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Metrobank vs CA

Metropolitan Bank & Trust Company vs. Court of Appeals
G.R. No. 88866 February 18, 1991

Eduardo Gomez opened an account with Golden Savings and Loan Association and deposited over a period of two
months 38 treasury warrants with a total value of P1,755,228.37. All these warrants were subsequently indorsed by
Gloria Castillo as Cashier of Golden Savings and deposited to its savings account in the Metrobank branch in
Calapan, Mindoro. 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. Before they were cleared, petitioner decided to allow
Golden Savings to withdraw from the proceeds of the warrants. Golden Savings in turn subsequently allowed Gomez
to make withdrawals from his own account. Subsequently, 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amount it had previously withdrawn, to make up the deficit in its account. Metrobank contends that by indorsing the
warrants in general, Golden Savings assumed that they were "genuine and in all respects what they purport to be," in
accordance with Section 66 of the Negotiable Instruments Law.

Whether petitioner can hold Golden Savings liable as an indorser of the treasury warrants based on the predication
that the treasury warrants involved in this case are negotiable instruments.

Clearly stamped on the face of the treasury warrants is the word "non-negotiable." It is also indicated that they are
payable from a particular fund, to wit, Fund 501. The indication of Fund 501 as the source of the payment to be
made on the treasury warrants makes the order or promise to pay "not unconditional" and the warrants themselves
non-negotiable. Petitioner cannot hold Golden Savings liable as an indorser under Section 66 of the NIL for the
simple reason that this law is not applicable to the non-negotiable treasury warrants.


G.R. No. 72593 April 30, 1987




Consolidated Plywood (CPI), a company engaged in logging business, had a project in 1978 for the opening of
additional roads, and simultaneous logging operations along the route of said roads, in its logging concession area at
Baganga, Manay, and Caraga, Davao Oriental. For this purpose, it needed two (2) additional units of tractors.

The said company then bought two (2) "Used" Allis Crawler Tractors from Industrial Products Marketing (IPM)
which dealt in tractors and other heavy equipment business. IPM assured CPI that the said tractors were fit for the job.
Relying on the assurance, the tractors were purchased on installment basis with Php210k as down payment. The deed of
sale was accompanied by a chattel mortgage and a promissory note. The pertinent portion of the note is as follows:

FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the
Philippine Currency, the said principal sum, to be payable in 24 monthly installments starting July 15, 1978 and every 15th of
the month thereafter until fully paid.

Simultaneously, with the execution of the deed of sale with chattel mortgage with promissory note, IPM assigned
its rights and interest in the chattel mortgage in favor of IFC Leasing and Acceptance Corporation.

The mechanics sent by IPM found that the tractors could not be repaired and were no longer serviceable. requested IPM to pull out the units and have them reconditioned for subsequent sale. Thus. plaintiff-petitioner. the VP of CPI." the instrument is payable only to the person designated therein and is therefore non-negotiable. The petitioners sought to dismiss and prayed for other reliefs. in order to be considered negotiable. The IAC. Thus. the operations were delayed and as such Vergara. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter. However. Without the words "or order" or "to the order of." it cannot be denied that the promissory note in question is not a negotiable instrument. Thereafter. the IAC ruled that the promissory note satisfied the requirements of a negotiable instrument which was discounted or sold to IFC Leasing which was engaged in financing and receivable discounting for extending credit facilities. and suing under the said note as holder in due course. IFC Leasing filed a case against CPI for principal of about Php 1. ASIAN INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES. must contain the so-called 'words of negotiable. The letter was not responded to by the latter despite follow ups. and a holder in due course. MARY CHENG UY. advised IPM that the payments for the installments in the promissory note will also be delayed. There must always be a specified person named in the instrument. Under Section 8. These words serve as an expression of consent that the instrument may be transferred. 3. the CPI may raise against the IFC Leasing all defenses available to it as against the seller-assignor IPM. CPI’s President. The trial court and IAC erred. defendants-respondents. with the proceeds given to IPM." Considering that paragraph (d). FACTS: . The instrument. CPI argued that the trial court erred in not approving its claim of warranty and finding that IFC Leasing as a holder in due course of the promissory note. SIMA WEI and/or LEE KIAN HUAT. SAMSON TUNG. however. On the second issue. RATIO Section 1(d) of the NIL requires that the promissory note must be payable to order or bearer. one of the tractors broke down. In its appeal to the IAC. the trial court rendered judgment in favor of IFC Leasing and ordered CPI to pay the amount. affirmed the trial court’s decision. When Payable to Order. The promissory note is NOT a negotiable instrument. Barely 14 days after delivery of the tractors.5m). (≈Php 1. Section 1 of the Negotiable Instruments Law requires that a promissory note "must be payable to order or bearer. It means that the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. vs. DEVELOPMENT BANK OF RIZAL (DBR). This consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a non-negotiable one. with the second following after a further 9 days. accrued interest of P151k. must be payable to 'order' or 'bearer'. — The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order.1m. ISSUE Whether or not the promissory note in question is a negotiable instrument HELD No. and P249k of attorney’s fees and costs of suit. Wee.

