FORGED SIGNATURE: G.R. No. 126696 January 21, 1999 SECURITY BANK TRUST CO!"ANY, petitioner, vs. TRIU!

"# $U!BER AND CONSTRUCTION COR"ORATION, respondent.

DA%IDE, JR., C.J.: In this petition for review on certiorari under Rule 45 of the Rules of Court the petitioner asks this Court to reverse the decision 1 of 28 December !!5 and the resolution 2 of "
#eptember !!$ of the Court of %ppeals in C%&'.R. C( )o, **5 *. +he former set aside the decision & of 4 )ovember !!, of the Re-ional +rial Court .R+C/ of 0akati in Civil Case )o. $882 and ordered the petitioner to reimburse the private respondent the value of the alle-ed for-ed checks drawn a-ainst private respondent1s account, plus interest and attorne21s fees. +he latter denied petitioner1s motion for reconsideration. 3etitioner and private respondent were the defendant and plaintiff respectivel2, in Civil Case )o. $882. +he factual antecedents of this case were summari4ed b2 the trial court in its decision in Civil Case )o. $8825 thus6 7ased on plaintiffs evidence, it appears that plaintiff is a depositor in -ood standin- of defendant bank1s branch at #ucat, 3ara8a9ue, under current checkin- account no. 2 ,& ,,5*&$,. 3laintiff claims that on 0arch 2* and 24, !8", three .*/ checks all pa2able to cash and all drawn a-ainst plaintiffs aforementioned current account were presented for encashment at defendant1s #ucat 3ara8a9ue branch, to wit6 #ecurit2 7ank check nos. 4$$""! and 4$$""", both dated 0arch 2*, !8" in the amount of 3 5,,,,,.,, and 3 *,,,,,.,,, respectivel25 and #ecurit2 7ank Check no. 4$$"8, dated 0arch 24, !8" in the amount of 32,,,,,.,,. .:;hs. %, %& to %&*, 7, 7& to 7&*, C, C& to C&*/ 3laintiff also claims that due to defendant bank1s -ross ne-li-ence and ine;cusable ne-li-ence in e;ercisin- ordinar2 dili-ence in verif2in- from plaintiff the encashment of plaintiff1s checks whose amount e;ceed 3 ,,,,,.,, and in determinin- the for-er2 of drawer1s si-natures, the aforesaid three .*/ checks were encashed b2 unauthori4ed persons to the dama-e and pre<udice of the plaintiff corporation. .:;hs, D, D&l, D&2/ 3laintiff then re9uested the defendant to credit back and restore to its account the value of the checks which were wron-full2 encashed in the amount of 3*,,,,,,.,, but despite due demand the defendant failed to pa2 its liabilit2. .:;hs. =, =&l, =&2/ =inall2, plaintiff claims that per findin-s of the 3C Crime >aborator2, the si-natures of Co ?ok +en- and ?u Chun @it, the authori4ed Asi-natoriesB of plaintiff were for-ed. .:;hs.:, :& , to :&4, ', '& , '&2, C, I, I& , I&2/ Dpon the other hand, the defendant bank claims that on Eune !, !85 the plaintiff corporation opened savin-s account no. *22,&,52!&"! and current account no. *2 ,& ,,5*&$, with defendant bank1s branch in #ucat, 3ara8a9ue, 0etro 0anila. In order to make the said current and savin-s account operational, the plaintiff herein provided the defendant with the re9uisite specimen si-nature cards which in effect authori4ed defendant bank to honor withdrawals on the basis of an2 two of three si-natures affi;ed thereon, specificall2 those of 0r. Dee @on-, 0r. Co ?ok +en- and 0r. Chun ?un @it, the

president, treasurer and -eneral mana-er, respectivel2, of plaintiff corporation. .:;hs. *, 4/ #ubse9uentl2, plaintiff e;ecuted an automatic transfer a-reement authori4indefendant bank to transfer cleared funds from plaintiff1s savin-s account to its current account at an2 time whenever funds in the current account are insufficient to meet withdrawals therefrom or are below the stipulated minimum balance. .:;hs. 5, $, $&%/ Defendant also claims that the savin-s account pass book and the check booklets were kept b2 the plaintiff in its filin- cabinet but on 0arch 2*, !8" the plaintiff herein discovered that the door of his office was forced open includin- that of the filin- cabinet where the check booklets and other bank documents were bein- kept b2 the plaintiff. .pp. *2&**, +#) of %u-ust 5, !88/ Defendant further claims that the incident was not reported to the police authorities b2 the plaintiff nor was there an2 advise -iven to defendant bank and that on the same da2 of the discover2 b2 plaintiff of the bur-lar2, said plaintiff nevertheless made three separate deposits in a total amount of 3*"4,554. ,. .:;hs. , &%, &7, 2&%, 2&7/ Defendant also claims that immediatel2 after the said deposit of 3*"4,554. , has been made b2 the plaintiff, three checks namel26 check no. 4$$""! dated 0arch 2*, !8" in the amount of 3 *,,,,,.,,5 check no. 4$$""! dated 0arch 2*, !8" of 3 5,,,,,.,, and check no. 4$$"8, dated 0arch 24, !8" in the amount of 32,,,,,.,, which AwereB all pa2able to cash were successivel2 presented to defendant bank for encashment which was -iven due course b2 the latter after said checks have passed throu-h the standard bank procedure for verification the check si-natures and the re-ularit2 of the material particular of said checks. .pp. $, !, 2,, *!, +#) of =ebruar2 , !8!, p. 2 , +#) of %u-ust 5, !88/ ' Fn the basis of such factual environment, the trial court found no preponderance of evidence to support private respondent1s complaint. +he private respondent failed to show that the si-natures on the sub<ect checks were for-ed. It did not even present in court the ori-inals of the checks. )either did it bother to e;plain its failure to do so. +hus, it could be presumed that the ori-inal checks were willfull2 suppressed and would be adverse to private respondent1s case if produced. 0oreover, the si-natures on the checks were not compared with the specimen si-natures appearin- on the specimen si-natures cards provided b2 the private respondent upon openin- its current account with petitioner. +hus, the opinion of the e;pert witness is not worth2 of credit. 7esides, the private respondent failed to present 0r. Co ?ok +en-, one of the si-natories of the checks in 9uestion, to den2 the -enuineness of the si-natures. +he trial court was convinced that the petitioner bank had e;ercised due care and dili-ence in determininthe authenticit2 of the checks in 9uestion before the2 were encashed. It was rather the private respondent that had been ne-li-ent in the care and custod2 of the corporate checks. %fter the incident in 9uestion occurred, the private respondent should have reported the matter to the police authorities or to the bank in order that the latter could Gundertake strin-ent measure to counteract an2 attempt to for-e the corporate checks.G 7ut private respondent did not. Cence, private respondent should be the one to bear the loss. In view of such findin-s, the trial court is missed the complaint for lack of merit. Fn appeal, the Court of %ppeals reversed the decision of the trial court and ordered the petitioner to reimburse the private respondent the sum of 3*,,,,,,, plus interest at the rate of 2 H2 I per month from 24 0arch !8" until full pa2ment thereof, as well as attorne21s fees e9uivalent to 25I of the principal obli-ation. +he Court of appeals held that it was not necessar2 for the private respondent to prove that the si-natures on the three checks in 9uestion were for-ed of the followin- admissions set forth in petitioner1s answer6 4. 3laintiff was -uilt2 of ne-li-ence substantiall2 contributin- to the unauthori4ed si-natures or for for-er2 of the si-natures on the checks mentioned in the complaint.

