SEC 20 LIABILITY OF PERSONS SIGNING AS AGENT (1) NO.

- Please refer to Sec 20 of NIL

Philippine Bank of Commerce v. Aruego; 102 SCRA 530 - An inspection of the drafts accepted by the defendant
shows that nowhere has he disclosed that he was
Petitioner: Philippine Bank of Commerce; Respondent: Jose M. signing as representative of the Philippine Education
Foundation Company. He merely signed as follows:
Aruego
"JOSE ARUEGO (Acceptor) (SGD) JOSE ARUEGO."
For failure to disclose his principal, Aruego is personally
Facts:
liable for the drafts he accepted.
(2) NO
To facilitate payment of the printing of a periodical called World
- For definition of accommodation party, please refer to
Current Events., Aruego, its publisher, obtained a credit Sec 29 of NIL
accommodation from the Philippine Bank of Commerce. For every - In lending his name to the accommodated party, the
printing of the periodical, the printer collected the cost of printing by accommodation party is in effect a surety for the latter.
drawing a draft against the bank, said draft being sent later to He lends his name to enable the accommodated party to
Aruego for acceptance. As an added security for the payment of the obtain credit or to raise money. He receives no part of
amounts advanced to the printer, the bank also required Aruego to the consideration for the instrument but assumes liability
to the other parties thereto because he wants to
execute a trust receipt in favor of the bank wherein Aruego
accommodate another. In the instant case, the
undertook to hold in trust for the bank the periodicals and to sell the defendant signed as a drawee/acceptor. Under the
same with the promise to turn over to the bank the proceeds of the Negotiable Instruments Law, a drawee is primarily
sale to answer for the payment of all obligations arising from the liable.
draft. Plaintiff bank instituted an action against defendant Jose M. - Thus, if the defendant who is a lawyer, really intended to
Aruego for recovery of money it had paid on various drafts drawn be secondarily liable only, he should not have signed as
an acceptor/drawee. In doing so, he became primarily
against it and signed by defendant as follows: "JOSE ARUEGO
and personally liable for the drafts.
(Acceptor) (SGD) JOSE ARUEGO". Aruego interposing as defenses (3) YES
that he signed the drafts in a representative capacity as an agent of - For definition of bill of exchange, please see Sec 26 of
the Philippine Education Foundation Company where he is NIL
president, that he signed only as accommodation party, and that the - The defendant also contends that the drafts signed by
drafts were really no bills of exchange. him were not really bills of exchange but mere pieces of
evidence of indebtedness because payments were
Issues: made before acceptance. This is also without merit.
- As long as a commercial paper conforms with the
(1) WON Aruego is only signing the drafts in representative definition of a bill of exchange, that paper is considered
capacity a bill of exchange. The nature of acceptance is important
only in the determination of the kind of liabilities of the
(2) WON Aruego signed such drafts as an accommodation party
parties involved, but not in the determination of whether
(3) WON the drafts are bills of exchange a commercial paper is a bill of exchange or not.
Held:
(9) FRANCISCO vs. CA signing, should indicate that he is merely signing in behalf of the
principal and must disclose the name of his principal; otherwise he
Facts: shall be held personally liable. Even assuming that Francisco was
authorized by HCCC to sign Ongs name, still, Francisco did not
Francisco Realty and Development Corporation, of which
indorse the instrument in accordance with law. Instead of signing
AdaliaFransico is president and Herby Commercial and Construction
Ongs name, Francisco should have signed her own name and
Corporation, represented by its president, Jaime Ong, entered into a
expressly indicated that she was signing as an agent of HCCC.
land and development construction contract pursuant to a housing
Thus, the certification cannot be used by Francisco to validate her
project financed by the government Service Insurance System.
act of forgery.
