PNB v Quimpo
The prime duty of a bank is to ascertain the The SC even held that it was Ilusorio who was
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 being encashed or presented to it.
Payment in neglect of duty places upon him the result of
such negligence. Still, Gozon’s act in leaving his
checkbook in the car, where his trusted friend remained
in, cannot be considered negligence sufficient to excuse
the bank from its own negligence. The bank bears the
loss.
PNB v CA
Acceptance is not required for checks, for t
he same are payable on demand. Acceptance and
payment are distinguished with each other. The former
pertains to a promise to perform an act while the latter is
the actual performance of the act.
PNB had also been negligent with the particularity
that it had been guilty of a greater degree of negligence
because it had a previous and formal notice from GSIS
that the check had been lost, with the request that
payment be stopped. Just as important is that it is its
acts, which are the proximate cause of the loss.
MWSS v CA
There was no categorical finding that the 23
checks were signed by
persons other than those authorized to sign. O
n the contrary, the NBI reports shows that the fraud
was an “inside job” and that the delay in the
reconciliation of the bank statements and the lax
ity and loss of records
control in the printing of the personalized checks
facilitated the fraud. It further doesn’t provide that the
signatures were forgeries.
Forgery cannot be presumed. It should be proven
by clear, convincing and positive evidence. This wasn’t
done in the present case.
The petitioner cannot invoke Section 23 because it was
guilty of negligence not only before the questioned
checks but even after the same had already been
negotiated.
ILUSORIO v CA
The SC affirmed the lower court's decision. Ilusorio failed
to prove that the bank was negligent on their part as he
has the burden of proof. The bank's employees did not
know the secretary's modus operandi as she was always
transacting in behalf of Ilusorio.
negligent as he trusted his secretary of unusual
degree.
Ilusorio also cites Sec. 23 of the NIL that a forged
check is inoperative and that he bank has no
authority to pay. While true, the case at bar falls
under the exception stated in the section. The SC
held that Ilusorio is precluded from setting up the
forgery, assuming there is forgery, due to his own
negligence in entrusting his secretary.
BPI vs. Casa Montessori Internationale
Under this provision, a forged signature is a real or
absolute defense, and a person whose signature on
a negotiable instrument is forged is deemed to have
never become a party thereto and to have never
consented to the contract that allegedly gave rise to
it. The counterfeiting of any writing, consisting in the
signing of anothers name with intent to defraud, is
forgery. In the present case, we hold that there was
forgery of the drawers signature on the check.
Negligence is attributable to BPI alone. A banking
business is impressed with public interest, of
paramount importance thereto is the trust and
confidence of the public in general. Consequently,
the highest degree of diligence is expected, and high
standards of integrity and performance are even
required, of it. BPI, despite claims of following its
signature verification procedure, still failed to detect
the eight instances of forgery. Its negligence
consisted in the omission of that degree of diligence
required of a bank. It cannot now feign ignorance, for
very early on we have already ruled 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.
San Carlos Milling Co. Ltd V. BPI
Duty was upon the BPI, and the China Banking
Corporation was not bound to inspect and verify all
endorsements of the check, even if some of them
were also those of depositors in that bank. 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. Under
section 23 of the Negotiable Instruments Law they
are not a charge against San Carlos nor are the
checks of any value to the BPI. Proximate cause of loss
was due to the negligence of the Bank of the Philippine
Islands in honoring and cashing the two forged checks.
Republic v Equitable Bank
The Government was found to be negligent, thus
they are not entitled to recovery. It was the Treasurer
who initially cleared the 28 treasury warrant, being a
member of the aforementioned Clearing Office.
The gross nature of the negligence of the Treasury
becomes more apparent when we consider that each
one of the 24 warrants was for over P5,000, and, hence;
beyond the authority of the auditor of the Treasury —
whose signature thereon had been forged — to approve.
In other words, the irregularity of said warrants was
apparent the face thereof, from the viewpoint of the
Treasury. Moreover, the same had not advertised the
loss of genuine forms of its warrants. Neither had the BPI
nor the Equitable Bank been informed of any irregularity
in connection with any of the warrants involved in these 2
cases, until after the warrants had been cleared and
honored. As a consequence, the loss of the amounts
thereof is mainly imputable to acts and omissions of the
Treasury, for which the BPI and the Equitable Bank
should not and cannot be penalized.