;;; ;;; ;;; 5. +he alle-ed for-ed si-natures on the checks were sufficientl2 adroit as to escape detection even under the officer1s scrutin2. ;;; ;;; ;;; 2,.* %nna 3. )aval and Roberto ). 'abutao verball2 admitted that the checks were for-ed. ;;; ;;; ;;; 2 . %nna )aval and Roberto 'abutao are now facin- char-es for estafa thru =alsification of Commercial Documents under Criminal Case )o. *,,,4 pendin- with the Re-ional +rial Court, )ational Capital Eudicial Re-ion, sittin- at 0akati, 0etro 0anila. %ccordin- to the Court of %ppeals, the e;pert witness, contrar2 to the trial court1s findin-, was able to e;amine the si-natures on the ori-inal checks and compared them with the standard si-natures of the si-natories. +he photo-raphic enlar-ements of the 9uestioned checks, which she identified in court, were in fact taken from the ori-inal checks. Jith the bank1s admission in its answer, as well as the unrebutted testimon2 of the e;pert witness and of Chun ?un @it, there could be no doubt that the si-natures on the 9uestioned checks were for-ed. +he Court of %ppeals likewise held that the petitioner must be the one to bear the conse9uences of its failure to detect the fo-er2. 7esides, petitioner was Gless than prudentG in the treatment of private respondent1s account. It did not observe its arran-ement with the private respondent that it would inform the latter whenever a check of more than 3 ,,,,, would be presented for encashment. )either did it ask the pa2ee to present an identification card or to brin- someone who could attest to identit2 of the pa2ee. %fter its motion for reconsideration was denied ( b2 the Court of %ppeals, petitioner filed this petition contendin- that the Court of %ppeals erred in holdin- that I . . . +C: #I')%+DR:# F) +C: CC:C@# I) KD:#+IF) J:R: =FR':D. II . . . JC:+C:R +C: #I')%+DR:# J:R: =FR':D I# )F >F)':R %) I##D: I) +C: C%#: CF)#ID:RI)' +C: %==IR0%+I(: D:=:)#:# #:+ =FR+ I) 3:+I+IF):R1# %)#J:R. III . . . +C: 3:+I+IF):R I+#:>= J%# ):'>I':)+ %)D +C%+ R:#3F)D:)+ :L:RCI#:D DD: C%R: I) +C: CD#+FD? F= I+# CC:C@# %)D F+C:R R:>%+:D DFCD0:)+#. I( . . . R:#3F)D:)+ I# :)+I+>:D +F R:I07DR#:0:)+ F= 3*,,,,,,.,, 3>D# I)+:R:#+ +C:R:F= %# J:>> %# %++FR):?1# =::#.

In the first assi-ned error, the petitioner alle-es that the best evidence of the for-er2 were the ori-inal checks bearin- the alle-ed for-ed si-natures of private respondent1s officers. In spite of the timel2 ob<ection made b2 the petitioner, the private respondent introduced in evidence mere photocopies of the 9uestioned checks. +he failure to produce the ori-inals of the checks was a fatal omission inasmuch as there would be no evidentiar2 basis for the court to declare that the instruments were for-eries. >ikewise such failure amounted to a willful suppression of evidence, which created a presumption that its production would be unfavorable to respondent1s case. 6 It could also be presumed that Gthe checks in 9uestion AwereB -enuine checks re-ularl2 issued b2 the respondent in the course of its business, bearinthe -enuine si-natures of the officers whom it authori4ed to si-n in its behalf.G %lso, an unfavorable inference could be drawn from the une;plained failure of private respondent to call as its witness 0r. Co ?ok +en-, whose si-nature was amon- those alle-edl2 for-ed. 3etitioner further contends that the opinion of private respondent1s e;pert witness, Crispina (. +abo, #enior Document :;aminer of the 3C Crime >aborator2, has no wei-ht and deserves no consideration. +abo did not use as basis of her anal2tical stud2 the standard si-natures of Chun ?un @it and Co ?ok +en- on the specimen si-nature cards provided b2 the private respondent upon openin- Current %ccount )o. *2 ,&,52*&$, with the petitioner. It was to be a-ainst these standard si-natures appearin- on the specimen cards that petitioner was to honor checks drawn a-ainst private respondent1s account. Jhat +abo utili4ed for comparisons were si-natures that were not even authenticated b2 Chun ?un @it and Co ?ok +en-. )either was it proved that the supposed standard si-natures had been written Gclosel2 pro;imateG to the date of the 9uestioned checks. 0oreover, the Gre9uested si-naturesG on the lon- bond paper written post litem motam could not be accepted as standards of comparison Gbecause of the ease with which the2 AcouldB be dis-uised to intentionall2 differentiate them from those bein- challen-ed.G ) %s to the second assi-ned error, petitioner maintains that its %nswer contained a specific denial of private respondent1s alle-ation of for-er2. It could set in its answer affirmative and ne-ative defenses alternativel2 even if the2 were inconsistent with each other. 9 Jith respect to its third assi-ned error, petitioner asserts that it e;ercised due care and dili-ence in the pa2ment of private respondent1s checks b2 first verif2in- in accordance with standard bank practices and procedures the -enuineness of the si-natures and endorsements. Dpon the other hand, the private respondent, in the mana-ement of its business affairs, fell short of the dili-ence and the ordinar2 prudence re9uired under the circumstances. It should have advised petitioner of the alle-ed bur-lar2 that petitioner could have applied stricter rules in the processin- of checks drawn a-ainst private respondent1s account, but it did not bother to do so. )either did it reconcile its account balances with the petitioner in order to forestall the happenin- of the for-er2. In the last assi-ned error, the petitioner alle-es that in view of the reasons it stated in the first and third assi-ned errors the petitioner cannot be obli-ed to pa2 the amount of 3*,,,,,, plus interest. Fn the contrar2, petitioner is entitled to an award of attorne21s fees because private respondent1s complaint was Ginsincere, baseless, and intended to harass, anno2 and defame AitB.G 1* Dpon the other hand, the respondent claims that petitioner should have filed Ga petition for review b2 certiorari and not merel2 a petition for review.G +he determination of ne-li-ence b2 the Court of %ppeals is a 9uestion of fact that cannot be disturbed on appeal. :ven assumin- that the instant case is an e;eption to the rule limitin- the appellate <urisdiction of the #upreme Court to reviewin- errors of law nonetheless, the issue of for-er2 was ade9uatel2 proved b2 preponderance of evidence. +his appeal is meritorious. Jell settled is the rule that in the e;ercise of our power of review the findin-s of facts of the Court of %ppeals are conclusive and bindin- on this Court. Cowever, there are reco-ni4ed e;ceptions, amonwhich is when the factual findin-s of the trial court and the appellate court are conflictin-. 11 +he disa-reement between the trial court and the Court of %ppeals in the factual conclusion, especiall2 with

re-ard to the alle-ed for-er2 of the si-natures on the 9uestioned checks and the ne-li-ence of the parties, has constrained us to e;amine the evidence submitted b2 the parties. Fn the issue of for-er2, we are unable to a-ree with the findin- of the Court of %ppeals that the petitioner admitted in its %nswer 12 to the complaint the for-er2 of the si-natures. =ar from admittin- the for-er2, petitioner cate-oricall2 denied that the si-natures on the 9uestioned checks were for-eries. Cowever, b2 wa2 of an alternative affirmative defense, petitioner contended that it had e;ercised reasonable de-ree of dili-ence in detectin- whether there was for-er2 :ven assumin- that the si-natures on the checks were for-ed, still petitioner could not be held liable for the value of the checks because all the checks were complete and re-ular on their face. +he alle-ed for-ed si-natures were Gsufficientl2 adroit as to escape detection even under the officer1s scrutin2.G +he Court of %ppeals also erred in holdin- that for-er2 was dul2 established. =irst, #ection *, Rule *, of the Rules of Court was not complied with b2 private respondent. +he #ection e;plicitl2 provides that when the sub<ect of in9uir2 is the contents of a document, no evidence shall be admissible other than the ori-inal document itself. +his is what is known as the Gbest evidenceG rule. +he e;ceptions are as follows6 . Jhen the ori-inal has been lost or destro2ed, or cannot be produced in court, without bad faith on the part of the offeror5 2. Jhen the ori-inal is in the custod2 or under the control of the part2 a-ainst whom the evidence is offered, and the latter fails to produce it after reasonable notice5 *. Jhen the ori-inal consists of numerous accounts or other documents which cannot be e;amined in court without -reat loss of time, and the fact sou-ht to be established from them is onl2 the -eneral result of the whole5 and 4. Jhen the ori-inal is a public record in the custod2 of a public officer or is recorded in a public office. In this case, the ori-inals of the alle-ed for-ed check has to be produced since it was shown that an2 of these e;ceptions was present. Jhat the private respondent offered were mere photocopies of the checks in 9uestion marked as :;hibits G%,G G7,G and GC,G 1& It never e;plained the reason wh2 it could not produce the ori-inals of the checks. Its e;pert witness Crispina +abo admitted thou-h that the ori-inal checks were taken back b2 the investi-atin- policeman, 'len +icson5 thus6 %++?. )%R%'6 K Do 2ou have a cop2, 0adam Jitness of the checks which were submitted to 2ou under 9uestionM % It was onl2 a ;ero; cop2, because the ori-inal was withdrawn b2 the investi-atin- policeman, which is in .sic/ the name of 'lenn +ic4on, sir. K Do 2ou want to impress the court that the ori-inals of these checks were submitted to 2ouM % ?es, sir. K Do 2ou have a cop2 of the ori-inals of the checks under .sic/ standardsM

