metropolitan waterworks

8/13/2019 Metropolitan Waterworks

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METROPOLITAN WATERWORKS & SEWERAGE SYSTEM, petitioner, vs. COURT OF APPEALS & PNB,respondents.

FACTS: MWSS is a GOCC as the successor-in- interest of the defunct NWSA. PNB is the depository ban ofMWSS and its predecessor-in-interest NWSA !Account No. "#. $he authori%ed si&natories 'ere MWSS$reasurer, auditor, and its actin& GM 'ith respective speci(en si&natures on fi)e 'ith PNB. By specia)arran&e(ent 'ith PNB, MWSS used persona)i%ed checs in dra'in& fro( this account, printed for MWSS by itsprinter, *. Mesina +nterprises.

urin& March, Apri) and May ", /0 checs 'ere prepared, processed, issued and re)eased by NWSA, a)) of 'hich 'ere paid and c)eared by PNB and debited by PNB a&ainst NWSA and another set of checs bearin& thesa(e nu(bers 'ere a)so paid and c)eared by PNB. $he checs 'ere deposited by payees 1au) i%on, ArturoSison and Antonio Mendo%a in their respective current accounts 'ith PC2B and PBC. $hru Centra) BanC)earin&, these checs 'ere presented for pay(ent by PBC and PC2B to the PNB and paid. At the ti(e of theirpresentation to PNB these checs bear standard indorse(ent 'hich reads 3a)) prior indorse(ent and4or )ac ofendorse(ent &uaranteed.3 2nvesti&ation by NB2 sho'ed that payees 'ere a)) fictitious. NWSA re5uestedi((ediate restoration to its account the tota) a(ount of checs c)ai(ed by NWSA to be for&ed and4or spuriouschecs. 62n vie' of the refusa) of PNB to credit bac, MWSS fi)ed the instant co(p)aint.

PNB contended that the checs in 5uestion 'ere re&u)ar on its face in a)) respects, inc)udin& the &enuineness ofthe si&natures of authori%ed NWSA si&nin& officers and there 'as nothin& on its face that cou)d have arousedany suspicion as to its &enuineness and due e7ecution and8 that NWSA 'as &ui)ty of ne&)i&ence 'hich 'as thepro7i(ate cause of the )oss. PNB a)so fi)ed a third party co(p)aint a&ainst the ne&otiatin& bans PBC and PC2B

on the &round that they fai)ed to ascertain the 2dentity of the payees and their tit)e to the checs 'hich 'eredeposited in the respective ne' accounts of the payees 'ith the(. C*2 rendered 9ud&(ent in favor of MWSS.$he Court of Appea)s reversed it. On $:21 PA1$; COMPWAS


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Moreover, the petitioner is barred fro( settin& up the defense of for&ery under Section /0 because it 'as &ui)ty ofne&)i&ence not on)y before the 5uestioned checs 'ere ne&otiated but even after the sa(e had a)ready beenne&otiated. $he records sho' that at the ti(e the /0 checs 'ere prepared, ne&otiated, and encashed, thepetitioner 'as usin& its o'n persona)i%ed checs, instead of the officia) PNB Co((ercia) b)an checs. 2n thee7ercise of this specia) privi)e&e, ho'ever, the petitioner fai)ed to provide the needed security (easures. $hatthere 'as &ross ne&)i&ence in the printin& of its persona)i%ed checs is sho'n by !# $he petitioner fai)ed to &iveits printer specific instructions re)ative to the safeeepin& and disposition of e7cess for(s, chec vouchers, andsafety papers8 fai)ed to retrieve fro( its printer a)) spoi)ed chec for(s8 fai)ed to provide any contro) re&ardin& thepaper used in the printin& of said checs8 fai)ed to furnish the respondent dra'ee ban 'ith sa(p)es oftype'ritin&, chee 'ritin&, and print used by its printer in the printin& of its checs and of the ins and pens usedin si&nin& the sa(e8 and fai)ed to send a representative to the printin& office durin& the printin& of said checs.

$he NB2 1eport is even (ore e7p)icit. $husF We observed so(e )a7ity and )oose contro) in the printin& ofNAWASA chees. We &athered fro( M+S2NA +N$+1P12S+S, the printin& fir( that undertoo the printin& of thechec vouchers of NAWASA that NAWASA had no representative at the printin& press durin& the process of theprintin& and no particu)ar security (easure instructions adopted to safe&uard the interest of the &overn(ent inconnection 'ith printin& of this accountab)e for(.

Another factor 'hich faci)itated the fraudu)ent encash(ent of the /0 checs in 5uestion 'as the fai)ure of thepetitioner to reconci)e the ban state(ents 'ith its o'n records. 2t is accepted banin& procedure for thedepository ban to furnish its depositors ban state(ents and debt and credit (e(os throu&h the (ai). $herecords sho' that the petitioner re5uested the respondent dra'ee ban to discontinue the practice of (ai)in& theban state(ents, but to de)iver it to Mr. +(i)iano aporte%a 'ho 'as unreasonab)y de)ayed in tain& pro(pt

de)iveries of the said ban state(ents and credit and debit (e(os and fai)ed to reconci)e the ban state(ents 'ith the petitioner3s records. 2f Mr. aporte%a had not been re(iss in his duty the fraudu)ent encash(ents of thefirst checs shou)d have been discovered, and further frauds prevented. $his ne&)i&ence 'as, therefore, thepro7i(ate cause of the fai)ure to discover the fraud. $hus,

