelient purchaser. C?is&on First $ational "an% vs.)ynd'ere "an%, supra.DO course, the drawee 'ust, in order to recover &ac% the holder, show that he hi'sel was ree ro' ault. C "ee also* 2. !. ?.,

pp. **H**5.D

So, i a collectin &an% is alone culpa&le, and, on account o its nelience only, the loss has occurred, the drawee 'ay recover

the a'ount it paid on the ored drat or chec%. CSecurity !o''ercial L Sav. "an% vs.Southern -rust L !. "an% 19*K, 7/ !al.

pp., 73/B /1 #ac., 9/*.D

"ut we are aware o no case in which the principle that the drawee is &ound to %now the sinature o the drawer o a &ill or chec%

which he underta%es to pay has &een held to &e decisive in avor o a payee o a ored &ill or chec% to which he has hi'sel

iven credit &y his indorse'ent. CSecalso, >c%leroy vs."an%, 1/ ?a. nn., /*5B !anal "an% vs."an% o l&any, 1 0ill, 57B

2ouvant vs."an%, supra, First $at. "an% vs.Indiana $ational "an%B 3+ $. (., 5+551+.D

In First $at. "an% vs.nited States $ational "an% C191K, 1++ Or., H/B 1/ . ?. 2., /79B 197 #ac., */7D, the court declared6

holder cannot proit &y a 'ista%e which his nelient disreard o duty has contri&uted to induce the drawee to co''it. . . . -he

holder 'ust reund, i &y his nelience he has contri&uted to the consu''ation o the 'ista%e on the part o the drawee &y

'isleadin hi'. . . . I the only ault attri&uta&le to the drawee is the constructive ault which the law raises ro' the &ald act that

he has ailed to detect the orery, and i he is not charea&le with actual ault in addition to such constructive ault, then he is not

precluded ro' recovery ro' a holder whose conduct has &een such as to 'islead the drawee or induce hi' to pay the chec%

or &ill o eEchane without the usual security aainst raud. -he holder 'ust reund to a drawee who is not uilty o actual ault i

the holder was nelient in not 'a%in due inAuiry concernin the validity o the chec% &eore he too% it, and i the drawee can &e

said to have &een eEcused ro' 'a%in inAuiry &eore ta%in the chec% &ecause o havin had a riht to, presu'e that the

holder had 'ade such inAuiry.

-he rule that one who irst neotiates ored paper without ta%in so'e precaution to learn whether or not it is enuine shouldnot &e allowed to retain the proceeds o the drat or chec% ro' the drawee, whose sole ault was that he did not discover the

orery &eore he paid the drat or chec%, has &een ollowed &y the later cases. CSecurity !o''ercial L Savins

"an% vs.Southern -rust L !. "an% 19*K, 7/ !al. pp., 73/B /1 #ac., 9/*B 0utcheson 0ardware !o. vs.#lanters State "an%

191K, H Ga. pp., 31B 1+* S. (., 5*/B nnotation at 71 . ?. 2., 337K.D

)here a &an%, without inAuiry or identiication o the person presentin a ored chec%, purchases it, indorses it, enerally, and

presents it to the drawee &an%, which pays it, the latter 'ay recover i its only nelience was its 'ista%e in havin ailed to

9


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detect the orery, since its 'ista%e, did not 'islead the purchaser or &rin a&out a chane in position. CSecurity !o''ercial L

Savins "an% vs.Southern -rust L !. "an% 19*K, 7/ !al. pp., 73/B /1 #ac., 9/*.D

lso, a drawee could recover ro' another &an% the portion o the proceeds o a ored chec% cashed &y the latter and deposited

&y the orer in the second &an% and never withdrawn, upon the discovery o the orery three 'onths later, ater the drawee had

paid the chec% and returned the voucher to the purported drawer, where the purchasin &an% was nelient in ta%in the chec%,

and was not in4ured &y the drawees nelience in discoverin and reportin the orery as to the a'ount let on deposit, since itwas not a purchaser or value. CFirst State "an% L -. !o. vs.First $at. "an% 19/K, 31/ Ill., H9B 1/* $. (., 35.D

Si'ilarly, it has &een held that the drawee o a chec% could recover the a'ount paid on the chec%, ater discovery o the orery,

ro' another &an%, which put the chec% into circulation &y cashin it or the one who had ored the sinature o &oth drawer and

payee without 'a%in any inAuiry as to who he was althouh he was a straner, ater which the chec% reached, and was paid &y,

the drawee, ater oin throuh the hands o several inter'ediate indorsees. C71 . ?. 2., p. 3/+.D