% Lero; copies onl2, because it was also withdrawn b2 the investi-atinpoliceman, who is 0r. 'lenn +ic4on. 1' ?et, the said policeman was not presented to produce the ori-inal checks. It is true that the photocopies of the 9uestioned checks were all identified b2 private respondent1s witness ?u Chun @it durin- his direct testimon2 1( without ob<ection on the part of petitioner1s counsel. +he latter even cross&e;amined ?u Chun @it, 16 and, at the formal offer of said e;hibits, he ob<ected to their admission solel2 on the -rounds that the2 were Girrelevant, immaterial and self&servin-.G 1+ +he photocopies of the checks ma2 therefore be admitted for failure of petitioner to tender an appropriate ob<ection 1) to their admission. )evertheless, their probative value is nil. 19 +hen, too, .the proper procedure in the investi-ation of a disputed handwritin- was not observed. +he initial step in such investi-ation is the introduction of the -enuine handwritin- of the part2 sou-ht to be char-ed with the disputed writin-, which is to serve as a standard of comparison. 2* +he standard or the e;emplar must therefore be proved to be -enuine. 21 =or the purpose of provin- the -enuineness of a handwritin- #ection 22, Rule *2 of the Rules of Court provides6 #ec. 22. How the genuineness of handwriting is proved. N +he handwritin- of a person ma2 be proved b2 an2 witness who believes it to be the handwritin- of such person because he has seen the person write, or has seen writin- purportin- to be his upon which the witness has acted or been char-ed, and has thus ac9uired knowled-e of the handwritin- of such person. :vidence respectin- the handwritin- ma2 also be -iven b2 a comparison, made b2 the witness or the court, with writin-s admitted or treated as -enuine b2 the part2 a-ainst whom the evidence is offered, or proved to be -enuine to the satisfaction of the <ud-e. In BA Finance v. Court of Appeals, 22 we had the occasion to rule that the -enuineness of a standard writin- ma2 be established b2 an2 of the followin-6 . / b2 the admission of the person sou-ht to be char-ed with the disputed writin- made at or for the purposes of the trial, or b2 his testimon25 .2/ b2 witnesses who saw the standards written or to whom or in whose hearin- the person sou-ht to be char-ed acknowled-ed the writin- thereof5 .*/ b2 evidence showin- that the reputed writer of the standard has ac9uiesced in or reco-ni4ed the same, or that it has been adopted and acted upon b2 him in his business transactions or other concerns. Je find in the records onl2 photocopies, not the ori-inals, of the Glon- bond papersG containin- the alle-ed specimen si-natures. 2& )obod2 was presented to prove that the specimen si-natures were in fact si-natures affi;ed b2 ?u Chun @it and Co ?ok +en-. %lthou-h the former took the witness stand, he was never called to identif2 or authenticate his si-natures on the said photocop2. Clearl2 then, #ection 22 of Rule *2 of the Rules of Court and the -uidelines set forth in 7% =inance v. Court of %ppeals 2' were not complied with. 0oreover, the so&called specimen si-natures on the bond paper were not directl2 turned over to +abo b2 those who purportedl2 wrote them. +he2, to-ether with the 9uestioned checks, were first submitted to the %dministration 7ranch of the 3C Crime >aborator2, then endorsed to the Kuestioned Document 7ranch. +he chief of the latter branch thereafter referred them to +abo. +abo never saw the parties write the specimen si-natures. #he <ust presumed the specimen si-natures to be -enuine si-natures of the parties concerned. +hese facts were disclosed b2 +abo durin- her cross&e;amination5 thus6 K These question [sic] signatures and the specimen or signatures or standard were just given to ou ! the police of "ara#aque$ % %t was su!mitted to the Administrative Branch and the Administrative Branch endorsed that to the &uestion the 'ocument Branch and the

Chief of the 'ocument Branch assigned that case to me( sir That is wh % received it and e)amined it. CFDR+6 K How do ou *now that( that is the genuine signatures$ %1I+?. R:(I>>% ?es, how do 2ou know that, that is the -enuine si-natures when 2ou were not able to see him personall2 write his si-natureM % Because % e)amined the genuine signatures of Co +o* Teng which was su!mitted to the office ! the investigator and it said to !e genuine( and % compared the signature whether genuine or not. And upon comparing( all the specimen signatures were written ! one( and also comparing all the question [sic] signatures( this one ,pointing to the chart- are written ! one so( the were written( the question [sic] and specimen were written ! two different persons. K ?ou did not ask the person to personall2 -ive his si-nature in order that there will be basis of comparison between standard si-nature and the 9uestion AsicB si-natureM % ?our Conor, if the specimen si-nature is not sufficient enou-h to arrive at a conclusion, we will tell the investi-ator to let the person involved to come to our office to write and si-n his si-nature, if it is not sufficient to arrive at a conclusion we let him si-n. K #o, 2ou do not normall2 demand his income ta; for e;ample, the residence certificate or other documents which contained this undisputed si-natureM %. Je did not ask an2more additional specimen because the submitted document is sufficient enou-h to arrive at the conclusion. %++?. R:(I>>%6 K .o( ou just relied on what were given to ou ! the investigator as the informed ou that these were genuine and standard signature$ % +es( sir. K And who was that person who gave ou this document$ % %t was the Administrative Branch who [sic] endorsed this document to the 'ocumentation Branch. % do not *now the person who !rought that. K +ou do not *now the person who !rought this document to the Administrative !ranch$ % +es( sir % do not *now.

K /hen ou started ma*ing comparison and anal sis of0 this question [sic] signatures and standard signatures( ou did not an more require the person( 1r. C2 +o* Teng to appear personall to ou$ % % did not( sir. 2( %+I?. R:(I>>% K 1rs. Ta!o( li*e the question [sic] signature of 1r. Co +o* Teng( ou also did not personall see or o!serve how 1r. Co +o* Teng write this standard signature$ %. +es( sir K %nd this AsicB standard si-natures were <ust submitted to 2ouM % ?es, it was submitted to the office, sir. K And when ou made the e)amination and anal sis of these documents the standard and the question [sic] signature ou did not require an other signature from these two personalities e)cept those which were delivered to ou$ %. +es( sir. CFDR+ K /hen this standard signature were su!mitted to ou( ou were just told that this is the genuine signature of the person involved( ou were just told$ % +es( our Honor. As stated in the request it is the genuine signature. K #o that was 2our basis in claimin- that this is the -enuine si-nature of the persons involvedM % I e;amined first the specimen, all the specimen whether it was written b2.... K Jhat are those specimen submitted to 2ou. % +he same checks, 2our Conor, and the written standard. K 'id ou confront Co +o* Teng$ %++?. R:(I>>% % .he said no( our Honor. CFDR+

