Professional Documents
Culture Documents
Nego Cases Batch 3
Nego Cases Batch 3
SAN MIGUEL CORPORATION, G.R. No. 167567 value of the products purchased on credit before the same were
Petitioner, released to him. Said checks were returned to Puzon when the
transactions covered by these checks were paid or settled in full.
Present:
On December 31, 2000, Puzon purchased products on credit
CORONA, C. J., Chairperson,
amounting to P11,820,327 for which he issued, and gave to SMC,
- versus - CARPIO MORALES,⃰
Bank of the Philippine Islands (BPI) Check Nos. 27904
VELASCO, JR.,
DEL CASTILLO, and (for P309,500.00) and 27903 (for P11,510,827.00) to cover the
PEREZ, JJ. said transaction.
BARTOLOME PUZON, JR., Promulgated: On January 23, 2001, Puzon, together with his accountant, visited
Respondent. September 22, 2010 the SMC Sales Office in Paraaque City to reconcile his account
x-------------------------------------------------- with SMC. During that visit Puzon allegedly requested to see BPI
-----------------x
Check No. 17657. However, when he got hold of BPI Check No.
DECISION 27903 which was attached to a bond paper together with BPI
Check No. 17657 he allegedly immediately left the office with his
DEL CASTILLO, J.:
accountant, bringing the checks with them.
Factual Antecedents
Rulings of the Prosecutor and the Secretary of
Department of Justice (DOJ)
Respondent Bartolome V. Puzon, Jr., (Puzon) owner of Bartenmyk
Enterprises, was a dealer of beer products of petitioner San
The investigating prosecutor, Elizabeth Yu Guray found that
Miguel Corporation (SMC) for Paraaque City.Puzon purchased SMC
the relationship between [SMC] and [Puzon] appears to be one of
products on credit. To ensure payment and as a business practice,
credit or creditor-debtor relationship.The problem lies in the
reconciliation of accounts and the non-payment of beer empties
which cannot give rise to a criminal prosecution for theft.[3] Thus,
The motion for reconsideration of SMC was denied. Hence, the
in her July 31, 2001 Resolution,[4] she recommended the dismissal
present petition.
of
Issues
the case for lack of evidence. SMC appealed.
SO ORDERED.[7] IV
WHETHER X X X SMC HAD ESTABLISHED PROBABLE At the outset we find that as pointed out by Puzon, SMC raises
CAUSE TO JUSTIFY THE INDICTMENT OF PUZON FOR
THE CRIME OF THEFT PURSUANT TO ART. 308 OF questions of fact. The resolution of the first issue raised by SMC of
THE REVISED PENAL CODE.[8] whether respondent stole the subject check, which calls for the
Court to determine whether respondent is guilty of a felony, first
Petitioner's Arguments requires that the facts be duly established in the proper forum
and in accord with the proper procedure. This issue cannot be
SMC contends that Puzon was positively identified by its resolved based on mere allegations of facts and affidavits. The
employees to have taken the subject postdated checks. It also same is true with the second issue raised by petitioner, to wit:
contends that ownership of the checks was transferred to it whether the checks issued by Puzon were payments for his
because these were issued, not merely as security but were, in purchases or were intended merely as security to ensure
payment of Puzons purchases. SMC points out that it has payment. These issues cannot be properly resolved in the present
established more than sufficient probable cause to justify the petition for review on certiorari which is rooted merely on the
indictment of Puzon for the crime of Theft. resolution of the prosecutor finding no probable cause for the
filing of an information for theft.
Respondents Arguments
The third issue raised by petitioner, on the other hand, would
On the other hand, Puzon contends that SMC raises questions of entail venturing into constitutional matters for a complete
fact that are beyond the province of an appeal on certiorari. He resolution. This route is unnecessary in the present case
also insists that there is no probable cause to charge him with considering that the main matter for resolution here only concerns
theft because the subject checks were issued only as security and grave abuse of discretion and the existence of probable cause for
he therefore retained ownership of the same. theft, which at this point is more properly resolved through
another more clear cut route.
Our Ruling
Probable Cause for Theft
Preliminary Matters will engender a well-founded belief that a crime has been
committed and that the respondent is probably guilty thereof and
should be held for trial.[9] On the fine points of the determination
of probable cause, Reyes v. Pearlbank Securities, Inc. In the present case, we are also not sufficiently convinced to
[10]
comprehensively elaborated that: deviate from the general rule of non-interference. Indeed the CA
did not err in dismissing the petition for certiorari before it, absent
The determination of [the existence or absence of grave abuse of discretion on the part of the DOJ Secretary in not
probable cause] lies within the discretion of the
prosecuting officers after conducting a preliminary finding probable cause against Puzon for theft.
investigation upon complaint of an offended party.
Thus, the decision whether to dismiss a complaint
or not is dependent upon the sound discretion of The Revised Penal Code provides:
the prosecuting fiscal. He may dismiss the
complaint forthwith, if he finds the charge Art. 308. Who are liable for theft. - Theft is
insufficient in form or substance or without any committed by any person who, with intent to gain
ground. Or he may proceed with the investigation if but without violence against, or intimidation of
the complaint in his view is sufficient and in proper persons nor force upon things, shall take personal
form. To emphasize, the determination of probable property of another without the latters consent.
cause for the filing of information in court is an
executive function, one that properly pertains at the xxxx
first instance to the public prosecutor and,
ultimately, to the Secretary of Justice, who may
direct the filing of the corresponding information or
[T]he essential elements of the crime of theft are the following: (1)
move for the dismissal of the case. Ultimately,
whether or not a complaint will be dismissed is that there be a taking of personal property; (2) that said property
dependent on the sound discretion of the Secretary belongs to another; (3) that the taking be done with intent to gain;
of Justice. And unless made with grave abuse of
discretion, findings of the Secretary of Justice are (4) that the taking be done without the consent of the owner; and
not subject to review. (5) that the taking be accomplished without the use of violence or
intimidation against persons or force upon things.[11]
For this reason, the Court considers it sound judicial
policy to refrain from interfering in the conduct of
preliminary investigations and to leave the Considering that the second element is that the thing
Department of Justice ample latitude of discretion in
the determination of what constitutes sufficient taken belongs to another, it is relevant to determine whether
evidence to establish probable cause for the ownership of the subject check was transferred to petitioner.On
prosecution of supposed offenders. Consistent with
this point the Negotiable Instruments Law provides:
this policy, courts do not reverse the Secretary of
Justice's findings and conclusions on the matter of
probable cause except in clear cases of grave abuse Sec. 12. Antedated and postdated The instrument
of discretion. is not invalid for the reason only that it is antedated
or postdated, provided this is not done for an illegal
or fraudulent purpose. The person to whom an
instrument so dated is delivered acquires the title
thereto as of the date of delivery. (Underscoring payment was not used instead the terms covered and cover were
supplied.)
used.
Note however that delivery as the term is used in the Although the petitioner's witness, Gregorio L. Joven III, states in
aforementioned provision means that the party delivering did so paragraph 6 of his affidavit that the check was given in payment
[12]
for the purpose of giving effect thereto. Otherwise, it cannot be of the obligation of Puzon, the same is contradicted by his
said that there has been delivery of the negotiable statements in paragraph 4, where he states that As a standard
instrument. Once there is delivery, the person to whom the company operating procedure, all beer purchases by dealers on
instrument is delivered gets the title to the instrument completely credit shall be covered by postdated checks equivalent to the
and irrevocably. value of the beer products purchased; in paragraph 9 where he
states that the transaction covered by the said check had not yet
If the subject check was given by Puzon to SMC in payment of the been paid for, and in paragraph 8 which clearly shows that partial
obligation, the purpose of giving effect to the instrument is payment is expected to be made by the return of beer empties,
evident thus title to or ownership of the check was transferred and not by the deposit or encashment of the check.Clearly the
upon delivery. However, if the check was not given as payment, term cover was not meant to be used interchangeably with
there being no intent to give effect to the instrument, then payment.
ownership of the check was not transferred to SMC.
When taken in conjunction with the counter-affidavit of Puzon
The evidence of SMC failed to establish that the check was given where he states that As the [liquid beer] contents are paid for,
in payment of the obligation of Puzon. There was no provisional SMC return[s] to me the corresponding PDCs or request[s] me to
receipt or official receipt issued for the amount of the check. What replace them with whatever was the unpaid balance.[15] it
was issued was a receipt for the document, a POSTDATED CHECK becomes clear that both parties did not intend for the check
[13]
SLIP. to pay for the beer products. The evidence proves that the check
was accepted, not as payment, but in accordance with the long-
Furthermore, the petitioner's demand letter sent to respondent standing policy of SMC to require its dealers to issue postdated
states As per company policies on receivables, all issuances are to checks to cover its receivables. The check was only meant
be covered by post-dated checks. However, you have deviated to cover the transaction and in the meantime Puzon was to pay
from this policy by forcibly taking away the check you have issued for the transaction by some other means other than the
[14]
to us to cover the December issuance. Notably, the term check. This being so, title to the check did not transfer to SMC; it
remained with Puzon. The second element of the felony of theft
was therefore not established. Petitioner was not able to show
that Puzon took a check that belonged to another. Hence, the
prosecutor and the DOJ were correct in finding no probable cause
for theft.
SO ORDERED.
FIRST DIVISION (later PHILIPPINE
COMMERCIAL
HI-CEMENT CORPORATION, G.R. No. INTERNATIONAL BANK
132403 and now, EQUITABLE-
Petitioner, PCI
BANK),Respondent.
-versus- Promulgated:
September 28,
INSULAR BANK OF 2007
ASIA AND AMERICA
(later PHILIPPINE
COMMERCIAL x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INTERNATIONAL BANK -----------x
and now, EQUITABLE-
PCI
BANK) DECISION
Respondent.
CORONA, J.:
x----------------------x
E.T. HENRY & CO. and G.R. At bar are consolidated petitions assailing the decision of the
No. 132419
SPOUSES ENRIQUE Court of Appeals (CA) dated January 21, 1998 in CA-G.R. CV
TAN
and LILIA TAN, No. 31600 entitled Insular Bank of Asia and America [now
Petitioners, Present:
Philippine Commercial International Bank/(PCIB)] v. E.T.
PUNO, C.J., Chairperso
n, Henry & Co., et al.[1]
SANDOVAL-
GUTIERREZ,
- v e r s u s - The antecedent facts follow.