If a check is stolen from the payee. DBR instituted actions against the Sima Wei and the other defendants. is not only a written evidence of a contract right but is also a species of property. in the alternative or otherwise. if the allegations in the complaint are found to be true. Natividad Gempesaw vs Court of Appeals 218 SCRA 682 – Mercantile Law – Negotiable Instruments Law – Liabilities of Parties – Forgery – Forged Indorsements Natividad Gempesaw is a businesswoman who entrusted to her bookkeeper. Thus. These two checks however were not delivered to the DBR but instead came into the possession of respondent Lee Kian Huat. of which a check is. there can be no liability on the instrument. However. Gempesaw cannot set up the defense of forgery by reason of her negligence. the payee of the negotiable instrument acquires no interest with respect thereto until its delivery to him.208. it is Sima Wei. An exception to this rule is where the drawer is guilty of such negligence which causes the bank to honor such a check or checks. From 1984 to 1986. Sima Wei issued two crossed checks payable to DBR. anything which the respondents may have done with respect to said checks could not have prejudiced petitioner Bank.820. these checks were never delivered to the supposed payees. ISSUE: Whether or not the bank should refund the money lost by reason of the forged indorsements.Sima Wei executed a promissory note in consideration of a loan secured from DBR in the amount of P1. Petitioner Bank has therefore no cause of action against said respondents. Just as a deed to a piece of land must be delivered in order to convey title to the grantee. CA affirmed this decision. who would have a cause of action against her co-respondents. 4. Section 16 provides that every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto.606. who deposited the checks without DBR's indorsement to the account of respondent Plastic Corporation with Producers Bank. Instead. If at all. it never owned them (the checks) nor did it acquire any interest therein. through Galang. the preparation of checks about to be issued in the course of her business transactions.000. Thus. Subsequently. Alicia Galang. RULING: A negotiable instrument. HELD: No. Moreover. The trial court dismissed the case stating that DBR had no cause of action against the defendants- respondents. were prepared and were supposed to be delivered to Gempesaw’s clients as payees named thereon. Since petitioner Bank never received the checks on which it based its action against said respondents. so must a negotiable instrument be delivered to the payee in order to evidence its existence as a binding contract. the Branch Manager of Producers Bank authorized the acceptance of the checks for deposit and credited them to the account of said Plastic Corporation.89. As a rule. It had no right or interest in the checks which could have been violated by said respondents. the checks were fraudulently indorsed to Alfredo Romero and Benito Lam. ISSUE: Whether petitioner Bank has a cause of action against any or all of the defendants-respondents. such delivery must be intended to give effect to the instrument. Without the initial delivery of the instrument from the drawer to the payee. 82 checks amounting to P1. a drawee bank (in this case the Philippine Bank of Communications) who has paid a check on which an indorsement has been forged cannot charge the drawer’s (Gempesaw’s) account for the amount of said check. Sima Wei was able to pay partially for the loan but failed to pay the balance. Inspite of the fact that the checks were crossed and payable to DBR and bore no indorsement of the latter. it is quite obvious that the drawer cannot possibly discover the forged indorsement by mere . the drawer.

