SECONDDIVISION

[G.R.No.129015.August13,2004]

SAMSUNG CONSTRUCTION COMPANY PHILIPPINES, INC., petitioner, vs. FAR

EAST BANK AND TRUST COMPANY AND COURT OF APPEALS,
respondents.
DECISION
TINGA,J.:

Calledtoforeinthepresentpetitionisaclassictextbookquestionifabankpaysoutonaforged
check,isitliabletoreimbursethedrawerfromwhoseaccountthefundswerepaidout?TheCourtof
Appeals,inreversingatrialcourtdecisionadversetothebank,invokedtenuousreasoningtoacquit
thebankofliability.Wereverse,applyingtimehonoredprinciplesoflaw.
Thesalientfactsfollow.
Plaintiff Samsung Construction Company Philippines, Inc. (Samsung Construction), while based
[1]
in Bian, Laguna, maintained a current account with defendant Far East Bank and Trust Company
[2]
(FEBTC)atthelattersBelAir,Makatibranch. ThesolesignatorytoSamsungConstructionsaccount
[3]
was Jong Kyu Lee (Jong), its Project Manager, while the checks remained in the custody of the
[4]
companysaccountant,KyuYongLee(Kyu).
On19March1992,acertainRobertoGonzagapresentedforpaymentFEBTCCheckNo.432100
to the banks branch in BelAir, Makati. The check, payable to cash and drawn against Samsung
Constructions current account, was in the amount of Nine Hundred Ninety Nine Thousand Five
HundredPesos(P999,500.00).Thebankteller,CleofeJustiani,firstcheckedthebalanceofSamsung
[5]
Constructions account. After ascertaining there were enough funds to cover the check, she
comparedthesignatureappearingonthecheckwiththespecimensignatureofJongascontainedin
thespecimensignaturecardwiththebank.Aftercomparingthetwosignatures,Justianiwassatisfied
as to the authenticity of the signature appearing on the check. She then asked Gonzaga to submit
[6]
proofofhisidentity,andthelatterpresentedthree(3)identificationcards.
At the same time, Justiani forwarded the check to the branch Senior Assistant Cashier Gemma
Velez, as it was bank policy that two bank branch officers approve checks exceeding One Hundred
Thousand Pesos, for payment or encashment. Velez likewise counterchecked the signature on the
checkasagainstthatonthesignaturecard.Hetooconcludedthatthecheckwasindeedsignedby
Jong. Velez then forwarded the check and signature card to Shirley Syfu, another bank officer, for
approval. Syfu then noticed that Jose Sempio III (Sempio), the assistant accountant of Samsung
Construction,wasalsointhebank.SempiowaswellknowntoSyfuandtheotherbankofficers,he
being the assistant accountant of Samsung Construction. Syfu showed the check to Sempio, who
vouched for the genuineness of Jongs signature. Confirming the identity of Gonzaga, Sempio said
that the check was for the purchase of equipment for Samsung Construction. Satisfied with the
genuineness of the signature of Jong, Syfu authorized the banks encashment of the check to
Gonzaga.
The following day, the accountant of Samsung Construction, Kyu, examined the balance of the
bankaccountanddiscoveredthatacheckintheamountofNineHundredNinetyNineThousandFive

HundredPesos(P999,500.00)hadbeenencashed.Awarethathehadnotpreparedsuchacheckfor
[7]
Jongssignature,Kyuperusedthecheckbookandfoundthatthelastblankcheckwasmissing. He
reportedthemattertoJong,whothenproceededtothebank.Jonglearnedoftheencashmentofthe
check,andrealizedthathissignaturehadbeenforged.The Bank Manager reputedly told Jong that
[8]

he would be reimbursed for the amount of the check. Jong proceeded to the police station and
[9]

consultedwithhislawyers. Subsequently,acriminalcaseforqualifiedtheftwasfiledagainstSempio
[10]
beforetheLagunacourt.
In a letter dated 6 May 1992, Samsung Construction, through counsel, demanded that FEBTC
credit to it the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00),
[11]

withinterest. In response, FEBTC said that it was still conducting an investigation on the matter.
Unsatisfied,SamsungConstructionfiledaComplainton 10June1992 for violation of Section 23 of
theNegotiableInstrumentsLaw,andprayedforthepaymentoftheamountdebitedasaresultofthe
[12]
questionedcheckplusinterest,andattorneysfees. ThecasewasdocketedasCivilCaseNo.92
61506beforetheRegionalTrialCourt(RTC)ofManila,Branch9.

[13]

Duringthetrial,bothsidespresentedtheirrespectiveexpertwitnessestotestifyontheclaimthat
Jongssignaturewasforged.SamsungCorporation,whichhadreferredthecheckforinvestigationto
theNBI,presentedSeniorNBIDocumentExaminerRodaB.Flores.Shetestifiedthat based on her
examination,sheconcludedthatJongssignaturehadbeenforgedonthecheck.Ontheotherhand,
[14]

FEBTC, which had sought the assistance of the Philippine National Police (PNP), presented
Rosario C. Perez, a document examiner from the PNP Crime Laboratory. She testified that her
findingsshowedthatJongssignatureonthecheckwasgenuine.

