ERNESTINA CRISOLOGO-JOSE VS. CA GR No. 80599 Sept.

15, 1989

FACTS: The Vice-president of Mover Enterprises, Inc. issued a check drawn against Traders Royal Bank, payable to
petitioner Ernestina Crisologo-Jose, for the accommodation of his client. Petitioner-payee was charged with the
knowledge that the check was issued at the instance and for the personal account of the President who merely prevailed
upon respondent vice-president to act as co-signatory in accordance with the arrangement of the corporation with its
depository bank. While it was the corporation's check which was issued to petitioner for the amount involved, petitioner
actually had no transaction directly with said corporation.

ISSUE: Whether private respondent, one of the signatories of the check issued under the account of Mover Enterprises,
Inc., is an accommodation party under NIL and a debtor of petitioner to the extent of the amount of said check.

HELD: Yes. To be considered an accommodation party, a person must (1) be a party to the instrument, signing as maker,
drawer, acceptor, or indorser, (2) not receive value therefor, and (3) sign for the purpose of lending his name for the credit
of some other person. It is not a valid defense that the accommodation party did not receive any valuable consideration
when he executed the instrument. He is liable to a holder for value as if the contract was not for accommodation, in
whatever capacity such accommodation party signed the instrument, whether primarily or secondarily. 33
PNB VS. MAZA GR No. 24224, Nov. 3, 1925

FACTS: PNB is suing Ramon Maza and Francisco Mecenas on five promissory notes of P10,000 each, two of which is due 3
months after date, the three were due 4 months after date. The notes were not taken up by Maza and Mecenas at
maturity. The special defines interposed by the defendants was that the promissory notes were sent in blank to them by
Enrique Echaus with the request that they sign them so that Echaus might negotiate them with the PNB in case of need;
that the defendants have not negotiated the note with the bank nor have they received the value thereof, or delivered
them to the bank in payment of any pre-existing debt; and that it was Echaus who negotiated the note with the bank and
who is accordingly the real party in interest and the party liable for the payment of the notes. Defendants move for the
inclusion of Echaus as defending party, which was denied. The court rendered a judgment in favor of PNB.

ISSUE: Whether Ramon Maza and Francisco Mecenas are liable even if classified as accommodation parties

HELD: Yes. The most plausible and reasonable stand for the defendants is that they are accommodation parties. But as
accommodation parties, the defendants having signed the instrument without receiving value therefor and for the
purpose of lending their names to some other person, are still liable on the instruments. The law now is that the
accommodation party can claim no benefit as such, but he is liable according to the face of his undertaking, the same as
if he were himself financially interested in the transaction. To fasten liability upon an accommodation maker, it is not
necessary that any consideration should move to him. The consideration which supports the promise of the
accommodation maker is that parted with by the person taking the note and received by the person accommodated. The
accommodation parties may make payment to the holder of the notes and have the right to sue the party accommodated
for reimbursement, since the relation between them is in effect that of principal and sureties
FERNANDO MAULIN, ET. AL. VS ANTONIO G. SERRANO
GR. NO. L-8844 DECEMBER 16, 1914

FACTS: This is an appeal from a judgment of the Court of the First Instance of the City of Manila in favor of the plaintiff for
the sum of P3,000 with interest at the rate of 1½ per month. The action was brought by the plaintiff, Fernando Maulin
upon the contract of indorsement alleged to have been made in his favor by the defendant, Antonio Serrano upon a
promissory note. Thus, in a parol evidence presented in the trial, it showed that the defendant was a broker doing business
in Manila which consisted in looking up and ascertaining persons who had money to loan, as well as those who desired to
borrow money and acting as a “median,” who negotiates a loan between the two. According to the method in the said
transaction, the broker delivers the money personally to the borrower, takes note in his own name and immediately
transfers it by indorsement to the lender.

ISSUE: Whether or not, Serrano is an accommodation indorser.

RULING: The accommodation to which reference is made in the section quoted is not one to the person who takes the
note (the payee or indorsee), but one to the maker or indorser of the note. It is true that in the case at bar, it was an
accommodation described in the law, but rather, a mere favor to him and one which in no way bound Serrano. In cases of
accommodation indorsement, the indorse rakes the indorsement for the accommodation of the maker for the purpose of
securing the payment of the note – that is, he lend his name to the maker, not to the holder. There is no contradiction of
the evidence offered by the defense and received provisionally by the court. Accepting it as true, the judgment must be
reversed. The judgment appealed from is reversed and the complaint dismissed on the merits.
PEOPLE OF THE PHILIPPINES vs. JULIA MANIEGO G.R. No. L-30910 February 27, 1987

FACTS: Julia Maniego was an indorser of several checks drawn by her sister, Milagros Pamintuan, which weredishonored
after they had been exchange with cash belonging to the Government, then in the official custodyof Lt. Rizalino Ubay.
Ubay, Pamintuan and Maniego were indicted for the crime of malversation. Ubay andManiego were arraigned, while
Pamintuan fled to the United States. Ubay was found guilty while Maniegowas acquitted. Both, however, were ordered
to pay in solidum the amount of P57,434.50 to the government.Maniego appealed.

ISSUES: (A) Parties who are liable; Indosers; General Indorser (B) Parties who are liable; Indosers; Order of Liability Whether
Julia Maniego is liable as indorser?

HELD: YES, A mere indorser is also liable on account of the dishonor of the checks indorsed by her.

(A) Under the law, the holder or last indorsee of a negotiable instrument has the right to "enforce payment of the
instrument for the full amount thereof against all parties liable thereon." Among the "parties liable thereon" is an indorser
of the instrument i.e. .., "a person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor
unless he clearly indicates by appropriate words his intention to be bound in some other capacity."