When a person opens a checin& account 'ith a ban, he is &iven b)an checs 'hich he (ay fi)) outand use 'henever he 'ishes. +ach ti(e he issues a chec, he shou)d a)so fi)) out the chec stub to 'hich the chec is usua))y attached. $his stub, if proper)y ept, 'i)) contain the nu(ber of the chec, thedate of its issue, the na(e of the payee and the a(ount thereof. $he dra'er 'ou)d therefore have aco(p)ete record of the checs he issues. 2t is the custo( of bans to send to its depositors a (onth)ystate(ent of the status of their accounts, to&ether 'ith a)) the cance))ed checs 'hich have beencashed by their respective ho)ders. 2f the depositor has fi))ed out his chec stubs proper)y, a co(parisonbet'een the( and the cance))ed checs 'i)) revea) any for&ed chec not taen fro( his checboo. 2t isthe duty of a depositor to carefu))y e7a(ine the ban3s state(ent, his cance))ed checs, his chec stubsand other pertinent records 'ithin a reasonab)e ti(e, and to report any errors 'ithout unreasonab)e

de)ay. 2f his ne&)i&ence shou)d cause the ban to honor a for&ed chec or prevent it fro( recoverin& thea(ount it (ay have a)ready paid on such chec, he cannot )ater co(p)ain shou)d the ban refuse torecredit his account 'ith the a(ount of such chec. !*irst Nat. Ban of 1ich(ond v. 1ich(ond +)ectric#

$he records sho' that petitioner fai)ed to provide appropriate security (easures over its o'n records thereby)ayin& confidentia) records open to unauthori%ed persons. $he petitioner3s o'n *act *indin& Co((itteeunderscored this )a7ity of records contro). 2t observed that the 6office of Mr. On&ten&co !Cashier# is 5uite open toany person no'n to hi( or his staff (e(bers and that the chec 'riter is (ere)y on top of his tab)e.6 NB2conc)uded that the fraudu)ent encash(ent 'as an 6inside 9ob6. $hus-We have a)) the reasons to be)ieve that thisfraudu)ent act 'as an inside 9ob or one pu))ed 'ith inside connivance at NAWASA. As pointed ear)ier in thisreport, the seria) nu(bers of these checs in 5uestion confor( 'ith the nu(bers in current use of NAWASA,aside fro( the fact that these fraudu)ent checs 'ere found to be of the sa(e ind and desi&n as that ofNAWASA3s o'n checs. Whi)e no')ed&e as to such facts (ay be obtained throu&h the possession of aNAWASA chec of current issue, an outsider 'ithout infor(ation fro( the inside cannot possib)y pinpoint 'hichof NAWASA3s various accounts has sufficient ba)ance to cover a)) these fraudu)ent checs. None of these

checs, it shou)d be noted, 'as dishonored for insufficiency of funds. . .+ven if the checs in 5uestion areconsidered for&eries, considerin& the petitioner3s &ross ne&)i&ence, it is barred fro( settin& up the defense offor&ery under Section /0 of the Ne&otiab)e 2nstru(ents


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2SM2SS+ for )ac of (erit. $he decision of the respondent Court of Appea)s dated October /, H/ isA**21M+. SO O1+1+.G.R. No. 139130 Nove!e" #$, #00#RAMON K. ILUSORIO, petitioner, vs COURT OF APPEALS & MANILA BANKINGCORPORATION, respondents.

FACTS: Petitioner is a pro(inent business(an, Mana&in& irector of Mu)tinationa) 2nvest(ent Bancorporationand the Chair(an and4or President of severa) other corporations. :e 'as a depositor in &ood standin& of MBC.

As he 'as then runnin& about /I corporations, and 'as &oin& out of the country a nu(ber of ti(es, petitionerentrusted to his secretary, >atherine +. +u&enio, his credit cards and his checboo 'ith b)an checs. 2t 'asa)so +u&enio 'ho verified and reconci)ed the state(ents of said checin& account.

Bet'een Septe(ber D, HI and anuary /0, H, +u&enio 'as ab)e to encash and deposit to her persona)account J checs dra'n a&ainst the account of 2)usorio at the respondent ban !P,"0.0#. Petitioner did notbother to chec his state(ent of account unti) a business partner apprised hi( that he sa' +u&enio use his creditcards. :e fired +u&enio i((ediate)y, and instituted a cri(ina) action a&ainst her for estafa thru fa)sification.Private respondent, throu&h an affidavit of Mr. ante 1a%on, a)so )od&ed a co(p)aint for estafa thru fa)sificationof co((ercia) docu(ents a&ainst +u&enio on the basis of petitionerEs state(ent that his si&natures 'ere for&ed.

Petitioner then re5uested the respondent ban to credit bac and restore to its account the va)ue of the checs 'hich 'ere 'ron&fu))y encashed but respondent ban refused. :ence, petitioner fi)ed the instant case. Petitionertestified on his o'n beha)f, attestin& to the truth of the circu(stances as narrated above, and ho' he discoveredthe a))e&ed for&eries. Severa) e(p)oyees of MBC 'ere a)so ca))ed to the 'itness stand they testified that it is the

banEs standard operatin& procedure that 'henever a chec is presented for encash(ent or c)earin&, thesi&nature on the chec is first verified a&ainst the speci(en si&nature cards on fi)e 'ith the ban.

Mani)a Ban a)so sou&ht the e7pertise of NB2 in deter(inin& the &enuineness of the si&natures appearin& on thechecs. :o'ever, NB2 infor(ed the tria) court that they cou)d not conduct the desired e7a(ination for the reasonthat the standard speci(ens sub(itted 'ere not sufficient for purposes of renderin& a definitive opinion. $he NB2then su&&ested that petitioner sub(it J or (ore standard si&natures e7ecuted before or about, and i((ediate)yafter the dates of the 5uestioned checs. Petitioner, ho'ever, fai)ed to co(p)y 'ith this re5uest. $he court a 5uorendered 9ud&(ent findin& no sufficient basis for p)aintiff3s cause herein a&ainst defendant ban, this case ishereby 2SM2SS+. Court of Appea)s he)d that petitionerEs o'n ne&)i&ence 'as the pro7i(ate cause of his )oss.

