WESTMONT BANK V.
EUGENE ONG Securities, much less to have authorized Tanlimco to
FACTS:
Respondent Eugene Ong maintained a current
account with petitioner, formerly the Associated
Banking Corporation, but now known as Westmont
Bank. Sometime in May 1976, he sold certain shares of
stocks through Island Securities Corporation. To pay
Ong, Island Securities purchased two (2) Pacific
Banking Corporation manager’s checks, both dated May
4, 1976, issued in the name of Eugene Ong as payee.
Before Ong could get hold of the checks, his friend
Paciano Tanlimco got hold of them, forged Ong’s
signature and deposited these with petitioner, where
Tanlimco was also a depositor. Even though Ong’s
specimen signature was on file, petitioner accepted and
credited both checks to the account of Tanlimco,
without verifying the ‘signature indorsements’
appearing at the back thereof. Tanlimco then
immediately withdrew the money and absconded.
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. Later, he reported the
incident to the Central Bank, which like the first effort,
unfortunately proved futile. 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 pay the value of the two checks from the
bank on whose gross 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 subject
checks issued to him and asserted that the signatures
on the back were spurious. The bank did not present
evidence to the contrary, but simply contended that
since plaintiff Ong claimed to have never received the
originals of the two (2) checks in question from Island
receive the same, he never acquired ownership of these
checks. Thus, he had no legal personality to sue as he
is not a real party in interest. The bank then filed a
demurrer to evidence which was denied.
ISSUE:
Whether or not Ong has a cause of action against the
bank
HELD:
Petitioner’s claim that respondent has no cause of
action against the bank is clearly misplaced. As defined,
a cause of action is the act or omission by which a party
violates a right of another. The essential 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 the defendant in violation
of said legal right. The complaint filed before the trial
court expressly alleged respondent’s right as payee of
the manager’s checks to receive the amount involved,
petitioner’s correlative duty as collecting bank to ensure
that the amount gets to the rightful payee or his order,
and a breach of that duty because of a blatant act of
negligence on the part of petitioner which violated
respondent’s rights. Under Section 23 of the Negotiable
Instruments Law:
When a signature is forged or made without
the authority of the person whose signature it
purports to be, it is wholly inoperative, and no
right to retain the instrument, or to give a
discharge therefor, or to enforce payment thereof
against any party thereto, can be acquired
through or under such signature, unless the party
 against whom it is sought to enforce such right is
precluded from setting up the forgery or want of
authority.
Since the signature of the payee, in the case at
bar, was forged to make it appear that he had
made an indorsement in favor of the forger, such
signature should be deemed as inoperative and
ineffectual. Petitioner, as the collecting bank,
grossly erred in making payment by virtue of said
forged signature. The payee, herein respondent,
should therefore be allowed to recover from the
collecting bank. The collecting bank is liable to the
payee and must bear the loss because it is its legal duty
to ascertain that the payee’s endorsement was genuine
before cashing the check. As a general rule, a bank or
corporation who has obtained possession of a check
upon an unauthorized or forged indorsement of the
payee’s signature and who collects the amount of the
check from the drawee, is liable for the proceeds
thereof to the payee or other owner, notwithstanding
that the amount has been paid to the person from
whom the check was obtained. The theory of the rule is
that the possession of the check on the forged or
unauthorized indorsement is wrongful, and when the
money had been collected on the check, the bank or
other person or corporation can be held as for moneys
had and received, and the proceeds are held for the
rightful owners who may recover them. The position of
the bank taking the check on the forged or
unauthorized indorsement is the same as if it had taken
the check and collected the money without indorsement
at all and the act of the bank amounts to conversion of
the check.
Petitioner’s claim that since there was no delivery yet
and respondent has never acquired possession of the
checks, respondent’s remedy is with the drawer and not
with petitioner bank. Petitioner relies on the view to the
effect that where there is no delivery to the payee and
no title vests in him, he ought not to be allowed to
recover on the ground that he lost nothing because he
never became the owner of the check and still retained
his claim of debt against the drawer. However, another
view in 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 said cases
the plaintiff uses one action to reach, by a desirable
short cut, the person who ought in any event to be
ultimately liable as among the innocent persons
involved in the transaction. In other words, the payee
ought to be allowed to recover directly from the
collecting bank, regardless of whether the check was
delivered to the payee or not.
Considering the circumstances in this case, in our view,
petitioner could not escape liability for its negligent
acts. Admittedly, respondent Eugene Ong at the time
the fraudulent transaction took place was a depositor of
petitioner bank. Banks are engaged in a business
impressed with public interest, and it is their duty to
protect in return their many clients and depositors who
transact business with them. They have the obligation
to treat their client’s account meticulously and with the
highest degree of care, considering the fiduciary nature
of their relationship. The diligence required of banks,
therefore, is more than that of a good father of a
family. In the present case, petitioner was held to be
grossly negligent in performing its duties.
ASSOCIATED BANK V. CA
FACTS:
The private respondent is engaged in the business of
ready-to-wear garments under the firm name "Melissa's
RTW." She deals with, among other customers,
Robinson's Department Store, Payless Department
Store, Rempson Department Store, and the Corona
Bazaar.
