12/7/2019 G.R. No. 37467 December 11, 1933 - SAN CARLOS MILLING CO. v. BPI, ET AL.

, ET AL. <br /><br />059 Phil 59 : DECEMBER 1933 - PHILIPPINE SUP…

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Philippine Supreme Court Jurisprudence > Year 1933 > December 1933 Decisions > G.R. No. 37467 December
11, 1933 - SAN CARLOS MILLING CO. v. BPI, ET AL.

059 Phil 59:

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SECOND DIVISION

[G.R. No. 37467. December 11, 1933.]

SAN CARLOS MILLING CO., LTD., Plaintiff-Appellant, v. BANK OF THE PHILIPPINES ISLANDS
and CHINA BANKING CORPORATION, Defendants-Appellees.

Gibbs & McDonough and Roman Ozaeta for Appellant.

Araneta, De Joya, Zaragoza & Araneta for appellee Bank of the Philippine Islands.

Marcelo Nubla and Guevara, Francisco & Recto for appellee China Banking Corporation.

SYLLABUS

1. BANKS AND BANKING; PAYMENT OF FORGED CHECKS. — It is an elementary principle of banking that
"A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid
to the account of the depositor whose name was forges." (7. C. J., 683.) There is no act of the plaintiff
that led the Bank of the Philippine Islands astray. If it was in fact lulled into a false sense of security, it
was by the effrontery of D, the messenger to whom it entrusted the large sum of money in question.

2. ID.; ID.; PROXIMATE CAUSE OF LOSS. — The signatures of the checks in question being forged, under
section 23 of the Negotiable Instruments Law they are not a charge against plaintiff nor are the checks of
DebtKollect Company, Inc. any value to the defendant. The proximate cause of loss was due to the negligence of the Bank of the
Philippine Islands in honoring and cashing the two forged checks.

3. ID.; DEPOSITOR AND BANKER; CREDITOR AND DEBTOR. — It is very clear that the relation of plaintiff
with the Bank of the Philippine Islands in regard to the checks in question, was that of depositor and
banker, creditor and debtor. The contention of the bank that it was a gratuitous bailee is without merit,
and absolutely contrary to what the bank did. It did not take it up as a separate account but it
transferred the credit to plaintiff’s current account as a depositor of the bank. Banks are not gratuitous
bailees of the funds deposited with them by their customers.

4. ID.; ID.; ID. — As the money in question was in fact paid to the plaintiff corporation the China
Banking Corporation was indebted neither to the plaintiff nor to the Bank of the Philippine Islands and
consequently was properly absolved from any responsibility.

DECISION

HULL, J.:

ChanRobles Intellectual Property Plaintiff corporation, organized under the laws of the Territory of Hawaii, is authorized to engage in
Division business in the Philippine Islands, and maintains its main office in their Islands in the City of Manila.

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December-1933 Jurisprudence               purporting to be signed by Newland Baldwin as agent.
  