In First $ational "an% vs."rule $ational "an% C1917K, 1 . ?. 2., 1+79, 1+5*D, the ollowin state'ent was 'ade6

)e are clearly o opinion, thereore that the warranty o enuineness, arisin upon the act o the "rule $ational "an% in puttin

the chec% in circulation, was not dischared &y pay'ent o the chec% &y the drawee CFirst $ational "an%D, nor was the "rule

$ational "an% deceived or 'isled to its pre4udice &y such pay'ent. -he "rule $ational "an% &y its indorse'ent and deliverywarranted its own identiication o ;ost and the enuineness o his sinature. -he indorse'ent o the chec% &y the "rule $ational

"an% was such as to assin the title to the chec% to its assinee, the )hit&ec% $ational "an%, and the a'ount was credited to

the indorser. -he chec% &ore no indication that it was deposited or collection, and was not in any 'anner restricted so as to

constitute the indorsee the aent o the indorser, nor did it prohi&it arther neotiation o the instru'ent, nor did it appear to &e in

trust or, or to the use o, any other person, nor was it conditional. !ertainly the #u%wana "an% was 4ustiied in relyin upon the

warrant o enuineness, which i'plied the ull identiication o ;ost, and his sinature &y the deendant &an%. -his view o the

statute is in accord with the decisions o 'any courts. CFirst $ational "an% vs.State "an%, $e&., 7H9B 3 '. St. 2ep., 9/B 3H

$. )., 59B First $ational "an% vs.First $ational "an%, 1*1 >ass., 5+B 1 '. St. 2ep., /*+B / $. (., //B #eoples

"an% vs.Fran%lin "an%, 55 -enn., 99B H ?. 2. ., 77B 17 '. St. 2ep., 55/B 1 S. )., 71H.D

-he appellant leans heavily on the case o Fidelity L !o. vs.#lanenschec% C71 . ?. 2., 331D, decided in 199. )e have careully

eEa'ined this decision and we do not eel 4ustiied in acceptin its conclusions. It is &ut a restate'ent o the lon a&andoned ruleo $eal vs.#rice, and it predicated on the wron pre'ise that the pay'ent includes acceptance, and that a &an% drawee payin

a chec% drawn on it &eco'es ipso factoan acceptor within the 'eanin o section H o the $eotia&le Instru'ents ct.

>oreover in a 'ore recent decision, that o ?ouisa $ational "an% vs.;entuc%y $ational "an% C39 S. ). ndK /97, *+1D decided

in 1931, the !ourt o ppeals o ;entuc%y held the ollowin6

-he appellee, on presentation or pay'ent o NH++ chec%, ailed to discover it was a orery. It was &ound to %now the

sinature o its custo'er, r'stron, and it was derelict in ailin to ive his sinature to the chec% suicient attention

and eEa'ination to ena&le it to discover instantly the orery. -he appellant, when the chec% was presented to it &y

"anield, ailed to 'a%e an inAuiry o or a&out hi' and did not cause or have hi' to &e identiied. Its act in so payin to

hi' the chec% is a deree o nelience on its part eAuivalent to positive nelience. It indorsed the chec%, and, while

such indorse'ent 'ay not &e rearded within the 'eanin o the $eotia&le Instru'ent ?aw as a'ountin to a

warranty to appellant o that which it indorsed, it at least su&stantially served as a representation to it that it had

eEercised ordinary care and had co'plied with the rules and custo's o prudent &an%in. Its indorse'ent was

calculated, i it did not in act do so, to lull the drawee &an% into indierence as to the drawers sinature to it when

payin the chec% and charin it to its custo'ers account and re'ittin its proceeds to appellants correspondent.

I in such a transaction &etween the drawee and the holder o a chec% &oth are without ault, no recovery 'ay &e had

o the 'oney so paid. Ceposit "an% o Georetown vs.Fayette $ational "an%, supra, and cases cited.D Or the rule

'ay &e 'ore accurately stated that, where the drawee pays the 'oney, he cannot recover it &ac% ro' a holder in

ood aith, or value and without ault.