These companies issued in payment of their respective
accounts crossed checks payable to Melissa's RTW in
the amounts and on the dates indicated below:
PAYOR BANK AMOUNT DATE
Payless Solid Bank P3,960.00 January 19, 1982
Robinson's FEBTC 4,140.00 December 18, 1981
Robinson's FEBTC 1,650.00 December 24, 1981
Robinson's FEBTC 1,980.00 January 12, 1982
Rempson TRB 1,575.00 January 9, 1982
Corona RCBC 2,500.00 December 22, 1981
When she went to these companies to collect on what
she thought were still unpaid accounts, she was
informed of the issuance of the above-listed crossed
checks. Further inquiry revealed that the said checks
had been deposited with the Associated Bank
(hereinafter, "the Bank") and subsequently paid by it to
one Rafael Sayson, one of its "trusted depositors," in
the words of its branch manager and co-petitioner,
Conrado Cruz, Sayson had not been authorized by the
private respondent to deposit and encash the said
checks.
ISSUE:
Whether or not the private respondent Reyes has a
cause of action against the petitioners for their
encashment and payment to another person of certain
crossed checks issued in her favor
HELD:
The contents of the said checks issued by the customers
of the appellee had not been questioned. There is no
dispute that the same are crossed checks or for payee's
account only, which is Melissa's RTW. The appellee had
clearly shown that she had never authorized anyone to
deposit the said checks nor to encash the same; that
the appellants had allowed all said checks to be
deposited, cleared and paid to one Rafael Sayson in
violation of the instructions in the said crossed checks
that the same were for payee's account only; and that
the appellee maintained a savings account with the
Prudential Bank, Cubao Branch, Quezon City which
never cleared the said checks and the appellee had
been damaged by such encashment of the same.
Under accepted banking practice, crossing a check is
done by writing two parallel lines diagonally on the left
top portion of the checks. The crossing is special where
the name of a bank or a business institution is written
between the two parallel lines, which means that the
drawee should pay only with the intervention of that
company. 3 The crossing is general where the words
written between the two parallel lines are "and Co." or
"for payee's account only," as in the case at bar. This
means that the drawee bank should not encash the
check but merely accept it for deposit. 
In State Investment House vs. IAC, this Court declared
that "the effects of crossing a check are: (1) that the
check may not be encashed but only deposited in the
bank; (2) that the check may be negotiated only once
–– to one who has an account with a bank; and (3) that
the act of crossing 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 the
check pursuant to that purpose."
The effects therefore of crossing a check relate to the
mode of its presentment for payment. Under Sec. 72 of
the Negotiable Instruments Law, presentment for
payment, to be sufficient, must be made by the holder
or by some person authorized to receive payment on
his behalf. Who the holder or authorized person is
depends on the instruction stated on the face of the
check.
The six checks in the case at bar had been crossed and
issued "for payee's account only." This could only
signify that the drawers had intended the same for
deposit only by the person indicated, to wit, Melissa's
RTW.
The petitioners argue that the cause of action for
violation of the common instruction found on the face of
the checks exclusively belongs to the issuers thereof
and not to the payee. Moreover, having acted in good
faith as they merely facilitated the encashment of the
checks, they cannot be made liable to the private
respondent.
The subject checks were accepted for deposit by the
Bank for the account of Rafael Sayson although they
were crossed checks and the payee was not Sayson but
Melissa's RTW. The Bank stamped thereon its guarantee
that "all prior endorsements and/or lack of
endorsements (were) guaranteed." By such deliberate
and positive act, the Bank had for all legal intents and
purposes treated the said checks as negotiable
instruments and, accordingly, assumed the warranty of
the endorser.
The weight of authority is to the effect that "the
possession of check on a forged or unauthorized
indorsement is wrongful, and when the money is
collected on the check, the bank can be held 'for
moneys had and received." The proceeds are held for
the rightful owner of the payment and may be
recovered by him. The position of the bank taking the
check on the forged or unauthorized indorsement is the
same as if it had taken the check and collected without
indorsement at all. The act of the bank amounts to
conversion of the check. 
It is not disputed that the proceeds of the subject
checks belonged to the private respondent. As she had
not at any time authorized Rafael Sayson to endorse or
encash them, there was conversion of the funds by the
Bank.
When the Bank paid the checks so endorsed
notwithstanding that title had not passed to the
endorser, it did so at its peril and became liable to
the payee for the value of the checks. This liability
attached whether or not the Bank was aware of
the unauthorized endorsement. 
The petitioners were negligent when they
permitted the encashment of the checks by
Sayson. The 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 of the checks put upon notice
that they were issued for deposit only to the
private respondent's 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 vs. Equitable Banking Corp., "the law
imposes a duty of diligence on the collecting bank to
scrutinize checks deposited with it, for the purpose of
determining their genuineness and regularity. The
collecting bank, being primarily engaged in banking,
holds itself out to the public as the expert on this field,
and the law thus holds it to a high standard of conduct."
The petitioners insist that the private respondent has no
cause of action against them because they have no
privity of contract with her. They also argue that it was
Eddie Reyes, the private respondent's own husband,
who endorsed the checks.
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.  exemplary damages for lack of sufficient evidence to
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 direct action
in the case at bar.
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 the assurance that it had ascertained the
genuineness of all prior endorsements.
We find that the respondent court committed no
reversible error in holding that the private respondent
had a valid cause of action against the petitioners and
that the latter are indeed liable to her for their
unauthorized encashment of the subject checks. We
also agree with the reduction of the award of the
support them.