G.R. No. 38989 December 1, 1933 - ALEJO BASCO
v. MANUEL ERNESTO GONZALEZ
059 Phil 1
G.R. No. 39298 December 1, 1933 - PEOPLE OF THE
PHIL. ISLANDS v. SANTIAGO RAMOS, ET AL.
059 Phil 7
G.R. No. 38499 December 6, 1933 - FAUSTINA
UDARBE, ET AL. v. MARCIANA JURADO, ET AL.
059 Phil 11
G.R. No. 38572 December 6, 1933 - EUSEBIO
RIVERO v. MARIANO RIVERO
059 Phil 15
G.R. No. 37792 December 7, 1933 - QUINTIN DE
BORJA v. FRANCISCO DE BORJA
059 Phil 19
G.R. No. 38097 December 7, 1933 - ASIATIC
PETROLEUM CO., LTD. v. ORLANES & BANAAG TRANS.
CO.
059 Phil 24
G.R. No. 38552 December 7, 1933 - ENRIQUE
SOMES v. VICENTE SOMES, ET AL.
059 Phil 28
G.R. No. 38398 December 8, 1933 - PHIL. TRUST
CO., ET AL. v. L. P. MITCHELL, ET AL.
059 Phil 30
G.R. No. 39864 December 8, 1933 - PEOPLE OF THE
PHIL. ISLANDS v. MARCELINO VALENCIA, ET AL.
059 Phil 42
G.R. No. 40492 December 8, 1933 - TIMOTEO
EVANGELISTA v. CFI OF BULACAN, ET AL.
059 Phil 45
G.R. No. 40494 December 8, 1933 - GREGORIO
PASCUA, ET AL. v. BUENAVENTURA OCAMPO, ET AL.
059 Phil 48
G.R. No. 37105 December 9, 1933 - GUI PING HUI
v. ACTING INSULAR COLLECTOR OF CUSTOMS
059 Phil 52
G.R. No. 38298 December 9, 1933 - PEOPLE OF THE
PHIL. ISLANDS v. JESUS TOLENTINO
059 Phil 56
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The business of the Philippine Islands was in the hands of Alfred D. Cooper, its agent under general
power of attorney with authority of substitution. The principal employee in the Manila office was one
Joseph L. Wilson, to whom had been given a general power of attorney but without power of substitution.
In 1926 Cooper, desiring to go on vacation, gave a general power of attorney to Newland Baldwin and at
the same time revoked the power of Wilson relative to the dealings with the Bank of the Philippine
Islands, one of the banks in Manila in which plaintiff maintained a deposit.
About a year thereafter Wilson, conspiring together with one Alfredo Dolores, a messenger-clerk in
plaintiff’s Manila office, sent a cablegram in code to the company in Honolulu requesting a telegraphic
transfer to the China Banking Corporation of Manila of $100,000. The money was transferred by cable,
and upon its receipt the China Banking Corporation, likewise a bank in which plaintiff maintained a
deposit, sent an exchange contract to plaintiff corporation offering the sum of P201,000, which was then
the current rate of exchange. On this contract was forged the name of Newland Baldwin and typed on the
body of the contract was a note: jgc:chanrobles.com.ph
"Please sent us certified check in our favor when transfer in received."cralaw virtua1aw library
A manager’s check on the China Banking Corporation for P201,000 payable to San Carlos Milling
Company or order was receipted for by Dolores. On the same date, September 28, 1927, the manager’s
check was deposited with the Bank of the Philippine Islands by the following endorsement: jgc:chanrobles.com.ph
"For deposit only with Bank of the Philippine Islands, to credit of account of San Carlos Milling Co., Ltd.
"By (Sgd.) NEWLAND BALDWIN
"For Agent"
The endorsement to which the name of the Newland Baldwin was affixed was spurious.
The Bank of the Philippine Islands thereupon credited the current account of plaintiff in the sum of
P201,000 and passed the cashier’s check in the ordinary course of business through the clearing house,
where it was paid by the China Banking Corporation.
On the same day the cashier of the Bank of the Philippine Islands received a letter, purporting to be
signed by Newland Baldwin, directing that P200,000 in bills of various denominations, named in the
letter, be packed for shipment and delivery the next day. The next day, Dolores witnessed the counting
and packing of the money, and shortly afterwards returned with the check for the sum of P200,000,
Plaintiff had frequently withdrawn currency for shipment to its mill from the Bank of the Philippine Islands
but never in so large an amount, and according to the record, never under the sole supervision of
Dolores as the representative of plaintiff.
Before delivering the money, the bank asked Dolores for P1 to cover the cost of packing the money, and
he left the bank and shortly afterwards returned with another check for P1, purporting to be signed by
Newland Baldwin. Whereupon the money was turned over to Dolores, who took it to plaintiff’s office,
where he turned the money over to Wilson and received as his share, P10,000.
Shortly thereafter the crime was discovered, and upon the defendant bank refusing to credit plaintiff with
the amount withdrawn by the two forged checks of P200,000 and P1, suit was brought against the Bank
of the Philippine Islands, and finally on the suggestion of the defendant bank, an amended complaint was
filed by plaintiff against both the Bank of the Philippine Islands and the China Banking Corporation.
At the trial the China Banking Corporation contended that they had drawn a check to the credit of the
plaintiff company, that the check had been endorsed for deposit, and that as the prior endorsement had
in law been guaranteed by the Bank of the Philippine Islands, when they presented the cashier’s check to
it for payment, the China Banking Corporation was absolved even if the endorsement of Newland Baldwin