[15]

Confronted with conflicting expert testimony, the RTC chose to believe the findings of the NBI
expert.InaDecisiondated25April1994,theRTCheldthatJongssignatureonthecheckwasforged
and accordingly directed the bank to pay or credit back to Samsung Constructions account the
amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00), together with
interest tolled from the time the complaint was filed, and attorneys fees in the amount of Fifteen
ThousandPesos(P15,000.00).
FEBTCtimelyappealedtotheCourtofAppeals.On28November1996,theSpecialFourteenth
[16]

Division of the Court of Appeals rendered a Decision, reversing the RTC Decision and absolving
FEBTCfromanyliability.TheCourtofAppealsheldthatthecontradictoryfindingsoftheNBIandthe
[17]
PNP created doubt as to whether there was forgery. Moreover, the appellate court also held that
assuming there was forgery, it occurred due to the negligence of Samsung Construction, imputing
blameontheaccountantKyuforlackofcareandprudenceinkeepingthechecks,whichifobserved
[18]

would have prevented Sempio from gaining access thereto. The Court of Appeals invoked the
[19]
rulinginPNBv.NationalCityBankofNewYork that,ifaloss,whichmustbebornebyoneortwo
innocent persons, can be traced to the neglect or fault of either, such loss would be borne by the
negligentparty,evenifinnocentofintentionalfraud.

[20]

SamsungConstructionnowarguesthattheCourtofAppealshadseriouslymisapprehendedthe
factswhenitoverturnedtheRTCsfindingofforgery.Italsocontendsthattheappellatecourterredin
finding that it had been negligent in safekeeping the check, and in applying the equity principle
enunciatedinPNBv.NationalCityBankofNewYork.
SincethetrialcourtandtheCourtofAppealsarrivedatcontraryfindingsonquestionsoffact,the
Courtisobligedtoexaminetherecordtodrawoutthecorrectconclusions.Uponexaminationofthe
record,andbasedontheapplicablelawsandjurisprudence,wereversetheCourtofAppeals.
Section23oftheNegotiableInstrumentsLawstates:

Whenasignatureisforgedormadewithouttheauthorityofthepersonwhosesignatureitpurportstobe,itis
whollyinoperative,andnorighttoretaintheinstrument,ortogiveadischargetherefor,ortoenforcepayment
thereofagainstanypartythereto,canbeacquiredthroughorundersuchsignature,unlessthepartyagainst
whomitissoughttoenforcesuchrightisprecludedfromsettinguptheforgeryorwantofauthority.(Emphasis
supplied)
Thegeneralruleistotheeffectthataforgedsignatureiswhollyinoperative,andpaymentmade
[21]

throughorundersuchsignatureisineffectualordoesnotdischargetheinstrument. Ifpaymentis
made,thedraweecannotchargeittothedrawersaccount.Thetraditionaljustificationfortheresultis
thatthedraweeisinasuperiorpositiontodetectaforgerybecausehehasthemakerssignatureand
[22]
is expected to know and compare it. The rule has a healthy cautionary effect on banks by
encouragingcareinthecomparisonofthesignaturesagainstthoseonthesignaturecardstheyhave
on file. Moreover, the very opportunity of the drawee to insure and to distribute the cost among its
[23]

customerswhousechecksmakesthedraweeanidealpartytospreadtherisktoinsurance.
Brady,inhistreatiseTheLawofForgedandAlteredChecks,elucidates:

Whenapersondepositsmoneyinageneralaccountinabank,againstwhichhehastheprivilegeofdrawing
checksintheordinarycourseofbusiness,therelationshipbetweenthebankandthedepositoristhatofdebtor
andcreditor.Sofarasthelegalrelationshipbetweenthetwoisconcerned,thesituationisthesameasthoughthe
bankhadborrowedmoneyfromthedepositor,agreeingtorepayitondemand,orhadboughtgoodsfromthe
depositor,agreeingtopayforthemondemand.Thebankowesthedepositormoneyinthesamesensethatany
debtorowesmoneytohiscreditor.Addedtothis,inthecaseofbankanddepositor,thereis,ofcourse,thebanks
obligationtopaychecksdrawnbythedepositorinproperformandpresentedinduecourse.Whenthebank
receivesthedeposit,itimpliedlyagreestopayonlyuponthedepositorsorder.Whenthebankpaysacheck,on
whichthedepositorssignatureisaforgery,ithasfailedtocomplywithitscontractinthisrespect.Therefore,the
bankisheldliable.
Thefactthattheforgeryisacleveroneisimmaterial.Theforgedsignaturemaysocloselyresemblethegenuine
astodefydetectionbythedepositorhimself.Andyet,ifabankpaysthecheck,itispayingoutitsownmoney
andnotthedepositors.
Theforgerymaybecommittedbyatrustedemployeeorconfidentialagent.Thebankstillmustbeartheloss.
Eveninacasewheretheforgedcheckwasdrawnbythedepositorspartner,thelosswasplaceduponthebank.
ThecasereferredtoisRobinsonv.SecurityBank,Ark.,216S.W.Rep.717.Inthiscase,theplaintiffbrought
suitagainstthedefendantbankformoneywhichhadbeendepositedtotheplaintiffscreditandwhichthebank
hadpaidoutonchecksbearingforgeriesoftheplaintiffssignature.
xxx
Itwasheldthatthebankwasliable.Itwasfurtherheldthatthefactthattheplaintiffwaitedeightorninemonths
afterdiscoveringtheforgery,beforenotifyingthebank,didnot,asamatteroflaw,constitutearatificationofthe
payment,soastoprecludetheplaintifffromholdingthebankliable.xxx
Thisruleofliabilitycanbestatedbrieflyinthesewords:Abankisboundtoknowitsdepositorssignature.The
ruleisvariouslyexpressedinthemanydecisionsinwhichthequestionhasbeenconsidered.Buttheyallsumup
tothepropositionthatabankmustknowthesignaturesofthosewhosegeneraldepositsitcarries.

