Westmont Bank (formerly Associated Banking Corp.) vs.

Eugene Ong

Facts:

Respondent Eugene Ong maintained a current account with petitioner, formerly the Associated Banking
Corporation, now known as Westmont Bank. In May of 1976, he sold certain shares of stock through the
Island Securities Corporation. In order to pay Ong, he purchased (2) Pacific Banking Corporation
manager’s checks issued, Ong being the payee thereof. However, before Ong could be a holder thereof,
his friend Paciano Tanlimco took them and forged Ong’s signature and thereafter deposited them with
the petitioner bank as depositor of said checks. Petitioner Bank, though Ong’s signature was on file,
nevertheless accepted and credited both checks in the account of Tanlimco without verifying the
“signature indorsements” appearing on the back of the said checks. Tanlimco then withdrew the money
and absconded. Ong asked for the help of Tanlimco’s family to recover the amount and went as far as
reporting the incident to Central Bank. On October 7, 1977, (5) months from the discovery of the fraud,
Ong instituted a complaint against petitioner bank demanding that they answer for the value of the two
checks which in their gross negligence, had resulted in his loss. The petitioner bank countered in saying
that there was no delivery of the said checks to Ong so he never became a holder of such, therefore he
had no cause of action against them. RTC ruled in favor of the defendant, directing petitioner bank to
pay P1,754,787.50 representing the total face value of the two checks with interest of (12%) per annum
from October 7, 1977 (the date of the first extrajudicial demand) until full payment. CA affirmed in toto
the appealed decision.
Issue:
WON the lower courts were correct in finding that the petitioner bank is liable to respondent and that
the latter may recover directly from them
Ruling:
The Supreme Court ruled in the affirmative. Citing Section 23 of the Negotiable Instruments Law “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,” therefore the signature of the payee that was forged is deemed wholly inoperative or
ineffectual. Since the collecting bank grossly erred in accepting and crediting said checks in the name of
Tanlimco notwithstanding the fact that they have Ong’s signature on file, it is only proper that the
respondent should therefore be allowed to collect from them. The collecting bank is liable to the payee
and must bear the loss because it is its legal duty to ascertain that the payee’s endorsement was
genuine before cashing the check. As a general rule, a bank or corporation who has obtained possession
of a check upon an unauthorized or forged indorsement of the payee’s signature and who collects the
amount of the check from the drawee, is liable for the proceeds thereof to the payee or other owner,
notwithstanding that the amount has been paid to the person from whom the check was obtained. The
theory of the rule is that the possession of the check on the forged or unauthorized indorsement is
wrongful, and when the money had been collected on the check, the bank or other person or
corporation can be held as for moneys had and received, and the proceeds are held for the rightful
owners who may recover them. The position of the bank taking the check on the forged or unauthorized
indorsement is the same as if it had taken the check and collected the money without indorsement at all
and the act of the bank amounts to conversion of the check.
 Associated Bank vs Court of Appeals, Province of Tarlac and Philippine National Bank
Facts:
The provincial funds of the Province of Tarlac are deposited in their current account with the Philippine
National Bank, Tarlac Branch. Checks issued by the province are signed by the Provincial Treasurer and
countersigned by the Provincial Auditor or the Secretary of the Sangguniang Bayan. An allocation was
made to the Concepcion Emergency Hospital, allotment checks are drawn to the order of said hospital.
The checks are released by the Office of the Provincial Treasurer and received by the hospital’s
administrative officer and cashier. In 1981, it was discovered that the hospital did not receive several
allotment checks. After verification, the Provincial Treasurer found that 30 checks amounting to
P203,300.00 were encashed by one Fausto Pangilinan, with the Associated Bank acting as collecting
bank. Pangilinan was the hospital’s former administrative officer and cashier of payee hospital. He
claimed that such encashment was corollary with his duty of assisting the hospital follow up the release
of the checks and had official receipts. As he were to encash the first check with the petitioner bank, he
was refused and was told to deposit the check instead in his personal savings account with the same
bank, he withdrew said funds thereafter. Following the procedure in the encashment of the first check,
he forged the signature of Dr. Adena Canlas, chief of the payee hospital. He did the same as to the
subsequent 28 checks. All the checks bore the stamp of Associated Bank which reads "All prior
endorsements guaranteed Associated Bank." Pangilinan made it appear that the checks were paid to
him for certain projects with the hospital so the forgery went undetected. The Provincial Treasurer then
wrote to PNB and asked for the restoration of the various amounts, the PNB in turn, asked for
reimbursement with the collecting bank. Since both banks refused payment, bore this suit by the
Province of Tarlac against PNB which, in turn, impleaded Associated Bank as third-party defendant. The
latter then filed a fourth-party complaint against Adena Canlas and Fausto Pangilinan. The lower court’s
ruling was disposed as follows:
1. On the basic complaint, in favor of the the plaintiff, ordering PNB to pay to the Province of
Tarlac, the sum of (P203,300.00) Pesos with legal interest thereon from March 20, 1981 until
fully paid
2. On the third-party complaint, in favor of defendant/third-party plaintiff Philippine National Bank
(PNB) and against third-party defendant/fourth-party plaintiff Associated Bank ordering the
latter to reimburse to the former the amount of (P203,300.00) Pesos with legal interests
thereon from March 20, 1981 until fully paid
3. On the fourth-party complaint, ordered dismissed for lack of cause of action as against fourth-
party defendant Adena Canlas and lack of jurisdiction over the person of fourth-party defendant
Fausto Pangilinan.
4. On the counterclaims on the complaint, third-party complaint and fourth-party complaint, the
dismissed for lack of merit.
The CA affirmed such decision of the RTC and so this petition against the assailed decision.
Issue:
WON Petitioner Bank should bear the loss of the forged document
Ruling:
The infirmity lies in the payee's indorsements which are forgeries. At the time of their indorsement, the
checks were order instruments. Checks having forged indorsements should be differentiated from
forged checks or checks bearing the forged signature of the drawer. The exception to the general rule in
Section 23 is where "a party against whom it is sought to enforce a right is precluded from setting up the
forgery or want of authority." Parties who warrant or admit the genuineness of the signature in question
and those who, by their acts, silence or negligence are estopped from setting up the defense of forgery,
are precluded from using this defense. Indorsers, persons negotiating by delivery and acceptors are
warrantors of the genuineness of the signatures on the instrument. In a bearer instrument, indorsement
is not necessary--the signature of the payee or holder is unnecessary to pass title to the instrument.
Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the
defense of forgery against a holder in due course.
PNB is not negligent as it is not required to return the check to the collecting bank within 24 hours as the
banks involved are covered by Central Bank Circular 580 and not the rules of the Philippine Clearing
House. Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as genuine, valid
and subsisting at the time of indorsement pursuant to Section 66 of the Negotiable Instruments Law.
The stamp guaranteeing prior indorsement is not an empty rubric; the collecting bank is held
accountable for checks deposited by its customers. However, due to the fact that the Province of Tarlac
is equally negligent in permitting Pangilinan to collect the checks when he was no longer connected with
the hospital, it shares the burden of loss from the checks bearing a forged indorsement. Therefore, the
Province can only recover 50% of the amount from the drawee bank (PNB), and the collecting bank
(Associated Bank) is liable to PNB for 50% of the same amount.
 Bank of the Philippine Islands vs Casa Montessori Internationale
Facts:
Plaintiff, Casa Montessori International opened a current account with defendant BPI, with Casa’s
President Ms. Carina C. Lebron as one of its authorized signatories. After an investigation, plaintiff
discovered that nine (9) of its checks had been encashed by a certain Sonny D. Santos since 1990 in the
total amount of ₱782,000. Said name of ‘Sonny D. Santos, an account with BPI Greenbelt Branch, turned
