Professional Documents
Culture Documents
132560 January 30, 2002 subject checks issued to him and asserted that the signatures on the
back were spurious. 3
This is a petition for review of the decision dated January 13, 1998, of the
1 On February 8, 1989, after trial on the merits, the Regional Trial Court of
Court of Appeals in CA-G.R. CV No. 28304 ordering the petitioner to pay Manila, Branch 38, rendered a decision, thus:
respondent ₱1,754,787.50 plus twelve percent (12%) interest per annum
computed from October 7, 1977, the date of the first extrajudicial IN VIEW OF THE FOREGOING, the court hereby renders judgment for
demand, plus damages. the plaintiff and against the defendant, and orders the defendant to pay
the plaintiff:
The facts of this case are undisputed.
1. The sum of P1,754,787.50 representing the total face value of
Respondent Eugene Ong maintained a current account with petitioner, the two checks in question, exhibits "A" and "B", respectively, with
formerly the Associated Banking Corporation, but now known as interest thereon at the legal rate of twelve percent (12%) per
Westmont Bank. Sometime in May 1976, he sold certain shares of stocks annum computed from October 7, 1977 (the date of the first
through Island Securities Corporation. To pay Ong, Island Securities extrajudicial demand) up to and until the same shall have been
purchased two (2) Pacific Banking Corporation manager’s checks, both 2 paid in full;
dated May 4, 1976, issued in the name of Eugene Ong as payee. Before
Ong could get hold of the checks, his friend Paciano Tanlimco got hold of 2. Moral damages in the amount of P250,000.00;
them, forged Ong’s signature and deposited these with petitioner, where
Tanlimco was also a depositor. Even though Ong’s specimen signature 3. Exemplary or corrective damages in the sum of P100,000.00
was on file, petitioner accepted and credited both checks to the account by way of example or correction for the public good;
of Tanlimco, without verifying the ‘signature indorsements’ appearing at
the back thereof. Tanlimco then immediately withdrew the money and 4. Attorney’s fees of P50,000.00 and costs of suit.
absconded.
Defendant’s counterclaims are dismissed for lack of merit.
Instead of going straight to the bank to stop or question the payment,
Ong first sought the help of Tanlimco’s family to recover the amount. SO ORDERED. 4
Later, he reported the incident to the Central Bank, which like the first
effort, unfortunately proved futile.
Petitioner elevated the case to the Court of Appeals without success. In
its decision, the appellate court held:
It was only on October 7, 1977, about five (5) months from discovery of
the fraud, did Ong cry foul and demanded in his complaint that petitioner
WHEREFORE, in view of the foregoing, the appealed decision is
pay the value of the two checks from the bank on whose gross
AFFIRMED in toto. 5
negligence he imputed his loss. In his suit, he insisted that he did not
"deliver, negotiate, endorse or transfer to any person or entity" the
Petitioner now comes before this Court on a petition for review, alleging Petitioner also cites Article 1249 of the Civil Code explaining that a
9
that the Court of Appeals erred: check, even if it is a manager’s check, is not legal tender. Hence, the
creditor cannot be compelled to accept payment thru this means. It is 10
I petitioner’s position that for all intents and purposes, Island Securities
has not yet tendered payment to respondent Ong, thus, any action by
... IN AFFIRMING THE TRIAL COURT’S CONCLUSION THAT Ong should be directed towards collecting the amount from Island
RESPONDENT HAS A CAUSE OF ACTION AGAINST THE Securities. Petitioner claims that Ong’s cause of action against it has not
PETITIONER. ripened as of yet. It may be that petitioner would be liable to the drawee
bank - - but that is a matter between petitioner and drawee-bank, Pacific
Banking Corporation. 11
II
For its part, respondent Ong leans on the ruling of the trial court and the
... IN AFFIRMING THE TRIAL COURT’S DECISION FINDING
Court of Appeals which held that the suit of Ong against the petitioner
PETITIONER LIABLE TO RESPONDENT AND DECLARING
bank is a desirable shortcut to reach the party who ought in any event to
THAT THE LATTER MAY RECOVER DIRECTLY FROM THE
be ultimately liable. It likewise cites the ruling of the courts a quo which
12
FORMER; AND
held that according to the general rule, a bank who has obtained
possession of a check upon an unauthorized or forged indorsement of
III the payee’s signature and who collects the amount of the check from the
drawee is liable for the proceeds thereof to the payee. The theory of said
... IN NOT ADJUDGING RESPONDENT GUILTY OF LACHES rule is that the collecting bank’s possession of such check is wrongful. 13
Essentially the issues in this case are: (1) whether or not respondent Ong that the collecting bank or last endorser generally suffers the loss
has a cause of action against petitioner Westmont Bank; and (2) whether because it has the duty to ascertain the genuineness of all prior
or not Ong is barred to recover the money from Westmont Bank due to endorsements. The collecting bank is also made liable because it is privy
laches. to the depositor who negotiated the check. The bank knows him, his
address and history because he is a client. Hence, it is in a better
Respondent admitted that he was never in actual or physical possession position to detect forgery, fraud or irregularity in the indorsement. 15
of the two (2) checks of the Island Securities nor did he authorize
Tanlimco or any of the latter’s representative to demand, accept and Anent Article 1249 of the Civil Code, Ong points out that bank checks are
receive the same. For this reason, petitioner argues, respondent cannot specifically governed by the Negotiable Instruments Law which is a
sue petitioner because under Section 51 of the Negotiable Instruments special law and only in the absence of specific provisions or deficiency in
Law it is only when a person becomes a holder of a negotiable
6
the special law may the Civil Code be invoked. 16
elements of a cause of action are: (a) a legal right or rights of the plaintiff,
(b) a correlative obligation of the defendant, and (c) an act or omission of had taken the check and collected the money without indorsement at all
the defendant in violation of said legal right.
18
and the act of the bank amounts to conversion of the check. 22
The complaint filed before the trial court expressly alleged Petitioner’s claim that since there was no delivery yet and respondent
respondent’s right as payee of the manager’s checks to receive the has never acquired possession of the checks, respondent’s remedy is
amount involved, petitioner’s correlative duty as collecting bank to ensure with the drawer and not with petitioner bank. Petitioner relies on the view
that the amount gets to the rightful payee or his order, and a breach of to the effect that where there is no delivery to the payee and no title vests
that duty because of a blatant act of negligence on the part of petitioner in him, he ought not to be allowed to recover on the ground that he lost
which violated respondent’s rights. 19
nothing because he never became the owner of the check and still
retained his claim of debt against the drawer. However, another view in
23
Under Section 23 of the Negotiable Instruments Law: certain cases holds that even if the absence of delivery is considered,
such consideration is not material. The rationale for this view is that in
When a signature is forged or made without the authority of the person said cases the plaintiff uses one action to reach, by a desirable short cut,
whose signature it purports to be, it is wholly inoperative, and no right to the person who ought in any event to be ultimately liable as among the
retain the instrument, or to give a discharge therefor, or to enforce innocent persons involved in the transaction. In other words, the payee
payment thereof against any party thereto, can be acquired through or ought to be allowed to recover directly from the collecting bank,
under such signature, unless the party against whom it is sought to regardless of whether the check was delivered to the payee or not. 24
forged signature. The payee, herein respondent, should therefore be treat their client’s account meticulously and with the highest degree of
allowed to recover from the collecting bank. care, considering the fiduciary nature of their relationship. The diligence
required of banks, therefore, is more than that of a good father of a
family. In the present case, petitioner was held to be grossly negligent in
26
The collecting bank is liable to the payee and must bear the loss because
performing its duties. As found by the trial court:
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
20
has obtained possession of a check upon an unauthorized or forged xxx (A)t the time the questioned checks were accepted for deposit to
indorsement of the payee’s signature and who collects the amount of the Paciano Tanlimco’s account by defendant bank, defendant bank,
check from the drawee, is liable for the proceeds thereof to the payee or admittedly had in its files specimen signatures of plaintiff who maintained
other owner, notwithstanding that the amount has been paid to the a current account with them (Exhibits "L-1" and "M-1"; testimony of
person from whom the check was obtained. 21 Emmanuel Torio). Given the substantial face value of the two checks,
totalling P1,754,787.50, and the fact that they were being deposited by a
person not the payee, the very least defendant bank should have done,
The theory of the rule is that the possession of the check on the forged or
as any reasonable prudent man would have done, was to verify the
unauthorized indorsement is wrongful, and when the money had been
genuineness of the indorsements thereon. The Court cannot help but
collected on the check, the bank or other person or corporation can be
note that had defendant conducted even the most cursory comparison
held as for moneys had and received, and the proceeds are held for the
with plaintiff’s specimen signatures in its files (Exhibit "L-1" and "M-1") it
rightful owners who may recover them. The position of the bank taking
would have at once seen that the alleged indorsements were falsified and
the check on the forged or unauthorized indorsement is the same as if it
were not those of the plaintiff-payee. However, defendant apparently
failed to make such a verification or, what is worse did so but, chose to
disregard the obvious dissimilarity of the signatures. The first omission after he had exhausted possibilities of settling the matter amicably with
makes it guilty of gross negligence; the second of bad faith. In either the family of Tanlimco and through the CB, about five months after the
case, defendant is liable to plaintiff for the proceeds of the checks in unlawful transaction took place, did he resort to making the demand upon
question. 27
the petitioner and eventually before the court for recovery of the money
value of the two checks. These acts cannot be construed as undue delay
These findings are binding and conclusive on the appellate and the in or abandonment of the assertion of his rights.
reviewing courts.
Moreover, the claim of petitioner that respondent should be barred by
On the second issue, petitioner avers that respondent Ong is barred by laches is clearly a vain attempt to deflect responsibility for its negligent
laches for failing to assert his right for recovery from the bank as soon as act. As explained by the appellate court, it is petitioner which had the last
1âwphi1
he discovered the scam. The lapse of five months before he went to seek clear chance to stop the fraudulent encashment of the subject checks
relief from the bank, according to petitioner, constitutes laches. had it exercised due diligence and followed the proper and regular
banking procedures in clearing checks. As we had earlier ruled, the one
31
In turn, respondent contends that petitioner presented no evidence to who had the last clear opportunity to avoid the impending harm but failed
support its claim of laches. On the contrary, the established facts of the to do so is chargeable with the consequences thereof. 32
case as found by the trial court and affirmed by the Court of Appeals are
that respondent left no stone unturned to obtain relief from his WHEREFORE, the instant petition is DENIED for lack of merit. The
predicament. assailed decision of the Court of Appeals, sustaining the judgment of the
Regional Trial Court of Manila, is AFFIRMED.
On the matter of delay in reporting the loss, respondent calls attention to
the fact that the checks were issued on May 4, 1976, and on the very Costs against petitioner.
next day, May 5, 1976, these were already credited to the account of
Paciano Tanlimco and presented for payment to Pacific Banking SO ORDERED.
Corporation. So even if the theft of the checks were discovered and
reported earlier, respondent argues, it would not have altered the
situation as the encashment of the checks was consummated within
twenty four hours and facilitated by the gross negligence of the petitioner
bank.28
In the case at bar, it cannot be said that respondent sat on his rights. He
immediately acted after knowing of the forgery by proceeding to seek
help from the Tanlimco family and later the Central Bank, to remedy the
situation and recover his money from the forger, Paciano Tanlimco. Only
G.R. No. 89802 May 7, 1992 listed crossed checks. Further inquiry revealed that the said checks had
been deposited with the Associated Bank (hereinafter, "the Bank") and
ASSOCIATED BANK and CONRADO CRUZ, petitioners, subsequently paid by it to one Rafael Sayson, one of its "trusted
vs. depositors," in the words of its branch manager and co-petitioner,
HON. COURT OF APPEALS, and MERLE V. REYES, doing business Conrado Cruz, Sayson had not been authorized by the private
under the name and style "Melissa's RTW," respondents. respondent to deposit and encash the said checks.
Soluta, Leonidas, Marifosque, Javier, Liboon & aguila Law Offices for The private respondent sued the petitioners in the Regional Trial Court of
petitioners. Quezon City for recovery of the total value of the checks plus damages.
After trial, judgment was rendered requiring them to pay the private
Roberto B. Lugue for private respondent. respondent the total value of the subject checks in the amount of
P15,805.00 plus 12% interest, P50,000.00 actual damages, P25,000.00
exemplary damages, P5,000.00 attorney's fees, and the costs of the
suit.
1
CRUZ, J.:
The petitioners appealed to the respondent court, reiterating their
argument that the private respondent had no cause of action against
The sole issue raised in this case is whether or not the private them and should have proceeded instead against the companies that
respondent has a cause of action against the petitioners for their issued the checks. In disposing of this contention, the Court of
encashment and payment to another person of certain crossed checks Appeals said:
2
where the words written between the two parallel lines are "and Co." or and may be recovered by him. The position of the bank taking the check
"for payee's account only," as in the case at bar. This means that the on the forged or unauthorized indorsement is the same as if it had taken
drawee bank should not encash the check but merely accept it for the check and collected without indorsement at all. The act of the bank
deposit.
4
amounts to conversion of the check. 7
In State Investment House vs. IAC, this Court declared that "the effects
5
It is not disputed that the proceeds of the subject checks belonged to the
of crossing a check are: (1) that the check may not be encashed but only private respondent. As she had not at any time authorized Rafael Sayson
deposited in the bank; (2) that the check may be negotiated only once –– to endorse or encash them, there was conversion of the funds by the
to one who has an account with a bank; and (3) that the act of crossing Bank.
the check serves as a warning to the holder that the check has been
issued for a definite purpose so that he must inquire if he has received When the Bank paid the checks so endorsed notwithstanding that title
the check pursuant to that purpose." 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
The effects therefore of crossing a check relate to the mode of its not the Bank was aware of the unauthorized endorsement. 8
presentment for payment. Under Sec. 72 of the Negotiable Instruments
Law, presentment for payment, to be sufficient, must be made by the The petitioners were negligent when they permitted the encashment of the checks by Sayson. The
holder or by some person authorized to receive payment on his behalf. Bank should have first verified his right to endorse the crossed checks, of which he was not the payee,
and to deposit the proceeds of the checks to his own account. The Bank was by reason of the nature
Who the holder or authorized person is depends on the instruction stated of the checks put upon notice that they were issued for deposit only to the private respondent's
on the face of the check. account. Its failure to inquire into Sayson's authority was a breach of a duty it owed to the private
respondent.
As the Court stressed in Banco de Oro Savings and Mortgage Bank the assurance that it had ascertained the genuineness of all prior
vs. Equitable Banking Corp., "the law imposes a duty of diligence on the
9
endorsements.
collecting bank to scrutinize checks deposited with it, for the purpose of
determining their genuineness and regularity. The collecting bank, being We find that the respondent court committed no reversible error in
primarily engaged in banking, holds itself out to the public as the expert holding that the private respondent had a valid cause of action against
on this field, and the law thus holds it to a high standard of conduct." the petitioners and that the latter are indeed liable to her for their
unauthorized encashment of the subject checks. We also agree with the
The petitioners insist that the private respondent has no cause of action reduction of the award of the exemplary damages for lack of sufficient
against them because they have no privity of contract with her. They also evidence to support them.
argue that it was Eddie Reyes, the private respondent's own husband,
who endorsed the checks. WHEREFORE, the petition is DENIED, with costs against the petitioner.
It is so ordered.
Assuming that Eddie Reyes did endorse the crossed checks, we hold
that the Bank would still be liable to the private respondent because he
was not authorized to make the endorsements. And even if the
endorsements were forged, as alleged, the Bank would still be liable to
the private respondent for not verifying the endorser's authority. There is
no substantial difference between an actual forging of a name to a check
as an endorsement by a person not authorized to make the signature and
the affixing of a name to a check as an endorsement by a person not
authorized to endorse it.
10
The Bank does not deny collecting the money on the endorsement. It
was its responsibility to inquire as to the authority of Rafael Sayson to
deposit crossed checks payable to Melissa's RTW upon a prior
endorsement by Eddie Reyes. The failure of the Bank to make this
inquiry was a breach of duty that made it liable to the private respondent
for the amount of the checks.
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. In
a similar situation, 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. We approve such
11
It is worth repeating 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
G.R. No. 149454 May 28, 2004 defendant Yabut who is likewise ORDERED to pay the other half
to plaintiff corporation [Casa Montessori Internationale (CASA)]."4
BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs. The assailed Resolution denied all the parties’ Motions for
CASA MONTESSORI INTERNATIONALE LEONARDO T. Reconsideration.
YABUT, respondents.
The Facts
x ----------------------------- x
The facts of the case are narrated by the CA as follows:
G.R. No. 149507 May 28, 2004
"On November 8, 1982, plaintiff CASA Montessori
CASA MONTESSORI INTERNATIONALE, petitioner, International5 opened Current Account No. 0291-0081-01 with
vs. defendant BPI[,] with CASA’s President Ms. Ma. Carina C.
BANK OF THE PHILIPPINE ISLANDS, respondent. Lebron as one of its authorized signatories.
Among its obligations in furtherance thereof is knowing the signatures of 1. 839700 April 24, 1990 ₱ 43,400.00
its clients. Depositors are not estopped from questioning wrongful 2. 839459 Nov. 2, 1990 110,500.00
withdrawals, even if they have failed to question those errors in the
statements sent by the bank to them for verification. 3. 839609 Oct. 17, 1990 47,723.00
4. 839549 April 7, 1990 90,700.00
The Case
5. 839569 Sept. 23, 1990 52,277.00
Before us are two Petitions for Review under Rule 45 of the Rules of
1
6. 729149 Mar. 22, 1990 148,000.00
Court, assailing the March 23, 2001 Decision2 and the August 17, 2001
Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 63561. The 7. 729129 Mar. 16, 1990 51,015.00
decretal portion of the assailed Decision reads as follows:
8. 839684 Dec. 1, 1990 140,000.00
"WHEREFORE, upon the premises, the decision appealed from 9. 729034 Mar. 2, 1990 98,985.00
is AFFIRMED with the modification that defendant bank [Bank of
the Philippine Islands (BPI)] is held liable only for one-half of the
value of the forged checks in the amount of ₱547,115.00 after Total -- ₱ 782,600.006
deductions subject to REIMBURSEMENT from third party
"It turned out that ‘Sonny D. Santos’ with account at BPI’s Negotiable Instruments Law (NIL) which precludes CASA, on
Greenbelt Branch [was] a fictitious name used by third party account of its own negligence, from asserting its forgery claim
defendant Leonardo T. Yabut who worked as external auditor of against BPI, specially taking into account the absence of any
CASA. Third party defendant voluntarily admitted that he forged negligence on the part of BPI."10
the signature of Ms. Lebron and encashed the checks. "The PNP
Crime Laboratory conducted an examination of the nine (9) In GR No. 149507, Petitioner CASA submits the following issues:
checks and concluded that the handwritings thereon compared to
the standard signature of Ms. Lebron were not written by the "1. The Honorable Court of Appeals erred when it ruled that ‘there
latter. is no showing that [BPI], although negligent, acted in bad faith x x
x’ thus denying the prayer for the award of attorney’s fees, moral
"On March 4, 1991, plaintiff filed the herein Complaint for damages and exemplary damages to [CASA]. The Honorable
Collection with Damages against defendant bank praying that the Court also erred when it did not order [BPI] to pay interest on the
latter be ordered to reinstate the amount of ₱782,500.007 in the amounts due to [CASA].
current and savings accounts of the plaintiff with interest at 6%
per annum. "2. The Honorable Court of Appeals erred when it declared that
[CASA] was likewise negligent in the case at bar, thus warranting
"On February 16, 1999, the RTC rendered the appealed decision its conclusion that the loss in the amount of ₱547,115.00 be
in favor of the plaintiff."8 ‘apportioned between [CASA] and [BPI] x x x.’"11
Ruling of the Court of Appeals These issues can be narrowed down to three. First, was there forgery
under the Negotiable Instruments Law (NIL)? Second, were any of the
Modifying the Decision of the Regional Trial Court (RTC), the CA parties negligent and therefore precluded from setting up forgery as a
apportioned the loss between BPI and CASA. The appellate court took defense? Third, should moral and exemplary damages, attorney’s fees,
into account CASA’s contributory negligence that resulted in the and interest be awarded?
undetected forgery. It then ordered Leonardo T. Yabut to reimburse BPI
half the total amount claimed; and CASA, the other half. It also The Court’s Ruling
disallowed attorney’s fees and moral and exemplary damages.
The Petition in GR No. 149454 has no merit, while that in GR No. 149507
Hence, these Petitions.9 is partly meritorious.