BPI V. CASA MONTESSORI Lebron and encashed the checks. The PNP Crime
Laboratory conducted an examination of the nine (9)
FACTS: checks and concluded that the handwritings thereon
compared to the standard signature of Ms. Lebron were
On November 8, 1982, plaintiff CASA Montessori not written by the latter. On March 4, 1991, plaintiff
International opened Current Account No. 0291-0081- filed the herein Complaint for Collection with Damages
01 with defendant BPI[,] with CASA’s President Ms. Ma. against defendant bank praying that the latter be
Carina C. Lebron as one of its authorized signatories. In ordered to reinstate the amount of ₱782,500.00 in the
1991, after conducting an investigation, plaintiff current and savings accounts of the plaintiff with
discovered that nine (9) of its checks had been interest at 6% per annum.
encashed by a certain Sonny D. Santos since 1990 in
the total amount of ₱782,000.00, on the following dates ISSUE:
and amounts:
Whether or not Forgery can be presumed
‘Check
Date Amount
No. HELD:
1. 839700 April 24, 1990 ₱ 43,400.00
Section 23 of the NIL provides:
2. 839459 Nov. 2, 1990 110,500.00
3. 839609 Oct. 17, 1990 47,723.00 "Section 23. Forged signature; effect of. -- When
4. 839549 April 7, 1990 90,700.00
a signature is forged or made without the
authority of the person whose signature it
5. 839569 Sept. 23, 1990 52,277.00 purports to be, it is wholly inoperative, and no
6. 729149 Mar. 22, 1990 148,000.00 right x x x to enforce payment thereof against
any party thereto, can be acquired through or
7. 729129 Mar. 16, 1990 51,015.00
under such signature, unless the party against
8. 839684 Dec. 1, 1990 140,000.00 whom it is sought to enforce such right is
9. 729034 Mar. 2, 1990 98,985.00 precluded from setting up the forgery or want of
authority."
Total -- ₱ 782,600.00
Under this provision, a forged signature is a real or
absolute defense, and a person whose signature on a
It turned out that ‘Sonny D. Santos’ with account at negotiable instrument is forged is deemed to have
BPI’s Greenbelt Branch [was] a fictitious name used by never become a party thereto and to have never
third party defendant Leonardo T. Yabut who worked as consented to the contract that allegedly gave rise to it.
external auditor of CASA. Third party defendant The counterfeiting of any writing, consisting in the
voluntarily admitted that he forged the signature of Ms. signing of another’s name with intent to defraud, is
forgery. In the present case, we hold that there was
forgery of the drawer’s signature on the check.
First, both the CA and the RTC found that Respondent
Yabut himself had voluntarily admitted, through an
Affidavit, that he had forged the drawer’s signature and
encashed the checks. He never refuted these
findings. That he had been coerced into admission was
not corroborated by any evidence on record.
Second, the appellate and the trial courts also ruled
that the PNP Crime Laboratory, after its examination of
the said checks, had concluded that the handwritings
thereon -- compared to the standard signature of the
drawer -- were not hers. This conclusion was the same
as that in the Report that the PNP Crime Laboratory had
earlier issued to BPI -- the drawee bank -- upon the
latter’s request.
Indeed, we respect and affirm the RTC’s factual
findings, especially when affirmed by the CA, since
these are supported by substantial evidence on record.
Clear, Positive and Convincing Examination and
Evidence
The examination by the PNP, though inconclusive, was
nevertheless clear, positive and convincing.
Forgery "cannot be presumed." It must be
established by clear, positive and convincing
evidence. Under the best evidence rule as applied
to documentary evidence like the checks in
question, no secondary or substitutionary
evidence may inceptively be introduced, as the
original writing itself must be produced in
court. But when, without bad faith on the part of
the offeror, the original checks have already been
destroyed or cannot be produced in court,
secondary evidence may be produced.  Without
bad faith on its part, CASA proved the loss or
destruction of the original checks through the
Affidavit of the one person who knew of that
fact-- Yabut. He clearly admitted to discarding the
paid checks to cover up his misdeed. In such a
situation, secondary evidence like microfilm
copies may be introduced in court.
The drawer’s signatures on the microfilm copies were
compared with the standard signature. PNP Document
Examiner II Josefina de la Cruz testified on cross-
examination that two different persons had written
them. Although no conclusive report could be issued in
the absence of the original checks, she affirmed that
her findings were 90 percent conclusive. According to
her, even if the microfilm copies were the only basis of
comparison, the differences were evident. Besides, the
RTC explained that although the Report was
inconclusive, no conclusive report could have been
given by the PNP, anyway, in the absence of the original
checks. This explanation is valid; otherwise, no such
report can ever be relied upon in court.
Even with respect to documentary evidence, the best
evidence rule applies only when the contents of a
document -- such as the drawer’s signature on a check
-- is the subject of inquiry. As to whether the document
has been actually executed, this rule does not apply;
and testimonial as well as any other secondary evidence
is admissible. Carina Lebron herself, the drawer’s
authorized signatory, testified many times that she had
never signed those checks. Her testimonial evidence is
admissible; the checks have not been actually
executed. The genuineness of her handwriting is
proved, not only through the court’s comparison of the
questioned handwritings and admittedly genuine
specimens thereof, but above all by her.
The failure of CASA to produce the original checks
neither gives rise to the presumption of suppression of
evidence nor creates an unfavorable inference against
it. Such failure merely authorizes the introduction of
secondary evidence in the form of microfilm copies. Of
no consequence is the fact that CASA did not present
the signature card containing the signatures with which
those on the checks were compared. Specimens of
standard signatures are not limited to such a card.