K 'id ou confront +u Chun 3it whether those were actuall his genuine signature$ % 4o( our Honor. K .o ou just relied on the claim of the person who su!mitted to ou that these are the genuine signatures$ % +es( our Honor. K And on the !asis that ou compare the characteristic handwriting !etween the alleged genuine and question [sic] signature$ % +es( our Honor. 26 .Dnderscorin- ours for emphasis/. Fur review of the testimon2 of private respondent1s e;pert witness, Crispina (. +abo, fails to convince us that she was a credible document e;aminer, despite petitioner1s admission that she was. #he was candid enou-h to admit to the court that althou-h she had testified more or less three hundred times as an e;pert, her findin-s were sustained b2 the courts in more or less ten cases onl2. +hus6 Court6 K Cow man2 times have 2ou testified in CourtM % 0ore or less three hundred .*,,/ times, 2our Conor. K Cow man2 were sustained b2 the CourtM % 0ore or less ten . ,/, sir. K Fut of *,,M %. ?es, 2our Conor. 2+ 7esides, under the circumstances obtainin- in this case, +abo could b2 no 2ardstick be considered to have ade9uate knowled-e of the -enuine si-natures of the parties whose si-natures on the 9uestioned checks were claimed to be for-ed. +hat knowled-e could be obtained either b2 .a/ seein- the person write some other documents or si-natures . e) visu scriptionis/5 .b/ seein- documents otherwise known to him to have been written b2 the person in 9uestion .e) scriptis olim visis/5 or .c/ e;aminin-, in or out of court, for the e;press purpose of obtainin- such knowled-e, the documents said to have been written b2 the person in 9uestion .e) comparatione scriptorum/. 2) +abo could not be a witness under the first and the second. #he tried to be under the third. 7ut under the third, it is essential that .a/ certain specimens of handwritin- were seen and considered b2 her and .b/ the2 were -enuinel2 written b2 the person in 9uestion. 29 )ow, as stated above, +abo had no ade9uate basis for concludin- that the alle-ed specimen si-natures in the lon- bond paper were indeed the si-natures of the parties whose si-natures in the checks were claimed to have been for-ed. 0oreover, we do not think that the alle-ed specimens before her were sufficient in number. &* 'iven the fact that 0rs. +abo1s testimon2 cannot inspire a conclusion that she was an e;pert, it was error to rel2 on her representation. It is settled that the relative wei-ht of the opinions of e;perts b2 and lar-e

depends on the value of assistance and -uidance the2 furnish the court in the determination of the issue involved. &1 Fn the issue of ne-li-ence, the Court of %ppeals held6 A+Bhere is overwhelmin- evidence to show that appellee .petitioner herein/ was less than prudent in the treatment of appellant1s .private respondents1/ account. %ccordin- to Chun ?un @it, the2 had an a-reement with %ppellee1s %ssistant branch mana-er, =elicidad, Dimaano, that appellant should be informed whenever a check for than 3 ,,,,,.,, is presented for encashment. 'imaano did not controvert Chun 3it5s testimon on this point. #uch an arran-ement was not observed b2 appellee with respect to the pa2ment of the checks in 9uestion..:mphasis supplied/. Je do not a-ree. Durin- the hearin- on =ebruar2 !8!, =elicidad Dimaano denied havin- such a-reement with the private respondent. Rather, the a-reement was that Gall encashments over the counter of 3 ,,,,,.,, and above should be accompanied b2 one of the si-natoriesG of private respondent. 7ut this a-reement was made onl2 on * 0arch !8", or a few da2s after the encashment of the checks in 9uestion, &2 %t an2 rate, since the 9uestioned checks, which were pa2able to Gcash,G appeared re-ular on their face and the bank found nothin- unusual in the transaction, as the respondent usuall2 issued checks in biamounts && made pa2able to cash or to a particular person or to a compan2, &' the petitioner cannot be faulted in pa2in- the value of the disputed checks. Contrar2 to the findin- of the Court of %ppeals, the private respondent is the one which stands to be blamed for its predicament. Chun ?un @it testified that in the mornin- of 2* 0arch !8", he and some emplo2ees found the doors of their office and the filin- cabinets containin- the compan21s check booklet to have been forcibl2 opened. +he2 also found the documents in disarra2. Dnder these circumstances, a prudent and reasonable man would simpl2 have to -o over the check booklet to find out whether a check was missin-. 7ut, apparentl2, private respondent1s officers and emplo2ees did not bother to do so. If the2 did e;amine the booklet the2 could have readil2 discovered whether a check was taken. +he followintestimon2 of Chun ?un @it is apropos6 K ?ou said also durin- the last hearin- that on the mornin- of 0arch 2*, !8" 2ou found out in the mornin- that the doors of the office were forced openedM % ?es, sir. K %nd 2ou also testified durin- the last hearin- that the locked A sicB of the filin- cabinet were also forced openedM % ?es, sir. K %nd 2ou found out on that same time and date on 0arch 2*, !8" that the documents in the filin- cabinet were not in their proper position M % ?es, sir. K Jhat did 2ou do when 2ou found out this AsicB circumstances on 0arch 2*, !8"M % Je did not do an2thin- because nothin- was lost.

K Did it not occur to 2ou 0r. witness, that considerin- that bur-lar2 was committed in 2our office, the doors of 2our office were forced opened, the locks of the filin- cabinet were forced opened, the documents placed in the filin- cabinet were not in their proper position, it did not occur to 2ou to check the checks of the compan2 as bein- placed in the filin- cabinetM % Jhen we e;amined the check booklet, we did not discover an2thinlost. K ?ou did not at all bother 0r. witness or 2our treasurer to check somethin- mi-ht have lost in the check AsicB, considerin- that the bur-ler2 AsicB and the filin- cabinet were forced openedM % )o, sir. K Did 2ou notice an2thin- lostM % )o, #ir. &( )either did an2 of private respondents officers or emplo2ees report the incident to the police authorities, &6 nor did an2one advise the petitioner of such incident so that the latter could adopt necessar2 measures to prevent unauthori4ed encashments of private respondent1s checks. Cence, as correctl2 held b2 the trial court, it is the private respondent, not the petitioner, which must bear the loss. JC:R:=FR:, the instant petition is 'R%)+:D the challen-ed decision of the Court of %ppeals in C%& '.R. C( )o. **5 * is hereb2 R:(:R#:D, and the decision of the Re-ional +rial Court of 0akati in Civil Case )o. $882 is hereb2 R:I)#+%+:D.67wphi6.n8t #F FRD:R:D.

G.R. No. 107382/G.R. No. 107612

January 31, 1996

ASSOCIATED BAN , petitioner, vs. !ON. CO"RT O# A$$EA%S, $RO&INCE O# TAR%AC an' $!I%I$$INE NATIONA% BAN , respondents. xxxxxxxxxxxxxxxxxxxxx G.R. No. 107612 January 31, 1996

PHI IPPIN! N"#I$N" %"N&, petitioner, vs. !ONORAB%E CO"RT O# A$$EA%S, $RO&INCE O# TAR%AC, an' ASSOCIATED BAN , respondents. DECISION RO(ERO, J.)