(B) Such an indorser "who indorses without qualification," inter alia "engages that on due presentment, (the
instrument) shall be accepted or paid, or both, as the case may be, according to its order, and that if it be dis honored and
the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent
indorser who may be compelled to pay it."
The Philippine Bank of Commerce vs. Aruego G.R. Nos. L-25836-37 January 31, 1981

Herein plaintiff instituted against an action against defendant for the recovery of the total sum of money plus interests
and attorney’s fees. The complaint filed by the Philippine Bank of Commerce contains twenty-two (22) causes of action
referring to twenty-two (22) transactions entered into by the said Bank and Aruego on different dates. The sum sought to
be recovered represents the cost of the printing of "World Current Events," a periodical published by the defendant. To
facilitate the payment of the printing the defendant obtained a credit accommodation from the plaintiff. Thus, for every
printing of the "World Current Events," the printer collected the cost of printing by drawing a draft against the plaintiff,
said draft being sent later to the defendant for acceptance. As an added security for the payment of the amounts advanced
to printer, the plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said bank wherein said
defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the promise to turn over to the
plaintiff the proceeds of the sale of said publication to answer for the payment of all obligations arising from the draft.
Defendant filed an answer interposing for his defense that he signed the drafts in a representative capacity, that he signed
only as accommodation party and that the drafts signed by him were not really bills of exchange but mere pieces of
evidence of indebtedness because payments were made before acceptance.

ISSUE: Whether Aruego is personally liable?

HELD: Yes. Sec. 20 provides that “a person (who) adds to his signature words indicating that he signs for or on behalf of a
principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition
of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not
exempt him from personal liability. An inspection of the drafts accepted by the defendant shows that nowhere has he
disclosed that he was signing as representative of the Philippine Education Foundation Company. He merely signed as
follows: “JOSE ARUEGO (Acceptor) (SGD) JOSE ARUEGO”. For failure to disclose his principal, Aruego is personally liable
for the drafts he accepted.
ATRIUM MANAGEMENT CORPORATION VS. CA G.R. No. 109491, February 28, 2001

Hi-Cement Corp. issued checks in favor of E.T. Henry and Co. Inc., as payee. The latter, in turn, endorsed the checks to
Atrium for valuable consideration. But upon presentment for payment, the drawee bank dishonored the checks for the
common reason "payment stopped" which prompted petitioner to institute this action. The trial court rendered a decision
ordering E.T. Henry and Co., Inc. and Hi-Cement to pay petitioner Atrium, jointly and severally, the amount corresponding
to the value of the checks. CA, however, absolved & ruled, inter alia, that Lourdes de Leon of Hi-Cement was not authorized
to issue the subject checks in favor of E.T. Henry, Inc.

ISSUE: Whether the issuance of the checks were ultra vires

HELD: No. the act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to
finance the activities of the corporation, hence, not an ultra vires act. An ultra vires act is one committed outside the
object for which a corporation is created as defined by the law of its organization and therefore beyond the power
conferred upon it by law" The term "ultra vires" is "distinguished from an illegal act for the former is merely voidable which
may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be validated.
ERNESTINA CRISOLOGO-JOSE VS. CA GR No. 80599 Sept. 15, 1989

FACTS: The Vice-president of Mover Enterprises, Inc. issued a check drawn against Traders Royal Bank, payable to
petitioner Ernestina Crisologo-Jose, for the accommodation of his client. Petitioner-payee was charged with the
knowledge that the check was issued at the instance and for the personal account of the President who merely prevailed
upon respondent vice-president to act as co-signatory in accordance with the arrangement of the corporation with its
depository bank. While it was the corporation's check which was issued to petitioner for the amount involved, petitioner
actually had no transaction directly with said corporation.

ISSUE: Whether the Corporation can be held as an Accommodation Party

RULING: The liability of an accommodation party to a holder for value, although such holder does not include nor apply to
corporations which are accommodation parties. This is because the issue or indorsement of negotiable paper by a
corporation without consideration and for the accommodation of another is ultra vires. Hence, one who has taken the
instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it is only
an accommodation party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee
with knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another,
he cannot recover against the corporation thereon.
SALAS VS. CA G.R. No. 76788 January 22, 1990

FACTS: Juanita Salas (Petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS) as evidenced by
a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (private respondent)
which financed the purchase. Petitioner defaulted in her installments allegedly due to a discrepancy in the engine and
chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed
of chattel mortgage, which fact she discovered when the vehicle figured in an accident. This failure to pay prompted
private respondent to initiate an action for a sum of money against petitioner before the Regional Trial Court.

ISSUE: Whether VMS’ fraud in the conduct of its business, specifically in the delivery of a defective truck, would release
petitioner-maker from paying First Finance the amount stated in the note

HELD: No. The note was a negotiable instrument and was validly negotiated to private respondent who is a holder in due
course and as such holds the instrument free from defenses available to prior parties among themselves. This being so,
petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS
EULALIO PRUDENCIO VS COURT OF APPEALS GR No. L-34539 143 SCRA 7 July 14, 1986

