G.R. No. L-15894 - Republic vs. Equitable Banking Corporation

The Republic of the Philippines (the Government), represented by the Treasurer and the Bureau of the Treasury, is the plaintiff and appellant.
The Equitable Banking Corporation is the defendant and appellee in G. R. No. L-15894.
The Bank of the Philippine Islands (PI Bank) is the defendant and appellee in G. R. No. L-15895.
Third-party complaints were filed by, among others, depositors such as Robert Wong, Lu Chiu Kau, and Chung Ching in the case involving the Equitable Bank, and by the Corporacion de los Padres Dominicos (the Corporacion) in the case involving the PI Bank.

The Government sought to recover funds paid for treasury warrants allegedly executed on genuine government forms but carrying forged signatures of officials (the drawing officer and the representative of the Auditor General).
Two sets of claims were made:

In G. R. No. L-15894 against the Equitable Bank for P17,100.00 representing four treasury warrants.
In G. R. No. L-15895 against the PI Bank for P342,767.63 representing twenty-four treasury warrants.

The warrants, though executed on genuine government forms, bore forged signatures which ultimately led to the Treasury demanding their return and a reversal of payment.

The Corporacion, having acquired twenty-four treasury warrants through its former trusted employee, Jacinto Carranza, deposited the warrants with the PI Bank under the condition of “subject to collection only.”
The bank subsequently cleared the warrants through the Clearing Office of the Central Bank, which operated under the “24‑hour clearing house rule.”
Upon clearing, the PI Bank credited the proceeds to the Corporacion’s account.
The Corporacion later withdrew funds and made payments to Jacinto Carranza.

Four treasury warrants were deposited by known depositors.
The Equitable Bank, after clearing these through the Clearing Office, collected the amounts from the Treasurer and credited the corresponding funds to the depositors’ accounts.

On December 23, 1952, three warrants were returned to the Central Bank with a demand that their value be charged against the PI Bank’s account.
Within the days that followed, two additional warrants and subsequently, on January 16, 1953, the remaining nineteen warrants were similarly returned by the Treasury for the same reason.

The “24‑hour clearing house rule” was embodied in Section 4, subsection (c) of Circular No. 9 of the Central Bank (amended by subsequent correspondence).
This rule governed the processing and return of items, including treasury warrants, indicating that any returned items must be reprocessed within prescribed periods.
The Government contended that it was not bound by this rule on the basis that the Treasury is not a bank and due to the Treasurer’s objections regarding the term “24‑hour.”
However, evidence showed that the Treasury had agreed to clear its clearable items through the Clearing Office, thus making the rule applicable.

Despite warnings about the forged nature of the signatures on the warrants, the Treasury cleared and paid the amounts to the depositors.
The PI Bank and Equitable Bank acted in reliance upon the Treasury’s clearance and the established clearing procedures, thereby crediting the respective depositors and honoring their checks.
The negligence on the part of the Treasury was underscored by the fact that the amounts involved were significant and exceeded the authority of certain Treasury officials to approve.
Ultimately, the loss from the forged warrants was imputed primarily to the actions and omissions of the Treasury.

Whether the failure of the Treasury to detect and prevent the clearance of forged treasury warrants constitutes actionable negligence on its part.
Whether such negligence in processing warrants, despite the operation of the “24‑hour clearing house rule,” exempts the PI Bank and Equitable Bank from liability for the subsequent payment made to the depositors.

Whether the Treasury, despite its objections, was bound by the Clearing Office rule applicable to banks and other entities clearing items via the Central Bank.
The extent to which the rule obligates the Treasury, and consequently protects the banks, once the warrants have been cleared and paid.

Whether the delay in the Treasury’s discovery and subsequent notification of the forgery adversely affected the rights of the banks to recover the amounts paid out.
Whether such unreasonable delay, if proven, bars the banks from seeking reimbursement for the amounts paid on forged documents.