To facilitate payment, FRDC executed a deed of assignment
in favor of HCCC to enable the latter to collect payment directly from
GSIS. Furthermore, the GSIS and FDRC put up an executive (JAI-ALAI CORPORATION OF THE PHILIPPINES v. BPI
committee account with the Insular Bank of Asia and America from
which checks would be issued and co-signed by Francisco and the Petitioner: Jai-Alai Corporation of the Philippines
GSIS vice-president Armando Diaz. Respondent: Bank of the Philippine Islands (BPI)
Summary: Checks were deposited to the BPI account of the
After an examination of records, Ong discovered that Diaz petitioner but they were forged. Thus BPI debited the value of the
and Francisco had executed and signed seven checks of various checks. When petitioner was about to draw a check, it was unable to
dates and amount, drawn against the IBAA and payable to HCCC for do so because the amount is not sufficient due to the amount debited
for the dishonoured checks.
completed and delivered work under the contract. Ong, however
claims that these checks were never delivered to HCCC. Instead, FACTS:
Francisco forged the signature of Ong, without his knowledge or Petitoner deposited ten checks with a total face value of
consent at the dorsal portion of the said checks to make it appear P8,030.58 with respondent BPI, which were all acquired
that HCCC had indorsed the checks; Francisco then indorsed the from one Antonio J. Ramirez, a sales agent of the Inter-
checks for a second time by signing her name at the back of the Island Gas and a regular bettor at jai-alai games.
checks in her IBAA savings account. IBAA credited Franciscos Ramirez temporarily credited the same to the petitioner's
account.
account with the amount of the checks and the latter withdrew the
Inter-Island Gas discovered that all the indorsements made
amount so credited. on the checks by its cashiers, Santiago Amplayo and
Vicenta Mucor (who were merely authorized to deposit
Issue: WON Francisco is liable on the instruments checks issued payable to the said company) as well as the
rubber stamp impressionwere forgeries. Inter-Island Gas
Held: advised the petitioner, the respondent, the drawers and the
drawee-banks of the said checks about the forgeries, and
Yes. The NIL provides that where any person is under filed a criminal complaint against Ramirez.
obligation to indorse in a representative capacity, he may indorse in BPIs cashier, Ramon Sarthou, called up the petitioner's
such terms as to negative personal liability an agent, when so cashier, Manuel Garcia, and advised the latter that he would
 debit the value of the checks against the petitioner's account expected to know or ascertain the genuineness of all prior
as soon as they were returned by the respective drawee- endorsements on the said checks.
banks. Since petitioner indorsed the said checks when it deposited
The drawers of the checks demanded reimbursement to them with the respondent, he is an endorser guaranteed the
their respective accounts genuineness of all prior endorsements thereon.
When the drawee-banks returned the checks to BPI, the Section 67, NIL - "Where a person places his endorsement
latter paid their value which the former in turn paid to the on an instrument negotiable by delivery he incurs all the
Inter-Island Gas. liability of an endorser,"
BPI debited the petitioner's current account and forwarded to
the latter the checks containing the forged indorsements, Republic v. Ebrada [G.R. No. L-40796. July 31, 1975.]
which the petitioner, however, refused to accept.
Oct 1959 Petitioner drew against its current account with Parties: REPUBLIC BANK (plaintiff-appellee) and MAURICIA T.
BPI a check for P135,000 payable to the order of the
EBRADA (defendant-appellant)
Mariano Olondriz y Cia but it was dishonoured as its records
showed that as of the current account of the petitioner, after
netting out the value of the checks P8,030.58 with the forged Facts:
indorsements, had a balance of only P128,257.65.
On or about February 27, 1963 Mauricia T. Ebrada,
ISSUE: WON BPI acted negligently when it debited the account of encashed a check dated January 15, 1963 for P1,246.08 at
Jai-Alai for the dishonoured checks the main office of the Republic Bank at Escolta, Manila. The
check was issued by the Bureau of Treasury.
HELD: Republic Bank was later advised by the said bureau that the
The Supreme Court ruled that respondent acted within legal alleged indorsement on the reverse side of the aforesaid
bounds when it debited petitioner's account; that the check by the payee, "Martin Lorenzo" was a forgerysince
payments made by the drawee banks to the respondent on Lorenzo had allegedly died as of July 14, 1952
account of the checks with forged endorsements were Republic Bank was then requested by the Bureau of
ineffective. Treasury to refund the amount of P1,246.08.