CORONA,
AZCUNA
and Petitioners Enrique Tan and Lilia Tan (spouses Tan)
GARCIA, J
J. were the controlling stockholders of E.T. Henry & Co., Inc.
customers were petitioner Hi-Cement Corporation (Hi- the checks of Riverside and Kanebo.[6]
Sometime in 1979, respondent Insular Bank of Asia checks), Riverside and Kanebo.[11]
its general manager and treasurer were not authorized to which read:
issue the postdated crossed checks in E.T. Henry's favor; (2) WHEREFORE, in view of the foregoing,
and as a consequence of the preponderance of
the deed of assignment purportedly executed by Hi-Cement evidence, this Court hereby renders judgment in
favor of [respondent] and against [E.T. Henry,
assigning them to respondent only bore the conformity of its spouses Tan, Hi-Cement, Riverside and Kanebo],
to wit:
treasurer and (3) respondent was not a holder in due course
as it should not have discounted them for being crossed 1. Ordering [E.T. Henry, spouses Tan, Hi-
Cement, Riverside and Kanebo], jointly and
checks.[13] severally, to pay [respondent] damages
represented by the face value of the
In their answer (with counterclaim against respondent and postdated checks as follows:
judicial sale of the mortgaged Sucat property was void due to 2. Ordering [E.T. Henry] and/or [spouses Tan]
to pay to [respondent] the sum
gross inadequacy of the bid price [15] and (3) their loans were of P4,900,805.00 plus accrued interests,
charges, penalties until fully paid;
subjected to a usurious interest rate of 21% p.a.
3. Ordering [E.T. Henry and spouses Tan] to
pay [respondent] the sum of P1,661,266.51
For their part, Riverside and Kanebo sought the plus interests, charges, and penalties until
fully paid;
dismissal of the case against them, arguing that they were
4. Ordering [E.T. Henry, spouses Tan, Hi-
not privy to the re-discounting arrangement between Cement, Riverside and Kanebo] to pay
[respondent] [a]ttorneys fees and expenses
respondent and E.T. Henry. of litigation in the amount of P200,000.00
and pay the cost of this suit.[16]
SO ORDERED.[17] factual findings of the trial court, specially when affirmed by
Only petitioners appealed the decision to the CA which was a misapprehension of facts or when the inference drawn
affirmed it in toto. Hence, these petitions. from the facts was manifestly mistaken.[21] This case falls
for the postdated crossed checks because (1) it did not AUTHORITY
OF HI-
authorize their issuance; (2) respondent was not a holder in CEMENTS
GENERAL
due course and (3) there was no basis for the lower courts MANAGER AN
D TREASURER
holding that it was solidarily liable for the face value of TO ISSUE
THE POSTDAT
Riversides and Kanebos checks. [18] ED CROSSEDC
HECKS
In G.R. No. 132419, on the other hand, E.T. Henry and the
spouses Tan essentially contend that the lower courts erred Both the trial court and the CA concluded that Hi-
in: (1) applying the doctrine of piercing the veil of the Cement authorized its general manager and treasurer to
corporate entity to make the spouses Tan solidarily liable with issue the subject postdated crossed checks. They both held
E.T. Henry; (2) not ruling on their cross-claims and that Hi-Cement was already estopped from denying such
counterclaims, and (3) not declaring the foreclosure of E.T. authority since it never objected to the signatories' issuance
Henry's Sucat property as void.[19] of all previous checks to E.T. Henry which the latter, in turn,
(A) G.R. 132403 was able to re-discount with respondent.
fact, respondent could not be considered a holder in due is not a holder in due course. In the case at bar, the last two
E.T. Henry, Hi-Cement and its treasurer[26] again engaged in a crossed and bore restrictions that they were for deposit to
legal scuffle over four postdated crossed checks, we held that payee's account only; hence, they could not be further
Atrium (with which the checks were re-discounted) was not a negotiated to it. The records likewise reveal that respondent
holder in due course. In that case, E.T. Henry was the payee completely disregarded a telling sign of irregularity in the re-
of four Hi-Cement postdated checks discounting of the checks when the general manager did not
which it endorsed to Atrium. When the latter presented the acquiesce to it as only the treasurer's signature appeared on
crossed checks to the drawee bank, Hi-Cement the deed of assignment. As a banking institution, it behooved
stopped payment.[27] We held that Atrium was not a holder in respondent to act with extraordinary diligence
In the instant case, the checks were interest, thus, it was not expected to be careless and
crossed and specifically indorsed for deposit to
payees account only. From the beginning, Atrium negligent, specially so where the checks it dealt with were
was aware of the fact that the checks were all
for deposit only to payees account, meaning E.T. crossed. In Bataan Cigar and Cigarette Factory, Inc.,[29] we
Henry. Clearly, then, Atrium could not be
ruled:
considered a holder in due course.
faith when it accepted and discounted Hi-Cements postdated It is then settled that crossing of checks
should put the holder on inquiry and upon
crossed checks from E.T. Henry (as payee therein) fails to him devolves the duty to ascertain the
indorsers title to the check or the nature of
convince us. Good faith becomes inconsequential amidst his possession. Failing in this respect, the
holder is declared guilty of gross
proof of respondent's grossly negligent conduct in dealing negligence amounting to legal absence of
good faithand as such[,] the consensus of
with the subject checks. authority is to the effect that the holder of the
check is not a holder in due course. (emphasis
supplied)
The next query is whether Hi-Cement can still be made We note, however, that in the two aforementioned cases, we
liable for the checks. We answer in the negative. made it clear that the NIL does not absolutely bar a holder
E.T. Henry and/or the spouses Tan for the respective values of DOCTRINE OF PIERCING THE
VEIL OF CORPORATE ENTITY
their checks.
Furthermore, solidary liability cannot be presumed but In their petition, E.T. Henry and the spouses Tan argue that
must be established by law or contract. Neither is present the lower courts erred in applying the piercing the veil of
here. Articles 1207 and 1208 of the Civil Code provide: corporate entity doctrine to their case. They claim that both
Art. 1207. The concurrence of two or the trial and appellate courts failed to cite the reasons why
more debtors in one and the same obligation
does not imply that each one of the former has the doctrine was relevant to them.
a right to demand, or that each one of the latter
is bound to render, entire compliance with the
presentation. There is solidary liability only We agree with petitioners E.T. Henry and the spouses Tan in
when the obligation expressly so states, or
when the obligation requires this respect.
solidarity. (emphasis supplied)
At any rate, the issue has become moot in view of our ruling piercing the veil of corporate entity.
(B) G.R. No. 132419 corporate veil should not have been pierced at all.
Second, the mere ownership by a single stockholder or
First, the trial court failed to provide a clear ground
by another corporation of all or nearly all of the capital stock
why the doctrine was used. It merely stated that it agreed
of a corporation is not of itself sufficient ground for
with respondents arguments but did not explain why the
disregarding the separate corporate personality. [38] For this
doctrine was relevant to petitioner E.T. Henry's and the
ground to stand in this case, there must be proof that the
spouses Tans case. On the other hand, the CA held:
spouses Tan: (1) had control or complete domination of E.T.
It appears that spouses Tan are
controlling stockholders of E.T. Henry & Co., Inc. Henrys finances and that the latter had no separate
as well as its authorized signatories. The
business of the corporation was conducted existence with respect to the act complained of; (2) used
solely for the benefit of the spouses Tan who
such control to commit fraud or wrong and (3) the control
colluded with [Hi-Cement] in defrauding
[respondent]. As the lower court cited[I]t is a was the proximate cause of the loss or injury complained of
settled law in this and other jurisdictions that
when the corporation is a mere alter ego of a by respondent.[39] The records of this case do not show that
person, same being true when the corporation is
controlled, and its affairs are so conducted to these elements were present.
make it merely an instrumentality, agency or
conduit of another.[35]
INADEQUACY OF
THE BID PRICE
TO ANNUL
Similarly, the CA left a gaping hole by failing to provide FORECLOSURE
PROCEEDING
the basis for its ruling that E.T. Henry and the spouses Tan
foreclosure sale but merely alleged a disparity in the bid Second, E.T. Henry and the spouses Tan filed the
price and the propertys fair market value. counterclaim against respondent on the basis of an alleged
upon their counterclaim against respondent or cross-claims Incidentally, the petition in G.R. No. 132419 posed no contest
against Hi-Cement, Riverside and Kanebo. They ask us now on the lower courts ruling on E.T. Henrys and the spouses
to hold these parties liable on the basis of said claims. We Tans solidary liability with Riverside and Kanebo vis-a-vis
the solidarity liability arising from the checks of Riverside and of litigation.
WHEREFORE, the assailed decision of the Court of Appeals and Lilia Tan.
the following:
Let the records of this case be remanded to the trial court for
As to the third-party complaint, third- (a) That it is complete and regular upon its
party defendants Spouses Rodrigo and Marissa face;
Cawili are hereby ordered to indemnify
defendant Bank of the Philippine Islands such (b) That he became the holder of it before it
amount(s) adjudged and actually paid by it to was overdue and without notice that it had
herein plaintiff Gregorio C. Roxas, including the been previously dishonored, if such was
costs of suit. the fact;
Petitioner ascribes to the Court of Appeals the element of value is not present, therefore, respondent could
following errors: (1) in finding that respondent is a holder in not be a holder in due course.
In Walker Rubber Corp. v. Nederlandsch Indische In view of the above pronouncements, petitioner bank
& Handelsbank, N.V. and South Sea Surety & Insurance Co., became liable to respondent from the moment it issued the
[2]
Inc., this Court ruled that value in general terms may be cashiers check. Having been accepted by respondent, subject
some right, interest, profit or benefit to the party who makes to no condition whatsoever, petitioner should have paid the
the contract or some forbearance, detriment, loan, same upon presentment by the former.
responsibility, etc. on the other side. Here, there is no dispute
that respondent received Rodrigo Cawilis cashiers check as
payment for the formers vegetable oil. The fact that it was WHEREFORE, the petition is DENIED. The assailed Decision
Rodrigo who purchased the cashiers check of the Court of Appeals (Fourth Division) in CA-G.R. CV No.
from petitioner will not affect respondents status as a holder 67980 is AFFIRMED. Costs against petitioner.
for value since the check was delivered to him as payment
for the vegetable oil he sold to spouses Cawili. Verily, the
SO ORDERED.
Court of Appeals did not err in concluding that respondent is
a holder in due course of the cashiers check.
SO ORDERED.
Petitioner,
Present:
The facts are undisputed.
charge all the respondents jointly and severally liable with Rule 131 of the Rules of Court, it is presumed that a person
G.G. Sportswear since the respondents held themselves takes ordinary care of his concerns.Hence, the natural
liable upon demand in case the instrument was dishonored presumption is that one does not sign a document without
and on the surety, they even waived notice of dishonor as first informing himself of its contents and consequences. Said
stipulated in their Letters of Guarantee. presumption acquires greater force in the case at bar where
not only one document but several documents were
As to respondent Alcron, it is bound by the Letter of Guaranty executed at different times and at different places by the
executed by its representative Hans-Joachim Schloer. As to herein respondent guarantors and sureties. [20]
the other respondents, not to be overlooked is the fact that,
the Suretyship Agreement they executed, expressly
In this case, having affixed their consenting signatures
contemplated a solidary obligation, providing as it did that
in several documents executed at different times, it is safe to
the sureties hereby guarantee jointly and severally the
presume that they had full knowledge of its terms and SO ORDERED.
conditions, hence, they are precluded from asserting
ignorance of the legal effects of the undertaking they
assumed thereunder. It is also presumed that private
[21]
transactions have been fair and regular and that he who
alleges has the burden of proving his allegation with the
requisite quantum of evidence.[22] But here the records of this
case do not support their claims.
