BPI vs.
CA
G.R. Number 102383 | 216 SCRA 51 | November 26, 1992 | Gutierrez, J.
Petition: Review from Decision and Resolution of CA
Petitioner: Bank of the Philippine Islands
Respondents: Court of Appeals (Seventh Judicial), Hon. Judge RTC Makati (Branch
59), China Banking Corporation, Clearing House Corporation
Section 23; Forge Indorsements
DOCTRINE
 General rule is that forged signature is wholly inoperative; exception is when the
party relying on the forgery is precluded from setting up the forgery or want of
authority. Negligence of the party invoking forgery as an exception is recognized.
 Banks are expected to exercise the highest degree of diligence in the selection
and supervision of their employees
 Losses of the collecting bank due to negligence of its employees may be mitigated
(pursuant to Art. 2176, Civil Code) if it is shown that employees of drawee bank
are also negligent.
FACTS
 Started with a phone call where the caller, who was purportedly Eligia G. Fernando,
wanted to preterminate her money market placement on October 9, 1981
o Fernando had a money market placement with BPI, as evidenced by a
promissory note that matures on Nov. 11, 1981, and with maturity value of
P2,462,243.19
 Promissory note was a roll-over of an earlier 50-day money market
placement that had matured on Sept. 24, 1981
o Purported Fernando called again on Monday to follow up the pretermination
 Reginaldo Eustaquio (Dealer Trainee) processed the request, and
said that he “made certain” that the caller was the real Fernando by
verifying details the caller gave with the ones in the ledger/folder of
the account
 It was known to Eustaquio and Penelope Bulan (officer who handled
Fernando’s account) that Fernando worked as a Treasurer of
Philamlife, but no BPI employee ever thought of verifying the
pretermination request by calling up Fernando’s Philamlife office
o Caller insisted on pretermination, even if the amount to be received was
diminished
 Method of collection of pretermination funds: two checks, one for
P1,800,000.00 and the second for the remaining balance; to be
delivered to Fernando’s Philamlife office
 Request was processed, two check were already drawn
and were given to dispatcher for delivery
 This was later changed when the caller called again and said that
Rosemarie Fernando, Eligia Fernando’s niece, would “definitely” be
the one to pick up the checks (with written authorization from Eligia
Fernando)
 Eustaquio wrote on the purchase order slip: “Rosemarie
Fernando release only with authority to pickup”
 Rosemarie later on claimed the checks from dispatcher
 Spoiler: It was an impostor; the impostor impersonated both Eligia and
Rosemarie
o BPI’s employees’ supposed negligence
 Dispatcher failed to get or to require surrender of the promissory
note evidencing the placement
 No showing that the signatures of Eligia on the written authorization
and pretermination request letter were compared to the sample
signatures in BPI’s files
 Impostor then went to China Bank’s office and represented herself as Eligia
Fernando; then opened a current account
o Initial deposit was P10,000.00
o Application form for current account was reviewed by the Cashier; she then
put her initials; BUT she did not interview the fake Eligia
o Impostor then deposited the two BPI checks
 Her endorsement on the two checks were found to conform with the
depositor’s specimen signature; thereafter, China Bank’s guaranty
of prior endorsements and/or lack of endorsement was stamped on
the two checks
 China Bank then sent the checks to clearing and BPI cleared them
on the same day
o Withdrawals began; allowed due to match of signature of impostor and
specimen signatures on file, and sufficiency of funds
 P1,000,000.00 payable to “cash”, dated October 16, 1981
 P48,500.00 payable to “cash”, dated October 15, 1981
 P1,000,000.00 payable to “cash”, dated October 19, 1981
 P370,000.00 payable to “cash”, dated October 22, 1981
 P4,100.00 payable to “cash”, dated November 3, 1981
 After withdrawals, remaining funds were at P571.61
 Real Eligia, on Nov. 11, 1981 (maturity date of market money placement) went to
BPI for a roll-over; thereafter she discovered what happened
o Real Eligia denied having preterminated her placement
 Executed an affidavit saying that she was payee of the two checks
and that she never received nor endorsed them, and that the
purported signatures at the back (endorsement) were forged
o BPI issued a new promissory note to evidence the roll-over
 BPI returned the two controversial checks to China Bank (“Payee’s endorsement
forged”); China Bank gave back the checks (“Beyond Clearing Time”)
 Investigation by Presidential Security Command led to filing of criminal actions for
Estafa through Falsification of Commercial Documents against four BPI
employees
o Arbitration Committee ruled in favor of BPI (China Bank to pay
P1,206,607.57)
 Costs of suit: BPI=25%, China Bank=75%
o Upon MR, Board of Directors of Philippine Clearing House Corporation
(PCHC) reversed (BPI to pay China Bank)
 Costs of suit: BPI=25%, China Bank=75%
o Upon appeal by BPI, RTC Makati dismissed
o Upon appeal by BPI, CA affirmed RTC
ISSUES
1. W/N China Bank may claim reimbursement from BPI, considering that China Bank
guaranteed the forged endorsement – YES, if China Bank was negligent and BPI
was not; NO, if both are negligent
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2. W/N employees of both banks were negligent, such negligence being the
proximate cause of the losses – YES
RULING & RATIO
1. If only China Bank was negligent, then BPI could have claimed reimbursement
from BPI
a. BPI: Liability was with China Bank since it guaranteed the legitimacy of
the endorsement due to the negligence of its employees. Section 23, NIL
is wholly inapplicable since China Bank had absolute liability as collecting
bank who guaranteed the forged endorsement.
