G.R. No. L-10476; November 20, 1915
OSADA CARR, plaintiff-appellee, vs. THE HONGKONG & SHANGHAI BANKING CORPORATION, defendant-appellant.

FACTS:
On September 7, 1908, plaintiff Osada Carr and her husband, Edward Carr, deposited P1,000 with the defendant bank. The bank issued a “deposit receipt” (No. 44/363) payable to “Mr. Edward Carr & or Mrs. Cid Carr,” bearing 3.5% annual interest, and containing the clause “repayable here on production of this receipt.” The receipt also stated “NOT TRANSFERABLE.” The plaintiff retained possession of the original receipt.

On July 3, 1913, Edward Carr approached the bank, claimed the original receipt was lost, and requested payment. Without requiring the original receipt, the bank issued a new deposit receipt (No. 49/269) for P1,158.78 (representing principal and accrued interest) in Edward Carr’s name alone, with a notation on the back indicating it was a renewal of the original. To secure this, Edward Carr executed an indemnity agreement on July 2, 1913, holding the bank harmless against any future claims on the original receipt. The bank paid Edward Carr the full amount on November 11, 1913.

Subsequently, Osada Carr presented the original deposit receipt and demanded payment from the bank. When the bank refused, she filed an action to recover P1,035 (the principal plus interest). The Court of First Instance ruled in her favor. The bank appealed, arguing that its demurrer should have been sustained and that payment to Edward Carr discharged its obligation.

ISSUE:
Whether the bank is liable to pay Osada Carr on the original deposit receipt, despite having already paid Edward Carr (one of the alternative payees) without production of the receipt.

RULING:
Yes, the bank is liable. The Supreme Court affirmed the lower court’s judgment.

The deposit receipt was expressly payable “on production of this receipt.” The bank’s contract was to pay either Edward Carr or Osada Carr only upon presentation of the original document. By paying Edward Carr without requiring the receipt, the bank violated the terms of its own contract. The indemnity agreement executed by Edward Carr acknowledged the bank’s continued risk in making payment without the receipt.

The Court held that either payee had the right to demand payment upon production of the receipt. Since Osada Carr duly produced the original, the bank was obligated to pay her. Payment to Edward Carr without production of the receipt did not discharge the bank’s liability to the other alternative payee. The demurrer was correctly overruled, as the complaint sufficiently alleged non-payment, and production of the receipt created a presumption that it had not been paid.

Judgment affirmed, with costs against the appellant bank.