out to be a fictitious name used by third party defendant Leonardo T. Yabut, formerly the external
auditor of CASA. Yabut admitted that he forged the signature of Lebron and thereafter encashed the
checks. After a thorough examination on the said checks, it was found that the signature of Ms. Lebron
and the signature in that of the checks does not match. A complaint was filed by the plaintiff for
Collection of Damages against defendant bank. RTC ruled in favor of the plaintiff, reinstating the amount
of ₱782,500.007 in the current and savings accounts of the plaintiff with interest at 6% per annum. CA
modified said decision by apportioning the loss between CASA and BPI, taking into account the
contributory negligence of CASA that resulted in the undetected forgery and so ordered Leonardo T.
Yabut to reimburse BPI half and CASA, the other half.
Issues:
1. WON there is a forgery under the Negotiable Instruments Law
2. Who shall bear the loss
Ruling:
1. Yes. The Court did not find reason to disturb the findings of the lower court for it is supported by
substantial evidence. The RTC and the CA found that there is indeed a forgery and this is
supported by the affidavit which states the voluntary admission of Yabut and this is further
strengthened by the findings of the PNP Crime Laboratory.
2. BPI was found to be negligent in its transaction as a banking institution. The forged signatures
are wholly inoperative, and CASA -- the drawer whose authorized signatures do not appear on
the negotiable instruments -- cannot be held liable thereon. Neither is the latter precluded from
setting up forgery as a real defense. Banking business is impressed with public interest and so is
accorded highest degree of diligence and high standards of integrity and performance. 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." Its contention
that it has a signature verification procedure when it honors checks cannot be upheld when it
failed to detect the forgeries in the 8 subsequent checks; 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." For allowing payment on the checks to a wrongful and fictitious payee, BPI -- the
drawee bank -- becomes liable to its depositor-drawer. Since the encashing bank is one of its
branches, BPI can easily go after it and hold it liable for reimbursement. It "may not debit the
drawer’s account and is not entitled to indemnification from the drawer."Pursuant to its prime
duty to ascertain well the genuineness of the signatures of its client-depositors on checks being
encashed, BPI is "expected to use reasonable business prudence." In the performance of that
obligation, it is bound by its internal banking rules and regulations that form part of the contract
 it enters into with its depositors. CASA is not found to be negligent and so is not precluded from
setting up the defense of forgery.
Ramon K. Ilusorio vs Court of Appeals
Facts:
Petitioner was the Managing Director of Multinational Investment Bancorporation and the Chairman
and/or President of several other corporations, a depositor in good standing of respondent bank, the
Manila Banking Corporation to which he maintained a checking account. Petitioner entrusted to his
Secretary, Katherine E. Eugenio, his credit cards and checkbooks with blank checks, who also verified
and reconciled the statements of the said checking account. Between September of 1980 to January of
1981, Eugenio was able to encash and deposit to her personal account a total of about 17 checks which
are drawn against the account of petitioner at the respondent bank with an estimated total of
P119,634.34. Petitioner only knew of this incident upon the advise of his business partner claiming that
he saw Eugenio use his credit cards and so petitioner immediately fired Eugenio and lodged a complaint
against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. Private
respondent, through an affidavit executed by its employee, Mr. Dante Razon, 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 requested the respondent bank that
the value of the checks be restored however this was refused upon by the said bank. The lower court
dismissed the case finding no sufficient basis for the plaintiff’s cause against respondent bank, CA
affirmed the same.
Issue:
WON the bank was negligent in receiving the check
Ruling:
The Court ruled in the negative, the burden to prove forgery was upon the plaintiff, which burden he
failed to discharge. Aside from his own testimony, the appellant presented no other evidence to prove
the fact of forgery. He did not even submit his own specimen signatures, taken on or about the date of
the questioned checks, for examination and comparison with those of the subject checks. Petitioner’s
contention that respondent bank has been remiss in its duties cannot also be upheld, the CA and the
RTC found that Manila Bank employees exercised due diligence in cashing the checks. The bank’s
employees in the present case did not have a hint as to Eugenio’s modus operandi because she was a
regular customer of the bank, having been designated by petitioner himself to transact in his behalf.
According to the appellate court, the employees of the bank exercised due diligence in the performance
of their duties. Although it is possible that the verifiers of TMBC might have made a mistake in failing to
detect any forgery -- if indeed there was. However, a mistake is not equivalent to negligence if they
were honest mistakes. In the instant case, we believe and so hold that if there were mistakes, the same
were not deliberate, since the bank took all the precautions. Petitioner’s failure to examine his bank
statements appears as the proximate cause of his own damage. Proximate cause is that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.
 Samsung Construction Company Philippines, Inc vs Far East Bank and Trust Company and CA
Facts:
Plaintiff maintained a current account with the respondent bank at it’s Bel-Air Makati Branch. The sole
signatory to Samsung Construction’s account was Jong Kyu Lee, its Project Manager, the checks on the
other hand remained in the custody of the company’s accountant, Kyu Yong Lee. On 1992, a certain
Roberto Gonzaga presented a FEBTC check which is payable to cash and drawn against the Samsung
current account in the amount of P999,500. After verifying if the account has sufficient funds to cover
the check, the bank teller thereafter compared the signature on the check with the specimen signature
of Jong as contained in the specimen signature card with the bank. Satisfied, she then forwarded the
check to Senior Assistant Velez, it was bank policy that two bank officers approve checks exceeding
P100,000 for encashment. Syfu, another bank officer noticed that the assistant accountant (Sempio) of
petitioner company was also in the same bank, she then told the same to the accountant who then
vouched for the genuineness of Jong’s signature and claimed that the funds shall be used for the
purchase of equipment of petitioner company. Satisfied, Syfu authorized the encashment. Upon
examination of the bank account, said encashment was found as well as the loss of the last blank check.
Jong went to the bank and claimed that his signature has been forged however the Bank Manager
assured him that he shall be reimbursed. Hence, a criminal complaint for qualified theft was filed against
Sempio. RTC adopted the findings of the NBI expert and adjudged that there has been a forgery and
accordingly directed the bank to pay or credit back to Samsung Construction’s account the amount of
P999,500.00, together with interest tolled from the time the complaint was filed, and attorney’s fees in
the amount of P15,000. CA reversed said decision finding that there are conflicting findings of the NBI
and the PNP created doubt as to whether there was forgery.17 Moreover, the appellate court also held
that assuming there was forgery, it occurred due to the negligence of Samsung Construction, imputing
blame on the accountant Kyu for lack of care and prudence in keeping the checks, which if observed
would have prevented Sempio from gaining access thereto.
Issue:
WON respondent bank is liable to reimburse for the payment of the forged check
Ruling:
The Court ruled in the affirmative. 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 drawer’s account. The
traditional justification for the result is that the drawee is in a superior position to detect a forgery
because he has the maker’s signature and is expected to know and compare it. The SC upheld the
finding of the RTC since it was an intricate finding than that of the CA. In this case, not only did the
amount in the check nearly total one million pesos, it was also payable to cash. That latter circumstance
should have aroused the suspicion of the bank, as it is not ordinary business practice for a check for such
large amount to be made payable to cash or to bearer, instead of to the order of a specified person.
Moreover, the check was presented for payment by one Roberto Gonzaga, who was not designated as
the payee of the check, and who did not carry with him any written proof that he was authorized by
Samsung Construction to encash the check. 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.