In GR No. 149454, Petitioner BPI submits the following issues for our Forged Signature Wholly Inoperative
consideration:
Section 23 of the NIL provides:
"I. The Honorable Court of Appeals erred in deciding this
case NOT in accord with the applicable decisions of this "Section 23. Forged signature; effect of. -- When a signature is
Honorable Court to the effect that forgery cannot be presumed; forged or made without the authority of the person whose
that it must be proved by clear, positive and convincing evidence; signature it purports to be, it is wholly inoperative, and no right x x
and that the burden of proof lies on the party alleging the forgery. x to enforce payment thereof against any party thereto, can be
acquired through or under such signature, unless the party
"II. The Honorable Court of Appeals erred in deciding this against whom it is sought to enforce such right is precluded from
case not in accord with applicable laws, in particular the setting up the forgery or want of authority."12
Under this provision, a forged signature is a real13 or absolute him by the police authorities for the purpose of eliciting admissions,
defense,14 and a person whose signature on a negotiable instrument is confessions, or any information."30 The said constitutional provision does
forged is deemed to have never become a party thereto and to have "not apply to spontaneous statements made in a voluntary
never consented to the contract that allegedly gave rise to it.15 manner"31 whereby an individual orally admits to authorship of a
crime.32 "What the Constitution proscribes is the compulsory or coercive
The counterfeiting of any writing, consisting in the signing of another’s disclosure of incriminating facts."33
name with intent to defraud, is forgery.16
Moreover, the right against self-incrimination34 under Section 17 of Article
In the present case, we hold that there was forgery of the drawer’s III35 of the Constitution, which is ordinarily available only in criminal
signature on the check. prosecutions, extends to all other government proceedings -- including
civil actions, legislative investigations,36 and administrative proceedings
First, both the CA17 and the RTC18 found that Respondent Yabut himself that possess a criminal or penal aspect37 -- but not to private
had voluntarily admitted, through an Affidavit, that he had forged the investigations done by private individuals. Even in such government
drawer’s signature and encashed the checks.19 He never refuted these proceedings, this right may be waived,38 provided the waiver is certain;
findings.20 That he had been coerced into admission was not unequivocal; and intelligently, understandingly and willingly made.39
corroborated by any evidence on record.21
If in these government proceedings waiver is allowed, all the more is it so
Second, the appellate and the trial courts also ruled that the PNP Crime in private investigations. It is of no moment that no criminal case has yet
Laboratory, after its examination of the said checks,22 had concluded that been filed against Yabut. The filing thereof is entirely up to the
the handwritings thereon -- compared to the standard signature of the appropriate authorities or to the private individuals upon whom damage
drawer -- were not hers.23 This conclusion was the same as that in the has been caused. As we shall also explain later, it is not mandatory for
Report24 that the PNP Crime Laboratory had earlier issued to BPI -- the CASA -- the plaintiff below -- to implead Yabut in the civil case before the
drawee bank -- upon the latter’s request. lower court.
Indeed, we respect and affirm the RTC’s factual findings, especially when Under these two constitutional provisions, "[t]he Bill of Rights40 does not
affirmed by the CA, since these are supported by substantial evidence on concern itself with the relation between a private individual and another
record.25 individual. It governs the relationship between the individual and the
State."41 Moreover, the Bill of Rights "is a charter of liberties for the
individual and a limitation upon the power of the [S]tate."42 These
Voluntary Admission Not Violative of Constitutional Rights
rights43 are guaranteed to preclude the slightest coercion by the State that
may lead the accused "to admit something false, not prevent him from
The voluntary admission of Yabut did not violate his constitutional rights freely and voluntarily telling the truth."44
(1) on custodial investigation, and (2) against self-incrimination.
Yabut is not an accused here. Besides, his mere invocation of the
In the first place, he was not under custodial investigation.26 His Affidavit aforesaid rights "does not automatically entitle him to the constitutional
was executed in private and before private individuals.27 The mantle of protection."45 When he freely and voluntarily executed46 his Affidavit, the
protection under Section 12 of Article III of the 1987 Constitution28 covers State was not even involved. Such Affidavit may therefore be admitted
only the period "from the time a person is taken into custody for without violating his constitutional rights while under custodial
investigation of his possible participation in the commission of a crime or investigation and against self-incrimination.
from the time he is singled out as a suspect in the commission of a crime
although not yet in custody."29
Clear, Positive and Convincing Examination and Evidence
Therefore, to fall within the ambit of Section 12, quoted above, there must
be an arrest or a deprivation of freedom, with "questions propounded on
The examination by the PNP, though inconclusive, was nevertheless is the fact that CASA did not present the signature card containing the
clear, positive and convincing. signatures with which those on the checks were compared.64 Specimens
of standard signatures are not limited to such a card. Considering that it
Forgery "cannot be presumed."47 It must be established by clear, positive was not produced in evidence, other documents that bear the drawer’s
and convincing evidence.48 Under the best evidence rule as applied to authentic signature may be resorted to.65 Besides, that card was in the
documentary evidence like the checks in question, no secondary or possession of BPI -- the adverse party.
substitutionary evidence may inceptively be introduced, as the original
writing itself must be produced in court.49 But when, without bad faith on We have held that without the original document containing the allegedly
the part of the offeror, the original checks have already been destroyed or forged signature, one cannot make a definitive comparison that would
cannot be produced in court, secondary evidence may be establish forgery;66 and that a comparison based on a mere reproduction
produced.50 Without bad faith on its part, CASA proved the loss or of the document under controversy cannot produce reliable results.67 We
destruction of the original checks through the Affidavit of the one person have also said, however, that a judge cannot merely rely on a
who knew of that fact51 -- Yabut. He clearly admitted to discarding the handwriting expert’s testimony,68 but should also exercise independent
paid checks to cover up his misdeed.52 In such a situation, secondary judgment in evaluating the authenticity of a signature under scrutiny.69 In
evidence like microfilm copies may be introduced in court. the present case, both the RTC and the CA conducted independent
examinations of the evidence presented and arrived at reasonable and
The drawer’s signatures on the microfilm copies were compared with the similar conclusions. Not only did they admit secondary evidence; they
standard signature. PNP Document Examiner II Josefina de la Cruz also appositely considered testimonial and other documentary evidence
testified on cross-examination that two different persons had written in the form of the Affidavit.
them.53 Although no conclusive report could be issued in the absence of
the original checks,54 she affirmed that her findings were 90 percent The best evidence rule admits of exceptions and, as we have discussed
conclusive.55 According to her, even if the microfilm copies were the only earlier, the first of these has been met.70 The result of examining a
basis of comparison, the differences were evident.56 Besides, the RTC questioned handwriting, even with the aid of experts and scientific
explained that although the Report was inconclusive, no conclusive instruments, may be inconclusive;71 but it is a non sequitur to say that
report could have been given by the PNP, anyway, in the absence of the such result is not clear, positive and convincing. The preponderance of
original checks.57 This explanation is valid; otherwise, no such report can evidence required in this case has been satisfied.72
ever be relied upon in court.
Second Issue:
Even with respect to documentary evidence, the best evidence rule
applies only when the contents of a document -- such as the drawer’s Negligence Attributable to BPI Alone
signature on a check -- is the subject of inquiry.58 As to whether the
document has been actually executed, this rule does not apply; and Having established the forgery of the drawer’s signature, BPI -- the
testimonial as well as any other secondary evidence is drawee -- erred in making payments by virtue thereof. The forged
admissible.59 Carina Lebron herself, the drawer’s authorized signatory, signatures are wholly inoperative, and CASA -- the drawer whose
testified many times that she had never signed those checks. Her authorized signatures do not appear on the negotiable instruments --
testimonial evidence is admissible; the checks have not been actually cannot be held liable thereon. Neither is the latter precluded from setting
executed. The genuineness of her handwriting is proved, not only up forgery as a real defense.
through the court’s comparison of the questioned handwritings and
admittedly genuine specimens thereof,60 but above all by her.
Clear Negligence in Allowing Payment Under a Forged Signature
The failure of CASA to produce the original checks neither gives rise to
We have repeatedly emphasized that, since the banking business is
the presumption of suppression of evidence61 nor creates an unfavorable
impressed with public interest, of paramount importance thereto is the
inference against it.62 Such failure merely authorizes the introduction of
trust and confidence of the public in general. Consequently, the highest
secondary evidence63 in the form of microfilm copies. Of no consequence
degree of diligence73 is expected,74 and high standards of integrity and is merely presumptive and cannot be the basis of a valid waiver.89 BPI
performance are even required, of it.75 By the nature of its functions, a has no right to impose a condition unilaterally and thereafter consider
bank is "under obligation to treat the accounts of its depositors with failure to meet such condition a waiver. Neither may CASA renounce a
meticulous care,76 always having in mind the fiduciary nature of their right90 it has never possessed.91
relationship."77
Every right has subjects -- active and passive. While the active subject is
BPI contends that it has a signature verification procedure, in which entitled to demand its enforcement, the passive one is duty-bound to
checks are honored only when the signatures therein are verified to be suffer such enforcement.92
the same with or similar to the specimen signatures on the signature
cards. Nonetheless, it still failed to detect the eight instances of forgery. On the one hand, BPI could not have been an active subject, because it
Its negligence consisted in the omission of that degree of diligence could not have demanded from CASA a response to its notice. Besides,
required78 of a bank. It cannot now feign ignorance, for very early on we the notice was a measly request worded as follows: "Please examine x x
have already ruled that a bank is "bound to know the signatures of its x and report x x x."93 CASA, on the other hand, could not have been a
customers; and if it pays a forged check, it must be considered as making passive subject, either, because it had no obligation to respond. It could
the payment out of its own funds, and cannot ordinarily charge the -- as it did -- choose not to respond.
amount so paid to the account of the depositor whose name was
forged."79 In fact, BPI was the same bank involved when we issued this Estoppel precludes individuals from denying or asserting, by their own
ruling seventy years ago. deed or representation, anything contrary to that established as the truth,
in legal contemplation.94 Our rules on evidence even make a juris et de
Neither Waiver nor Estoppel Results from Failure to Report Error in jure presumption95 that whenever one has, by one’s own act or omission,
Bank Statement intentionally and deliberately led another to believe a particular thing to
be true and to act upon that belief, one cannot -- in any litigation arising
The monthly statements issued by BPI to its clients contain a notice from such act or omission -- be permitted to falsify that supposed truth.96
worded as follows: "If no error is reported in ten (10) days, account will be
correct."80 Such notice cannot be considered a waiver, even if CASA In the instant case, CASA never made any deed or representation that
failed to report the error. Neither is it estopped from questioning the misled BPI. The former’s omission, if any, may only be deemed an
mistake after the lapse of the ten-day period. innocent mistake oblivious to the procedures and consequences of
periodic audits. Since its conduct was due to such ignorance founded
This notice is a simple confirmation81 or "circularization" -- in accounting upon an innocent mistake, estoppel will not arise.97 A person who has no
parlance -- that requests client-depositors to affirm the accuracy of items knowledge of or consent to a transaction may not be estopped by
recorded by the banks.82 Its purpose is to obtain from the depositors a it.98 "Estoppel cannot be sustained by mere argument or doubtful
direct corroboration of the correctness of their account balances with their inference x x x."99 CASA is not barred from questioning BPI’s error even
respective banks.83 Internal or external auditors of a bank use it as a after the lapse of the period given in the notice.
basic audit procedure84 -- the results of which its client-depositors are
neither interested in nor privy to -- to test the details of transactions and Loss Borne by Proximate Source of Negligence
balances in the bank’s records.85 Evidential matter obtained from
independent sources outside a bank only serves to provide greater For allowing payment100 on the checks to a wrongful and fictitious payee,
assurance of reliability86 than that obtained solely within it for purposes of BPI -- the drawee bank -- becomes liable to its depositor-drawer. Since
an audit of its own financial statements, not those of its client-depositors. the encashing bank is one of its branches,101 BPI can easily go after it and
hold it liable for reimbursement.102 It "may not debit the drawer’s
Furthermore, there is always the audit risk that errors would not be account103 and is not entitled to indemnification from the drawer."104 In
detected87 for various reasons. One, materiality is a consideration in audit both law and equity, when one of two innocent persons "must suffer by
planning;88 and two, the information obtained from such a substantive test the wrongful act of a third person, the loss must be borne by the one
whose negligence was the proximate cause of the loss or who put it into audit and ends with the fulfilled expectation of the auditor’s ethical119 and
the power of the third person to perpetrate the wrong."105 competent performance in all aspects of the audit.120
Proximate cause is determined by the facts of the case.106 "It is that cause The financial statements are representations of the client; but it is the
which, in natural and continuous sequence, unbroken by any efficient auditor who has the responsibility for the accuracy in the recording of
intervening cause, produces the injury, and without which the result data that underlies their preparation, their form of presentation, and the
would not have occurred."107 opinion121 expressed therein.122 The auditor does not assume the role of
employee or of management in the client’s conduct of operations123 and is
Pursuant to its prime duty to ascertain well the genuineness of the never under the control or supervision124 of the client.
signatures of its client-depositors on checks being encashed, BPI is
"expected to use reasonable business prudence."108 In the performance of Yabut was an independent auditor125 hired by CASA. He handled its
that obligation, it is bound by its internal banking rules and regulations monthly bank reconciliations and had access to all relevant documents
that form part of the contract it enters into with its depositors.109 and checkbooks.126 In him was reposed the client’s127 trust and
confidence128 that he would perform precisely those functions and apply
Unfortunately, it failed in that regard. First, Yabut was able to open a the appropriate procedures in accordance with generally accepted
bank account in one of its branches without privity;110 that is, without the auditing standards.129 Yet he did not meet these expectations. Nothing
proper verification of his corresponding identification papers. Second, BPI could be more horrible to a client than to discover later on that the person
was unable to discover early on not only this irregularity, but also the tasked to detect fraud was the same one who perpetrated it.
marked differences in the signatures on the checks and those on the
signature card. Third, despite the examination procedures it conducted, Cash Balances Open to Manipulation
the Central Verification Unit111 of the bank even passed off these evidently
different signatures as genuine. Without exercising the required prudence It is a non sequitur to say that the person who receives the monthly bank
on its part, BPI accepted and encashed the eight checks presented to it. statements, together with the cancelled checks and other debit/credit
As a result, it proximately contributed to the fraud and should be held memoranda, shall examine the contents and give notice of any
primarily liable112 for the "negligence of its officers or agents when acting discrepancies within a reasonable time. Awareness is not equipollent with
within the course and scope of their employment."113 It must bear the loss. discernment.
CASA Not Negligent in Its Financial Affairs Besides, in the internal accounting control system prudently installed by
CASA,130 it was Yabut who should examine those documents in order to
In this jurisdiction, the negligence of the party invoking forgery is prepare the bank reconciliations.131 He owned his working papers,132 and
recognized as an exception114 to the general rule that a forged signature his output consisted of his opinion as well as the client’s financial
is wholly inoperative.115 Contrary to BPI’s claim, however, we do not find statements and accompanying notes thereto. CASA had every right to
CASA negligent in handling its financial affairs. CASA, we stress, is not rely solely upon his output -- based on the terms of the audit engagement
precluded from setting up forgery as a real defense. -- and could thus be unwittingly duped into believing that everything was
in order. Besides, "[g]ood faith is always presumed and it is the burden of
Role of Independent Auditor the party claiming otherwise to adduce clear and convincing evidence to
the contrary."133
The major purpose of an independent audit is to investigate and
determine objectively if the financial statements submitted for audit by a Moreover, there was a time gap between the period covered by the bank
corporation have been prepared in accordance with the appropriate statement and the date of its actual receipt. Lebron personally received
financial reporting practices116 of private entities. The relationship that the December 1990 bank statement only in January 1991134 -- when she
arises therefrom is both legal and moral.117 It begins with the execution of was also informed of the forgery for the first time, after which she
the engagement letter118 that embodies the terms and conditions of the immediately requested a "stop payment order." She cannot be faulted for
the late detection of the forged December check. After all, the bank Clearly then, Yabut was able to perpetrate the wrongful act through no
account with BPI was not personal but corporate, and she could not be fault of CASA. If auditors may be held liable for breach of contract and
expected to monitor closely all its finances. A preschool teacher charged negligence,146 with all the more reason may they be charged with the
with molding the minds of the youth cannot be burdened with the perpetration of fraud upon an unsuspecting client. CASA had the
intricacies or complexities of corporate existence. discretion to pursue BPI alone under the NIL, by reason of expediency or
munificence or both. Money paid under a mistake may rightfully be
There is also a cutoff period such that checks issued during a given recovered,147 and under such terms as the injured party may choose.
month, but not presented for payment within that period, will not be
reflected therein.135 An experienced auditor with intent to defraud can Third Issue:
easily conceal any devious scheme from a client unwary of the
accounting processes involved by manipulating the cash balances on Award of Monetary Claims
record -- especially when bank transactions are numerous, large and
frequent. CASA could only be blamed, if at all, for its unintelligent choice Moral Damages Denied
in the selection and appointment of an auditor -- a fault that is not
tantamount to negligence.
We deny CASA’s claim for moral damages.
Negligence is not presumed, but proven by whoever alleges it.136 Its mere
In the absence of a wrongful act or omission,148 or of fraud or bad
existence "is not sufficient without proof that it, and no other
faith,149 moral damages cannot be awarded.150 The adverse result of an
cause,"137 has given rise to damages.138 In addition, this fault is common
action does not per se make the action wrongful, or the party liable for it.
to, if not prevalent among, small and medium-sized business entities,
One may err, but error alone is not a ground for granting such
thus leading the Professional Regulation Commission (PRC), through the
damages.151 While no proof of pecuniary loss is necessary therefor -- with
Board of Accountancy (BOA), to require today not only accreditation for
the amount to be awarded left to the court’s discretion152 -- the claimant
the practice of public accountancy,139 but also the registration of firms in
must nonetheless satisfactorily prove the existence of its factual
the practice thereof. In fact, among the attachments now required upon
basis153 and causal relation154 to the claimant’s act or omission.155
registration are the code of good governance140 and a sworn statement on
adequate and effective training.141
Regrettably, in this case CASA was unable to identify the particular
instance -- enumerated in the Civil Code -- upon which its claim for moral
The missing checks were certainly reported by the bookkeeper142 to the
damages is predicated.156 Neither bad faith nor negligence so gross that it
accountant143 -- her immediate supervisor -- and by the latter to the
amounts to malice157 can be imputed to BPI. Bad faith, under the law,
auditor. However, both the accountant and the auditor, for reasons
"does not simply connote bad judgment or negligence;158 it imports a
known only to them, assured the bookkeeper that there were no
dishonest purpose or some moral obliquity and conscious doing of a
irregularities.
wrong, a breach of a known duty through some motive or interest or ill
will that partakes of the nature of fraud."159
The bookkeeper144 who had exclusive custody of the checkbooks145 did
not have to go directly to CASA’s president or to BPI. Although she
As a general rule, a corporation -- being an artificial person without
rightfully reported the matter, neither an investigation was conducted nor
feelings, emotions and senses, and having existence only in legal
a resolution of it was arrived at, precisely because the person at the top
contemplation -- is not entitled to moral damages,160 because it cannot
of the helm was the culprit. The vouchers, invoices and check stubs in
experience physical suffering and mental anguish.161 However, for breach
support of all check disbursements could be concealed or fabricated --
of the fiduciary duty required of a bank, a corporate client may claim such
even in collusion -- and management would still have no way to verify its
damages when its good reputation is besmirched by such breach, and
cash accountabilities.
social humiliation results therefrom.162 CASA was unable to prove that BPI
had debased the good reputation of,163 and consequently caused
incalculable embarrassment to, the former. CASA’s mere allegation or
supposition thereof, without any sufficient evidence on record,164 is not interest, which is six percent per annum."178 The actual base for its
enough. computation shall be "on the amount finally
adjudged,"179 compounded180 annually to make up for the cost of
Exemplary Damages Also Denied money181 already lost to CASA.
We also deny CASA’s claim for exemplary damages. Moreover, the failure of the CA to award interest does not prevent us
from granting it upon damages awarded for breach of
Imposed by way of correction165 for the public good,166 exemplary contract.182 Because BPI evidently breached its contract of deposit with
damages cannot be recovered as a matter of right.167 As we have said CASA, we award interest in addition to the total amount adjudged. Under
earlier, there is no bad faith on the part of BPI for paying the checks of Section 196 of the NIL, any case not provided for shall be "governed by
CASA upon forged signatures. Therefore, the former cannot be said to the provisions of existing legislation or, in default thereof, by the rules of
have acted in a wanton, fraudulent, reckless, oppressive or malevolent the law merchant."183 Damages are not provided for in the NIL. Thus, we
manner.168 The latter, having no right to moral damages, cannot demand resort to the Code of Commerce and the Civil Code. Under Article 2 of
exemplary damages.169 the Code of Commerce, acts of commerce shall be governed by its
provisions and, "in their absence, by the usages of commerce generally
observed in each place; and in the absence of both rules, by those of the
Attorney’s Fees Granted
civil law."184 This law being silent, we look at Article 18 of the Civil Code,
which states: "In matters which are governed by the Code of Commerce
Although it is a sound policy not to set a premium on the right to and special laws, their deficiency shall be supplied" by its provisions. A
litigate,170 we find that CASA is entitled to reasonable attorney’s fees perusal of these three statutes unmistakably shows that the award of
based on "factual, legal, and equitable justification."171 interest under our civil law is justified.
