G.R. No. 50373 February 15, 1990
MANILA LIGHTER TRANSPORTATION, INC., petitioner, vs. COURT OF APPEALS AND CHINA BANKING CORPORATION, respondents.

FACTS

Petitioner Manila Lighter Transportation, Inc. filed a complaint against respondent China Banking Corporation for the recovery of the value of forty-nine checks. These checks, issued by the petitioner’s customers in payment for services, were collected by its employee, Augusto Perez. The checks were subsequently indorsed with the forged signature of the petitioner’s general manager, Luis Gaskell, and were deposited into the accounts of third parties, Cao Pek & Co. and Ko Lit, at the respondent bank. The proceeds were withdrawn, leading to the petitioner’s loss. The petitioner alleged the bank was liable for accepting checks with forged indorsements.
The trial court found both parties equally negligent. It held the petitioner negligent for its poor internal supervision, which enabled its employees to misappropriate and forge the checks over eighteen months. It held the bank negligent for not detecting the forgeries. Consequently, it apportioned the loss equally. Both parties appealed. The Court of Appeals reversed the trial court, completely exonerating the bank and dismissing the complaint. It held the petitioner’s own negligence was the proximate cause of its loss.

ISSUE

Whether the Court of Appeals erred in holding that the petitioner’s negligence precluded recovery from the respondent bank for the checks with forged indorsements.

RULING

The Supreme Court denied the petition, affirming the Court of Appeals. The core ruling is that the petitioner’s gross negligence was the proximate cause of the loss, thereby precluding its claim against the bank. The legal logic rests on the principle of proximate cause and the petitioner’s failure to exercise due diligence in supervising its employees. The Court emphasized that the petitioner, through its own internal failures, created the situation enabling the fraud. Its collector, Augusto Perez, was entrusted to receive checks, and its accountant, Wilfredo Lagamon, negotiated them. The forgery went undetected for a year and a half, and the petitioner only discovered the discrepancies after sending collection letters to clients who had already paid via the stolen checks. This demonstrated a severe lack of oversight.
Furthermore, the Court upheld the appellate court’s factual finding that the respondent bank was not negligent. The bank was not the drawee bank but a collecting bank where the third-party depositors maintained accounts. Since the petitioner was not a client of the bank, the latter had no specimen signature against which to verify the indorsements. The bank followed standard banking practice by processing the checks through the clearing house before allowing withdrawals. The Supreme Court declined to re-examine these factual determinations, as its review is limited to questions of law. The petitioner’s negligence was so pronounced that it constituted the proximate and efficient cause of the loss, barring any right to recover from the bank.