Philippine National Bank vs. F.F. Cruz and Co., Inc

Facts:
Respondent company, FFCCI for brevity, opened a savings/current or combo account and a dollar
savings account with petitioner bank. Respondent company’s president, Felipe Cruz and Secretary-
Treasurer, Angelita Cruz were respectively the named signatories. Interchangeably, said signatories went
to the US on different dates, the latter following Cruz on a later date and returned ahead. While they
were out of the country, applications for cashier’s and manager’s checks were presented and approved
by PNB bearing the signature of Felipe. The first amounted to ₱9,950,000, payable to one Gene
Sangalang, the other for ₱3,260,500.31 payable to one Paul Bautista. Said amounts were debited against
the combo account of FFCCI. Upon returning, Angelita examined the statements of account of FFCCI and
noticed deductions. Claiming that these were unauthorized and fraudulently, (FFCCI) and requested PNB
to restore value of said checks to which PNB refused and so this suit for damages against PNB and its
own accountant Aurea Caparas. RTC ruled that both FFCCI and PNB were negligent, FFCI for clothing
Caparas authority to make dispositions and decisions of its account, PNB for failing to call or personally
verify from the authorized signatories further ordering PNB to pay plaintiff ₱13,210,500. CA affirmed
with modification that PNB shall pay FFCCI only 60% of the actual damages awarded by the lower court.
Issue:
WON CA seriously erred when it found PNB guilty of negligence
Ruling:
The Court ruled in the negative, upholding the ruling of the CA. find no reversible error in the findings of
the appellate court that PNB was negligent in the handling of FFCCI’s combo account, specifically, with
respect to PNB’s failure to detect the forgeries in the subject applications for manager’s check which
could have prevented the loss. As we have often ruled, the banking business is impressed with public
trust. A higher degree of diligence is imposed on banks relative to the handling of their affairs than that
of an ordinary business enterprise. Thus, the degree of responsibility, care and trustworthiness expected
of their officials and employees is far greater than those of ordinary officers and employees in other
enterprises. In the case at bar, PNB failed to meet the high standard of diligence required by the
circumstances to prevent the fraud. where the bank’s negligence is the proximate cause of the loss and
the depositor is guilty of contributory negligence, we allocated the damages between the bank and the
depositor on a 60-40 ratio. We apply the same ruling in this case considering that, as shown above,
PNB’s negligence is the proximate cause of the loss while the issue as to FFCCI’s contributory negligence
has been settled with finality in G.R. No. 173278. Thus, the appellate court properly adjudged PNB to
bear the greater part of the loss consistent with these rulings.
 PCI Bank vs. Balmaceda
Facts:
PCIB filed an action for recovery of sum of money with damages before the RTC against Antonio
Balmaceda, branch manager of its Sta. Cruz, Manila branch. In the complaint, PCIB alleged that
Balmaceda fraudulently obtained and encashed 31 Manager’s checks totaling ₱10,782,150. It then
moved to file an amended complaint impleading Rolando Ramos, a recipient of a portion of the
proceeds from the alleged fraud. PCIB increased the number of fraudulently obtained and encashed
Manager’s checks to 34 totaling to ₱11,937,150 which motion was granted upon by the RTC. The RTC
ruled in favor of PCIB. Ordered Balmaceda to pay ₱11,042,150 with interest at a legal rate from date of
misappropriation until fully paid, Ramos to pay ₱895,000 with interest at a legal rate from date of
misappropriation until fully paid and the defendants to pay plaintiff moral damages and attorney’s fees.
RTC found that Balmaceda, taking undue advantage of his position as branch manager, he successfully
obtained and misappropriated the bank’s funds by falsifying several commercial documents. The RTC
concluded that from the ₱11,937,150.00 that Balmaceda misappropriated from PCIB, ₱895,000.00
actually went to Ramos. Since the RTC disbelieved Ramos’ allegation that the sum of money deposited
into his Savings Account (PCIB, Pasig branch) were proceeds from the sale of fighting cocks, it held
Ramos liable to pay PCIB the amount of ₱895,000. The CA dismissed the complaint against Ramos
holding that there was no sufficient evidence to prove the collusion. the mere fact that Balmaceda made
Ramos the payee on some of the Manager’s checks is not enough basis to conclude that Ramos was
complicit in Balmaceda’s fraud. CA also found that PCIB acted illegally in freezing and debiting
₱251,910.96 from Ramos’ bank account. Appellee was ordered to release the amount of ₱251,910.96 to
appellant Ramos.
Issue:
WON Ramos, who received a portion of the money that Balmaceda took from PCIB should also be held
liable for the return of this money
Ruling:
The Court ruled in the negative. PCIB was proven to be negligent from the fact that it allowed
Balmaceda to encash the Manager’s checks that were plainly crossed checks. Under the Negotiable
Instruments Law; A crossed check is one where two parallel lines are drawn across its face or across its
corner. Based on jurisprudence, the crossing of checks has the following effects;(a) the check may not be
encashed but only deposited in the bank; (b) the check may be negotiated only once — to the one who
has an account with the bank; and (c) the act of crossing the check serves as a warning to the holder that
the check has been issued for a definite purpose and he must inquire if he received the check pursuant
to this purpose; otherwise, he is not a holder in due course. The crossing of a check is a warning that the
check should be deposited only in the account of the payee. When a check is crossed, it is the duty of
the collecting bank to ascertain that the check is only deposited to the payee’s account. In complete
disregard of this duty, PCIB’s systems allowed Balmaceda to encash 26 Manager’s checks which were all
crossed checks, or checks payable to the "payee’s account only. "Petition was Partially Granted in favor
of Ramos. On the part of PCIB, awards for damages and Attorney’s fees was modified and deleted
pursuant to the provisions of Article 22 of the New Civil Code. Ramos cannot be held liable to PCIB on
account of unjust enrichment simply because he received payments out of money secured by fraud from
PCIB. To hold Ramos accountable, it is necessary to prove that he received the money from Balmaceda,
knowing that he (Ramos) was not entitled to it. PCIB must also prove that Ramos, at the time that he
received the money from Balmaceda, knew that the money was acquired through fraud. Knowledge of
the fraud is the link between Ramos and PCIB that would obligate Ramos to return the money based on
the principle of unjust enrichment.
 Metropolitan Waterworks and Sewerage System vs. Court of Appeals
Facts:
Petitioner, MWSS for brevity, is a government-owned and controlled corporation created by virtue of RA
No. 6234. PNB is the depository bank of MWSS and its predecessor-in-interest, NWSA. An account of
NWSA with PNB namely NWSA Account 6. The authorized signatory for said account were those of
MWSS treasurer Jose Sanchez, auditor Pedro Aguilar, and its acting General Manager Victor L. Recio.
Their respective specimen signatures were submitted by MWSS and on file with PNB. By virtue of a
special agreement, MWSS used personalized checks in drawing from said account, the checks were
printed by F. Mesina Enterprises. On 1969, 23 checks were prepared, processed, issued and released by
NWSA, all were paid and cleared by PNB thereby debiting against NWSA Account No. 6. During the same
months of March, April and May 1969, 23 checks bearing the same numbers were likewise paid and
cleared by PNB and debited against said account. The foregoing checks were deposited by payees Raul
Dizon, Arturo Sison and Antonio Mendoza in their respective current accounts with the PCIB and PBC.
Through the CB Clearing, said checks were presented for payment by PBC and PCIB to PNB. At the time
of the presentation, the checks bear the standard indorsement which reads 'all prior indorsement
and/or lack of endorsement guaranteed.' However, a subsequent investigation showed that said payees
were fictitious persons. 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. CFI favored MWSS. CA: reversed and favored PNB applied Section 24 of the
Negotiable Instruments Law
Issue:
WON MWSS can claim against PNB
Ruling:
The Court ruled in the negative. CA reversed. 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. 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 obligation funds, and cannot
ordinarily charge the amount so paid to the account of the depositor whose name was forged. 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. 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 2 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. There was gross negligence in the printing
of its personalized checks - MWSS failed to give its printer, Mesina Enterprises, specific instructions
relative to the safekeeping and disposition of excess forms, check vouchers, and safety papers retrieve
from its printer all spoiled check forms provide any control regarding the paper used in the printing of
said checks furnish the respondent drawee bank with samples of typewriting, cheek writing, and print
used by its printer in the printing of its checks and of the inks and pens used in signing the same send a
representative to the printing office during the printing of said checks to reconcile the bank statements
with its own records. MWSS requested the PNB to discontinue the practice of mailing the bank
statements, but instead to deliver it to Mr. Emiliano Zaporteza. However, he was unreasonably delayed
in taking prompt deliveries of the bank statements and credit and debit memos. As a consequence, Mr.
Zaporteza failed to reconcile the bank statements. If Mr. Zaporteza had not been remiss in his duty of
taking the bank statements and reconciling them with the petitioner's records, the fraudulent
encashments of the first checks should have been discovered, and further frauds prevented. This
negligence was, therefore, the proximate cause of the failure to discover the fraud. One factor which
facilitate this fraud was the delay in the reconciliation of PNB statements with the NAWASA bank
accounts. x x x. Had the NAWASA representative come to the PNB early for the statements and had the
bank been advised promptly of the reported bogus check, the negotiation of practically all of the
remaining checks on May, 1969 could have been prevented. 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. The petitioner's own Fact Finding Committee, in its
report submitted to their General manager underscored this laxity of records control. It observed that
the "office of Mr. Ongtengco (Cashier No. 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, considering the petitioner's gross negligence,
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. In fact, long before the encashment of the 23 checks in question, the it had
issued constant reminders to all Current Account Bookkeepers informing them of the activities of
forgery syndicates. Under the circumstances, MWSS was in a better position to detect and prevent the
fraudulent encashment of its checks.
 Associated Bank vs Court of Appeals
Facts:
Private respondent is engaged in a business of ready-to-wear garments under firm name “Melissa’s
RTW”. She deals with companies such as Robinson’s Department Store, Payless Department Store,
Rempson Department Store, and Corona Bazaar. Said companies issued in payment of their respective
accounts crossed checks payable to said respondent. When she was to collect on what she thought was
unpaid accounts, she was informed that six crossed checks were deposited with the Petitioner Bank and
subsequently paid it to one Rafael Sayson, in the words of its branch manager and co-petitioner Conrado
Cruz “trusted depositors.” Sayson, however, had not been authorized by the Private respondent to
deposit and encash the checks. Private respondent filed a complaint before the RTC for recovery of total
value of the checks plus damages. The RTC ruled in favor of the private respondent and ordered
petitioner to pay the total value of the checks which is P15,805.00 plus interest, actual damages,
exemplary damages, attorney’s fees and costs of suit. CA affirmed RTC’s ruling stating that The appellee
had clearly shown that she had never authorized anyone to deposit the said checks nor to encash the
same; that the appellants had allowed all said checks to be deposited, cleared and paid to one Rafael
Sayson in violation of the instructions in the said crossed checks that the same were for payee's account
only; and that the appellee maintained a savings account with the Prudential Bank, Cubao Branch,
Quezon City which never cleared the said checks and the appellee had been damaged by such
encashment of the same.
Issue:
WON petitioner bank was negligent and therefore liable for the value of the checks
Ruling:
The Court ruled in the affirmative. The possession of check on a forged or unauthorized indorsement is
wrongful, and when the money is collected on the check, the bank can be held ‘for moneys had and
received. The proceeds are held for the rightful owner of the payment and may be recovered by him.
The position of the bank taking the check on the forged or unauthorized indorsement is the same as if it
had taken the check and collected without indorsement at all. The act of the bank amounts t conversion
of the check. When the bank paid the checks so endorsed notwithstanding that title had not passed to
the endorser, it did so at its peril and became liable to the payee for the value of the checks. This liability
attached whether or not the Bank was aware of the unauthorized endorsement. It is not disputed that
the proceeds of the subject checks belonged to the private respondent. As she had not at any time
authorized Rafael Sayson to endorse or encash them, there was conversion of the funds by the Bank.
There being no evidence that the crossed checks were actually received by the private respondent, she
would have a right of action against the drawer companies, which in turn could go against their
respective drawee banks, which in turn could sue the herein petitioner as collecting bank. It was held
that to simplify proceedings, the payee of the illegally encashed checks should be allowed to recover
directly from the bank responsible for such encashment regardless of whether or not the checks were
actually delivered to the payee. Worth noting is the fact that before presenting the checks for clearing
and for payment, the Bank had stamped on the back thereof the words: "All prior endorsements and/or
lack of endorsements guaranteed," and thus made the assurance that it had ascertained the
genuineness of all prior endorsements would thereby make them liable as last indorser.