When the act or omission of the defendant has compelled the plaintiff to WHEREFORE, the Petition in GR No. 149454 is hereby DENIED, and
incur expenses to protect the latter’s interest,172 or where the court deems that in GR No. 149507 PARTLY GRANTED. The assailed Decision of
it just and equitable,173 attorney’s fees may be recovered. In the present the Court of Appeals is AFFIRMED with modification: BPI is held liable
case, BPI persistently denied the claim of CASA under the NIL to recredit for ₱547,115, the total value of the forged checks less the amount
the latter’s account for the value of the forged checks. This denial already recovered by CASA from Leonardo T. Yabut, plus interest at the
constrained CASA to incur expenses and exert effort for more than ten legal rate of six percent (6%) per annum -- compounded annually, from
years in order to protect its corporate interest in its bank account. the filing of the complaint until paid in full; and attorney’s fees of ten
Besides, we have already cautioned BPI on a similar act of negligence it percent (10%) thereof, subject to reimbursement from Respondent Yabut
had committed seventy years ago, but it has remained unrelenting. for the entire amount, excepting attorney’s fees. Let a copy of this
Therefore, the Court deems it just and equitable to grant ten percent Decision be furnished the Board of Accountancy of the Professional
(10%)174 of the total value adjudged to CASA as attorney’s fees. Regulation Commission for such action as it may deem appropriate
against Respondent Yabut. No costs.
Interest Allowed
SO ORDERED.
For the failure of BPI to pay CASA upon demand and for compelling the
latter to resort to the courts to obtain payment, legal interest may be
adjudicated at the discretion of the Court, the same to run from the
filing175 of the Complaint.176 Since a court judgment is not a loan or a
forbearance of recovery, the legal interest shall be at six percent
(6%) per annum.177 "If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages, there
being no stipulation to the contrary, shall be the payment of x x x legal
G.R. No. 139130 November 27, 2002 That I have examined and scrutinized the following checks in accordance
with prescribed verification procedures with utmost care and diligence by
RAMON K. ILUSORIO, petitioner, comparing the signatures affixed thereat against the specimen signatures
vs. of Mr. Ramon K. Ilusorio which we have on file at our said office on such
HON. COURT OF APPEALS, and THE MANILA BANKING dates,
CORPORATION, respondents.
xxx
DECISION
That the aforementioned checks were among those issued by
QUISUMBING, J.: Manilabank in favor of its client MR. RAMON K. ILUSORIO,…
This petition for review seeks to reverse the decision1 promulgated on That the same were personally encashed by KATHERINE E. ESTEBAN,
January 28, 1999 by the Court of Appeals in CA-G.R. CV No. 47942, an executive secretary of MR. RAMON K. ILUSORIO in said Investment
affirming the decision of the then Court of First Instance of Rizal, Branch Corporation;
XV (now the Regional Trial Court of Makati, Branch 138) dismissing Civil
Case No. 43907, for damages. That I have met and known her as KATHERINE E. ESTEBAN the
attending verifier when she personally encashed the above-mentioned
The facts as summarized by the Court of Appeals are as follows: checks at our said office;
Petitioner is a prominent businessman who, at the time material to this That MR. RAMON K. ILUSORIO executed an affidavit expressly
case, was the Managing Director of Multinational Investment disowning his signature appearing on the checks further alleged to have
Bancorporation and the Chairman and/or President of several other not authorized the issuance and encashment of the same.…5
corporations. He was a depositor in good standing of respondent bank,
the Manila Banking Corporation, under current Checking Account No. 06- Petitioner then requested the respondent bank to credit back and restore
09037-0. As he was then running about 20 corporations, and was going to its account the value of the checks which were wrongfully encashed
out of the country a number of times, petitioner entrusted to his secretary, but respondent bank refused. Hence, petitioner filed the instant case.6
Katherine2 E. Eugenio, his credit cards and his checkbook with blank
checks. It was also Eugenio who verified and reconciled the statements At the trial, petitioner testified on his own behalf, attesting to the truth of
of said checking account.3 the circumstances as narrated above, and how he discovered the alleged
forgeries. Several employees of Manila Bank were also called to the
Between the dates September 5, 1980 and January 23, 1981, Eugenio witness stand as hostile witnesses. They testified that it is the bank’s
was able to encash and deposit to her personal account about seventeen standard operating procedure that whenever a check is presented for
(17) checks drawn against the account of the petitioner at the respondent encashment or clearing, the signature on the check is first verified
bank, with an aggregate amount of P119,634.34. Petitioner did not bother against the specimen signature cards on file with the bank.
to check his statement of account until a business partner apprised him
that he saw Eugenio use his credit cards. Petitioner fired Eugenio Manila Bank also sought the expertise of the National Bureau of
immediately, and instituted a criminal action against her for estafa thru Investigation (NBI) in determining the genuineness of the signatures
falsification before the Office of the Provincial Fiscal of Rizal. Private appearing on the checks. However, in a letter dated March 25, 1987, the
respondent, through an affidavit executed by its employee, Mr. Dante NBI informed the trial court that they could not conduct the desired
Razon, also lodged a complaint for estafa thru falsification of commercial examination for the reason that the standard specimens submitted were
documents against Eugenio on the basis of petitioner’s statement that his not sufficient for purposes of rendering a definitive opinion. The NBI then
signatures in the checks were forged.4 Mr. Razon’s affidavit states: suggested that petitioner be asked to submit seven (7) or more additional
standard signatures executed before or about, and immediately after the C. THE COURT OF APPEALS ERRED IN NOT HOLDING THE
dates of the questioned checks. Petitioner, however, failed to comply with BURDEN OF PROOF IS WITH THE RESPONDENT BANK TO PROVE
this request. THE DUE DILIGENCE TO PREVENT DAMAGE, TO THE PETITIONER,
AND THAT IT WAS NOT NEGLIGENT IN THE SELECTION AND
After evaluating the evidence on both sides, the court a quo rendered SUPERVISION OF ITS EMPLOYEES.11
judgment on May 12, 1994 with the following dispositive portion:
D. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
WHEREFORE, finding no sufficient basis for plaintiff's cause herein RESPONDENT BANK SHOULD BEAR THE LOSS, AND SHOULD BE
against defendant bank, in the light of the foregoing considerations and MADE TO PAY PETITIONER, WITH RECOURSE AGAINST
established facts, this case would have to be, as it is hereby KATHERINE EUGENIO ESTEBAN.12
DISMISSED.
Essentially the issues in this case are: (1) whether or not petitioner has a
Defendant’s counterclaim is likewise DISMISSED for lack of sufficient cause of action against private respondent; and (2) whether or not private
basis. respondent, in filing an estafa case against petitioner’s secretary, is
barred from raising the defense that the fact of forgery was not
SO ORDERED.7 established.
Aggrieved, petitioner elevated the case to the Court of Appeals by way of Petitioner contends that Manila Bank is liable for damages for its
a petition for review but without success. The appellate court held that negligence in failing to detect the discrepant checks. He adds that as a
petitioner’s own negligence was the proximate cause of his loss. The general rule a bank which has obtained possession of a check upon an
appellate court disposed as follows: unauthorized or forged endorsement of the payee’s signature and which
collects the amount of the check from the drawee is liable for the
proceeds thereof to the payee. Petitioner invokes the doctrine of
WHEREFORE, the judgment appealed from is AFFIRMED. Costs against
estoppel, saying that having itself instituted a forgery case against
the appellant.
Eugenio, Manila Bank is now estopped from asserting that the fact of
forgery was never proven.
SO ORDERED.8
For its part, Manila Bank contends that respondent appellate court did not
Before us, petitioner ascribes the following errors to the Court of Appeals: depart from the accepted and usual course of judicial proceedings, hence
there is no reason for the reversal of its ruling. Manila Bank additionally
A. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE points out that Section 2313 of the Negotiable Instruments Law is
RESPONDENT BANK IS ESTOPPED FROM RAISING THE DEFENSE inapplicable, considering that the fact of forgery was never proven.
THAT THERE WAS NO FORGERY OF THE SIGNATURES OF THE Lastly, the bank negates petitioner’s claim of estoppel.14
PETITIONER IN THE CHECK BECAUSE THE RESPONDENT FILED A
CRIMINAL COMPLAINT FOR ESTAFA THRU FALSIFICATION OF On the first issue, we find that petitioner has no cause of action against
COMMERCIAL DOCUMENTS AGAINST KATHERINE EUGENIO USING Manila Bank. To be entitled to damages, petitioner has the burden of
THE AFFIDAVIT OF PETITIONER STATING THAT HIS SIGNATURES proving negligence on the part of the bank for failure to detect the
WERE FORGED AS PART OF THE AFFIDAVIT-COMPLAINT.9 discrepancy in the signatures on the checks. It is incumbent upon
petitioner to establish the fact of forgery, i.e., by submitting his specimen
B. THE COURT OF APPEALS ERRED IN NOT APPLYING SEC. 23, signatures and comparing them with those on the questioned checks.
NEGOTIABLE INSTRUMENTS LAW.10 Curiously though, petitioner failed to submit additional specimen
signatures as requested by the National Bureau of Investigation from
which to draw a conclusive finding regarding forgery. The Court of
Appeals found that petitioner, by his own inaction, was precluded from the instant case, we believe and so hold that if there were mistakes, the
setting up forgery. Said the appellate court: same were not deliberate, since the bank took all the precautions.16
We cannot fault the court a quo for such declaration, considering that the As borne by the records, it was petitioner, not the bank, who was
plaintiff’s evidence on the alleged forgery is not convincing enough. The negligent. Negligence is the omission to do something which a
burden to prove forgery was upon the plaintiff, which burden he failed to reasonable man, guided by those considerations which ordinarily
discharge. Aside from his own testimony, the appellant presented no regulate the conduct of human affairs, would do, or the doing of
other evidence to prove the fact of forgery. He did not even submit his something which a prudent and reasonable man would do.17 In the
own specimen signatures, taken on or about the date of the questioned present case, it appears that petitioner accorded his secretary unusual
checks, for examination and comparison with those of the subject degree of trust and unrestricted access to his credit cards, passbooks,
checks. On the other hand, the appellee presented specimen signature check books, bank statements, including custody and possession of
cards of the appellant, taken at various years, namely, in 1976, 1979 and cancelled checks and reconciliation of accounts. Said the Court of
1981 (Exhibits "1", "2", "3" and "7"), showing variances in the appellant’s Appeals on this matter:
unquestioned signatures. The evidence further shows that the appellee,
as soon as it was informed by the appellant about his questioned Moreover, the appellant had introduced his secretary to the bank for
signatures, sought to borrow the questioned checks from the appellant purposes of reconciliation of his account, through a letter dated July 14,
for purposes of analysis and examination (Exhibit "9"), but the same was 1980 (Exhibit "8"). Thus, the said secretary became a familiar figure in
denied by the appellant. It was also the former which sought the the bank. What is worse, whenever the bank verifiers call the office of the
assistance of the NBI for an expert analysis of the signatures on the appellant, it is the same secretary who answers and confirms the checks.
questioned checks, but the same was unsuccessful for lack of sufficient
specimen signatures.15 The trouble is, the appellant had put so much trust and confidence in the
said secretary, by entrusting not only his credit cards with her but also his
Moreover, petitioner’s contention that Manila Bank was remiss in the checkbook with blank checks. He also entrusted to her the verification
exercise of its duty as drawee lacks factual basis. Consistently, the CA and reconciliation of his account. Further adding to his injury was the fact
and the RTC found that Manila Bank employees exercised due diligence that while the bank was sending him the monthly Statements of
in cashing the checks. The bank’s employees in the present case did not Accounts, he was not personally checking the same. His testimony did
have a hint as to Eugenio’s modus operandi because she was a regular not indicate that he was out of the country during the period covered by
customer of the bank, having been designated by petitioner himself to the checks. Thus, he had all the opportunities to verify his account as
transact in his behalf. According to the appellate court, the employees of well as the cancelled checks issued thereunder -- month after month. But
the bank exercised due diligence in the performance of their duties. Thus, he did not, until his partner asked him whether he had entrusted his credit
it found that: card to his secretary because the said partner had seen her use the
same. It was only then that he was minded to verify the records of his
The evidence on both sides indicates that TMBC’s employees exercised account. 18
due diligence before encashing the checks. Its verifiers first verified the
drawer’s signatures thereon as against his specimen signature cards, The abovecited findings are binding upon the reviewing court. We stress
and when in doubt, the verifier went further, such as by referring to a the rule that the factual findings of a trial court, especially when affirmed
more experienced verifier for further verification. In some instances the by the appellate court, are binding upon us19 and entitled to utmost
verifier made a confirmation by calling the depositor by phone. It is only respect20 and even finality. We find no palpable error that would warrant a
after taking such precautionary measures that the subject checks were reversal of the appellate court’s assessment of facts anchored upon the
given to the teller for payment. evidence on record.
Of course it is possible that the verifiers of TMBC might have made a Petitioner’s failure to examine his bank statements appears as the
mistake in failing to detect any forgery -- if indeed there was. However, a proximate cause of his own damage. Proximate cause is that cause,
mistake is not equivalent to negligence if they were honest mistakes. In
which, in natural and continuous sequence, unbroken by any efficient On the second issue, the fact that Manila Bank had filed a case for estafa
intervening cause, produces the injury, and without which the result against Eugenio would not estop it from asserting the fact that forgery
would not have occurred.21 In the instant case, the bank was not shown to has not been clearly established. Petitioner cannot hold private
be remiss in its duty of sending monthly bank statements to petitioner so respondent in estoppel for the latter is not the actual party to the criminal
that any error or discrepancy in the entries therein could be brought to action. In a criminal action, the State is the plaintiff, for the commission of
the bank’s attention at the earliest opportunity. But, petitioner failed to a felony is an offense against the State.25 Thus, under Section 2, Rule
examine these bank statements not because he was prevented by some 110 of the Rules of Court the complaint or information filed in court is
cause in not doing so, but because he did not pay sufficient attention to required to be brought in the name of the "People of the Philippines." 26
the matter. Had he done so, he could have been alerted to any anomaly
committed against him. In other words, petitioner had sufficient Further, as petitioner himself stated in his petition, respondent bank filed
opportunity to prevent or detect any misappropriation by his secretary the estafa case against Eugenio on the basis of petitioner’s own
had he only reviewed the status of his accounts based on the bank affidavit,27 but without admitting that he had any personal knowledge of
statements sent to him regularly. In view of Article 2179 of the New Civil the alleged forgery. It is, therefore, easy to understand that the filing of
Code,22 when the plaintiff’s own negligence was the immediate and the estafa case by respondent bank was a last ditch effort to salvage its
proximate cause of his injury, no recovery could be had for damages. ties with the petitioner as a valuable client, by bolstering the estafa case
which he filed against his secretary.
Petitioner further contends that under Section 23 of the Negotiable
Instruments Law a forged check is inoperative, and that Manila Bank had All told, we find no reversible error that can be ascribed to the Court of
no authority to pay the forged checks. True, it is a rule that when a Appeals.
signature is forged or made without the authority of the person whose
signature it purports to be, the check is wholly inoperative. No right to WHEREFORE, the instant petition is DENIED for lack of merit. The
retain the instrument, or to give a discharge therefor, or to enforce assailed decision of the Court of Appeals dated January 28, 1999 in CA-
payment thereof against any party, can be acquired through or under G.R. CV No. 47942, is AFFIRMED.
such signature. However, the rule does provide for an exception, namely:
"unless the party against whom it is sought to enforce such right is
Costs against petitioner.
precluded from setting up the forgery or want of authority." In the instant
case, it is the exception that applies. In our view, petitioner is precluded
from setting up the forgery, assuming there is forgery, due to his own SO ORDERED.
negligence in entrusting to his secretary his credit cards and checkbook
including the verification of his statements of account.
At the same time, Justiani forwarded the check to the branch Senior
Assistant Cashier Gemma Velez, as it was bank policy that two bank
branch officers approve checks exceeding One Hundred Thousand
DECISION Pesos, for payment or encashment. Velez likewise counterchecked the
signature on the check as against that on the signature card. He too
concluded that the check was indeed signed by Jong. Velez then
forwarded the check and signature card to Shirley Syfu, another bank
officer, for approval. Syfu then noticed that Jose Sempio III ("Sempio"),
the assistant accountant of Samsung Construction, was also in the bank.
TINGA, J.: Sempio was well-known to Syfu and the other bank officers, he being the
assistant accountant of Samsung Construction. Syfu showed the check
Called to fore in the present petition is a classic textbook question – if a to Sempio, who vouched for the genuineness of Jong’s signature.
bank pays out on a forged check, is it liable to reimburse the drawer from Confirming the identity of Gonzaga, Sempio said that the check was for
whose account the funds were paid out? The Court of Appeals, in the purchase of equipment for Samsung Construction. Satisfied with the
reversing a trial court decision adverse to the bank, invoked tenuous genuineness of the signature of Jong, Syfu authorized the bank’s
reasoning to acquit the bank of liability. We reverse, applying time- encashment of the check to Gonzaga.
honored principles of law.
The following day, the accountant of Samsung Construction, Kyu,
The salient facts follow. examined the balance of the bank account and discovered that a check
in the amount of Nine Hundred Ninety Nine Thousand Five Hundred
Plaintiff Samsung Construction Company Philippines, Inc. ("Samsung Pesos (P999,500.00) had been encashed. Aware that he had not
Construction"), while based in Biñan, Laguna, maintained a current prepared such a check for Jong’s signature, Kyu perused the checkbook
account with defendant Far East Bank and Trust Company ("FEBTC") at
1 and found that the last blank check was missing. He reported the matter
7
station and consulted with his lawyers. Subsequently, a criminal case for
9
On 19 March 1992, a certain Roberto Gonzaga presented for payment qualified theft was filed against Sempio before the Laguna court. 10
FEBTC Check No. 432100 to the bank’s branch in Bel-Air, Makati. The
check, payable to cash and drawn against Samsung Construction’s In a letter dated 6 May 1992, Samsung Construction, through counsel,
current account, was in the amount of Nine Hundred Ninety Nine demanded that FEBTC credit to it the amount of Nine Hundred Ninety
Thousand Five Hundred Pesos (P999,500.00). The bank teller, Cleofe Nine Thousand Five Hundred Pesos (P999,500.00), with interest. In 11
Justiani, first checked the balance of Samsung Construction’s account. response, FEBTC said that it was still conducting an investigation on the
matter. Unsatisfied, Samsung Construction filed a Complaint on 10 June
1992 for violation of Section 23 of the Negotiable Instruments Law, and had been negligent in safekeeping the check, and in applying the equity
prayed for the payment of the amount debited as a result of the principle enunciated in PNB v. National City Bank of New York.
questioned check plus interest, and attorney’s fees. The case was
12
docketed as Civil Case No. 92-61506 before the Regional Trial Court Since the trial court and the Court of Appeals arrived at contrary findings
("RTC") of Manila, Branch 9. 13
on questions of fact, the Court is obliged to examine the record to draw
out the correct conclusions. Upon examination of the record, and based
During the trial, both sides presented their respective expert witnesses to on the applicable laws and jurisprudence, we reverse the Court of
testify on the claim that Jong’s signature was forged. Samsung Appeals.