on the check was a forgery.
The Bank of the Philippine Islands presented many special defenses, but in the main their contentions
were that they had been guilty of no negligence, that they had dealt with the accredited representatives
of the company in the due course of business, and that the loss was due to the dishonesty of plaintiff’s
employees and the negligence of plaintiff’s general agent.
In plaintiff’s Manila office, besides the general agent, Wilson, and Dolores, most of the time there was
employed a woman stenographer and cashier. The agent did not keep in his personal possession either
the code-book or the blank checks of either the Bank of the Philippine Islands or the China Banking
Corporation. Baldwin was authorized to draw checks on either of the depositories. Wilson could draw
checks in the name of the plaintiff on the China Banking Corporation.
After trial in which much testimony was taken, the trial court held that the deposit of P201,000 in the
Bank of the Philippine Islands being the result of a forged endorsement, the relation of depositor and
banker did not exist, but the bank was only a gratuitous bailee; that the Bank of the Philippine Islands
acted in good faith in the ordinary course of its business, was not guilty of negligence, and therefore
under article 1902 of the Civil Code which should control the case, plaintiff could not recover; and that as
the cause of loss was the criminal actions of Wilson and Dolores, employees of plaintiff, and as Newland
Baldwin, the agent, had not exercised adequate supervision over plaintiff’s Manila office, therefore
plaintiff was guilty of negligence, which ground would likewise defect recovery.
From the decision of the trial court absolving the defendants, plaintiff brings this appeal and makes nine
assignments of error which we do not deem it necessary to discuss it detail.
There is a mild assertion on the part of the defendant bank that the disputed signatures on Newland
Baldwin were genuine and that he had been in the habit of signing checks in blank and turning the
checks so signed over to Wilson.
The proof as to the falsity of the questioned signatures of Baldwin places the matter beyond reasonable
doubt, nor is it believed that Baldwin signed checks in blank and turned them over to Wilson.
As to the China Banking Corporation, it will be seen that it drew its check payable to the order of plaintiff
and delivered it to plaintiff’s agent who was authorized to receive it. A bank that cashes a check must
know to whom it pays. In connection with the cashier’s check, this duty was therefore upon the Bank of
the Philippine Islands, and the China Banking Corporation was not bound to inspect and verify all
endorsements of the check, even if some of them were also those of depositors in the bank. It had a
right to rely upon the endorsement of the Bank of the Philippine Islands when it gave the latter bank
credit for its own cashier’s check. Even if we would treat the China Banking Corporation’s cashier’s check
the same as the check of a depositor and attempt to apply the doctrines of the great Eastern Life
Insurance Co. v. Hongkong & Shanghai Banking Corporation and National Bank (43 Phil., 678), and hold
the China Banking Corporation indebted to plaintiff, we would at the same time have to hold that the
Bank of the Philippine Islands was indebted to the China Banking Corporation in the same amount. As,
however, the money was in fact paid to plaintiff corporation, we must hold that the China Banking
Corporation is indebted neither to plaintiff not to the Bank of the Philippine Islands, and the judgment of
the lower court so far as it absolved the China Banking Corporation from responsibility is affirmed.
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12/7/2019 G.R. No. 37467 December 11, 1933 - SAN CARLOS MILLING CO. v. BPI, ET AL. <br /><br />059 Phil 59 : DECEMBER 1933 - PHILIPPINE SUP…
G.R. No. 37467 December 11, 1933 - SAN CARLOS
MILLING CO. v. BPI, ET AL.
059 Phil 59
G.R. No. 38850 December 11, 1933 - ANTONIO
ESTIVA, ET AL. v. GONZALO CAWIL, ET AL.
059 Phil 67
G.R. No. 39034 December 11, 1933 - INT’L.
BANKING CORP. v. GEORGE A. YARED
Returning to the relation between plaintiff and the Bank of the Philippine Islands, we will now consider
the effect of the deposit of P201,000. It must be noted that this was not a presenting of the check for
cash payment but for deposit only. It is a matter of general knowledge that most endorsements for
deposit only, are informal. Most are by means of a rubber stamp. The bank would have been justified in
accepting the check for deposit even with only a typed endorsement. It accepted the check and duly
credited plaintiff’s account with the amount on the face of the check. Plaintiff was not harmed by the
transaction as the only result was the removal of that sum of money from a bank from which Wilson
could have drawn it out in his own name to a bank where Wilson would not have authority to draw
checks and where funds could only be drawn out by the check of Baldwin.
Plaintiff in its letter of December 23, 1928, to the Bank of the Philippine Islands said in part: jgc:chanrobles.com.ph