and did not compare them with the same invoices. Sgd. The negligence of a depositor which will prevent recovery of an unauthorized payment is based on failure of the depositor to act as a prudent businessman would under the circumstances. It was not until two years after Galang commenced her fraudulent scheme that Gempesaw discovered that eighty-two (82) checks were wrongfully charged to her account. the sum of ___________ PESOS(…. averred that he should not be held personally liable for such authorized corporate acts that he performed inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing. With such discovery. World Garment Manufacturing. Canlas. I/we. CORP. through its board authorized Shozo Yamaguchi (president) and Fermin Canlas (treasurer) to obtain credit facilities from Republic Planters Bank (RPB). 2012 Negotiable Instruments in General – 216 SCRA 738 – Signature of Makers In 1979. 9 promissory notes were executed. although she regularly received her bank statements. at which she notified the Philippine Bank of Communications. at its office in Manila. In the case at bar. 5. after date.examination of his cancelled check. 1372-00257-6 of WORLDWIDE GARMENT MFG. or done with the active participation of the latter. Shozo Yamaguchi Sgd. Fermin Canlas The note became due and no payment was made. she apparently did not carefully examine the same nor the check stubs and the returned checks. jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK. Otherwise. For this. and did not even verify the accuracy of amounts of the checks she signed against the invoices attached thereto. RPB eventually sued Yamaguchi and Canlas. for value received. Each promissory note was uniformly written in the following manner: ___________. in his defense. the subsequent forgeries would not have been accomplished.Republic Planters Bank vs Court of Appeals on February 29. Philippines. A different situation arises where the indorsement was forged by an employee or agent of the drawer. Furthermore. she could have easily discovered the discrepancies between the checks and the documents serving as bases for the checks. .) Philippine Currency… Please credit proceeds of this note to: ________ Savings Account ______XX Current Account No. Gempesaw relied implicitly upon the honesty and loyalty of Galang.

31 January 1981. Where an instrument containing the words “I promise to pay” is signed by two or more persons. the bank also required Aruego to execute a trust receipt in favor of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to sell the same with the promise to turn over to the bank the proceeds of the sale to answer for the payment of all obligations arising from the draft. Drawn By: (drawer) Drawn Upon: (drawee) Payable to: (payee) . Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons: The promissory notes are negotiable instruments and must be governed by the Negotiable Instruments Law. Under the Negotiable lnstruments Law. obtained a credit accommodation from the Philippine Bank of Commerce. As an added security for the payment of the amounts advanced to the printer. 1959. By signing the notes. without disclosing his principal. Aruego GR L-25836-37. persons who write their names on the face of promissory notes are makers and are liable as such. JAI-ALAI VS BANK OF THE PHILIPPINE ISLANDS GR NO. 6. they are deemed to be jointly and severally liable thereon. Philippine Bank of Commerce vs. by the presence of the phrase “joint and several” as describing the unconditional promise to pay to the order of Republic Planters Bank.030. For every printing of the periodical. ten checks with a total face value of P8.ISSUE: Whether or not Canlas should be held liable for the promissory notes. 7. the maker promises to pay to the order of the payee or any holder according to the tenor thereof. 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 filing a representative character. The bank instituted an action against Aruego to recover the cost of printing of the latter’s periodical. Aruego is personally liable for the drafts he accepted. without reason for ambiguity.”. For failure to disclose his principal. RULING: Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of the Philippine Education Foundation Company. the printer collected the cost of printing by drawing a draft against the bank.58 were deposited by the petitioner Jai-Alai in its current account with the respondent bank BPI. 102 scra 530 --agents FACTS: To facilitate payment of the printing of a periodical called “World Current Events. pursuant to Section 20 of the NIL which provides that when a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity. Aruego. 1975 FACTS: From April 2. ISSUES: Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange only as an agent of Philippine Education Foundation Company. HELD: Yes. which the former acquired from one Antonio Ramirez who was a sales agent of Inter-Island Gas Corporation and a regular bettor at jai-alai games. L-29432 August 6. Aruego however argues that he signed the supposed bills of exchange only as an agent of the Philippine Education Foundation Company where he is president. The solidary liability of private respondent Fermin Canlas is made clearer and certain. said draft being sent later to Aruego for acceptance. does not exempt him from personal liability. its publisher. 1959 to May 18.