Corporation, which had referred the check for investigation to the NBI,
presented Senior NBI Document Examiner Roda B. Flores. She testified Section 23 of the Negotiable Instruments Law states:
that based on her examination, she concluded that Jong’s signature had
been forged on the check. On the other hand, FEBTC, which had sought When a signature is forged or made without the authority of the
the assistance of the Philippine National Police (PNP), presented
14
person whose signature it purports to be, it is wholly
Rosario C. Perez, a document examiner from the PNP Crime Laboratory. inoperative, and no right to retain the instrument, or to give a
She testified that her findings showed that Jong’s signature on the check discharge therefor, or to enforce payment thereof against any
was genuine. 15
party thereto, can be acquired through or under such
signature, unless the party against whom it is sought to enforce
Confronted with conflicting expert testimony, the RTC chose to believe such right is precluded from setting up the forgery or want of
the findings of the NBI expert. In a Decision dated 25 April 1994, the RTC authority. (Emphasis supplied)
held that Jong’s signature on the check was forged and accordingly
directed the bank to pay or credit back to Samsung Construction’s The general rule is to the effect that a forged signature is "wholly
account the amount of Nine Hundred Ninety Nine Thousand Five inoperative," and payment made "through or under such signature" is
Hundred Pesos (P999,500.00), together with interest tolled from the time ineffectual or does not discharge the instrument. If payment is made, the
21
the complaint was filed, and attorney’s fees in the amount of Fifteen drawee cannot charge it to the drawer’s account. The traditional
Thousand Pesos (P15,000.00). 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
FEBTC timely appealed to the Court of Appeals. On 28 November 1996, know and compare it. The rule has a healthy cautionary effect on banks
22
the Special Fourteenth Division of the Court of Appeals rendered by encouraging care in the comparison of the signatures against those on
a Decision, reversing the RTC Decision and absolving FEBTC from any
16
the signature cards they have on file. Moreover, the very opportunity of
liability. The Court of Appeals held that the contradictory findings of the the drawee to insure and to distribute the cost among its customers who
NBI and the PNP created doubt as to whether there was use checks makes the drawee an ideal party to spread the risk to
forgery. Moreover, the appellate court also held that assuming there was
17
insurance.23
check, it is paying out its own money and not the depositor’s.
Under Section 23 of the Negotiable Instruments Law, forgery is a real or
The forgery may be committed by a trusted employee or absolute defense by the party whose signature is forged. On the premise
26
confidential agent. The bank still must bear the loss. Even in a that Jong’s signature was indeed forged, FEBTC is liable for the loss
case where the forged check was drawn by the depositor’s since it authorized the discharge of the forged check. Such liability
partner, the loss was placed upon the bank. The case referred to attaches even if the bank exerts due diligence and care in preventing
is Robinson v. Security Bank, Ark., 216 S. W. Rep. 717. In this such faulty discharge. Forgeries often deceive the eye of the most
case, the plaintiff brought suit against the defendant bank for cautious experts; and when a bank has been so deceived, it is a harsh
money which had been deposited to the plaintiff’s credit and rule which compels it to suffer although no one has suffered by its being
which the bank had paid out on checks bearing forgeries of the deceived. The forgery may be so near like the genuine as to defy
27
plaintiff’s signature. detection by the depositor himself, and yet the bank is liable to the
depositor if it pays the check.
28
xxx
Thus, the first matter of inquiry is into whether the check was indeed
It was held that the bank was liable. It was further held that the forged. A document formally presented is presumed to be genuine until it
fact that the plaintiff waited eight or nine months after discovering is proved to be fraudulent. In a forgery trial, this presumption must be
the forgery, before notifying the bank, did not, as a matter of law, overcome but this can only be done by convincing testimony and
constitute a ratification of the payment, so as to preclude the effective illustrations.
29
xxx
By no means is the principle rendered obsolete with the advent of
modern commercial transactions. Contemporary texts still affirm this well- These contradictory findings create doubt on whether there was
indeed a forgery. In the case of Tenio-Obsequio v. Court of
Appeals, 230 SCRA 550, the Supreme Court held that forgery questioned signature was hesitant when the signature was
cannot be presumed; it must be proved by clear, positive and made. 30
convincing evidence.
During the testimony of PNP expert Rosario Perez, the RTC bluntly noted
This reasoning is pure sophistry. Any litigator worth his or her salt would that "apparently, there [are] differences on that questioned signature and
never allow an opponent’s expert witness to stand uncontradicted, thus the standard signatures." This Court, in examining the signatures, makes
31
the spectacle of competing expert witnesses is not unusual. The trier of a similar finding. The PNP expert excused the noted "differences" by
fact will have to decide which version to believe, and explain why or why asserting that they were mere "variations," which are normal deviations
not such version is more credible than the other. Reliance therefore found in writing. Yet the RTC, which had the opportunity to examine the
32
cannot be placed merely on the fact that there are colliding opinions of relevant documents and to personally observe the expert witness, clearly
two experts, both clothed with the presumption of official duty, in order to disbelieved the PNP expert. The Court similarly finds the testimony of the
draw a conclusion, especially one which is extremely crucial. Doing so is PNP expert as unconvincing. During the trial, she was confronted several
tantamount to a jurisprudential cop-out. times with apparent differences between strokes in the questioned
signature and the genuine samples. Each time, she would just blandly
Much is expected from the Court of Appeals as it occupies the assert that these differences were just "variations," as if the mere
33
penultimate tier in the judicial hierarchy. This Court has long deferred to conjuration of the word would sufficiently disquiet whatever doubts about
the appellate court as to its findings of fact in the understanding that it the deviations. Such conclusion, standing alone, would be of little or no
has the appropriate skill and competence to plough through value unless supported by sufficiently cogent reasons which might
the minutiae that scatters the factual field. In failing to thoroughly amount almost to a demonstration. 34
as more credible than that of the PNP, and explained its reason behind eight (8) of these signatures are looped, while the upward stroke of the
the conclusion: seventh forms a severe forty-five degree (45º) with the previous stroke.
36
The difference is glaring, and indeed, the PNP examiner was confronted
After subjecting the evidence of both parties to a crucible of with the inconsistency in point no. 6.
analysis, the court arrived at the conclusion that the testimony of
the NBI document examiner is more credible because the Q: Now, in this questioned document point no. 6, the "s" stroke is
testimony of the PNP Crime Laboratory Services document directly upwards.
examiner reveals that there are a lot of differences in the
questioned signature as compared to the standard specimen A: Yes, sir.
signature. Furthermore, as testified to by Ms. Rhoda Flores, NBI
expert, the manner of execution of the standard signatures used Q: Now, can you look at all these standard signature (sic) were
reveals that it is a free rapid continuous execution or stroke as (sic) point 6 is repeated or the last stroke "s" is pointing directly
shown by the tampering terminal stroke of the signatures upwards?
whereas the questioned signature is a hesitating slow drawn
execution stroke. Clearly, the person who executed the
A: There is none in the standard signature, sir. 37
authenticating Jong’s signature. The distinction is irrelevant in
establishing forgery. Forgery can be established comparing the contested
Again, the PNP examiner downplayed the uniqueness of the final stroke signatures as against those of any sample signature duly established as
in the questioned signature as a mere variation, the same excuse she
38 that of the persons whose signature was forged.
proffered for the other marked differences noted by the Court and the
counsel for petitioner. 39
FEBTC lays undue emphasis on the fact that the PNP examiner did
compare the questioned signature against the bank signature cards. The
There is no reason to doubt why the RTC gave credence to the testimony crucial fact in question is whether or not the check was forged, not
of the NBI examiner, and not the PNP expert’s. The NBI expert, Rhoda whether the bank could have detected the forgery. The latter issue
Flores, clearly qualifies as an expert witness. A document examiner for becomes relevant only if there is need to weigh the comparative
fifteen years, she had been promoted to the rank of Senior Document negligence between the bank and the party whose signature was
Examiner with the NBI, and had held that rank for twelve years prior to forged.
her testimony. She had placed among the top five examinees in the
Competitive Seminar in Question Document Examination, conducted by At the same time, the Court of Appeals failed to assess the effect of
the NBI Academy, which qualified her as a document examiner. She had 40
Jong’s testimony that the signature on the check was not his. The
47
trained with the Royal Hongkong Police Laboratory and is a member of assertion may seem self-serving at first blush, yet it cannot be ignored
the International Association for Identification. As of the time she
41
that Jong was in the best position to know whether or not the signature
testified, she had examined more than fifty to fifty-five thousand on the check was his. While his claim should not be taken at face value,
questioned documents, on an average of fifteen to twenty documents a any averments he would have on the matter, if adjudged as truthful,
day. In comparison, PNP document examiner Perez admitted to having
42
deserve primacy in consideration. Jong’s testimony is supported by the
examined only around five hundred documents as of her testimony. 43
findings of the NBI examiner. They are also backed by factual
circumstances that support the conclusion that the assailed check was
In analyzing the signatures, NBI Examiner Flores utilized the scientific indeed forged. Judicial notice can be taken that is highly unusual in
comparative examination method consisting of analysis, recognition, practice for a business establishment to draw a check for close to a
comparison and evaluation of the writing habits with the use of million pesos and make it payable to cash or bearer, and not to order.
instruments such as a magnifying lense, a stereoscopic microscope, and Jong immediately reported the forgery upon its discovery. He filed the
varied lighting substances. She also prepared enlarged photographs of appropriate criminal charges against Sempio, the putative forger. 48
compared the questioned signature as against ten (10) other sample Now for determination is whether Samsung Construction was precluded
signatures of Jong. Five of these signatures were executed on checks from setting up the defense of forgery under Section 23 of the Negotiable
previously issued by Jong, while the other five contained in business Instruments Law. The Court of Appeals concluded that Samsung
letters Jong had signed. The NBI found that there were significant
45
Construction was negligent, and invoked the doctrines that "where a loss
differences in the handwriting characteristics existing between the must be borne by one of two innocent person, can be traced to the
questioned and the sample signatures, as to manner of execution, neglect or fault of either, it is reasonable that it would be borne by him,
link/connecting strokes, proportion characteristics, and other identifying even if innocent of any intentional fraud, through whose means it has
details. 46
succeeded or who put into the power of the third person to perpetuate
49
the wrong." Applying these rules, the Court of Appeals determined that it
50
The RTC was sufficiently convinced by the NBI examiner’s testimony, was the negligence of Samsung Construction that allowed the
and explained her reasons in its Decisions. While the Court of Appeals encashment of the forged check.
disagreed and upheld the findings of the PNP, it failed to convincingly
demonstrate why such findings were more credible than those of the NBI In the case at bar, the forgery appears to have been made
expert. As a throwaway, the assailed Decision noted that the PNP, not possible through the acts of one Jose Sempio III, an assistant
the NBI, had the opportunity to examine the specimen signature card accountant employed by the plaintiff Samsung [Construction] Co.
signed by Jong, which was relied upon by the employees of FEBTC in Philippines, Inc. who supposedly stole the blank check and who
presumably is responsible for its encashment through a forged Still, in the absence of evidence to the contrary, we can conclude that
signature of Jong Kyu Lee. Sempio was assistant to the Korean there was no negligence on Samsung Construction’s part. The
accountant who was in possession of the blank checks and who presumption remains that every person takes ordinary care of his
through negligence, enabled Sempio to have access to the same. concerns, and that the ordinary course of business has been
56
Had the Korean accountant been more careful and prudent in followed. Negligence is not presumed, but must be proven by him who
57
keeping the blank checks Sempio would not have had the chance alleges it. While the complaint was lodged at the instance of Samsung
58
to steal a page thereof and to effect the forgery. Besides, Sempio Construction, the matter it had to prove was the claim it had alleged -
was an employee who appears to have had dealings with the whether the check was forged. It cannot be required as well to prove that
defendant Bank in behalf of the plaintiff corporation and on the it was not negligent, because the legal presumption remains that ordinary
date the check was encashed, he was there to certify that it was a care was employed.
genuine check issued to purchase equipment for the company. 51
and prudence on his part would have prevented the forgery. We cannot FEBTC was unable to dispute the presumption of ordinary care exercised
sustain this "tar and feathering" resorted to without any basis. by Samsung Construction, hence we cannot agree with the Court of
Appeals’ finding of negligence.
The bare fact that the forgery was committed by an employee of the party
whose signature was forged cannot necessarily imply that such party’s The assailed Decision replicated the extensive efforts which FEBTC
negligence was the cause for the forgery. Employers do not possess the devoted to establish that there was no negligence on the part of the bank
preternatural gift of cognition as to the evil that may lurk within the hearts in its acceptance and payment of the forged check. However, the degree
and minds of their employees. The Court’s pronouncement in PCI Bank of diligence exercised by the bank would be irrelevant if the drawer is not
v. Court of Appeals applies in this case, to wit:
53
precluded from setting up the defense of forgery under Section 23 by his
own negligence. The rule of equity enunciated in PNB v. National City
[T]he mere fact that the forgery was committed by a drawer- Bank of New York, as relied upon by the Court of Appeals, deserves
60
would have the personal knowledge as to how the checks were kept.
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 The fact that the check was made out in the amount of nearly one million
comparative negligence between the drawer and the drawee to pesos is unusual enough to require a higher degree of caution on the part
determine who should bear the burden of loss. The Court finds no basis of the bank. Indeed, FEBTC confirms this through its own internal
to conclude that Samsung Construction was negligent in the safekeeping procedures. Checks below twenty-five thousand pesos require only the
of its checks. For one, the settled rule is that the mere fact that the approval of the teller; those between twenty-five thousand to one
depositor leaves his check book lying around does not constitute such hundred thousand pesos necessitate the approval of one bank officer;
negligence as will free the bank from liability to him, where a clerk of the and should the amount exceed one hundred thousand pesos, the
depositor or other persons, taking advantage of the opportunity, abstract concurrence of two bank officers is required.67
some of the check blanks, forges the depositor’s signature and collect on
the checks from the bank. And for another, in point of fact Samsung
62
In this case, not only did the amount in the check nearly total one million
Construction was not negligent at all since it reported the forgery almost pesos, it was also payable to cash. That latter circumstance should have
immediately upon discovery. 63
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
It is also worth noting that the forged signatures in PNB v. National City bearer, instead of to the order of a specified person. Moreover, the check
68
Bank of New York were not of the drawer, but of indorsers. The same was presented for payment by one Roberto Gonzaga, who was not
circumstance attends PNB v. Court of Appeals, which was also cited by
64
designated as the payee of the check, and who did not carry with him any
the Court of Appeals. It is accepted that a forged signature of the drawer written proof that he was authorized by Samsung Construction to encash
differs in treatment than a forged signature of the indorser. the check. Gonzaga, a stranger to FEBTC, was not even an employee of
Samsung Construction. These circumstances are already suspicious if
69
The justification for the distinction between forgery of the taken independently, much more so if they are evaluated in concurrence.
signature of the drawer and forgery of an indorsement is that the Given the shadiness attending Gonzaga’s presentment of the check, it
drawee is in a position to verify the drawer’s signature by was not sufficient for FEBTC to have merely complied with its internal
comparison with one in his hands, but has ordinarily no procedures, but mandatory that all earnest efforts be undertaken to
opportunity to verify an indorsement. 65 ensure the validity of the check, and of the authority of Gonzaga to collect
payment therefor.
Thus, a drawee bank is generally liable to its depositor in paying
a check which bears either a forgery of the drawer’s signature or According to FEBTC Senior Assistant Cashier Gemma Velez, the bank
a forged indorsement. But the bank may, as a general rule, tried, but failed, to contact Jong over the phone to verify the check. She
70
recover back the money which it has paid on a check bearing a added that calling the issuer or drawer of the check to verify the same
forged indorsement, whereas it has not this right to the same was not part of the standard procedure of the bank, but an "extra
extent with reference to a check bearing a forgery of the drawer’s effort." Even assuming that such personal verification is tantamount to
71
signature.66 extraordinary diligence, it cannot be denied that FEBTC still paid out the
check despite the absence of any proof of verification from the drawer.
The general rule imputing liability on the drawee who paid out on the Instead, the bank seems to have relied heavily on the say-so of Sempio,
forgery holds in this case. who was present at the bank at the time the check was presented.
Since FEBTC puts into issue the degree of care it exercised before FEBTC alleges that Sempio was well-known to the bank officers, as he
paying out on the forged check, we might as well comment on the bank’s had regularly transacted with the bank in behalf of Samsung
performance of its duty. It might be so that the bank complied with its own Construction. It was even claimed that everytime FEBTC would contact
internal rules prior to paying out on the questionable check. Yet, there are Jong about problems with his account, Jong would hand the phone over
several troubling circumstances that lead us to believe that the bank itself to Sempio. However, the only proof of such allegations is the testimony
72
was remiss in its duty. of Gemma Velez, who also testified that she did not know Sempio
personally, and had met Sempio for the first time only on the day the
73
check was encashed. In fact, Velez had to inquire with the other officers
74
of the bank as to whether Sempio was actually known to the employees
of the bank. Obviously, Velez had no personal knowledge as to the past
75
Even assuming that FEBTC had a standing habit of dealing with Sempio,
acting in behalf of Samsung Construction, the irregular circumstances
attending the presentment of the forged check should have put the bank
on the highest degree of alert. The Court recently emphasized that the
highest degree of care and diligence is required of banks.
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
77
forged check. 78
SO ORDERED.
G.R. No. 173259 July 25, 2011 one was on April 24, 1995 for ₱3,260,500.31 payable to one Paul
Bautista. The amounts of these checks were then debited by the PNB
PHILIPPINE NATIONAL BANK, Petitioner, against the combo account of [FFCCI].
vs.
F.F. CRUZ and CO., INC. Respondent. When Angelita returned to the country, she had occasion to examine the
PNB statements of account of [FFCCI] for the months of February to
DECISION August 1995 and she noticed the deductions of ₱9,950,000.00 and
₱3,260,500.31. Claiming that these were unauthorized and fraudulently
DEL CASTILLO, J.: made, [FFCCI] requested PNB to credit back and restore to its account
the value of the checks. PNB refused, and thus constrained [FFCCI] filed
the instant suit for damages against the PNB and its own accountant
As between a bank and its depositor, where the bank’s negligence is the
Aurea Caparas (or Caparas).
proximate cause of the loss and the depositor is guilty of contributory
negligence, the greater proportion of the loss shall be borne by the bank.
In its traverse, PNB averred lack of cause of action. It alleged that it
exercised due diligence in handling the account of [FFCCI]. The
This Petition for Review on Certiorari seeks to reverse and set aside the
applications for manager’s check have passed through the standard bank
Court of Appeal’s January 31, 2006 Decision1 in CA-G.R. CV No. 81349,
procedures and it was only after finding no infirmity that these were given
which modified the January 30, 2004 Decision2 of the Regional Trial
due course. In fact, it was no less than Caparas, the accountant of
Court of Manila City, Branch 46 in Civil Case No. 97-84010, and the June
[FFCCI], who confirmed the regularity of the transaction. The delay of
26, 2006 Resolution3 denying petitioner’s motion for reconsideration.
[FFCCI] in picking up and going over the bank statements was the
proximate cause of its self-proclaimed injury. Had [FFCCI] been
Factual Antecedents conscientious in this regard, the alleged chicanery would have been
detected early on and Caparas effectively prevented from absconding
The antecedents are aptly summarized by the appellate court: with its millions. It prayed for the dismissal of the complaint.4
In its complaint, it is alleged that [respondent F.F. Cruz & Co., Inc.] Regional Trial Court’s Ruling
(hereinafter FFCCI) opened savings/current or so-called combo account
No. 0219-830-146 and dollar savings account No. 0219-0502-458-6 with The trial court ruled that F.F. Cruz and Company, Inc. ( FFCCI) was guilty
[petitioner Philippine National Bank] (hereinafter PNB) at its Timog of negligence in clothing Aurea Caparas (Caparas) with authority to make
Avenue Branch. Its President Felipe Cruz (or Felipe) and Secretary- decisions on and dispositions of its account which paved the way for the
Treasurer Angelita A. Cruz (or Angelita) were the named signatories for fraudulent transactions perpetrated by Caparas; that, in practice, FFCCI
the said accounts. waived the two-signature requirement in transactions involving the
subject combo account so much so that Philippine National Bank (PNB)
The said signatories on separate but coeval dates left for and returned could not be faulted for honoring the applications for manager’s check
from the Unites States of America, Felipe on March 18, 1995 until June even if only the signature of Felipe Cruz appeared thereon; and that
10, 1995 while Angelita followed him on March 29, 1995 and returned FFCCI was negligent in not immediately informing PNB of the fraud.
ahead on May 9, 1995.
On the other hand, the trial court found that PNB was, likewise, negligent
While they were thus out of the country, applications for cashier’s and in not calling or personally verifying from the authorized signatories the
manager’s [checks] bearing Felipe’s [signature] were presented to and legitimacy of the subject withdrawals considering that they were in huge
both approved by the PNB. The first was on March 27, 1995 for amounts. For this reason, PNB had the last clear chance to prevent the
₱9,950,000.00 payable to a certain Gene B. Sangalang and the other
unauthorized debits from FFCCI’s combo account. Thus, PNB should a Resolution10 denying said petition. On June 13, 2007, the Court issued
bear the whole loss – another Resolution11 denying FFCCI’s motion for reconsideration. In
denying the aforesaid petition, the Court ruled that FFCCI essentially
WHEREFORE, judgment is hereby rendered ordering defendant [PNB] to raises questions of fact which are, as a rule, not reviewable under a Rule
pay plaintiff [FFCCI] ₱13,210,500.31 representing the amounts debited 45 petition; that FFCCI failed to show that its case fell within the
against plaintiff’s account, with interest at the legal rate computed from established exceptions to this rule; and that FFCCI was guilty of
the filing of the complaint plus costs of suit. contributory negligence. Thus, the appellate court correctly mitigated
PNB’s liability.