Last, we find the defense of laches unavailing. The question
of laches is addressed to the sound discretion of the court
and since laches is an equitable doctrine, its application is
controlled by equitable considerations.[23] Respondents,
however, failed to show that the collection suit against them
as sureties was inequitable. Remedies in equity address only
situations tainted with inequity, not those expressly governed
by statutes.[24]
The two (2) checks had similar entries (1) The sum of Two Hundred Twenty
with similar infirmities and irregularities. On the Thousand (P220,000.00) Pesos, with legal
space where the name of the payee should be interest to be computed from date of the filing
indicated (Pay To The Order Of) the following 2- of the herein complaint;
line entries were instead typewritten: on the
upper line was the word CASH while the lower (2) The sum of Twenty Thousand
line had the following typewritten words, viz: (P20,000.00) Pesos by way of attorneys fees;
ONE HUNDRED TEN THOUSAND PESOS
(3) The sum of Ten Thousand
ONLY. Despite the highly irregular entries on the
face of the checks, defendant-appellant bank, (P10,000.00) Pesos for litigation expenses, and
without as much as verifying and/or confirming (4) To pay the costs of suit.
the legitimacy of the checks considering the
substantial amount involved and the obvious
infirmity/defect of the checks on their faces,
encashed said checks. A verification process, SO ORDERED.[5]
even by was of a telephone call to PRCI office,
would have taken less than ten (10) minutes. Petitioner appealed the aforesaid trial court Decision to
But this was not done by BA. Investigation the CA which, however, affirmed said decision in toto in its
conducted by plaintiff-appellee corporation
yielded the fact that there was no transaction July 16, 2001 Decision. Petitioners Motion for Reconsideration
involving PRCI that call for the payment of of the CA Decision was subsequently denied on September
P220,000.00 to anyone. The checks appeared to
28, 2001.
have come into the hands of an employee of
Petitioner now comes before this Court arguing that: applicable ground under Article 2208 of
the Civil Code.
The case originated from an action for collection of sum of 7-4535700-6 8-24-81 Antonio Lisan 95,100.00
money filed on 16 March 1982 by the International Corporate
Bank, Inc.4 ("petitioner") against the Philippine National Bank Ace Enterprises,
7-4697902-2 9-18-81 96,000.00
("respondent"). The case was raffled to the then Court of First Inc.
Instance (CFI) of Manila, Branch 6. The complaint was
amended on 19 March 1982. The case was eventually re- Golden City
7-4697925-6 9-18-81 93,030.00
raffled to the Regional Trial Court of Manila, Branch 52 ("trial Trading
court").
10-02- Wintrade
7-4697011-6 90,960.00
The Ministry of Education and Culture issued 15 81 Marketing
checks5 drawn against respondent which petitioner accepted
for deposit on various dates. The checks are as follows: 10-02-
7-4697909-4 ABC Trading, Inc. 99,300.00
81
7-3694621-4 7-23-81 CA 0060 02360 3 The trial court ruled that respondent is expected to use
reasonable business practices in accepting and paying the
7-3694609-6 7-28-81 CA 0060 02360 3 checks presented to it. Thus, respondent cannot be faulted
for the delay in clearing the checks considering the ingenuity
in which the alterations were effected. The trial court
7-3666224-4 8-4-81 CA 0060 02360 3
observed that there was no attempt from petitioner to verify
the status of the checks before petitioner paid the value of
7-3528348-4 8-11-81 CA 0060 02360 3 the checks or allowed withdrawal of the deposits. According
to the trial court, petitioner, as collecting bank, could have
7-3666225-5 8-11-81 SA 0061 32331 7 inquired by telephone from respondent, as drawee bank,
about the status of the checks before paying their value.
7-3688945-6 8-17-81 CA 0060 30982 5 Since the immediate cause of petitioner’s loss was the lack of
caution of its personnel, the trial court held that petitioner is
7-4535674-1 8-26-81 CA 0060 02360 3 not entitled to recover the value of the checks from
respondent.
7-4535675-2 8-27-81 CA 0060 02360 3
The dispositive portion of the trial court’s Decision reads:
7-4535699-5 8-31-81 CA 0060 30982 5
WHEREFORE, judgment is hereby rendered dismissing
7-4535700-6 8-24-81 SA 0061 32331 7 both the complaint and the counterclaim. Costs shall,
however be assessed against the plaintiff.
7-4697902-2 9-23-81 CA 0060 02360 3
SO ORDERED.7
7-4697925-6 9-23-81 CA 0060 30982 5
Petitioner appealed the trial court’s Decision before the Court
7-4697011-6 10-7-81 CA 0060 02360 3 of Appeals.
Hence, the recourse to this Court. Alteration of Serial Number Not Material
The Issues The alterations in the checks were made on their serial
numbers.
Petitioner raises the following issues in its Memorandum:
Sections 124 and 125 of Act No. 2031, otherwise known as
1. Whether the checks were materially altered; the Negotiable Instruments Law, provide:
2. Whether respondent was negligent in failing to SEC. 124. Alteration of instrument; effect of. ― Where
recognize within a reasonable period the altered a negotiable instrument is materially altered without
checks and in not returning the checks within the the assent of all parties liable thereon, it is avoided,
period; and except as against a party who has himself made,
authorized, or assented to the alteration and
subsequent indorsers.
But when an instrument has been materially altered Section 1 of the Negotiable Instruments Law provides:
and is in the hands of a holder in due course, not a
party to the alteration, he may enforce payment Section 1. ― Form of negotiable instruments. An
thereof according to its original tenor. instrument to be negotiable must conform to the
following requirements:
SEC. 125. What constitutes a material alteration. ―
Any alteration which changes: (a) It must be in writing and signed by the
maker or drawer;
(a) The date;
(b) Must contain an unconditional promise or
(b) The sum payable, either for principal or order to pay a sum certain in money;
interest;
(c) Must be payable on demand, or at a fixed or
(c) The time or place of payment; determinable future time;
(d) The number or the relations of the parties; (d) Must be payable to order or to bearer; and
(e) The medium or currency in which payment is (e) Where the instrument is addressed to a
to be made; drawee, he must be named or otherwise
indicated therein with reasonable certainty.
or which adds a place of payment where no place of
payment is specified, or any other change or addition In his book entitled "Pandect of Commercial Law and
which alters the effect of the instrument in any Jurisprudence," Justice Jose C. Vitug opines that "an
respect, is a material alteration. innocent alteration (generally, changes on items other
than those required to be stated under Sec. 1, N.I.L.)
The question on whether an alteration of the serial number of and spoliation (alterations done by a stranger) will not
a check is a material alteration under the Negotiable avoid the instrument, but the holder may enforce it
Instruments Law is already a settled matter. In Philippine only according to its original tenor.
National Bank v. Court of Appeals, this Court ruled that the
alteration on the serial number of a check is not a material xxxx
alteration. Thus:
The case at the bench is unique in the sense that what
An alteration is said to be material if it alters the effect was altered is the serial number of the check in
of the instrument. It means an unauthorized change in question, an item which, it can readily be observed, is
an instrument that purports to modify in any respect not an essential requisite for negotiability under
the obligation of a party or an unauthorized addition of Section 1 of the Negotiable Instruments Law. The
words or numbers or other change to an incomplete aforementioned alteration did not change the relations
instrument relating to the obligation of a party. In other between the parties. The name of the drawer and the
words, a material alteration is one which changes the drawee were not altered. The intended payee was the
items which are required to be stated under Section 1 same. The sum of money due to the payee remained
of the Negotiable Instrument[s] Law. the same. x x x
xxxx reconsideration was filed late. Despite its late filing, the Court
of Appeals resolved to admit the motion for reconsideration
The check’s serial number is not the sole indication of "in the interest of substantial justice." 20
its origin. As succinctly found by the Court of Appeals,
the name of the government agency which issued the There are instances when rules of procedure are relaxed in
subject check was prominently printed therein. The the interest of justice. However, in this case, respondent did
check’s issuer was therefore sufficiently identified, not proffer any explanation for the late filing of the motion for
rendering the referral to the serial number redundant reconsideration. Instead, there was a deliberate attempt to
and inconsequential. x x x deceive the Court of Appeals by claiming that the copy of the
10 October 1991 Decision was received on 22 October 1991
xxxx instead of on 16 October 1991. We find no justification for the
posture taken by the Court of Appeals in admitting the
Petitioner, thus cannot refuse to accept the check in motion for reconsideration. Thus, the late filing of the motion
question on the ground that the serial number was for reconsideration rendered the 10 October 1991 Decision
altered, the same being an immaterial or innocent final and executory.
one.17
The 24-Hour Clearing Time
Likewise, in the present case the alterations of the serial
numbers do not constitute material alterations on the checks. The Court will not rule on the proper application of Central
Bank Circular No. 580 in this case. Since there were no
Incidentally, we agree with the petitioner’s observation that material alterations on the checks, respondent as drawee
the check in the PNB case appears to belong to the same bank has no right to dishonor them and return them to
batch of checks as in the present case. The check in petitioner, the collecting bank.21 Thus, respondent is liable to
the PNB case was also issued by the Ministry of Education petitioner for the value of the checks, with legal interest from
and Culture. It was also drawn against PNB, respondent in the time of filing of the complaint on 16 March 1982 until full
this case. The serial number of the check in the PNB case is payment.22 Further, considering that respondent’s motion for
7-3666-223-3 and it was issued on 7 August 1981. reconsideration was filed late, the 10 October 1991 Decision,
which held respondent liable for the value of the checks
Timeliness of Filing of Respondent’s Motion for amounting to P1,447,920, had become final and executory.
Reconsideration
WHEREFORE, we SET ASIDE the 9 August 1994 Amended
Respondent filed its motion for reconsideration of the 10 Decision and the 16 July 1997 Resolution of the Court of
October 1991 Decision on 6 November 1991. Respondent’s Appeals. We rule that respondent Philippine National Bank is
motion for reconsideration states that it received a copy of liable to petitioner International Corporate Bank, Inc. for the
the 10 October 1991 Decision on 22 October 1991. 18 Thus, it value of the checks amounting to P1,447,920, with legal
appears that the motion for reconsideration was filed on interest from 16 March 1982 until full payment. Costs against
time. However, the Registry Return Receipt shows that respondent.
counsel for respondent or his agent received a copy of the 10
October 1991 Decision on 16 October 1991,19 not on 22 SO ORDERED.
October 1991 as respondent claimed. Hence, the Court of
Appeals is correct when it noted that the motion for
Quisumbing, Chairperson, Carpio-Morales, Tinga, Velasco, Jr.,
J.J., concur.
Respondent Renato D. Cabilzo (Cabilzo) was one of
Metrobank’s clients who maintained a current account with
Metrobank Pasong Tamo Branch.3
METROPOLITAN BANK AND TRUST Subsequently, the check was presented to Westmont Bank
COMPANY, petitioners, for payment. Westmont Bank, in turn, indorsed the check to
vs. Metrobank for appropriate clearing. After the entries thereon
RENATO D. CABILZO, respondent. were examined, including the availability of funds and the
authenticity of the signature of the drawer, Metrobank
DECISION cleared the check for encashment in accordance with the
Philippine Clearing House Corporation (PCHC) Rules.