[24]

By no means is the principle rendered obsolete with the advent of modern commercial
transactions. Contemporary texts still affirm this wellentrenched standard. Nickles, in his book
NegotiableInstrumentsandOtherRelatedCommercialPaperwrote,thus:
Thedepositcontractbetweenapayorbankanditscustomerdetermineswhocandrawagainstthecustomers
accountbyspecifyingwhosesignatureisnecessaryonchecksthatarechargeableagainstthecustomersaccount.

Therefore,acheckdrawnagainsttheaccountofanindividualcustomerthatissignedbysomeoneotherthanthe
customer,andwithoutauthorityfromher,isnotproperlypayableandisnotchargeabletothecustomers
account,inasmuchasanyunauthorizedsignatureonaninstrumentisineffectiveasthesignatureoftheperson
[25]

whosenameissigned.

UnderSection23oftheNegotiableInstrumentsLaw,forgeryisarealorabsolutedefensebythe
[26]

partywhosesignatureisforged. OnthepremisethatJongssignaturewasindeedforged,FEBTCis
liableforthelosssinceitauthorizedthedischargeoftheforgedcheck.Suchliabilityattachesevenif
thebankexertsduediligenceandcareinpreventingsuchfaultydischarge.Forgeries often deceive
theeyeofthemostcautiousexpertsandwhenabankhasbeensodeceived,itisaharshrulewhich
[27]

compelsittosufferalthoughnoonehassufferedbyitsbeingdeceived. Theforgerymaybesonear
like the genuine as to defy detection by the depositor himself, and yet the bank is liable to the
depositorifitpaysthecheck.

[28]

Thus,thefirstmatterofinquiryisintowhetherthecheckwasindeedforged.Adocumentformally
presented is presumed to be genuine until it is proved to be fraudulent. In a forgery trial, this
presumption must be overcome but this can only be done by convincing testimony and effective
[29]

illustrations.

Inrulingthatforgerywasnotdulyproven,theCourtofAppealsheld:
[There]isgroundtodoubtthefindingsofthetrialcourtsustainingtheallegedforgeryinviewoftheconflicting
conclusionsmadebyhandwritingexpertsfromtheNBIandthePNP,bothagenciesofthegovernment.
xxx
Thesecontradictoryfindingscreatedoubtonwhethertherewasindeedaforgery.InthecaseofTenioObsequio
v.CourtofAppeals,230SCRA550,theSupremeCourtheldthatforgerycannotbepresumeditmustbeproved
byclear,positiveandconvincingevidence.
This reasoning is pure sophistry. Any litigator worth his or her salt would never allow an
opponentsexpertwitnesstostanduncontradicted,thusthespectacleofcompetingexpertwitnesses
isnotunusual.Thetrieroffactwillhavetodecidewhichversiontobelieve,andexplainwhyorwhy
notsuchversionismorecrediblethantheother.Reliancethereforecannotbeplacedmerelyonthe
factthattherearecollidingopinionsoftwoexperts,bothclothedwiththepresumptionofofficialduty,
inordertodrawaconclusion,especiallyonewhichisextremelycrucial.Doingsoistantamounttoa
jurisprudentialcopout.
Much is expected from the Court of Appeals as it occupies the penultimate tier in the judicial
hierarchy. This Court has long deferred to the appellate court as to its findings of fact in the
understanding that it has the appropriate skill and competence to plough through the minutiae that
scattersthefactualfield.Infailingtothoroughlyevaluatetheevidencebeforeit,andrelyinginsteadon
presumptions haphazardly drawn, the Court of Appeals was sadly remiss. Of course, courts, like
humans, are fallible, and not every error deserves a stern rebuke.Yet, the appellate courts error in
this case warrants special attention, as it is absurd and even dangerous as a precedent. If this
rationale were adopted as a governing standard by every court in the land, barely any actionable
claim would prosper, defeated as it would be by the mere invocation of the existence of a contrary
expertopinion.
Ontheotherhand,theRTCdidadjudgethetestimonyoftheNBIexpertasmorecrediblethan
thatofthePNP,andexplaineditsreasonbehindtheconclusion:
Aftersubjectingtheevidenceofbothpartiestoacrucibleofanalysis,thecourtarrivedattheconclusionthatthe
testimonyoftheNBIdocumentexaminerismorecrediblebecausethetestimonyofthePNPCrimeLaboratory
Servicesdocumentexaminerrevealsthattherearealotofdifferencesinthequestionedsignatureascomparedto

thestandardspecimensignature.Furthermore,astestifiedtobyMs.RhodaFlores,NBIexpert,themannerof
executionofthestandardsignaturesusedrevealsthatitisafreerapidcontinuousexecutionorstrokeasshown
bythetamperingterminalstrokeofthesignatureswhereasthequestionedsignatureisahesitatingslowdrawn
executionstroke.Clearly,thepersonwhoexecutedthequestionedsignaturewashesitantwhenthesignaturewas
[30]
made.
DuringthetestimonyofPNPexpertRosarioPerez,theRTCbluntlynotedthatapparently,there
[31]