Section 26, NIL - "When a signature is forged or made Republic Bank made verbal and formal demands upon
without the authority of the person whose signature it Ebrada to account for the sum of P1,246.08, but said Ebrada
purports to be, it is wholly inoperative, and no right to retain refused to do so. So plaintiff Bank sued Ebrada before the
the instrument, or to give a discharge therefore, or to enforce City Court of Manila.
payment thereof against any party thereto, can be acquired Ebrada denied all allegations, and maintained that she is a
through or under such signature, unless the party against holder in due course. Ebrada filed a Third-Party complaint
whom it is sought to enforce such right is precluded from against Adelaida Dominguez who, in turn, filed on
setting up the forgery or want of authority." September 14, 1966 a Fourth-Party complaint against
Thus, the payments made by the drawee-banks to the BPI Justina Tinio.
on account of the said checks were ineffective and Jai-Alai The City Court of Manila rendered judgment for the plaintiff
did not received any deposit from it. Having received the Bank against defendant Ebrada; for Third-Party plaintiff
checks merely for collection and deposit, BPI cannot he against Third-Party defendant, Adelaida Dominguez, and for
Fourth-Party plaintiff against Fourth-Party defendant, Justina
 Tinio. presentation he impliedly asserts that he has performed his duty and
the drawee who has paid the forged check, without actual negligence
Issue: Whether or not the existence of one forged signature therein on his part, may recover the money paid from such negligent
will render void all the other negotiations of the check with respect to purchasers. In such cases the recovery is permitted because
the other parties whose signature are genuine although the drawee was in a way negligent in failing to detect the
forgery, yet if the encasher of the check had performed his duty, the
Held: No. the existence of one forged signature therein will not forgery would in all probability, have been detected and the fraud
render void all the other negotiations of the check with respect to the defeated.
other parties whose signature are genuine.

In the case of Beam vs. Farrel, 135 Iowa 670, 113 N.W. 590,
where a check has several indorsements on it, it was held METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM
that it is only the negotiation based on the forged or (MWSS) vs.CA
unauthorized signature which is inoperative.
Applying this principle to the case at bae, it can be safely FACTS:
concluded that it is only the negotiation predicated on the
forged indorsement that should be declared inoperative. This MWSS is a government owned and controlled corporation
means that the negotiation of the check in question from created under Republic Act No. 6234 as the successor-in-
Martin Lorenzo, the original payee, to Ramon R. Lorenzo, interest of the defunct NWSA. The Philippine National Bank (PNB
the second indorser, should be declared of no effect, but the for short), on the other hand, is the depository bank of MWSS and its
negotiation of the aforesaid check from Ramon R. Lorenzo predecessor-in-interest NWSA.
to Adelaida Dominguez, the third indorser, and from
Adelaida Dominguez to the defendant-appellant who did not
Among the several accounts of NWSA with PNB is NWSA Account
know of the forgery, should be considered valid and
No. 6, otherwise known as Account No. 381-777 and which is
enforceable, barring any claim of forgery.
presently allocated No. 010-500281. The authorized signature for
said Account No. 6 were those of MWSS treasurer Jose
Additional (with regards the drawee)
Sanchez, its auditor Pedro Aguilar, and its acting General
In the case of State v. Broadway Mut. Bank, 282 S.W. 196, 197, it Manager Victor L. Recio. Their respective specimen signatures
was held that the drawee of a check can recover from the holder the were submitted by the MWSS to and on file with the PNB. By
money paid to him on a forged instrument. It is not supposed to be special arrangement with the PNB, the MWSS used personalized
its duty to ascertain whether the signatures of the payee or indorsers checks in drawing from this account. These checks were printed
are genuine or not. This is because the indorser is supposed to for MWSS by its printer, F. Mesina Enterprises
warrant to the drawee that the signatures of the payee and previous
indorsers are genuine, warranty not extending only to holders in due During March, April and May 1969, 23 checks were prepared,
processed, issued and released by NWSA, all of which were
course. One who purchases a check or draft is bound to satisfy
paid and cleared by PNB and debited by PNB against NWSA
himself that the paper is genuine and that by indorsing it or Account No. 6. During the same months,23 checks bearing the
presenting it for payment or putting it into circulation before same numbersas the aforementioned NWSA checks were
likewise paid and cleared by PNB and debited against NWSA charge the amount so paid to the account of the depositor
Account No. 6 whose name was forged.