Considering that it was not produced in evidence, other
documents that bear the drawer’s authentic signature
may be resorted to. Besides, that card was in the
possession of BPI -- the adverse party.
We have held that without the original document
containing the allegedly forged signature, one cannot
make a definitive comparison that would establish
forgery; and that a comparison based on a mere
reproduction of the document under controversy cannot
produce reliable results. We have also said, however,
that a judge cannot merely rely on a handwriting
expert’s testimony, but should also exercise
independent judgment in evaluating the authenticity of
a signature under scrutiny. In the present case, both
the RTC and the CA conducted independent
examinations of the evidence presented and arrived at
reasonable and similar conclusions. Not only did they
admit secondary evidence; they also appositely
considered testimonial and other documentary evidence
in the form of the Affidavit.
The best evidence rule admits of exceptions and, as we
have discussed earlier, the first of these has been
met. The result of examining a questioned handwriting,
even with the aid of experts and scientific instruments,
may be inconclusive; but it is a non sequitur to say that
such result is not clear, positive and convincing. The
preponderance of evidence required in this case has
been satisfied.
ILUSORIO V. CA
FACTS
Ramon Ilusorio entrusted his credit cards and checkbooks and blank
checks to his secretary. Apparently, his secretary was able to encash and
deposit to her personal account 17 checks drawn against his account.
Ilusorio requested to restore to his account the value of the checks that
were wrongfully encashed but the bank refused, hence the case.
In court, the bank testified that they make sure that the sign on the check
is verified. When asked by the NBI to submit standard signs to compare,
Ilusorio failed to comply. The lower held held in favor of defendant.
ISSUE
Whether the bank was negligent in receiving the checks
RULING
The SC affirmed the lower court's decision. Ilusorio failed to prove that
the bank was negligent on their part as he has the burden of proof. The
bank's employees did not know the secretary's modus operandi as she
was always transacting in behalf of Ilusorio.
The SC even held that it was Ilusorio who was negligent as he trusted his
secretary of unusual degree.
Ilusorio also cites Sec. 23 of the NIL that a forged check is inoperative and
that he bank has no authority to pay. While true, the case at bar falls
under the exception stated in the section. The SC held that Ilusorio is
precluded from setting up the forgery, assuming there is forgery, due to
his own negligence in entrusting his secretary.

Samsung Construction Corporation, Inc. v. Far East Bank and
Trust Company
G.R. No. 129015; August 13, 2004; Tinga, J.
Digest prepared by Jackie Canlas
FACTS:
 Samsung Construction held an account with Far East Bank.
 One day, a check worth P999,500 payable to case was
presented by a certain Roberto Gonzaga to the Makati Branch
of Far East Bank. The check was certified to be true by Jose
Sempio, the assistant accountant of Samsung, who also
happened to be present in the bank during the time that the
check was presented.
 Three bank personnel (teller, Assistant Cashier, and another
bank officer) examined the check and compared the signature
appearing on the check with the specimen signatures of
Samsung’s President Jong. After ascertaining that the signature
was genuine, and that the account had sufficient funds,
Gonzaga was asked to submit 3 proof of his identity.
Eventually, Gonzaga was able to encash the check.
 When Samsung discovered the unauthorized withdrawal, it
filed a complaint against FEBTC for violation of Sec 23 of the
Negotiable Instruments Law.
 During the trial, both parties presented their respective expert
witnesses:
o Samsung presented NBI Document Examiner Roda Flores.
o FEBTC presented PNP Crime Laboratory document Examiner Rosario
Perez.
 RTC rendered judgment in favor of Samsung, holding FEBTC
liable. It gave more credence to the testimony of NBI Examiner
Flores.
 CA reversed the RTC and absolved FEBTC from any liability.
o The contradictory findings of NBI and PNP created doubt as to the
whether there was forgery.
o Assuming there was forgery, it was due to the negligence of
Samsung.
o As held in PNB v. National City Bank of NY, as between 2 innocent
persons, loss would be borne by the negligent party.
 Samsung – 45 to SC.
ISSUES/HELD: WON the check was forged – YES
WON Samsung could set up the defense of
forgery in Sec. 23 – YES
RULING: Petition granted.
RATIO:
WON the check was forged – YES
(The details of the forgery are not really important to the lesson.
The Court just needed to answer this issue before the 2 nd issue can be
resolved.)
 The testimony of the NBI Examiner was more credible because
even the testimony of the PNP Examiner reveals that there are
a lot of differences in the questioned signature as compared to
the standard signature specimen. The PNP Examiner tried to
excuse the “differences” by asserting that there were mere
“variations”, but such conclusion was not supported by
sufficient cogent reasons.
o The most telling difference between the question and
genuine signatures examined by the PNP is in the final
upward stroke in the signature, or “the point to the short
stroke of the terminal in the capital letter “L”. The
difference was glaring, yet the PNP Examiners brushed this
off as a mere variation.
 The NBI Examiner testified that there is a free rapid
continuous execution or stroke as shown by the tampering
terminal stroke of the signatures whereas the questioned
signature is a hesitating slow drawn execution stroke.
 The Court also compared the qualifications of the NBI
Examiner to that the PNP Examiner. The NBI Examiner was
more experienced (15 years) and had examined more than
50,000-55,000 questioned documents, as opposed to the PNP
Examiner who admitted to having examined only around 500
documents.
