36 BPI v.
CA, China Bank, and PCHC Delaer Trainee in BPI’s Money Market
GR NO. 102383 | November 26, 1992 |
Ponente: Gutierrez, Jr.
DIGESTED BY: Osit, Calvin V.
TOPIC: Liability of Indorsers
DOCTRINE/S:
 The general rule is to the effect that a
forged signature is "wholly inoperative",
and payment made "through or under
such signature" is ineffectual or does
not discharge the instrument. The
exception to this rule is when the party
relying on the forgery is "precluded from
setting up the forgery or want of
authority." In this jurisdiction we
recognize negligence of the party
invoking forgery as an exception to the
general rule.
EMERGENCY RECIT: Eligia Fernando had
a money market placement with BPI. A
woman pretending to be Fernando was able
to preterminate the money market
placement and claim the value thereof thru
two cashier’s checks issued by BPI. The
woman opened an account with CBC where
she deposited the checks. CBC stamped its
guaranty to all prior endorsements of the
checks and the same were cleared by the
BPI. Two days after, several checks were
issued from the CBC account and these
were encashed leaving only PhP571.61
balance. This was only discovered when the
real Fernando went to BPI after the money
market placement has matured. The SC
held that CBC is liable (40% of the loss) for
its warranty on the validity of all
endorsements. However, since BPI (60% of
the loss) was also negligent both should
share the loss.
FACTS:
1. On October 9, 1981, BPI’s Money
Market Dept. received a phone call
allegedly from Eligia Fernando who had
a money market placement evidenced
by a promissory note with a value of
P2.4M. She wanted to preterminate the
placement but Reginaldo Eustaquio,
Dept. told her that “trading time” was
over for that day (Friday) and suggested
that she call again the following week.
2. The promissory note that the caller
wanted to preterminate was a roll-over
of an earlier 50-day money market
placement that had matured on
September 24, 1981.
3. The next Monday, the caller of the
previous Friday followed up with
Eustaquio, merely by phone again, on
the pretermination of the placement.
4. Eustaquio knew the real Eligia Fernando
to be the Treasurer of Philamlife since
he was handling Philamlife's corporate
money market account. But neither
Eustaquio nor Penelope Bulan who
originally handled Fernando's account,
nor anybody else at BPI, bothered to call
up Fernando at her Philamlife office to
verify the request for pretermination.
5. Informed that the placement would yield
less than the maturity value because of
its pretermination, the caller insisted just
the same and asked that two checks be
issued for the proceeds, one for P1.8M
and the second for the balance, and that
the checks be delivered to her office at
Philamlife.
6. Eustaquio then proceeded to prepare
two cashier’s checks both payable to
Eligia Fernando covering the
preterminated placement. The two
cashier’s checks were signed by the
manager and administrative assistant of
BPI’s Treasury Operations Dept., both
authorized signatories.
7. However, before it was delivered, the
same caller changed the delivery
instructions. She stated that it would be
her niece, Rosemarie Fernando who
would pick up the checks.
8. Rosemarie (same woman caller) picked
up the checks. It was established that
the signature in the pretermination and
authorization letter was forged.
9. On October 13, 1981, the woman
pretending to be Eligia Fernando applied
at CBC’s Head Office for the opening of
 a current account and deposited the two
cashier’s checks therein.
10. CBC's guaranty of prior endorsements
and was then stamped on the two
checks, which CBC forthwith sent to
clearing and which BPI cleared on the
same day.
11. Two days after, several checks payable
to cash were issued until it was left with
a balance of only P571.61.
12. On November 11, 1981, the maturity
date of Eligia Fernando’s money market
placement, the real Eligia went to BPI
for the roll-over of her placement. She
denied having preterminated her
placement and receiving two cashier’s
checks. BPI issued her a new
promissory note to evidence a roll-over
of the placement.
13. BPI returned the two checks in
controversy to CBC for the reason
'Payee's endorsement forged'. A ping
pong started when CBC, in turn,
returned the checks for reason 'Beyond
Clearing Time'.
14. The Arbitration Committee initially ruled
in favor of BPI. However, upon MR by
CBC, the BOD of the PCHC reversed
and ruled in favor of CBC.
15. RTC denied BPI’s appeal and affirmed
the PCHC.
16. CA affirmed the RTC.
17. BPI argues that CBC should solely be
held liable due to its indorsement of the
checks.