FACTS: The Prudencios are the registered owners of a parcel of land located in Sampaloc, Manila. On October 7, 1954, the
property was mortgaged by the Prudencios to the PNB to guarantee a loan of P1,000 extended to one Domingo Prudencio.
Sometime in 1955, the Concepcion & Tamayo Construction Company, had a pending contract with the Bureau of Public
Works, for the construction of the municipal building in Puerto Princesa in the amount of P36,800 and said company
needed funds for the construction, Jose Toribio, Prudencio’s relative, and atty-in-fact of the company, approached the
Prudencios asking them to mortgage their property to secure the load on P10,000 which the company was negotiating
with the PNB. The Prudencios signed on December 23, 1955 the ‘Amendment of Real Estate Mortgage’, mortgaging their
said property to PNB to guaranty a loan of P10,000 extended to the Company. The terms and conditions of the original
mortgage for P1,000 were made integral part of the new mortgage for P10,000. The promissory note covering the loan of
P10,000 dated December 29, 1955, maturing on April 27, 1956 was signed by Jose Toribio, as atty-in-fact of the company,
and by the Prudencios. The Prudencios also signed the portion of the promissory note indicating that they are requesting
the PNB to issue the check covering the loan to the company. On the same day, Toribio also executed the ‘Deed of
Assignment’ assigning all payments to be made by the Bureau to the company on account of the contract for the
construction in favor of PNB. The Bureau’s last request for P5,000 on June 20, 1956, however, was denied by the PNB
because since the loan was already overdue as of April 28, 1956, the remaining balance of the contract price should be
applied to the loan. The company abandoned the work and the Bureau rescinded the construction contract and assumed
the work of completing the building. On November 14, 1958, the Prudencios wrote the PNB contending that since the PNB
authorized payments to the company instead of on account of the loan guaranteed by the mortgage there was a change
in the conditions of the contract without the knowledge of the Prudencios, which entitled them to cancel their mortgage
contract. Failing to have the mortgage cancelled, the Prudencios filed this action against PNB seeking for it’s cancellation.
The trial court denied. The CA affirmed the decision of the trial court.

ISSUE: Whether PNB can be considered a holder for value under Sec 29 of the NIL such that the petitioners must be
necessarily barred from setting up the defense of want of consideration or some other personal defenses which may be
set up against a party who is not a holder in due course

RULING: No, PNB cannot be considered a holder for value under Sec 29 of the NIL. Since the court ruled that the PNB is
not a holder in due course, the petitioners can validly set up their personal defense of release from the real estate
mortgage against PNB. The latter, in authorizing the third payment to the Company after the promissory note became
due, in effect, extended the term of the payment of the note without the consent of the accommodation makers who
stand as sureties to the accommodated party and to all other parties who are not holders in due course or who do not
derive their right from the same, including PNB..
ASSOCIATED BANK VS. CA GR No. 107382; 107612; Jan. 31, 1996

FACTS: The Province of Tarlac maintains a current account with the Philippine National Bank where the provincial funds
are deposited. A portion of the funds of the province is allocated to the Concepcion Emergency Hospital. The allotment
checks for said government hospital are drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or
"The Chief, Concepcion Emergency Hospital, Concepcion, Tarlac”. It was later discovered that the hospital did not receive
several allotment checks drawn by the Province. After the checks were examined, it was learned that 30 checks were
encashed by one Fausto Pangilinan, with the Associated Bank acting as collecting bank. It turned out that Fausto
Pangilinan, who was the administrative officer and cashier of payee hospital, collected the questioned checks from the
office of the Provincial Treasurer claiming to be assisting or helping the hospital on the release of the checks. To encash
the checks, he forged the signature of Dr. Adena Canlas chief of the payee hospital. All the checks bore the stamp of
Associated Bank which reads "All prior endorsements guaranteed ASSOCIATED BANK." The Provincial Treasurer sought to
recover from PNB various amounts debited from the current account of the Province. In turn, PNB demanded
reimbursement from the Associated Bank who refused to pay interposing the defense of forgery.

ISSUE: Whether Associated Bank (collecting bank) may interpose the real defense of forgery against PNB (drawee bank)
as to bar recovery by the latter

HELD: NO. Where the instrument is payable to order at the time of the forgery, such as the checks in this case, the signature
of its rightful holder (here, the payee hospital) is essential to transfer title to the same instrument. When the holder's
indorsement is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent
thereto. An indorser of an order instrument warrants "that the instrument is genuine and in all respects what it purports
to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of
his indorsement valid and subsisting." He cannot interpose the defense that signatures prior to him are forged. A collecting
bank where a check is deposited and which indorses the check upon presentment with the drawee bank, is such an
indorser. So even if the indorsement on the check deposited by the bank's client is forged, the collecting bank is bound by
his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. The loss incurred by
drawee bank-PNB can be passed on to the collecting bank-Associated Bank which presented and indorsed the checks to
it. Associated Bank can, in turn, hold the forger, Fausto Pangilinan, liable. The drawee bank is not similarly situated as the
collecting bank because the former makes no warranty as to the genuineness of any indorsement. The drawee bank's duty
is but to verify the genuineness of the drawer's signature and not of the indorsement because the drawer is its client.
NATIVIDAD GEMPESAW, petitioner, vs. THE HONORABLE COURT OF APPEALS and PHILIPPINE BANK OF
COMMUNICATIONS, respondents. G.R. No. 92244 February 9, 1993

FACTS: Petioner, Natividad Gempesaw entrusted to her bookkeeper, Alicia Galang, the preparation of checks about to be
issued in the course of her business transactions. From 1984 to 1986, 82 checks amounting to P1,208,606.89, were
prepared and were supposed to be delivered to Gempesaw’s clients as payees named thereon. However, through Galang,
these checks were never delivered to the supposed payees. Instead, the checks were fraudulently indorsed to Alfredo
Romero and Benito Lam.