ISSUES:!# 'hether or not petitioner has a cause of action a&ainst private respondent8!/# 'hether or not private respondent, in fi)in& an estafa case a&ainst petitionerEs secretary, is barred fro( raisin&

the defense that the fact of for&ery 'as not estab)ished.

Petitioner contends that Mani)a Ban is )iab)e for da(a&es for its ne&)i&ence in fai)in& to detect the discrepantchecs. As &enera) ru)e a ban 'hich has obtained possession of a chec upon an unauthori%ed or for&edendorse(ent of the payeeEs si&nature and 'hich co))ects the a(ount of the chec fro( the dra'ee is )iab)e forthe proceeds thereof to payee. Petitioner invoes doctrine of estoppe), sayin& that havin& itse)f instituted afor&ery case a&ainst +u&enio, Mani)a Ban is estopped fro( assertin& that the fact of for&ery 'as never proven.

Mani)a Ban contends that appe))ate court did not depart fro( the accepted and usua) course of 9udicia)proceedin&s, hence there is no reason for the reversa) of its ru)in&. Mani)a Ban additiona))y points out thatSection /0 is inapp)icab)e, considerin& that for&ery 'as never proven.


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and unrestricted access to his credit cards, passboos, chec boos, ban state(ents, inc)udin& custody andpossession of cance))ed checs and reconci)iation of accounts. Moreover, appe))ant introduced his secretary tothe ban for purposes of reconci)iation of his account, throu&h a )etter. $hus, said secretary beca(e a fa(i)iarfi&ure in the ban. What is 'orse, 'henever the ban verifiers ca)) the office of appe))ant, it is the sa(e secretary 'ho ans'ers and confir(s the checs.$he appe))ant put so (uch trust and confidence in the said secretary, byentrustin& not on)y his credit cards 'ith her but a)so his checboo 'ith b)an checs. :e a)so entrusted to herthe verification and reconci)iation of his account. *urther addin& to his in9ury 'as the fact that 'hi)e the ban 'assendin& hi( the (onth)y State(ents of Accounts, he 'as not persona))y checin& the sa(e. :is testi(ony didnot indicate that he 'as out of the country durin& the period covered by the checs. $hus, he had a)) theopportunities to verify his account as 'e)) as the cance))ed checs issued thereunder -- (onth after (onth.

PetitionerEs fai)ure to e7a(ine his ban state(ents appears as the pro7i(ate cause of his o'n da(a&e.Pro7i(ate cause is that cause, 'hich, in natura) and continuous se5uence, unbroen by any efficient intervenin&cause, produces the in9ury, and 'ithout 'hich the resu)t 'ou)d not have occurred./ 2n the instant case, the ban 'as not sho'n to be re(iss in its duty of sendin& (onth)y ban state(ents to petitioner so that any error ordiscrepancy in the entries therein cou)d be brou&ht to the banEs attention at the ear)iest opportunity. But,petitioner fai)ed to e7a(ine these ban state(ents not because he 'as prevented by so(e cause in not doin&so, but because he did not pay sufficient attention to the (atter. 2n vie' of Artic)e /J of the Civi) Code 'henthe p)aintiffEs o'n ne&)i&ence 'as the i((ediate and pro7i(ate cause of his in9ury, no recovery cou)d be had forda(a&es.

Petitioner further contends that under Section /0 of the N2< a for&ed chec is inoperative, and that Mani)a Banhad no authority to pay the for&ed checs. $rue, it is a ru)e that 'hen a si&nature is for&ed or (ade 'ithout the

authority of the person 'hose si&nature it purports to be, the chec is 'ho))y inoperative. No ri&ht to retain theinstru(ent, or to &ive a dischar&e therefor, or to enforce pay(ent thereof a&ainst any party, can be ac5uiredthrou&h or under such si&nature. :o'ever, the ru)e does provide for an e%e'()o*, na(e)y 6un)ess the partya&ainst 'ho( it is sou&ht to enforce such ri&ht is prec)uded fro( settin& up the for&ery or 'ant of authority.6 2nthe instant case, it is the e7ception that app)ies. 2n our vie', petitioner is prec)uded fro( settin& up the for&ery,assu(in& there is for&ery, due to his o'n ne&)i&ence in entrustin& to his secretary his credit cards andchecboo inc)udin& the verification of his state(ents of account.

PetitionerEs re)iance on Associated Ban vs. Court of Appea)s /0 and Phi)ippine Ban of Co((erce vs. CA/ tobuttress his contention that respondent Mani)a Ban as the co))ectin& or )ast endorser &enera))y suffers the )ossbecause it has the duty to ascertain the &enuineness of a)) prior endorse(ents is (isp)aced. 2n the cited cases,the fact of for&ery 'as not in issue. 2n the present case, the fact of for&ery 'as not estab)ished 'ith certainty. 2nthose cited cases, the co))ectin& bans 'ere he)d to be ne&)i&ent for fai)in& to observe precautionary (easures todetect the for&ery. 2n the case before us, both courts be)o' unifor()y found that Mani)a BanEs personne)

di)i&ent)y perfor(ed their duties, havin& co(pared the si&nature in the checs fro( the speci(en si&natures onrecord and satisfied the(se)ves that it 'as petitionerEs.

!/# $he fact that Mani)a Ban had fi)ed a case for estafa a&ainst +u&enio 'ou)d not estop it fro( assertin& thefact that for&ery has not been c)ear)y estab)ished. Petitioner cannot ho)d private respondent in estoppe) for the)atter is not the actua) party to the cri(ina) action. 2n a cri(ina) action, the State is the p)aintiff, for the co((issionof a fe)ony is an offense a&ainst the State./D $hus, under Section /, 1u)e I of the 1u)es of Court the co(p)aintor infor(ation fi)ed in court is re5uired to be brou&ht in the na(e of the 6Peop)e of the Phi)ippines.6 /"

*urther, as petitioner hi(se)f stated in his petition, respondent ban fi)ed the estafa case a&ainst +u&enio on thebasis of petitionerEs o'n affidavit,/J but 'ithout ad(ittin& that he had any persona) no')ed&e of the a))e&edfor&ery. 2t is, therefore, easy to understand that the fi)in& of the estafa case by respondent ban 'as a )ast ditcheffort to sa)va&e its ties 'ith the petitioner as a va)uab)e c)ient, by bo)sterin& the estafa case 'hich he fi)eda&ainst his secretary.