I, on the other hand, the holder acts in &ad aith, or is uilty o culpa&le nelience, a recovery 'ay &e had &y the

drawee o such holder. -he nelience o the "an% o ?ouisa in ailin to inAuire o and a&out "anield, and to cause or

to have hi' identiied &eore it parted with its 'oney on the ored chec%, 'ay &e rearded as the pri'ary and

proEi'ate cause o the loss. Its nelience in this respect reached in its eect the appellee, and induced incaution on

its part. In co'parison o the derees o the nelience o the two, it is apparent that o the appellant eEcels in

culpa&ility. "oth appellant and appellee inadvertently 'ade a 'ista%e, dou&tless due to a hurry incident to &usiness.

-he irst and 'ost rievous one was 'ade &y the appellant , a'ountin to its disreard o the duty, it owed itsel as

well as the duty it owed to the appellee, and it cannot on account thereo retain as aainst the appellee the 'oney

which it so received. It cannot shit the loss to the appellee, or such disreard o its duty inevita&ly contri&uted to

induce the appellee to o'it its duty critically to eEa'ine the sinature o r'stron, even i it did not %now it instantly at

the ti'e it paid the chec%. CFar'ers "an% o uusta vs.Far'ers "an% o >aysville, supra, and cases cited.D

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IM. -he Auestion now is to deter'ine whether the appellants nelience in purchasin the chec%s in Auestion is such as to ive

the appellee the riht to recover upon said chec%s, and on the other hand, whether the drawee &an% was not itsel nelient,

eEcept or its constructive ault in not %nowin the sinature o the drawer and detectin the orery.

)e Auote with approval the ollowin conclusions o the court a quo6

!hec% (Ehi&it &ears nu'&er H37+3 and is dated pril H, 1933, whereas chec% (Ehi&it 1 &ears nu'&er H37++ and is dated pril 7, 1933. -hereore, the latter chec%, which is prior in nu'&er to the or'er chec%, is however,

issued on a later date. -his circu'stance 'ust have aroused at least the curiosity o the >otor Service !o., Inc.

-he >otor Service !o., Inc., accepted the two chec%s ro' un%nown persons. nd not only thisB chec% (Ehi&it is

indorsed &y a su&aent o the aent o the payee, International uto 2epair Shop. -he >otor Service !o., Inc., 'ade

no inAuiry whatsoever as to the eEtent o the authority o these un%nown persons. Our Supre'e !ourt said once that

any person ta%in chec%s 'ade paya&le to a corporation, which can act only &y aents, does so at his peril, and 'ust

a&ide &y the conseAuences i the aent who indorses the sa'e is without authority CInsular ru !o. vs.$ational

"an%, *5, #hil., H5/D.

E E E E E E E E E

!hec% (Ehi&it 1, aside ro' havin &een indorsed &y a supposed aent o the international uto 2epair Shop is

crossed enerally. -he eEistence o two parallel lines transversally drawn on the ace o this chec% was a warnin that

the chec% could only &e collected throuh a &an%in institution CJaco&s, ?aw o "ills o (Echane, etc., pp., 179, 15+B

"ills o (Echane ct o (nland, secs. 7H and 79D. @et the >otor Service !o., Inc., accepted the chec% in pay'ent or

'erchandise.

. . . In (Ehi&it 0 attached to the stipulation o acts as an interal part thereo, the >otor Service !o., Inc., stated the

ollowin6

-he #anasinan -ransportation !o. is a ood custo'er o this ir' and we received chec%s ro' the' every 'onth in

pay'ent o their account. -he two chec%s in Auestion see' to &e eEactly si'ilar to the chec%s which we received ro'

the #anasinan -ransportation !o. every 'onth.

I the ailure o the >otor Service !o., Inc., to detect the orery o the drawers sinature in the two chec%s, 'ay &e

considered as an o'ission in ood aith &ecause o the si'ilarity stated in the letter, then the sa'e consideration

applies to the #hilippine $ational "an%, or the drawer is a custo'er o &oth the >otor Service !o., Inc., and the

#hilippine $ational "an%. C". o (., pp. *, 5, 3*.D

)e are o opinion that the acts o the present case do not 'a%e it one &etween two eAually innocent persons, the drawee &an%

and the holder, and that they are overned &y the authorities already cited and also the ollowin6