i. Court: Section 23 of the 1980 Revised PCHC Clearing House
Rules and Regulations, which was in effect when BPI gave back
the checks to China Bank, is substantially the same with the
clearing regulation as quoted in Banco De Oro Savings and
Mortgage Bank v. Equitable Banking Corporation, to wit:
1. Sec. 21. xxx xxx xxx
Items which have been the subject of material
alteration or items bearing forged endorsement when
such endorsement is necessary for negotiation shall be
returned by direct presentation or demand to the
Presenting Bank and not through the regular clearing
house facilities within the period prescribed by law for
the filing of a legal action by the returning bank/branch,
institution or entity sending the same.
ii. Banco De Oro case is applicable since, like in this case, being
questioned is the effect of the collecting bank’s guarantee of “all
prior endorsements and/or lack of endorsements” at the back of
the checks and the effects of the forged endorsements of the
payees
1. That the stamp is an express guarantee of the validity
of the checks and that the drawee bank would not have
paid the checks if the guarantee was absent; thus,
defendant is liable for any damage arising from the
guarantee (collecting bank is estopped from denying
the guarantee of validity)
2. On the forged endorsements, collecting bank or
last indorser suffers the loss because it has the
duty to ascertain the genuineness of all prior
indorsements considering that the act of
presenting the check for payment to the drawee is
an assertion that the party making the presentment
has done its duty to ascertain the genuineness of
the endorsements
a. Collecting bank had privity with depositor-
impostor as its client; it should have
verified, authenticated and ascertained
depositor-impostor’s person
2. Both BPI and China Bank employees were negligent; losses are to be mitigated
accordingly
a. Court: Section 23 mandates that, as a general rule, forged signatures are
wholly inoperative. But, Section 23 admits of exceptions, when the party
alleging forgery is precluded from setting it up as defense; one of these
exceptions is negligence.
b. BPI’s negligence as found by Arbitration Committee and PHCH Board of
Directors
i. Mere telephone call to Eligia’s office in Philamlife for
vaerification could have unmasked the impostor
ii. Bulan, officer who usually handled Eligia’s account negligently
delegated it to Eustaquio, a Dealer Trainee
1. Eustaquio disclosing sensitive information about the
money market placement is a violation of General
Banking Act
iii. During pickup, no verification of signatures on pretermination
request letter, letter of authorization, as compared to BPI’s
specimen signatures of Eligia
iv. Failure to ask for surrender of the promissory notes evidencing
the money market placement
c. China Bank’s negligence as found by Arbitration Committee and PHCH
Board of Directors
i. Application process was bypassed due to recommendations by
the employees (friends-friends, so easier process and even
absent verification and even misrepresentation that impostor
was recommended by a long-standing client of China Bank,
Valentin Co)
ii. Sudden deposit of more than P2M, as compared to first deposit
of P10K should have alerted China Bank employees
iii. Successive withdrawals of big amounts should have alerted
them
d. To determine liability of each, which negligence was graver?
i. Court: Both were negligent in selection and supervision of
their employees
ii. BPI: Following Picart v. Smith’s doctrine of last clear chance,
China Bank had the last clear chance to avoid the loss but it did
not due to negligence of its employees
1. Court: Nope, China Bank had no prior notice of the
fraud; therefore, Picart v. Smith does not apply
iii. BPI: China Bank was proximate cause, due to its acts and
omissions; that BPI’s acts did not actually produce a loss
1. Court: Nope, both BPI and China Bank acts and
omissions were proximate causes of the loss
DISPOSITION
 60-40 ratio of the P2,413,215.16 loss and P7,250.00 costs; BPI to shoulder 60%,
China Bank to shoulder 40%
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