Negotiable Instruments Section 23 Forged Signature of Drawer

! SAN CARLOS MILLING v. BPI

G.R. No. 37467 December 11, 1933
! This is an appeal from the judgement of the CFI of Manila absolving BPI.
!Facts
- San Carlos Milling is a corporation organized under the laws of Hawaii, which is authorised to engage
in business in the Philippines. Its main office is in Manila.
- Alfred D. Cooper is the agent of the corporation who handles the business in the Philippines. He has
general power of attorney with authority of substitution.
- Joseph Wilson is the principal employee in the Manila office with the same powers except for the
authority of substitution. His authority to deal with BPI was revoked by Cooper when he decided to go
on vacation.*
- Newland Baldwin was given the general power of attorney when Cooper decided to go on vacation.*
- A year after, Wilson conspired with a messenger from the Manila office, Dolores, to steal money by
forging Baldwin’s signature.
• He requested for $100,000 from the Honolulu office, which was transferred by cable to China
Bank, another bank San Carlos Milling maintained a deposit in.
• China Bank sent an exchange contract to San Carlos Milling offering PhP201,000, which was
the current exchange rate. Baldwin’s signature was forged in said contract.
• Dolores received a check from China Bank payable to San Carlos Milling Company or order in
the amount of PhP201,000. This was deposited to BPI on the same day.
• BPI accepted the check and credited it to San Carlos’ account.
• BPI received a request purportedly signed by Baldwin requesting that the PhP200,000 be packed
for shipment and delivery the next day. It should be in bills of various denominations.
- Packing and shipping of money was normal for San Carlos but never in this large
amount nor under the sole supervision of Dolores.
• Money was turned over to Dolores, who gave it to Wilson. Dolores then received his share of
PhP10,000.
- San Carlos Milling sued BPI after the discovery of the crime. On the suggestion of BPI, the complaint
was amended to include China Bank.
- China Bank contended that BPI guaranteed the check when they presented it to BPI for payment. China
Bank was absolved.
- RTC also absolved BPI, finding them guilty of NO NEGLIGENCE. The loss was due to the dishonesty
of the plaintiff’s employees and negligence of its agent, Baldwin.
!Issue
Whether or not San Carlos Milling may recover the sum of PhP201,000 from BPI.
!Held
Yes. 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.”
!There is no act of the plaintiff that led the Bank of the Philippine Islands astray. The bank paid out its money
because it relied upon the genuineness of the purported signatures of Baldwin. 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.
!The judgment absolving the Bank of the Philippine Islands must therefore be reversed, and a judgment
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, together with costs
in both instances. So ordered.

*this happened at the same time