IT IS SO ORDERED.5
On July 13, 2006, PNB filed its petition for review on certiorari which is
Court of Appeal’s Ruling the subject matter of this case.
On January 31, 2006, the CA rendered the assailed Decision affirming Issue
with modification the Decision of the trial court, viz:
Whether the Court of Appeals seriously erred when it found PNB guilty of
WHEREFORE, the appealed Decision is AFFIRMED with negligence.12
the MODIFICATION that [PNB] shall pay [FFCCI] only 60% of the actual
damages awarded by the trial court while the remaining 40% shall be Our Ruling
borne by [FFCCI].
We affirm the ruling of the CA.
SO ORDERED.6
PNB is guilty of negligence.
The appellate court ruled that PNB was negligent in not properly verifying
the genuineness of the signatures appearing on the two applications for Preliminarily, in G.R. No. 173278, we resolved with finality13 that FFCCI is
manager’s check as evidenced by the lack of the signature of the bank guilty of contributory negligence, thus, making it partly liable for the loss
verifier thereon. Had this procedure been followed, the forgery would (i.e., as to 40% thereof) arising from the unauthorized withdrawal of
have been detected. ₱13,210,500.31 from its combo account. The case before us is, thus,
limited to PNB’s alleged negligence in the subject transactions which the
Nonetheless, the appellate court found FFCCI guilty of contributory appellate court found to be the proximate cause of the loss, thus, making
negligence because it clothed its accountant/bookkeeper Caparas with it liable for the greater part of the loss (i.e., as to 60% thereof) pursuant to
apparent authority to transact business with PNB. In addition, FFCCI our rulings in Philippine Bank of Commerce v. Court of
failed to timely examine its monthly statement of account and report the Appeals14 and The Consolidated Bank & Trust Corporation v. Court of
discrepancy to PNB within a reasonable period of time to prevent or Appeals.15
recover the loss. FFCCI’s contributory negligence, thus, mitigated the
bank’s liability. Pursuant to the rulings in Philippine Bank of Commerce v. PNB contends that it was not negligent in verifying the genuineness of
Court of Appeals7 and The Consolidated Bank & Trust Corporation v. the signatures appearing on the subject applications for manager’s
Court of Appeals,8 the appellate court allocated the damages on a 60-40 check. It claims that it followed the standard operating procedure in the
ratio with the bigger share to be borne by PNB. verification process and that four bank officers examined the signatures
and found the same to be similar with those found in the signature cards
From this decision, both FFCCI and PNB sought review before this Court. of FFCCI’s authorized signatories on file with the bank.
On August 17, 2006, FFCCI filed its petition for review on certiorari which PNB raises factual issues which are generally not proper for review under
was docketed as G.R. No. 173278.9 On March 7, 2007, the Court issued a Rule 45 petition. While there are exceptions to this rule, we find none
1avvphi1
applicable to the present case. As correctly found by the appellate court, Corporation v. Court of Appeals, 25 where the bank’s negligence is the
PNB failed to make the proper verification because the applications for proximate cause of the loss and the depositor is guilty of contributory
the manager’s check do not bear the signature of the bank verifier. PNB negligence, we allocated the damages between the bank and the
concedes the absence16 of the subject signature but argues that the same depositor on a 60-40 ratio. We apply the same ruling in this case
was the result of inadvertence. It posits that the testimonies of Geronimo considering that, as shown above, PNB’s negligence is the proximate
Gallego (Gallego), then the branch manager of PNB Timog Branch, and cause of the loss while the issue as to FFCCI’s contributory negligence
Stella San Diego (San Diego), then branch cashier, suffice to establish has been settled with finality in G.R. No. 173278. Thus, the appellate
that the signature verification process was duly followed. court properly adjudged PNB to bear the greater part of the loss
consistent with these rulings.
We are not persuaded.
WHEREFORE, the petition is DENIED. The January 31, 2006 Decision
First, oral testimony is not as reliable as documentary and June 26, 2006 Resolution of the Court of Appeals in CA-G.R. CV No.
evidence.17 Second, PNB’s own witness, San Diego, testified that in the 81349 are AFFIRMED.
verification process, the principal duty to determine the genuineness of
the signature devolved upon the account analyst.18 However, PNB did not Costs against petitioner.
present the account analyst to explain his or her failure to sign the box for
signature and balance verification of the subject applications for SO ORDERED.
manager’s check, thus, casting doubt as to whether he or she did indeed
verify the signatures thereon. Third, we cannot fault the appellate court
for not giving weight to the testimonies of Gallego and San Diego
considering that the latter are naturally interested in exculpating
themselves from any liability arising from the failure to detect the
forgeries in the subject transactions. Fourth, Gallego admitted that PNB’s
employees received training on detecting forgeries from the National
Bureau of Investigation.19 However, Emmanuel Guzman, then NBI senior
document examiner, testified, as an expert witness, that the forged
signatures in the subject applications for manager’s check contained
noticeable and significant differences from the genuine signatures of
FFCCI’s authorized signatories and that the forgeries should have been
detected or observed by a trained signature verifier of any bank.20
In ruling that Ramos acted in collusion with Balmaceda, the RTC noted c) ₱20,000.00 as attorney’s fees.
that although the Manager’s checks payable to Ramos were crossed
checks, Balmaceda was still able to encash the checks.6 After Balmaceda
No costs.
encashed three of these Manager’s checks, he deposited most of the
money into Ramos’ account.7 The RTC concluded that from the
₱11,937,150.00 that Balmaceda misappropriated from PCIB, SO ORDERED.9
₱895,000.00 actually went to Ramos. Since the RTC disbelieved Ramos’
allegation that the sum of money deposited into his Savings Account THE PETITION
(PCIB, Pasig branch) were proceeds from the sale of fighting cocks, it
held Ramos liable to pay PCIB the amount of ₱895,000.00. In the present petition, PCIB avers that:
On appeal, the CA dismissed the complaint against Ramos, holding that THE APPELLATE COURT ERRED IN HOLDING THAT THERE
no sufficient evidence existed to prove that Ramos colluded with IS NO EVIDENCE TO HOLD THAT RESPONDENT RAMOS
Balmaceda in the latter’s fraudulent manipulations.8 ACTED IN COMPLICITY WITH RESPONDENT BALMACEDA
According to the CA, the mere fact that Balmaceda made Ramos the II
payee in some of the Manager’s checks does not suffice to prove that
Ramos was complicit in Balmaceda’s fraudulent scheme. It observed that THE APPELLATE COURT ERRED IN ORDERING THE
other persons were also named as payees in the checks that Balmaceda PETITIONER TO RELEASE THE AMOUNT OF ₱251,910.96 TO
acquired and encashed, and PCIB only chose to go after Ramos. With RESPONDENT RAMOS AND TO PAY THE LATTER MORAL
PCIB’s failure to prove Ramos’ actual participation in Balmaceda’s fraud, AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES10
no legal and factual basis exists to hold him liable.
PCIB contends that the circumstantial evidence shows that Ramos had
The CA also found that PCIB acted illegally in freezing and debiting knowledge of, and acted in complicity with Balmaceda in, the
₱251,910.96 from Ramos’ bank account. The CA thus decreed: perpetuation of the fraud. Ramos’ explanation that he is a businessman
and that he received the Manager’s checks as payment for the fighting
WHEREFORE, the appeal is granted. The Decision of the trial court cocks he sold to Balmaceda is unconvincing, given the large sum of
rendered on September 22, 2000[,] insofar as appellant Ramos is money involved. While Ramos presented evidence that he is a reputable
concerned, is SET ASIDE, and the complaint below against him is businessman, this evidence does not explain why the Manager’s checks
DISMISSED. were made payable to him in the first place.
Appellee is hereby ordered to release the amount of ₱251,910.96 to PCIB maintains that it had the right to freeze and debit the amount of
appellant Ramos plus interest at [the] legal rate computed from ₱251,910.96 from Ramos’ bank account, even without his consent, since
September 30, 1993 until appellee shall have fully complied therewith. legal compensation had taken place between them by operation of law.
PCIB debited Ramos’ bank account, believing in good faith that Ramos
was not entitled to the proceeds of the Manager’s checks and was weight of the credible evidence." Preponderance of evidence is a phrase
actually privy to the fraud perpetrated by Balmaceda. PCIB cannot thus which, in the last analysis, means probability of the truth. It is evidence
be held liable for moral and exemplary damages. which is more convincing to the court as worthy of belief than that which
is offered in opposition thereto.
OUR RULING
The party, whether the plaintiff or the defendant, who asserts the
We partly grant the petition. affirmative of an issue has the onus to prove his assertion in order to
obtain a favorable judgment, subject to the overriding rule that the burden
At the outset, we observe that the petition raises mainly questions of fact to prove his cause of action never leaves the plaintiff. For the defendant,
whose resolution requires the re-examination of the evidence on record. an affirmative defense is one that is not merely a denial of an essential
As a general rule, petitions for review on certiorari only involve questions ingredient in the plaintiff's cause of action, but one which, if established,
of law.11 By way of exception, however, we can delve into evidence and will constitute an "avoidance" of the claim.15
the factual circumstance of the case when the findings of fact in the
tribunals below (in this case between those of the CA and of the RTC) Thus, PCIB, as plaintiff, had to prove, by preponderance of evidence, its
are conflicting. When the exception applies, we are given latitude to positive assertion that Ramos conspired with Balmaceda in perpetrating
review the evidence on record to decide the case with finality.12 the latter’s scheme to defraud the Bank. In PCIB’s estimation, it
successfully accomplished this through the submission of the following
Ramos’ participation in Balmaceda’s scheme not proven evidence:
From the testimonial and documentary evidence presented, we find it [1] Exhibits "A," "D," "PPPP," "QQQQ," and "RRRR" and their
beyond question that Balmaceda, by taking advantage of his position as submarkings, the application forms for MCs, show that [these
branch manager of PCIB’s Sta. Cruz, Manila branch, was able to apply MCs were applied for in favor of Ramos;]
for and obtain Manager’s checks drawn against the bank account of one
of PCIB’s clients. The unsettled question is whether Ramos, who [2] Exhibits "K," "N," "SSSS," "TTTT," and "UUUU" and their
received a portion of the money that Balmaceda took from PCIB, should submarkings prove that the MCs were issued in favor of x x x
also be held liable for the return of this money to the Bank. Ramos[; and]
PCIB insists that it presented sufficient evidence to establish that Ramos [3] [T]estimonies of the witness for [PCIB].16
colluded with Balmaceda in the scheme to fraudulently secure Manager’s
checks and to misappropriate their proceeds. Since Ramos’ defense – We cannot accept these submitted pieces of evidence as sufficient to
anchored on mere denial of any participation in Balmaceda’s wrongdoing satisfy the burden of proof that PCIB carries as plaintiff.
– is an intrinsically weak defense, it was error for the CA to exonerate
Ramos from any liability. On its face, all that PCIB’s evidence proves is that Balmaceda used
Ramos’ name as a payee when he filled up the application forms for the
In civil cases, the party carrying the burden of proof must establish his Manager’s checks. But, as the CA correctly observed, the mere fact that
case by a preponderance of evidence, or evidence which, to the court, is Balmaceda made Ramos the payee on some of the Manager’s checks is
more worthy of belief than the evidence offered in opposition.13 This not enough basis to conclude that Ramos was complicit in Balmaceda’s
Court, in Encinas v. National Bookstore, Inc.,14 defined "preponderance of fraud; a number of other people were made payees on the other
evidence" in the following manner: Manager’s checks yet PCIB never alleged them to be liable, nor did the
Bank adduce any other evidence pointing to Ramos’ participation that
"Preponderance of evidence" is the weight, credit, and value of the would justify his separate treatment from the others. Also, while Ramos is
aggregate evidence on either side and is usually considered to be Balmaceda’s brother-in-law, their relationship is not sufficient, by itself, to
synonymous with the term "greater weight of the evidence" or "greater
render Ramos liable, absent concrete proof of his actual participation in xxxx
the fraudulent scheme.
Q: After the accomplishment of this application form as you stated Mrs.
Moreover, the evidence on record clearly shows that Balmaceda acted witness, do you know what happened to the application form?
on his own when he applied for the Manager’s checks against the bank
account of one of PCIB’s clients, as well as when he encashed the A: Before that application form is processed it goes to several stages.
fraudulently acquired Manager’s checks. Here for example this was signed supposed to be by the client and his
signature representing that, he certified the signature based on their
Mrs. Elizabeth Costes, the Area Manager of PCIB at the time of the records to be authentic.
relevant events, testified that Balmaceda committed all the acts
necessary to obtain the unauthorized Manager’s checks – from filling up Q: When you said he to whom are you referring to?
the application form by forging the signature of the client’s representative,
to forging the signatures of the payees in order to encash the checks. As A: Mr. Balmaceda. And at the same time he approved the transaction.
Mrs. Costes stated in her testimony:
xxxx
Q: I am going into [these] particular instances where you said that Mr.
Balmaceda [has] been making unauthorized withdrawals from particular
Q: Do you know if the corresponding checks applied for in the application
account of a client or a client of yours at Sta. Cruz branch. Would you tell
forms were issued?
us how he effected his unauthorized withdrawals?
A: Yes sir.
A: He prevailed upon the domestic remittance clerk to prepare the
application of a Manager’s check which [has] been debited to a client’s
account. This particular Manager’s check will be payable to a certain Q: Could you please show us where these checks are now, the one
individual thru his account as the instruction of the client. applied for in Exhibit "A" which is in the amount of ₱150,000.00, where is
the corresponding check?
Q: What was your findings in so far as the particular alleged instruction of
a client is concerned? A: Rolando Ramos dated December 26, 1991 and one of the signatories
with higher authority, this is Mr. Balmaceda’s signature.
A: We found out that he forged the signature of the client.
Q: In other words he is likewise approving signatory to the Manager’s
check?
Q: On that particular application?
A: Yes sir. This is an authority that the check [has] been encashed.
A: Yes sir.
Q: In other words this check issued to Rolando Ramos dated December
Q: Showing to you several applications for Manager’s Check previously
26, 1991 is a cross check but nonetheless he allowed to encash by
attached as Annexes "A, B, C, D and E["] of the complaint. Could you
granting it.
please tell us where is that particular alleged signature of a client
applying for the Manager’s check which you claimed to have been forged
by Mr. Balmaceda? Could you please show us?
A: Here sir. ATTY. PACES: Witness pointing to an initial of the defendant Antonio
Balmaceda, the notation cross check.
A: And this is his signature. Q: Do you know if this particular person having in fact withdraw of
received the proceeds of [these] particular checks, the payee?
xxxx
A: No sir.
Q: How about the check corresponding to Exhibit E-2 which is an
application for ₱125,000.00 for a certain Rolando Ramos. Do you have Q: It was all Mr. Balmaceda dealing with you?
the check?
A: Yes sir.
A: Yes sir.
Q: In other words it would be possible that Mr. Balmaceda himself gotten
ATTY. PACES: Witness producing a check dated December 19, 1991 the the proceeds of the checks by forging the payees signature?
amount of ₱125,000.00 payable to certain Rolando Ramos.
A: Yes sir.18 (emphases ours)
Q: Can you tell us whether the same modus operandi was ad[o]pted by
Mr. Balmaceda in so far as he is concerned? Mrs. Nilda Laforteza, the Commercial Account Officer of PCIB’s Sta.
Cruz, Manila branch at the time the events of this case occurred,
A: Yes sir he is also the right signer and he authorized the cancellation of confirmed Mrs. Costes’ testimony by stating that it was Balmaceda who
the cross check.17 (emphasis ours) forged Ramos’ signature on the Manager’s checks where Ramos was the
payee, so as to encash the amounts indicated on the checks.19 Mrs.
xxxx Laforteza also testified that Ramos never went to the PCIB, Sta. Cruz,
Manila branch to encash the checks since Balmaceda was the one who
Q: These particular checks [Mrs.] witness in your findings, do you know if deposited the checks into Ramos’ bank account. As revealed during Mrs.
Mr. Balmaceda [has] again any participation in these checks? Laforteza’s cross-examination:
A: He is also the right signer and approved officer and he was authorized Q: Mrs. Laforteza, these checks that were applied for by Mr. Balmaceda,
to debit on file. did you ever see my client go to the bank to encash these checks?
Q: And do you know if these particular checks marked as Exhibit G-2 to Q: Did my client ever call up the bank concerning this amount?
triple FFF were subsequently encashed?
A: Yes he is not going to call PCIBank Sta. Cruz branch because his
A: Yes sir. account is maintained at Pasig.
Q: Were you able to find out who encashed? Q: So Mr. Balmaceda was the one who just remitted or transmitted the
amount that you claimed [was sent] to the account of my client?
A: Mr. Balmaceda himself and besides he approved the encashment
because of the signature that he allowed the encashment of the check. A: Yes.20 (emphases ours)
xxxx Even Mrs. Rodelia Nario, presented by PCIB as its rebuttal witness to
prove that Ramos encashed a Manager’s check for ₱480,000.00, could
only testify that the money was deposited into Ramos’ PCIB bank
account. She could not attest that Ramos himself presented the a preponderance of evidence as defined must be established to achieve
Manager’s check for deposit in his bank account.21 These testimonies this result.
clearly dispute PCIB’s theory that Ramos was instrumental in the
encashment of the Manager’s checks. PCIB itself at fault as employer
We also find no reason to doubt Ramos’ claim that Balmaceda deposited In considering this case, one point that cannot be disregarded is the
these large sums of money into his bank account as payment for the significant role that PCIB played which contributed to the perpetration of
fighting cocks that Balmaceda purchased from him. Ramos presented the fraud. We cannot ignore that Balmaceda managed to carry out his
two witnesses – Vicente Cosculluela and Crispin Gadapan – who testified fraudulent scheme primarily because other PCIB employees failed to
that Ramos previously engaged in the business of buying and selling carry out their assigned tasks – flaws imputable to PCIB itself as the
fighting cocks, and that Balmaceda was one of Ramos’ biggest clients. employer.
Quoting from the RTC decision, PCIB stresses that Ramos’ own witness Ms. Analiza Vega, an accounting clerk, teller and domestic remittance
and business partner, Cosculluela, testified that the biggest net profit he clerk working at the PCIB, Sta. Cruz, Manila branch at the time of the
and Ramos earned from a single transaction with Balmaceda amounted incident, testified that Balmaceda broke the Bank’s protocol when he
to no more than ₱100,000.00, for the sale of approximately 45 fighting ordered the Bank’s employees to fill up the application forms for the
cocks.22 In PCIB’s view, this testimony directly contradicts Ramos’ Manager’s checks, to be debited from the bank account of one of the
assertion that he received approximately ₱400,000.00 from his biggest bank’s clients, without providing the necessary Authority to Debit from the
transaction with Balmaceda. To PCIB, the testimony also renders client.26 PCIB also admitted that these Manager’s checks were
questionable Ramos’ assertion that Balmaceda deposited large amounts subsequently released to Balmaceda, and not to the client’s
of money into his bank account as payment for the fighting cocks. representative, based solely on Balmaceda’s word that the client had
tasked him to deliver these checks.27
On this point, we find that PCIB misunderstood Cosculluela’s testimony.