ISSUE: Who shall bear the loss resulting from the forged indorsements

RULING: Under Sec. 23 of the Negotiable Instruments Law, a forged signature is “wholly inoperative, no one can gain title
to the instrument through such forged indorsement. Such an indorsement prevents any subsequent party from acquiring
any right as against any party whose name appears prior to the forgery. Such forged indorsement cuts-off the rights of all
subsequent parties as against parties prior to the forgery. As a rule, a drawee bank who has paid a check on which an
indorsement has been forged cannot charge the drawer’s account for the amount of said check. An exception to the rule
is where the drawer is guilty of such negligence which causes the bank to honor such checks. Gempesaw did not exercise
prudence in taking steps that a careful and prudent businessman would take in circumstances to discover discrepancies in
her account. Her negligence was the proximate cause of her loss, and under Section 23 of the Negotiable Instruments Law,
is precluded from using forgery as a defense.
REPUBLIC BANK VS. EBRADA GR No. L-40769; July 31, 1975

FACTS: This is a case of what appeared to be an indorsed check by one Martin Lorenzo who turned out to be dead since
1952. The forged signature of the deceased appeared at the dorsal portion of the check indorsed in favor of one Ramon
Lorenzo. From Ramon Lorenzo the same was indorsed to one Delia Dominguez and then from Dominguez to herein
respondent Ebrada. Subsequently, Ebrada encashed the same in 1963 at herein petitioner Republic Bank's main office in
Escolta. Upon informing petitioner Republic Bank, however, that the payee's (Lorenzo) indorsement was a forgery, the
Bureau of Treasury requested the Bank to refund them the amount given to Ebrada. The Bank sued Ebrada upon the
latter’s refusal to return the money of the forged check.

ISSUE: WHETHER Ebrada is liable to return the money paid to him by Republic Bank subject of a forged check and may the
petitioner recover the proceeds given?

HELD: It is clear from the provision of Section 23 of the NIL that where the signature on a negotiable instrument if forged,
the negotiation of the check is without force or effect. But does this mean that the existence of one forged signature
therein will render void all the other negotiations of the check with respect to the other parties whose signature are
genuine? Applying the principle of Beam vs. Farrel, 135 Iowa 670, 113 N.W. 590, it can be safely concluded that it is only
the negotiation predicated on the forged indorsement that should be declared inoperative. This means that the
negotiation of the check in question from Martin Lorenzo, the original payee, to Ramon R. Lorenzo, the 2nd indorser,
should be declared of no effect, but the negotiation of the aforesaid check from Ramon R. Lorenzo to Adelaida Dominguez,
the 3rd indorser, and from Adelaida Dominguez to the defendant-appellant who did not know of the forgery, should be
considered valid and enforceable, barring any claim of forgery. Being the last indorser, however, Ebrada warrants that she
has good title to the check subject of this action. The petitioner, drawee of the check can recover from the holder [Ebrada]
the money paid to the latter on a forged instrument. It is not supposed to be its duty to ascertain whether the signatures
of the payee or indorsers are genuine or not. This is because the indorser is supposed to warrant to the drawee that the
signatures of the payee and previous indorsers are genuine, warranty not extending only to holders in due course. Ebrada,
upon receiving the check in question from Dominguez, was duty-bound to ascertain whether the check in question was
genuine before presenting it to plaintiff Bank for payment. Indorsers own credulity or recklessness or misplaced
confidence was the sole cause of the loss. Why should he be permitted to shift the loss due to his own fault in assuming
the risk, upon the drawee, simply because of the accidental circumstance that the drawee afterwards failed to detect the
forgery when the check was presented for payment.
MWSS VS. CA GR No. L-62943; July 14, 1986

FACTS: 23 checks were deposited by the payees Dizon, Sison and Mendoza in their respective current accounts with the
PCIB and PBC. Thru the Central Bank Clearing, these checks were presented for payment by PBC and PCIB to the defendant
PNB, and were paid. At the time of their presentation to PNB, these checks bear the standard indorsement which reads
'all prior indorsement and/or lack of endorsement guaranteed.' Subsequent investigation however, conducted by the NBI
showed that Raul Dizon, Arturo Sison and Antonio Mendoza were all fictitious persons. NWSA addressed a letter to PNB
requesting the immediate restoration to its Account No. 6, of the total sum of P3,457,903.00 corresponding to the total
amount of these twenty-three (23) checks claimed by NWSA to be forged and/or spurious checks.

ISSUE: Whether the drawee bank was liable for the loss under section 23 of the negotiable instruments law

HELD: The NBI does not declare or prove that the signatures appearing on the questioned checks are forgeries. These
reports did not touch on the inherent qualities of the signatures which are indispensable in the determination of the
existence of forgery. There must be conclusive findings that there is a variance in the inherent characteristics of the
signatures and that they were written by two or more different persons. Forgery cannot be presumed. It must be
established by clear, positive, and convincing evidence. This was not done in the present case. Even if the twenty-three
(23) checks in question are considered forgeries, considering the petitioner's gross negligence, it is barred from setting up
the defense of forgery under Section 23 of the Negotiable Instruments Law. One factor which facilitates this fraud was the
delay in the reconciliation of bank (PNB) statements with the NAWASA bank accounts. The records likewise show that the
petitioner failed to provide appropriate security measures over its own records thereby laying confidential records open
to unauthorized persons. We cannot fault the respondent drawee Bank for not having detected the fraudulent
encashment of the checks because the printing of the petitioner's personalized checks was not done under the supervision
and control of the Bank. Under the circumstances, therefore, the petitioner was in a better position to detect and prevent
the fraudulent encashment of its checks.
Philippine Bank of Commerce vs Philippine Racing Club GR No. 150228, 30 July 2009

FACTS: Respondent PRCI is a domestic corporation which maintains several accounts with different banks in the Metro
Manila area; among the accounts maintained was with Bank of America- The authorize signatories are the president and
the vice-president of the corporation, respectively. Sometime in Dec 1988. The president and the vice-president of the
corporation went abroad. So, in order to insure continuity of business operation, the president and the vice-president of
the corporation left a pre-signed check and entrusted to the accountant. It turned out that on December 16, 1988, a John
Doe presented two (2) checks to Bank of America for encashment; the two (2) checks had similar entries with similar
infirmities and irregularities. Under the line for the payee, the upper line has a typewritten word “CASH” and the lower
line has a type written word “ONE HUNDRED TEN THOUSAND PESOS ONLY.” Despite the highly irregular entries on the
face of the checks bank of America encashed said checks. The RTC ordered Bank of America to pay respondent PRCI the
value of the two (2) checks, plus damages and attorney’s fees. Petitioner bank of America contended that since the
instrument is incomplete but delivered or complete but undelivered, it could validly presume upon presentation of the
checks, that the party who filled up the blanks had authority and that a valid and intentional delivery to the party
presenting the checks had taken place. And the proximate cause of the encashment was the respondent’s negligent
practice of delivering pre-signed check to its accountant.

