63 PHIL 711



Unknown persons negotiated with Motor Services Company checks, which were part of the stipulation in payment of automobile tires purchased from the  latter’s  store.    It  purported  to  have  been  issued  by  Pangasinan Transportation  Company.    The  said  checks  were  indorsed  at  the  back  by said unknown persons, the Motor company believing at that time that the signatures  contained  therein  were  genuine.    The  checks  were  later deposited  with  the  company’s  account  in  National  City  Bank  of  NY.    The said checks were consequently cleared and PNB credited National City Bank with  the  amounts.    Thereafter,  PNB  discovered  that  the  signatures  were forged  and  it  demanded  the  reimbursement  of  the  amounts  for  which  it credited the other bank.   


A  check  is  a  bill  of  exchange  payable  on  demand  and  only  the  rules governing  bills  of  exchanges  payable  on  demand  are  applicable  to  it.    in view of the fact that acceptance is a step necessary insofar as negotiable instruments  are  concerned,  it  follows  that  the  provisions  relative  to acceptance   are   without   application   to   checks.      Acceptance   implies subsequent negotiation of the instrument, which is not true in the case of checks  because  from  the  moment  it  is  paid,  it  is  withdrawn  from circulation.  When the drawee banks cashes or pays a check, the cycle of negotiation  is  terminated  and  it  is  illogical  thereafter  to  speak  of subsequent holders who can invoke the warrant against the drawee.  
Further, in determining the relative rights of a drawee who under a mistake of fact, has paid, a holder who has received such payment, upon a check to which the name of the drawer has been forged, it is only  fair to consider the question of diligence and negligence of the parties in respect thereto.  The  responsibility  of  the  drawee  who  pays  a  forged  check,  for  the genuineness of the drawer’s signature is absolute only in favor of one who has not, by his own fault or negligence, contributed to the success of the
fraud or to mislead the drawee.  
According  to  the  undisputed  facts,  National  City  Bank  in  purchasing  the papers in question from unknown persons without making any inquiry as to the identity and authority of said persons negotiating and indorsing them, acted negligently and contributed to the constructive loss of PNB in failing to detect the forgery.  Under the circumstances of the case, if the appellee bank  is  allowed  to  recover,  there  will  be  no  change  in  position  as  to  the injury or prejudice of the appellant.