A review of the testimony shows that Cosculluela specifically referred to Despite Balmaceda’s gross violations of bank procedures – mainly in the
the net profit that they earned from the sale of the fighting cocks;23 PCIB processing of the applications for Manager’s checks and in the releasing
apparently did not take into account the capital, transportation and other of the Manager’s checks – Balmaceda’s co-employees not only turned a
expenses that are components of these transactions. Obviously, in sales blind eye to his actions, but actually complied with his instructions. In this
transactions, the buyer has to pay not only for the value of the thing sold, way, PCIB’s own employees were unwitting accomplices in
but also for the shipping costs and other incidental costs that accompany Balmaceda’s fraud.
the acquisition of the thing sold. Thus, while the biggest net profit that
Ramos and Cosculluela earned in a single transaction amounted to no Another telling indicator of PCIB’s negligence is the fact that it allowed
more than ₱100,000.00,24 the inclusion of the actual acquisition costs of Balmaceda to encash the Manager’s checks that were plainly crossed
the fighting cocks, the transportation expenses (i.e., airplane tickets from checks. A crossed check is one where two parallel lines are drawn
Bacolod or Zamboanga to Manila) and other attendant expenses could across its face or across its corner.28 Based on jurisprudence, the
account for the ₱400,000.00 that Balmaceda deposited into Ramos’ bank crossing of a check has the following effects: (a) the check may not be
account. 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;
Given that PCIB failed to establish Ramos’ participation in Balmaceda’s and (c) the act of crossing the check serves as a warning to the holder
scheme, it was not even necessary for Ramos to provide an explanation that the check has been issued for a definite purpose and he must inquire
for the money he received from Balmaceda. Even if the evidence if he received the check pursuant to this purpose; otherwise, he is not a
adduced by the plaintiff appears stronger than that presented by the holder in due course.29 In other words, the crossing of a check is a
defendant, a judgment cannot be entered in the plaintiff’s favor if his warning that the check should be deposited only in the account of the
evidence still does not suffice to sustain his cause of action;25 to reiterate, 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.30 In Moreover, to substantiate a claim for unjust enrichment, the claimant
complete disregard of this duty, PCIB’s systems allowed Balmaceda to must unequivocally prove that another party knowingly received
encash 26 Manager’s checks which were all crossed checks, or checks something of value to which he was not entitled and that the state of
payable to the "payee’s account only." affairs are such that it would be unjust for the person to keep the
benefit. Unjust enrichment is a term used to depict result or effect of
The General Banking Law of 200031 requires of banks the highest failure to make remuneration of or for property or benefits received under
standards of integrity and performance. The banking business is circumstances that give rise to legal or equitable obligation to account for
impressed with public interest. Of paramount importance is the trust and them; to be entitled to remuneration, one must confer benefit by mistake,
confidence of the public in general in the banking industry. Consequently, fraud, coercion, or request. Unjust enrichment is not itself a theory of
the diligence required of banks is more than that of a Roman pater reconvey. Rather, it is a prerequisite for the enforcement of the doctrine
familias or a good father of a family.32 The highest degree of diligence is of restitution.35 (emphasis ours)
expected.33
Ramos cannot be held liable to PCIB on account of unjust enrichment
While we appreciate that Balmaceda took advantage of his authority and simply because he received payments out of money secured by fraud
position as the branch manager to commit these acts, this circumstance from PCIB. To hold Ramos accountable, it is necessary to prove that he
cannot be used to excuse the manner the Bank – through its employees received the money from Balmaceda, knowing that he (Ramos) was not
–handled its clients’ bank accounts and thereby ignored established bank entitled to it. PCIB must also prove that Ramos, at the time that he
procedures at the branch manager’s mere order. This lapse is made all received the money from Balmaceda, knew that the money was acquired
the more glaring by Balmaceda’s repetition of his modus operandi 33 through fraud. Knowledge of the fraud is the link between Ramos and
more times in a period of over one year by the Bank’s own estimation. PCIB that would obligate Ramos to return the money based on the
With this kind of record, blame must be imputed on the Bank itself and its principle of unjust enrichment.
systems, not solely on the weakness or lapses of individual employees.
However, as the evidence on record indicates, Ramos accepted the
Principle of unjust enrichment not applicable deposits that Balmaceda made directly into his bank account, believing
that these deposits were payments for the fighting cocks that Balmaceda
PCIB maintains that even if Ramos did not collude with Balmaceda, it still had purchased. Significantly, PCIB has not presented any evidence
has the right to recover the amounts unjustly received by Ramos proving that Ramos participated in, or that he even knew of, the
pursuant to the principle of unjust enrichment. This principle is embodied fraudulent sources of Balmaceda’s funds.
in Article 22 of the Civil Code which provides:
PCIB illegally froze and debited Ramos’ assets
Article 22. Every person who through an act of performance by another,
or any other means, acquires or comes into possession of something at We also find that PCIB acted illegally in freezing and debiting Ramos’
the expense of the latter without just or legal ground, shall return the bank account. In BPI Family Bank v. Franco,36 we cautioned against the
same to him. unilateral freezing of bank accounts by banks, noting that:
To have a cause of action based on unjust enrichment, we explained in More importantly, [BPI Family Bank] does not have a unilateral right to
University of the Philippines v. Philab Industries, Inc.34 that: freeze the accounts of Franco based on its mere suspicion that the funds
therein were proceeds of the multi-million peso scam Franco was
Unjust enrichment claims do not lie simply because one party benefits allegedly involved in. To grant [BPI Family Bank], or any bank for that
from the efforts or obligations of others, but instead it must be shown that matter, the right to take whatever action it pleases on deposits which it
a party was unjustly enriched in the sense that the term unjustly could supposes are derived from shady transactions, would open the
mean illegally or unlawfully. floodgates of public distrust in the banking industry.37
We see no legal merit in PCIB’s claim that legal compensation took place We deem it just and equitable, however, to uphold the award of
between it and Ramos, thereby warranting the automatic deduction from attorney’s fees in Ramos’ favor. Taking into consideration the time and
Ramos’ bank account. For legal compensation to take place, two efforts involved that went into this case, we increase the award of
persons, in their own right, must first be creditors and debtors of each attorney’s fees from ₱20,000.00 to ₱75,000.00.
other.38 While PCIB, as the depositary bank, is Ramos’ debtor in the
amount of his deposits, Ramos is not PCIB’s debtor under the evidence WHEREFORE, the petition is PARTIALLY GRANTED. We AFFIRM the
the PCIB adduced. PCIB thus had no basis, in fact or in law, to decision of the Court of Appeals dated April 29, 2003 in CA-G.R. CV No.
automatically debit from Ramos’ bank account. 69955 with the MODIFICATION that the award of moral and exemplary
damages in favor of Rolando N. Ramos is DELETED, while the award of
On the award of damages attorney’s fees is INCREASED to ₱75,000.00. Costs against the
Philippine Commercial International Bank.
Although PCIB’s act of freezing and debiting Ramos’ account is unlawful,
we cannot hold PCIB liable for moral and exemplary damages. Since a SO ORDERED.
contractual relationship existed between Ramos and PCIB as the
depositor and the depositary bank, respectively, the award of moral
damages depends on the applicability of Article 2220 of the Civil Code,
which provides:
Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances,
such damages are justly due. The same rule applies to breaches of
contract where the defendant acted fraudulently or in bad faith.
[emphasis ours]
Bad faith does not simply connote bad judgment or negligence; it imports
a dishonest purpose or some moral obliquity and conscious commission
of a wrong; it partakes of the nature of fraud.39
As the facts of this case bear out, PCIB did not act out of malice or bad
faith when it froze Ramos’ bank account and subsequently debited the
amount of ₱251,910.96 therefrom. While PCIB may have acted hastily
and without regard to its primary duty to treat the accounts of its
depositors with meticulous care and utmost fidelity,40 we find that its
actions were propelled more by the need to protect itself, and not out of
malevolence or ill will. One may err, but error alone is not a ground for
granting moral damages.41
On June 10, 1993; the trial court issued an Order dismissing the V. The court a quo erred when, contrary
complaint of petitioner MWSS on grounds of prescription, laches, to the rules and jurisprudence, it
estoppel and non-joinder of indispensable parties. prematurely ruled that laches and
estoppel bar the complaint as against motion of petitioner MWSS, this Court in a Resolution dated December 3,
Ayalas or that otherwise the alleged failure 1997 directed the consolidation of G.R. Nos. 126000 and 128520.
to implead indispensable parties dictates
the dismissal of the complaint. The errors assigned by petitioner MWSS in CA-GR No. 126000 are:
SO ORDERED. I.
Petitioner MWSS appealed to this Court that portion of the respondent The court of origin erred in belatedly granting
Court's decision affirming the trial court's dismissal of its complaint respondent's motions to dismiss which are but a rehash, a
against respondent AYALA, docketed as G.R. No. 126000. The portion disqualification, of their earlier motion for preliminary
dismissing the petition for certiorari (CA-GR Nos. 34605, 347718 and hearing of affirmative defense / motion to dismiss. These
35065) of respondents Roman, CHGCCI and SILHOUETTE, however, previous motions were denied by the lower court, which
became final and executory for their failure to appeal therefrom. denial the respondents raised to the Court of Appeals by
Nonetheless, these respondents were able to thereafter file before the way of perfection for certiorari, which petitions in turn
trial court another motion to dismiss grounded, again, on prescription were dismissed for lack of merit by the latter court. The
which the trial court in an Order of October 1996 granted. correctness and validity of the lower court's previous
orders denying movant's motion for preliminary hearing of
This prompted petitioner MWSS to file another petition for review of said affirmative defense / motion to dismiss has accordingly
trial court Order before this Court and docketed as G.R. No. 128520. On been settled already with finality and cannot be disturbed
or challenged anew at this instance of defendant's new The court a quo erred in failing to consider the complaint
but similarly anchored motions to dismiss, without recites six alternative causes of action, such that the
committing procedural heresy causative of miscarriage of insufficiency of one cause — assuming there is such
justice. insufficiency — does not render insufficient the other
cause and the complaint itself. The contrary ruling in this
II. regard by public respondent is founded entirely on
speculation and conjecture and is constitutive of grave
The lower court erred in not implementing correctly the abuse of discretion.
decision of the Court of Appeal. After all, respondents'
own petitions for certiorari questioning the earlier denial In disposing of the instant petition, this Court shall dwell on the more
of their motion for preliminary hearing of affirmative crucial grounds upon which the trial court and respondent based their
defense / motion to dismiss were dismissed by the Court respective rulings unfavorable to petitioner MWSS; i.e., prescription,
of Appeal, in the process of affirming the validity and laches, estoppel/ratification and non-joinder of indispensable parties.
legality of such denial by the court a quo. The dismissal
of the respondents' petitions are embodied in the RE: Prescription
dispositive portion of the said decision of the Court of
Appeals dated 19 August 1996. The lower court cannot Petitioner MWSS claims as erroneous both the lower courts' uniform
choose to disregard such decretal aspect of the decision finding that the action has prescribed, arguing that its complaint is one to
and instead implement an obiter dictum. declare the MWSS-SILHOUETTE sale, and all subsequent conveyances
of the subject property, void which is imprescriptible.
III.
We disagree.
That part of the decision of the decision of the Court of
Appeals resolving the issue of prescription attendant to The very allegations in petitioner MWSS' complaint show that the subject
the appeal of plaintiff against the Ayalas, has been property was sold through contracts which, at most, can be considered
appealed by plaintiff to the Supreme Court by way of a only as voidable, and not void. Paragraph 12 of the complaint reads in
petition for review on certiorari. Not yet being final and part:
executory, the lower court erred in making capital out of
the same to dismiss the case against the other 12. . . . .
defendants, who are the respondents herein.
The plaintiff has been in continuous, peaceful and public
IV. possession and ownership of the afore-described
properties, the title (TCT No. [36069] 199170) thereto,
The lower court erred in holding, per the questioned including its derivative titles TCT Nos. 213872 and
orders, that plaintiff's cause of action is for annulment of 307655, having been duly issued in its name. However,
contract which has already prescribed in the face of the as a result of fraudulent and illegal acts of herein
clear and unequivocal recitation of six causes of action in defendants, as described in the paragraphs hereinafter
the complaint, none of which is for annulment. This following, the original of said title/s were cancelled and in
conclusion of public respondent is manifestly mistaken lieu thereof new titles were issued to corporate
and legally absurd. defendant/s covering subject 127.9271 hectares. . . . .
V. Paragraph 34 alleges:
34. Sometime thereafter, clearly influenced by the consideration thereof was the price to be paid (on the part of
premature if not questionable approval by Mr. Marcos of a respondents CHGCCI/SILHOUETTE) and the land to be sold (on the
non-existent agreement, and despite full knowledge that part of petitioner MWSS). Likewise, petitioner MWSS' consent to the
both the assessed and market value of subject property May 11, 1983 and August 11, 1983 Agreements is patent on the face
were much higher, the MWSS Board of Trusties illegally of these documents and on its own resolution No. 36-83.
passed an undated resolution ("Resolution No. 36-83"),
approving the "sale" of the property to CHGCCI at As noted by both lower courts, petitioner MWSS admits that it
P40/sq.m. and illegally authorizing General Manager consented to the sale of the property, with the qualification that
Ilustre to sign the covering contract. such consent was allegedly unduly influenced by the President
Marcos. Taking such allegation to be hypothetically true, such
This "resolution" was signed by Messrs. Jesus Hipolito as would have resulted in only voidable contracts because all three
Chairman; Oscar Ilustre, as Vice Chairman; Aflredo Junio, elements of a contract, still obtained nonetheless. The alleged
as Member; and Silvestre Payoyo, as Member; . . . . vitiation of MWSS' consent did not make the sale null and void ab
initio. Thus, "a contract where consent is given through mistake,
Paragraph 53 states: violence, intimidation, undue influence or fraud, is voidable" .
2
Jose Roxas as well as defendant corporations (CHGCCI, These are not void as —
STC and Ayala) who acted through the former and their
other principal officers, knowingly induced and caused Concepts of Voidable Contracts. — Voidable or
then President Marcos and the former officers of plaintiff anullable contracts are existent, valid, and binding,
MWSS to enter into the aforesaid undated "Agreement" although they can be annulled because of want of
which are manifestly and grossly disadvantageous to the capacity or vitiated consent of the one of the parties,
government and which gave the same defendants but before annulment, they are effective and
unwarranted benefits, i.e., the ownership and dominion of obligatory between parties. Hence, it is valid until it is
the afore-described property of plaintiff. set aside and its validity may be assailed only in an
action for that purpose. They can be confirmed or
Paragraph 54 avers: ratified.
4
54. Defendants Jesus Hipolito and Alfredo Junio, then As the contracts were voidable at the most, the four year
public officers, together with the other public officers who prescriptive period under Art. 1391 of the New Civil Code will apply.
are now deceased (Ferdinand Marcos, Oscar Ilustre, and This article provides that the prescriptive period shall begin in the
Sivestre Payoyo) knowingly allowed themselves to be cases of intimidation, violence or undue influence, from the time the
persuaded, induced and influenced to approve and/or defect of the consent ceases", and "in case of mistake or fraud,
enter into the aforementioned "Agreements" which are from the time of the discovery of the same time".
grossly and manifestly disadvantageous to the
MWSS/government and which bestowed upon the other Hypothetically admitting that President Marcos unduly influenced
defendants the unwarranted benefit/ownership of subject the sale, the prescriptive period to annul the same would have
property. begun on February 26, 1986 which this Court takes judicial notice of
as the date President Marcos was deposed. Prescription would have
The three elements of a contract — consent, the object, and the cause of set in by February 26, 1990 or more than three years before
obligation are all present. It cannot be otherwise argued that the
1 petitioner MWSS' complaint was failed.
contract had for its object the sale of the property and the cause or
However, if petitioner MWSS' consent was vitiated by fraud, then the allegations in the complaint determine relief. "(I)t is the material
prescriptive period commenced upon discovery. Discovery allegations of fact in the complaint, not the legal conclusion made
commenced from the date of the execution of the sale documents therein or the prayer that determines the relief to which the plaintiff
as petitioner was party thereto. At the least, discovery is deemed to is entitled" . Respondent court is thus correct in holding that:
7
have taken place on the date of registration of the deeds with the
register of Deeds as registration is constructive notice to the x x x x x x x x x
world. Given these two principles on discovery, the prescriptive
5
period commenced in 1983 as petitioner MWSS actually knew of the The totality then of those allegations in the complaint
sale, or, in 1984 when the agreements were registered and titles makes up a case of a voidable contract of sale — not
thereafter were issued to respondent SILHOUTTE. At the latest, the a void one. The determinative allegations are those
action would have prescribed by 1988, or about five years before that point out that the consent of MWSS in the
the complaint was instituted. Thus, in Aznar vs. Bernard 6, this Agreement of Sale was vitiated either by fraud or
Court held that: undue for the declaration of nullity of the said
contract because the Complaint says no. Basic is the
Lastly, even assuming that the petitioners had indeed rule however that it is the body and not the caption
failed to raise the affirmative defense of prescription nor the prayer of the Complaint that determines the
in a motion to dismiss or in an appropriate pleading nature of the action. True, the caption and prayer of
(answer, or amended or supplemental answer) and an the Complaint state that the action is for a judicial
amendment would no longer be feasible, still declaration of nullity of a contract, but alas, as
prescription, if apparent on the face of the complaint, already pointed out, its body unmistakably alleges
may be favorably considered. In the case at bar, the only a voidable contract. One cannot change the real
private respondents admit in their complaint that the nature of an action adopting a different nomenclature
contract or real estate mortgage which they alleged to any more than one can change gin into whisky by just
be fraudulent and which had been foreclosed, giving replacing the label on the bottle with that of the
rise to this controversy with the petitioners, was latter's and calling it whisky. No matter what, the
executed on July 17, 1978, or more than eight long liquid inside remains gin.
years before the commencement of the suit in the
court a quo, on September 15, 1986. And an action x x x x x x x x x
declare a contract null and void on the ground of
fraud must be instituted within four years. Extinctive
Petitioner MWSS also theorizes that the May 11, 1983 MWSS-
prescription is thus apparent on the face of the
SILHOUTTE Agreement and the August 11, 1983 Supplemental
complaint itself as resolved by the Court.
Agreement were void ab initio because the "initial agreement" from
which these agreements emanated was executed "without the
Petitioner MWSS further contends that prescription does not apply knowledge, much less the approval" of petitioner MWSS through its
as its complaint prayed not for the nullification of voidable contracts Board of Trustees. The "initial agreement" referred to in petitioner
but for the declaration of nullity of void ab initio contracts which are MWSS' argument is the December 20, 1982 letter of respondents
imprescriptible. This is incorrect, as the prayers in a complaint are Roxas and Roman, Jr. to President Marcos where the authors
not determinative of what legal principles will operate based on the mentioned that they had reached an agreement with petitioner's
factual allegations of the complaint. And these factual allegations, then general manager, Mr. Oscar Ilustre. Petitioner MWSS maintains
assuming their truth, show that MWSS consented to the sale, only that Mr. Ilustre was not authorized to enter into such "initial
that such consent was purportedly vitiated by undue influence or agreement", contrary to Art. 1874 of the New Civil Code which
fraud. Therefore, the rules on prescription will operate. Even if provides that "when a sale of a parcel of land or any interest therein
petitioner MWSS asked for the declaration of nullity of these is through an agent, the authority of the latter shall be in writing
contracts, the prayers will not be controlling as only the factual otherwise the sale shall be void." It then concludes that since its
Res. No. 36-83 and the May 11, 1983 and August 11, 1983 In sum, our Agreement is for the purchase price of
Agreements are "fruits" of the "initial agreement" (for which Mr. FIFTY-SEVEN MILLION TWO-HUNDRED-FORTY
Ilustre was allegedly not authorized in writing), all of these would THOUSAND PESOS (P57,240,000) for the entire
have been also void under Art. 1422 of NCC, which provides that a leased area of 135 hectares; TWENTY-SEVEN
contract which is the direct result of a pronounced illegal contract, MILLION PESOS (P27,000,000) payable upon approval
is also void and inexistent." of the contract by Your Excellency and the balance of
THIRTY MILLION TWO HUNDRED FORTY THOUSAND
The argument does not impress. The "initial agreement" reflected in PESOS (P30,240,000) after one (1) year inclusive of a
the December 20, 1982 letter of respondent Roman to Pres. Marcos, 12% interest.
is not a sale under Art. 1874. Since the nature of the "initial
agreement" is crucial, we We believe that this arrangement is fair and equitable
quotes the letter in full:
8
to both parties considering that the value of the land
was appraised by a reputable company and
We respectfully approach Your Excellency in all independent appraisal company jointly
humility and in the spirit of the Yuletide Season. We commissioned by both parties and considering
have explained to Your Excellency when you allowed further that Capitol Hills has still a 23-year lien on the
us the honor to see you, that the negotiations with property by virtue of its existing lease contract with
MWSS which the late Pablo R. Roman initiated way MWSS.
back in 1975, with your kind approval, will finally be
concluded. We humbly seek your instruction, Your Excellency
and please accept our families' sincere wish for a
We have agreed in principle with Mr. Oscar Ilustre on Merry Christmas and a Happy New Year to you and
the terms of the sale as evidenced by the following: the First Family.
