Philippine Legal Guide: Negotiable Instruments, Torts and Damages Case Digest: BPI v. CA, China Banking Corp and Phil. Clearing Housee Corp. (1992)

G.R. No. 102383 November 26, 1992

Lessons Applicable:

Forgery (Negotiable Instruments Law)
Special Rules on Experts and Professionals (Torts and Damages)

FACTS:

October 9, 1981 afternoon: Eligia G. Fernando who had a money market placement as evidenced by a promissory note with a maturity date of November 11, 1981 amounting to P2,462,243.19 called Reginaldo Eustaquio, Dealer Trainee in BPI's Money Market Department to preterminate the placement

but she was told "trading time" was over for that Friday, and suggested that she call again the following week
The promissory note the caller wanted to preterminate was a roll-over of an earlier 50-day money market placement that had matured on September 24, 1981

Later that afternoon, Eustaquio conveyed the request for pretermination to Penelope Bulan, but Eustaquio was left to attend to the pretermination process
October 12, 1981 morning: Eligia followed up with Eustaquio.

Eustaquio knew the real Eligia G. Fernando to be the Treasurer of Philippine American Life Insurance Company (Philamlife) since he was handling Philamlife's corporate money market account.

But neither Eustaquio nor Bulan who originally handled Fernando's account, nor anybody else at BPI, bothered to call up Fernando at her Philamlife office to verify the request for pretermination
Despite being informed that the placement would yield less than the maturity value, Eligia still insisted

Eustaquio proceeded to prepare the "purchase order slip" for the requested pretermination as required by office procedure.

The 2 cashier's checks, together with the papers consisting of the money market placement was to be preterminated and the promissory note to be preterminated, were sent to Gerlanda E. de Castro (Manager) and Celestino Sampiton, Jr., (Administrative Assistant) in both signatories from BPI's Treasury Operations Department.
Having been singed, the checks now went to the dispatcher for delivery

Later in the same morning, the same caller changed the delivery instructions that she will personally pick them up the checks or send her niece.

Eustaquio told her that if were her niece, a written authorization is required.
The signature has been established to be forged although it has a "close similarity" to the real signature of Eligia G. Fernando

October 13, 1981 afternoon: a woman who represented herself to be Eligia G. Fernando applied for a current account

She was accompanied and introduced to Emily Sylianco Cuaso, Cash Supervisor, by Antonio Concepcion whom Cuaso knew to have opened, earlier that year, an account upon the introduction of Valentin Co, a long-standing "valued client" of China Banking Corp. (CBC)
However, Cuaso indicated that she was introduced by Valentin Co
The final approval of the new current account is indicated on the application form by the initials of Regina G. Dy, Cashier, who did not interview the new client but affixed her initials on the application form after reviewing it.

October 14, 1981: the woman deposited the 2 checks in controversy.

Her endorsement was found to conform with the depositor's specimen signature.
CBC's guaranty of prior endorsements and/or lack of endorsement was then stamped

withdrawals on Current Account was made through Checks payable to "cash"

October 16, 1981 - P1M
October 15, 1981- P48.5K through clearing from PNB
October 19, 1981 - P370K
November 4, 1981 - P4,100.00 through clearing from Far East Bank

All these withdrawals were allowed on the basis of the verification of the drawer's signature with the specimen signature on file and the sufficiency of the funds in the account.

However, the balance shown in the computerized teller terminal when a withdrawal is serviced at the counter, unlike the ledger or usual statement prepared at month-end, does not show the account's opening date, the amounts and dates of deposits and withdrawals.
The last withdrawal on November 4, 1981 with remaining balance of only P571.61

November 11, 1981 (maturity date of Eligia G. Fernado's money market placement with BPI): the real Eligia G. Fernando went to BPI for the roll-over of her placement

She disclaimed having preterminated her placement on October 12, 1981.

She executed an affidavit stating that while she was the payee of the two checks in controversy, she never received nor endorsed them and that her purported signature on the back of the checks was not hers but forged.
With her surrender of the original of the promissory note evidencing the placement which matured that day, BPI issued her a new promissory note to evidence a roll-over of the placement

November 12, 1981: Eligia supported w/ affidavit

BPI returned the 2 checks in controversy to CBC for the reason "Payee's endorsement forged"
CBC returned the checks for reason "Beyond Clearing Time"

CA afformed RTC: favored BPI

BPI: present clearing guarantee requirement imposed on the representing or collecting bank under the PCHC rules and regulations is independent of the Negotiable Instruments Law

ISSUE: W/N BPI should be liable for the forged check because of the doctrine of last clear chance

HELD: NO. Modified. BPI 60% CBC 40% of the loss

Section 23 of the Negotiable Instruments Law thereof is not applicable in the light of the absolute liability of the representing or collecting bank as regards forged endorsements in consonance with the clearing guarantee requirement imposed upon the presenting or collecting banks "as it is worded today."
Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself cannot be extended. (U.S. v. Tupasi Molina, supra)

In case of discrepancy between the basic law and a rule or regulation issued to implement said law the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v. Lim)

Section 23 of the Negotiable Instruments Law

When signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative and no right to retain the instrument, or to give discharge therefore, or to enforce payment thereof, against any party thereto, can be acquired through or under such forged signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.

2 parts of the provision

GR: forged signature = "wholly inoperative" and payment made "through or under such signature" = ineffectual or does not discharge the instrument

EX: when the party relying in the forgery is "precluded from setting up the forgery or want of authority - negligence of the party invoking forgery

BPI as drawee bank and CBC as representing/collecting bank were both negligent resulting in the encashment of the forged checks

Not verifying the phone call
officer who used to handle Eligia G. Fernando's account did not do anything about the account's pre-termination
No verification on Eligia'ssignature on the letter requesting the pre-termination and the letter authorizing her niece to pick-up the checks, yet, her signature was in BPI's file
Failure to ask for the surrender of the promissory note evidencing the money market placement that was supposedly pre-terminated

the opening of the impostor's current account in the name of Eligia G. Fernando
the deposit of account of the 2 checks in controversy
the withdrawal of their proceeds

Doctrine of Last Clear Chance: negligent acts of the 2 parties were not contemporaneous, since the negligence of the one succeeded the negligence of the another by an appreciable interval. Under these circumstances the law is that the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party
It is not unnatural or unexpected that after taking the risk of impersonating Eligia G. Fernando with the connivance of BPI's employees, the impostor would complete her deception by encashing the forged checks. There is therefore, greater reason to rule that the proximate cause of the payment of the forged checks by an impostor was due to the negligence of petitioner BPI.
Due care on the part of CBC could have prevented any loss. The Court cannot ignore the fact that the CBC employees closed their eyes to the suspicious circumstances of huge over-the-counter withdrawals made immediately after the account was opened. The opening of the account itself was accompanied by inexplicable acts clearly showing negligence.
while we do not apply the last clear chance doctrine as controlling in this case, still the CBC employees had ample opportunity to avoid the harm which befell both CBC and BPI. They let the opportunity slip by when the ordinary prudence expected of bank employees would have sufficed to seize it
While it is true that petitioner BPI's negligence may have been the proximate cause of the loss, CBC's negligence contributed equally to the success of the impostor in encashing the proceeds of the forged checks
Article 2179 of the Civil Code to the effect that while CBC may recover its losses, such losses are subject to mitigation by the court
Both banks were negligent in the selection and supervision of their employees resulting in the encashment of the forged checks by an impostor.