[are]differencesonthatquestionedsignatureandthestandardsignatures. ThisCourt,inexamining
thesignatures,makesasimilarfinding.ThePNPexpertexcusedthenoteddifferencesbyasserting
[32]

that they were mere variations, which are normal deviations found in writing. Yet the RTC, which
hadtheopportunitytoexaminetherelevantdocumentsandtopersonallyobservetheexpertwitness,
clearly disbelieved the PNP expert. The Court similarly finds the testimony of the PNP expert as
unconvincing.During the trial, she was confronted several times with apparent differences between
strokes in the questioned signature and the genuine samples. Each time, she would just blandly
[33]

assert that these differences were just variations, as if the mere conjuration of the word would
sufficientlydisquietwhateverdoubtsaboutthedeviations.Suchconclusion,standingalone,wouldbe
oflittleornovalueunlesssupportedbysufficientlycogentreasonswhichmightamountalmosttoa
[34]

demonstration.

ThemosttellingdifferencebetweenthequestionedandgenuinesignaturesexaminedbythePNP
is in the final upward stroke in the signature, or the point to the short stroke of the terminal in the
capital letter L, as referred to by the PNP examiner who had marked it in her comparison chart as
pointno.6.Totheplaineye,suchupwardfinalstrokeconsistsofaverticallinewhichformsaninety
degree(90)anglewiththepreviousstroke.Ofthetwentyone(21)othergenuinesamplesexamined
[35]

by the PNP, at least nine (9) ended with an upward stroke. However, unlike the questioned
signature,theupwardstrokesofeight(8)ofthesesignaturesarelooped,whiletheupwardstrokeof
[36]

theseventh formsaseverefortyfivedegree(45)withthepreviousstroke.Thedifferenceisglaring,
andindeed,thePNPexaminerwasconfrontedwiththeinconsistencyinpointno.6.
Q:Now,inthisquestioneddocumentpointno.6,thesstrokeisdirectlyupwards.
A:Yes,sir.
Q:Now,canyoulookatallthesestandardsignature(sic)were(sic)point6isrepeatedorthelaststroke
sispointingdirectlyupwards?
[37]

A:Thereisnoneinthestandardsignature,sir.

Again, the PNP examiner downplayed the uniqueness of the final stroke in the questioned
[38]
signature as a mere variation, the same excuse she proffered for the other marked differences
[39]

notedbytheCourtandthecounselforpetitioner.

ThereisnoreasontodoubtwhytheRTCgavecredencetothetestimonyoftheNBIexaminer,
and not the PNP experts. The NBI expert, Rhoda Flores, clearly qualifies as an expert witness. A
document examiner for fifteen years, she had been promoted to the rank of Senior Document
ExaminerwiththeNBI,andhadheldthatrankfortwelveyearspriortohertestimony.Shehadplaced
among the top five examinees in the Competitive Seminar in Question Document Examination,
[40]

conductedbytheNBIAcademy,whichqualifiedherasadocumentexaminer. Shehadtrainedwith
the Royal Hongkong Police Laboratory and is a member of the International Association for
Identification.

[41]

As of the time she testified, she had examined more than fifty to fiftyfive thousand
[42]

questioneddocuments,onanaverageoffifteentotwentydocumentsaday. In comparison, PNP

document examiner Perez admitted to having examined only around five hundred documents as of
[43]
hertestimony.

In analyzing the signatures, NBI Examiner Flores utilized the scientific comparative examination
method consisting of analysis, recognition, comparison and evaluation of the writing habits with the
use of instruments such as a magnifying lense, a stereoscopic microscope, and varied lighting
substances. She also prepared enlarged photographs of the signatures in order to facilitate the
[44]

necessarycomparisons. Shecomparedthequestionedsignatureasagainstten(10)othersample
signatures of Jong. Five of these signatures were executed on checks previously issued by Jong,
[45]

whiletheotherfivecontainedinbusinesslettersJonghadsigned. TheNBIfoundthattherewere
significant differences in the handwriting characteristics existing between the questioned and the
samplesignatures,astomannerofexecution,link/connectingstrokes,proportioncharacteristics,and
[46]
otheridentifyingdetails.
TheRTCwassufficientlyconvincedbytheNBIexaminerstestimony,andexplainedherreasons
initsDecisions.WhiletheCourtofAppealsdisagreedandupheldthefindingsofthePNP,itfailedto
convincingly demonstrate why such findings were more credible than those of the NBI expert.As a
throwaway,theassailedDecisionnotedthatthePNP,nottheNBI,hadtheopportunitytoexaminethe
specimen signature card signed by Jong, which was relied upon by the employees of FEBTC in
authenticating Jongs signature. The distinction is irrelevant in establishing forgery. Forgery can be
established comparing the contested signatures as against those of any sample signature duly
establishedasthatofthepersonswhosesignaturewasforged.
FEBTC lays undue emphasis on the fact that the PNP examiner did compare the questioned
signature against the bank signature cards. The crucial fact in question is whether or not the
check was forged, not whether the bank could have detected the forgery. The latter issue
becomesrelevantonlyifthereisneedtoweighthecomparativenegligencebetweenthebank
andthepartywhosesignaturewasforged.
At the same time, the Court of Appeals failed to assess the effect of Jongs testimony that the
[47]