NBI showed that the MWSS fraud was an "inside job"
The foregoing checks were deposited by the payees Raul Dizon, and that the MWSS' delay in the reconciliation of bank
Arturo Sison and Antonio Mendoza in their respective current statements and the laxity and loose records control in
accounts with the Philippine Commercial and Industrial Bank (PCIB) the printing of its personalized checks facilitated the
and Philippine Bank of Commerce (PBC) in the months of March, fraud. These reports did not touch on the inherent qualities
April and May 1969. Thru the Central Bank Clearing, these checks of the signatures which are indispensable in the
were presented for payment by PBC and PCIB to the defendant determination of the existence of forgery. There must be
PNB, and paid, also in the months of March, April and May 1969. At conclusive findings that there is a variance in the inherent
the time of their presentation to PNB these checks bear the characteristics of the signatures and that they were written
standard indorsement which reads 'all prior indorsement and/or by 2 or more different persons.
lack of endorsement guaranteed.' Forgery cannot be presumed. It must be established by
clear, positive, and convincing evidence. This was not
Subsequent investigation conducted by the NBI showed that done in the present case.
Raul Dizon, Arturo Sison and Antonio Mendoza were all
fictitious persons. SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature
is forged or made without authority of the person whose signature it
NWSA addressed a letter to PNB requesting the immediate purports to be, it is wholly inoperative, and no right to retain the
restoration to its Account No. 6, of the total sum of P3,457,903.00 instrument, or to give a discharge therefor, or to enforce payment
thereof against any party thereto can be acquired through or under
corresponding to the total amount of these 23 checks claimed by
such signature unless the party against whom it is sought to enforce
NWSA to be forged and/or spurious checks. PNB refused, MWSS
such right is precluded from setting up the forgery or want of
filed a complaint before CFI Manila which rendered judgment in favor
authority.
of the MWSS. Judgement was reversed by the CA as well as the
Motion for reconsideration filed by MWSS.
Gross negligence in the printing of its personalized checks -
MWSS failed to
ISSUE: WON DRAWEE BANK WAS LIABLE FOR THE LOSS
UNDER SECTION 23 OF THE NEGOTIABLE INSTRUMENTS
LAW. 1. give its printer, Mesina Enterprises, specific instructions
relative to the safekeeping and disposition of excess forms,
HELD: NO.Every negotiable instrument is deemed prima facie to check vouchers, and safety papers
2. Retrieve from its printer all spoiled check forms
have been issued for valuable consideration and every person
3. Provide any control regarding the paper used in the printing
whose signature appears thereon to have become a party thereto for
value of said checks
4. Furnish the respondent drawee bank with samples of
typewriting, cheek writing, and print used by its printer in the
A bank is bound to know the signatures of its customers; and printing of its checks and of the inks and pens used in
if it pays a forged check it must be considered as making the signing the same
payment out of its obligation funds, and cannot ordinarily 5. Send a representative to the printing office during the
printing of said checks
6. To reconcile the bank statements with its own records Current Account Bookkeepers informing them of the
activities of forgery syndicates.
MWSS requested the PNB to discontinue the practice of Under the circumstances, MWSS was in a better
mailing the bank statements, but instead to deliver it to Mr. position to detect and prevent the fraudulent
EmilianoZaporteza. However, he was unreasonably delayed encashment of its checks.
in taking prompt deliveries of the bank statements and credit
and debit memos. As a consequence, Mr. Zaporteza failed BDO VS EQUITABLE BANKING CORPORATION
to reconcile the bank statements. If Mr. Zaporteza had not
been remiss in his duty of taking the bank statements and GR No. 74917; Jan 20, 1988
reconciling them with the petitioner's records, the fraudulent
encashments of the first checks should have been Facts:
discovered, and further frauds prevented. This negligence
was, therefore, the proximate cause of the failure to discover Plaintiffthrough the Visa Card Department, drew 6 crossed
the fraud. Managers check having an aggregate amount of
One factor which facilitate this fraud was the delay in the P45,982.23 payable to certain member establishments of
reconciliation of PNB statements with the NAWASA bank Visa Card. the Checks were deposited with the defendant to
accounts. x xx. Had the NAWASA representative come to the credit of its depositor, a certain Aida Trencio.
the PNB early for the statements and had the bank been
Following normal procedures, and after stamping at the back
advised promptly of the reported bogus check, the
of the Checks the usual endorsements: 'All prior and/or lack
negotiation of practically all of the remaining checks on May, of endorsement guaranteed' the defendant sent the checks
1969 could have been prevented.
for clearing through the Philippine Clearing House
The records likewise show that the petitioner failed to
Corporation (PCHC). Accordingly, plaintiff paid the Checks;
provide appropriate security measures over its own
its clearing account was debited for the value of the Checks
records thereby laying confidential records open to
and defendant's clearing account was credited for the same
unauthorized persons. The petitioner's own Fact Finding
amount.