W:+1+*O1+, the instant petition is +N2+ for )ac of (erit. $he assai)ed decision of the Court of Appea)sdated anuary /H, in CA-G.1. C@ No. J/, is A**21M+. SO O1+1+.


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G.R. No. 1#901+ A-( 13, #00/SAMSUNG CONSTRUCTION COMPANY PILIPPINES, INC., petitioner, vs FAR EAST BANK AN TRUSTCOMPANY AN COURT OF APPEALS, respondents.

2f a ban pays out on a for&ed chec, is it )iab)e to rei(burse the dra'er fro( 'hose account the funds 'ere paidoutK $he Court of Appea)s, in reversin& a tria) court decision adverse to the ban, invoed tenuous reasonin& to

ac5uit the ban of )iabi)ity. We reverse, app)yin& ti(e-honored princip)es of )a'.

FACTS: Sa(sun& (aintained a current account 'ith *+B$C Maati branch 'ith on&, Pro9ect (ana&er as so)esi&natory, its Pro9ect Mana&er, 'hi)e checs re(ained in the custody of the co(panyEs accountant, >yu. A certain 1oberto Gon%a&a presented for pay(ent *+B$C Chec to Maati branch. $he chec, payab)e to cashand dra'n a&ainst Sa(sun&Es current account 'as P,DII.II. $he ban te))er first checed the ba)ance, afterascertainin& there 'ere enou&h funds to cover the chec, she co(pared the si&nature appearin& on the chec 'ith the speci(en si&nature of on&. ustiani 'as satisfied as to the authenticity of the si&nature appearin& onthe chec. She then ased Gon%a&a to sub(it proof of his identity, and the )atter presented 0 2s. At the sa(eti(e, ustiani for'arded the chec to the branch Senior Assistant Cashier, as it 'as ban po)icy that / banbranch officers approve checs e7ceedin& II,III, for pay(ent or encash(ent. @e)e% )ie'ise counterchecedthe si&nature on the chec as a&ainst that on the si&nature card. :e too conc)uded that the chec 'as indeedsi&ned by on&. @e)e% then for'arded the chec and si&nature card to Shir)ey Syfu, another ban officer, forapprova). Syfu noticed that Se(pio, assistant accountant of Sa(sun&, 'as a)so in the ban. Se(pio 'as 'e))-

no'n to ban officers. Syfu sho'ed the chec to Se(pio, 'ho vouched for the &enuineness of on&Es si&nature.Confir(in& the identity of Gon%a&a, Se(pio said that the chec 'as for the purchase of e5uip(ent. Satisfied 'iththe &enuineness of the si&nature of on&, Syfu authori%ed the banEs encash(ent of the chec to Gon%a&a.

$he fo))o'in& day, the accountant, >yu, e7a(ined the ban ba)ance and discovered that a chec of P,DII.IIhad been encashed. A'are that he had not prepared such a chec for on&Es si&nature, >yu perused thechecboo and found that the )ast b)an chec 'as (issin&. :e reported the (atter to on&, 'ho then proceededto the ban. on& )earned of the encash(ent of the chec, and rea)i%ed that his si&nature had been for&ed. $heBan Mana&er reputed)y to)d on& that he 'ou)d be rei(bursed for the a(ount of the chec. Subse5uent)y, acri(ina) case for 5ua)ified theft 'as fi)ed a&ainst Se(pio before the


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$he fact that the for&ery is a c)ever one is i((ateria). $he for&ed si&nature (ay so c)ose)y rese(b)e the&enuine as to defy detection by the depositor hi(se)f. And yet, if a ban pays the chec, it is payin& out itso'n (oney and not the depositorEs.$he for&ery (ay be co((itted by a trusted e(p)oyee or confidentia) a&ent. $he ban sti)) (ust bear the)oss. +ven in a case 'here the for&ed chec 'as dra'n by the depositorEs partner, the )oss 'as p)aced uponthe ban. $he case referred to is 1obinson v. Security Ban, Ar., /" S. W. 1ep. JJ. 2n this case, thep)aintiff brou&ht suit a&ainst the defendant ban for (oney 'hich had been deposited to the p)aintiffEs creditand 'hich the ban had paid out on checs bearin& for&eries of the p)aintiffEs si&nature.7772t 'as he)d that the ban 'as )iab)e. 2t 'as further he)d that the fact that the p)aintiff 'aited ei&ht or nine(onths after discoverin& the for&ery, before notifyin& the ban, did not, as a (atter of )a', constitute aratification of the pay(ent, so as to prec)ude the p)aintiff fro( ho)din& the ban )iab)e. 777$his ru)e of )iabi)ity can be stated brief)y in these 'ords 6A ban is bound to no' its depositorsE si&nature.6$he ru)e is various)y e7pressed in the (any decisions in 'hich the 5uestion has been considered. But theya)) su( up to the proposition that a ban (ust no' the si&natures of those 'hose &enera) deposits itcarries./

=nder Section /0, for&ery is a rea) or abso)ute defense by the party 'hose si&nature is for&ed. On the pre(isethat on&Es si&nature 'as indeed for&ed, *+B$C is )iab)e for the )oss since it authori%ed the dischar&e of thefor&ed chec. Such )iabi)ity attaches even if the ban e7erts due di)i&ence and care in preventin& such fau)tydischar&e. *or&eries often deceive the eye of the (ost cautious e7perts8 and 'hen a ban has been sodeceived, it is a harsh ru)e 'hich co(pe)s it to suffer a)thou&h no one has suffered by its bein& deceived. $hefor&ery (ay be so near )ie the &enuine as to defy detection by the depositor hi(se)f, and yet the ban is )iab)e tothe depositor if it pays the chec.