ISSUE: Whether or not petitioner bank is obligated to verify said checks to respondent

RULING: If the signatures are genuine, the bank has the unavoidable legal and contractual duty to pay.—Petitioner insists
that it merely fulfilled its obligation under law and contract when it encashed the aforesaid checks. Invoking Sections 126
and 185 of the Negotiable Instruments Law (NIL), petitioner claims that its duty as a drawee bank to a drawer-client
maintaining a checking account with it is to pay orders for checks bearing the drawer-client’s genuine signatures. The
genuine signatures of the client’s duly authorized signatories affixed on the checks signify the order for payment.
METROPOLITAN BANK & TRUST CO. VS. CA GR No. 88866; Feb. 18, 1991

FACTS: Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38 treasury
warrants. They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager
and counter-signed by its Auditor. Six of these were directly payable to Gomez while the others appeared to have been
indorsed by their respective payees, followed by Gomez as second indorser. On various dates all these warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account in the
Metrobank. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded
them to the Bureau of Treasury for special clearing. After being told to wait several times, Gloria Castillo and Gomez made
subsequent withdrawals at Metrobank with the impression that the treasury warrants had been cleared. Metrobank
informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and demanded the
refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account. The demand
was rejected.

ISSUE: Whether Metropolitan Bank can use forgery of the warrants as defense, hence, making Golden Savings liable

HELD: No. There was no question of Gomez's identity or of the genuineness of his signature as checked by Golden Savings.
In fact, the treasury warrants were dishonored allegedly because of the forgery of the signatures of the drawers, not of
Gomez as payee or indorser. Under the circumstances, it is clear that Golden Savings acted with due care and diligence
and cannot be faulted for the withdrawals it allowed Gomez to make. By contrast, Metrobank exhibited extraordinary
carelessness. Despite the lack of such clearance, it allowed Golden Savings to withdraw from the uncleared treasury
warrants. The supposed reason for the dishonor, to wit, the forgery of the signatures of the general manager and the
auditor of the drawer corporation, has not been established. This was the finding of the lower courts which must not be
disturbed. As held in MWSS v. Court of Appeals, forgery cannot be presumed. It must be established by clear, positive and
convincing evidence. This was not done in the present case. Hence, petition was denied
SAMSUNG CONSTRUCTION VS. FAR EAST BANK GR No. 129015 Aug. 15, 2003

FACTS: Petitioner maintained a current account with respondent bank. The sole signatory to petitioner’s account was
Jong Kyu Lee ("Jong"), its Project Manager, while the checks remained in the custody of the company’s accountant, Kyu
Yong Lee ("Kyu"). A certain Roberto Gonzaga presented for payment FEBTC Check to the bank. The check, payable to cash
and drawn against Samsung Construction’s current account, was in the amount of P999, 500.00. After the bank teller
ascertained that there were enough funds to cover the check and compared the signature as contained in the specimen
signature, the bank teller forwarded the check with two other bank branch officers, who counterchecked the signature.
One of the bank officers noticed Sempio, the assistant accountant of Samsung Construction, was also in the bank and
when asked, Sempio vouched for the genuineness of Jong’s signature. The following day, Kyu examined the balance of the
bank account and discovered that a check amounting to P999, 500.00 had been encashed. Aware that he had not prepared
such a check for Jong’s signature, Kyu perused the checkbook and found that the last blank check was missing. He reported
the matter to Jong, who then proceeded to the bank. Jong learned of the encashment of the check, and realized that his
signature had been forged. Samsung Construction filed before the RTC against respondent bank for violation of Section
23 of the Negotiable Instruments Law who ruled in favor of Samsung Construction while the CA reversed the RTC Decision
and absolved FEBTC from any liability. The Court of Appeals invoked the ruling in PNB v. National City Bank of New York
that, if a loss, which must be borne by one or two innocent persons, can be traced to the neglect or fault of either, such
loss would be borne by the negligent party, even if innocent of intentional fraud. (equity principle).

ISSUE: Whether Samsung Construction was precluded from setting up the defense of forgery under Section 23 of the
Negotiable Instruments Law

HELD: No. On the premise that Jong’s signature was indeed forged, FEBTC is liable for the loss since it authorized the
discharge of the forged check. Such liability attaches even if the bank exerts due diligence and care in preventing such
faulty discharge. Forgeries often deceive the eye of the most cautious experts; and when a bank has been so deceived, it
is a harsh rule which compels it to suffer although no one has suffered by its being deceived. The forgery may be so near
like the genuine as to defy detection by the depositor himself, and yet the bank is liable to the depositor if it pays the
check. The Court recognize that Section 23 of the Negotiable Instruments Law bars a party from setting up the defense of
forgery if it is guilty of negligence. Yet, we are unable to conclude that Samsung Construction was guilty of negligence in
this case. The appellate court failed to explain precisely how the Korean accountant was negligent or how more care and
prudence on his part would have prevented the forgery. We cannot sustain this "tar and feathering" resorted to without
any basis. When the bank receives the deposit, it impliedly agrees to pay ONLY UPON THE DEPOSITOR’S ORDER. When the
Bank pays a check, on which the depositor’s signature is a forgery, it has failed to comply with its contract in this respect.
PNB VS. QUIMPO GR No. L-53194, March 14, 1988

FACTS: Private Respondent Francisco Gozon went to the Caloocan City Branch of PNB with his friend Ernesto Santos, who
he left in the car while he transacted business in the bank. Santos saw that Gozon left his checkbook, he took a check
therefrom, filled it up for P5,000 and forged the signature of Gozon. Santos was later on apprehended and admitted that
he stole the check and encashed the same with the bank. Gozon filed an action to recover the amount from the Bank
which the court granted. Hence the petition.

