Jai-Alai Corp. of the Phil. v.

Bank of the Philippines

No. L-29432
August 6, 1975
Written Form and Signature
FACTS:
Petitioner Jai-Alai Corp. deposited ten checks, with a
total face value of 8,030.58 PHP, in its current account with
respondent bank. The checks were drawn by several
entities, all of which were payable to Inter-Island Gas
Service, Inc. Petitioner received the said checks from
Antonio J. Ramirez who was a sales agent of Inter-Island
Gas and a regular bettor of the jai-alai games. Inter-Island
Gas discovered that all endorsements made on the checks
including its rubber stamp were forgeries and advised
petitioner, respondent, drawers and the drawee-banks.
Respondents cashier acted upon such information and
debited the value of the checks against petitioners
account when they were returned by drawee-banks. The
drawers demanded reimbursements to which respondent
acted, debiting the petitioners current account and
forwarded to the same the checks containing the forgeries
which petitioner refused to accept. Petitioner then drew
against its current account with respondent a check of
135,000 PHP payable to order in payment of certain

shares of stock. The same check was dishonored since

their account, after netting out the value of the disputed
checks, only has 128,257.65 PHP of balance.
ISSUE/S: Whether the respondent had the right to debit
the petitioners account in the amount of the total value of
the checks
HELD: Yes, respondent acted within legal bounds. When
petitioner deposited the checks with respondent, the
nature of the relationship created was one of agency, that
is, the bank was to collect from the drawees of the checks
the corresponding proceeds. Although respondent already
collected the proceeds of the checks when it debited
petitoners account turning their relationship to that of a
creditor and debtor, the court sees that there was no
creditor-debtor relationship that was created. According to
Section 23 of the Negotiable Instruments Law, a forged
signature in a negotiable instrument is wholly inoperative
and nor right to discharge it or enforce its payment can be
acquired through or under the forged signature except
against a party who cannot invoke the forgery.
Respondent, the collecting bank which endorsed the
checks should be liable to the drawee-banks for
reimbursement since they were forged prior to their

delivery to the petitioner. The relationship of creditor and

debtor between the petitioner and respondent had not
been validly effected, the checks not having been properly
and legitimately converted into cash.