Forgery Cases Classified
Title Signature Ruling
Forged
Samsung Drawer - Jong FEBTC is liable to reimburse to
Construction v Far Samsung the amount of 995,000.
East Bank
TRB v Radio Phils. Payee - BIR In the instant case, the 3 checks
Network were payable to the BIR. It was
established, however, that said
checks were never delivered or
paid to the payee BIR but were in
fact presented for payment by
some unknown persons who, in
order to receive payment
therefor, forged the name of the
payee. Despite this fraud,
petitioner TRB paid the 3 checks.
Rule Applied
General rule - 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. 21 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.
General rule - Petitioner
ought to have known that,
where a check is drawn
payable to the order of one
person and is presented for
payment by another and
purports upon its face to
have been duly indorsed by
the payee of the check, it is
the primary duty of petitioner
to know that the check was
duly indorsed by the original
payee and, where it pays the
amount of the check to a
third person who has forged
the signature of the payee,
the loss falls upon petitioner
who cashed the check. Its

Assoc. Bank v CA Indorsers The six checks in the case at bar
and Melissa's signature had been crossed and issued "for
RTW (rule when payee's account only." This could
indorsement is only signify that the drawers had
forged) intended the same for deposit
only by the person indicated, to
wit, Melissa's RTW. 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.
Assoc Bank v CA Indorsement In this case, the checks were
and Province of of the payee indorsed by the collecting bank
Tarlac (PNB v (Associated Bank) to the drawee
Province of bank (PNB). The former will
Tarlac) necessarily be liable to the latter
for the checks bearing forged
indorsements. If the forgery is
that of the payee's or holder's
only remedy is against the
person to whom it paid the
money.
The weight of authority is to
the effect that "the
possession of a check on a
forged or unauthorized
indorsement is wrongful,
and when the money is
collected on the check, the
bank can be held 'for money
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.
In cases involving checks with
forged indorsements, such as
the present petition, the
chain of liability does not end
with the drawee bank. The
drawee bank may not debit
the account of the drawer
but may generally pass
 indorsement, the collecting bank
is held liable, without prejudice
to the latter proceeding against
the forger.
***
Associated Bank, and not PNB, is
the one duty-bound to warrant
the instrument as genuine, valid
and subsisting at the time of
indorsement pursuant to Section
66 of the Negotiable Instruments
Law. The stamp guaranteeing
prior indorsement is not an
empty rubric; the collecting bank
is held accountable for checks
deposited by its customers.  on the forger himself.
However, due to the fact that the
Province of Tarlac is equally
negligent in permitting Pangilinan
to collect the checks when he
was no longer connected with
the hospital, it shares the burden
of loss from the checks bearing a
forged indorsement. Therefore,
the Province can only recover
50% of the amount from the
drawee bank (PNB), and the
collecting bank (Associated Bank)
is liable to PNB for 50% of the
same amount.
Illusorio v CA Drawer -  The SC held that it was Ilusorio
Ramon who was negligent as he trusted
Illusorio his secretary of unusual degree.
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
liability back through the
collection chain to the party
who took from the forger
and, of course, to the forger
himself, if available.  In other
words, the drawee bank can
seek reimbursement or a
return of the amount it paid
from the presentor bank or
person. Theoretically, the
latter can demand
reimbursement from the
person who indorsed the
check to it and so on. The loss
falls on the party who took
the check from the forger, or
EXCEPTION - Under Sec 23 of
NIL, it is a rule that when a
signature is forged or made
without the authority of the
person whose signature it
purports to be, the check is
wholly inoperative. However,
the rule does provide for an
 operandi as she was always
transacting in behalf of Ilusorio.
Gempesaw v CA Payee - Petitioner in this case has relied
indorsement solely on the honesty and loyalty
of her bookkeeper and never
bothered to verify the accuracy
of the amounts of the checks she
signed the invoices attached
thereto. And though she received
her bank statements, she didn't
carefully examine the same to
double-check her payments.
Petitioner didn't exercise
reasonable diligence which
eventually led to the fruition of
her bookkeeper’s fraudulent
schemes.
PNB v Quimpo Drawer -  The prime duty of a bank is to
Gozon ascertain the genuineness of the
signature of the drawer or the
depositor on the check being
encashed. It is expected to use
reasonable business prudence in
accepting and cashing a check
presented to it. The findings of
exception, namely: “unless
the party against whom it is
sought to enforce such right
is 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 negligence in
entrusting to his secretary his
credit cards and checkbook
including the verification of
his statements of account.
EXCEPTION - As a rule, a
drawee bank who has paid a
check on which an
indorsement has been forged
cannot debit the account of a
drawer for the amount of
said check. An exception to
this rule is when the drawer
is guilty of negligence which
causes the bank to honor
such checks.
General rule - 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.
 facts of the court a quo are
conclusive. The trial court found
that a comparison of the
signature on the forged check
and the sample signatures of
private respondent show marked
differences as the graceful lines
in the sample signature which is
completely different from those
of the signature on the forged
check.

MWSS v CA and Drawer That there was gross negligence Exception - Moreover, the
PNB in the printing of its personalized petitioner is barred from
checks is shown by the following setting up the defense of
uncontroverted facts, to wit: forgery under Section 23 of
NIL because it was guilty of
(1) The petitioner failed to give its
negligence not only before
printer, Mesina Enterprises,
the questioned checks were
specific instructions relative to
negotiated but even after the
the safekeeping and
same had already been
disposition of excess forms, check
negotiated.
vouchers, and safety papers;
(2) The petitioner failed to
retrieve from its printer all
spoiled check forms; 

(3) The petitioner failed to

provide any control regarding the
paper used in the printing of said
checks;

(4) The petitioner failed to

furnish the respondent drawee
bank with samples of typewriting,
check writing, and print used by
its printer in the printing of its
checks and of the inks and pens
used in signing the same; and

(5) The petitioner failed to send a

representative to the printing
office during the printing of said
checks.
 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.

San Carlos Milling Indorser There is no act of the plaintiff
v BPI that led the Bank of the
Philippine Islands astray. The
bank paid out its money because
it relied upon the genuineness of
the purported signatures of
Baldwin. The signatures to the
checks being forged, under
section 23 of the Negotiable
Instruments Law they are not a
charge against the plaintiff nor
are the checks of any value to
the defendant. It must therefore
be held that the proximate cause
of loss was due to the negligence
of the Bank of the Philippine
Islands in honoring and cashing
the two forged checks.
General Rule - Yes. The fact
that these signatures were
forged is beyond question. It
is an elementary principle
both of 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.”

The judgment absolving the Bank

of the Philippine Islands must
therefore be reversed, and a
judgment entered in favor of
plaintiff- appellant and against
the Bank of the Philippine
Islands, defendant- appellee, for
the sum of P200,001, with legal
interest thereon from December
23, 1928, until payment, together
with costs in both instances.