Committee, in its report submitted to their General manager
Thereafter, plaintiff discovered that the endorsements were
underscored this laxity of records control. It observed that
forged
the "office of Mr. Ongtengco (Cashier No. VI of the Treasury
Plaitiff asked defendant for reimbursement but the latter
Department at the NAWASA) is quite open to any person
refused hence this case.
known to him or his staff members and that the check writer
is merely on top of his table Arbitration and RTC ordered defendant to reimburse plaintiff.
Even if the 23 checks in question are considered Issue:
forgeries, considering the petitioner's gross negligence,
it is barred from setting up the defense of forgery under Held:
Section 23 of the Negotiable Instruments Law
PNB had taken the necessary measures in the detection A commercial bank cannot escape the liability of an endorser
of forged checks and the prevention of their fraudulent of a check and which may turn out to be a forged
encashment. In fact, long before the encashment of the 23 endorsement.
checks in question, it had issued constant reminders to all this Court has succinctly emphasized that the collecting bank
or last endorser generally suffers the loss because it has the
 duty to ascertain the genuineness of all prior endorsements FORGERY ASSOCIATED BANK V. CA
considering that the act of presenting the check for payment
to the drawee is an assertion that the party making the
presentment has done its duty to ascertain the genuineness Drawer: Province of Tarlac
of the endorsements. This is laid down in the case of PNB Drawee Bank: PNB
vs. National City Bank. Collecting Bank: Associated Bank
In another case, this court held that if the drawee-bank Payee: Concepcion Emergency Hospital
discovers that the signature of the payee was forged after it Forger: Fausto Pangilinan
has paid the amount of the check to the holder thereof, it can
recover the amount paid from the collecting bank. Facts:
As held in PNB vs National City Bank:
The Province of Tarlac was disbursing funds to Concepcion
"Where a check is accepted or certified by the bank on which
Emergency Hospital via checks drawn against its account with the
it is drawn, the bank is estopped to deny the genuineness of
Philippine National Bank (PNB). These checks were drawn payable
the drawer's signature and his capacity to issue the
to the order of Concepcion Emergency Hospital. In January 1981,
instrument.
the books of account of the Provincial Treasurer were post-audited
by the Provincial Auditor. It was then discovered that the hospital did
If a drawee bank pays a forged check which "was previously
not receive several allotment checks drawn by the Province. After
accepted or certified by the said bank, it can not recover
the checks were examined, the Provincial Treasurer learned that 30
from a holder who did not participate in the forgery and did
checks amounting to P203,300.00 were encashed by one Fausto
not have actual notice thereof.
Pangilinan (after forging the signature of Dr. Adena Canlas who was
Thus We hold that while the drawer generally owes no duty
of diligence to the collecting bank, the law imposes a duty of chief of the payee hospital) , with the Associated Bank acting as
diligence on the collecting bank to scrutinize checks collecting bank. Fausto Pangilinan was the cashier of Concepcion
deposited with it for the purpose of determining their Emergency Hospital in Tarlac until his retirement in 1978. He used to
genuineness and regularity. The collecting bank being handle checks issued by the provincial government of Tarlac to the
primarily engaged in banking holds itself out to the public as said hospital. However, after his retirement, the provincial
the expert and the law holds it to a high standard of conduct. government still delivered checks to him until its discovery of this
Dismissed
irregularity in 1981.

The Provincial Treasurer wrote the manager of the PNB seeking the
restoration of the various amounts debited from the current account
of the Province. In turn, the PNB manager demanded
reimbursement from the Associated Bank. As both banks resisted
payment, the Province of Tarlac brought suit against PNB which, in
turn, impleaded Associated Bank as third-party defendant. The latter
then filed a fourth-party complaint against Adena Canlas and Fausto
Pangilinan.
Issue: What are the liabilities of each party? EXCEPTION: If the drawee bank (PNB) can prove a failure by the
customer/drawer (Tarlac Province) to exercise ordinary care that
Held: substantially contributed to the making of the forged signature, the
drawer is precluded from asserting the forgery.