'(ere t(irty )(e)*s +earin, -or,ed endorse.ents are paid, /(o +ears t(e 0oss, t(e dra/er, t(e dra/ee +an* or t(e )o00e)tin, +an*1 #(is is t(e .ain issue in t(ese )onso0idated petitions -or revie/ assai0in, t(e de)ision o- t(e 2ourt o- "ppea0s in 3Provin)e o- #ar0a) v. P(i0ippine Nationa0 %an* v. "sso)iated %an* v. 4austo Pan,i0inan, et. a0.3 52"6G.R. No. 27 No. 179628. 1 #(e -a)ts o- t(e )ase are as -o00o/s9 #(e Provin)e o- #ar0a) .aintains a )urrent a))ount /it( t(e P(i0ippine Nationa0 %an* 5PN%8 #ar0a) %ran)( /(ere t(e provin)ia0 -unds are deposited. 2(e)*s issued +y t(e Provin)e are si,ned +y t(e Provin)ia0 #reasurer and )ountersi,ned +y t(e Provin)ia0 "uditor or t(e :e)retary o- t(e :an,,unian, %ayan. " portion o- t(e -unds o- t(e provin)e is a00o)ated to t(e 2on)ep)ion !.er,en)y Hospita0. 2 #(e a00ot.ent )(e)*s -or said ,overn.ent (ospita0 are dra/n to t(e order o- 32on)ep)ion !.er,en)y Hospita0, 2on)ep)ion, #ar0a)3 or 3#(e 2(ie-, 2on)ep)ion !.er,en)y Hospita0, 2on)ep)ion, #ar0a).3 #(e )(e)*s are re0eased +y t(e $--i)e o- t(e Provin)ia0 #reasurer and re)eived -or t(e (ospita0 +y its ad.inistrative o--i)er and )as(ier. In January 19;1, t(e +oo*s o- a))ount o- t(e Provin)ia0 #reasurer /ere post6audited +y t(e Provin)ia0 "uditor. It /as t(en dis)overed t(at t(e (ospita0 did not re)eive severa0 a00ot.ent )(e)*s dra/n +y t(e Provin)e. $n 4e+ruary 19, 19;1, t(e Provin)ia0 #reasurer re<uested t(e .ana,er o- t(e PN% to return a00 oits )0eared )(e)*s /(i)( /ere issued -ro. 1977 to 19;0 in order to veri-y t(e re,u0arity o- t(eir en)as(.ent. "-ter t(e )(e)*s /ere exa.ined, t(e Provin)ia0 #reasurer 0earned t(at 30 )(e)*s a.ountin, to P203,300.00 /ere en)as(ed +y one 4austo Pan,i0inan, /it( t(e "sso)iated %an* a)tin, as )o00e)tin, +an*. It turned out t(at 4austo Pan,i0inan, /(o /as t(e ad.inistrative o--i)er and )as(ier o- payee (ospita0 unti0 (is retire.ent on 4e+ruary 2;, 197;, )o00e)ted t(e <uestioned )(e)*s -ro. t(e o--i)e o- t(e Provin)ia0 #reasurer. He )0ai.ed to +e assistin, or (e0pin, t(e (ospita0 -o00o/ up t(e re0ease o- t(e )(e)*s and (ad o--i)ia0 re)eipts. 3 Pan,i0inan sou,(t to en)as( t(e -irst )(e)* = /it( "sso)iated %an*. Ho/ever, t(e .ana,er o- "sso)iated %an* re-used and su,,ested t(at Pan,i0inan deposit t(e )(e)* in (is persona0 savin,s a))ount /it( t(e sa.e +an*. Pan,i0inan /as a+0e to /it(dra/ t(e .oney /(en t(e )(e)* /as )0eared and paid +y t(e dra/ee +an*, PN%. "-ter -or,in, t(e si,nature o- >r. "dena 2an0as /(o /as )(ie- o- t(e payee (ospita0, Pan,i0inan -o00o/ed t(e sa.e pro)edure -or t(e se)ond )(e)*, in t(e a.ount o- P?,000.00 and dated "pri0 20, 197;, ? as /e00 as -or t/enty6ei,(t ot(er )(e)*s o- various a.ounts and on various dates. #(e 0ast )(e)* ne,otiated +y Pan,i0inan /as -or -;,000.00 and dated 4e+ruary 10, 19;1. 6 "00 t(e )(e)*s +ore t(e sta.p o- "sso)iated %an* /(i)( reads 3"00 prior endorse.ents ,uaranteed "::$2I"#!> %"N&.3

Jesus >avid, t(e .ana,er o- "sso)iated %an* testi-ied t(at Pan,i0inan .ade it appear t(at t(e )(e)*s /ere paid to (i. -or )ertain pro@e)ts /it( t(e (ospita0. 7 He did not -ind as irre,u0ar t(e -a)t t(at t(e )(e)*s /ere not paya+0e to Pan,i0inan +ut to t(e 2on)ep)ion !.er,en)y Hospita0. '(i0e (e ad.itted t(at (is /i-e and Pan,i0inanAs /i-e are -irst )ousins, t(e .ana,er denied (avin, ,iven Pan,i0inan pre-erentia0 treat.ent on t(is a))ount. ; $n 4e+ruary 26, 19;1, t(e Provin)ia0 #reasurer /rote t(e .ana,er o- t(e PN% see*in, t(e restoration o- t(e various a.ounts de+ited -ro. t(e )urrent a))ount o- t(e Provin)e. 9 In turn, t(e PN% .ana,er de.anded rei.+urse.ent -ro. t(e "sso)iated %an* on Bay 1?, 19;1.
10

"s +ot( +an*s resisted pay.ent, t(e Provin)e o- #ar0a) +rou,(t suit a,ainst PN% /(i)(, in turn, i.p0eaded "sso)iated %an* as t(ird6party de-endant. #(e 0atter t(en -i0ed a -ourt(6party )o.p0aint a,ainst "dena 2an0as and 4austo Pan,i0inan. 11 "-ter tria0 on t(e .erits, t(e 0o/er )ourt rendered its de)ision on Bar)( 21, 19;;, disposin, as -o00o/s9 'H!R!4$R!, in vie/ o- t(e -ore,oin,, @ud,.ent is (ere+y rendered9 1. $n t(e +asi) )o.p0aint, in -avor o- p0ainti-- Provin)e o- #ar0a) and a,ainst de-endant P(i0ippine Nationa0 %an* 5PN%8, orderin, t(e 0atter to pay to t(e -or.er, t(e su. o- #/o Hundred #(ree #(ousand #(ree Hundred 5P203,300.008 Pesos /it( 0e,a0 interest t(ereon -ro. Bar)( 20, 19;1 unti0 -u00y paidC 2. $n t(e t(ird6party )o.p0aint, in -avor o- de-endantDt(ird6party p0ainti-- P(i0ippine Nationa0 %an* 5PN%8 and a,ainst t(ird6party de-endantD-ourt(6party p0ainti-- "sso)iated %an* orderin, t(e 0atter to rei.+urse to t(e -or.er t(e a.ount o- #/o Hundred #(ree #(ousand #(ree Hundred 5P203,300.008 Pesos /it( 0e,a0 interests t(ereon -ro. Bar)( 20, 19;1 unti0 -u00y paidC. 3. $n t(e -ourt(6party )o.p0aint, t(e sa.e is (ere+y ordered dis.issed -or 0a)* o- )ause o- a)tion as a,ainst -ourt(6party de-endant "dena 2an0as and 0a)* o- @urisdi)tion over t(e person o- -ourt(6party de-endant 4austo Pan,i0inan as a,ainst t(e 0atter. =. $n t(e )ounter)0ai.s on t(e )o.p0aint, t(ird6party )o.p0aint and -ourt(6party )o.p0aint, t(e sa.e are (ere+y ordered dis.issed -or 0a)* o- .erit. :$ $R>!R!>. 12 PN% and "sso)iated %an* appea0ed to t(e 2ourt o- "ppea0s. 13 Respondent )ourt a--ir.ed t(e tria0 )ourtAs de)ision in toto on :epte.+er 30, 1992. Hen)e t(ese )onso0idated petitions /(i)( see* a reversa0 o- respondent appe00ate )ourtAs de)ision.