Where a loss, which must be borne by one of two parties
alike innocent of forgery, can be traced to the neglect or
fault of either, it is reasonable that it would be borne by
him, even if innocent of any intentional fraud, through
whose means it has succeeded, (Phil. National Bank v.
National City Bank of New York, 63 Phil. 711, 723.)
PHILIPPINE NATIONAL BANK v.
THE NATIONAL CITY BANK OF NEW YORK,
and MOTOR SERVICE COMPANY, INC.
PNB can recover reimbursements from Motor
Service. In cases like this, the party guilty of negligence
bears the loss. In order to entitle a holder to payment of a
forged check, the holder must 1) prove that the
responsibility of determining the genuineness of the
signature is upon the drawee 2) he was diligent in
handling the check. In this case, Motor Service Co was
negligent. The bank was only guilty of constructive fault.
Motor Service Co on the other hand had several faults. In
the two checks that were indorsed, the check that was
later presented to Motor Services bears a check number
that is earlier than the one presented in an earlier
transaction. Motor Services failed to check it. They also
took the check from an unknown person. International
Auto Repair Shop is a company and in such situation, it
must inquire as to the authority of the one indorsing.
Section 23 of the Negotiable Instruments Act provides
that "when a signature is forged or made without the
authority of the person whose signature it purports to
be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, 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. PNB did not warrant to MCSI the
genuineness of the checks in question, by its
acceptance thereof, nor did it perform any act which
would have induced MSCI to believe in the
genuineness. Therefore, PNB is not precluded from
putting up the defense of forgery. It did not warrant
the genuineness of the signature when it paid the
check and it did not induce the appellant to believe
the genuineness of the signature. They can recover
reimbursements.
Samsung Construction v. FEBTC and CA
The general rule is to the effect that a forged
signature is wholly inoperative, and payment made
through or under such signature is ineffectual or
does not discharge the instrument. If payment is
made, the drawee cannot charge 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 to know and compare it. The rule has a
healthy cautionary effect on banks by encouraging
care in the comparison of the signatures against
those on the signature cards they have on file.
Quite palpably, the general rule remains that
the drawee who has paid upon the forged signature
bears the loss. The exception to this rule arises only
when negligence can be traced on the part of the
drawer whose signature was forged, and the need
arises to weigh the comparative negligence between
the drawer and the drawee to determine who should
bear the burden of loss.
We 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.
Given the circumstances, extraordinary diligence
dictates that FEBTC should have ascertained from
Jong personally that the signature in the
questionable check was his.
Still, even if the bank performed with utmost
diligence, the drawer whose signature was forged
may still recover from the bank as long as he or she
is not precluded from setting up the defense of
forgery. After all, Section 23 of the Negotiable
Instruments Law plainly states that no right to
enforce the payment of a check can arise out of a forged
signature. Since the drawer, Samsung Construction, is
not precluded by negligence from setting up the forgery,
the general rule should apply. Consequently, 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. A bank is liable, irrespective of
its good faith, in paying a forged check.

Citibank v. Sps. Cabamongan

The Court has repeatedly emphasized that, since

the banking business is impressed with public interest, of
paramount importance thereto is the trust and
confidence of the public in general. Consequently, the
highest degree of diligence is expected, and high
standards of integrity and performance are even required,
of it. By the nature of its functions, a bank is “under
obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary
nature of their relationship.”

In this case, it has been sufficiently shown that the

signatures of Carmelita in the forms for pretermination of
deposits are forgeries. Citibank, with its signature
verification procedure, failed to detect the forgery. Its
negligence consisted in the omission of that degree of
diligence required of banks. The Court has held 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.” Such principle
equally applies here.

The Court agrees with the observation of the CA that

Citibank, thru Account Officer San Pedro, openly courted
disaster when despite noticing discrepancies in the
signature and photograph of the person claiming to be
Carmelita and the failure to surrender the original
certificate of time deposit, the pretermination of the
account was allowed. Even the waiver document was not
notarized, a procedure meant to protect the bank. For not
observing the degree of diligence required of banking
institutions, whose business is impressed with public
interest, Citibank is liable for damages