Liability of Associated Bank
In sum, by reason of Associated Banks indorsement and warranties
Where the instrument is payable to order at the time of the forgery, of prior indorsements as a party after the forgery, it is liable to refund
such as the checks in this case, the signature of its rightful holder the amount to PNB. The Province of Tarlac can ask reimbursement
from PNB because the Province is a party prior to the forgery.
(here, the payee hospital) is essential to transfer title to the same
Hence, the instrument is inoperative. HOWEVER, it has been proven
instrument. When the holders indorsement is forged, all parties prior
that the Provincial Government of Tarlac has been negligent in
to the forgery may raise the real defense of forgery against all parties
issuing the checks especially when it continued to deliver the checks
subsequent thereto.
to Pangilinan even when he already retired. Due to this contributory
negligence, PNB is only ordered to pay 50% of the amount or half of
A collecting bank (in this case Associated Bank) where a check is P203 K.
deposited and which indorses the check upon presentment with the
drawee bank (PNB), is such an indorser. So even if the indorsement
BUT THEN AGAIN, since PNB can pass its loss to Associated Bank
on the check deposited by the bankss client is forged, Associated
Bank is bound by its warranties as an indorser and cannot set up the (by reason of Associated Banks warranties), PNB can ask the 50%
defense of forgery as against the PNB. reimbursement from Associated Bank. Associated Bank can ask
reimbursement from Pangilinan but unfortunately in this case, the
court did not acquire jurisdiction over him.
EXCEPTION: If it can be shown that the drawee bank (PNB)
unreasonably delayed in notifying the collecting bank (Associated
Bank) of the fact of the forgery so much so that the latter can no REPUBLIC BANK v. CA
longer collect reimbursement from the depositor-forger.
Petitioner: Republic Bank
Respondent: CA, First National City Bank (FNCB)
Liability of PNB Drawer SMC Drawee bank - FNCB Collecting
bank Republic
The bank on which a check is drawn, known as the drawee bank
(PNB), is under strict liability to pay the check to the order of the Summary: Gumawa ng check si SMC from its account with FNCB in
payee (Provincial Government of Tarlac). Payment under a forged favour of Delgado. Tapos pagkareceive ni Delgad pinnalitan niya
indorsement is not to the drawers order. When the drawee bank yung amount from P240 to P9,240 which he deposited with his bank
pays a person other than the payee, it does not comply with the Republic and was accepted. Nalaman ng SMC yung alteration kaya
terms of the check and violates its duty to charge its customers (the ininform nila yung FNCB but it was too late kasi tinanggal na ni
drawer) account only for properly payable items. Since the drawee Delgado yung account niya from Republic. FNCB demanded that
bank did not pay a holder or other person entitled to receive Republic refund the P9,240.
payment, it has no right to reimbursement from the drawer. The
general rule then is that the drawee bank may not debit the drawers
account and is not entitled to indemnification from the drawer. The
risk of loss must perforce fall on the drawee bank.
FACTS: demand against the bank, institution or entity whose
San Miguel Corporation (SMC) drew a dividend check for item has been returned.
P240 on its account in FNCB in favor of its stockholder J. It is true that when an endorsement is forged, the collecting
Roberto C. Delgado. Upon receipt, Delgado fraudulently bank or last endorser, as a general rule, bears the loss. But
and without authority of the drawer, SMC, altered by the unqualified endorsement of the collecting bank on the
increasing it from P240 to P9,240. He endorsed and check should be read together with the 24-hour regulation on
deposited it with his bank Republic. clearing house operation.
Republic accepted the check for deposit without ascertaining Thus, when the drawee bank (FNBC) fails to return a forged
its genuineness and regularity. And it endorsed the check to or altered check to the collecting (Republic) bank within the
FNCB and presented it to FNCB for payment through the 24-hour clearing period, the collecting bank (Republic) is
Central Bank Clearing House. Relying on the guaranty and absolved from liability.
endorsement of Republic, FNCB paid P9,240 to Republic. o Every bank that issues checks for the use of its
SMC informed FNBC that the check has been altered. Then customers should know whether or not the drawer's
FNCB informed Republic of the alteration and the forgery of signature thereon is genuine. Thus, FNBC should
the endorsement of Delgado. However, Delgado had already have known that the check has been altered by
withdrawn his account from Republic. Delgado.