PN% assi,ned t/o errors. 4irst, t(e +an* )ontends t(at respondent )ourt erred in exe.ptin, t(e Provin)e o- #ar0a) -ro. 0ia+i0ity /(en, in -a)t, t(e 0atter /as ne,0i,ent +e)ause it de0ivered and re0eased t(e <uestioned )(e)*s to 4austo Pan,i0inan /(o /as t(en a0ready retired as t(e (ospita0As )as(ier and ad.inistrative o--i)er. PN% a0so .aintains its inno)en)e and a00e,es t(at as +et/een t/o inno)ent persons, t(e one /(ose a)t /as t(e )ause o- t(e 0oss, in t(is )ase t(e Provin)e o- #ar0a), +ears t(e 0oss. Next, PN% asserts t(at it /as error -or t(e )ourt to order it to pay t(e provin)e and t(en see* rei.+urse.ent -ro. "sso)iated %an*. "))ordin, to petitioner +an*, respondent appe00ate 2ourt s(ou0d (ave dire)ted "sso)iated %an* to pay t(e ad@ud,ed 0ia+i0ity dire)t0y to t(e Provin)e o#ar0a) to avoid )ir)uity. 1= "sso)iated %an*, on t(e ot(er (and, ar,ues t(at t(e order o- 0ia+i0ity s(ou0d +e tota00y reversed, /it( t(e dra/ee +an* 5PN%8 so0e0y and u0ti.ate0y +earin, t(e 0oss. Respondent )ourt a00e,ed0y erred in app0yin, :e)tion 23 o- t(e P(i0ippine 20earin, House Ru0es instead o- 2entra0 %an* 2ir)u0ar No. ?;0, /(i)(, +ein, an ad.inistrative re,u0ation issued pursuant to 0a/, (as t(e -or)e and e--e)t o- 0a/. 1? #(e P2H2 Ru0es are .ere0y )ontra)tua0 stipu0ations a.on, and +et/een .e.+er6+an*s. "s su)(, t(ey )annot prevai0 over t(e a-oresaid 2% 2ir)u0ar. It 0i*e/ise )ontends t(at PN%, t(e dra/ee +an*, is estopped -ro. assertin, t(e de-ense o,uarantee o- prior indorse.ents a,ainst "sso)iated %an*, t(e )o00e)tin, +an*. In sta.pin, t(e ,uarantee 5-or a00 prior indorse.ents8, it .ere0y -o00o/ed a .andatory re<uire.ent -or )0earin, and (ad no )(oi)e +ut to p0a)e t(e sta.p o- ,uaranteeC ot(er/ise, t(ere /ou0d +e no )0earin,. #(e +an* /i00 +e in a 3no6/in3 situation and /i00 a0/ays +ear t(e 0oss as a,ainst t(e dra/ee +an*. 16 "sso)iated %an* a0so )0ai.s t(at sin)e PN% a0ready )0eared and paid t(e va0ue o- t(e -or,ed )(e)*s in <uestion, it is no/ estopped -ro. assertin, t(e de-ense t(at "sso)iated %an* ,uaranteed prior indorse.ents. #(e dra/ee +an* a00e,ed0y (as t(e pri.ary duty to veri-y t(e ,enuineness o- payeeAs indorse.ent +e-ore payin, t(e )(e)*. 17 '(i0e +ot( +an*s are inno)ent o- t(e -or,ery, "sso)iated %an* )0ai.s t(at PN% /as at -au0t and s(ou0d so0e0y +ear t(e 0oss +e)ause it )0eared and paid t(e -or,ed )(e)*s. xxx xxx xxx

#(e )ase at +en)( )on)erns )(e)*s paya+0e to t(e order o- 2on)ep)ion !.er,en)y Hospita0 or its 2(ie-. #(ey /ere proper0y issued and +ear t(e ,enuine si,natures o- t(e dra/er, t(e Provin)e o#ar0a). #(e in-ir.ity in t(e <uestioned )(e)*s 0ies in t(e payeeAs 52on)ep)ion !.er,en)y Hospita08 indorse.ents /(i)( are -or,eries. "t t(e ti.e o- t(eir indorse.ent, t(e )(e)*s /ere order instru.ents. 2(e)*s (avin, -or,ed indorse.ents s(ou0d +e di--erentiated -ro. -or,ed )(e)*s or )(e)*s +earin, t(e -or,ed si,nature o- t(e dra/er.

:e)tion 23 o- t(e Ne,otia+0e Instru.ents a/ 5NI 8 provides9 :e). 23. 4$RG!> :IGN"#ER!, !44!2# $4. F '(en a si,nature is -or,ed or .ade /it(out aut(ority o- t(e person /(ose si,nature it purports to +e, it is /(o00y inoperative, and no ri,(t to retain t(e instru.ent, or to ,ive a dis)(ar,e t(ere-or, or to en-or)e pay.ent t(ereo- a,ainst any party t(ereto, )an +e a)<uired t(rou,( or under su)( si,nature un0ess t(e party a,ainst /(o. it is sou,(t to en-or)e su)( ri,(t is pre)0uded -ro. settin, up t(e -or,ery or /ant o- aut(ority. " -or,ed si,nature, /(et(er it +e t(at o- t(e dra/er or t(e payee, is /(o00y inoperative and no one )an ,ain tit0e to t(e instru.ent t(rou,( it. " person /(ose si,nature to an instru.ent /as -or,ed /as never a party and never )onsented to t(e )ontra)t /(i)( a00e,ed0y ,ave rise to su)( instru.ent. 1; :e)tion 23 does not avoid t(e instru.ent +ut on0y t(e -or,ed si,nature. 19 #(us, a -or,ed indorse.ent does not operate as t(e payeeAs indorse.ent. #(e ex)eption to t(e ,enera0 ru0e in :e)tion 23 is /(ere 3a party a,ainst /(o. it is sou,(t to en-or)e a ri,(t is pre)0uded -ro. settin, up t(e -or,ery or /ant o- aut(ority.3 Parties /(o /arrant or ad.it t(e ,enuineness o- t(e si,nature in <uestion and t(ose /(o, +y t(eir a)ts, si0en)e or ne,0i,en)e are estopped -ro. settin, up t(e de-ense o- -or,ery, are pre)0uded -ro. usin, t(is de-ense. Indorsers, persons ne,otiatin, +y de0ivery and a))eptors are /arrantors o- t(e ,enuineness o- t(e si,natures on t(e instru.ent. 20 In +earer instru.ents, t(e si,nature o- t(e payee or (o0der is unne)essary to pass tit0e to t(e instru.ent. Hen)e, /(en t(e indorse.ent is a -or,ery, on0y t(e person /(ose si,nature is -or,ed )an raise t(e de-ense o- -or,ery a,ainst a (o0der in due )ourse. 21 #(e )(e)*s invo0ved in t(is )ase are order instru.ents, (en)e, t(e -o00o/in, dis)ussion is .ade /it( re-eren)e to t(e e--e)ts o- a -or,ed indorse.ent on an instru.ent paya+0e to order. '(ere t(e instru.ent is paya+0e to order at t(e ti.e o- t(e -or,ery, su)( as t(e )(e)*s in t(is )ase, t(e si,nature o- its ri,(t-u0 (o0der 5(ere, t(e payee (ospita08 is essentia0 to trans-er tit0e to t(e sa.e instru.ent. '(en t(e (o0derAs indorse.ent is -or,ed, a00 parties prior to t(e -or,ery .ay raise t(e rea0 de-ense o- -or,ery a,ainst a00 parties su+se<uent t(ereto. 22 "n indorser o- an order instru.ent /arrants 3t(at t(e instru.ent is ,enuine and in a00 respe)ts /(at it purports to +eC t(at (e (as a ,ood tit0e to itC t(at a00 prior parties (ad )apa)ity to )ontra)tC and t(at t(e instru.ent is at t(e ti.e o- (is indorse.ent va0id and su+sistin,.3 23 He )annot interpose t(e de-ense t(at si,natures prior to (i. are -or,ed. " )o00e)tin, +an* /(ere a )(e)* is deposited and /(i)( indorses t(e )(e)* upon present.ent /it( t(e dra/ee +an*, is su)( an indorser. :o even i- t(e indorse.ent on t(e )(e)* deposited +y t(e +an*sAs )0ient is -or,ed, t(e )o00e)tin, +an* is +ound +y (is /arranties as an indorser and )annot set up t(e de-ense o- -or,ery as a,ainst t(e dra/ee +an*. #(e +an* on /(i)( a )(e)* is dra/n, *no/n as t(e dra/ee +an*, is under stri)t 0ia+i0ity to pay t(e )(e)* to t(e order o- t(e payee. #(e dra/erAs instru)tions are re-0e)ted on t(e -a)e and +y t(e