059 Phil 72
G.R. No. 39456 December 11, 1933 - PASTOR V.
VALERA v. RURAL TRANSIT CO.
059 Phil 93
G.R. No. 39470 December 11, 1933 - NORTH
LUZON TRANS. CO., INC., ET AL. v. PASTOR V.
VALERA
059 Phil 96
G.R. No. 39008 December 12, 1933 - NIEVES E.
SAÑGA v. SEGUNDO ZABALLERO, ET AL.
059 Phil 101
G.R. No. 37185 December 13, 1933 - PEOPLE OF
THE PHIL. ISLANDS v. CHUA BUAN, ET AL.
059 Phil 106
G.R. No. 38332 December 14, 1933 - PEOPLE OF
THE PHIL. ISLANDS v. VALERIANO DUCOSIN
059 Phil 109
G.R. No. 38709 December 14, 1933 - SY TIANGCO
v. HIPOLITO PABLO, ET AL.
059 Phil 119
In the matter of the complaint against Attorney
Gregorio O. Santos. December 16, 1933 - INES
VENTURA v. GREGORIO O. SANTOS
059 Phil 123
G.R. No. 38256 December 16, 1933 - PHIL. COOP.
LIVESTOCK ASSO. v. TOMAS EARNSHAW, ET AL.
059 Phil 129
G.R. No. 38417 December 16, 1933 - PEOPLE OF
THE PHIL. ISLANDS v. MARCIANO MEDINA
059 Phil 134
". . . we now beg leave to demand that you pay over to us the entire amount of said manager’s check of
two hundred one thousand (P201,000) pesos, together with interest thereon at the agreed rate of 3 1/2
per cent per annum on daily balanced of our credit in account current with your bank to this date. In the
even of your refusal to pay, we shall claim interest at the legal rate of 6 per cent from and after the date
of this demand inasmuch as we desire to withdraw and make use of the money." Such language might
well be treated as a ratification of the deposit.
The contention of the bank that it was a gratuitous bailee is without merit. In the first place, it is
absolutely contrary to what the bank did. It did not take it up as a separate account but it transferred the
credit to plaintiff’s current account as a depositor of that bank. Furthermore, banks are not gratuitous
bailees of the funds deposited with them by their customers. Banks are run for gain, and they solicit
deposits in order that they can use the money for that very purpose. In this case the action was neither
gratuitous nor was it a bailment.
On the other hand, we cannot agree with the theory of plaintiff that the Bank of the Philippine Islands
was an intermeddling bank. In the many cases cited by plaintiff where the bank that cashed the forged
endorsement was held as an intermeddler, in none was the claimant a regular depositor of the bank, nor
in any of the cases cited, was the endorsement for deposit only. It is therefore clear that the relation of
plaintiff with the Bank of the Philippine Islands in regard to this item of P201,000 was that of depositor
and banker, creditor and debtor.
We now come to consider the legal effect of payment by the bank of the Dolores of the sum of P200,001,
on two checks on which the name of Baldwin was forged as drawer. As above stated, the fact that these
signatures were forged is beyond question. It is an elementary principle both of banking and of the
Negotiable Instruments Law that —
"A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid
to the account of the depositor whose name was forged." (7 C. J., 683.)
There is no act of the plaintiff that led the Bank of the Philippine Islands astray. If it was in fact lulled into
a false sense of security, it was by the effrontery of Dolores, the messenger to whom it entrusted this
large sum of money.
The bank paid out its money because it relied upon the genuineness of the purported signatures of
Baldwin. These, they never questioned at the time its employees should have used care. In fact, even
today the bank represents that it has a belief that they are genuine signatures.
The signatures to the checks being forged, under section 23 of the Negotiable Instruments Law they are
not a charge against plaintiff nor are the checks of any value to the defendant.
It must therefore be held that the proximate cause of loss was due to the negligence of the Bank of the
Philippine Islands in honoring and cashing the two forged checks.