FNCB demanded that Republic refund the P9,240. Thus, Republic is absolved from liability to refund to FNCB
Republic refused (1) delay in giving it notice of the the sum of P9,240.
alteration; (2) drawer SMC's fault in drawing the check in
such a way as to permit the insertion of numerals increasing Philippine Commercial International Bank v. Court of Appeals
the amount; (3) FNCB, as drawee, was absolved of any [G.R. No. 121413. January 29, 2001.]
liability to the SMC, thus, (4) FNCB had no right of recourse
against Republic.
Parties:
ISSUE: WON Republic (collecting bank), is protected, by the 24-hour
clearing house rule from liability to refund the amount paid by FNCB 1stcase:PHILIPPINE COMMERCIAL INTERNATIONAL BANK
(drawee) of the SMC (formerly INSULAR BANK OF ASIA AND AMERICA) (petitioner) and
COURT OF APPEALS and FORD PHILIPPINES, INC. and
HELD:
Yes, Republic is entitled to the protection of 24-hour clearing CITIBANK, N.A. (respondents)
house rule.
Section 4(c) of Central Bank Circular No. 9 (24-hour 2nd case: FORD PHILIPPINES, INC. (petitioner-plaintiff) and COURT
clearing house rule) OF APPEALS and CITIBANK, N.A. and PHILIPPINE COMMERCIAL
o Items which should be returned for any reason INTERNATIONAL BANK (respondents)
whatsoever shall be returned directly to the bank,
institution or entity from which the item was received. 3rd case: FORD PHILIPPINES, INC.(petitioner) and CITIBANK, N.A.,
o Should use the Receipt for Returned Checks. PHILIPPINE COMMERCIAL INTERNATIONAL BANK and THE
o The original of the Receipt for Returned Checks
COURT OF APPEALS (respondents)
shall be presented through the Clearing Office as a
Facts: [Friends, yung synopsis nalangsa full text nilagaykokasi mas checks. These two rulings became the subject of the present
madalisiyaintindihin and more or less nandunnayung details recourse.
necessary para magetsang case]
Issue: Whether or not Ford the right to recover from the collecting
Ford Philippines drew and issued Citibank Check. No. SN bank (PCIBank) and the drawee bank (Citibank) the value of the
04867 on October 19, 1977, Citibank Check No. SN 10597 checks intended as payment to the Commissioner of Internal
on July 19, 1978 and Citibank Check No. SN-16508 on April Revenue
20, 1979, all in favor of the Commissioner of Internal
Revenue (CIR) for payment of its percentage taxes. Held: Yes. Ford has the right to recover.
The checks were crossed and deposited with the IBAA, now
PCIB, BIR's authorized collecting bank. Section 5 of Central Bank Circular No. 580, Series of 1977
The first check was cleared containing an indorsement that provides that any theft affecting items in transit for clearing,
"all prior indorsements and/or lack of indorsements shall be for the account of sending bank, which in this case
guaranteed." The same, however, was replaced with two (2) is PCI Bank. But in this case, responsibility for negligence
IBAA's managers' checks based on a call and letter request does not lie on PCI Bank's shoulders alone.
made by Godofredo Rivera, Ford's General Ledger The evidence on record shows that Citibank as drawee bank
Accountant, on an alleged error in the computation of the tax was likewise negligent in the performance of its duties.
due without IBAA verifying the authority of Rivera. Citibank failed to establish that its payment of Ford's checks
These manager's checks were later deposited in another were made in due course and legally in order. In its defense,
bank and misappropriated by the syndicate. Citibank claims the genuineness and due execution of said
The last two checks were cleared by the Citibank but failed checks, considering that Citibank (1) has no knowledge of
to discover that the clearing stamps do not bear any initials. any infirmity in the issuance of the checks in question (2)
The proceeds of the checks were also illegally diverted or coupled by the fact that said checks were sufficiently funded
switched by officers of PCIB members of the syndicate, and (3) the endorsement of the Payee or lack thereof was
who eventually encashed them. guaranteed by PCI Bank (formerly IBAA), thus, it has the
Ford, which was compelled to pay anew the percentage obligation to honor and pay the same.
