Jai-Alai Corporation of the Philippines v. Bank of the Philippine Islands, G.R. No.
L-
29432, [August 6, 1975]
Summary: Petitioner deposited in its current account with respondent bank several checks with a total face value of
P8k , all acquired from Antonio J. Ramirez, a regular bettor at the jai-alai games and a sale agent of the Inter-Island
Gas Service, Inc., the payee of the checks. The deposits were all temporarily credited to petitioner's account in
accordance with the clause printed on the bank's deposit slip. Subsequently they discovered that all the indorsement
made on the checks purportedly by its cashiers were forgeries
Bank debited the petitioner's current account and forwarded to the latter the checks containing the forged
indorsements, which petitioner refused to accept. Later, petitioner drew against its current account a check for
P135k. This check was dishonored by respondent as its records showed that petitioner's balance after netting out the
value of the checks with the forged indorsement, was insufficient to cover the value of the check drawn.
The Supreme Court ruled that respondent acted within legal bounds when it debited petitioner's account; that the
payments made by the drawee banks to the respondent on account of the checks with forged indorsements were
ineffective; that on account thereof, no creditor-debtor relationship was created between the parties; that petitioner
was grossly negligent in accepting the checks in question from Ramirez without making any inquiry as to authority
to exchange checks belonging to the payee-corporation.
Facts:
Jai- Alai Co deposited 10 checks worth 8k in its account with the BPI. These checks were all payable to
Inter Island Gas and indorsed to Jai Alai by its regular bettor, Ramirez. Ramirez was a sales agent of
Inter Island. Upon deposit, BPI temporarily credited to the Jai Alai account in accordance with the clause
printed on the deposit slips issued by the respondent and which reads:
"Any credit allowed the depositor on the books of the Bank for checks or drafts hereby received for
deposit, is provisional only, until such time as the proceeds thereof, in current funds or solvent credits,
shall have been actually received by the Bank and the latter reserves to itself the right to charge back the
item to the account of its depositor, at any time before that event, regardless of whether or not the item
itself can be returned."
About 3 months later, BPI found out that all indorsements on the checks were forgeries. BPI Cashier,
Sarthou advised Jai alai that due to the discovery, the bank would have to debit its account and
forwarded to the latter the checks containing the forged indorsements, which the Jai Alai, however,
refused to accept.
When Jai-alai drew a check for 135k, it was dishonored for insufficiency of funds since the current
account had a sum of 128k, net of the debited 8k.
Jai Alai filed for damages.
WN the bank can debit the account of Jai-Alai. YES.
1. No debtor and creditor relationship
When the petitioner deposited the checks with the respondent, the nature of the relationship created at that
stage was one of agency, that is, the bank was to collect from the drawees of the checks the corresponding
proceeds.
2. A forged signature creates no rise and obligations.
Sec 23 of NIL provides that a forged signature shall be wholly inoperative as against the person whose
signature it purports to be and no right to discharge it or enforce its payment can be acquired through or
under the forged signature except against a party who cannot invoke the forgery. The indorsements on
the checks had been forged prior to their delivery to the petitioner. In legal contemplation, therefore,
the payments made by the drawee-banks to the respondent on account of the said checks were ineffective;
and, such being the case, the relationship of creditor and debtor between the petitioner and the respondent
had not been validly effected, the checks not having been properly and legitimately converted into cash.
Having received the checks merely for collection and deposit, the BPI cannot he expected to know or
ascertain the genuineness of all prior indorsements on the said checks.
3. Jai Alai was negligent.
Petitioner cashed these checks to a mere individual who was admittedly always bets at its jai-alai games
without making any inquiry as to his authority to exchange checks belonging to the payee-corporation.
It must be noted further that three of the checks in question are crossed checks which may only be
deposited, but not encashed; yet, the petitioner negligently accepted them for cash.
4. Jai Alai should bear the loss.
Under Section 67 of the Negotiable Instruments Law, "Where a person places his indorsement on an
instrument negotiable by delivery he incurs all the liability of an indorser," and under Section 66 of the
same statute a general indorser warrants that the instrument "is genuine and in all respects what it purports
to be." Where the depositor indorsed the checks with forged indorsement when it deposited them with the
collecting bank, the former as an endorser guaranteed the genuineness of all prior indorsement thereon.
The collecting bank which relied upon this warranty cannot be held liable for the resulting loss