WON Samsung could set up the defense of forgery in Sec. 23 –
YES
 The general rule is to the effect that a forged signature is wholly
inoperative, and payment made through or under such signature is
ineffectual or does not discharge the instrument. If payment is made,
the drawee cannot charge it to the drawer’s account. The traditional
justification for the result is that the drawee is in a superior position to
detect a forgery because he has the maker’s signature and is expected
to know and compare it.
 Under Sec 23 of the Negotiable Instruments Law, forgery is a real or
absolute defense by the party whose signature is forged. Such liability
attaches even if the bank exerts due diligence and care in preventing
such faulty discharge.
 Although the Court recognized that Sec 23 bars a party from setting up
the defense of forgery if it is guilty of negligence, it was unable to
conclude that Samsung was guilty of negligence.
o 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 negligence was the cause for the forgery.
o Admittedly, the record does not establish what measures Samsung
employed to safeguard its blank checks. Jong’s testimony regarding
the use of a safety box by Kyu was considered hearsay. But when CA
ruled that Samsung was negligent, it did not really explain how and
why.
o In the absence of evidence to the contrary, the court concluded that
there was no negligence, the presumption being that every person
takes ordinary care of his concerns.
 The CA Decision extensively discussed the FEBTC’s efforts in establishing
that there no negligence on its part in the acceptance and payment of
the forged check. However, the degree of diligence exercised by the
bank would be irrelevant if the drawer is not precluded from setting up
the defense of forgery under Sec 23 by his own negligence.
WON FEBTC exercised extraordinary diligence required of it
by the situation – NO
(This is irrelevant but the Court nevertheless made a comment since
it was brought up by FEBTC.)
 The fact that the check was made out in the amount of nearly 1M is
unusual enough ti require a higher degree of caution on the part of the
bank. FEBTC confirmed this through its own internal procedures. As the
amount increases, the number of officers who need to approve it also
increases.
 Not only did the amount nearly total 1M, it was payable to cash. This
should have aroused suspicion of the banks, as it is not ordinary
business practice for a check for such large amount to be made payable
to case or to bearer, instead of to the order of a specified person.
 Gonzaga did not carry any written proof that he was authorized by
Samsung to encash the check.
 FEBTC Senior Assistant Cashier admitted that the bank tried, but failed,
to contact Jong over the phone to verify. The bank just heavily relied on
the say-so of Sempio. FEBTC Accountant Velez even admitted that she
did not personally know Sempio, and had met Sempio for the 1 st time
only on the day the check was enchased.
1. G.R. No. 173259 July 25, 2011
Philippine National Bank, petitioner vs.
F.F. CRUZ and CO., INC., respondent,
FACTS:
This petition for review arose from a case for damages filed by FF Cruz against
PNB. Plaintiff FF Cruz has open an account at PNB-Timog Ave. Branch, wherein
its president and its secretary-treasurer were the named signatories. Plaintiff
FF Cruz, avers that PNB has been negligent to deduct the cashier’s and
manager’s checks amounting to Php9,950,000.00 and Php3,260,000.00,
respectively, as the same were unauthorized and fraudulently made by the
company accountant Aurea Caparas as both the president and the secretary
were out of the country at that time. The plaintiff seeks to credit back and
restore to its account the value of the checks, to which the defendant bank
refused as the defendant bank alleged that it exercised due diligence in handling
the account of FF Cruz, as the application of said checks have passed a through
standard bank procedures and it was only after finding that it has no infirmity
that the checks were given due course. The trial court rendered a Decision
against defendant bank for not calling or personally verifying from the
authorized signatories the legitimacy of the subject withdrawals considering
that they were huge amounts. For this reason, defendant PNB had the last clear
chance to prevent the unauthorized debits from the FF Cruz account. And thus,
PNB should bear the whole loss. On appeal, the Court of Appeal, affirmed the
Decision of the trial court with modification on the award for damages that PNB
should only pay 60% of the actual damage and the Plaintiff FF Cruz should bear
the remaining 40% for its contributory negligence by giving authority to its
company accountant to transact with defendant bank PNB. Petitioner PNB
appealed the Court of Appeals’ Decision.
ISSUES:
Whether or not the principle of last clear chance principle is applicable to held
the defendant bank liable for damages.
RULING:
The Court ruled that the finding of the appellate court that PNB failed to make a
proper verification as the manager’s check do not bear the signature of the bank
verifier, thus casting doubt as whether the signatures were indeed underwent
the proper verification. In view of the foregoing, the Court ruled that PNB was
negligent in handling the FF Cruz account specifically with respect to PNB’s
failure to detect the forgeries in subject application for manager’s check which
could have prevented the loss. It further states, that PNB failed to meet the high
standard of diligence required by the circumstances to prevent the fraud, where
the bank’s negligence is the proximate cause of the loss and the depositor is
guilty of contributory negligence, the damage between the bank and the
depositor, a 60-40 ratio applies. Wherefore, the petition was denied and the
CA’s Decision is affirmed.
G.R. No. 158143               September 21, 2011
PHILIPPINE COMMERCIAL INTERNATIONAL
BANK, Petitioner, 
vs.
ANTONIO B. BALMACEDA and ROLANDO N.
RAMOS, Respondents.