ISSUE: Whether Gozon who left his checkbook into hands of Santos was indeed the proximate cause of the loss and thus
precluded from setting up the defense of forgery

HELD: No. A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as
making the payment out of its own funds, and cannot ordinarily change the amount so paid to the account of the depositor
whose name was forged' (San Carlos Milling Co. vs. Bank of the P.I). This rule is absolutely necessary to the circulation of
drafts and checks, and is based upon the presumed negligence of the drawee in failing to meet its obligation to know the
signature of its correspondent. ... There is nothing inequitable in such a rule. If the paper comes to the drawee in the
regular course of business, and he, having the opportunity ascertaining its character, pronounces it to be valid and pays
it, it is not only a question of payment under mistake, but payment in neglect of duty which the commercial law places
upon him, and the result of his negligence must rest upon him. The prime duty of the bank is to ascertain the genuineness
of the signature of the drawer or the depositor on the check being encashed. It is expected to use reasonable business
prudence in accepting and cashing a check presented to it. Obviously, petitioner was negligent in encashing said forged
check without carefully examining the signature which shows marked variation from the genuine signature of private
respondent. The act of the plaintiff in leaving his checkbook in the car cannot be considered negligence sufficient to excuse
the defendant bank from its own negligence. Santos could not have been expected to know that Santos, a long time
classmate and friend, would remove a check from his checkbook.
BANCO DE ORO SAVINGS VS. EQUITABLE BANKING CORP.
GR No. 74917, Jan. 20, 1988

FACTS: Plaintiff through its Visa Card Department, drew six crossed Manager's check payable to certain member
establishments of Visa Card. Subsequently, the Checks were deposited with the defendant to the credit of its depositor, a
certain Aida Trencio. Following normal procedures, and after stamping at the back of the Checks the usual endorsements.
All prior and/or lack of endorsement guaranteed the defendant sent the checks for clearing through the Philippine Clearing
House Corporation (PCHC). Accordingly, plaintiff paid the Checks; its clearing account was debited for the value of the
Checks and defendant's clearing account was credited for the same amount, Thereafter, plaintiff discovered that the
endorsements appearing at the back of the Checks and purporting to be that of the payees were forged and/or
unauthorized or otherwise belong to persons other than the payees. Pursuant to the PCHC Clearing Rules and Regulations,
plaintiff presented the Checks directly to the defendant for the purpose of claiming reimbursement from the latter.
However, defendant refused to accept such direct presentation and to reimburse the plaintiff for the value of the Checks.

ISSUE: Whether or not BDO can escape liability by reasons of forgery

RULING: No. A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be a
forged endorsement. If the instrument involved is a check, the drawee cannot charge the account of the drawer if the
payee’s or indorser’s signature is forged. The drawee, in turn has the right of recourse against the collecting bank. The
drawer owes no duty of diligence to the collecting bank, the law imposes a duty of diligence on the collecting bank to
scrutinize checks deposited with it for the purpose of determining their genuineness and regularity. It is the collecting
bank that generally suffers the loss with regard to forged indorsements because it had the duty to ascertain the
genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements.
WESTMONT BANK VS. EUGENE ONG GR No. 132250 Jan. 30, 2002

FACTS: It was undisputed that Respondent Eugene Ong maintained a current account with petitioner, formerly the
Associated Banking Corporation, but now known as Westmont Bank. Sometime in May 1976, he sold certain shares of
stocks through Island Securities Corporation. To pay Ong, Island Securities purchased two (2) Pacific Banking Corporation
manager’s checks, both dated May 4, 1976, issued in the name of Eugene Ong as payee. Before Ong could get hold of the
checks, his friend Paciano Tanlimco got hold of them, forged Ong’s signature and deposited these with petitioner, where
Tanlimco was also a depositor. Even though Ong’s specimen signature was on file, petitioner accepted and credited both
checks to the account of Tanlimco, without verifying the ‘signature indorsements’ appearing at the back thereof. Tanlimco
then immediately withdrew the money and absconded.

ISSUE: Whether Westmont Bank is precluded from setting up the forgery or want of authority and therefore, should suffer
the loss and be made liable to herein Respondent Ong

HELD: YES. Citing the ruling in Associated Bank vs. Court of Appeals, the collecting bank or last endorser generally suffers
the loss because it has the duty to ascertain the genuineness of all prior endorsements. The collecting bank is also made
liable because it is privy to the depositor who negotiated the check. The bank knows him, his address and history because
he is a client. Hence, it is in a better position to detect forgery, fraud or irregularity in the indorsement. Further, respondent
Ong, at the time the fraudulent transaction took place, was a depositor of petitioner bank. Banks are engaged in a business
impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact
business with them. They have the obligation to treat their client’s account meticulously and with the highest degree of
care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that
of a good father of a family. Since the signature of the payee, in the case at bar, was forged to make it appear that he had
made an indorsement in favor of the forger, such signature should be deemed as inoperative and ineffectual. Petitioner,
as the collecting bank, grossly erred in making payment by virtue of said forged signature. The payee, herein respondent,
should therefore be allowed to recover from the collecting bank. The theory of said rule is that the collecting bank’s
possession of such check is wrongful.
ILLUSORIO VS. CA GR No. 139130; Nov. 27, 2002