signatureonthecheckwasnothis. Theassertionmayseemselfservingatfirstblush,yetitcannot
beignoredthatJongwasinthebestpositiontoknowwhetherornotthesignatureonthecheckwas
his.Whilehisclaimshouldnotbetakenatfacevalue,anyavermentshewouldhaveonthematter,if
adjudgedastruthful,deserveprimacyinconsideration.Jongstestimonyissupportedbythefindings
oftheNBIexaminer.Theyarealsobackedbyfactualcircumstancesthatsupporttheconclusionthat
theassailedcheckwasindeedforged.Judicialnoticecanbetakenthatishighlyunusualinpractice
forabusinessestablishmenttodrawacheckforclosetoamillionpesosandmakeitpayabletocash
or bearer, and not to order. Jong immediately reported the forgery upon its discovery. He filed the
[48]

appropriatecriminalchargesagainstSempio,theputativeforger.

Now for determination is whether Samsung Construction was precluded from setting up the
defense of forgery under Section 23 of the Negotiable Instruments Law. The Court of Appeals
concluded that Samsung Construction was negligent, and invoked the doctrines that where a loss
must be borne by one of two innocent person, can be traced to the neglect or fault of either, it is
reasonable that it would be borne by him, even if innocent of any intentional fraud, through whose
[49]

[50]

meansithassucceeded orwhoputintothepowerofthethirdpersontoperpetuatethewrong.
Applying these rules, the Court of Appeals determined that it was the negligence of Samsung
Constructionthatallowedtheencashmentoftheforgedcheck.
Inthecaseatbar,theforgeryappearstohavebeenmadepossiblethroughtheactsofoneJoseSempioIII,an
assistantaccountantemployedbytheplaintiffSamsung[Construction]Co.Philippines,Inc.whosupposedly
stoletheblankcheckandwhopresumablyisresponsibleforitsencashmentthroughaforgedsignatureofJong
KyuLee.SempiowasassistanttotheKoreanaccountantwhowasinpossessionoftheblankchecksandwho
throughnegligence,enabledSempiotohaveaccesstothesame.HadtheKoreanaccountantbeenmorecareful
andprudentinkeepingtheblankchecksSempiowouldnothavehadthechancetostealapagethereofandto
effecttheforgery.Besides,SempiowasanemployeewhoappearstohavehaddealingswiththedefendantBank

inbehalfoftheplaintiffcorporationandonthedatethecheckwasencashed,hewastheretocertifythatitwasa
[51]

genuinecheckissuedtopurchaseequipmentforthecompany.

WerecognizethatSection23oftheNegotiableInstrumentsLawbarsapartyfromsettingupthe
[52]

defense of forgery if it is guilty of negligence. Yet, we are unable to conclude that Samsung
Constructionwasguiltyofnegligenceinthiscase.Theappellatecourtfailedtoexplainpreciselyhow
the Korean accountant was negligent or how more care and prudence on his part would have
preventedtheforgery.Wecannotsustainthistarandfeatheringresortedtowithoutanybasis.
Thebarefactthattheforgerywascommittedbyanemployeeofthepartywhosesignaturewas
forgedcannotnecessarilyimplythatsuchpartysnegligencewasthecausefortheforgery.Employers
do not possess the preternatural gift of cognition as to the evil that may lurk within the hearts and
[53]

mindsoftheiremployees.TheCourtspronouncementinPCIBankv.CourtofAppeals
thiscase,towit:

applies in

[T]hemerefactthattheforgerywascommittedbyadrawerpayorsconfidentialemployeeoragent,whoby
virtueofhispositionhadunusualfacilitiesforperpetratingthefraudandimposingtheforgedpaperuponthe
bank,doesnotentitlethebanktoshiftthelosstothedrawerpayor,intheabsenceofsomecircumstanceraising
[54]

estoppelagainstthedrawer.

Admittedly,therecorddoesnotclearlyestablishwhatmeasuresSamsungConstructionemployed
to safeguard its blank checks. Jong did testify that his accountant, Kyu, kept the checks inside a
[55]

safety box, and no contrary version was presented by FEBTC. However, such testimony cannot
provethatthecheckswereindeedkeptinasafetybox,asJongstestimonyonthatpointishearsay,
sinceKyu,andnotJong,wouldhavethepersonalknowledgeastohowthecheckswerekept.
Still,intheabsenceofevidencetothecontrary,wecanconcludethattherewasnonegligenceon
SamsungConstructionspart.Thepresumptionremainsthateverypersontakesordinarycareofhis
[56]

concerns,

and that the ordinary course of business has been followed.