!# $he first (atter of in5uiry is into 'hether the chec 'as indeed for&ed. A docu(ent for(a))y presented ispresu(ed to be &enuine unti) it is proved to be fraudu)ent. 2n a for&ery tria), this presu(ption (ust be overco(ebut this can on)y be done by convincin& testi(ony and effective i))ustrations. Co*45)()*- )e6 o4 NBI & PNP.$he trier of fact 'i)) have to decide 'hich version to be)ieve, and e7p)ain 'hy or 'hy not such version is (orecredib)e than the other. 1e)iance therefore cannot be p)aced (ere)y on the fact that there are co))idin& opinions oft'o e7perts, both c)othed 'ith the presu(ption of officia) duty, in order to dra' a conc)usion, especia))y one 'hichis e7tre(e)y crucia). Much is e7pected fro( the Court of Appea)s as it occupies the penu)ti(ate tier in the 9udicia)hierarchy. 2n fai)in& to thorou&h)y eva)uate the evidence before it, and re)yin& instead on presu(ptionshapha%ard)y dra'n, the Court of Appea)s 'as sad)y re(iss. Of course, courts, )ie hu(ans, are fa))ib)e, and notevery error deserves a stern rebue. ;et, the appe))ate courtEs error in this case 'arrants specia) attention, as it isabsurd and even dan&erous as a precedent. 2f this rationa)e 'ere adopted as a &overnin& standard by everycourt in the )and, bare)y any actionab)e c)ai( 'ou)d prosper, defeated as it 'ou)d be by the (ere invocation ofthe e7istence of a contrary 6e7pert6 opinion.

T2e ")5 4( )* ;e()o* ) 62e(2e" o" *o( (2e 2e< 6 4o"-e8, *o( 62e(2e" (2e !*< o58 2ve 8e(e(e8 (2e 4o"-e"7. T2e 5((e" )e !eoe "e5ev*( o*57 )4 (2e"e ) *ee8 (o 6e)-2 (2e o'"()ve *e-5)-e*e!e(6ee* (2e !*< *8 (2e '"(7 62oe )-*("e 6 4o"-e8.

!/# Whether Sa(sun& Construction 'as prec)uded fro( settin& up the defense of for&ery under Section /0. $heCourt of Appea)s conc)uded that Sa(sun& Construction 'as ne&)i&ent, and invoed the doctrines that 6'here a)oss (ust be borne by one of t'o innocent person, can be traced to the ne&)ect or fau)t of either, it is reasonab)ethat it 'ou)d be borne by hi(, even if innocent of any intentiona) fraud, throu&h 'hose (eans it hassucceeded or 'ho put into the po'er of the third person to perpetuate the 'ron&.6 App)yin& these ru)es, theCourt of Appea)s deter(ined that it 'as the ne&)i&ence of Sa(sun& Construction that a))o'ed the encash(ent ofthe for&ed chec.

We reco&ni%e that Section /0 bars a party fro( settin& up the defense of for&ery if it is &ui)ty of ne&)i&ence. ;et, 'e are unab)e to conc)ude that Sa(sun& Construction 'as &ui)ty of ne&)i&ence in this case. $he appe))ate courtfai)ed to e7p)ain precise)y ho' the >orean accountant 'as ne&)i&ent or ho' (ore care and prudence on his part 'ou)d have prevented the for&ery. $he bare fact that the for&ery 'as co((itted by an e(p)oyee of the party 'hose si&nature 'as for&ed cannot necessari)y i(p)y that such partyEs ne&)i&ence 'as the cause for the for&ery.+(p)oyers do not possess the preternatura) &ift of co&nition as to the evi) that (ay )ur 'ithin the hearts and(inds of their e(p)oyees. PC! Bank v. Co"rt of AppealD0 app)ies in this case, to 'it

L$he (ere fact that the for&ery 'as co((itted by a dra'er-payorEs confidentia) e(p)oyee or a&ent, 'hoby virtue of his position had unusua) faci)ities for perpetratin& the fraud and i(posin& the for&ed paperupon the ban, does not entit)e the ban to shift the )oss to the dra'er-payor, in the absence of so(ecircu(stance raisin& estoppe) a&ainst the dra'er.D

$he ru)e of e5uity enunciated in PNB v. National City Bank of New York# "I as re)ied upon by the Court ofAppea)s, deserves carefu) e7a(ination.

$he point in issue has so(eti(es been said to be that of ne&)i&ence. T2e 8"6ee 62o 2 ')8 'o* (2e 4o"-e8 )-*("e ) 2e58 (o !e" (2e 5o, !ee 2e 2 !ee* *e-5)-e*( )* 4)5)*- (o "eo-*)=e

(2( (2e 2*86")()*- ) *o( (2( o4 2) (oe" . But it fo))o's obvious)y that if the payee, ho)der, orpresenter of the for&ed paper has hi(se)f been in defau)t, if he has hi(se)f been &ui)ty of a ne&)i&enceprior to that of the baner, or if by any act of his o'n he has at a)) contributed to induce the baner3sne&)i&ence, then he (ay )ose his ri&ht to cast the )oss upon the baner. " !+(phasis supp)ied#

uite pa)pab)y, the &enera) ru)e re(ains that the dra'ee 'ho has paid upon the for&ed si&nature bears the )oss.$he e7ception to this ru)e arises on)y 'hen ne&)i&ence can be traced on the part of the dra'er 'hose si&nature

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'as for&ed, and the need arises to 'ei&h the co(parative ne&)i&ence bet'een the dra'er and the dra'ee todeter(ine 'ho shou)d bear the burden of )oss.2t is a)so 'orth notin& that the for&ed si&natures in PNB v. National City Bank of New York 'ere not of thedra'er, but of indorsers. $he sa(e circu(stance attends PNB v. Co"rt of Appeal#" 'hich 'as a)so cited by theCourt of Appea)s. 2t is accepted that a for&ed si&nature of the dra'er differs in treat(ent than a for&ed si&natureof the indorser.