ter.s o- t(e )(e)*. Pay.ent under a -or,ed indorse.ent is not to t(e dra/erAs order. '(en t(e dra/ee +an* pays a person ot(er t(an t(e payee, it does not )o.p0y /it( t(e ter.s o- t(e )(e)* and vio0ates its duty to )(ar,e its )usto.erAs 5t(e dra/er8 a))ount on0y -or proper0y paya+0e ite.s. :in)e t(e dra/ee +an* did not pay a (o0der or ot(er person entit0ed to re)eive pay.ent, it (as no ri,(t to rei.+urse.ent -ro. t(e dra/er. 2= #(e ,enera0 ru0e t(en is t(at t(e dra/ee +an* .ay not de+it t(e dra/erAs a))ount and is not entit0ed to inde.ni-i)ation -ro. t(e dra/er. 2? #(e ris* o- 0oss .ust per-or)e -a00 on t(e dra/ee +an*. Ho/ever, i- t(e dra/ee +an* )an prove a -ai0ure +y t(e )usto.erDdra/er to exer)ise ordinary )are t(at su+stantia00y )ontri+uted to t(e .a*in, o- t(e -or,ed si,nature, t(e dra/er is pre)0uded -ro. assertin, t(e -or,ery. I- at t(e sa.e ti.e t(e dra/ee +an* /as a0so ne,0i,ent to t(e point o- su+stantia00y )ontri+utin, to t(e 0oss, t(en su)( 0oss -ro. t(e -or,ery )an +e apportioned +et/een t(e ne,0i,ent dra/er and t(e ne,0i,ent +an*. 26 In )ases invo0vin, a -or,ed )(e)*, /(ere t(e dra/erAs si,nature is -or,ed, t(e dra/er )an re)over -ro. t(e dra/ee +an*. No dra/ee +an* (as a ri,(t to pay a -or,ed )(e)*. I- it does, it s(a00 (ave to re)redit t(e a.ount o- t(e )(e)* to t(e a))ount o- t(e dra/er. #(e 0ia+i0ity )(ain ends /it( t(e dra/ee +an* /(ose responsi+i0ity it is to *no/ t(e dra/erAs si,nature sin)e t(e 0atter is its )usto.er. 27 In )ases invo0vin, )(e)*s /it( -or,ed indorse.ents, su)( as t(e present petition, t(e )(ain o0ia+i0ity does not end /it( t(e dra/ee +an*. #(e dra/ee +an* .ay not de+it t(e a))ount o- t(e dra/er +ut .ay ,enera00y pass 0ia+i0ity +a)* t(rou,( t(e )o00e)tion )(ain to t(e party /(o too* -ro. t(e -or,er and, o- )ourse, to t(e -or,er (i.se0-, i- avai0a+0e. 2; In ot(er /ords, t(e dra/ee +an* )ansee* rei.+urse.ent or a return o- t(e a.ount it paid -ro. t(e presentor +an* or person. 29 #(eoreti)a00y, t(e 0atter )an de.and rei.+urse.ent -ro. t(e person /(o indorsed t(e )(e)* to it and so on. #(e 0oss -a00s on t(e party /(o too* t(e )(e)* -ro. t(e -or,er, or on t(e -or,er (i.se0-. In t(is )ase, t(e )(e)*s /ere indorsed +y t(e )o00e)tin, +an* 5"sso)iated %an*8 to t(e dra/ee +an* 5PN%8. #(e -or.er /i00 ne)essari0y +e 0ia+0e to t(e 0atter -or t(e )(e)*s +earin, -or,ed indorse.ents. I- t(e -or,ery is t(at o- t(e payeeAs or (o0derAs indorse.ent, t(e )o00e)tin, +an* is (e0d 0ia+0e, /it(out pre@udi)e to t(e 0atter pro)eedin, a,ainst t(e -or,er. :in)e a -or,ed indorse.ent is inoperative, t(e )o00e)tin, +an* (ad no ri,(t to +e paid +y t(e dra/ee +an*. #(e -or.er .ust ne)essari0y return t(e .oney paid +y t(e 0atter +e)ause it /as paid /ron,-u00y. 30 Bore i.portant0y, +y reason o- t(e statutory /arranty o- a ,enera0 indorser in se)tion 66 o- t(e Ne,otia+0e Instru.ents a/, a )o00e)tin, +an* /(i)( indorses a )(e)* +earin, a -or,ed indorse.ent and presents it to t(e dra/ee +an* ,uarantees a00 prior indorse.ents, in)0udin, t(e -or,ed indorse.ent. It /arrants t(at t(e instru.ent is ,enuine, and t(at it is va0id and su+sistin, at t(e ti.e o- (is indorse.ent. %e)ause t(e indorse.ent is a -or,ery, t(e )o00e)tin, +an* )o..its a +rea)( o- t(is /arranty and /i00 +e a))ounta+0e to t(e dra/ee +an*. #(is 0ia+i0ity

s)(e.e operates /it(out re,ard to -au0t on t(e part o- t(e )o00e)tin,Dpresentin, +an*. !ven i- t(e 0atter +an* /as not ne,0i,ent, it /ou0d sti00 +e 0ia+0e to t(e dra/ee +an* +e)ause o- its indorse.ent. #(e 2ourt (as )onsistent0y ru0ed t(at 3t(e )o00e)tin, +an* or 0ast endorser ,enera00y su--ers t(e 0oss +e)ause it (as t(e duty to as)ertain t(e ,enuineness o- a00 prior endorse.ents )onsiderin, t(at t(e a)t o- presentin, t(e )(e)* -or pay.ent to t(e dra/ee is an assertion t(at t(e party .a*in, t(e present.ent (as done its duty to as)ertain t(e ,enuineness o- t(e endorse.ents.3 31 #(e dra/ee +an* is not si.i0ar0y situated as t(e )o00e)tin, +an* +e)ause t(e -or.er .a*es no /arranty as to t(e ,enuineness. o- any indorse.ent. 32 #(e dra/ee +an*As duty is +ut to veri-y t(e ,enuineness o- t(e dra/erAs si,nature and not o- t(e indorse.ent +e)ause t(e dra/er is its )0ient. Boreover, t(e )o00e)tin, +an* is .ade 0ia+0e +e)ause it is privy to t(e depositor /(o ne,otiated t(e )(e)*. #(e +an* *no/s (i., (is address and (istory +e)ause (e is a )0ient. It (as ta*en a ris* on (is deposit. #(e +an* is a0so in a +etter position to dete)t -or,ery, -raud or irre,u0arity in t(e indorse.ent. Hen)e, t(e dra/ee +an* )an re)over t(e a.ount paid on t(e )(e)* +earin, a -or,ed indorse.ent -ro. t(e )o00e)tin, +an*. Ho/ever, a dra/ee +an* (as t(e duty to pro.pt0y in-or. t(e presentor o- t(e -or,ery upon dis)overy. I- t(e dra/ee +an* de0ays in in-or.in, t(e presentor o- t(e -or,ery, t(ere+y deprivin, said presentor o- t(e ri,(t to re)over -ro. t(e -or,er, t(e -or.er is dee.ed ne,0i,ent and )an no 0on,er re)over -ro. t(e presentor. 33 "pp0yin, t(ese ru0es to t(e )ase at +en)(, PN%, t(e dra/ee +an*, )annot de+it t(e )urrent a))ount o- t(e Provin)e o- #ar0a) +e)ause it paid )(e)*s /(i)( +ore -or,ed indorse.ents. Ho/ever, i- t(e Provin)e o- #ar0a) as dra/er /as ne,0i,ent to t(e point o- su+stantia00y )ontri+utin, to t(e 0oss, t(en t(e dra/ee +an* PN% )an )(ar,e its a))ount. I- +ot( dra/ee +an*6 PN% and dra/er6Provin)e o- #ar0a) /ere ne,0i,ent, t(e 0oss s(ou0d +e proper0y apportioned +et/een t(e.. #(e 0oss in)urred +y dra/ee +an*6PN% )an +e passed on to t(e )o00e)tin, +an*6"sso)iated %an* /(i)( presented and indorsed t(e )(e)*s to it. "sso)iated %an* )an, in turn, (o0d t(e -or,er, 4austo Pan,i0inan, 0ia+0e. I- PN% ne,0i,ent0y de0ayed in in-or.in, "sso)iated %an* o- t(e -or,ery, t(us deprivin, t(e 0atter o- t(e opportunity to re)over -ro. t(e -or,er, it -or-eits its ri,(t to rei.+urse.ent and /i00 +e .ade to +ear t(e 0oss. "-ter )are-u0 exa.ination o- t(e re)ords, t(e 2ourt -inds t(at t(e Provin)e o- #ar0a) /as e<ua00y ne,0i,ent and s(ou0d, t(ere-ore, s(are t(e +urden o- 0oss -ro. t(e )(e)*s +earin, a -or,ed indorse.ent. #(e Provin)e o- #ar0a) per.itted 4austo Pan,i0inan to )o00e)t t(e )(e)*s /(en t(e 0atter, (avin, a0ready retired -ro. ,overn.ent servi)e, /as no 0on,er )onne)ted /it( t(e (ospita0. 'it( t(e ex)eption o- t(e -irst )(e)* 5dated January 17, 197;8, a00 t(e )(e)*s /ere issued and re0eased