So when petitioner drew against its current account with respondent a check for P135. had to reimburse to the drawee-banks. It stands to reason. and filed a criminal complaint against Ramirez with the Office of the City Fiscal of Manila. the return of the amounts they had paid on account thereof. The reason is that the bank with which the check was deposited has no right to pay the sum stated therein to the forger "or anyone else upon a forged signature. which in turn demanded from the respondent." In contrast. Pursuant to Sec. It is the obligation of the collecting bank to reimburse the drawee-bank the value of the checks subsequently found to contain the forged indorsement of the payee. the latter paid their value which the former in turn paid to the Inter-Island Gas. the relationship of creditor and debtor between the petitioner and the respondent had not been validly effected.5 checks: Delta Engineering Service Pacific Banking Corporation Inter-Island Gas Service or ORDER 2 checks: Enrique Cortiz & Co. therefore. Inter-Island Gas notified the petitioner. Having indorsed the checks to respondent bank. ISSUE: Whether or not the BPI had the right to debit from petitioner’s current account the value of the checks with the forged endorsements? HELD: YES. Pacific Banking Corporation Inter-Island Gas Service or BEARER 1 check: Luzon Tinsmith & Co. the nature of the relationship created at that stage was one of agency.. the bank was to collect from the drawees of the checks the corresponding proceeds. 23 of the NIL. The drawers demanded reimbursement from the drawee-banks. When the petitioner deposited the checks with the respondent. it was petitioner’s duty to that the payee's endorsement was genuine before cashing the check. the drawers and the drawee-banks of the said checks about the forgeries. The petitioner must in turn shoulder the loss of the amounts which the respondent." were forgeries. for the indorsements on the checks had been forged prior to their delivery to the petitioner. petitioner is deemed to have given the warranty prescribed in Section 66 of the NIL that every single one of those checks "is genuine and in all respects . as collecting bank. China Banking Corporation I nter-Island Gas Service or BEARER 2 checks: Roxas Manufacturing Inc Philippine National Bank Inter-Island Gas Service or ORDER After Ramirez had resigned from the Inter-Island Gas and after the checks had been submitted to inter-bank clearing. The petitioner filed a complaint against the respondent with CFI Manila but it was dismissed by the trial court as well as by Court of Appeals. and. the payments made by the drawee-banks to the respondent on account of the said checks were ineffective. Inc. that the respondent. The respondent BPI acted within legal bounds when it debited the petitioner's account. as a collecting bank which indorsed the checks to the drawee-banks for clearing. the same was dishonored for the insufficiency of funds. as its collecting agent. upon the facts of record. a forged signature in a negotiable instrument is wholly inoperative and no right to discharge it or enforce its payment can be acquired through or under the forged signature except against a party who cannot invoke the forgery. Repondent BPI debited petitioner’s current account and forwarded to the latter the checks containing the forged indorsements. the respondent. which the petitioner refused to accept. the checks not having been properly and legitimately converted into cash. When the drawee-banks returned the checks to the respondent BPI. that is. such being the case. the Inter-Island Gas discovered that all the indorsements made on the checks purportedly by its cashiers as well as the rubber stamp impression thereon reading "Inter-Island Gas Service.000 payable to the order of Mariano Olondriz. In legal contemplation. should be liable to the latter for reimbursement.

08. Ebrada. ISSUE: Whether or not Republic Bank may recover from Ebrada. upon receiving the encashment. acceptor. notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party." Respondent which relied upon the petitioner's warranty should not be held liable for the resulting loss. warranted the genuineness of the signatures of the payee and the previous indorsers. Republic Bank paid the amount of the check to Ebrada. then to Delia Dominguez and then to Mauricia Ebrada. 23 August 1922] Facts: . Republic Bank refunded the amount to the Bureau of Treasury. the Bureau of Treasury notified that the check was a forgery because the payee named therein (Martin Lorenzo) was actually dead 11 years ago before the check was issued. The check was subsequently indorsed to Ramon Lorenzo. The drawee named therein was Republic Bank. One who purchases a check or draft is bound to satisfy himself that the paper is genuine and that by indorsing it or presenting it for payment or putting it into circulation before presentation he impliedly asserts that he has performed his duty and the drawee (in this case Republic Bank) who has paid the forged check. drawer. 1963. Such a person is liable on the instrument to a holder for value. Ebrada encashed the check with the Republic Bank.246. and for the purpose of lending his name to some other person. Later. (Issue on Indorsement) Jai Alai Corporation is negligent in accepting the checks without question from Antonio Ramirez notwithstanding that the payee was the Inter-Island Gas Services. gave it to Dominguez. The drawee bank is not duty bound to ascertain whether or not the signatures of the payee and the indorsers are genuine. Republic Bank vs Mauricia Ebrada 65 SCRA 680 – Mercantile Law – Negotiable Instruments Law – Consideration – Forgery – Liability of Accommodation Party On January 15. Ebrada. being the last indorser. may recover the money paid from such negligent purchasers. An accommodation party is one who has signed the instrument as maker.The Great Eastern Life Insurance Co. 9. [GR 18657. 8. But Ebrada did not profit from this because she. the Bureau of Treasury issued a back pay check to Martin Lorenzo in the amount of P1. The bank then demanded Ebrada to refund them. Hongkong & Shanghai Banking Corp. HELD: Yes.what it purports to be. and it did not appear that he was authorized to indorse it. or indorser. Inc. without actual negligence on his part. Dominguez in turn gave the cash to Ramon Lorenzo. upon receiving the cash. vs. without receiving value therefor. gave the same to Dominguez? She is still liable because she is considered as an accommodation party – pursuant to Section 29 of the Negotiable Instruments Law.