$he 9ustification for the distinction bet'een for&ery of the si&nature of the dra'er and for&ery of anindorse(ent is that the dra'ee is in a position to verify the dra'erEs si&nature by co(parison 'ith one inhis hands, but has ordinari)y no opportunity to verify an indorse(ent. "D

$hus, a dra'ee ban is &enera))y )iab)e to its depositor in payin& a chec 'hich bears either a for&ery ofthe dra'erEs si&nature or a for&ed indorse(ent. But the ban (ay, as a &enera) ru)e, recover bac the(oney 'hich it has paid on a chec bearin& a for&ed indorse(ent, 'hereas it has not this ri&ht to thesa(e e7tent 'ith reference to a chec bearin& a for&ery of the dra'erEs si&nature. ""

$he &enera) ru)e i(putin& )iabi)ity on the dra'ee 'ho paid out on the for&ery ho)ds in this case.Since *+B$C puts into issue the de&ree of care it e7ercised before payin& out on the for&ed chec, 'e (i&ht as 'e)) co((ent on the banEs perfor(ance of its duty. 2t (i&ht be so that the ban co(p)ied 'ith its o'n interna)ru)es prior to payin& out on the 5uestionab)e chec. ;et, there are severa) troub)in& circu(stances that )ead us tobe)ieve that the ban itse)f 'as re(iss in its duty.$he fact that the chec 'as (ade out in the a(ount of near)y one (i))ion pesos is unusua) enou&h to re5uire ahi&her de&ree of caution on the part of the ban. 2ndeed, *+B$C confir(s this throu&h its o'n interna)procedures. Checs be)o' t'enty-five thousand pesos re5uire on)y the approva) of the te))er8 those bet'eent'enty-five thousand to one hundred thousand pesos necessitate the approva) of one ban officer8 and shou)dthe a(ount e7ceed one hundred thousand pesos, the concurrence of t'o ban officers is re5uired ."J

2n this case, not on)y did the a(ount in the chec near)y tota) one (i))ion pesos, it 'as a)so payab)e to cash. $hat)atter circu(stance shou)d have aroused the suspicion of the ban, as it is not ordinary business practice for achec for such )ar&e a(ount to be (ade payab)e to cash or to bearer, instead of to the order of a specifiedperson."H Moreover, the chec 'as presented for pay(ent by one 1oberto Gon%a&a, 'ho 'as not desi&nated asthe payee of the chec, and 'ho did not carry 'ith hi( any 'ritten proof that he 'as authori%ed by Sa(sun&Construction to encash the chec. Gon%a&a, a stran&er to *+B$C, 'as not even an e(p)oyee of Sa(sun&Construction." $hese circu(stances are a)ready suspicious if taen independent)y, (uch (ore so if they areeva)uated in concurrence. Given the shadiness attendin& Gon%a&aEs present(ent of the chec, it 'as notsufficient for *+B$C to have (ere)y co(p)ied 'ith its interna) procedures, but (andatory that a)) earnest effortsbe undertaen to ensure the va)idity of the chec, and of the authority of Gon%a&a to co))ect pay(ent therefor.Accordin& to *+B$C Senior Assistant Cashier Ge((a @e)e%, the ban tried, but fai)ed, to contact on& over thephone to verify the chec.JI She added that ca))in& the issuer or dra'er of the chec to verify the sa(e 'as notpart of the standard procedure of the ban, but an 6e7tra effort.6J +ven assu(in& that such persona) verificationis tanta(ount to e7traordinary di)i&ence, it cannot be denied that *+B$C sti)) paid out the chec despite the

absence of any proof of verification fro( the dra'er. 2nstead, the ban see(s to have re)ied heavi)y on the say-so of Se(pio, 'ho 'as present at the ban at the ti(e the chec 'as presented.*+B$C a))e&es that Se(pio 'as 'e))-no'n to the ban officers, as he had re&u)ar)y transacted 'ith the ban inbeha)f of Sa(sun& Construction. 2t 'as even c)ai(ed that everyti(e *+B$C 'ou)d contact on& about prob)e(s 'ith his account, on& 'ou)d hand the phone over to Se(pio.J/ :o'ever, the on)y proof of such a))e&ations is thetesti(ony of Ge((a @e)e%, 'ho a)so testified that she did not no' Se(pio persona))y, J0 and had (et Se(piofor the first ti(e on)y on the day the chec 'as encashed.J 2n fact, @e)e% had to in5uire 'ith the other officers ofthe ban as to 'hether Se(pio 'as actua))y no'n to the e(p)oyees of the ban. JD Obvious)y, @e)e% had nopersona) no')ed&e as to the past re)ationship bet'een *+B$C and Se(pio, and any aver(ents of her to thateffect shou)d be dee(ed hearsay evidence. 2nterestin&)y, *+B$C did not present as a 'itness any othere(p)oyee of their Be)-Air branch, inc)udin& those 'ho supposed)y had transacted 'ith Se(pio before.+ven assu(in& that *+B$C had a standin& habit of dea)in& 'ith Se(pio, actin& in beha)f of Sa(sun&Construction, the irre&u)ar circu(stances attendin& the present(ent of the for&ed chec shou)d have put theban on the hi&hest de&ree of a)ert. $he Court recent)y e(phasi%ed that the hi&hest de&ree of care and di)i&enceis re5uired of bans.