FACTS: Petitioner was a depositor in good standing of respondent bank, the Manila Banking Corporation. As he was then
running about 20 corporations, and was going out of the country a number of times, petitioner entrusted to his secretary,
Katherine E. Eugenio, his credit cards and his checkbook with blank checks. It was also Eugenio who verified and reconciled
the statements of said checking account. Between the dates September 5, 1980 and January 23, 1981, Eugenio was able
to encash and deposit to her personal account about seventeen (17) checks drawn against the account of the petitioner
at the respondent bank. Upon learning that Eugenio has been using his credit cards, petitioner fired Eugenio immediately,
and instituted a criminal action against her for estafa thru falsification. Private respondent also lodged a complaint for
estafa thru falsification of commercial documents against Eugenio on the basis of petitioner’s statement that his signatures
in the checks were forged. Petitioner then requested the respondent bank to credit back and restore to its account the
value of the checks which were wrongfully encashed but respondent bank refused. Hence, petitioner filed the instant case.
Petitioner contends that Manila Bank is liable for damages for its negligence in failing to detect the discrepant checks. He
adds that as a general rule a bank which has obtained possession of a check upon an unauthorized or forged endorsement
of the payee’s signature and which collects the amount of the check from the drawee is liable for the proceeds thereof to
the payee. Petitioner further contends that under Section 23 of the Negotiable Instruments Law a forged check is
inoperative, and that Manila Bank had no authority to pay the forged checks.

ISSUE: Whether petitioner may put up the defense of forgery against Manila bank

HELD: NO. True, it is a rule that when a signature is forged or made without the authority of the person whose signature
it purports to be, the check is wholly inoperative. No right to retain the instrument, or to give a discharge therefor, or to
enforce payment thereof against any party, can be acquired through or under such signature. However, the rule does
provide for an exception, namely: “unless the party against whom it is sought to enforce such right is precluded from
setting up the forgery or want of authority.” In the instant case, it is the exception that applies. In our view, petitioner is
precluded from setting up the forgery, assuming there is forgery, due to his own negligence in entrusting to his secretary
his credit cards and checkbook including the verification of his statements of account. Petitioner’s reliance on Associated
Bank vs. Court of Appeals and Philippine Bank of Commerce vs. CA to buttress his contention that respondent Manila Bank
as the collecting or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements is misplaced. In the cited cases, the fact of forgery was not in issue. In the present case, the fact of forgery
was not established with certainty. In those cited cases, the collecting banks were held to be negligent for failing to observe
precautionary measures to detect the forgery. In the case before us, both courts below uniformly found that Manila Bank’s
personnel diligently performed their duties, having compared the signature in the checks from the specimen signatures
on record and satisfied themselves that it was petitioner’s.
TRADERS ROYAL BANK VS. RPN GR No. 138510; Oct. 10, 2002

FACTS: The BIR assessed plaintiffs Radio Philippines Network (RPN), Intercontinental Broadcasting Corporation (IBC), and
Banahaw Broadcasting Corporation (BBC) of their tax obligations for the taxable years 1978 to 1983. To pay the assessed
taxes, respondent networks purchased from petitioner Traders Royal Bank (TRB) three manager’s checks which was turned
over through Aida Nuñez, TRB Branch Manager, to Mrs. Lourdes C. Vera, the financial comptroller of respondents. The 3
manager’s checks, however, were never delivered nor paid to the BIR but instead, the checks were presented for payment
by unknown persons to Security Bank, Taytay Branch. Respondents sent letters to both TRB and Security Bank thereafter
demanding that the amounts covered by the checks be reimbursed or credited to their account. An action was filed where
it was decided that the networks should be reimbursed for the amounts of the checks by petitioner bank and the latter in
turn, must be reimbursed by Security Bank. In the appellate court, it was held that Traders Bank should be the only Bank
liable.

ISSUE: Whether Traders Royal Bank should solely bare the loss for its negligence

HELD: YES. If a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount
so paid to the account of the depositor. Petitioner TRB ought to have known that where checks drawn payable to the
order of one person and is presented for payment by another and purports upon its face to have been duly indorsed by
the payee of the check, it is the primary duty of petitioner to know that the check was duly indorsed by the original payee
and, where it pays the amount of the check to a third person who has forged the signature of the payee, the loss falls upon
petitioner who cashed the check. Its only remedy is against the person to whom it paid the money. A bank is engaged in a
business impressed with public interest and it is its duty to protect its many clients and depositors who transact business
with it. It is under the obligation to treat the accounts of the depositors and clients with meticulous care, whether such
accounts consist only of a few hundred or millions of pesos. Since TRB did not pay the rightful holder or other person or
entity entitled to receive payment, it has no right to reimbursement. Petitioner TRB was remiss in its duty and obligation,
and must therefore suffer the consequences of its own negligence and disregard of established banking rules and
procedures. It should be further noted that one of the checks was a crossed check. The crossing of the check should have
put petitioner on guard; it was duty-bound to ascertain the indorser’s title to the check or the nature of his possession.
Bank of the Philippine Islands v. Court of Appeals G.R. No. 102383. November 26, 1992

FACTS

On 9 October 1981 someone impersonated herself as Eligia Fernando who wanted to pre-terminate her placement in the
money market with the bank. Reginaldo Estaquio, a dealer trainee, received the call and told her that the “trading time”
for the week was over. The next week, Estaquio conveyed the pre-termination request, however, he did not verify whether
he talked to the real Eligia Fernando. He relied to the early conversation the week prior and he proceeded with processing
the termination. Thereafter, the caller gave instructions that the checks will be picked up by her niece, Rosemarie
Fernando, rather than delivering the checks to her office. The dispatcher failed to get the promissory note evidencing the
placement. The impersonator opened an account with the bank, deposited the checks, then withdrew the amounts. The
real Eligia appeared to roll-over her placement upon the maturity and denied pre-terminating her money market
placements, and that she never received the proceeds. This prompted BPI to surrender the checks to China Banking
Corporation (CBC) on the alleged forgery of payee’s indorsements.