PNB vs Hon. Romulo S. Quimpo

Facts:
Francisco Gozon II, a depositor of the Caloocan City Branch of PNB, went to the bank using his car and
was accompanied by his friend, Ernesto Santos. He went in and transacted business with the bank
however Santos was left and saw that Gozon’s checkbook was left behind. He then took a check
therefrom and filled it up for the amount of P5,000, forged the signature of Gozon and thereafter
encashing it on the same day to which was debited from the account of Gozon. Gozon was now seeking
for the restoration of the value of the check to the petitioner bank to which petitioner bank refused and
so this criminal complaint by private respondent. Santos was apprehended and upon inverstigation, he
admitted stealing the check, forging the signature of Gozon and thereafter encashing the same with the
bank. Gozon filed the complaint for recovery of the amount of P5,000.00, plus interest, damages,
attorney's fees and costs against the bank. CFI ruled in favor of Gozon.
Issue:
WON Gozon, in putting his checkbook containing the check in question into the hands of Santos was a
proximate cause of loss thereby precluding him from setting up the defense of forgery or want of
authority
Ruling:
The prime duty of a 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. In this case the findings of facts of the court a quo are conclusive. The
trial court found that a comparison of the signature on the forged check and the sample signatures of
private respondent show marked differences as the graceful lines in the sample signature which is
completely different from those of the signature on the forged check which is consistent with the NBI
handwriting expert’s finding. 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 plaintiff in leaving his checkbook in the car while he went out for a short while
cannot be considered negligence sufficient to excuse the defendant bank from its own negligence.
 San Carlos Milling Co., LTD vs BPI and China Banking Corp
Facts:
Plaintiff corporation is organized under the laws of Hawaii and is authorized to engage business in the
Philippine Islands, Manila being the place of their main office. Said business was in the hands of Alfred D.
Cooper, its agent under general power of attorney with authority of substitution. Joseph L. Wilson, a
principal employee in the Manila office was also given the same power but without authority of
substitution. Cooper gave Newland Baldwin general power of attorney and revoked power of Wilson
relative to dealings with BPI wherein plaintiff maintained a deposit. Wilson, conspiring with one Alfredo
Dolores, sent a cablegram to the company in Honolulu requesting a telegraphic transfer to CBC of
Manila $100,000. Money was then transferred by cable and upon receipt, the CBC a bank also in which
plaintiff maintained a deposit sent an exchange contract to plaintiff offering P201,000. The manager’s
check payable to San Carlos Milling or order was receipted for by Dolores. The endorsement to which
the name of Baldwin was affixed was forged. BPI credited to the current account said sum and passed
through clearing, where it was paid by CBC. It was deposited with the BPI having a fake endorsement.
San Carlos had frequently withdrawn currency for shipment to its mill but never in so large an amount,
and never under the sole supervision of Dolores Before delivering the money, the bank asked Dolores
for P1 to cover the cost of packing the money, and he left the bank and shortly afterwards returned with
another check for P1, purporting to be signed by Newland Baldwin the crime was discovered and San
Carlos filed against the BPI and China Bank (after amendment complaint) China Bank: as the prior
endorsement had in law been guaranteed by the BPI, they are absolved even if the endorsement of
Newland Baldwin on the check was a forgery. BPI: guilty of no negligence, loss was due to the
dishonesty of San Carlos employees and the negligence of San Carlos general agent. RTC: BPI in GF and
San Carlos could not recover
Issue:
WON BPI was bound to inspect the checks and shall therefore be liable in case of forgery
Ruling:
The Court ruled in the affirmative. Judgment absolving the Bank of the Philippine Islands must therefore
be reversed 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.
 Bank of America NT and SA vs. Philippine Racing Club
Facts:
Plaintiff-appellee PRCI is a domestic corporation which maintains several accounts with different banks
in the Metro Manila area, among said accounts was a current account with defendant-appellant bank.
The authorized joint signatories were PRCI’s President Antonia Reyes and Vice President for Finance,
Gregorio Reyes. When the signatories were scheduled to go out of the country for business-related
matters, they pre-signed several checks to not disrupt operations and ensure continuity by making
available cash to settle obligations that might become due, covering the time of their absence. The
checks were entrusted to the accountant, that he uses it when there is already the need to make use of
the same, he would then prepare a corresponding voucher and thereafter complete the entries on the
pre-signed checks. On December 16, 1988, a John Doe presented to the defendant-appellant bank for
encashment a couple of said corporation’s checks with an indicated value of P110,000 each. Those two
checks were among the pre-signed authorized signatures. The 2 checks had similar entries but bore
similar infirmities. Despite said infirmities, defendant-appellant bank encashed said checks without any
verification whatsoever. After an investigation, it was found that there was no transaction involving PRCI
with the payment of P220,000. The checks have come into the hands of Clarita Mesina, an employee
who completed the entries on the pre-signed checks without authority. RTC ruled in favor of plaintiff
and ordered defendant to pay the value the check with legal interest, attorney’s fees, costs of suit. CA
denied the petitioner’s MR, holding that petitioner was liable.
Issue:
WON the appellate court’s denial is proper
Ruling:
The Court ruled in the affirmative. Although not in the strict sense "material alterations," the
misplacement of the typewritten entries for the payee and the amount on the same blank and the
repetition of the amount using a check writer were glaringly obvious irregularities on the face of the
check. Clearly, someone made a mistake in filling up the checks and the repetition of the entries was
possibly an attempt to rectify the mistake. Also, if the check had been filled up by the person who
customarily accomplishes the checks of respondent, it should have occurred to petitioner's employees
that it would be unlikely such mistakes would be made. All these circumstances should have alerted the
bank to the possibility that the holder or the person who is attempting to encash the checks did not
have proper title to the checks or did not have authority to fill up and encash the same. As noted by the
CA, petitioner could have made a simple phone call to its client to clarify the irregularities and the loss to
respondent due to the encashment of the stolen checks would have been prevented. Although
respondent’s practice of pre-signing blank checks could be deemed a seriously negligent behavior,
Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the loss,
petitioner will still emerge as the party foremost liable in this case. In instances where both parties are
at fault, this Court has consistently applied the doctrine of last clear chance in order to assign liability.
Following established jurisprudential precedents, we believe the allocation of sixty percent (60%) of the
actual damages involved in this case (represented by the amount of the checks with legal interest) to
petitioner is proper under the premises. Respondent should, in light of its contributory negligence, bear
forty percent (40%) of its own loss.