(HSBC) and Philippine National Bank (PNB) are banking corporations. E. Upon the . as prayed for in its complaint. and each is duly licensed to do its respective business in the Philippine Islands. GELIC promptly made a demand upon HSBC that it should be given credit for the amount of the forged check. PNB was made defendant. Upon the issues being joined. from which the plaintiff appeals. Maasim fraudulently obtained possession of the check. which paid it. HSBC denies any liability.000 which was paid on the forged check. while Hongkong & Shanghai Banking Corp. It was discovered that Melicor. and GELIC commenced the action to recover the P2. and in not rendering a judgment in its favor. HSBC rendered a bank statement to GELIC showing that the amount of the check was charged to its account About 4 months after the check was charged to the account of GELIC. a trial was had and judgment was rendered against the plaintiff and in favor of the defendants. GELIC drew its check payable to the order of Lazaro Melicor for P2. On the petition of HSBC. and that his signature. had never received it.M. was forged by Maasim. as an endorser. if a judgment should be rendered against it.The Great Eastern Life Insurance Co. forged Melicor's signature. and charged the amount of the check to the account of GELIC. PNB endorsed the check to HSBC. but prays that. notwithstanding its finding of fact. The latter bank placed the said amount on Maasim’s account. With this knowledge. On 3 May 1920. as an endorser. which the bank refused to do. In the ordinary course of business.000 on HSBC with whom it had an account. and then personally endorsed and presented it to PNB. (GELIC) is an insurance corporation. claiming that the court erred in dismissing the case. it should have like judgment against PNB which denies all liability to either party. in turn. to whom the check was made payable.

with interest thereon from 8 November 1920. PNB cashed the check upon a forged signature. the plaintiff authorized and directed the Shanghai Bank to pay Melicor.” The money was on deposit in HSBC. Here. The Supreme Court reversed the lower court's judgment. and never received any of its proceeds. or to enforce payment thereof against any party thereto. and the costs of the action. at the rate of 6% per annum.000. and a . and placed the money to the credit of Maasim. “When a signature is forged or made without the authority of the person whose signature it purports to be. PNB had no license or authority to pay the money to Maasim or anyone else upon a forged signature.issued being joined.000 to Melicor. GELIC ordered HSBC to pay the P2. a trial was had and judgment was rendered against GELIC and in favor HSBC and PNB from which GELIC appealed. and no right to retain the instrument. P2. or his order. or authorized any one to endorse it for him. PNB’s remedy is against Maasim to whom it paid the money. and the testimony is undisputed that Melicor never did part with his title or endorse the check. and entered another in favor of GELIC and against HSBC for P2. and he never personally endorsed the check. unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. and it had no legal right to pay it out to anyone except GELIC or its order. It did not authorize or direct the bank to pay the check to any other person than Melicor.000. it is wholly inoperative. who was the forger. Section 23 of the Negotiable Instruments Law is square in point. and the money was actually paid to Maasim and was never paid to Melicor. HSBC has no defense to the present action. or his order. In other words. Issue: Whether or not GELIC can recover inasmuch as Melicor’s indorsement was forged. can be acquired through or under such signature. and the alleged endorsement was a forgery. or to give a discharge therefor. Ruling: Plaintiff's check was drawn on Shanghai Bank payable to the order of Melicor. Hence. That PNB then endorsed the check and forwarded it to HSBC by whom it was paid. It was its legal duty to know that Melicor's endorsement was genuine before cashing the check.