CHICO-NAZARIO, J.:
On 16 November 1994, Cabilzo’s representative was at
Metrobank Pasong Tamo Branch to make some transaction
Before this Court is a Petition for Review on Certiorari, filed
when he was asked by a bank personnel if Cabilzo had issued
by petitioner Metropolitan Bank and Trust Company
a check in the amount of P91,000.00 to which the former
(Metrobank) seeking to reverse and set aside the Decision 1 of
replied in the negative. On the afternoon of the same date,
the Court of Appeals dated 8 March 2002 and its Resolution
Cabilzo himself called Metrobank to reiterate that he did not
dated 26 July 2002 affirming the Decision of the Regional Trial
issue a check in the amount of P91,000.00 and requested
Court (RTC) of Manila, Branch 13 dated 4 September 1998.
that the questioned check be returned to him for verification,
The dispositive portion of the Court of Appeals Decision
to which Metrobank complied.5
reads:
Upon receipt of the check, Cabilzo discovered that Metrobank
WHEREFORE, the assailed decision dated September 4,
Check No. 985988 which he issued on 12 November 1994 in
1998 is AFFIRMED with modifications (sic) that the
the amount of P1,000.00 was altered to P91,000.00 and the
awards for exemplary damages and attorney’s fees are
date 24 November 1994 was changed to 14 November 1994. 6
hereby deleted.
Hence, Cabilzo demanded that Metrobank re-credit the
Petitioner Metrobank is a banking institution duly organized
amount of P91,000.00 to his account. Metrobank, however,
and existing as such under Philippine laws. 2
refused reasoning that it has to refer the matter first to its
Legal Division for appropriate action. Repeated verbal
demands followed but Metrobank still failed to re-credit the thereon, possible. On account of his negligence in the
amount of P91,000.00 to Cabilzo’s account.7 preparation and issuance of the check, which according to
Metrobank, was the proximate cause of the loss, Cabilzo
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter- cannot thereafter claim indemnity by virtue of the doctrine of
demand8 to Metrobank for the payment of P90,000.00, after equitable estoppel.
deducting the original value of the check in the amount
of P1,000.00. Such written demand notwithstanding, Thus, Metrobank demanded from Cabilzo, for payment in the
Metrobank still failed or refused to comply with its obligation. amount of P100,000.00 which represents the cost of litigation
and attorney’s fees, for allegedly bringing a frivolous and
Consequently, Cabilzo instituted a civil action for damages baseless suit. 11
against Metrobank before the RTC of Manila, Branch 13. In his
Complaint docketed as Civil Case No. 95-75651, Renato D. On 19 April 1996, Metrobank filed a Third-Party
Cabilzo v. Metropolitan Bank and Trust Company,Cabilzo Complaint12 against Westmont Bank on account of its
prayed that in addition to his claim for reimbursement, actual unqualified indorsement stamped at the dorsal side of the
and moral damages plus costs of the suit be awarded in his check which the former relied upon in clearing what turned
favor.9 out to be a materially altered check.
For its part, Metrobank countered that upon the receipt of the Subsequently, a Motion to Dismiss13 the Third-Party
said check through the PCHC on 14 November 1994, it Complaint was then filed by Westmont bank because another
examined the genuineness and the authenticity of the case involving the same cause of action was pending before
drawer’s signature appearing thereon and the technical a different court. The said case arose from an action for
entries on the check including the amount in figures and in reimbursement filed by Metrobank before the Arbitration
words to determine if there were alterations, erasures, Committee of the PCHC against Westmont Bank, and now the
superimpositions or intercalations thereon, but none was subject of a Petition for Review before the RTC of Manila,
noted. After verifying the authenticity and propriety of the Branch 19.
aforesaid entries, including the indorsement of the collecting
bank located at the dorsal side of the check which stated In an Order14 dated 4 February 1997, the trial court granted
that, "all prior indorsements and lack of indorsement the Motion to Dismiss the Third-Party Complaint on the
guaranteed," Metrobank cleared the check. 10 ground of litis pendentia.
Anent thereto, Metrobank claimed that as a collecting bank On 4 September 1998, the RTC rendered a Decision 15 in favor
and the last indorser, Westmont Bank should be held liable of Cabilzo and thereby ordered Metrobank to pay the sum
for the value of the check. Westmont Bank indorsed the of P90,000.00, the amount of the check. In stressing the
check as the an unqualified indorser, by virtue of which it fiduciary nature of the relationship between the bank and its
assumed the liability of a general indorser, and thus, among clients and the negligence of the drawee bank in failing to
others, warranted that the instrument is genuine and in all detect an apparent alteration on the check, the trial court
respect what it purports to be. ordered for the payment of exemplary damages, attorney’s
fees and cost of litigation. The dispositive portion of the
In addition, Metrobank, in turn, claimed that Cabilzo was Decision reads:
partly responsible in leaving spaces on the check, which,
made the fraudulent insertion of the amount and figures
WHEREFORE, judgment is rendered ordering defendant Metrobank now poses before this Court this sole issue:
Metropolitan Bank and Trust Company to pay plaintiff
Renato Cabilzo the sum of P90,000 with legal interest THE HONORABLE COURT OF APPEALS GRAVELY ERRED
of 6 percent per annum from November 16, 1994 until IN HOLDING METROBANK, AS DRAWEE BANK, LIABLE
payment is made plus P20,000 attorney’s fees, FOR THE ALTERATIONS ON THE SUBJECT CHECK
exemplary damages of P50,000, and costs of the suit.16 BEARING THE AUTHENTIC SIGNATURE OF THE DRAWER
THEREOF.
Aggrieved, Metrobank appealed the adverse decision to the
Court of Appeals reiterating its previous argument that as the We resolve to deny the petition.
last indorser, Westmont Bank shall bear the loss occasioned
by the fraudulent alteration of the check. Elaborating, An alteration is said to be material if it changes the effect of
Metrobank maintained that by reason of its unqualified the instrument. It means that an unauthorized change in an
indorsement, Westmont Bank warranted that the check in instrument that purports to modify in any respect the
question is genuine, valid and subsisting and that upon obligation of a party or an unauthorized addition of words or
presentment the check shall be accepted according to its numbers or other change to an incomplete instrument
tenor. relating to the obligation of a party.20 In other words, a
material alteration is one which changes the items which are
Even more, Metrobank argued that in clearing the check, it required to be stated under Section 1 of the Negotiable
was not remiss in the performance of its duty as the drawee Instruments Law.
bank, but rather, it exercised the highest degree of diligence
in accordance with the generally accepted banking practice. Section 1 of the Negotiable Instruments Law provides:
It further insisted that the entries in the check were regular
and authentic and alteration could not be determined even Section 1. Form of negotiable instruments. - An
upon close examination. instrument to be negotiable must conform to the
following requirements:
In a Decision17 dated 8 March 2002, the Court of Appeals
affirmed with modification the Decision of the court a (a) It must be in writing and signed by the maker or
quo, similarly finding Metrobank liable for the amount of the drawer;
check, without prejudice, however, to the outcome of the
case between Metrobank and Westmont Bank which was (b) Must contain an unconditional promise or order to
pending before another tribunal. The decretal portion of the pay a sum certain in money;
Decision reads:
(c) Must be payable on demand or at a fixed
WHEREFORE, the assailed decision dated September 4, determinable future time;
1998 is AFFIRMED with the modifications (sic) that the
awards for exemplary damages and attorney’s fees are
(d) Must be payable to order or to bearer; and
hereby deleted.18
(e) Where the instrument is addressed to a drawee, he
Similarly ill-fated was Metrobank’s Motion for Reconsideration
must be named or otherwise indicated therein with
which was also denied by the appellate court in its
reasonable certainty.
Resolution19 issued on 26 July 2002, for lack of merit.
Also pertinent is the following provision in the Negotiable without the assent of all parties liable thereon, it is
Instrument Law which states: avoided, except as against a party who has
himself made,authorized, and assented to the
Section 125. What constitutes material alteration. – alteration and subsequent indorsers.
Any alteration which changes:
But when the instrument has been materially altered
(a) The date; and is in the hands of a holder in due course not a
party to the alteration, he may enforce the payment
(b) The sum payable, either for principal or thereof according to its original tenor. (Emphasis ours.)
interest;
Indubitably, Cabilzo was not the one who made nor
(c) The time or place of payment; authorized the alteration. Neither did he assent to the
alteration by his express or implied acts. There is no showing
(d) The number or the relation of the parties; that he failed to exercise such reasonable degree of diligence
required of a prudent man which could have otherwise
(e) The medium or currency in which payment is prevented the loss. As correctly ruled by the appellate court,
to be made; Cabilzo was never remiss in the preparation and issuance of
the check, and there were no indicia of evidence that would
prove otherwise. Indeed, Cabilzo placed asterisks before and
Or which adds a place of payment where no place of
after the amount in words and figures in order to forewarn
payment is specified, or any other change or addition
the subsequent holders that nothing follows before and after
which alters the effect of the instrument in any respect
the amount indicated other than the one specified between
is a material alteration.
the asterisks.
In the case at bar, the check was altered so that the amount
The degree of diligence required of a reasonable man in the
was increased from P1,000.00 to P91,000.00 and the date
exercise of his tasks and the performance of his duties has
was changed from 24 November 1994 to 14 November 1994.
been faithfully complied with by Cabilzo. In fact, he was wary
Apparently, since the entries altered were among those
enough that he filled with asterisks the spaces between and
enumerated under Section 1 and 125, namely, the sum of
after the amounts, not only those stated in words, but also
money payable and the date of the check, the instant
those in numerical figures, in order to prevent any fraudulent
controversy therefore squarely falls within the purview of
insertion, but unfortunately, the check was still successfully
material alteration.
altered, indorsed by the collecting bank, and cleared by the
drawee bank, and encashed by the perpetrator of the fraud,
Now, having laid the premise that the present petition is a
to the damage and prejudice of Cabilzo.
case of material alteration, it is now necessary for us to
determine the effect of a materially altered instrument, as
Verily, Metrobank cannot lightly impute that Cabilzo was
well as the rights and obligations of the parties thereunder.