Analysis
Before delving into the comparative analysis of the cases above-stated, it is imperative to cite
section 23 of the Negotiable Instruments Law to set a legal standard in determining the differences
regarding its applicability to said cases. Section 23 states,
Forged signature; effect of. When a signature is forged or is made without authority of the
person whose signature it purports to be, it is wholly inoperative and no right to retain the instrument,
or to give 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 sought to be enforced such right is
precluded from setting up the defense of forgery or want of authority.
Thus, a forged signature, whether it be that of the drawer, the maker, the payee or any other
party, is wholly inoperative and no one can gain title to the instrument through such forged signature
against parties prior to the forgery. A person whose signature was forged was never a party and never
consented to the contract, which gave rise to the instrument. However, a person alleging such forgery
has the burden of proving it. Forgery cannot be presumed; it must be established by clear and
convincing evidence.
However, it can be gleaned from the provision the exception to the general rule which goes, “..where a
party against whom it sought to be enforced such right is precluded from setting up the defense of
forgery or want of authority. The persons it refers to are the following:
1. Parties who warrant or admit the genuineness of the signature in question
2. Those who, by their acts, silence, or negligence are estopped from setting up the defense of
forgery. These include acts or omissions that amount to ratification, express or implied
Those under enumeration 1 are those indorsers, persons negotiating by delivery, and acceptors are
warrantors of the genuineness of certain signatures on the instrument. With respect to negligence, a
drawer who can otherwise recover from the drawee may be barred from doing so because of its
negligence or may have to suffer reduction of the amount because if his (drawer’s) negligence.
These enumerations were apparent in the several cases above-stated. Liability attaches to the
person who is found to be negligent or the person who warrants the genuineness of the indorsements.
In the case of Westmont Bank vs Eugene Ong, the collecting bank bore the liability for it warranted the
signature indorsements as genuine even though it has Tanlimco’s signature on file. The collecting bank is
liable to the payee and must bear the loss because it is its legal duty to ascertain that the payee’s
endorsement was genuine before cashing the check. As a general rule, a bank or corporation who has
obtained possession of a check upon an unauthorized or forged indorsement of the payee’s signature
and who collects the amount of the check from the drawee, is liable for the proceeds thereof to the
payee or other owner, notwithstanding that the amount has been paid to the person from whom the
check was obtained. The act of taking of a check on the forged or unauthorized indorsement is the same
as if it had taken the check and collected the money without indorsement at all and the act of the bank
amounts to conversion of the check. Verification of the signature indorsements is a vital obligation on
the part of the collecting bank, failure to do so would mean attachment of liability. Similarly, with the
case of Associated Bank vs CA, the drawer may directly proceed against the collecting bank in this case
for such bank is responsible for the encashment of the check regardless of the delivery to the payee. It
was held that, “to simplify proceedings, the payee of the illegally encashed checks should be allowed to
recover directly from the bank responsible for such encashment regardless of whether or not the checks
were actually delivered to the payee. Worth noting is the fact that before presenting the checks for
clearing and for payment, the Bank had stamped on the back thereof the words: "All prior
endorsements and/or lack of endorsements guaranteed," and thus made the assurance that it had
ascertained the genuineness of all prior endorsements would thereby make them liable as last
indorser.” Being the last indorser, it warranted the genuineness of the indorsements on the said check.
“The act of the bank amounts t conversion of the check. When the bank paid the checks so endorsed
notwithstanding that title had not passed to the endorser, it did so at its peril and became liable to the
payee for the value of the checks. This liability attached whether or not the Bank was aware of the
unauthorized endorsement.” In contrast, the collecting bank will not bear any liability absent any
showing of negligence. In the case of San Carlos Milling Co., LTD vs BPI and China Banking Corp, China
Bank cannot be held liable for it is the drawee bank who was negligent in its affairs. “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.”
On account of negligence, the case of Associated Bank vs CA and Province of Tarlac, the liability
were born equally by the petitioner and PNB for they were found to be equally negligent in their
transactions. The payee can collect from the drawee bank who is charged with the responsibility of
knowing the drawer’s signature who in turn can collect reimbursement from the collecting bank. In
cases involving checks with forged indorsements, the chain of liability does not end with the drawee
bank, it may pass liability through collection claim to the party who took from the forger and to the
forger, himself if available. Associated Bank as the collecting bank which indorsed the checks shall be
liable to PNB, drawee bank for the checks bearing forged indorsements. The Court has consistently ruled
that “the collecting bank or last endorser generally suffers the loss because it has 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 its
genuineness. Collecting bank is made liable because it is privy to the depositor who negotiated the
check. Still on the concept of negligence of both parties, Philippine National Bank vs. F.F. Cruz and Co.,
Inc holds a similar situation. It is PNB’s failure to detect the forgeries in the subject applications for
manager’s check which could have prevented the loss and so makes it liable. As we have often ruled, the
banking business is impressed with public trust. A higher degree of diligence is imposed on banks
relative to the handling of their affairs than that of an ordinary business enterprise. Thus, the degree of
responsibility, care and trustworthiness expected of their officials and employees is far greater than
those of ordinary officers and employees in other enterprises. In the case at bar, PNB failed to meet the
high standard of diligence required by the circumstances to prevent the fraud. where the bank’s
negligence is the proximate cause of the loss and the depositor is guilty of contributory negligence, we
allocated the damages between the bank and the depositor on a 60-40 ratio. We apply the same ruling
in this case considering that, as shown above, PNB’s negligence is the proximate cause of the loss while
the issue as to FFCCI’s contributory negligence has been settled with finality in G.R. No. 173278.A 60:40
ratio has been adopted by the Court since PNB should bear greater liability for it could have prevented
the loss. In a similar footing, Bank of America NT and SA vs. Philippine Racing Club, the Court stated, “As
noted by the CA, petitioner could have made a simple phone call to its client to clarify the irregularities
and the loss to respondent due to the encashment of the stolen checks would have been prevented.
Although respondent’s practice of pre-signing blank checks could be deemed a seriously negligent
behavior, Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the
loss, petitioner will still emerge as the party foremost liable in this case. In instances where both parties
are at fault, this Court has consistently applied the doctrine of last clear chance in order to assign
liability. Following established jurisprudential precedents, we believe the allocation of sixty percent
(60%) of the actual damages involved in this case (represented by the amount of the checks with legal
interest) to petitioner is proper under the premises. Respondent should, in light of its contributory
negligence, bear forty percent (40%) of its own loss”. In these cases, there is negligence on the part of
the drawer/maker as well as on the part of the drawee-bank and so both shall share the liability of the
loss.
In the case of BPI vs Casa Montessori Internationale, liability is born by BPI, the drawee-bank.
BPI was found to be negligent for failure to detect the subsequent 8 forged checks. “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." For allowing payment on the checks to a wrongful and fictitious payee, BPI -- the drawee
bank -- becomes liable to its depositor-drawer.” When there is forgery, there is no right to discharge on
the part of the drawee bank. A drawee-bank is bound to know the signature of its client, the drawer.
BPI, having found to be remiss in failing to verify the genuineness of the signature of Ms. Lebron, must
bear the loss. As a banking institution, it must exert extraordinary diligence in its dealings or
transactions. Bridging the ruling of the Supreme Court in Associated Bank vs CA, “In cases involving a
forged check, where the drawer’s signature is forged, the drawer can recover from the drawee bank. No
drawee bank has a right to pay a forged check. If it does, it shall have to recredit the amount of the
check to the account of the drawer. The same is applicable in Samsung Construction Company
Philippines vs Far East Bank and Trust Company, respondent bank was likewise held to be liable, in this
case, not only did the amount in the check nearly total one million pesos, it was also payable to cash.
That latter circumstance should have aroused the suspicion of the bank, as it is not ordinary business
practice for a check for such large amount to be made payable to cash or to bearer, instead of to the
order of a specified person. Moreover, the check was presented for payment by one Roberto Gonzaga,
who was not designated as the payee of the check, and who did not carry with him any written proof
that he was authorized by Samsung Construction to encash the check. The drawee bank should
therefore bear the loss absent any showing of contributory negligence of that of the drawee. In the case
of PCI Bank vs. Balmaceda, the drawee-bank is likewise found to be negligent. “The crossing of a check is
a warning that the check should be deposited only in the account of the payee. When a check is crossed,
it is the duty of the collecting bank to ascertain that the check is only deposited to the payee’s account.
In complete disregard of this duty, PCIB’s systems allowed Balmaceda to encash 26 Manager’s checks
which were all crossed checks, or checks payable to the "payee’s account only.” The determining factor
of Ramos’ liability was his knowledge of the fraud, absent any showing or evidence that he was
instrumental to the fraud, he shall bear no liability. Similarly In the case of PNB vs Hon. Romulo S.
Quimpo, the drawee bank bears the loss for the act of plaintiff in leaving his checkbook in the car while
he went out for a short while cannot be considered negligence sufficient to excuse the defendant bank
from its own negligence. It is the primary duty of the drawee-bank to ascertain the genuineness of its
drawer’s signature therefore PNB, being the drawee-bank, should bear the loss.

