FACTS:

The corporation had acquired 24 treasury warrants by accommodating its former trusted employee who asked the corporation to cash the warrants, alleging  it  was  difficulty  to  do  directly  with  the  government  and  that  his wife expected a sort of commission for the encashment.   The corporation
acceded  to  the  request  provided  that  it  be  first  cleared  and  that  the corporation would receive the amount before paying for it.  The warrants were then cleared but later on, at different periods of time, the treasurer returned 24 warrants to the CB on the ground that they have forged.  The bank refused to return the cash.  
 
The  clearing  of  the  checks,  it  should  be  noted,  was  in  accordance  to  the 24-hour clearing rule by the CB.
 

HELD:

The  warrants  were  cleared  and  paid  by  the  Treasurer,  in  view  of  which Equitable   and   PI   bank   credited   the   corresponding   amounts   to   the respective depositors of the warrants and then honored the checks for said amounts.    Thus,  the  treasury  had  not  been  only  negligent  in  clearing  its own  warrants  but  had  already  thereby  induced  the  banks  to  pay  the amounts thereof to said depositors.  This gross negligence becomes more apparent  when  each  of  the  warrants  were  valued  for  more  than  the authority of the treasurer to approve.