negligent and is therefore prevented from asserting his rights
The following provision of the Negotiable Instrument Law will
under the doctrine of equitable estoppel when the facts on
shed us some light in threshing out this issue:
record are bare of evidence to support such conclusion. The
doctrine of equitable estoppel states that when one of the
Section 124. Alteration of instrument; effect of. –
two innocent persons, each guiltless of any intentional or
Where a negotiable instrument is materially altered
moral wrong, must suffer a loss, it must be borne by the one In every case, the depositor expects the bank to treat his
whose erroneous conduct, either by omission or commission, account with the utmost fidelity, whether such account
was the cause of injury.21 Metrobank’s reliance on this dictum, consists only of a few hundred pesos or of millions. The bank
is misplaced. For one, Metrobank’s representation that it is an must record every single transaction accurately, down to the
innocent party is flimsy and evidently, misleading. At the last centavo, and as promptly as possible. This has to be
same time, Metrobank cannot asseverate that Cabilzo was done if the account is to reflect at any given time the amount
negligent and this negligence was the proximate cause 22 of of money the depositor can dispose of as he sees fit,
the loss in the absence of even a scintilla proof to buttress confident that the bank will deliver it as and to whomever he
such claim. Negligence is not presumed but must be proven directs.26
by the one who alleges it.23
The point is that as a business affected with public interest
Undoubtedly, Cabilzo was an innocent party in this instant and because of the nature of its functions, the bank is under
controversy. He was just an ordinary businessman who, in obligation to treat the accounts of its depositors with
order to facilitate his business transactions, entrusted his meticulous care, always having in mind the fiduciary nature
money with a bank, not knowing that the latter would yield a of their relationship. The appropriate degree of diligence
substantial amount of his deposit to fraud, for which Cabilzo required of a bank must be a high degree of diligence, if not
can never be faulted. the utmost diligence.27
We never fail to stress the remarkable significance of a In the present case, it is obvious that Metrobank was remiss
banking institution to commercial transactions, in particular, in that duty and violated that relationship. As observed by
and to the country’s economy in general. The banking the Court of Appeals, there are material alterations on the
system is an indispensable institution in the modern world check that are visible to the naked eye. Thus:
and plays a vital role in the economic life of every civilized
nation. Whether as mere passive entities for the safekeeping x x x The number "1" in the date is clearly imposed on
and saving of money or as active instruments of business a white figure in the shape of the number "2". The
and commerce, banks have become an ubiquitous presence appellant’s employees who examined the said check
among the people, who have come to regard them with should have likewise been put on guard as to why at
respect and even gratitude and, most of all, confidence. 24 the end of the amount in words, i.e., after the word
"ONLY", there are 4 asterisks, while at the beginning of
Thus, even the humble wage-earner does not hesitate to the line or before said phrase, there is none, even as 4
entrust his life's savings to the bank of his choice, knowing asterisks have been placed before and after the word
that they will be safe in its custody and will even earn some "CASH" in the space for payee. In addition, the 4
interest for him. The ordinary person, with equal faith, usually asterisks before the words "ONE THOUSAND PESOS
maintains a modest checking account for security and ONLY" have noticeably been erased with typing
convenience in the settling of his monthly bills and the correction paper, leaving white marks, over which the
payment of ordinary expenses. As for a businessman like the word "NINETY" was superimposed. The same can be
respondent, the bank is a trusted and active associate that said of the numeral "9" in the amount "91,000", which
can help in the running of his affairs, not only in the form of is superimposed over a whitish mark, obviously an
loans when needed but more often in the conduct of their erasure, in lieu of the asterisk which was deleted to
day-to-day transactions like the issuance or encashment of insert the said figure. The appellant’s employees
checks.25 should have again noticed why only 2 asterisks were
placed before the amount in figures, while 3 asterisks reimbursement from the drawer, much less, the right to
were placed after such amount. The word "NINETY" is deduct the erroneous payment it made from the drawer’s
also typed differently and with a lighter ink, when account which it was expected to treat with utmost fidelity.
compared with the words "ONE THOUSAND PESOS
ONLY." The letters of the word "NINETY" are likewise a Metrobank vigorously asserts that the entries in the check
little bigger when compared with the letters of the were carefully examined: The date of the instrument, the
words "ONE THOUSAND PESOS ONLY".28 amount in words and figures, as well as the drawer’s
signature, which after verification, were found to be proper
Surprisingly, however, Metrobank failed to detect the above and authentic and was thus cleared. We are not persuaded.
alterations which could not escape the attention of even an Metrobank’s negligence consisted in the omission of that
ordinary person. This negligence was exacerbated by the fact degree of diligence required of a bank owing to the fiduciary
that, as found by the trial court, the check in question was nature of its relationship with its client. Article 1173 of the
examined by the cash custodian whose functions do not Civil Code provides:
include the examinations of checks indorsed for payment
against drawer’s accounts.29 Obviously, the employee The fault or negligence of the obligor consists in the
allowed by Metrobank to examine the check was not verse omission of that diligence which is required by the
and competent to handle such duty. These factual findings of nature of the obligation and corresponds with the
the trial court is conclusive upon this court especially when circumstances of the persons, of the time and of the
such findings was affirmed the appellate court. 30 place. x x x.
Apropos thereto, we need to reiterate that by the very nature Beyond question, Metrobank failed to comply with the degree
of their work the degree of responsibility, care and required by the nature of its business as provided by law and
trustworthiness expected of their employees and officials is jurisprudence. If indeed it was not remiss in its obligation,
far better than those of ordinary clerks and employees. then it would be inconceivable for it not to detect an evident
Banks are expected to exercise the highest degree of alteration considering its vast knowledge and technical
diligence in the selection and supervision of their expertise in the intricacies of the banking business. This
employees.31 Court is not completely unaware of banks’ practices of
employing devices and techniques in order to detect
In addition, the bank on which the check is drawn, known as forgeries, insertions, intercalations, superimpositions and
the drawee bank, is under strict liability to pay to the order of alterations in checks and other negotiable instruments so as
the payee in accordance with the drawer’s instructions as to safeguard their authenticity and negotiability. Metrobank
reflected on the face and by the terms of the check. Payment cannot now feign ignorance nor claim diligence; neither can it
made under materially altered instrument is not payment point its finger at the collecting bank, in order to evade
done in accordance with the instruction of the drawer. liability.
When the drawee bank pays a materially altered check, it Metrobank argues that Westmont Bank, as the collecting
violates the terms of the check, as well as its duty to charge bank and the last indorser, shall bear the loss. Without ruling
its client’s account only for bona fide disbursements he had on the matter between the drawee bank and the collecting
made. Since the drawee bank, in the instant case, did not bank, which is already under the jurisdiction of another
pay according to the original tenor of the instrument, as tribunal, we find that Metrobank cannot rely on such
directed by the drawer, then it has no right to claim indorsement, in clearing the questioned check. The corollary
liability of such indorsement, if any, is separate and WHEREFORE, premises considered, the instant Petition
independent from the liability of Metrobank to Cabilzo. is DENIED. The Decision dated 8 March 2002 and the
Resolution dated 26 July 2002 of the Court of Appeals
The reliance made by Metrobank on Westmont Bank’s are AFFIRMED with modification that exemplary damages in
indorsement is clearly inconsistent, if not totally offensive to the amount of P50,000.00 be awarded. Costs against the
the dictum that being impressed with public interest, banks petitioner.
should exercise the highest degree of diligence, if not utmost
diligence in dealing with the accounts of its own clients. It SO ORDERED.
owes the highest degree fidelity to its clients and should not
therefore lightly rely on the judgment of other banks on Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-
occasions where its clients money were involve, no matter Martinez, and Callejo, Sr., JJ., concur.
how small or substantial the amount at stake.
III For its part, respondent Ong leans on the ruling of the
trial court and the Court of Appeals which held that the suit
... IN NOT ADJUDGING RESPONDENT GUILTY OF LACHES AND of Ong against the petitioner bank is a desirable shortcut to
IN NOT ABSOLVING PETITIONER FROM LIABILITY. reach the party who ought in any event to be ultimately
liable.[12] It likewise cites the ruling of the courts a quo which
Essentially the issues in this case are: (1) whether or not held that according to the general rule, a bank who has
respondent Ong has a cause of action against petitioner obtained possession of a check upon an unauthorized or
Westmont Bank; and (2) whether or not Ong is barred to forged indorsement of the payees signature and who collects
recover the money from Westmont Bank due to laches. the amount of the check from the drawee is liable for the
proceeds thereof to the payee. The theory of said rule is that
Respondent admitted that he was never in actual or the collecting banks possession of such check is wrongful. [13]
physical possession of the two (2) checks of the Island
Securities nor did he authorize Tanlimco or any of the latters Respondent also cites Associated Bank vs. Court of
representative to demand, accept and receive the same. For Appeals[14] which held that the collecting bank or last
this reason, petitioner argues, respondent cannot sue endorser generally suffers the loss because it has the duty to
petitioner because under Section 51 of the Negotiable ascertain the genuineness of all prior endorsements. The
collecting bank is also made liable because it is privy to the Since the signature of the payee, in the case at bar, was
depositor who negotiated the check. The bank knows him, his forged to make it appear that he had made an indorsement
address and history because he is a client. Hence, it is in a in favor of the forger, such signature should be deemed as
better position to detect forgery, fraud or irregularity in the inoperative and ineffectual. Petitioner, as the collecting bank,
indorsement.[15] grossly erred in making payment by virtue of said forged
signature. The payee, herein respondent, should therefore be
Anent Article 1249 of the Civil Code, Ong points out that
allowed to recover from the collecting bank.
bank checks are specifically governed by the Negotiable
Instruments Law which is a special law and only in the The collecting bank is liable to the payee and must bear
absence of specific provisions or deficiency in the special law the loss because it is its legal duty to ascertain that the
may the Civil Code be invoked.[16] payees endorsement was genuine before cashing the check.
[20]
As a general rule, a bank or corporation who has obtained
Considering the contentions of the parties and the
possession of a check upon an unauthorized or forged
evidence on record, we find no reversible error in the assailed
indorsement of the payees signature and who collects the
decisions of the appellate and trial courts, hence there is no
amount of the check from the drawee, is liable for the
justifiable reason to grant the petition.
proceeds thereof to the payee or other owner,
Petitioners claim that respondent has no cause of action notwithstanding that the amount has been paid to the person
against the bank is clearly misplaced. As defined, a cause of from whom the check was obtained.[21]
action is the act or omission by which a party violates a right
The theory of the rule is that the possession of the check
of another.[17] The essential elements of a cause of action are:
on the forged or unauthorized indorsement is wrongful, and
(a) a legal right or rights of the plaintiff, (b) a correlative
when the money had been collected on the check, the bank
obligation of the defendant, and (c) an act or omission of the
or other person or corporation can be held as for moneys had
defendant in violation of said legal right. [18]
and received, and the proceeds are held for the rightful
The complaint filed before the trial court expressly owners who may recover them. The position of the bank
alleged respondents right as payee of the managers checks taking the check on the forged or unauthorized indorsement
to receive the amount involved, petitioners is the same as if it had taken the check and collected the
correlative duty as collecting bank to ensure that the amount money without indorsement at all and the act of the bank
gets to the rightful payee or his order, and a breach of that amounts to conversion of the check.[22]
duty because of a blatant act of negligence on the part of
Petitioners claim that since there was no delivery yet and
petitioner which violated respondents rights. [19]
respondent has never acquired possession of the checks,
Under Section 23 of the Negotiable Instruments Law: respondents remedy is with the drawer and not with
petitioner bank. Petitioner relies on the view to the effect that
When a signature is forged or made without the authority of where there is no delivery to the payee and no title vests in
the person whose signature it purports to be, it is wholly him, he ought not to be allowed to recover on the ground
inoperative, and no right to retain the instrument, or to give a that he lost nothing because he never became the owner of
discharge therefor, or to enforce payment thereof against the check and still retained his claim of debt against the
any party thereto, can be acquired through or under such drawer.[23] However, another view in certain cases holds that
signature, unless the party against whom it is sought to even if the absence of delivery is considered, such
enforce such right is precluded from setting up the forgery or consideration is not material. The rationale for this view is
want of authority. that in said cases the plaintiff uses one action to reach, by a
desirable short cut, the person who ought in any event to be
ultimately liable as among the innocent persons involved in These findings are binding and conclusive on the
the transaction. In other words, the payee ought to be appellate and the reviewing courts.