FACTS:
PCIB filed an action for recovery of sum of money with damages
before the RTC against Antonio Balmaceda, the Branch
Manager of its Sta. Cruz, Manila branch. In its complaint, PCIB
alleged that between 1991 and 1993, Balmaceda, by taking
advantage of his position as branch manager, fraudulently
obtained and encashed 31 Manager’s checks. PCIB then
moved to be allowed to file an amended complaint to implead
Rolando Ramos as one of the recipients of a portion of the
proceeds from Balmaceda’s alleged fraud. PCIB also increased
the number of fraudulently obtained and encashed Manager’s
checks to 34 in which the RTC granted.
Since Balmaceda did not file an Answer, he was declared in
default. On the other hand, Ramos filed an Answer denying any
knowledge of Balmaceda’s scheme. The RTC then issued a
decision in favor of PCIB, where the RTC found that
Balmaceda, took undue advantage of his position and authority
as branch manager and Ramos acted in collusion with
Balmaceda. On appeal, the CA dismissed the complaint against
Ramos, holding that no sufficient evidence existed to prove that
Ramos colluded with Balmaceda in the latter’s fraudulent
manipulations and thus CA SET ASIDE the Decision of the trial
court insofar as Ramos is concerned. Hence this petition for
review on certiorari, filed by the Philippine Commercial
International Bank.
ISSUE:
Whether or not Ramos who received a portion of the money that
Balmaceda took from PCIB, should also be held liable for the
return of this money to the Bank.
RULING:
No, Ramos is not liable.
The Supreme Court PARTIALLY GRANTED the petition and
AFFIRMED the decision of the Court of Appeals dated with
the MODIFICATION that the award of moral and exemplary
damages in favor of Rolando N. Ramos is DELETED.
PCIB, as plaintiff, had to prove, by preponderance of evidence,
its positive assertion that Ramos conspired with Balmaceda in
perpetrating the latter’s scheme to defraud the Bank. All that
PCIB’s evidence proves is that Balmaceda used Ramos’ name
as a payee when he filled up the application forms for the
Manager’s checks. But, as the CA correctly observed, the mere
fact that Balmaceda made Ramos the payee on some of the
Manager’s checks is not enough basis to conclude that Ramos
was complicit in Balmaceda’s fraud; a number of other people MWSS V. CA (1986)
were made payees on the other Manager’s checks yet PCIB
never alleged them to be liable, nor did the Bank adduce any G.R. No. L-62943 July 14, 1986
other evidence pointing to Ramos’ participation that would justify Lessons Applicable: Forgery (Negotiable Instruments Law)
his separate treatment from the others. Also, while Ramos is
Balmaceda’s brother-in-law, their relationship is not sufficient,
by itself, to render Ramos liable, absent concrete proof of his
actual participation in the fraudulent scheme. FACTS:
 Metropolitan Waterworks and Sewerage System (MWSS)
The party carrying the burden of proof must establish his case is a GOCC and successor-in- interest of the defunct NWSA. 
by a preponderance of evidence, or evidence which, to the
court, is more worthy of belief than the evidence offered in
 The authorized signature for PNB Account No. 6 were
opposition. In Encinas v. National Bookstore, Inc., defined
"preponderance of evidence" in the following manner: those of MWSS treasurer Jose Sanchez, its auditor Pedro
Aguilar, and its acting General Manager Victor L. Recio. 
"Preponderance of evidence" is the weight, credit, and value of
the aggregate evidence on either side and is usually considered  Specimen signatures were submitted by the
to be synonymous with the term "greater weight of the
MWSS to and on file with the PNB
evidence" or "greater weight of the credible evidence."
Preponderance of evidence is a phrase which, in the last
analysis, means probability of the truth. It is evidence which is  By special arrangement with the PNB, the MWSS
more convincing to the court as worthy of belief than that which used personalized checks in drawing from this account. 
is offered in opposition thereto.
 printed for MWSS by its printer, F. Mesina
Ramos’ participation in Balmaceda’s scheme was not proven by
PCIB by preponderance of evidence. Given that PCIB failed to Enterprises
establish Ramos’ participation in Balmaceda’s scheme, it was
not even necessary for Ramos to provide an explanation for the  March, April and May 1969: 23 checks were prepared,
money he received from Balmaceda. Even if the evidence processed, issued and released by NWSA, all of which were
adduced by the plaintiff appears stronger than that presented by
paid and cleared by PNB and debited by PNB against NWSA
the defendant, a judgment cannot be entered in the plaintiff’s
favor if his evidence still does not suffice to sustain his cause of Account No. 6
action;25 to reiterate, a preponderance of evidence as defined
must be established to achieve this result.  deposited by the fictitious payees Raul Dizon,
Arturo Sison and Antonio Mendoza in their respective
current accounts with the Philippine Commercial and
 Industrial Bank (PCIB) and Philippine Bank of Commerce
(PBC)  and if it pays a forged check it must be considered as
 At the time of their presentation to PNB these
checks bear the standard indorsement which reads 'all prior
indorsement and/or lack of endorsement guaranteed'
 NWSA filed against PNB before the CFI
 PNB also filed a 3rd party complaint against the
negotiating banks PBC and PCIB on the ground that they
failed to ascertain the Identity of the payees and their title
to the checks which were deposited in the respective new
accounts of the payees with them
 February 6, 1976: CFI favored MWSS
 CA: reversed and favored PNB
 applied Section 24 of the Negotiable Instruments
Law
ISSUE: W/N MWSS can can claim against PNB
HELD: NO. CA reversed.