In comparison with Associated Bank vs CA and the Province of Tarlac

Associated Bank vs CA and Province of Tarlac BPI vs CASA Montessori Internationale, Samsung
Construction vs FEBTC, PCI Bank vs. Balmaceda,
PNB vs Hon. Romulo S. Quimpo
“..the chain of liability does not end with the “The liability chain ends with the drawee bank
drawee bank, it may pass liability through whose responsibility it is to know the drawer’s
collection claim to the party who took from the signature since the latter is its customer.”
forger and to the forger, himself if available.
Associated Bank as the collecting bank which
indorsed the checks shall be liable to PNB,
drawee bank for the checks bearing forged
indorsements.”

Ilusorio vs CA is a case when the drawer is negligent in his own dealings which thereby subjects
him to bear the liability of his loss. It has to be reiterated that the burden of proving the forgery the
burden to prove forgery was upon the plaintiff, which burden he failed to discharge. Aside from his own
testimony, the appellant presented no other evidence to prove the fact of forgery. He did not even
submit his own specimen signatures, taken on or about the date of the questioned checks, for
examination and comparison with those of the subject checks. The petitioner’s contention that the
drawee-bank should bear the loss was found to be unmeritorious since he has long been entering into
transactions with the bank through his Secretary which makes her an authorized representative.
Petitioner’s failure to examine his bank statements appears as the proximate cause of his own damage.
Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred. Following
the premise of the negligence of the drawer, MWSS vs CA holds a similar ruling. The Court ruled that,
“there was gross negligence in the printing of its personalized checks - MWSS failed to give its printer,
Mesina Enterprises, specific instructions relative to the safekeeping and disposition of excess forms,
check vouchers, and safety papers retrieve from its printer all spoiled check forms provide any control
regarding the paper used in the printing of said checks furnish the respondent drawee bank with
samples of typewriting, cheek writing, and print used by its printer in the printing of its checks and of the
inks and pens used in signing the same send a representative to the printing office during the printing of
said checks to reconcile the bank statements with its own records. MWSS requested the PNB to
discontinue the practice of mailing the bank statements, but instead to deliver it to Mr. Emiliano
Zaporteza. However, he was unreasonably delayed in taking prompt deliveries of the bank statements
and credit and debit memos. As a consequence, Mr. Zaporteza failed to reconcile the bank statements.
If Mr. Zaporteza had not been remiss in his duty of taking the bank statements and reconciling them
with the petitioner's records, the fraudulent encashments of the first checks should have been
discovered, and further frauds prevented. This negligence was, therefore, the proximate cause of the
failure to discover the fraud.” Due to the petitioner’s own negligence, (failing to give proper security
measures in its printer of its personalized checks) petitioner is precluded from setting up the defense of
forgery.
In a nutshell, the liability varies according to the degree of negligence committed by any of the
parties. The drawer, drawee-bank or the collecting bank may be negligent in their affairs or transactions
and that would make any or both of them as in the case of a negligent drawer and a drawee-bank or a
drawee-bank and a collecting bank.