allowed to recover directly from the collecting bank,
On the second issue, petitioner avers that respondent
regardless of whether the check was delivered to the payee
Ong is barred by laches for failing to assert his right for
or not.[24]
recovery from the bank as soon as he discovered the
Considering the circumstances in this case, in our view, scam. The lapse of five months before he went to seek relief
petitioner could not escape liability for its negligent from the bank, according to petitioner, constitutes laches.
acts. Admittedly, respondent Eugene Ong at the time the
In turn, respondent contends that petitioner presented no
fraudulent transaction took place was a depositor of
evidence to support its claim of laches. On the contrary, the
petitioner bank. Banks are engaged in a business impressed
established facts of the case as found by the trial court and
with public interest, and it is their duty to protect in return
affirmed by the Court of Appeals are that respondent left no
their many clients and depositors who transact business with
stone unturned to obtain relief from his predicament.
them.[25] They have the obligation to treat their clients
account meticulously and with the highest degree of care, On the matter of delay in reporting the loss, respondent
considering the fiduciary nature of their relationship. The calls attention to the fact that the checks were issued on May
diligence required of banks, therefore, is more than that of a 4, 1976, and on the very next day, May 5, 1976, these were
good father of a family.[26] In the present case, petitioner was already credited to the account of Paciano Tanlimco and
held to be grossly negligent in performing its duties. As found presented for payment to Pacific Banking Corporation. So
by the trial court: even if the theft of the checks were discovered and reported
earlier, respondent argues, it would not have altered the
xxx (A)t the time the questioned checks were accepted for situation as the encashment of the checks was consummated
deposit to Paciano Tanlimcos account by defendant bank, within twenty four hours and facilitated by the gross
defendant bank, admittedly had in its files specimen negligence of the petitioner bank.[28]
signatures of plaintiff who maintained a current account with
them (Exhibits L-1 and M-1; testimony of Emmanuel Laches may be defined as the failure or neglect for an
Torio). Given the substantial face value of the two checks, unreasonable and unexplained length of time, to do that
totalling P1,754,787.50, and the fact that they were being which, by exercising due diligence, could or should have been
deposited by a person not the payee, the very least done earlier. It is negligence or omission to assert a right
defendant bank should have done, as any reasonable within a reasonable time, warranting a presumption that the
prudent man would have done, was to verify the genuineness party entitled thereto has either abandoned or declined to
of the indorsements thereon. The Court cannot help but note assert it.[29] It concerns itself with whether or not by reason of
that had defendant conducted even the most cursory long inaction or inexcusable neglect, a person claiming a
comparison with plaintiffs specimen signatures in its files right should be barred from asserting the same, because to
(Exhibit L-1 and M-1) it would have at once seen that the allow him to do so would be unjust to the person against
alleged indorsements were falsified and were not those of the whom such right is sought to be enforced. [30]
plaintiff-payee. However, defendant apparently failed to In the case at bar, it cannot be said that respondent sat
make such a verification or, what is worse did so but, chose on his rights. He immediately acted after knowing of the
to disregard the obvious dissimilarity of the signatures. The forgery by proceeding to seek help from the Tanlimco family
first omission makes it guilty of gross negligence; the second and later the Central Bank, to remedy the situation and
of bad faith. In either case, defendant is liable to plaintiff for recover his money from the forger, Paciano Tanlimco. Only
the proceeds of the checks in question. [27] after he had exhausted possibilities of settling the matter
amicably with the family of Tanlimco and through the CB,
about five months after the unlawful transaction took place,
did he resort to making the demand upon the petitioner and
eventually before the court for recovery of the money value
of the two checks. These acts cannot be construed as undue
delay in or abandonment of the assertion of his rights.
Moreover, the claim of petitioner that respondent should
be barred by laches is clearly a vain attempt to deflect
responsibility for its negligent act. As explained by the
appellate court, it is petitioner which had the last clear
chance to stop the fraudulent encashment of the subject
checks had it exercised due diligence and followed the proper
and regular banking procedures in clearing checks. [31] As we
had earlier ruled, the one who had the last clear opportunity
to avoid the impending harm but failed to do so is chargeable
with the consequences thereof. [32]
WHEREFORE, the instant petition is DENIED for lack of
merit. The assailed decision of the Court of Appeals,
sustaining the judgment of the Regional Trial Court of Manila,
is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr.,
JJ., concur.
SECOND DIVISION account. After ascertaining there were enough funds to cover
the check,[5] she compared the signature appearing on the
check with the specimen signature of Jong as contained in
the specimen signature card with the bank. After comparing
[G.R. No. 129015. August 13, 2004] the two signatures, Justiani was satisfied as to the
authenticity of the signature appearing on the check. She
then asked Gonzaga to submit proof of his identity, and the
latter presented three (3) identification cards. [6]
SAMSUNG CONSTRUCTION COMPANY PHILIPPINES,
INC., petitioner, vs. FAR EAST BANK AND TRUST At the same time, Justiani forwarded the check to the
COMPANY AND COURT OF branch Senior Assistant Cashier Gemma Velez, as it was bank
APPEALS, respondents. policy that two bank branch officers approve checks
exceeding One Hundred Thousand Pesos, for payment or
DECISION encashment. Velez likewise counterchecked the signature on
the check as against that on the signature card. He too
TINGA, J.: concluded that the check was indeed signed by Jong. Velez
then forwarded the check and signature card to Shirley Syfu,
Called to fore in the present petition is a classic textbook another bank officer, for approval.Syfu then noticed that Jose
question if a bank pays out on a forged check, is it liable to Sempio III (Sempio), the assistant accountant of Samsung
reimburse the drawer from whose account the funds were Construction, was also in the bank. Sempio was well-known
paid out? The Court of Appeals, in reversing a trial court to Syfu and the other bank officers, he being the assistant
decision adverse to the bank, invoked tenuous reasoning to accountant of Samsung Construction. Syfu showed the check
acquit the bank of liability. We reverse, applying time- to Sempio, who vouched for the genuineness of Jongs
honored principles of law. signature.Confirming the identity of Gonzaga, Sempio said
that the check was for the purchase of equipment for
The salient facts follow.
Samsung Construction. Satisfied with the genuineness of the
Plaintiff Samsung Construction Company Philippines, Inc. signature of Jong, Syfu authorized the banks encashment of
(Samsung Construction), while based in Bian, Laguna, the check to Gonzaga.
maintained a current account with defendant Far East Bank
The following day, the accountant of Samsung
and Trust Company[1] (FEBTC) at the latters Bel-
Construction, Kyu, examined the balance of the bank account
Air, Makati branch.[2] The sole signatory to Samsung
and discovered that a check in the amount of Nine Hundred
Constructions account was Jong Kyu Lee (Jong), its Project
Ninety Nine Thousand Five Hundred Pesos (P999,500.00) had
Manager,[3] while the checks remained in the custody of the
been encashed. Aware that he had not prepared such a check
companys accountant, Kyu Yong Lee (Kyu).[4]
for Jongs signature, Kyu perused the checkbook and found
On 19 March 1992, a certain Roberto Gonzaga presented that the last blank check was missing. [7] He reported the
for payment FEBTC Check No. 432100 to the banks branch in matter to Jong, who then proceeded to the bank. Jong learned
Bel-Air, Makati. The check, payable to cash and drawn of the encashment of the check, and realized that his
against Samsung Constructions current account, was in the signature had been forged. The Bank Manager reputedly told
amount of Nine Hundred Ninety Nine Thousand Five Hundred Jong that he would be reimbursed for the amount of the
Pesos (P999,500.00). The bank teller, Cleofe Justiani, first check.[8] Jong proceeded to the police station and consulted
checked the balance of Samsung Constructions
with his lawyers.[9] Subsequently, a criminal case for qualified NBI and the PNP created doubt as to whether there was
theft was filed against Sempio before the Laguna court. [10] forgery.[17] Moreover, the appellate court also held that
assuming there was forgery, it occurred due to the
In a letter dated 6 May 1992, Samsung Construction,
negligence of Samsung Construction, imputing blame on the
through counsel, demanded that FEBTC credit to it the
accountant Kyu for lack of care and prudence in keeping the
amount of Nine Hundred Ninety Nine Thousand Five Hundred
checks, which if observed would have prevented Sempio
Pesos (P999,500.00), with interest.[11] In response, FEBTC said
from gaining access thereto.[18] The Court of Appeals invoked
that it was still conducting an investigation on the matter.
the ruling in PNB v. National City Bank of New York [19] that, if a
Unsatisfied, Samsung Construction filed a Complaint on 10
loss, which must be borne by one or two innocent persons,
June 1992 for violation of Section 23 of the Negotiable
can be traced to the neglect or fault of either, such loss
Instruments Law, and prayed for the payment of the amount
would be borne by the negligent party, even if innocent of
debited as a result of the questioned check plus interest, and
intentional fraud.[20]
attorneys fees.[12] The case was docketed as Civil Case No.
92-61506 before the Regional Trial Court (RTC) of Manila, Samsung Construction now argues that the Court of
Branch 9.[13] Appeals had seriously misapprehended the facts when it
overturned the RTCs finding of forgery. It also contends that
During the trial, both sides presented their respective
the appellate court erred in finding that it had been negligent
expert witnesses to testify on the claim that Jongs signature
in safekeeping the check, and in applying the equity principle
was forged. Samsung Corporation, which had referred the
enunciated in PNB v. National City Bank of New York.
check for investigation to the NBI, presented Senior NBI
Document Examiner Roda B. Flores. She testified that based Since the trial court and the Court of Appeals arrived at
on her examination, she concluded that Jongs signature had contrary findings on questions of fact, the Court is obliged to
been forged on the check. On the other hand, FEBTC, which examine the record to draw out the correct conclusions. Upon
had sought the assistance of the Philippine National Police examination of the record, and based on the applicable laws
(PNP),[14] presented Rosario C. Perez, a document examiner and jurisprudence, we reverse the Court of Appeals.
from the PNP Crime Laboratory. She testified that her findings
Section 23 of the Negotiable Instruments Law states:
showed that Jongs signature on the check was genuine. [15]
Confronted with conflicting expert testimony, the RTC When a signature is forged or made without the authority of
chose to believe the findings of the NBI expert. In the person whose signature it purports to be, it is wholly
a Decision dated 25 April 1994, the RTC held that Jongs inoperative, and no right to retain the instrument, or to
signature on the check was forged and accordingly directed give a discharge therefor, or to enforce payment thereof
the bank to pay or credit back to Samsung Constructions against any party thereto, can be acquired through or
account the amount of Nine Hundred Ninety Nine Thousand under such signature, unless the party against whom it is
Five Hundred Pesos (P999,500.00), together with interest sought to enforce such right is precluded from setting up the
tolled from the time the complaint was filed, and attorneys forgery or want of authority. (Emphasis supplied)
fees in the amount of Fifteen Thousand Pesos (P15,000.00).