Every negotiable instrument is deemed prima facie to have
been issued for valuable consideration and every person whose
signature appears thereon to have become a party thereto for
value
 A bank is bound to know the signatures of its customers;
making the payment out of its obligation funds, and cannot
ordinarily charge the amount so paid to the account of the
depositor whose name was forged.
 NBI showed that the MWSS fraud was an "inside job" and
that the MWSS' delay in the reconciliation of bank
statements and the laxity and loose records control in the
printing of its personalized checks facilitated the
fraud. These reports did not touch on the inherent qualities
of the signatures which are indispensable in the
determination of the existence of forgery. There must be
conclusive findings that there is a variance in the inherent
characteristics of the signatures and that they were written
by 2 or more different persons.
 Forgery cannot be presumed. It must be established by
clear, positive, and convincing evidence. This was not done
in the present case.
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the
signature is forged or made without authority of the person
whose signature it purports to be, it is wholly inoperative, and
no right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party
thereto can be acquired through or under such signature unless
the party against whom it is sought to enforce such right is
precluded from setting up the forgery or want of authority.
 Gross negligence in the printing of its personalized
checks - MWSS failed to
 1. give its printer, Mesina Enterprises, specific instructions
relative to the safekeeping and disposition of excess forms,
check vouchers, and safety papers
2. retrieve from its printer all spoiled check forms
3. provide any control regarding the paper used in the
printing of said checks
4. furnish the respondent drawee bank with samples of
typewriting, cheek writing, and print used by its printer in
the printing of its checks and of the inks and pens used in
signing the same
5. send a representative to the printing office during the
printing of said checks
6. to reconcile the bank statements with its own records
 MWSS requested the PNB to discontinue the practice of
mailing the bank statements, but instead to deliver it to Mr.
Emiliano Zaporteza. However, he was unreasonably delayed
in taking prompt deliveries of the bank statements and
credit and debit memos. As a consequence, Mr. Zaporteza
failed to reconcile the bank statements.  If Mr. Zaporteza
had not been remiss in his duty of taking the bank
statements and reconciling them with the petitioner's
records, the fraudulent encashments of the first checks
should have been discovered, and further frauds prevented.
This negligence was, therefore, the proximate cause of the
failure to discover the fraud. 
 One factor which facilitate this fraud was the delay in the
reconciliation of PNB statements with the NAWASA bank
accounts. x x x. Had the NAWASA representative come to
the PNB early for the statements and had the bank been
advised promptly of the reported bogus check, the
negotiation of practically all of the remaining checks on May,
1969 could have been prevented.
 The records likewise show that the petitioner failed to
provide appropriate security measures over its own records
thereby laying confidential records open to unauthorized
persons. The petitioner's own Fact Finding Committee, in its
report submitted to their General manager underscored this
laxity of records control. It observed that the "office of Mr.
Ongtengco (Cashier No. VI of the Treasury Department at
the NAWASA) is quite open to any person known to him or
his staff members and that the check writer is merely on top
of his table
 Even if the 23 checks in question are considered
forgeries, considering the petitioner's gross negligence, it is
barred from setting up the defense of forgery under Section
23 of the Negotiable Instruments Law
 PNB had taken the necessary measures in the detection
of forged checks and the prevention of their fraudulent
encashment. In fact, long before the encashment of the 23
checks in question, the it had issued constant reminders to
all Current Account Bookkeepers informing them of the
activities of forgery syndicates. 
 Under the circumstances, MWSS was in a better position with the hospital, it shares the burden of loss from the checks bearing
to detect and prevent the fraudulent encashment of its a forged indorsement. Therefore, the Province can only recover 50%
of the amount from the drawee bank (PNB), and the collecting bank
checks.
(Associated Bank) is liable to PNB for 50% of the same amount.
 ASSOCIATED BANK vs. CA,
 PROVINCE OF TARLAC and PHILIPPINE NATIONAL
BANK
san Carlos Milling vs. BPI GR 37467, 11
 G.R. No. 107382/G.R. No. 107612             January 31, 1996 December 1933 Second Division, Hull (J)


The Province of Tarlac maintains a current account with the
Facts: Joseph Wilson, the principal
Philippine National Bank (PNB Tarlac Branch) where the provincial employee of San Carlos Milling Co. Ltd. in
funds are deposited. Portions of the funds were allocated to the the Manila Office, conspired with one
Concepcion Emergency Hospital. Checks were issued to it and were
received by the hospital’s administrative officer and cashier (Fausto Alfredo Dolores, a messenger-clerk in the
Pangilinan). Pangilinan, through the help of Associated Bank but same office, in sending a cablegram in code
after forging the signature of the hospital’s chief (Adena Canlas),
was able to deposit the checks in his personal account. All the checks
to the company in Honolulu requesting a
bore the stamp “All prior endorsement guaranteed Associated Bank.” telegraphic transfer of $100,000 to China
Through post-audit, the province discovered that the hospital did not Bank of Manila. Upon receipt of the money,
receive several allotted checks, and sought the restoration of the
debited amounts from PNB. In turn, PNB demanded reimbursement China Bank sent an exchange contract to
from Associated Bank. Both banks resisted payment. Hence, the San Carlos Milling offering the sum of
present action.