Bans are en&a&ed in a business i(pressed 'ith pub)ic interest, and it is their duty to protect in returntheir (any c)ients and depositors 'ho transact business 'ith the(. $hey have the ob)i&ation to treattheir c)ientEs account (eticu)ous)y and 'ith the hi&hest de&ree of care, considerin& the fiduciary natureof their re)ationship. $he di)i&ence re5uired of bans, therefore, is (ore than that of a &ood father of afa(i)y.J"

Given the circu(stances, e7traordinary di)i&ence dictates that *+B$C shou)d have ascertained fro( on&persona))y that the si&nature in the 5uestionab)e chec 'as his.Sti)), even if the ban perfor(ed 'ith ut(ost di)i&ence, the dra'er 'hose si&nature 'as for&ed (ay sti)) recoverfro( the ban as )on& as he or she is not prec)uded fro( settin& up the defense of for&ery. After a)), Section /0 ofthe Ne&otiab)e 2nstru(ents


8/16

G.R. No. 13#+>0. ?*"7 30, #00#WESTMONT BANK @4o"e"57 ASSOCIATE BANKING CORP., petitioner, vs. EUGENE ONG, respondent.

FACTS: +u&ene On& (aintained a current account 'ith West(ont Ban. 2n May J", he so)d certain shares ofstocs throu&h 2s)and Securities Corporation. $o pay On&, 2s)and Securities purchased / Pacific Banin&Corporation (ana&erEs checs issued in the na(e of +u&ene On& as payee. Before On& cou)d &et ho)d of thechecs, his friend Paciano $an)i(co &ot ho)d of the(, for&ed On&Es si&nature and deposited these 'ithWest(ont, 'here $an)i(co 'as a)so a depositor. +ven thou&h On&Es speci(en si&nature 'as on fi)e, itaccepted and credited both checs to the account of $an)i(co, 'ithout verifyin& the si&nature indorse(entsEappearin& at the bac thereof. $an)i(co then i((ediate)y 'ithdre' the (oney and absconded.

2nstead of &oin& strai&ht to the ban to stop or 5uestion the pay(ent, On& first sou&ht the he)p of $an)i(coEsfa(i)y.


9/16

(oneys had and received, and the proceeds are he)d for the ri&htfu) o'ners 'ho (ay recover the(. $heposition of the ban tain& the chec on the for&ed or unauthori%ed indorse(ent is the sa(e as if it had taen thechec and co))ected the (oney 'ithout indorse(ent at a)) and the act of the ban a(ounts to conversion of thechec.

L< o4 8e5)ve"7. Another vie' in certain cases ho)ds that even if the absence of de)ivery is considered, suchconsideration is not (ateria). $he rationa)e for this vie' is that in said cases the p)aintiff e o*e ()o* (o"e2, !7 8e)"!5e 2o"( (, (2e 'e"o* 62o o-2( )* *7 eve*( (o !e 5()(e57 5)!5e o*- (2e

)**oe*( 'e"o* )*vo5ve8 )* (2e ("*()o*. 2n other 'ords, the payee ou&ht to be a))o'ed to recover direct)yfro( the co))ectin& ban, re&ard)ess of 'hether the chec 'as de)ivered to the payee or not .L/

Petitioner cou)d not escape )iabi)ity for its ne&)i&ent acts. +u&ene On& at the ti(e the fraudu)ent transaction toop)ace 'as a depositor of petitioner ban. Bans are en&a&ed in a business i(pressed 'ith pub)ic interest, and itis their duty to protect in return their (any c)ients and depositors 'ho transact business 'ith the(. $hey have theob)i&ation to treat their c)ientEs account (eticu)ous)y and 'ith the hi&hest de&ree of care, considerin& the fiduciarynature of their re)ationship. $he di)i&ence re5uired of bans, therefore, is (ore than that of a &ood father of afa(i)y.L 2n the present case, petitioner 'as he)d to be &ross)y ne&)i&ent in perfor(in& its duties.

!/# Petitioner avers that On& is barred by )aches for fai)in& to assert his ri&ht for recovery fro( the ban as soonas he discovered the sca(. $he )apse of five (onths before he 'ent to see re)ief fro( the ban, accordin& topetitioner, constitutes )aches.On the (atter of de)ay in reportin& the )oss, respondent ca))s attention to the factthat the checs 'ere issued on May , J", and on the very ne7t day these 'ere a)ready credited to theaccount of $an)i(co and presented for pay(ent to Pacific Banin& Corporation. So even if the theft of the

checs 'ere discovered and reported ear)ier, respondent ar&ues, it 'ou)d not have a)tered the situation as theencash(ent of the checs 'as consu((ated 'ithin / hours and faci)itated by the &ross ne&)i&ence of thepetitioner ban.


10/16

G.R. No. 9##// Fe!""7 9, 1993NATIIA GEMPESAW, petitioner, vs. TE ONORABLE COURT OF APPEALS *8 PILIPPINE BANK OFCOMMUNICATIONS, respondents. CAMPOS, ?R., J.:*ro( the adverse decision of the Court of Appea)s !CA-G.1. C@ No. "J#, petitioner, Natividad Ge(pesa',appea)ed to this Court in a Petition for 1evie', on the issue of the ri&ht of the dra'er to recover fro( the dra'ee