[57]

Negligence is not

[58]

presumed, but must be proven by him who alleges it. While the complaint was lodged at the
instanceofSamsungConstruction,thematterithadtoprovewastheclaimithadallegedwhether
the check was forged.It cannot be required as well to prove that it was not negligent, because the
legalpresumptionremainsthatordinarycarewasemployed.
Thus, it was incumbent upon FEBTC, in defense, to prove the negative fact that Samsung
Constructionwasnegligent.Whilethepayee,asinthiscase,maynothavethepersonalknowledge
as to the standard procedures observed by the drawer, it well has the means of disputing the
[59]

presumptionofregularity.Provinganegativefactmaybeadifficultoffice, butnecessarilyso,asit
seekstoovercomeapresumptioninlaw.FEBTCwasunabletodisputethepresumptionofordinary
careexercisedbySamsungConstruction,hencewecannotagreewiththeCourtofAppealsfindingof
negligence.
The assailed Decision replicated the extensive efforts which FEBTC devoted to establish that
therewasnonegligenceonthepartofthebankinitsacceptanceandpaymentoftheforgedcheck.
However, the degree of diligence exercised by the bank would be irrelevant if the drawer is not
precludedfromsettingupthedefenseofforgeryunderSection23byhisownnegligence.Theruleof
equity enunciated in PNB v. National City Bank of New York,
Appeals,deservescarefulexamination.

[60]

as relied upon by the Court of

Thepointinissuehassometimesbeensaidtobethatofnegligence.Thedraweewhohaspaiduponthe
forgedsignatureisheldtobeartheloss,becausehehasbeennegligentinfailingtorecognizethatthe
handwritingisnotthatofhiscustomer.Butitfollowsobviouslythatifthepayee,holder,orpresenterofthe
forgedpaperhashimselfbeenindefault,ifhehashimselfbeenguiltyofanegligencepriortothatofthebanker,

orifbyanyactofhisownhehasatallcontributedtoinducethebanker'snegligence,thenhemaylosehisright
[61]

tocastthelossuponthebanker.

(Emphasissupplied)

Quitepalpably,thegeneralruleremainsthatthedraweewhohaspaidupontheforgedsignature
bearstheloss.Theexceptiontothisrulearisesonlywhennegligencecanbetracedonthepartofthe
drawer whose signature was forged, and the need arises to weigh the comparative negligence
betweenthedrawerandthedraweetodeterminewhoshouldbeartheburdenofloss.TheCourtfinds
nobasistoconcludethatSamsungConstructionwasnegligentinthesafekeepingofitschecks.For
one,thesettledruleisthatthemerefactthatthedepositorleaveshischeckbooklyingarounddoes
notconstitutesuchnegligenceaswillfreethebankfromliabilitytohim,whereaclerkofthedepositor
orotherpersons,takingadvantageoftheopportunity,abstractsomeofthecheckblanks,forgesthe
[62]

depositors signature and collect on the checks from the bank. And for another, in point of fact
SamsungConstructionwasnotnegligentatallsinceitreportedtheforgeryalmostimmediatelyupon
[63]

discovery.

ItisalsoworthnotingthattheforgedsignaturesinPNBv.NationalCityBankofNewYorkwere
[64]

notofthedrawer,butofindorsers.ThesamecircumstanceattendsPNBv.CourtofAppeals, which
wasalsocitedbytheCourtofAppeals.Itisacceptedthataforgedsignatureofthedrawerdiffersin
treatmentthanaforgedsignatureoftheindorser.
Thejustificationforthedistinctionbetweenforgeryofthesignatureofthedrawerandforgeryofanindorsement
isthatthedraweeisinapositiontoverifythedrawerssignaturebycomparisonwithoneinhishands,buthas
[65]

ordinarilynoopportunitytoverifyanindorsement.

Thus,adraweebankisgenerallyliabletoitsdepositorinpayingacheckwhichbearseitheraforgeryofthe
drawerssignatureoraforgedindorsement.Butthebankmay,asageneralrule,recoverbackthemoneywhichit
haspaidonacheckbearingaforgedindorsement,whereasithasnotthisrighttothesameextentwithreference
toacheckbearingaforgeryofthedrawerssignature.

[66]

Thegeneralruleimputingliabilityonthedraweewhopaidoutontheforgeryholdsinthiscase.
Since FEBTC puts into issue the degree of care it exercised before paying out on the forged
check,wemightaswellcommentonthebanksperformanceofitsduty.Itmightbesothatthebank
complied with its own internal rules prior to paying out on the questionable check. Yet, there are
severaltroublingcircumstancesthatleadustobelievethatthebankitselfwasremissinitsduty.
The fact that the check was made out in the amount of nearly one million pesos is unusual
enough to require a higher degree of caution on the part of the bank. Indeed, FEBTC confirms this
through its own internal procedures. Checks below twentyfive thousand pesos require only the
approval of the teller those between twentyfive thousand to one hundred thousand pesos
necessitatetheapprovalofonebankofficerandshouldtheamountexceedonehundredthousand
[67]
pesos,theconcurrenceoftwobankofficersisrequired.
In this case, not only did the amount in the check nearly total one million pesos, it was also
payabletocash.Thatlattercircumstanceshouldhavearousedthesuspicionofthebank,asitisnot
ordinarybusinesspracticeforacheckforsuchlargeamounttobemadepayabletocashortobearer,
[68]

insteadoftotheorderofaspecifiedperson. Moreover, the check was presented for payment by

oneRobertoGonzaga,whowasnotdesignatedasthepayeeofthecheck,andwhodidnotcarrywith
him any written proof that he was authorized by Samsung Construction to encash the check.
[69]