-he point in issue has so'eti'es &een said to &e that o nelience. -he drawee who has paid upon the ored

sinature is held to &ear the loss, &ecause he has &een nelient in ailin to reconize that the handwritin is not that

o his custo'er. "ut it ollows o&viously that i the payee, holder, or presenter o the ored paper has hi'sel &een indeault, i he has hi'sel &een uilty o a nelience prior to that o the &an%er, or i &y any act o his own he has at all

contri&uted to induce the &an%ers nelience, then he 'ay lose his riht to cast the loss upon the &an%er. -he courts

have shown a steadily increasin disposition to eEtend the application o this rule over the new conditions o act which

ro' ti'e to ti'e arise, until it can now rarely happen that the holder, payee, or presenter can escape the i'putation o

havin &een in so'e deree contri&utory towards the 'ista%e. )ithout any actual chane in the a&stract doctrines o

the law, which are clear, 4ust, and si'ple enouh, the radual &ut sure tendency and eect o the decisions have &een

to put as heavy a &urden o responsi&ility upon the payee as upon the drawee, contrary to the oriinal custo'. . . . C

>orse on "an%s and "an%in, *th ed., secs. /H/ and /HH, pp. 55* and 5H, 57.D

In First $ational "an% vs."rule $ational "an% C1 . ?. 2., 1+79, 1+55, 1+59D, the ollowin state'ent appears in the concurrin

opinion6

)hat, then, should &e the rule -he drawee as%s to recover or 'oney had and received. I his clai' did not rest upon

a transaction relatin to a neotia&le instru'ent plainti could recover as or 'oney paid under 'ista%e, unless

deendant could show so'e eAuita&le reason, such as chaned condition since, and relyin upon, pay'ent &y plainti.

In the )ynd'ere !ase, the $orth a%ota court holds that this rule ivin riht to recover 'oney paid under 'ista%e

should eEtend to neotia&le paper, and it re4ects in its entirety the theory o estoppel and puts a case o this %ind on

eEactly the sa'e &asis as the ordinary case o pay'ent under 'ista%e. "ut the reat weiht o authority, and that

&ased on the &etter reasonin, holds that the eEiencies o &usiness de'and a dierent rule in relation to neotia&le

11


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paper. )hat is that rule Is it an a&solute estoppel aainst the drawee in avor o a holder, no 'atter how nelient

such holder has &een It surely is not. -he correct rule reconizes the act that, in case o pay'ent without a prior

acceptance or certiication, the holder ta%es the paper upon the o the prior indorsers and the credit o the drawer, and

not upon the credit o the drawee, in 'a%in pay'ent, has a riht to rely upon the assu'ption that the payee used due

dilience, especially where such payee neotiated the &ill or chec% to a holder, thus representin that it had so ully

satisied itsel as to the identity and sinature o the 'a%er that it was willin to warrant as relates thereto to all

su&seAuent holders. Cnior' ct, secs. H* and HH.D Such correct rule denies the drawee the riht to recover when theholder was without ault or when there has &een so'e chane o position callin or eAuita&le relie. )hen a holder o

a &ill o eEchane uses all due care in the ta%in o &ill or chec% and the drawee thereater pays sa'e, the transaction

is a&solutely closed 8 'odern &usiness could not &e done on any other &asis. )hile the correct rule pro'otes the

luidity o two reconized 'ediu's o eEchane, those 'ediu's &y which the reat &ul% o &usiness is carried on,

chec%s and drats, upon the other hand it encouraes and de'ands prudent &usiness 'ethods upon the part o those

receivin such 'ediu's o eEchane. C#enninton !ounty "an% vs.First State "an%, 11+ >inn., H3B H ?. 2. . $.

S.K, 5/9B 13H '. St. 2ep., /9HB 1* $. )., 119B First $ational "an% vs.State "an%, $e&., 7H9B 3 '. St. 2ep., 9/B

3H $. )., 59B "an% o )illia'son, vs.>cowell !ounty "an%, HH ). Ma., */*B 3H ?. 2. . $. S.K, H+*B HH S. (., 7H1B

Ger'ania "an% vs."outell, H+ >inn., 159B 7 ?. 2. ., H3*B *1 '. St. 2ep., *19B H $. )., 37B 'erican (Epress

!o. vs.State $ational "an%, 7 O%la., 5/B 33 ?. 2. . $. S.K, 155B 113 #ac., 711B Far'ers $ational "an% vs.Far'ers

L -raders "an%, ?. 2. ., 191*, 77, and note C1*9 ;y., 1/1B 1HH S. )., 95HK.D

-hat the deendant &an% did not use reasona&le &usiness prudence is clear. #t took this check from a strangerwithout

other identiication than that iven &y another stranerB its cashier witnessed the 'ar% o such straner thus vouchin

or the identity and sinature o the 'a%erB and it indorsed the chec% as #aid, thus urther throwin plainti o uard.

eendant could not &ut have %nown, when neotiatin such chec% and puttin it into the channel throuh which it

would inally &e presented to plainti or pay'ent, that plainti, i it paid such chec%, as deendant was as%in it to do,

would have to rely solely upon the apparent aith and credit that deendant had placed in the drawer. Fro' the very

circu'stances o this case plainti had to act on the acts as presented to it &y deendant, upon such acts only.

