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Insular Drug V. PNB

Insular Drug Co. filed a case against Philippine National Bank (PNB) to recover the amount that U.E. Foerster, one of Insular Drug's salesmen, deposited in his personal account at PNB instead of Insular Drug's account. Foerster deposited 132 checks worth 18,000 pesos payable to Insular Drug into his personal account at PNB. PNB was found liable because Foerster did not have the implied authority as a salesman to endorse checks meant for Insular Drug, and PNB permitted the endorsement and withdrawals from Foerster's personal account without authority from Insular Drug. PNB did not prove that Insular Drug did not suffer any loss from

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69 views1 page

Insular Drug V. PNB

Insular Drug Co. filed a case against Philippine National Bank (PNB) to recover the amount that U.E. Foerster, one of Insular Drug's salesmen, deposited in his personal account at PNB instead of Insular Drug's account. Foerster deposited 132 checks worth 18,000 pesos payable to Insular Drug into his personal account at PNB. PNB was found liable because Foerster did not have the implied authority as a salesman to endorse checks meant for Insular Drug, and PNB permitted the endorsement and withdrawals from Foerster's personal account without authority from Insular Drug. PNB did not prove that Insular Drug did not suffer any loss from

Uploaded by

roland deschain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Insular Drug V.

PNB

The Insular Drug Co., Inc., is a Philippine corporation with offices in the City of Manila. U.E. Foerster was formerly a salesman of drug
company for the Islands of Panay and Negros. Foerster also acted as a collector for the company. He was instructed to take the checks
which came to his hands for the drug company to the Iloilo branch of the Chartered Bank of India, Australia and China and deposit the
amounts to the credit of the drug company. Instead, Foerster deposited checks, with PNB.

The checks were in that bank placed in the personal account of Foerster. After the indorsement on the checks was written "Received
payment prior indorsement guaranteed by Philippine National bank, Iloilo Branch, Angel Padilla, Manager." The indorsement on the checks
took various forms always signed by Forester and/or his wife and stenographer, Carmen. As a consequence of the indorsements on checks
the amounts therein stated were subsequently withdrawn by the Sps. Foerster.

This came to the knowledge of the company and upon investigation, the salesman committed suicide thereafter. Insular Drugs
filed an action against the bank, to credit to its account the amount Foerster and his wife took from them (132 checks P18k).

issue

WON PNB is liable for the loss suffered by Insular. YES.

ratio

PNB avers that Insular did not suffer loss. While evidence of loss is not very clear, PNB did not chose not to present evidence during trial.
The next point relied upon by the bank, to the effect that Foerster had implied authority to indorse all checks made out in the name of the
Insular Drug Co., Inc., has even less force. Not only did the bank permit Foerster to indorse checks and then place them to his personal
account, but it went farther and permitted Foerster's wife and clerk to indorse the checks.

The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. A salesman with authority to
collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking
checks made payable to a corporation, which can act only by agent does so at his peril, and must same by the consequences if the agent
who indorses the same is without authority.

The fact that bank acted in good faith does not relieve it from responsibility; that no proof was adduced, admitting that Foerster had right to
indorse the checks, indicative of right of his wife and clerk to do the same , and that the checks drawn on the Bank of the Philippine Islands
can not be differentiated from those drawn on the Philippine National Bank because of the indorsement by the latter.

The bank could tell by the checks themselves that the money belonged to the Insular Drug Co., Inc., and not to Foerster or his wife or his
clerk. When the bank credited those checks to the personal account of Foerster and permitted Foerster and his wife to make withdrawals
without there being made authority from the drug company to do so, the bank made itself responsible to the drug company for the amounts
represented by the checks. The bank could relieve itself from responsibility by pleading and proving that after the money was withdrawn
from the bank it passed to the drug company which thus suffered no loss, but the bank has not done so. Much more could be said about this
case, but it suffices to state in conclusion that bank will have to

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