P201,000, which was then the current rate of
 Issue: Who shall bear the loss resulting from the forged checks. exchange. On this contract was forged the

 Held: PNB is not negligent as it is not required to return the check to
name of Newland Baldwin. A manager’s
the collecting bank within 24 hours as the banks involved are check on China Bank payable to San Carlos
covered by Central Bank Circular 580 and not the rules of the Milling or order was receipt for by Dolores.
Philippine Clearing House. Associated Bank, and not PNB, is the
one duty-bound to warrant the instrument as genuine, valid and The check was deposited with BPI indorsed
subsisting at the time of indorsement pursuant to Section 66 of the by a spurious signature of Baldwin. After
Negotiable Instruments Law. The stamp guaranteeing prior
indorsement is not an empty rubric; the collecting bank is held
clearing, BPI received a letter, purportedly
accountable for checks deposited by its customers. However, due to signed by Baldwin, directing the shipment
the fact that the Province of Tarlac is equally negligent in permitting and delivery of P201,000. Dolores witnessed
Pangilinan to collect the checks when he was no longer connected

the packing of the money and returned with
the check for P201,000 purportedly signed
by Baldwin. Dolores turned the money over
to Wilson and received as his share P10,000.
When the crime was discovered, BPI
refused to credit San Carlos Milling’s
account with the amount withdrawn by the
forged checks. Issue: Who shall be liable for
the value of the forged check. Held: A bank
that cashes a check must know to whom it
pays. It is an elementary principle both in
banking and of the Negotiable Instruments
Law that a bank is bound to know the
signatures of its customers; and if it pays a
forged check, it must be considered as
making the payment out of its own funds,
and cannot ordinarily charge the amount so
paid to the account of the depositor whose
name was forged. As the proximate cause of
loss was due to the negligence of BPI in
honoring and cashing the forged checks, it is
liable for the amount of P201,000 with legal
interest thereon from 23 December 1928,
until payment.
Bank of America v. PRC Digest
Bank of America vs. Philippine Racing Club
G.R. 150228  July 30, 2009
Ponente: Leonardo-De Castro, J:
Facts:
1. Plaintiff PRCI is a domestic corporation which
maintains a current account with petitioner Bank of
America. Its authorized signatories are the company
President and Vice-President. By virtue of a travel
abroad for these officers, they pre-signed checks to
accommodate any expenses that may come up while
they were abroad for a business trip. The said pre-
signed checks were left for safekeeping by PRCs
accounting officer. Unfortunately, the two (2) of said
checks came into the hands of one of its employees
who managed to encash it with petitioner bank. The
said check was filled in with the use of a check-writer,
wherein in the blank for the 'Payee', the amount in
words was written, with the word 'Cash' written above
it.
2. Clearly there was an irregularity with the filling up of
the blank checks as both showed similar infirmities and
irregularities and yet, the petitioner bank did not try to
verify with the corporation and proceeded to encash
the checks.
3. PRC filed an action for damages against the bank.
The lower court awarded actual and exemplary
damages. On appeal, the CA affirmed the lower court's
decision and held that the bank was negligent. Hence
this appeal. Petitioner contends that it was merely
doing its obligation under the law and contract in
encashing the checks, since the signatures in the
checks are genuine.
Issue: Whether or not the petitioner can be held
liable for negligence and thus should pay damages
to PRC
Both parties are held to be at fault but the bank has the
last clear chance to prevent the fraudulent encashment
hence it is the one foremost liable .
1. There was no dispute that the signatures in the
checks are genuine but the presence of irregularities
on the face of the check should have alerted the bank
to exercise caution before encashing them. It is well-
settled that banks are in the business impressed with
public interest that they  are duty bound to protect their
clients and their deposits at all times.  They must treat
the accounts of these clients with meticulousness and
a highest degree of care considering the fiduciary
nature of their relationship. The diligence required of
banks are more than that of a good father of a family.
2. The PRC officers' practice of pre-signing checks is a
seriously negligent and highly risky behavior which
makes them also contributor to the loss. It's own
negligence must therefore mitigate the petitioner's
liability. Moreover, the person who stole the checks is
also an employee of the plaintiff, a cleck in its
accounting department at that. As the employer, PRC
supposedly should have control and supervision over
its own employees.
3. The court held that the petitioner is liable for 60% of
the total amount of damages while PRC should
shoulder 40% of the said amount.
PHILIPPINE NATIONAL BANK vs. HON.
ROMULO S. QUIMPO
and FRANCISCO S. GOZON II
G.R. No. L-53194         March 14, 1988
Francisco Gozon was a depositor of the
Philippine National Bank (PNB Caloocan City
branch). Ernesto Santos, Gozon’s friend, took a
check from the latter’s checkbook which was left in
the car, filled it up for the amount of P5,000, forged
Gozon’s signature, and encashed it. Gozon learned
about the transaction upon receipt of the bank’s
statement of account, and requested the bank to
recredit the amount to his account. The bank refused.
Hence, the present action.
Issue: Whether or not the bank shall bear the loss
resulting from the forged check.
Held: Yes. The prime duty of a bank is to ascertain
the genuineness of the signature of the drawer or the
depositor on the check being encashed. It is expected
to use reasonable business prudence in accepting and
cashing a check being encashed or presented to it.
Payment in neglect of duty places upon him the
result of such negligence. Still, Gozon’s act in
leaving his checkbook in the car, where his trusted
friend remained in, cannot be considered negligence
sufficient to excuse the bank from its own
negligence. The bank bears the loss.