taxes, sued in two actions for collection against the two Citing Section 62 of the Negotiable Instruments Law, Ford
banks on January 20, 1983, barely six years from the date argues that by accepting the instrument, the acceptor which
the first check was returned to the drawer. The direct is Citibank engages that it will pay according to the tenor of
perpetrators of the crime are now fugitives from justice. its acceptance, and that it will pay only to the payee, (the
In the first case, the trial court held that Citibank and IBAA CIR), considering the fact that here the check was crossed
were jointly and severally liable for the checks, but on review with annotation "Payees Account Only."
by certiorari, the Court of Appeals held only IBAA (PCIB) As ruled by the Court of Appeals, Citibank must likewise
solely liable for the amount of the first check. answer for the damages incurred by Ford on Citibank
In the second case involving the last two checks, the trial Checks Numbers SN 10597 and 16508, because of the
court absolved PCIB from liability and held that only the contractual relationship existing between the two. Citibank,
Citibank is liable for the checks issued by Ford. as the drawee bank breached its contractual obligation with
However, on appeal, the Court of Appeals held both banks Ford and such degree of culpability contributed to the
liable for negligence in the selection and supervision of their damage caused to the latter. On this score, the Court agrees
employees resulting in the erroneous encashment of the
 with the CAs ruling. officer who then showed it to Sempio, assistant accountant
Invoking the doctrine of comparative negligence, the Court is of Samsung Construction who vouched for the same. Syfu
of the view that both PCI Bank and Citibank failed in their authorized the withdrawal.
respective obligations and both were negligent in the The next day Samsung Construction found the balance of
selection and supervision of their employees resulting in the their account was lacking P999,500 , the last blank check
encashment of Citibank Check Nos. SN 10597 and 16508. missing and his signature was forged. They instituted a
Thus, the Court is constrained to hold them equally liable for criminal case for qualified theft against Sempio.
the loss of the proceeds of said checks issued by Ford in RTC: Asked to credit back Samsung. CA: reversed
favor of the CIR. Issue: Who shall bear the loss

Samsung vs FEBTC Held: FEBTC.

G.R. No. 129015. August 13, 2004

Facts: Section 23 of the Negotiable Instruments Law states:

Plaintiff Samsung Construction Company Philippines, Inc. When a signature is forged or made without the authority of the
maintained a current account with defendant Far East Bank person whose signature it purports to be, it is wholly inoperative, and
and Trust Company (FEBTC) at the latters Bel-Air, Makati no right to retain the instrument, or to give a discharge therefor, or to
branch. 2The sole signatory to Samsung Constructions enforce payment thereof against any party thereto, can be acquired
account was Jong Kyu Lee (Jong), its Project Manager, through or under such signature, unless the party against whom it is
while the checks remained in the custody of the companys
sought to enforce such right is precluded from setting up the forgery
accountant, Kyu Yong Lee (Kyu)
a certain Roberto Gonzaga presented for payment FEBTC or want of authority.
Checknto the banks branch in Bel-Air, Makati.
The check, payable to cash and drawn against Samsung
Constructions current account, was in the amount of Nine
Hundred Ninety Nine Thousand Five Hundred Pesos general rule is to the effect that a forged signature is wholly
(P999,500.00). inoperative, and payment made through or under such
The bank teller, CleofeJustiani compared the signature signature is ineffectual or does not discharge the
appearing on the check with the specimen signature of Jong instrument.
as contained in the specimen signature card with the bank. f payment is made, the drawee cannot charge it to the
After comparing the two signatures, Justiani was satisfied as drawers account.
to the authenticity of the signature appearing on the check. The traditional justification for the result is that the drawee is
She then asked Gonzaga to submit proof of his identity, and in a superior position to detect a forgery because he has the
the latter presented three (3) identification cards. makers signature and is expected to know and compare it.
Justiani later showed it to the Senior Asst. Cashier Velez The rule has a healthy cautionary effect on banks by
who counterchecked the signature against the card and encouraging care in the comparison of the signatures
concluded it was Jongs. Velez showed it to Syfu, a bank against those on the signature cards they have on file.
 The forgery may be committed by a trusted employee or
confidential agent. The bank still must bear the loss. Even in
a case where the forged check was drawn by the depositors
partner, the loss was placed upon the bank.
forgery is a real or absolute defense by the party whose
signature is forged
liability attaches even if the bank exerts due diligence and
care in preventing such faulty discharge, even if the forgery
be near like genuine as to defy detection, bank is still liable