ISSUE: Whether or not the banks were negligent which should be held responsible.

HELD: YES. Both banks, BPI and CBC were negligent in the selection and supervision of their employees resulting in the
encashment of the forged checks by an impostor. Both banks were not able to overcome the presumption of negligence
in the selection and supervision of their employees. The general rule is that since the payee’s indorsement has been forged,
the instrument is wholly inoperative. However, on this case, the issue in this case is as to who between the parties should
bear the loss in the payment of the forged checks. It is held that the acts of the employees of BPI were tainted with more
negligence if not criminal than the acts of CBC. First, the act of disclosing information about the money market placement
over the phone is a violation of the General Banking Law. Second, there was failure on BPI’s part to compare the signatures
during the termination of the placement, opening of a new account with the specimen signature in file of Fernando. Third,
there was failure to ask the surrender of the promissory note evidencing the placement. While the acts of BPI was the
proximate cause to the loss. Nevertheless, the negligence of the employees of CBC should be taken also into consideration
as they closed their eyes to the suspicious large amount withdrawals made over the counter as well as the opening of the
account.
Philippine Savings Bank v. Sakata, G.R. No. 229450. June 17, 2020

On December 17, 2002, Maria Cecilia Sakata (Sakata) opened Savings Account No. 035-111-05773-6 with the Philippine
Savings Bank (PS Bank) Dasmariñas, Cavite Branch. On December 20, 2002, Sakata opened Current Account No. 035-
10100399-5 in the same bank, and received a passbook and checkbook with Serial Nos. 99501 to 99550. Stamped on the
Deposit Account Information and Specimen Signature Card for her savings account were the words: "With Instruction to
transfer funds from [savings account no.] 035-111-05773-6 to [current account no.] 035-101-00399-5." On May 4, 2003,
Sakata left for Osaka, Japan to work. While in Japan, she remitted cash to her PS Bank savings account, and issued checks
for the support of her children and the amortization of a house and lot she purchased. On July 27, 2006, Sakata went back
to the Philippines. On August 7, 2006, Sakata went to PS Bank to close her checking account and surrender unused checks.
When Sakata had her passbook updated, she noticed that the deposit and withdrawal entries from May 1, 2003 to
September 16, 2005 were "lumped in one entry" instead of having a "per transaction entry. This prompted Sakata to
request for a copy of the itemized transaction entries from October 1, 2004 to September 16, 2005 as she had trouble
verifying the bank transactions. However, PSBank denied her requests. Upon updating her savings account, Sakata was
surprised to find out that instead of P1,000,000.00, she only had a remaining balance of P391.00. She also discovered that
there was a deposit of P4,488,197.01 and a withdrawal of P4,751.112.42 both made on September 16, 2005. Sakata
informed the teller that she could not have made those transactions as she was in Japan during that time, but she was
only asked to return to the bank. Sometime in January 2007, Sakata talked to the PS Bank branch manager who instructed
her to write a letter requesting for "specimen signature cards for her savings and current accounts, statement of account
for her current account, printout of her passbook, and the original checks which were encashed and paid by the bank. On
April 30, 2007, PS Bank provided Sakata with copies of her current account statement and some checks, as well as two
original checks. Upon examination of the documents, Sakata found that there were 25 checks debited from her account
which she did not issue or sign. She claimed that she never possessed a checkbook bearing the serial numbers of the 25
checks, and the entries and signatures on them were all forged. On March 14, 2008, Sakata, through her counsel, made a
formal request asking PS Bank to hand over the 25 checks and the specimen signature cards. A demand letter was also
sent to PS Bank on the same date asking them to re-credit P1,087,500.000 to Sakata's account representing the amount
withdrawn through the forged checks plus interest. PS Bank failed to re-credit the amount prompting Sakata to file a Civil
Case for Sum of Money and Damages before the Regional Trial Court of Imus, Cavite. In its Answer with Counterclaim, PS
Bank insisted that Sakata authorized her mother, Gemma Bartolome, to request and receive two additional checkbooks
bearing serial numbers 159601 to 159650 and 159651 to 159700. They claimed the 25 checks were validly encashed as
they were verified by their bank personnel. In her Reply, Sakata denied that she authorized her mother to request and
receive additional checkbooks and monthly bank statements from PS Bank. The Regional Trial Court ruled in favor of Sakata
and ordered PS Bank to pay Sakata.

ISSUE: Whether or not there was forgery of Sakata's signature in the questioned checks;
Whether respondent was negligent, which demands the application of the doctrine of shared responsibility between the
drawee bank and the negligent drawer

RULING: It is settled that "a bank is bound to know the signatures of its customers; and if it pays a forged check, it must
be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account
of the depositor whose name was forged."

Section 23 of the Negotiable Instruments Law bars a party from setting up the defense of forgery if it is guilty of
negligence.” However, we find that respondent is not negligent in this case. Petitioner failed to prove its contentions that
respondent received the monthly statements, and that her mother received, forged and presented the questioned checks.
Thus, there is no need to discuss the applicability of Section 14 of the Negotiable Instruments Law.The presumption
remains that every person takes ordinary care of his or her concerns, and that the ordinary course of business has been
followed.’ “Negligence is not presumed, but must be proven by him [or her] who alleges it.” Here, petitioner was unable
to dispute the presumption of ordinary care exercised by respondent. Furthermore, in Philippine
National Bank v. Quimpo,84 the respondent’s act of leaving his checkbook in the car with his longtime classmate and friend
while he went out for a short while cannot be considered negligence sufficient to excuse the bank from its own negligence,
because respondent had no reason to suspect that his friend would breach his trust.Similarly in this case, even assuming
that her mother indeed presented the questioned checks while respondent was in Japan, she cannot be held negligent in
entrusting the same to her mother.