"ut appellant arues that it so chaned its position, ater pay'ent &y plainti, that in eAuity and ood conscience

plainti should not recover 8 it says it did not pay over any 'oney to the orer until ater plainti had paid the chec%.

-here would &e 'erit in such contention i deendant had indorsed the chec% or collection, thus advisin plainti that

it was relyin on plainti and not on the drawer. It stands in court where it would have &een i it had done as it

represented.

In )oods and >alone vs.!olony "an% C*H ?. 2. ., 99, 93D, the court said6

. . . I the holder has &een nelient in payin the ored paper, or has &y his conduct, however innocent, 'isled or

deceived the drawee to his da'ae, it would &e un4ust or hi' to &e allowed to shield hi'sel ro' the results o his

own carelessness &y assertin that the drawee was &ound in law to %now his drawers sinature.

M. Section 3 o the $eotia&le Instru'ents ct provides that when a sinature is ored or 'ade without the authority o the

person whose sinature it purports to &e, is wholly inoperative, and no riht to retain the instru'ent, or to ive a dischare

thereor, or to enorce pay'ent thereo aainst any party thereto, can &e acAuired throuh or under such sinature, unless the

party aainst who' it is souht to enorce such riht is precluded ro' settin up the orery or want o authority.

It not appearin that the appellee &an% did not warrant to the appellant the enuineness o the chec%s in Auestion, &y its

acceptance thereo, nor did it peror' any act which would have induced the appellant to &elieve in the enuineness o said

instru'ents &eore appellant purchased the' or value, it can not &e said that the appellee is precluded ro' settin up the

orery and, thereore, the appellant is not entitled to retain the a'ount o the ored chec% paid to it &y the appellee.

MI. It has &een held &y 'any courts that a drawee o a chec%, who is deceived &y a orery o the drawers sinature 'ay recover

the pay'ent &ac%, unless his 'ista%e has placed an innocent holder o the paper in a worse position than he would have &een in

i the discovery o the orery had &een 'ade on presentation. C* 2. !. ?., p. **9B aniel on $eotia&le Instru'ents, 1*35.D

Foreries oten deceived the eye o the 'ost cautious eEpertsB and when a &an% has &een deceived, it is a harsh rule which

co'pels it to suer althouh no one has suered &y its &ein deceived. C17 . ?. 2. 591B * 2. !. ?., **9.D

In the instant case should the drawee &an% &e allowed recovery, the appellants position would not &eco'e worse than i the

drawee had reused the pay'ent o these chec%s upon their presentation. -he appellant has lost nothin &y anythin which the

drawee has done. It had in its hands so'e ored worthless papers. It did not purchase or acAuire these papers &ecause o any

representation 'ade to it &y the drawee. It purchased the' ro' un%nown persons and under suspicious circu'stances. It had

no valid title to the', &ecause the persons ro' who' it received the' did not have such title. -he appellant could not have

co'pelled the drawee to pay the', and the drawee could have reused pay'ent had it &een a&le to detect the orery. "y

'a%in a reund, the appellant would only returnin what it had received without any title or riht. nd when appellant pays &ac%

the 'oney it had received it will &e entitled to have restored to it the ored papers it parted with. -here is no ood reason why

12


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the accidental pay'ent 'ade &y the appellant should inure to the &eneit o the appellant. I there were in4ury to the appellant

said in4ury was caused not &y the ailure o the appellee to detect the orery &ut &y the very nelience o the appellant in

purchasin co''ercial papers ro' un%nown persons without 'a%in inAuiry as to their enuineness.