and its acting General Manager Victor L. L-62943 July 14. the MWSS used personalized checks in drawing from this account.R. CA reversed. together with the amount of its costs in the action. Negotiable Instruments Case Digest: MWSS V. its auditor Pedro Aguilar. Mesina Enterprises  March. 6  deposited by the fictitious payees Raul Dizon.  Specimen signatures were submitted by the MWSS to and on file with the PNB  By special arrangement with the PNB. 1976: CFI favored MWSS  CA: reversed and favored PNB  applied Section 24 of the Negotiable Instruments Law ISSUE: W/N MWSS can can claim against PNB HELD: NO.  printed for MWSS by its printer.interest of the defunct NWSA. CA (1986) G. Arturo Sison and Antonio Mendoza in their respective current accounts with the Philippine Commercial and Industrial Bank (PCIB) and Philippine Bank of Commerce (PBC)  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'  NWSA filed against PNB before the CFI  PNB also filed a 3rd party complaint against the negotiating banks PBC and PCIB on the ground that they failed to ascertain the Identity of the payees and their title to the checks which were deposited in the respective new accounts of the payees with them  February 6. all of which were paid and cleared by PNB and debited by PNB against NWSA Account No. 10. 6 were those of MWSS treasurer Jose Sanchez. April and May 1969: 23 checks were prepared. 1986 Lessons Applicable: Forgery (Negotiable Instruments Law) FACTS:  Metropolitan Waterworks and Sewerage System (MWSS) is a GOCC and successor-in. Every negotiable instrument is deemed prima facie to have been issued for valuable consideration and every person whose signature appears thereon to have become a party thereto for value . Recio. processed. issued and released by NWSA. No.corresponding judgment will be entered in favor of HSBC against PNB for the same amount.  The authorized signature for PNB Account No. F.

and if it pays a forged check it must be considered as making the payment out of its obligation funds. SEC. positive. cheek writing. send a representative to the printing office during the printing of said checks .  Forgery cannot be presumed. and convincing evidence. Mesina Enterprises. and print used by its printer in the printing of its checks and of the inks and pens used in signing the same 5. and no right to retain the instrument. specific instructions relative to the safekeeping and disposition of excess forms.  NBI showed that the MWSS fraud was an "inside job" and that the MWSS' delay in the reconciliation of bank statements and the laxity and loose records control in the printing of its personalized checks facilitated the fraud.When the signature is forged or made without authority of the person whose signature it purports to be. or to give a discharge therefor. There must be conclusive findings that there is a variance in the inherent characteristics of the signatures and that they were written by 2 or more different persons. and safety papers 2. A bank is bound to know the signatures of its customers. EFFECT OF. retrieve from its printer all spoiled check forms 3. it is wholly inoperative. check vouchers. and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged.MWSS failed to 1. give its printer. FORGED SIGNATURE. furnish the respondent drawee bank with samples of typewriting..  Gross negligence in the printing of its personalized checks . It must be established by clear. provide any control regarding the paper used in the printing of said checks 4. These reports did not touch on the inherent qualities of the signatures which are indispensable in the determination of the existence of forgery. 23. This was not done in the present case. or to enforce payment thereof against any party thereto can be acquired through or under such signature unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.

This negligence was.  One factor which facilitate this fraud was the delay in the reconciliation of PNB statements with the NAWASA bank accounts. to reconcile the bank statements with its own records  MWSS requested the PNB to discontinue the practice of mailing the bank statements. VI of the Treasury Department at the NAWASA) is quite open to any person known to him or his staff members and that the check writer is merely on top of his table  Even if the 23 checks in question are considered forgeries. However.  Under the circumstances. the negotiation of practically all of the remaining checks on May. If Mr. MWSS was in a better position to detect and prevent the fraudulent encashment of its checks. therefore. Emiliano Zaporteza. The petitioner's own Fact Finding Committee. It observed that the "office of Mr. As a consequence. the fraudulent encashments of the first checks should have been discovered. 6. the it had issued constant reminders to all Current Account Bookkeepers informing them of the activities of forgery syndicates. and further frauds prevented. considering the petitioner's gross negligence. Had the NAWASA representative come to the PNB early for the statements and had the bank been advised promptly of the reported bogus check. Zaporteza had not been remiss in his duty of taking the bank statements and reconciling them with the petitioner's records. Zaporteza failed to reconcile the bank statements. long before the encashment of the 23 checks in question. it is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law  PNB had taken the necessary measures in the detection of forged checks and the prevention of their fraudulent encashment. x x x. but instead to deliver it to Mr. the proximate cause of the failure to discover the fraud. he was unreasonably delayed in taking prompt deliveries of the bank statements and credit and debit memos. 1969 could have been prevented. in its report submitted to their General manager underscored this laxity of records control.  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. Mr. In fact. Ongtengco (Cashier No. .