G.R. No. L-15894 & L-15895; January 30, 1964
Republic of the Philippines, plaintiff-appellant, vs. Equitable Banking Corporation, defendant-appellee; and Republic of the Philippines, plaintiff-appellant, vs. The Bank of the Philippine Islands, defendant-appellee, Corporacion de los P. Dominicos de Filipinas, third-party-defendant-appellee.

FACTS

The Republic sought to recover from two banks the aggregate value of 28 treasury warrants paid by the National Treasurer through the Central Bank Clearing Office, on the ground that the signatures of the drawing office and the auditor’s representative on the warrants were forged. In L-15895, the Bank of the Philippine Islands (BPI) presented 24 warrants for clearing after they were deposited by the Corporacion de los Padres Dominicos. The Corporacion had acquired these warrants from a trusted employee, Jacinto Carranza, under an arrangement where payment would only be made after the warrants were cleared and the proceeds credited. BPI accepted the deposits “subject to collection,” presented them through clearing, and, upon payment by the Treasurer, credited the Corporacion, which then paid Carranza. In L-15894, the Equitable Banking Corporation similarly collected on four warrants deposited by its known customers. Months after clearing and payment, the Treasurer notified the banks of the forgeries and demanded reimbursement.

ISSUE

Whether the collecting banks (BPI and Equitable) are liable to refund the government for the amounts paid on the forged treasury warrants.

RULING

The Supreme Court affirmed the dismissal of the complaints, ruling the banks were not liable. The legal logic centers on the doctrine of comparative negligence and the drawee’s duty of diligence. The Treasury, as the drawee, was grossly negligent. The warrants were cleared and paid through the government’s own clearing mechanism, inducing the banks to credit their depositors. The irregularity was apparent on the warrants’ face, as each exceeded P5,000—beyond the signing authority of the forged auditor. The Treasury also failed to advertise the loss of genuine warrant forms or give timely notice of the forgeries, only doing so months after payment. Where a loss from forgery must fall on one of two innocent parties, it should be borne by the party whose negligence enabled the loss to occur. The Treasury’s neglect in examining the warrants before payment and its delay in notification were the proximate causes of the loss, barring its recovery from the banks that acted in good faith upon the government’s own clearance.