Gonzaga, a stranger to FEBTC, was not even an employee of Samsung Construction. These
circumstancesarealreadysuspiciousiftakenindependently,muchmoresoiftheyareevaluatedin
concurrence.GiventheshadinessattendingGonzagaspresentmentofthecheck,itwasnotsufficient
forFEBTCtohavemerelycompliedwithitsinternalprocedures,butmandatorythatallearnestefforts

beundertakentoensurethevalidityofthecheck,andoftheauthorityofGonzagatocollectpayment
therefor.
AccordingtoFEBTCSeniorAssistantCashierGemmaVelez,thebanktried,butfailed,tocontact
[70]

Jongoverthephonetoverifythecheck. Sheaddedthatcallingtheissuerordrawerofthecheckto
[71]
verify the same was not part of the standard procedure of the bank, but an extra effort. Even
assumingthatsuchpersonalverificationistantamounttoextraordinarydiligence,itcannotbedenied
thatFEBTCstillpaidoutthecheckdespitetheabsenceofanyproofofverificationfromthedrawer.
Instead,thebankseemstohavereliedheavilyonthesaysoofSempio,whowaspresentatthebank
atthetimethecheckwaspresented.
FEBTCallegesthatSempiowaswellknowntothebankofficers,ashehadregularlytransacted
withthebankinbehalfofSamsungConstruction.ItwasevenclaimedthateverytimeFEBTCwould
[72]

contact Jong about problems with his account, Jong would hand the phone over to Sempio.
However,theonlyproofofsuchallegationsisthetestimonyofGemmaVelez,whoalsotestifiedthat
[73]

she did not know Sempio personally,

[74]

checkwasencashed.

and had met Sempio for the first time only on the day the

Infact,Velezhadtoinquirewiththeotherofficersofthebankastowhether
[75]

Sempio was actually known to the employees of the bank. Obviously, Velez had no personal
knowledgeastothepastrelationshipbetweenFEBTCandSempio,andanyavermentsofhertothat
effect should be deemed hearsay evidence. Interestingly, FEBTC did not present as a witness any
otheremployeeoftheirBelAirbranch,includingthosewhosupposedlyhadtransactedwithSempio
before.
Even assuming that FEBTC had a standing habit of dealing with Sempio, acting in behalf of
Samsung Construction, the irregular circumstances attending the presentment of the forged check
should have put the bank on the highest degree of alert. The Court recently emphasized that the
highestdegreeofcareanddiligenceisrequiredofbanks.
Banksareengagedinabusinessimpressedwithpublicinterest,anditistheirdutytoprotectinreturntheir
manyclientsanddepositorswhotransactbusinesswiththem.Theyhavetheobligationtotreattheirclients
accountmeticulouslyandwiththehighestdegreeofcare,consideringthefiduciarynatureoftheirrelationship.
Thediligencerequiredofbanks,therefore,ismorethanthatofagoodfatherofafamily.

[76]

Given the circumstances, extraordinary diligence dictates that FEBTC should have ascertained
fromJongpersonallythatthesignatureinthequestionablecheckwashis.
Still, even if the bank performed with utmost diligence, the drawer whose signature was forged
maystillrecoverfromthebankaslongasheorsheisnotprecludedfromsettingupthedefenseof
forgery.Afterall,Section23oftheNegotiableInstrumentsLawplainlystatesthatnorighttoenforce
thepaymentofacheckcanariseoutofaforgedsignature.Sincethedrawer,SamsungConstruction,
is not precluded by negligence from setting up the forgery, the general rule should apply.
Consequently, if a bank pays a forged check, it must be considered as paying out of its funds and
[77]
cannotchargetheamountsopaidtotheaccountofthedepositor. Abankisliable,irrespectiveof
[78]

itsgoodfaith,inpayingaforgedcheck.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 28
November 1996 is REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9,
dated25April1994isREINSTATED.Costsagainstrespondent.
SOORDERED.
Puno,(Chairman),AustriaMartinez,Callejo,Sr.,andChicoNazario,JJ.,concur.

[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]

LateracquiredbyormergedwiththeBankofthePhilippineIslands.
Rollo,p.35.
Ibid.
Id.at28.
Ibid.
Ibid.
Rollo,p.35.
SeeTSNdated25June1993,p.10.
Id.at9.

[10]
[11]

SeeTSNdated15June1993,p.26.

Ibid.

[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26]

ActNo.2031.
PresidedbyJudgeE.G.Sandoval,nowJusticeoftheSandiganbayan.
TSNdated8October1993,p.8.
Rollo,p.24.
PennedbyJusticeS.Montoya,concurredinbyJusticesG.JacintoandA.Tuquero.
Rollo,p.38.
Ibid.
63Phil711(1936).
Rollo,p.38.
BankofPhilippineIslandsv.CourtofAppeals,G.R.No.102383,26November1992,216SCRA51,65.
FARNSWORTH,E.A.,NEGOTIABLEINSTRUMENTS:CasesandMaterials,2nded.(1959),at173.
Id.at174.
Brady,J.E.,TheLawofForgedandAlteredChecks(1925),at67.Casecitationsomitted.
Nickles,S.H.,NegotiableInstrumentsandOtherRelatedCommercialPaper,2nded.(1993),at415.
Gempesawv.CourtofAppeals,G.R.No.92244,9February1993,218SCRA682,689.