Travel-On Inc vs Court of Appeals and Arturo S. Miranda

Facts:
Petitioner Company is a travel agency selling airline tickets on commission basis for and in behalf of
different airline companies to which Private respondent had a revolving credit line therein, procuring
tickets from petitioner on behalf of airline passengers and deriving commissions therefrom. On 1972,
Petitioner filed a complaint with a prayer for the issuance of a writ of preliminary attachment and
attorney's fees before the CFI to collect 6 checks issued by private respondent with a totaling P115,000.
petitioner sold and delivered various airline tickets to respondent at a total price of P278,201.57. Private
respondent paid various amounts in cash and in kind, and issued 6 postdated checks amounting to
P115,000, all dishonored by the drawee banks. However, private respondent made another payment of
P10,000 reducing his indebtedness to P105,000. The writ was granted by the court a quo. The Private
respondent averred that contrary to the allegations of the petitioner company, he in fact has paid all his
obligation and even overpaid and is due for a refund and that it merely issued the checks for purposes of
accommodation further alleging that this is to show to the petitioner’s board of directors that the
account receivables were still good. RTC ruled in favor of the Private respondent finding that private
respondent's indebtedness to petitioner was not satisfactorily established and said issuance of the 6
postdated checks were merely for the purpose of accommodation, CA affirmed the same.
Issue:
WON Miranda is liable
Ruling:
The Supreme Court ruled in the affirmative. It is important to stress that a check which is regular on its
face is deemed prima facie to have been issued for a valuable consideration and every person whose
signature appears thereon is deemed to have become a party thereto for value. Thus, the mere
introduction of the instrument sued on in evidence prima facie entitles the plaintiff to recovery. Further,
the rule is quite settled that a negotiable instrument is presumed to have been given or indorsed for a
sufficient consideration unless otherwise contradicted and overcome by other competent evidence.
Reliance by the lower and appellate court on the company’s financial statements were wrong, to see if
Miranda was liable or not. These financial statements were actually not updated to show that there was
indebtedness on the part of Miranda. The best evidence that the courts should have looked at were the
checks itself. There is a prima facie presumption that a check was issued for valuable consideration and
the provision puts the burden upon the drawer to disprove this presumption. Miranda was unable to
relieve himself of this burden. Only clear and convincing evidence and not mere self-serving evidence of
drawer can rebut this presumption. The company was entitled to the benefit conferred by the statutory
provision. Miranda failed to show that the checks weren’t issued for any valuable consideration. The
checks were clear by stating that the company was the payee and not a mere accommodated party.
Notice was given to the fact that the checks were issued after a written demand by the company
regarding Miranda’s unpaid liabilities. Also, the fact alone that the various statements of account had
variances in figures, simply did not mean that private respondent had no more financial obligations to
petitioner. It must be stressed that private respondent's account with petitioner was a running or open
one, which explains the varying figures in each of the statements rendered as of a given date.