1. Our written agreement The foregoing does not document a sale, but at most, only the
to hire Asian Appraisal conditions proposed by respondent Roman to enter into one. By the
Company to appraise the terms thereof, it refers only to an "agreement in principle".
entire leased area which Reflecting a future consummation, the letter mentions "negotiations
then be the basis for the with MWSS (which) with your (Marcos) kind approval, will finally be
negotiations of the concluded". It must likewise be noted that presidential approval had
purchase price of the yet to be obtained. Thus, the "initial agreement" was not a sale as it
property; and did not in any way transfer ownership over the property. The
proposed terms had yet to be approval by the President and the
2. Our exchange of agreement in principle still had to be formalized in a deed of sale.
communications Written authority as is required under Art. 1834 of the New Civil
wherein made a counter- Code, was not needed at the point of the "initial agreement".
offer and our acceptance
counter-offer. Verily, the principle on prescription of actions is designed to cover
situations such as the case at bar, where there have been a series
However, we were informed by Mr. Ilustre that only of transfers to innocent purchasers for value. To set aside these
written instruction from Your Excellency will allow us transactions only to accommodate a party who has slept on his
to finally sign the Agreement. rights is anathema to good order. 9
RE: Laches opportunity to institute a
suit;
Even assuming, for argument's sake, that the allegations in the
complaint establish the absolute nullity of the assailed contracts (3) lack of knowledge or
and hence imprescriptible, the complaint can still be dismissed on notice on the part of the
the ground of laches which is different from prescription. This defendant that the
Court, as early as 1966, has distinguished these two concepts in complainant would
this wise: assert the right on which
he bases his suit; and
. . . (T)he defense of laches applies independently of
prescription. Laches is different from the statute of (4) injury or prejudice to
limitations. Prescription is concerned with the fact of the defendant in the
delay, whereas laches, is concerned with the effect of event relief is accorded
delay. Prescription is a matter of time; laches is to the complainant, or
principally a question of inequity of permitting a claim the suit is not held
to be enforced, this inequity being founded on some barred. 12
Thus, the prevailing doctrine is that the right to have a The second element of delay is evident from the fact that petitioner
contract declared void ab initio may be barred by laches tarried for almost ten (10) years from the conclusion of the sale
although not barred by prescription. 11
sometime in 1983 before formally laying claim to the subject
property in 1993.
It has, for all its elements are present, viz:
The third element is present as can be deduced from the allegations
(1) conduct on the part in the complaint that petitioner MWSS (a) demanded for a
of the defendant, or one downpayment for no less than three times; (b) accepted
under whom he claims, downpayment for P25 Million; and (c) accepted a letter of credit for
giving rise to the the balance. The pertinent paragraphs in the complaint thus read:
situation that led to the
complaint and for which 38. In a letter dated September 19, 1983, for failure of
the complaint seeks a CHGCCI to pay on time, Mr. Ilustre demanded
remedy; payment of the downpayment of P25 Million which
was due as of 18 April 1983. A copy of this letter is
(2) delay in asserting the hereto attached as Annex "X";
complainant's rights,
having had knowledge 39. Again, in a letter dated February 7, 1984, then
or notice of the MWSS Acting General Manager Aber Canlas
defendant's conduct and demanded payment from CHGCCI of the purchase
having been afforded an
price long overdue. A copy of this letter is hereto There was express ratification made by the Board of petitioner
attached as Annex "Y"; MWSS when it passed Resolution No. 36-83 approving the sale of
the subject property to respondent SILHOUETTE and authorizing
40. Likewise, in a letter dated March 14, 1984, Mr. Mr. Ilustre, as General Manager, "to sign for and in behalf of the
Canlas again demanded from CHGCCI payment of the MWSS the contract papers and other pertinent documents relative
price. A copy of this demand letter is hereto attached thereto." Implied ratification by "silence or acquiescence" is
as Annex "Z"; revealed from the acts of petitioner MWSS in (a) sending three (3)
demand letters for the payment of the purchase price, (b) accepting
41. Thereafter, in a letter dated July 27, 1984, another P25 Million as downpayment, and (c) accepting a letter of credit for
entity, defendant Ayala Corporation, through SVP the balance, as hereinbefore mentioned. It may well be pointed out
Renato de la Fuente, paid with a check the long also that nowhere in petitioner MWSS' complaint is it alleged that it
overdue downpayment of P25,000,000.00 of returned the amounts, or any part thereof, covering the purchase
STC/CHGCCI. Likewise a domestic stand-by letter of price to any of the respondents-vendees at any point in time. This is
credit for the balance was issued in favor of MWSS; only indicative of petitioner MWSS' acceptance and retention of
Copies of the said letter, check and letter of credit are benefits flowing from the sales transactions which is another form
hereto attached as Annexes "AA", "BB", and "CC", of implied ratification.
respectively.
RE: Non-joinder of indispensable parties
Under these facts supplied by petitioner MWSS itself,
respondents have every good reason to believe that There is no denying that petitioner MWSS' action against herein
petitioner was honoring the validity of the conveyances of respondents for the recovery of the subject property now converted
the subject property, and that the sudden institution of the into a prime residential subdivision would ultimately affect the
complaint in 1993 alleging the nullity of such conveyances proprietary rights of the many lot owners to whom the land has
was surely an unexpected turn of events for respondents. already been parceled out. They should have been included in the
Hence, petitioner MWSS cannot escape the effect of laches. suit as parties-defendants, for "it is well established that owners of
property over which reconveyance is asserted are indispensable
RE: Ratification parties without whom no relief is available and without whom the
court can render no valid judgment." Being indispensable parties,
14
this case.
G.R. No. 107382/G.R. No. 107612 January 31, 1996 Tarlac." The checks are released by the Office of the Provincial Treasurer
and received for the hospital by its administrative officer and cashier.
ASSOCIATED BANK, petitioner,
vs. In January 1981, the books of account of the Provincial Treasurer were
HON. COURT OF APPEALS, PROVINCE OF TARLAC and post-audited by the Provincial Auditor. It was then discovered that the
PHILIPPINE NATIONAL BANK, respondents. hospital did not receive several allotment checks drawn by the Province.
xxxxxxxxxxxxxxxxxxxxx On February 19, 1981, the Provincial Treasurer requested the manager
of the PNB to return all of its cleared checks which were issued from
G.R. No. 107612 January 31, 1996 1977 to 1980 in order to verify the regularity of their encashment. After
the checks were examined, the Provincial Treasurer learned that 30
PHILIPPINE NATIONAL BANK, petitioner, checks amounting to P203,300.00 were encashed by one Fausto
vs. Pangilinan, with the Associated Bank acting as collecting bank.
HONORABLE COURT OF APPEALS, PROVINCE OF TARLAC, and
ASSOCIATED BANK, respondents. It turned out that Fausto Pangilinan, who was the administrative officer
and cashier of payee hospital until his retirement on February 28, 1978,
DECISION collected the questioned checks from the office of the Provincial
Treasurer. He claimed to be assisting or helping the hospital follow up the
release of the checks and had official receipts. Pangilinan sought to
3
ROMERO, J.:
encash the first check with Associated Bank. However, the manager of
4
The Province of Tarlac maintains a current account with the Philippine which reads "All prior endorsements guaranteed ASSOCIATED BANK."
National Bank (PNB) Tarlac Branch where the provincial funds are
deposited. Checks issued by the Province are signed by the Provincial Jesus David, the manager of Associated Bank testified that Pangilinan
Treasurer and countersigned by the Provincial Auditor or the Secretary of made it appear that the checks were paid to him for certain projects with
the Sangguniang Bayan. the hospital. He did not find as irregular the fact that the checks were not
7
In turn, the PNB manager demanded reimbursement from the Associated Hence these consolidated petitions which seek a reversal of respondent
Bank on May 15, 1981. 10
appellate court's decision.
As both banks resisted payment, the Province of Tarlac brought suit PNB assigned two errors. First, the bank contends that respondent court
against PNB which, in turn, impleaded Associated Bank as third-party erred in exempting the Province of Tarlac from liability when, in fact, the
defendant. The latter then filed a fourth-party complaint against Adena latter was negligent because it delivered and released the questioned
Canlas and Fausto Pangilinan. 11
checks to Fausto Pangilinan who was then already retired as the
hospital's cashier and administrative officer. PNB also maintains its
After trial on the merits, the lower court rendered its decision on March innocence and alleges that as between two innocent persons, the one
21, 1988, disposing as follows: whose act was the cause of the loss, in this case the Province of Tarlac,
bears the loss.
WHEREFORE, in view of the foregoing, judgment is hereby
rendered: Next, PNB asserts that it was error for the court to order it to pay the
province and then seek reimbursement from Associated Bank. According
1. On the basic complaint, in favor of plaintiff Province of Tarlac to petitioner bank, respondent appellate Court should have directed
and against defendant Philippine National Bank (PNB), ordering Associated Bank to pay the adjudged liability directly to the Province of
the latter to pay to the former, the sum of Two Hundred Three Tarlac to avoid circuity.
14
SO ORDERED. 12
Associated Bank also claims that since PNB already cleared and paid the
value of the forged checks in question, it is now estopped from asserting
the defense that Associated Bank guaranteed prior indorsements. The silence or negligence are estopped from setting up the defense of
drawee bank allegedly has the primary duty to verify the genuineness of forgery, are precluded from using this defense. Indorsers, persons
payee's indorsement before paying the check. 17
negotiating by delivery and acceptors are warrantors of the genuineness
of the signatures on the instrument. 20
While both banks are innocent of the forgery, Associated Bank claims
that PNB was at fault and should solely bear the loss because it cleared In bearer instruments, the signature of the payee or holder is
and paid the forged checks. unnecessary to pass title to the instrument. Hence, when the
indorsement is a forgery, only the person whose signature is forged can
xxx xxx xxx raise the defense of forgery against a holder in due course. 21
The case at bench concerns checks payable to the order of Concepcion The checks involved in this case are order instruments, hence, the
Emergency Hospital or its Chief. They were properly issued and bear the following discussion is made with reference to the effects of a forged
genuine signatures of the drawer, the Province of Tarlac. The infirmity in indorsement on an instrument payable to order.
the questioned checks lies in the payee's (Concepcion Emergency
Hospital) indorsements which are forgeries. At the time of their Where the instrument is payable to order at the time of the forgery, such
indorsement, the checks were order instruments. as the checks in this case, the signature of its rightful holder (here, the
payee hospital) is essential to transfer title to the same instrument. When
Checks having forged indorsements should be differentiated from forged the holder's indorsement is forged, all parties prior to the forgery may
checks or checks bearing the forged signature of the drawer. raise the real defense of forgery against all parties subsequent thereto. 22
Section 23 of the Negotiable Instruments Law (NIL) provides: An indorser of an order instrument warrants "that the instrument is
genuine and in all respects what it purports to be; that he has a good title
Sec. 23. FORGED SIGNATURE, EFFECT OF. — When a to it; that all prior parties had capacity to contract; and that the instrument
signature is forged or made without authority of the person whose is at the time of his indorsement valid and subsisting." He cannot
23
signature it purports to be, it is wholly inoperative, and no right to interpose the defense that signatures prior to him are forged.
retain the instrument, or to give a discharge therefor, or to enforce
payment thereof against any party thereto, can be acquired A collecting bank where a check is deposited and which indorses the
through or under such signature unless the party against whom it check upon presentment with the drawee bank, is such an indorser. So
is sought to enforce such right is precluded from setting up the even if the indorsement on the check deposited by the banks's client is
forgery or want of authority. forged, the collecting bank is bound by his warranties as an indorser and
cannot set up the defense of forgery as against the drawee bank.
A forged signature, whether it be that of the drawer or the payee, is
wholly inoperative and no one can gain title to the instrument through it. A The bank on which a check is drawn, known as the drawee bank, is
person whose signature to an instrument was forged was never a party under strict liability to pay the check to the order of the payee. The
and never consented to the contract which allegedly gave rise to such drawer's instructions are reflected on the face and by the terms of the
instrument. Section 23 does not avoid the instrument but only the forged
18 check. Payment under a forged indorsement is not to the drawer's order.
signature. Thus, a forged indorsement does not operate as the payee's
19 When the drawee bank pays a person other than the payee, it does not
indorsement. comply with the terms of the check and violates its duty to charge its
customer's (the drawer) account only for properly payable items. Since
The exception to the general rule in Section 23 is where "a party against the drawee bank did not pay a holder or other person entitled to receive
whom it is sought to enforce a right is precluded from setting up the payment, it has no right to reimbursement from the drawer. The general
24
forgery or want of authority." Parties who warrant or admit the rule then is that the drawee bank may not debit the drawer's account and
genuineness of the signature in question and those who, by their acts,
is not entitled to indemnification from the drawer. The risk of loss must
25
forged indorsement. It warrants that the instrument is genuine, and that it
perforce fall on the drawee bank. is valid and subsisting at the time of his indorsement. Because the
indorsement is a forgery, the collecting bank commits a breach of this
However, if the drawee bank can prove a failure by the customer/drawer warranty and will be accountable to the drawee bank. This liability
to exercise ordinary care that substantially contributed to the making of scheme operates without regard to fault on the part of the
the forged signature, the drawer is precluded from asserting the forgery. collecting/presenting bank. Even if the latter bank was not negligent, it
would still be liable to the drawee bank because of its indorsement.
If at the same time the drawee bank was also negligent to the point of
substantially contributing to the loss, then such loss from the forgery can The Court has consistently ruled that "the collecting bank or last endorser
be apportioned between the negligent drawer and the negligent bank. 26 generally suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that the act of
In cases involving a forged check, where the drawer's signature is forged, presenting the check for payment to the drawee is an assertion that the
the drawer can recover from the drawee bank. No drawee bank has a party making the presentment has done its duty to ascertain the
right to pay a forged check. If it does, it shall have to recredit the amount genuineness of the endorsements." 31
of the check to the account of the drawer. The liability chain ends with the
drawee bank whose responsibility it is to know the drawer's signature The drawee bank is not similarly situated as the collecting bank because
since the latter is its customer.
27 the former makes no warranty as to the genuineness. of any
indorsement. The drawee bank's duty is but to verify the genuineness of
32
In cases involving checks with forged indorsements, such as the present the drawer's signature and not of the indorsement because the drawer is
petition, the chain of liability does not end with the drawee bank. The its client.
drawee bank may not debit the account of the drawer but may generally
pass liability back through the collection chain to the party who took from Moreover, the collecting bank is made liable because it is privy to the
the forger and, of course, to the forger himself, if available. In other
28 depositor who negotiated the check. The bank knows him, his address
words, the drawee bank canseek reimbursement or a return of the and history because he is a client. It has taken a risk on his deposit. The
amount it paid from the presentor bank or person. Theoretically, the
29 bank is also in a better position to detect forgery, fraud or irregularity in
latter can demand reimbursement from the person who indorsed the the indorsement.
check to it and so on. The loss falls on the party who took the check from
the forger, or on the forger himself. Hence, the drawee bank can recover the amount paid on the check
bearing a forged indorsement from the collecting bank. However, a
In this case, the checks were indorsed by the collecting bank (Associated drawee bank has the duty to promptly inform the presentor of the forgery
Bank) to the drawee bank (PNB). The former will necessarily be liable to upon discovery. If the drawee bank delays in informing the presentor of
the latter for the checks bearing forged indorsements. If the forgery is that the forgery, thereby depriving said presentor of the right to recover from
of the payee's or holder's indorsement, the collecting bank is held liable, the forger, the former is deemed negligent and can no longer recover
without prejudice to the latter proceeding against the forger. from the presentor. 33
Since a forged indorsement is inoperative, the collecting bank had no Applying these rules to the case at bench, PNB, the drawee bank, cannot
right to be paid by the drawee bank. The former must necessarily return debit the current account of the Province of Tarlac because it paid checks
the money paid by the latter because it was paid wrongfully. 30 which bore forged indorsements. However, if the Province of Tarlac as
drawer was negligent to the point of substantially contributing to the loss,
More importantly, by reason of the statutory warranty of a general then the drawee bank PNB can charge its account. If both drawee bank-
indorser in section 66 of the Negotiable Instruments Law, a collecting PNB and drawer-Province of Tarlac were negligent, the loss should be
bank which indorses a check bearing a forged indorsement and presents properly apportioned between them.
it to the drawee bank guarantees all prior indorsements, including the
The loss incurred by drawee bank-PNB can be passed on to the help in the release of these checks and we were apparently
collecting bank-Associated Bank which presented and indorsed the misled because they accepted the representation of Pangilinan
checks to it. Associated Bank can, in turn, hold the forger, Fausto that he was helping them in the release of the checks and
Pangilinan, liable. besides according to them they were, Pangilinan, like the rest,
was able to present an official receipt to acknowledge these
If PNB negligently delayed in informing Associated Bank of the forgery, receipts and according to them since this is a government check
thus depriving the latter of the opportunity to recover from the forger, it and believed that it will eventually go to the hospital following the
forfeits its right to reimbursement and will be made to bear the loss. standard procedure of negotiating government checks, they
released the checks to Pangilinan aside from Miss Juco. 34
After careful examination of the records, the Court finds that the Province
of Tarlac was equally negligent and should, therefore, share the burden The failure of the Province of Tarlac to exercise due care contributed to a
of loss from the checks bearing a forged indorsement. significant degree to the loss tantamount to negligence. Hence, the
Province of Tarlac should be liable for part of the total amount paid on the
The Province of Tarlac permitted Fausto Pangilinan to collect the checks questioned checks.
when the latter, having already retired from government service, was no
longer connected with the hospital. With the exception of the first check The drawee bank PNB also breached its duty to pay only according to
(dated January 17, 1978), all the checks were issued and released after the terms of the check. Hence, it cannot escape liability and should also
Pangilinan's retirement on February 28, 1978. After nearly three years, bear part of the loss.
the Treasurer's office was still releasing the checks to the retired cashier.
In addition, some of the aid allotment checks were released to Pangilinan As earlier stated, PNB can recover from the collecting bank.
and the others to Elizabeth Juco, the new cashier. The fact that there
were now two persons collecting the checks for the hospital is an In the case of Associated Bank v. CA, six crossed checks with forged
35
unmistakable sign of an irregularity which should have alerted employees indorsements were deposited in the forger's account with the collecting
in the Treasurer's office of the fraud being committed. There is also bank and were later paid by four different drawee banks. The Court found
evidence indicating that the provincial employees were aware of the collecting bank (Associated) to be negligent and held:
Pangilinan's retirement and consequent dissociation from the hospital.
Jose Meru, the Provincial Treasurer, testified:. The Bank should have first verified his right to endorse the
crossed checks, of which he was not the payee, and to deposit
ATTY. MORGA: the proceeds of the checks to his own account. The Bank was by
reason of the nature of the checks put upon notice that they were
Q Now, is it true that for a given month there were two releases of issued for deposit only to the private respondent's account. . . .
checks, one went to Mr. Pangilinan and one went to Miss Juco?
The situation in the case at bench is analogous to the above case, for it
JOSE MERU: was not the payee who deposited the checks with the collecting bank.
Here, the checks were all payable to Concepcion Emergency Hospital
A Yes, sir. but it was Fausto Pangilinan who deposited the checks in his personal
savings account.
Q Will you please tell us how at the time (sic) when the
authorized representative of Concepcion Emergency Hospital is Although Associated Bank claims that the guarantee stamped on the
and was supposed to be Miss Juco? checks (All prior and/or lack of endorsements guaranteed) is merely a
requirement forced upon it by clearing house rules, it cannot but remain
A Well, as far as my investigation show (sic) the assistant cashier liable. The stamp guaranteeing prior indorsements is not an empty rubric
told me that Pangilinan represented himself as also authorized to which a bank must fulfill for the sake of convenience. A bank is not
required to accept all the checks negotiated to it. It is within the bank's proceed against the forger. If prompt notice is not given, the collecting
discretion to receive a check for no banking institution would consciously bank maybe prejudiced and lose the opportunity to go after its depositor.
or deliberately accept a check bearing a forged indorsement. When a
check is deposited with the collecting bank, it takes a risk on its The Court finds that even if PNB did not return the questioned checks to
depositor. It is only logical that this bank be held accountable for checks Associated Bank within twenty-four hours, as mandated by the rule, PNB
deposited by its customers. did not commit negligent delay. Under the circumstances, PNB gave
prompt notice to Associated Bank and the latter bank was not prejudiced
A delay in informing the collecting bank (Associated Bank) of the forgery, in going after Fausto Pangilinan. After the Province of Tarlac informed
which deprives it of the opportunity to go after the forger, signifies PNB of the forgeries, PNB necessarily had to inspect the checks and
negligence on the part of the drawee bank (PNB) and will preclude it from conduct its own investigation. Thereafter, it requested the Provincial
claiming reimbursement. Treasurer's office on March 31, 1981 to return the checks for verification.