[27]

PhilippineNationalBankv.NationalCityBankofNewYork,63Phil.711,743744(1936)citing17A.L.R.,8915R.
C.L.,559.
[28]

BRADY, H.J., BRADY ON BANK CHECKS, 3rd ed. (1962), at 475 citingHardyv. Chesapeake Bank (1879) 51Md.
562,34Am.Rep.325.
[29]
[30]

OSBORN,A.,QUESTIONEDDOCUMENTPROBLEMS,2nded.(1946),at181182.
Rollo,p.31.

[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39]
[40]
[41]
[42]
[43]
[44]
[45]
[46]
[47]
[48]

TSNdated8October1993,p.15.
Id.at15and19.
SeeTSNdated8October1993,pp.15,17,19,34,36and38.
Venutov.Lizzo,148App.Div.164,132N.Y.Supp.1066(1911),ascitedinA.Osborn,supra,note29.
DefendantsExhibitsNos.S1,S7,S8,S9,S10,S12,S14,S15,andS16.
DefendantsExhibitNo.S9.
TSNdated8October1993,p.35.
Id.at19and36.
Supra,note26.
TSNdated27April1993,p.5.
Id.at7.
Id.at78.
TSNdated8October1993,p.4.
TSNdated27April1993,pp.1819.
Id.at14.
PerNBIQuestionedDocumentsReportNo.244492,PlaintiffsExhibitD.
SeeTSNdated25January1993,p.7.
Seenote10.

[49]

Rollo, p. 38, citingPNBv. National City Bank of New York, 63 Phil. 711, 733 (1936), which in turn cites Gloucester
Bankv.SalemBank,17Mass.,33FirstNat.BankofDanversvs.FirstNationalBankofSalem,151Mass.,280andB.B.
Ford&Co.v.PeoplesBankofOrangeburg,74S.C.,180.
[50]
[51]
[52]
[53]
[54]
[55]
[56]
[57]

Ibid.,citingPNBv.CA,134Phil.829,834(1968),whichinturncitesBlondeauv.Nano,61Phil.625,631,632.
Rollo,p.38.
MWSSv.CourtofAppeals,G.R.No.L62943,14July1986,143SCRA20,31.
G.R.Nos.121413,121479and128604,29January2001,350SCRA446.
Ibidat465.
TSNdated25January1993,pp.19,31.
SeeSection3(d),Rule131,RulesofCourt.
SeeSection3(q),Rule131,RulesofCourt.

[58]

Taylorv. Manila Electric Railroad, 16 Phil. 8, 28 (1910), citingScaevola, Jurisprudencia del Codigo Civil, vol. 6, 551,
552.
[59]

USv.Tria,17Phil.303,307(1910).

[60]
[61]

63Phil.711(1936).
Id.at740citing2MorseonBanksandBanking,5thed.,secs.464and466,pp.8285and86,87.

[62]

BRADY,J.E.,THELAWOFFORGEDANDALTEREDCHECKS,supra,note24,at2427citingMacIntoshv.Bank,
123Mass.393EastSt.LouisCottonOilCo.v.BankofSteele,Mo.,205S.W.Rep.96.
[63]

For his failure or negligence either to discover or to report promptly the fact of such forgery to the drawee, the drawer
loses his right against the drawee who has debited his account under the forged indorsement. Gempesaw v. Court of
Appeals,G.R.No.92244,9February1993,218SCRA682,690citingAmericanjurisprudence.Abankmayescapeliability
where the depositors negligence consists of failure to properly examine his bank statements and cancelled checks and
failuretonotifythebankofforgerywithinareasonabletime.H.Bailey,supra,note28,at477.Butseenote24.
[64]
[65]
[66]
[67]

G.R.No.L26001,29October1968,25SCRA693.
Farnsworth,E.A.,supranote22,at173.
Brady,J.E.,supra,note24,at5.
SeeTSNdated12July1993,p.8.

[68]

When the instrument is payable to order the payee must be named or otherwise indicated therein with reasonable
certainty.Sec.8,ActNo.2031(NegotiableInstrumentsLaw).Worthyofnoteisthefactthatacheckpayabletobeareris
more likely to be forged than one that is payable to order. The unofficial essence of bearer check is that anyone who
possessesorholdsitcanindorseorreceivepaymentforitwhichimpliesthatpaymentisnotlimitedtoaparticularperson.
SeeNickles,S.H.,Matheson,J.H.,andAdams,E.S.,ModernCommercialPaper:TheNewLawofNegotiableInstruments
andRelatedCommercialPaper(1994),at61.
[69]
[70]
[71]
[72]
[73]
[74]
[75]
[76]
[77]
[78]

SeeTSNdated26July1993,p.18.
SeeTSNdated12July1993,p.11.
Ibid.
Id.at17.
Id.at18.
TSNdated26July1993,p.3.
Id.at6.
WestmontBankv.Ong,G.R.No.132560,30January2002,375SCRA212,220221.
TradersRoyalBankv.RadioPhilippinesNetwork,Inc.,G.R.No.138510,10October2002,390SCRA608,614.
Bailey,H.J.,supra,note28at474.