G.R. No. 39003 December 16, 1933 - LAUREANO The judgment absolving the Bank of the Philippine Islands must therefore be reversed, and a judgment
ELEGADO, ET AL. v. NICANOR TAVORA entered in favor of plaintiff- appellant and against the Bank of the Philippine Islands, defendant-
appellee, for the sum of P200,001, with legal interest thereon from December 23, 1928, until payment,
059 Phil 140 together with costs in both instances. So ordered.

G.R. No. 39403 December 16, 1933 - LEE SING v. Malcolm, Villa-Real, Vickers, and Imperial, JJ., concur.
INSULAR COLLECTOR OF CUSTOMS

059 Phil 147

G.R. No. 38773 December 19, 1933 - PEOPLE OF

THE PHIL. ISLANDS v. GINES S. ALBURQUERQUE
Back to Home | Back to Main
059 Phil 150

G.R. No. 39913 December 19, 1933 - PEOPLE OF

QUICK SEARCH
THE PHIL. ISLANDS v. RICARDO N. MELENDREZ

059 Phil 154

G.R. No. 39181 December 20, 1933 - MANILA 1901 1902 1903 1904 1905 1906 1907 1908
RAILROAD CO. v. M. P. TRANCO, INC.
1909 1910 1911 1912 1913 1914 1915 1916
059 Phil 158 1917 1918 1919 1920 1921 1922 1923 1924

G.R. No. 39217 December 20, 1933 - MANILA

1925 1926 1927 1928 1929 1930 1931 1932
RAILROAD CO. v. M. P. TRANCO, INC. 1933 1934 1935 1936 1937 1938 1939 1940

059 Phil 160

1941 1942 1943 1944 1945 1946 1947 1948
1949 1950 1951 1952 1953 1954 1955 1956
G.R. No. 39275 December 20, 1933 - PEOPLE OF
THE PHIL. ISLANDS v. RICARDO MENDOZA
1957 1958 1959 1960 1961 1962 1963 1964
1965 1966 1967 1968 1969 1970 1971 1972
059 Phil 163
1973 1974 1975 1976 1977 1978 1979 1980
G.R. No. 40637 December 20, 1933 - M.P. TRANS. 1981 1982 1983 1984 1985 1986 1987 1988
CO. v. PUBLIC SERVICE COM., ET AL.
1989 1990 1991 1992 1993 1994 1995 1996
059 Phil 173 1997 1998 1999 2000 2001 2002 2003 2004

G.R. No. 40759 December 20, 1933 - LIME CORP.