ISSUE/S:
Whether a drawee bank (BPI) could claim
reimbursement from the collecting bank
(CBC) in case of forgery of indorsements. –
YES.
HELD:
YES. In a similar case, BDO v. Equitable
Banking, the Court ruled that in presenting
the checks for clearing and/for payment, the
defendant made an express guarantee on
the validity of 'all prior endorsements.' Thus,
stamped at the back of the checks are the
defendant's clear warranty: ALL PRIOR
ENDORSEMENTS AND/OR LACK OF
ENDORSEMENTS GUARANTEED. Without
such warranty, plaintiff would not have paid
on the checks. The principle of estoppel,
effectively prevents the defendant from
denying liability for any damage sustained
by the plaintiff.
The collecting bank or last endorser
generally suffers the loss because it has the
duty to ascertain the genuineness of all prior
endorsements considering that the act of
presenting the check for payment to the
drawee is an assertion that the party making
the presentment has done its duty to
ascertain the genuineness of the
endorsements.
The collecting bank has privity with the
depositor who is the principal culprit. The
defendant knows the depositor; her address
and her history. Depositor is defendant's
client. It has taken a risk on its depositor
when it allowed her to collect.
Sec. 23 of the Negotiable Instruments Law
states:
When a signature is forged or made
without the authority of the person
whose signature it purports to be, it
is wholly inoperative and no right to
retain the instrument, or to give
discharge therefore, or to enforce
payment thereof, against any party
thereto, can be acquired through or
under such forged signature, unless
the party against whom it is sought
to enforce such right is precluded
from setting up the forgery or want
of authority.
There are two (2) parts of the provision. The
first part states the general rule while the
second part states the exception to the
general rule. The general rule is to the
effect that a forged signature is "wholly
inoperative", and payment made "through or
under such signature" is ineffectual or does
not discharge the instrument. The exception
to this rule is when the party relying on the
forgery is "precluded from setting up the
forgery or want of authority." In this
jurisdiction we recognize negligence of
the party invoking forgery as an
exception to the general rule.
The underlying circumstances of the case
show that the general rule on forgery is not
applicable. The records show that BPI as
drawee bank and CBC as collecting bank
were both negligent resulting in the
encashment of the forged checks.
Specifically, they were negligent in the
selection and supervision of their
employees which resulted to the
encashment of the forged checks by an
impostor.
For BPI, its employees failed to verify by a
mere telephone call whether the one who
called them was indeed Eligia Fernando.
Fernando’s signature was also not verified
even if they have her signature in their file. It
also failed to require the surrender of the
promissory note evidencing the money
market placement, among others.
CBC on the other hand, was negligent when
it allowed the impostor to open a current
account; when it allowed the deposit into
such account the two checks in controversy
which was grossly disproportionate to her
initial deposit of only P10k; and when it
allowed the withdrawal of the checks’
proceeds in a span of just two days.
BPI's reliance on the doctrine of last clear
chance to clear it from liability is not well
taken. CBC had no prior notice of the fraud
perpetrated by BPI's employees on the
pretermination of Eligia Fernando's money
market placement. Moreover, Fernando is
not a depositor of CBC. Hence, a
comparison of the signature of Eligia
Fernando with that of the impostor, which
CBC did, could not have resulted in the
discovery of the fraud.
Also, applying the doctrine of proximate
cause, BPI's contention that CBC alone
should bear the loss must fail. The gap of
one day between the issuance and delivery
of the checks bearing the impostor's name
as payee and the impostor's negotiating the
said forged checks by opening an account
and depositing the same with CBC is not
controlling. It is not unnatural or unexpected
that after taking the risk of impersonating
Eligia Fernando with the connivance of
BPI's employees, the impostor would
complete her deception by encashing the
forged checks. There is, therefore, greater
reason to rule that the proximate cause of
the payment of the forged checks by an
impostor was due to the negligence of BPI.
Both banks were negligent in the selection
and supervision of their employees resulting
in the encashment of the forged checks by
an impostor. Both banks were not able to
overcome, the presumption of negligence in
the selection and supervision of their
employees. It was the gross negligence of
the employees of both banks which resulted
in the fraud and the subsequent loss. While
it is true that BPI's negligence may have
been the proximate cause of the loss,
CBC's negligence contributed equally to the
success of the impostor in encashing the
proceeds of the forged checks.
CA Decision is MODIFIED. BPI is
responsible for 60% while CBC shall share
40% of the loss of 2.4M and the arbitration
costs of P7,250.