Remigio S. Ong vs People of the Philippines and Court of Appeals

Facts:
Private complainant Marcial de Jesus and accused Remigio Ong are both businessmen who are both
suppliers of certain companies. On 1992, Ong approached De Jesus and requested to be accommodated
a loan of P130,000.00 which he needed to pay the 13th month pay of his employees to which De Jesus
complied with by the issuance of a Producer’s Bank check. In order to insure payment, Ong issued a
FEBTC check. Said FEBTC check was deposited by De Jesus in his account at Producer’s Bank which was
returned the following day for it was drawn on insufficient funds. After which, De Jesus verbally notified
Ong of the bounced checks however this was unacted upon and so a written formal demand was made.
De Jesus filed a case against Ong for said failure of repayment. RTC found Ong guilty beyond reasonable
doubt for violation of Sec. 1 BP Blg. 22 CA dismissed the appeal for lack of merit and appealed lower
court’s decision.
Issue:
WON Ong was guilty of violation of BP Blg .22
Ruling:
The Court ruled in the affirmative. The contention of the petitioner that there was no evidence that the
Producers Bank check issued by private complainant in his favor was ever encashed by him and so the
subject check cannot be considered drawn and issued "to apply on account or for value cannot be
upheld." The trial court as well as the CA clearly established the existence of the loan and the
subsequent encashment of the Producer’s Bank check. Petitioner’s argument that the subject check was
issued without consideration is inconsequential. The law invariably declares the mere act of issuing a
worthless check as malum prohibitum. We quote with approval the appellate court’s findings on this
matter: In actions based upon a negotiable instrument, it is unnecessary to aver or prove consideration,
for consideration is imported and presumed from the fact that it is a negotiable instrument. The
presumption exists whether the words "value received" appear on the instrument or not (Agbayani,
A.F., Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1989 Ed., Vol. 1, p.
227, Emphasis supplied). Furthermore, such contention is also inconsequential in Batas Pambansa Blg.
22.
Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Veloso, Alfonso Co vs Court of Appeals
and Philippine Bank Communications
Facts:
On 1979, Charles Lee, President of MICO wrote to respondent bank requesting for a grant of a
discounting loan/credit line in the sum P3,000,000.00 to maintain and carry out their line or volume of
business. On the same day, Lee requested another P3M as discounting loan/credit line now for the
purpose of opening letters of credit and trust receipts. -Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso
Yap and Richard Velasco, in their personal capacities executed a two Surety Agreements in favor of
PBCom whereby the petitioners jointly and severally, guaranteed the prompt payment on due dates or
at maturity of overdrafts, promissory notes, discounts, drafts, letters of credit, bills of exchange, trust
receipts, and other obligations of every kind and nature, for which MICO may be held accountable by
PBCom. MICO furnished PBCom with a notarized certification issued by its corporate secretary, Atty. P.B.
Barrera, that Chua Siok Suy was duly authorized by the Board of Directors to negotiate on behalf of
MICO for loans and other credit availments from PBCom. Several applications for domestic as well as
foreign letters of credit and availments of the credit line were made by MICO. -Upon maturity of all
credit availments obtained by MICO from PBCom, the latter made a demand for payment. For failure of
petitioner MICO to pay the obligations incurred despite repeated demands, private PBCom
extrajudicially foreclosed MICO’s REM and sold the said mortgaged properties in a public auction sale.
PBCom then demanded the settlement of the aforesaid obligations from sureties who, however, refused
to acknowledge their obligations to PBCom under the surety agreements. -Hence, PBCom filed a
complaint with prayer for writ of preliminary attachment before the RTC of Manila alleging that MICO
was no longer in operation and had no properties to answer for its obligations. Petitioners denied having
received the loans, and that, since no loan was ever released or received by MICO, the corresponding
real estate mortgage and surety agreements signed concededly by MICO are null and void. RTC:
Dismissed the case in favor of MICO, ruling that PBcom failed to adequately prove that the proceeds of
the loan were ever delivered to MICO, no proof has been adduced as to the existence of the goods
covered and paid by the said amounts. Hence, inasmuch as no consideration ever passed from Pbcom to
MICO, all the documents involved therein, such as the promissory notes, real estate mortgage, including
the suretyship agreements were all void for lack of cause or consideration CA: The Court of Appeals
reversed the ruling of the trial court, saying that the latter committed an erroneous application and
appreciation of the rules governing the burden of proof. Citing Section 24 of the Negotiable Instruments
Law which provides that “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”, the Court of Appeals said that while the subject promissory notes and letters of
credit issued by the PBCom made no mention of delivery of cash, it is presumed that said negotiable
instruments were issued for valuable consideration.
Issue:
WON there is sufficient consideration with respect to the drafts issued in connection with the Letters of
Credit.
Ruling:
The Court ruled in the affirmative. Although letters of Credit and trust receipts are not negotiable
instruments, drafts issued in connection with the letters of credit are negotiable instruments. Hence,
while the presumption of consideration under the negotiable instruments law may not necessarily be
applicable to trust receipts and letters of credit, the presumption that the drafts drawn in connection
with the letter of credit have sufficient consideration apply. The drafts signed by the
beneficiary/suppliers in connection with the corresponding letters of credit proved that said suppliers
were paid by PBCom for the account of MICO. On the other hand, aside from their bare denials
petitioners did not present sufficient and competent evidence to rebut the evidence of private
respondent PBCom. Petitioner MICO did not proffer a single piece of evidence, apart from its bare
denials, to support its allegation that the loan transactions, real estate mortgage, letters of credit and
trust receipts were issued allegedly without any consideration. Anent petitioners-sureties contention
that they obtained no consideration whatsoever on the surety agreements, we need only point out that
the consideration for the sureties is the very consideration for the principal obligor, MICO, in the
contracts of loan.
 Quirino Gonzales Logging vs Court of Appeals and Republic Planters Bank
Facts:
Quirino Logging applied for credit accommodations with Respondent Bank. Bank approved, granting it a
credit line of P900,000 broken in an overdraft line of P500,000 which was later reduced to P450,000 and
a Letter of Credit line of P400,00. Pursuant to the grant, the bank and petitioners and spouses Quirino
executed 10 documents, 2 denominated as "Agreement for Credit in Current Account,"4 "Application
and Agreement for Commercial Letter of Credit," and 4 denominated "Trust Receipt." Said obligations
were secured by a real estate mortgage on 4 parcels of land. To secure certain advances, it executed a
promissory note in favor of the Bank and 3 more subsequently. In 1965, petitioners long defaulted in the
payment of their obligations under the credit line. The Bank foreclosed the mortgage and bought
properties covered thereby. The Bank filed a complaint against petitioners for non-payment of the
balance and promissory notes despite repeated demands. The notes were payable 30 days after date
and provided for the solidary liability in their non-payment at maturity. Petitioners deny having received
the value of the promissory notes. RTC ruled in favor of the petitioner but the CA reversed the decision.
Issue:
WON the promissory notes were valid
RULING:
The Court ruled in the affirmative. The genuineness and due execution of the notes had, however, been
deemed admitted by petitioners, they having failed to deny the same under oath. Their claim that they
signed the notes in blank does not thus lie. Petitioners' admission of the genuineness and due execution
of the promissory notes notwithstanding, they raise want of consideration thereof. The promissory
notes, however, appear to be negotiable as they meet the requirements of Section 146 of the
Negotiable Instruments Law. Such being the case, the notes are prima facie deemed to have been issued
for consideration. It bears noting that no sufficient evidence was adduced by petitioners to show
otherwise. In any case, it is no defense that the promissory notes were signed in blank as Section 14 of
the Negotiable Instruments Law concedes the prima facie authority of the person in possession of
negotiable instruments, such as the notes herein, to fill in the blanks.
 Engr. Jose E. Cayanan vs North Star International Travel, Inc
Facts:
Respondent Company is a travel agency while petitioner is the owner of a recruitment agency. On 1994,
the General Manager of North Star, in accommodation and upon the instruction of the petitioner, sent
the amount of $40,000 to View Sea Ventures by telegraphic transfer, with $15,000 coming from
petitioner. North Star extended credit to petitioner totaling P510,035.47 with the total amount of such
indebtedness. To cover said indebtedness, petitioner issued 5 checks in which those with the amount of
P1,500,000 and P35,000 were dishonored for insufficiency of funds while 3 others were dishonored due
to a stop payment order from petitioner. North Star instituted a complaint for violation of BP Blg. 22.
MeTC found petitioner guilty. RTC acquitted petitioner of criminal charges positing that the checks
issued by the accused were presented beyond the period of NINETY (90) DAYS and therefore, there is no
violation of the provision of Batas Pambansa Blg. 22 and the accused is not considered to have
committed the offense. There being no offense committed, accused is not criminally liable and there
would be no basis for the imposition of the civil liability arising from the offense. CA reversed decision of
the RTC insofar as the issue of civil liability.
Issue:
WON the checks issued by Cayanan were for valuable consideration
Ruling:
The Court ruled in the affirmative, checks were issued for a valuable consideration. Cayanan has not
presented credible evidence to rebut resumption that checks were issued for a valuable consideration.
Contrary to petitioners claims that North Star did not give any valuable consideration for the checks
since the US$85,000 was taken from the personal dollar account of Virginia and not the corporate funds
of North Star, the fact that petitioner himself specifically named North Star as the payee of the checks is
an admission of his liability to North Star and not to Virginia Balagtas. it is highly inconceivable that an
experienced businessman like petitioner would issue various checks in sizeable amounts to a payee if
these are without consideration. Also, his defense that dollars sent to View Sea in Nigeria was Virginia’s
own investment could not hold as she only remitted such money due to Cayanan’s request/ instructions
– this he never denied. It was him who had business transactions with View Sea and not Virginia.
Transaction between North Star and Cayanan was actually in the nature of a loan, and checks were
issued as payment of such hence there was no absence of consideration for the issuance of checks.
 Analysis
The above-stated cases are examples of negotiable instruments that are issued for valuable
consideration. Section 24 states that, “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.” The onus of proving the absence of consideration is upon the party alleging
such. Section 25 states that, “Value is any consideration sufficient to support a simple contract. An
antecedent or pre-existing debt constitutes value; and is deemed as such whether the instrument is
payable on demand or at a future time. A valuable consideration consists of either of rights, interest,
profit or benefit accruing to the party who makes the contract or some forbearance, detriment, loss or
some responsibility to act, or labor, or service given or suffered or undertaken by the other party.
In the case of Quirino Gonzales Logging vs Court of Appeals and Republic Planters Bank, the petitioner
failed to prove that the promissory notes are not negotiable. Their claim that they signed the notes in
blank was not upheld. The promissory notes were negotiable for they comply with the requirements of
Section 146 of the NIL. Such being the case, the notes are prima facie deemed to have been issued for
consideration. Since there was no sufficient evidence adduced by petitioners to show otherwise, they
cannot claim that said notes were not negotiable instruments for value. It is also of no defense that the
promissory notes were signed in blank for Section 14 of the Negotiable Instruments Law concedes the
prima facie authority of the person in possession of negotiable instruments, such as the notes herein, to
fill in the blanks. Absent any evidence of the absence of consideration, Section 24 of the NIL will operate,
that the negotiable instrument is deemed prima facie to have been issued for valuable consideration,
same goes to the case of Engr. Jose E. Cayanan vs North Star International Travel, Inc, where petitioner
failed to prove the absence of consideration of the checks he issued. Being the payee of said checks, he
warranted himself to liability to North Star, not its General Manager as he claims so. It was him who had
business transactions with View Sea and not Virginia.
However, in the case of Travel-On Inc vs Court of Appeals and Arturo S. Miranda, the trial court erred in
only taking into consideration the company’s financial statements when the check itself is conclusive
evidence of Miranda’s indebtedness. There is a prima facie presumption that a check was issued for
valuable consideration and the provision puts the burden upon the drawer to disprove this
presumption. Miranda was unable to relieve himself of this burden. Only clear and convincing evidence
and not mere self-serving evidence of drawer can rebut this presumption. The checks were clear by
stating that the company was the payee and not a mere accommodated party.
In the case of Remigio S. Ong vs People of the Philippines and Court of Appeals, the contention of the
petitioner is that there was no evidence that the Producers Bank check issued by private complainant in
his favor was ever encashed by him and so the subject check cannot be considered drawn and issued "to
apply on account or for value cannot be upheld. The findings of the lower court and the appellate court
is accorded great respect for it has better standing to ascertain the facts such as the establishment the
existence of the loan and the subsequent encashment of the Producer’s Bank check. The Court further
stated that, “in actions based upon a negotiable instrument, it is unnecessary to aver or prove
consideration, for consideration is imported and presumed from the fact that it is a negotiable
instrument. The presumption exists whether the words "value received" appear on the instrument or
not” in relation to Section 24 of the NIL. A negotiable instrument is therefore deemed transferred for a
valuable consideration if it was transferred in consideration of the obligation of the transferee to give or
deliver a thing, or to perform a service. Lastly, in the case of Charles Lee, Chua Siok Suy, Mariano Sio,
Alfonso Yap, Richard Veloso, Alfonso Co vs Court of Appeals and Philippine Bank Communications,
although letters of credit and trust receipts are not negotiable instruments, drafts issued in connection
with the letters of credit are negotiable instruments and so Section 24 is remains operative. Ultimately,
the petitioner failed to prove the absence of consideration, “aside from their bare denials petitioners did
not present sufficient and competent evidence to rebut the evidence of private respondent PBCom.
Petitioner MICO did not proffer a single piece of evidence, apart from its bare denials, to support its
allegation that the loan transactions, real estate mortgage, letters of credit and trust receipts were
issued allegedly without any consideration.”