FEBTC timely appealed to the Court of Appeals. On 28 The general rule is to the effect that a forged signature is
November 1996, the Special Fourteenth Division of the Court wholly inoperative, and payment made through or under
of Appeals rendered a Decision,[16] reversing the such signature is ineffectual or does not discharge the
RTC Decision and absolving FEBTC from any liability. The instrument.[21] If payment is made, the drawee cannot charge
Court of Appeals held that the contradictory findings of the it to the drawers account. The traditional justification for the
result is that the drawee is in a superior position to detect a
forgery because he has the makers signature and is expected 717. In this case, the plaintiff brought suit against the
to know and compare it.[22] The rule has a healthy cautionary defendant bank for money which had been deposited to the
effect on banks by encouraging care in the comparison of the plaintiffs credit and which the bank had paid out on checks
signatures against those on the signature cards they have on bearing forgeries of the plaintiffs signature.
file. Moreover, the very opportunity of the drawee to insure
and to distribute the cost among its customers who use xxx
checks makes the drawee an ideal party to spread the risk to
insurance.[23] It was held that the bank was liable. It was further held that
Brady, in his treatise The Law of Forged and Altered the fact that the plaintiff waited eight or nine months after
Checks, elucidates: discovering the forgery, before notifying the bank, did not, as
a matter of law, constitute a ratification of the payment, so
as to preclude the plaintiff from holding the bank liable. xxx
When a person deposits money in a general account in a
bank, against which he has the privilege of drawing checks in
the ordinary course of business, the relationship between the This rule of liability can be stated briefly in these words: A
bank and the depositor is that of debtor and creditor. So far bank is bound to know its depositors signature. The rule is
as the legal relationship between the two is concerned, the variously expressed in the many decisions in which the
situation is the same as though the bank had borrowed question has been considered. But they all sum up to the
money from the depositor, agreeing to repay it on demand, proposition that a bank must know the signatures of those
or had bought goods from the depositor, agreeing to pay for whose general deposits it carries.[24]
them on demand. The bank owes the depositor money in the
same sense that any debtor owes money to his By no means is the principle rendered obsolete with the
creditor. Added to this, in the case of bank and depositor, advent of modern commercial transactions. Contemporary
there is, of course, the banks obligation to pay checks drawn texts still affirm this well-entrenched standard.Nickles, in his
by the depositor in proper form and presented in due book Negotiable Instruments and Other Related Commercial
course. When the bank receives the deposit, it impliedly Paper wrote, thus:
agrees to pay only upon the depositors order. When the bank
pays a check, on which the depositors signature is a forgery, The deposit contract between a payor bank and its customer
it has failed to comply with its contract in this determines who can draw against the customers account by
respect. Therefore, the bank is held liable. specifying whose signature is necessary on checks that are
chargeable against the customers account. Therefore, a
The fact that the forgery is a clever one is immaterial. The check drawn against the account of an individual customer
forged signature may so closely resemble the genuine as to that is signed by someone other than the customer, and
defy detection by the depositor himself. And yet, if a bank without authority from her, is not properly payable and is not
pays the check, it is paying out its own money and not the chargeable to the customers account, inasmuch as any
depositors. unauthorized signature on an instrument is ineffective as the
signature of the person whose name is signed. [25]
The forgery may be committed by a trusted employee or
confidential agent. The bank still must bear the loss. Even in Under Section 23 of the Negotiable Instruments Law,
a case where the forged check was drawn by the depositors forgery is a real or absolute defense by the party whose
partner, the loss was placed upon the bank. The case signature is forged.[26] On the premise that Jongs signature
referred to is Robinson v. Security Bank, Ark., 216 S. W. Rep. was indeed forged, FEBTC is liable for the loss since it
authorized the discharge of the forged check. Such liability which is extremely crucial. Doing so is tantamount to a
attaches even if the bank exerts due diligence and care in jurisprudential cop-out.
preventing such faulty discharge. Forgeries often deceive the
Much is expected from the Court of Appeals as it
eye of the most cautious experts; and when a bank has been
occupies the penultimate tier in the judicial hierarchy. This
so deceived, it is a harsh rule which compels it to suffer
Court has long deferred to the appellate court as to its
although no one has suffered by its being deceived. [27] The
findings of fact in the understanding that it has the
forgery may be so near like the genuine as to defy detection
appropriate skill and competence to plough through
by the depositor himself, and yet the bank is liable to the
the minutiae that scatters the factual field. In failing to
depositor if it pays the check.[28]
thoroughly evaluate the evidence before it, and relying
Thus, the first matter of inquiry is into whether the check instead on presumptions haphazardly drawn, the Court of
was indeed forged. A document formally presented is Appeals was sadly remiss. Of course, courts, like humans, are
presumed to be genuine until it is proved to be fraudulent. In fallible, and not every error deserves a stern rebuke. Yet, the
a forgery trial, this presumption must be overcome but this appellate courts error in this case warrants special attention,
can only be done by convincing testimony and effective as it is absurd and even dangerous as a precedent. If this
illustrations.[29] rationale were adopted as a governing standard by every
court in the land, barely any actionable claim would prosper,
In ruling that forgery was not duly proven, the Court of
defeated as it would be by the mere invocation of the
Appeals held:
existence of a contrary expert opinion.
[There] is ground to doubt the findings of the trial court On the other hand, the RTC did adjudge the testimony of
sustaining the alleged forgery in view of the conflicting the NBI expert as more credible than that of the PNP, and
conclusions made by handwriting experts from the NBI and explained its reason behind the conclusion:
the PNP, both agencies of the government.
After subjecting the evidence of both parties to a crucible of
xxx analysis, the court arrived at the conclusion that the
testimony of the NBI document examiner
These contradictory findings create doubt on whether there is more credible because thetestimony of the PNP Crime
was indeed a forgery. In the case of Tenio-Obsequio v. Court Laboratory Services document examiner reveals that there
of Appeals, 230 SCRA 550, the Supreme Court held that are a lot of differences in the questioned signature as
forgery cannot be presumed; it must be proved by clear, compared to the standard specimen signature. Furthermore,
positive and convincing evidence. as testified to by Ms. Rhoda Flores, NBI expert, the manner of
execution of the standard signatures used reveals that it is a
This reasoning is pure sophistry. Any litigator worth his or free rapid continuous execution or stroke as shown by the
her salt would never allow an opponents expert witness to tampering terminal stroke of the signatures whereas the
stand uncontradicted, thus the spectacle of competing expert questioned signature is a hesitating slow drawn execution
witnesses is not unusual. The trier of fact will have to decide stroke. Clearly, the person who executed the questioned
which version to believe, and explain why or why not such signature was hesitant when the signature was made. [30]
version is more credible than the other. Reliance therefore
cannot be placed merely on the fact that there are colliding During the testimony of PNP expert Rosario Perez, the
opinions of two experts, both clothed with the presumption of RTC bluntly noted that apparently, there [are] differences on
official duty, in order to draw a conclusion, especially one that questioned signature and the standard signatures.
[31]
This Court, in examining the signatures, makes a similar Again, the PNP examiner downplayed the uniqueness of
finding. The PNP expert excused the noted differences by the final stroke in the questioned signature as a mere
asserting that they were mere variations, which are normal variation,[38] the same excuse she proffered for the other
deviations found in writing. [32] Yet the RTC, which had the marked differences noted by the Court and the counsel for
opportunity to examine the relevant documents and to petitioner.[39]
personally observe the expert witness, clearly disbelieved the
There is no reason to doubt why the RTC gave credence
PNP expert. The Court similarly finds the testimony of the
to the testimony of the NBI examiner, and not the PNP
PNP expert as unconvincing. During the trial, she was
experts. The NBI expert, Rhoda Flores, clearly qualifies as an
confronted several times with apparent differences between
expert witness. A document examiner for fifteen years, she
strokes in the questioned signature and the genuine
had been promoted to the rank of Senior Document Examiner
samples. Each time, she would just blandly assert that these
with the NBI, and had held that rank for twelve years prior to
differences were just variations,[33] as if the mere conjuration
her testimony. She had placed among the top five examinees
of the word would sufficiently disquiet whatever doubts about
in the Competitive Seminar in Question Document
the deviations. Such conclusion, standing alone, would be of
Examination, conducted by the NBI Academy, which qualified
little or no value unless supported by sufficiently cogent
her as a document examiner. [40] She had trained with the
reasons which might amount almost to a demonstration. [34]
Royal Hongkong Police Laboratory and is a member of the
The most telling difference between the questioned and International Association for Identification. [41] As of the time
genuine signatures examined by the PNP is in the final she testified, she had examined more than fifty to fifty-five
upward stroke in the signature, or the point to the short thousand questioned documents, on an average of fifteen to
stroke of the terminal in the capital letter L, as referred to by twenty documents a day.[42] In comparison, PNP document
the PNP examiner who had marked it in her comparison chart examiner Perez admitted to having examined only around
as point no. 6. To the plain eye, such upward final stroke five hundred documents as of her testimony. [43]
consists of a vertical line which forms a ninety degree (90)
In analyzing the signatures, NBI Examiner Flores utilized
angle with the previous stroke. Of the twenty one (21) other
the scientific comparative examination method consisting of
genuine samples examined by the PNP, at least nine (9)
analysis, recognition, comparison and evaluation of the
ended with an upward stroke.[35] However, unlike the
writing habits with the use of instruments such as a
questioned signature, the upward strokes of eight (8) of
magnifying lense, a stereoscopic microscope, and varied
these signatures are looped, while the upward stroke of the
lighting substances. She also prepared enlarged photographs
seventh[36] forms a severe forty-five degree (45) with the
of the signatures in order to facilitate the necessary
previous stroke. The difference is glaring, and indeed, the
comparisons.[44] She compared the questioned signature as
PNP examiner was confronted with the inconsistency in point
against ten (10) other sample signatures of Jong. Five of
no. 6.
these signatures were executed on checks previously issued
Q: Now, in this questioned document point no. 6, the by Jong, while the other five contained in business letters
s stroke is directly upwards. Jong had signed.[45] The NBI found that there were significant
differences in the handwriting characteristics existing
A: Yes, sir.
between the questioned and the sample signatures, as to
Q: Now, can you look at all these standard signature manner of execution, link/connecting strokes, proportion
(sic) were (sic) point 6 is repeated or the last characteristics, and other identifying details. [46]
stroke s is pointing directly upwards?