2005 2006 2007 2008 2009 2010 2011 2012
OF THE PHIL., ET AL. v. MANUEL V. MORAN, ET AL. 2013 2014 2015 2016 2017 2018

059 Phil 175

G.R. No. 36890 December 21, 1933 - BPI v.

PASCUAL ACUÑA, ET AL.

059 Phil 183 Main Indices of the Library ---> Go!

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12/7/2019 G.R. No. 37467 December 11, 1933 - SAN CARLOS MILLING CO. v. BPI, ET AL. <br /><br />059 Phil 59 : DECEMBER 1933 - PHILIPPINE SUP…

G.R. No. 37590 December 21, 1933 - JOSE

FERNANDO RODRIGO v. CONCEPCION CABIGAO, ET
AL.

059 Phil 187

G.R. No. 37640 December 21, 1933 - GOV’T. OF

THE PHIL. ISLANDS v. EL AHORRO INSULAR

059 Phil 199

G.R. No. 38010 December 21, 1933 - PATRICK

HENRY FRANK, ET AL. v. G. KOSUYAMA

059 Phil 206

G.R. No. 38084 December 21, 1933 - DOLORES M.

VIUDA DE BARRETTO ET AL. v. LA PREVISORA
FILIPINA

059 Phil 212

G.R. No. 38131 December 21, 1933 - BEHN, MEYER

& CO., ET AL. v. COLLECTOR OF INTERNAL REVENUE

059 Phil 227

G.R. No. 38684 December 21, 1933 - CYRUS

PADGETT v. BABCOCK & TEMPLETON, INC., ET AL.

059 Phil 232

G.R. Nos. 38215 & 38216 December 22, 1933 -

PEOPLE OF THE PHIL. ISLANDS v. FAUSTINO RIVERA

059 Phil 236

G.R. No. 38375 December 22, 1933 - JOSE SY JONG

CHUY v. PABLO C. REYES

059 Phil 244

G.R. No. 39078 December 22, 1933 - NICASIA

BATALLONES v. PUBLEO BATALLONES, ET AL.

059 Phil 265

G.R. No. 39839 December 22, 1933 - PEOPLE OF

THE PHIL. ISLANDS v. GABRIEL HERNANDEZ

059 Phil 272

G.R. No. 40659 December 22, 1933 - PASAY

TRANS. CO., INC. v. PUBLIC SERVICE COMMISSION,
ET AL.

059 Phil 278

G.R. No. 40889 December 22, 1933 - ISIDORO

YBOLEON v. PEDRO MA. SISON, ET AL.

059 Phil 281

G.R. No. 35694 December 23, 1933 - ALLISON D.

GIBBS v. GOV’T. OF THE PHIL. ISLANDS

059 Phil 293

G.R. No. 37090 December 23, 1933 - CRISANTA

SUAREZ, ET AL. v. PRUDENCIO TIRAMBULO, ET AL.

059 Phil 303

G.R. No. 37345 December 23, 1933 - ALEJANDRA

REPOLLO, ET AL. v. BERNABE BALECHA

059 Phil 308

G.R. No. 37452 December 23, 1933 - FERMIN

SUPIA, ET AL. v. JOSE M. QUINTERO, ET AL.

059 Phil 312

G.R. No. 38052 December 23, 1933 - CONCEPCION

ABELLA DE DIAZ v. ERLANGER & GALINGER, INC., ET
AL.

059 Phil 326

G.R. No. 38434 December 23, 1933 - PEOPLE OF

THE PHIL. ISLANDS v. MARCIANO D. MEDINA

059 Phil 330

G.R. No. 38774 December 23, 1933 - PEOPLE OF

THE PHIL. ISLANDS v. ALEKO LILIUS

059 Phil 339

G.R. Nos. 39840 & 39841 December 23, 1933 -

PEOPLE OF THE PHIL. ISLANDS v. GABRIEL
HERNANDEZ

059 Phil 343

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