In the liht o the oreoin discussion, we conclude6

1. -hat where a chec% is accepted or certiied &y the &an% on which it is drawn, the &an% is estopped to deny theenuineness o the drawers sinature and his capacity to issue the instru'entB

. -hat i a drawee &an% pays a ored chec% which was previously accepted or certiied &y the said &an% it cannot

recover ro' a holder who did not participate in the orery and did not have actual notice thereoB

3. -hat the pay'ent o a chec% does not include or i'ply its acceptance in the sense that this word is used in section

H o the $eotia&le Instru'ents ?awB

/. -hat in the case o the pay'ent o a ored chec%, even without or'er acceptance, the drawee can not recover

ro' a holder in due course not charea&le with any act o nelience or disreard o dutyB

*. -hat to entitle the holder o a ored chec% to retain the 'oney o&tained thereon, there 'ust &e a showin that the

duty to ascertain the enuineness o the sinature rested entirely upon the drawee, and that the constructive

nelience o such drawee in ailin to detect the orery was not aected &y any disreard o duty on the part o the

holder, or &y ailure o any precaution which, ro' his i'plied assertion in presentin the chec% as a suicient voucher,

the drawee had the riht to &elieve he had ta%enB

H. -hat in the a&sence o actual ault on the part o the drawee, his constructive ault in not %nowin the sinature o the

drawer and detectin the orery will nor preclude his recovery ro' one who too% the chec% under circu'stances o

suspicion and without proper precaution, or whose conduct has &een such as to 'islead the drawee or induce hi' to

pay the chec% without the usual scrutiny or other precautions aainst 'ista%e or raudB

7. -hat on who purchases a chec% or drat is &ound to satisy hi'sel that the paper is enuine, and that &y indorsin it

or presentin it or pay'ent or puttin it into circulation &eore presentation he i'pliedly asserts that he peror'ed hisdutyB

5. -hat while the oreoin rule, chosen ro' a welter o decisions on the issue as the correct one, will not hinder the

circulation o two reconized 'ediu's o eEchane &y which the reat &ul% o &usiness is carried on, na'ely, drats

and chec%s, on the other hand, it will encourae and de'and prudent &usiness 'ethods on the part o those receivin

such 'ediu's o eEchaneB

9. -hat it &ein a 'atter o record in the present case, that the appellee &an% in no 'ore charea&le with the

%nowlede o the drawers sinature than the appellant is, as the drawer was as 'uch the custo'er o the appellant as

o the appellee, the presu'ption that a drawee &an% is &ound to %now 'ore than any indorser the sinature o its

depositor does not holdB

1+. -hat accordin to the undisputed acts o the case the appellant in purchasin the papers in Auestion ro'

un%nown persons without 'a%in any inAuiry as to the identity and authority o the said persons neotiatin and

indorsin the', acted neliently and contri&uted to the appellees constructive nelience in ailin to detect the

oreryB

11. -hat under the circu'stances o the case, i the appellee &an% is allowed to recover, there will &e no chane o

position as to the in4ury or pre4udice o the appellant.

)hereore, the assin'ents o error are overruled, and the 4ud'ent appealed ro' 'ust &e, as it is here&y, air'ed, with costs

aainst the appellant. So ordered.

G.R. No. L-3747 !c!!r 11, 1933

SAN )ARLOS MILLING )O., LT.,plaintiappellant,

vs.

BANK O THE PHILIPPINE ISLANS a%$ )HINA BANKING )ORPORATION,deendantsappellees.

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$ibbs and %cDonough and &oman '(aeta for appellant.

)raneta, De *oya, +aragosa and )raneta for appellee ank of the -hilippine #slands.

%arcelo ubla and $uevara, /rancisco and &ecto for appellee China anking Corporation.

HULL, J.:

#lainti corporation, oranized under the laws o the -erritory o 0awaii, is authorized to enaed in &usiness in the #hilippine

Islands, and 'aintains its 'ain oice in these Islands in the !ity o >anila.

-he &usiness in the #hilippine Islands was in the hands o lred . !ooper, its aent under eneral power o attorney with

authority o su&stitution. -he principal e'ployee in the >anila oice was one Joseph ?. )ilson, to who' had &een iven a

eneral power o attorney &ut without power o su&stitution. In 19H !ooper, desirin to o on vacation, ave a eneral power o

attorney to $ewland "aldwin and at the sa'e ti'e revo%ed the power o )ilson relative to the dealins with the "an% o the

#hilippine Islands, one o the &an%s in >anila in which plainti 'aintained a deposit.

