Gempesaw v.

CA
Facts: Gempesaw was defrauded by her bookkeeper. Her bookkeeper forged checks prompting
her to demand from the respondent bank to refund the amount of forged checks to her account.

Issue: Whether or not Respondent bank is liable for the amount of forged checks.

Ruling: 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. Petitioner in this case has relied 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. Gempesaw is precluded from setting up the defense of forgery due to her negligence.