The RTC was sufficiently convinced by the NBI examiners
A: There is none in the standard signature, sir. [37] testimony, and explained her reasons in its Decisions. While
the Court of Appeals disagreed and upheld the findings of the and invoked the doctrines that where a loss must be borne by
PNP, it failed to convincingly demonstrate why such findings one of two innocent person, can be traced to the neglect or
were more credible than those of the NBI expert. As a fault of either, it is reasonable that it would be borne by him,
throwaway, the assailed Decision noted that the PNP, not the even if innocent of any intentional fraud, through whose
NBI, had the opportunity to examine the specimen signature means it has succeeded[49]or who put into the power of the
card signed by Jong, which was relied upon by the employees third person to perpetuate the wrong. [50] Applying these rules,
of FEBTC in authenticating Jongs signature. The distinction is the Court of Appeals determined that it was the negligence of
irrelevant in establishing forgery. Forgery can be established Samsung Construction that allowed the encashment of the
comparing the contested signatures as against those of any forged check.
sample signature duly established as that of the persons
whose signature was forged. In the case at bar, the forgery appears to have been made
possible through the acts of one Jose Sempio III, an assistant
FEBTC lays undue emphasis on the fact that the PNP
accountant employed by the plaintiff Samsung [Construction]
examiner did compare the questioned signature against the
Co. Philippines, Inc. who supposedly stole the blank check
bank signature cards. The crucial fact in question is
and who presumably is responsible for its encashment
whether or not the check was forged, not whether the
through a forged signature of Jong Kyu Lee. Sempio was
bank could have detected the forgery. The latter issue
assistant to the Korean accountant who was in possession of
becomes relevant only if there is need to weigh the
the blank checks and who through negligence, enabled
comparative negligence between the bank and the
Sempio to have access to the same. Had the Korean
party whose signature was forged.
accountant been more careful and prudent in keeping the
At the same time, the Court of Appeals failed to assess blank checks Sempio would not have had the chance to steal
the effect of Jongs testimony that the signature on the check a page thereof and to effect the forgery. Besides, Sempio was
was not his.[47] The assertion may seem self-serving at first an employee who appears to have had dealings with the
blush, yet it cannot be ignored that Jong was in the best defendant Bank in behalf of the plaintiff corporation and on
position to know whether or not the signature on the check the date the check was encashed, he was there to certify that
was his. While his claim should not be taken at face value, it was a genuine check issued to purchase equipment for the
any averments he would have on the matter, if adjudged as company.[51]
truthful, deserve primacy in consideration. Jongs testimony is
supported by the findings of the NBI examiner. They are also We recognize that Section 23 of the Negotiable
backed by factual circumstances that support the conclusion Instruments Law bars a party from setting up the defense of
that the assailed check was indeed forged. Judicial notice can forgery if it is guilty of negligence. [52] Yet, we are unable to
be taken that is highly unusual in practice for a business conclude that Samsung Construction was guilty of negligence
establishment to draw a check for close to a million pesos in this case. The appellate court failed to explain precisely
and make it payable to cash or bearer, and not to order. Jong how the Korean accountant was negligent or how more care
immediately reported the forgery upon its discovery. He filed and prudence on his part would have prevented the
the appropriate criminal charges against Sempio, the forgery. We cannot sustain this tar and feathering resorted to
putative forger.[48] without any basis.
Now for determination is whether Samsung Construction The bare fact that the forgery was committed by an
was precluded from setting up the defense of forgery under employee of the party whose signature was forged cannot
Section 23 of the Negotiable Instruments Law.The Court of necessarily imply that such partys negligence was the cause
Appeals concluded that Samsung Construction was negligent, for the forgery. Employers do not possess the preternatural
gift of cognition as to the evil that may lurk within the hearts presumption of ordinary care exercised by Samsung
and minds of their employees. The Courts pronouncement Construction, hence we cannot agree with the Court of
in PCI Bank v. Court of Appeals[53] applies in this case, to wit: Appeals finding of negligence.
The assailed Decision replicated the extensive efforts
[T]he mere fact that the forgery was committed by a drawer-
which FEBTC devoted to establish that there was no
payors confidential employee or agent, who by virtue of his
negligence on the part of the bank in its acceptance and
position had unusual facilities for perpetrating the fraud and
payment of the forged check. However, the degree of
imposing the forged paper upon the bank, does not entitle
diligence exercised by the bank would be irrelevant if the
the bank to shift the loss to the drawer-payor, in the absence
drawer is not precluded from setting up the defense of
of some circumstance raising estoppel against the drawer. [54]
forgery under Section 23 by his own negligence. The rule of
equity enunciated in PNB v. National City Bank of New
Admittedly, the record does not clearly establish what York, [60] as relied upon by the Court of Appeals, deserves
measures Samsung Construction employed to safeguard its careful examination.
blank checks. Jong did testify that his accountant, Kyu, kept
the checks inside a safety box, [55] and no contrary version
The point in issue has sometimes been said to be that of
was presented by FEBTC. However, such testimony cannot
negligence. The drawee who has paid upon the forged
prove that the checks were indeed kept in a safety box, as
signature is held to bear the loss, because he has
Jongs testimony on that point is hearsay, since Kyu, and not
been negligent in failing to recognize that the
Jong, would have the personal knowledge as to how the
handwriting is not that of his customer. But it follows
checks were kept.
obviously that if the payee, holder, or presenter of the forged
Still, in the absence of evidence to the contrary, we can paper has himself been in default, if he has himself been
conclude that there was no negligence on Samsung guilty of a negligence prior to that of the banker, or if by any
Constructions part. The presumption remains that every act of his own he has at all contributed to induce the banker's
person takes ordinary care of his concerns, [56] and that the negligence, then he may lose his right to cast the loss upon
ordinary course of business has been followed. [57] Negligence the banker.[61] (Emphasis supplied)
is not presumed, but must be proven by him who alleges it.
[58]
While the complaint was lodged at the instance of Quite palpably, the general rule remains that the drawee
Samsung Construction, the matter it had to prove was the who has paid upon the forged signature bears the loss. The
claim it had alleged - whether the check was forged. It cannot exception to this rule arises only when negligence can be
be required as well to prove that it was not negligent, traced on the part of the drawer whose signature was forged,
because the legal presumption remains that ordinary care and the need arises to weigh the comparative negligence
was employed. between the drawer and the drawee to determine who should
bear the burden of loss. The Court finds no basis to conclude
Thus, it was incumbent upon FEBTC, in defense, to prove
that Samsung Construction was negligent in the safekeeping
the negative fact that Samsung Construction was
of its checks. For one, the settled rule is that the mere fact
negligent. While the payee, as in this case, may not have the
that the depositor leaves his check book lying around does
personal knowledge as to the standard procedures observed
not constitute such negligence as will free the bank from
by the drawer, it well has the means of disputing the
liability to him, where a clerk of the depositor or other
presumption of regularity. Proving a negative fact may be a
persons, taking advantage of the opportunity, abstract some
difficult office,[59] but necessarily so, as it seeks to overcome
of the check blanks, forges the depositors signature and
a presumption in law. FEBTC was unable to dispute the
collect on the checks from the bank. [62] And for another, in
point of fact Samsung Construction was not negligent at all approval of one bank officer; and should the amount exceed
since it reported the forgery almost immediately upon one hundred thousand pesos, the concurrence of two bank
discovery.[63] officers is required.[67]
It is also worth noting that the forged signatures in PNB v. In this case, not only did the amount in the check nearly
National City Bank of New York were not of the drawer, but of total one million pesos, it was also payable to cash. That
indorsers. The same circumstance attends PNB v. Court of latter circumstance should have aroused the suspicion of the
Appeals,[64] which was also cited by the Court of Appeals. It is bank, as it is not ordinary business practice for a check for
accepted that a forged signature of the drawer differs in such large amount to be made payable to cash or to bearer,
treatment than a forged signature of the indorser. instead of to the order of a specified person. [68] Moreover, the
check was presented for payment by one Roberto Gonzaga,
The justification for the distinction between forgery of the who was not designated as the payee of the check, and who
signature of the drawer and forgery of an indorsement is that did not carry with him any written proof that he was
the drawee is in a position to verify the drawers signature by authorized by Samsung Construction to encash the
comparison with one in his hands, but has ordinarily no check. Gonzaga, a stranger to FEBTC, was not even an
opportunity to verify an indorsement.[65] employee of Samsung Construction.[69] These circumstances
are already suspicious if taken independently, much more so
Thus, a drawee bank is generally liable to its depositor in if they are evaluated in concurrence. Given the shadiness
paying a check which bears either a forgery of the drawers attending Gonzagas presentment of the check, it was not
signature or a forged indorsement. But the bank may, as a sufficient for FEBTC to have merely complied with its internal
general rule, recover back the money which it has paid on a procedures, but mandatory that all earnest efforts be
check bearing a forged indorsement, whereas it has not this undertaken to ensure the validity of the check, and of the
right to the same extent with reference to a check bearing a authority of Gonzaga to collect payment therefor.
forgery of the drawers signature.[66] According to FEBTC Senior Assistant Cashier Gemma
Velez, the bank tried, but failed, to contact Jong over the
The general rule imputing liability on the drawee who phone to verify the check.[70] She added that calling the
paid out on the forgery holds in this case. issuer or drawer of the check to verify the same was not part
Since FEBTC puts into issue the degree of care it of the standard procedure of the bank, but an extra effort.
[71]
exercised before paying out on the forged check, we might as Even assuming that such personal verification is
well comment on the banks performance of its duty. It might tantamount to extraordinary diligence, it cannot be denied
be so that the bank complied with its own internal rules prior that FEBTC still paid out the check despite the absence of any
to paying out on the questionable check. Yet, there are proof of verification from the drawer. Instead, the bank seems
several troubling circumstances that lead us to believe that to have relied heavily on the say-so of Sempio, who was
the bank itself was remiss in its duty. present at the bank at the time the check was presented.
The fact that the check was made out in the amount of FEBTC alleges that Sempio was well-known to the bank
nearly one million pesos is unusual enough to require a officers, as he had regularly transacted with the bank in
higher degree of caution on the part of the bank. Indeed, behalf of Samsung Construction. It was even claimed that
FEBTC confirms this through its own internal everytime FEBTC would contact Jong about problems with his
procedures. Checks below twenty-five thousand pesos account, Jong would hand the phone over to Sempio.
[72]
require only the approval of the teller; those between twenty- However, the only proof of such allegations is the
five thousand to one hundred thousand pesos necessitate the testimony of Gemma Velez, who also testified
that she did not know Sempio personally,[73] and had met forged check, it must be considered as paying out of its funds
Sempio for the first time only on the day the check was and cannot charge the amount so paid to the account of the
encashed.[74] In fact, Velez had to inquire with the other depositor.[77] A bank is liable, irrespective of its good faith, in
officers of the bank as to whether Sempio was actually known paying a forged check.[78]
to the employees of the bank. [75] Obviously, Velez had no
WHEREFORE, the Petition is GRANTED. The Decision of
personal knowledge as to the past relationship between
the Court of Appeals dated 28 November 1996 is REVERSED,
FEBTC and Sempio, and any averments of her to that effect
and the Decision of the Regional Trial Court of Manila, Branch
should be deemed hearsay evidence.Interestingly, FEBTC did
9, dated 25 April 1994 is REINSTATED. Costs against
not present as a witness any other employee of their Bel-Air
respondent.
branch, including those who supposedly had transacted with
Sempio before. SO ORDERED.
Even assuming that FEBTC had a standing habit of Puno, (Chairman), Austria-Martinez, Callejo,
dealing with Sempio, acting in behalf of Samsung Sr., and Chico-Nazario, JJ., concur.
Construction, the irregular circumstances attending the
presentment of the forged check should have put the bank
on the highest degree of alert. The Court recently
emphasized that the highest degree of care and diligence is
required of banks.