The Province of Tarlac returned the checks only on April 22, 1981. Two
It is here that Associated Bank's assignment of error concerning C.B. days later, Associated Bank received the checks from PNB. 36
bank. Section 23 of the PCHC Rules deleted the requirement that items Pangilinan's account, it could not have recovered the amounts paid on
bearing a forged endorsement should be returned within twenty-four the questioned checks. In addition, while Associated Bank filed a fourth-
hours. Associated Bank now argues that the aforementioned Central party complaint against Fausto Pangilinan, it did not present evidence
Bank Circular is applicable. Since PNB did not return the questioned against Pangilinan and even presented him as its rebuttal
checks within twenty-four hours, but several days later, Associated Bank witness. Hence, Associated Bank was not prejudiced by PNB's failure to
38
alleges that PNB should be considered negligent and not entitled to comply with the twenty-four-hour return rule.
reimbursement of the amount it paid on the checks.
Next, Associated Bank contends that PNB is estopped from requiring
The Court deems it unnecessary to discuss Associated Bank's assertions reimbursement because the latter paid and cleared the checks. The
that CB Circular No. 580 is an administrative regulation issued pursuant Court finds this contention unmeritorious. Even if PNB cleared and paid
to law and as such, must prevail over the PCHC rule. The Central Bank the checks, it can still recover from Associated Bank. This is true even if
circular was in force for all banks until June 1980 when the Philippine the payee's Chief Officer who was supposed to have indorsed the checks
Clearing House Corporation (PCHC) was set up and commenced is also a customer of the drawee bank. PNB's duty was to verify the
39
operations. Banks in Metro Manila were covered by the PCHC while genuineness of the drawer's signature and not the genuineness of
banks located elsewhere still had to go through Central Bank Clearing. In payee's indorsement. Associated Bank, as the collecting bank, is the
any event, the twenty-four-hour return rule was adopted by the PCHC entity with the duty to verify the genuineness of the payee's indorsement.
until it was changed in 1982. The contending banks herein, which are
both branches in Tarlac province, are therefore not covered by PCHC PNB also avers that respondent court erred in adjudging circuitous
Rules but by CB Circular No. 580. Clearly then, the CB circular was liability by directing PNB to return to the Province of Tarlac the amount of
applicable when the forgery of the checks was discovered in 1981. the checks and then directing Associated Bank to reimburse PNB. The
Court finds nothing wrong with the mode of the award. The drawer,
The rule mandates that the checks be returned within twenty-four hours Province of Tarlac, is a clientor customer of the PNB, not of Associated
after discovery of the forgery but in no event beyond the period fixed by Bank. There is no privity of contract between the drawer and the
law for filing a legal action. The rationale of the rule is to give the collecting bank.
collecting bank (which indorsed the check) adequate opportunity to
The trial court made PNB and Associated Bank liable with legal interest (50%) of P203,300.00 to the Philippine National Bank, likewise, with legal
from March 20, 1981, the date of extrajudicial demand made by the interest from March 20, 1981 until payment is made.
Province of Tarlac on PNB. The payments to be made in this case stem
from the deposits of the Province of Tarlac in its current account with the SO ORDERED.
PNB. Bank deposits are considered under the law as loans. Central
40
Bank Circular No. 416 prescribes a twelve percent (12%) interest per
annum for loans, forebearance of money, goods or credits in the absence
of express stipulation. Normally, current accounts are likewise interest-
bearing, by express contract, thus excluding them from the coverage of
CB Circular No. 416. In this case, however, the actual interest rate, if any,
for the current account opened by the Province of Tarlac with PNB was
not given in evidence. Hence, the Court deems it wise to affirm the trial
court's use of the legal interest rate, or six percent (6%) per annum. The
interest rate shall be computed from the date of default, or the date of
judicial or extrajudicial demand. The trial court did not err in granting
41
legal interest from March 20, 1981, the date of extrajudicial demand.
The collecting bank, Associated Bank, shall be liable to PNB for fifty
(50%) percent of P203,300.00. It is liable on its warranties as indorser of
the checks which were deposited by Fausto Pangilinan, having
guaranteed the genuineness of all prior indorsements, including that of
the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was
also remiss in its duty to ascertain the genuineness of the payee's
indorsement.
On July 3, 1973, Francisco S. Gozon II, who was a depositor of the Caloocan City Branch of the This Court reproduces with approval the disquisition of the court a quo as
Philippine National Bank, went to the bank in his car accompanied by his friend Ernesto Santos whom follows:
he left in the car while he transacted business in the bank. When Santos saw that Gozon left his check
book he took a check therefrom, filled it up for the amount of P5,000.00, forged the signature of Gozon,
and thereafter he encashed the check in the bank on the same day. The account of Gozon was A bank is bound to know the signatures of its customers;
debited the said amount. Upon receipt of the statement of account from the bank, Gozon asked that
the said amount of P5,000.00 should be returned to his account as his signature on the check was and if it pays a forged check, it must be considered as
forged but the bank refused. making the payment out of its own funds, and cannot
ordinarily change the amount so paid to the account of
Upon complaint of private respondent on February 1, 1974 Ernesto the depositor whose name was forged' (San Carlos
Santos was apprehended by the police authorities and upon investigation Milling Co. vs. Bank of the P.I., 59 Phil. 59).
he admitted that he stole the check of Gozon, forged his signature and
encashed the same with the Bank. This rule is absolutely necessary to the circulation of
drafts and checks, and is based upon the presumed
Hence Gozon filed the complaint for recovery of the amount of negligence of the drawee in failing to meet its obligation to
P5,000.00, plus interest, damages, attorney's fees and costs against the know the signature of its correspondent. ... There is
bank in the Court of First Instance of Rizal. After the issues were joined nothing inequitable in such a rule. If the paper comes to
and the trial on the merits ensued, a decision was rendered on February the drawee in the regular course of business, and he,
4, 1980, the dispositive part of which reads as follows: having the opportunity ascertaining its character,
pronounces it to be valid and pays it, it is not only a
WHEREFORE, judgment is hereby rendered in favor of question of payment under mistake, but payment in
the plaintiff. The defendant is hereby condemned to return neglect of duty which the commercial law places upon
to plaintiff the amount of P5,000.00 which it had him, and the result of his negligence must rest upon him
unlawfully withheld from the latter, with interest at the (12 ALR 1901, citing many cases found in I Agbayani,
legal rate from September 22, 1972 until the amount is supra).
fully delivered. The defendant is further condemned to
pay plaintiff the sum of P2,000.00 as attorney's fees and Defendant, however, interposed the defense that it
to pay the costs of this suit. exercised diligence in accordance with the accepted
norms of banking practice when it accepted and paid
Not satisfied therewith, the bank now filed this petition for review on Exhibit "A". It presented evidence that the check had to
certiorari in this Court raising the sole legal issue that — pass scrutiny by a signature verifier as well as an officer
of the bank.
A comparison of the signature (Exhibit "A-l") on the forged The act of plaintiff in leaving his checkbook in the car
check (Exhibit "A") with plaintiffs exemplar signatures while he went out for a short while can not be considered
(Exhibits "5-N" and "5-B") found in the PNB Form 35-A negligence sufficient to excuse the defendant bank from
would immediately show the negligence of the employees its own negligence. It should be home in mind that when
of the defendant bank. Even a not too careful comparison defendant left his car, Ernesto Santos, a long time
would immediately arrest one's attention and direct it to classmate and friend remained in the same. Defendant
the graceful lines of plaintiffs exemplar signatures found could not have been expected to know that the said
in Exhibits "5-A" and "5-B". The formation of the first letter Ernesto Santos would remove a check from his
"F" in the exemplars, which could be regarded as artistic, checkbook. Defendant had trust in his classmate and
is completely different from the way the same letter is friend. He had no reason to suspect that the latter would
formed in Exhibit "A-l". That alone should have alerted a breach that trust .
more careful and prudent signature verifier.
We agree.
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
1
Private respondent trustee Ernesto Santos as a classmate and a friend.
expected to use reasonable business prudence in accepting and cashing He brought him along in his car to the bank and he left his personal
a check presented to it. belongings in the car. Santos however removed and stole a check from
his cheek book without the knowledge and consent of private respondent.
In this case the findings of facts of the court a quo are conclusive. The No doubt private respondent cannot be considered negligent under the
trial court found that a comparison of the signature on the forged check circumstances of the case.
and the sample signatures of private respondent show marked
differences as the graceful lines in the sample signature which is WHEREFORE, the petition is DISMISSED for lack of merit with costs
completely different from those of the signature on the forged check. against petitioner.
Indeed the NBI handwriting expert Estelita Santiago Agnes whom the trial
court considered to be an "unbiased scientific expert" indicated the SO ORDERED.
marked differences between the signature of private respondent on the
sample signatures and the questioned signature. Notwithstanding the
testimony of Col. Fernandez, witness for petitioner, advancing the opinion
that the questioned signature appears to be genuine, the trial court by
merely examining the pictorial report presented by said witness, found a
marked difference in the second "c" in Francisco as written on the
questioned signature as compared to the sample signatures, and the
separation between the "s" and the "c" in the questioned signature while
they are connected in the sample signatures. 2
Plaintiff corporation, organized under the laws of the Territory of Hawaii, The Bank of the Philippine Islands thereupon credited the current
is authorized to engaged in business in the Philippine Islands, and account of plaintiff in the sum of P201,000 and passed the cashier's
maintains its main office in these Islands in the City of Manila. check in the ordinary course of business through the clearing house,
where it was paid by the China Banking Corporation.
The business in the Philippine Islands was in the hands of Alfred D.
Cooper, its agent under general power of attorney with authority of On the same day the cashier of the Bank of the Philippine Islands
substitution. The principal employee in the Manila office was one Joseph received a letter, purporting to be signed by Newland Baldwin, directing
L. Wilson, to whom had been given a general power of attorney but that P200,000 in bills of various denominations, named in the letter, be
without power of substitution. In 1926 Cooper, desiring to go on vacation, packed for shipment and delivery the next day. The next day, Dolores
gave a general power of attorney to Newland Baldwin and at the same witnessed the counting and packing of the money, and shortly afterwards
time revoked the power of Wilson relative to the dealings with the Bank of returned with the check for the sum of P200,000, purporting to be signed
the Philippine Islands, one of the banks in Manila in which plaintiff by Newland Baldwin as agent.
maintained a deposit.
Plaintiff had frequently withdrawn currency for shipment to its mill from
About a year thereafter Wilson, conspiring together with one Alfredo the Bank of the Philippine Islands but never in so large an amount, and
Dolores, a messenger-clerk in plaintiff's Manila office, sent a cable gram according to the record, never under the sole supervision of Dolores as
in code to the company in Honolulu requesting a telegraphic transfer to the representative of plaintiff.
the China Banking Corporation of Manila of $100,00. The money was
transferred by cable, and upon its receipt the China Banking Corporation, Before delivering the money, the bank asked Dolores for P1 to cover the
likewise a bank in which plaintiff maintained a deposit, sent an exchange cost of packing the money, and he left the bank and shortly afterwards
contract to plaintiff corporation offering the sum of P201,000, which was returned with another check for P1, purporting to be signed by Newland
then the current rate of exchange. On this contract was forged the name Baldwin. Whereupon the money was turned over to Dolores, who took it
of Newland Baldwin and typed on the body of the contract was a note: lawphil.net
to plaintiff's office, where he turned the money over to Wilson and
received as his share, P10,000.
Shortly thereafter the crime was discovered, and upon the defendant From the decision of the trial court absolving the defendants, plaintiff
bank refusing to credit plaintiff with the amount withdrawn by the two brings this appeal and makes nine assignments of error which we do not
forged checks of P200,000 and P1, suit was brought against the Bank of deem it necessary to discuss in detail.
the Philippine Islands, and finally on the suggestion of the defendant
bank, an amended complaint was filed by plaintiff against both the Bank There is a mild assertion on the part of the defendant bank that the
of the Philippine Islands and the China Banking Corporation. disputed signatures of Newland Baldwin were genuine and that he had
been in the habit of signing checks in blank and turning the checks so
At the trial the China Banking Corporation contended that they had drawn signed over to Wilson.
a check to the credit of the plaintiff company, that the check had been
endorsed for deposit, and that as the prior endorsement had in law been The proof as to the falsity of the questioned signatures of Baldwin places
guaranteed by the Bank of the Philippine Islands, when they presented the matter beyond reasonable doubt, nor is it believed that Baldwin
the cashier's check to it for payment, the China Banking Corporation was signed checks in blank and turned them over to Wilson.
absolved even if the endorsement of Newland Baldwin on the check was
a forgery. As to the China Banking Corporation, it will be seen that it drew its check
payable to the order of plaintiff and delivered it to plaintiff's agent who
The Bank of the Philippine Islands presented many special defenses, but was authorized to receive it. A bank that cashes a check must know to
in the main their contentions were that they had been guilty of no whom it pays. In connection with the cashier's check, this duty was
negligence, that they had dealt with the accredited representatives of the therefore upon the Bank of the Philippine Islands, and the China Banking
company in the due course of business, and that the loss was due to the Corporation was not bound to inspect and verify all endorsements of the
dishonesty of plaintiff's employees and the negligence of plaintiff's check, even if some of them were also those of depositors in that bank. It
general agent. had a right to rely upon the endorsement of the Bank of the Philippine
Islands when it gave the latter bank credit for its own cashier's check.
In plaintiff's Manila office, besides the general agent, Wilson, and Even if we would treat the China Banking Corporation's cashier's check
Dolores, most of the time there was employed a woman stenographer the same as the check of a depositor and attempt to apply the doctrines
and cashier. The agent did not keep in his personal possession either the of the Great Eastern Life Insurance Co. vs. Hongkong & Shanghai
code-book or the blank checks of either the Bank of the Philippine Islands Banking Corporation and National Bank (43 Phil., 678), and hold the
or the China Banking Corporation. Baldwin was authorized to draw China Banking Corporation indebted to plaintiff, we would at the same
checks on either of the depositaries. Wilson could draw checks in the time have to hold that the Bank of the Philippine Islands was indebted to
name of the plaintiff on the China Banking Corporation. the China Banking Corporation in the same amount. As, however, the
money was in fact paid to plaintiff corporation, we must hold that the
After trial in which much testimony was taken, the trial court held that the China Banking Corporation is indebted neither to plaintiff nor to the Bank
deposit of P201,000 in the Bank of the Philippine Islands being the result of the Philippine Islands, and the judgment of the lower court far as it
of a forged endorsement, the relation of depositor and banker did not absolves the China Banking Corporation from responsibility is affirmed.
exist, but the bank was only a gratuitous bailee; that the Bank of the
Philippine Islands acted in good faith in the ordinary course of its Returning to the relation between plaintiff and the Bank of the Philippine
business, was not guilty of negligence, and therefore under article 1902 Islands, we will now consider the effect of the deposit of P201,000. It
of the Civil Code which should control the case, plaintiff could not must be noted that this was not a presenting of the check for cash
recover; and that as the cause of loss was the criminal actions of Wilson payment but for deposit only. It is a matter of general knowledge that
and Dolores, employees of plaintiff, and as Newland Baldwin, the agent, most endorsements for deposit only, are informal. Most are by means of
had not exercised adequate supervision over plaintiff's Manila office, a rubber stamp. The bank would have been justified in accepting the
therefore plaintiff was guilty of negligence, which ground would likewise check for deposit even with only a typed endorsement. It accepted the
defeat recovery. check and duly credited plaintiff's account with the amount on the face of
the check. Plaintiff was not harmed by the transaction as the only result
was the removal of that sum of money from a bank from which Wilson
could have drawn it out in his own name to a bank where Wilson would payment out of its own funds, and cannot ordinarily charge the
not have authority to draw checks and where funds could only be drawn amount so paid to the account of the depositor whose name was
out by the check of Baldwin. forged. (7 C.J., 683.)
Plaintiff in its letter of December 23, 1928, to the Bank of the Philippine There is no act of the plaintiff that led the Bank of the Philippine Islands
Islands said in part: astray. If it was in fact lulled into a false sense of security, it was by the
effrontery of Dolores, the messenger to whom it entrusted this large sum
". . . we now leave to demand that you pay over to us the entire of money.
amount of said manager's check of two hundred one thousand
(P201,000) pesos, together with interest thereon at the agreed The bank paid out its money because it relied upon the genuineness of
rate of 3 ½ per cent per annum on daily balances of our credit in the purported signatures of Baldwin. These, they never questioned at the
account current with your bank to this date. In the event of your time its employees should have used care. In fact, even today the bank
refusal to pay, we shall claim interest at the legal rate of 6 per represents that it has a relief that they are genuine signatures.
cent from and after the date of this demand inasmuch as we
desire to withdraw and make use of the money." Such language The signatures to the check being forged, under section 23 of the
might well be treated as a ratification of the deposit. Negotiable Instruments Law they are not a charge against plaintiff nor are
the checks of any value to the defendant.
The contention of the bank that it was a gratuitous bailee is without merit.
In the first place, it is absolutely contrary to what the bank did. It did not It must therefore be held that the proximate cause of loss was due to the
take it up as a separate account but it transferred the credit to plaintiff's negligence of the Bank of the Philippine Islands in honoring and cashing
current account as a depositor of that bank. Furthermore, banks are not the two forged checks.
gratuitous bailees of the funds deposited with them by their customers.
Banks are run for gain, and they solicit deposits in order that they can The judgment absolving the Bank of the Philippine Islands must therefore
use the money for that very purpose. In this case the action was neither be reversed, and a judgment entered in favor of plaintiff-appellant and
gratuitous nor was it a bailment. against the Bank of the Philippine Islands, defendant-appellee, for the
sum of P200,001, with legal interest thereon from December 23,1928,
On the other hand, we cannot agree with the theory of plaintiff that the until payment, together with costs in both instances. So ordered.
Bank of the Philippine Islands was an intermeddling bank. In the many
cases cited by plaintiff where the bank that cashed the forged
endorsement was held as an intermeddler, in none was the claimant a
regular depositor of the bank, nor in any of the cases cited, was the
endorsement for deposit only. It is therefore clear that the relation of
plaintiff with the Bank of the Philippine Islands in regard to this item of
P201,000 was that of depositor and banker, creditor and debtor.
…[I]t is petitioner [bank] which had the last clear chance to stop the As we previously stated, respondent’s practice of signing checks in blank
fraudulent encashment of the subject checks had it exercised due whenever its authorized bank signatories would travel abroad was a
diligence and followed the proper and regular banking procedures in dangerous policy, especially considering the lack of evidence on record
clearing checks. As we had earlier ruled, the one who had a last clear that respondent had appropriate safeguards or internal controls to
opportunity to avoid the impending harm but failed to do so is chargeable prevent the pre-signed blank checks from falling into the hands of
with the consequences thereof.22 (emphasis ours) unscrupulous individuals and being used to commit a fraud against the
company. We cannot believe that there was no other secure and
In the case at bar, petitioner cannot evade responsibility for the loss by reasonable way to guarantee the non-disruption of respondent’s
attributing negligence on the part of respondent because, even if we business. As testified to by petitioner’s expert witness, other corporations
concur that the latter was indeed negligent in pre-signing blank checks, would ordinarily have another set of authorized bank signatories who
the former had the last clear chance to avoid the loss. To reiterate, would be able to sign checks in the absence of the preferred
petitioner’s own operations manager admitted that they could have called signatories.26 Indeed, if not for the fortunate happenstance that the thief
up the client for verification or confirmation before honoring the dubious failed to properly fill up the subject checks, respondent would expectedly
take the blame for the entire loss since the defense of forgery of a
drawer’s signature(s) would be unavailable to it. Considering that
respondent knowingly took the risk that the pre-signed blank checks
might fall into the hands of wrongdoers, it is but just that respondent
shares in the responsibility for the loss.
We also cannot ignore the fact that the person who stole the pre-signed
checks subject of this case from respondent’s accountant turned out to
be another employee, purportedly a clerk in respondent’s accounting
department. As the employer of the "thief," respondent supposedly had
control and supervision over its own employee. This gives the Court more
reason to allocate part of the loss to respondent.
Finally, we find that the awards of attorney’s fees and litigation expenses
in favor of respondent are not justified under the circumstances and,
thus, must be deleted. The power of the court to award attorney’s fees
and litigation expenses under Article 2208 of the NCC28 demands factual,
legal, and equitable justification.
WHEREFORE, the Decision of the Court of Appeals dated July 16, 2001
and its Resolution dated September 28, 2001 are AFFIRMED with the
following MODIFICATIONS: (a) petitioner Bank of America NT & SA shall
pay to respondent Philippine Racing Club sixty percent (60%) of the sum
of Two Hundred Twenty Thousand Pesos (₱220,000.00) with legal
interest as awarded by the trial court and (b) the awards of attorney’s
fees and litigation expenses in favor of respondent are deleted.
Proportionate costs.
SO ORDERED.