ban 'ho pays a chec 'ith a for&ed indorse(ent of the payee, debitin& the sa(e a&ainst the dra'er3s account.$he records sho' that on anuary /0, HD, petitioner fi)ed a Co(p)aint a&ainst the private respondent Phi)ippineBan of Co((unications !respondent dra'ee Ban# for recovery of the (oney va)ue of ei&hty-t'o !H/# checschar&ed a&ainst the petitioner3s account 'ith the respondent dra'ee Ban on the &round that the payees3indorse(ents 'ere for&eries. $he 1e&iona) $ria) Court, Branch C??@222 of Ca)oocan City, 'hich tried the case,rendered a decision on Nove(ber J, HJ dis(issin& the co(p)aint as 'e)) as the respondent dra'ee Ban3scounterc)ai(. On appea), the Court of Appea)s in a decision rendered on *ebruary //, I, affir(ed thedecision of the 1$C on t'o &rounds, na(e)y !# that the p)aintiff3s !petitioner herein# &ross ne&)i&ence in issuin&the checs 'as the pro7i(ate cause of the )oss and !/# assu(in& that the ban 'as a)so ne&)i&ent, the )oss (ustneverthe)ess be borne by the party 'hose ne&)i&ence 'as the pro7i(ate cause of the )oss. On March D, I,the petitioner fi)ed this petition under 1u)e D of the 1u)es of Court settin& forth the fo))o'in& as the a))e&ed errorsof the respondent Court 1

2 $:+ 1+SPON+N$ CO=1$ O* APP+A


11/16

;au)t Phi)ippines !+7h. A-J0#, the )atter3s invoice 'as on)y PD/I.II !+7h. :-/#8 !# in ChecNo. "/I00 dated May /0, H in the a(ount of P,DI.II in favor of Monde en(arBiscuit !+7h. A-0#, her ob)i&ation 'as on)y PDI.II !+7hs. 2- and 2-/#. #

Practica))y, a)) the checs issued and honored by the respondent dra'ee ban 'ere crossed checs. 3 Aside fro(the dai)y notice &iven to the petitioner by the respondent dra'ee Ban, the )atter a)so furnished her 'ith a(onth)y state(ent of her transactions, attachin& thereto a)) the cance))ed checs she had issued and 'hich 'eredebited a&ainst her current account. 2t 'as on)y after the )apse of (ore t'o !/# years that petitioner found outabout the fraudu)ent (anipu)ations of her booeeper.A)) the ei&hty-t'o !H/# checs 'ith for&ed si&natures of the payees 'ere brou&ht to +rnest


12/16

2n the case at bar, petitioner ad(itted that the checs 'ere fi))ed up and co(p)eted by her trusted e(p)oyee,A)icia Ga)an&, and 'ere &iven to her for her si&nature. :er si&nin& the checs (ade the ne&otiab)e instru(entco(p)ete. Prior to si&nin& the checs, there 'as no va)id contract yet.+very contract on a ne&otiab)e instru(ent is inco(p)ete and revocab)e unti) de)ivery of the instru(ent to thepayee for the purpose of &ivin& effect thereto. $ $he first de)ivery of the instru(ent, co(p)ete in for(, to the payee 'ho taes it as a ho)der, is ca))ed issuance of the instru(ent. D Without the initia) de)ivery of the instru(ent fro(the dra'er of the chec to the payee, there can be no va)id and bindin& contract and no )iabi)ity on theinstru(ent.Petitioner co(p)eted the checs by si&nin& the( as dra'er and thereafter authori%ed her e(p)oyee A)icia Ga)an&to de)iver the ei&hty-t'o !H/# checs to their respective payees. 2nstead of issuin& the checs to the payees asna(ed in the checs, A)icia Ga)an& de)ivered the( to the Chief Accountant of the Buendia branch of therespondent dra'ee Ban, a certain +rnest


13/16

no' co(p)ain shou)d the ban refuse to recredit her account 'ith the a(ount of such checs. 10 =nder Section/0 of the N2


14/16

to the circu(stances of the case the )a's pertinent thereto. $hus, the fact that petitioner3s ne&)i&ence 'as foundto be the pro7i(ate cause of her )oss does not prec)ude her fro( recoverin& da(a&es. $he reason 'hy thedecision dea)t on a discussion on pro7i(ate cause is due to the error pointed out by petitioner as a))e&ed)yco((itted by the respondent court. And in breaches of contract under Artic)e J0, due di)i&ence on the part ofthe defendant is not a defense.P1+M2S+S CONS2+1+, the case is hereby ordered 1+MAN+ to the tria) court for the reception ofevidence to deter(ine the e7act a(ount of )oss suffered by the petitioner, considerin& that she part)y benefitedfro( the issuance of the 5uestioned checs since the ob)i&ation for 'hich she issued the( 'ere apparent)ye7tin&uished, such that on)y the e7cess a(ount over and above the tota) of these actua) ob)i&ations (ust beconsidered as )oss of 'hich one ha)f (ust be paid by respondent dra'ee ban to herein petitioner.SO O1+1+.

G.R. No. 9##// Fe!""7 9, 1993NATIIA GEMPESAW, petitioner, vs. TE ONORABLE COURT OF APPEALS *8 PILIPPINE BANK OFCOMMUNICATIONS, respondents.


15/16

FACTS: Natividad Ge(pesa' issued checs, prepared by her booeeper, a tota) of H/ checs in favor ofsevera) supp)ies. Most of the checs for a(ounts in e7cess of actua) ob)i&ations as sho'n in their correspondin&invoices. 2t 'as on)y after the )apse of (ore than / years did she discovered the fraudu)ent (anipu)ations of herbooeeper. 2t 'as a)so )earned that the indorse(ents of the payee 'ere for&ed, and the checs 'ere brou&ht tothe chief accountant of Phi)ippine Ban of Co((erce !the ra'ee Ban, Buendia Branch# 'ho deposited the( inthe accounts of A)fredo 1o(ero and Benito


16/16

FACTS: P)aintiff Sa(sun& Construction Co(pany Phi)ippines, 2nc. (aintained a current account 'ith defendant*ar +ast Ban and $rust Co(pany at the )atterEs Be)-Air, Maati branch. $he so)e si&natory to Sa(sun&ConstructionEs account 'as on& >yu

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