&out a year thereater )ilson, conspirin toether with one lredo olores, a 'essenercler% in plaintis >anila oice, sent a

ca&le ra' in code to the co'pany in 0onolulu reAuestin a teleraphic transer to the !hina "an%in !orporation o >anila oN1++,++. -he 'oney was transerred &y ca&le, and upon its receipt the !hina "an%in !orporation, li%ewise a &an% in which

plainti 'aintained a deposit, sent an eEchane contract to plainti corporation oerin the su' o #+1,+++, which was then the

current rate o eEchane. On this contract was ored the na'e o $ewland "aldwin and typed on the &ody o the contract was a

note6lawphil.net

#lease send us certiied chec% in our avor when transer is received.

'anaers chec% on the !hina "an%in !orporation or #+1,+++ paya&le to San !arlos >illin !o'pany or order was

receipted or &y olores. On the sa'e date, Septe'&er 5, 197, the 'aners chec% was deposited with the "an% o the

#hilippine Islands &y the ollowin endorse'ent6

For deposit only with "an% o the #hilippine Islands, to credit o account o San !arlos >illin !o., ?td.

"y CSd.D $()?$ "?)I$

/or )gent

-he endorse'ent to which the na'e o $ewland "aldwin was aiEed was spurious.

-he "an% o the #hilippine Islands thereupon credited the current account o plainti in the su' o #+1,+++ and passed the

cashiers chec% in the ordinary course o &usiness throuh the clearin house, where it was paid &y the !hina "an%in

!orporation.

On the sa'e day the cashier o the "an% o the #hilippine Islands received a letter, purportin to &e sined &y $ewland "aldwin,

directin that #++,+++ in &ills o various deno'inations, na'ed in the letter, &e pac%ed or ship'ent and delivery the neEt day.

-he neEt day, olores witnessed the countin and pac%in o the 'oney, and shortly aterwards returned with the chec% or the

su' o #++,+++, purportin to &e sined &y $ewland "aldwin as aent.

#lainti had reAuently withdrawn currency or ship'ent to its 'ill ro' the "an% o the #hilippine Islands &ut never in so lare an

a'ount, and accordin to the record, never under the sole supervision o olores as the representative o plainti.

"eore deliverin the 'oney, the &an% as%ed olores or #1 to cover the cost o pac%in the 'oney, and he let the &an% and

shortly aterwards returned with another chec% or #1, purportin to &e sined &y $ewland "aldwin. )hereupon the 'oney was

turned over to olores, who too% it to plaintis oice, where he turned the 'oney over to )ilson and received as his share,

#1+,+++.

Shortly thereater the cri'e was discovered, and upon the deendant &an% reusin to credit plainti with the a'ount withdrawn

&y the two ored chec%s o #++,+++ and #1, suit was &rouht aainst the "an% o the #hilippine Islands, and inally on the

suestion o the deendant &an%, an a'ended co'plaint was iled &y plainti aainst &oth the "an% o the #hilippine Islands

and the !hina "an%in !orporation.

t the trial the !hina "an%in !orporation contended that they had drawn a chec% to the credit o the plainti co'pany, that the

chec% had &een endorsed or deposit, and that as the prior endorse'ent had in law &een uaranteed &y the "an% o the

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#hilippine Islands, when they presented the cashiers chec% to it or pay'ent, the !hina "an%in !orporation was a&solved even

i the endorse'ent o $ewland "aldwin on the chec% was a orery.

-he "an% o the #hilippine Islands presented 'any special deenses, &ut in the 'ain their contentions were that they had &een

uilty o no nelience, that they had dealt with the accredited representatives o the co'pany in the due course o &usiness,

and that the loss was due to the dishonesty o plaintis e'ployees and the nelience o plaintis eneral aent.

In plaintis >anila oice, &esides the eneral aent, )ilson, and olores, 'ost o the ti'e there was e'ployed a wo'an

stenorapher and cashier. -he aent did not %eep in his personal possession either the code&oo% or the &lan% chec%s o either

the "an% o the #hilippine Islands or the !hina "an%in !orporation. "aldwin was authorized to draw chec%s on either o the

depositaries. )ilson could draw chec%s in the na'e o the plainti on the !hina "an%in !orporation.

ter trial in which 'uch testi'ony was ta%en, the trial court held that the deposit o #+1,+++ in the "an% o the #hilippine

Islands &ein the result o a ored endorse'ent, the relation o depositor and &an%er did not eEist, &ut the &an% was only a

ratuitous &aileeB that the "an% o the #hilippine Islands acted in ood aith in the ordinary course o its &usiness, was not uilty

o nelience, and thereore under article 19+ o the !ivil !ode which should control the case, plainti could not recoverB and

that as the cause o loss was the cri'inal actions o )ilson and olores, e'ployees o plainti, and as $ewland "aldwin, the

aent, had not eEercised adeAuate supervision over plaintis >anila oice, thereore plainti was uilty o nelience, which

round would li%ewise deeat recovery.

