GR 38816; (November, 1933) (Digest)
G.R. No. 38816 ; November 3, 1933
INSULAR DRUG CO., INC., plaintiff-appellee, vs. THE PHILIPPINE NATIONAL BANK, ET AL., defendants. THE PHILIPPINE NATIONAL BANK, appellant.
FACTS
Insular Drug Co., Inc. employed U.E. Foerster as a salesman and collector for Panay and Negros. Foerster was instructed to deposit checks he collected into the company’s account at the Chartered Bank’s Iloilo branch. Instead, Foerster, along with his wife and clerk, deposited 132 checks payable to “Insular Drug Co., Inc.” into his personal account at the Philippine National Bank’s (PNB) Iloilo branch. The checks were endorsed variously by Foerster, his wife Carmen E. de Foerster, or his clerk, without proper authorization from the company. PNB accepted these endorsements, credited the amounts to Foerster’s personal account, and allowed him to withdraw the funds. Upon discovery of the fraud, Foerster committed suicide. Insular Drug Co. sued PNB to recover the total face value of the checks, P18,285.92, which it never received.
ISSUE
Whether the Philippine National Bank is liable to Insular Drug Co., Inc. for accepting and cashing checks payable to the corporation based on unauthorized endorsements by its agent (Foerster) and his wife/clerk, and crediting the proceeds to the agent’s personal account.
RULING
Yes, the Philippine National Bank is liable. The Supreme Court affirmed the trial court’s judgment ordering PNB to pay Insular Drug Co. the amount of the checks with interest. The Court held that an agent with authority to collect money does not have implied authority to endorse checks payable to the principal. A bank that accepts checks payable to a corporation, endorsed by an agent without proper authority, does so at its peril. PNB could tell from the checks themselves that the funds belonged to the corporation, not to Foerster or his relatives. By accepting the unauthorized endorsements and crediting the checks to Foerster’s personal account, PNB became liable to the true owner, the corporation. The bank’s good faith is not a defense, and it failed to prove that the drug company ultimately received the funds and thus suffered no loss. The bank’s negligence caused the loss.
AI Generated by Armztrong.