Fro' the decision o the trial court a&solvin the deendants, plainti &rins this appeal and 'a%es nine assin'ents o error

which we do not dee' it necessary to discuss in detail.

-here is a 'ild assertion on the part o the deendant &an% that the disputed sinatures o $ewland "aldwin were enuine and

that he had &een in the ha&it o sinin chec%s in &lan% and turnin the chec%s so sined over to )ilson.

-he proo as to the alsity o the Auestioned sinatures o "aldwin places the 'atter &eyond reasona&le dou&t, nor is it &elieved

that "aldwin sined chec%s in &lan% and turned the' over to )ilson.

s to the !hina "an%in !orporation, it will &e seen that it drew its chec% paya&le to the order o plainti and delivered it to

plaintis aent who was authorized to receive it. &an% that cashes a chec% 'ust %now to who' it pays. In connection with thecashiers chec%, this duty was thereore upon the "an% o the #hilippine Islands, and the !hina "an%in !orporation was not

&ound to inspect and veriy all endorse'ents o the chec%, even i so'e o the' were also those o depositors in that &an%. It

had a riht to rely upon the endorse'ent o the "an% o the #hilippine Islands when it ave the latter &an% credit or its own

cashiers chec%. (ven i we would treat the !hina "an%in !orporations cashiers chec% the sa'e as the chec% o a depositor

and atte'pt to apply the doctrines o the $reat0astern Life #nsurance Co. vs. 1ongkong 2 "hanghai anking Corporation and

ationalankC/3 #hil., H75D, and hold the !hina "an%in !orporation inde&ted to plainti, we would at the sa'e ti'e have to

hold that the "an% o the #hilippine Islands was inde&ted to the !hina "an%in !orporation in the sa'e a'ount. s, however,

the 'oney was in act paid to plainti corporation, we 'ust hold that the !hina "an%in !orporation is inde&ted neither to plainti

nor to the "an% o the #hilippine Islands, and the 4ud'ent o the lower court ar as it a&solves the !hina "an%in !orporation

ro' responsi&ility is air'ed.

2eturnin to the relation &etween plainti and the "an% o the #hilippine Islands, we will now consider the eect o the deposit o#+1,+++. It 'ust &e noted that this was not a presentin o the chec% or cash pay'ent &ut or deposit only. It is a 'atter o

eneral %nowlede that 'ost endorse'entsfor deposit only, are inor'al. >ost are &y 'eans o a ru&&er sta'p. -he &an%

would have &een 4ustiied in acceptin the chec% or deposit even with only a typed endorse'ent. It accepted the chec% and duly

credited plaintis account with the a'ount on the ace o the chec%. #lainti was not har'ed &y the transaction as the only result

was the re'oval o that su' o 'oney ro' a &an% ro' which )ilson could have drawn it out in his own na'e to a &an% where

)ilson would not have authority to draw chec%s and where unds could only &e drawn out &y the chec% o "aldwin.

#lainti in its letter o ece'&er 3, 195, to the "an% o the #hilippine Islands said in part6

. . . we now leave to de'and that you pay over to us the entire a'ount o said 'anaers chec% o two hundred one

thousand C#+1,+++D pesos, toether with interest thereon at the areed rate o 3 per cent per annu' on daily

&alances o our credit in account current with your &an% to this date. In the event o your reusal to pay, we shall clai'interest at the leal rate o H per cent ro' and ater the date o this de'and inas'uch as we desire to withdraw and

'a%e use o the 'oney. Such lanuae 'iht well &e treated as a ratiication o the deposit.

-he contention o the &an% that it was a ratuitous &ailee is without 'erit. In the irst place, it is a&solutely contrary to what the

&an% did. It did not ta%e i t up as a separate account &ut it transerred the credit to plaintis current account as a depositor o that

&an%. Further'ore, &an%s are not ratuitous &ailees o the unds deposited with the' &y their custo'ers. "an%s are run or ain,

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and they solicit deposits in order that they can use the 'oney or that very purpose. In this case the action was neither ratuitous

nor was it a &ail'ent.

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