a-ter Pan,i0inanAs retire.ent on 4e+ruary 2;, 197;. "-ter near0y t(ree years, t(e #reasurerAs o--i)e /as sti00 re0easin, t(e )(e)*s to t(e retired )as(ier. In addition, so.e o- t(e aid a00ot.ent )(e)*s /ere re0eased to Pan,i0inan and t(e ot(ers to !0iGa+et( Ju)o, t(e ne/ )as(ier. #(e -a)t t(at t(ere /ere no/ t/o persons )o00e)tin, t(e )(e)*s -or t(e (ospita0 is an un.ista*a+0e si,n oan irre,u0arity /(i)( s(ou0d (ave a0erted e.p0oyees in t(e #reasurerAs o--i)e o- t(e -raud +ein, )o..itted. #(ere is a0so eviden)e indi)atin, t(at t(e provin)ia0 e.p0oyees /ere a/are oPan,i0inanAs retire.ent and )onse<uent disso)iation -ro. t(e (ospita0. Jose Beru, t(e Provin)ia0 #reasurer, testi-ied9. "##H. B$RG"9 I No/, is it true t(at -or a ,iven .ont( t(ere /ere t/o re0eases o- )(e)*s, one /ent to Br. Pan,i0inan and one /ent to Biss Ju)o1 J$:! B!RE9 " Hes, sir. I 'i00 you p0ease te00 us (o/ at t(e ti.e 5sic8 /(en t(e aut(oriGed representative o2on)ep)ion !.er,en)y Hospita0 is and /as supposed to +e Biss Ju)o1 " 'e00, as -ar as .y investi,ation s(o/ 5sic8 t(e assistant )as(ier to0d .e t(at Pan,i0inan represented (i.se0- as a0so aut(oriGed to (e0p in t(e re0ease o- t(ese )(e)*s and /e /ere apparent0y .is0ed +e)ause t(ey a))epted t(e representation o- Pan,i0inan t(at (e /as (e0pin, t(e. in t(e re0ease o- t(e )(e)*s and +esides a))ordin, to t(e. t(ey /ere, Pan,i0inan, 0i*e t(e rest, /as a+0e to present an o--i)ia0 re)eipt to a)*no/0ed,e t(ese re)eipts and a))ordin, to t(e. sin)e t(is is a ,overn.ent )(e)* and +e0ieved t(at it /i00 eventua00y ,o to t(e (ospita0 -o00o/in, t(e standard pro)edure o- ne,otiatin, ,overn.ent )(e)*s, t(ey re0eased t(e )(e)*s to Pan,i0inan aside -ro. Biss Ju)o.3= #(e -ai0ure o- t(e Provin)e o- #ar0a) to exer)ise due )are )ontri+uted to a si,ni-i)ant de,ree to t(e 0oss tanta.ount to ne,0i,en)e. Hen)e, t(e Provin)e o- #ar0a) s(ou0d +e 0ia+0e -or part o- t(e tota0 a.ount paid on t(e <uestioned )(e)*s. #(e dra/ee +an* PN% a0so +rea)(ed its duty to pay on0y a))ordin, to t(e ter.s o- t(e )(e)*. Hen)e, it )annot es)ape 0ia+i0ity and s(ou0d a0so +ear part o- t(e 0oss. "s ear0ier stated, PN% )an re)over -ro. t(e )o00e)tin, +an*. In t(e )ase o- Associated Bank v. CA, 3? six )rossed )(e)*s /it( -or,ed indorse.ents /ere deposited in t(e -or,erAs a))ount /it( t(e )o00e)tin, +an* and /ere 0ater paid +y -our di--erent dra/ee +an*s. #(e 2ourt -ound t(e )o00e)tin, +an* 5"sso)iated8 to +e ne,0i,ent and (e0d9 #(e %an* s(ou0d (ave -irst veri-ied (is ri,(t to endorse t(e )rossed )(e)*s, o- /(i)( (e /as not t(e payee, and to deposit t(e pro)eeds o- t(e )(e)*s to (is o/n a))ount. #(e

%an* /as +y reason o- t(e nature o- t(e )(e)*s put upon noti)e t(at t(ey /ere issued -or deposit on0y to t(e private respondentAs a))ount. . . . #(e situation in t(e )ase at +en)( is ana0o,ous to t(e a+ove )ase, -or it /as not t(e payee /(o deposited t(e )(e)*s /it( t(e )o00e)tin, +an*. Here, t(e )(e)*s /ere a00 paya+0e to 2on)ep)ion !.er,en)y Hospita0 +ut it /as 4austo Pan,i0inan /(o deposited t(e )(e)*s in (is persona0 savin,s a))ount. "0t(ou,( "sso)iated %an* )0ai.s t(at t(e ,uarantee sta.ped on t(e )(e)*s 5"00 prior andDor 0a)* o- endorse.ents ,uaranteed8 is .ere0y a re<uire.ent -or)ed upon it +y )0earin, (ouse ru0es, it )annot +ut re.ain 0ia+0e. #(e sta.p ,uaranteein, prior indorse.ents is not an e.pty ru+ri) /(i)( a +an* .ust -u0-i00 -or t(e sa*e o- )onvenien)e. " +an* is not re<uired to a))ept a00 t(e )(e)*s ne,otiated to it. It is /it(in t(e +an*As dis)retion to re)eive a )(e)* -or no +an*in, institution /ou0d )ons)ious0y or de0i+erate0y a))ept a )(e)* +earin, a -or,ed indorse.ent. '(en a )(e)* is deposited /it( t(e )o00e)tin, +an*, it ta*es a ris* on its depositor. It is on0y 0o,i)a0 t(at t(is +an* +e (e0d a))ounta+0e -or )(e)*s deposited +y its )usto.ers. " de0ay in in-or.in, t(e )o00e)tin, +an* 5"sso)iated %an*8 o- t(e -or,ery, /(i)( deprives it ot(e opportunity to ,o a-ter t(e -or,er, si,ni-ies ne,0i,en)e on t(e part o- t(e dra/ee +an* 5PN%8 and /i00 pre)0ude it -ro. )0ai.in, rei.+urse.ent. It is (ere t(at "sso)iated %an*As assi,n.ent o- error )on)ernin, 2.%. 2ir)u0ar No. ?;0 and :e)tion 23 o- t(e P(i0ippine 20earin, House 2orporation Ru0es )o.es to -ore. Ender :e)tion =5)8 o- 2% 2ir)u0ar No. ?;0, ite.s +earin, a -or,ed endorse.ent s(a00 +e returned /it(in t/enty6:our 52=8 (ours a-ter dis)overy o- t(e -or,ery +ut in no event +eyond t(e period -ixed or provided +y 0a/ -or -i0in, o- a 0e,a0 a)tion +y t(e returnin, +an*. :e)tion 23 o- t(e P2H2 Ru0es de0eted t(e re<uire.ent t(at ite.s +earin, a -or,ed endorse.ent s(ou0d +e returned /it(in t/enty6-our (ours. "sso)iated %an* no/ ar,ues t(at t(e a-ore.entioned 2entra0 %an* 2ir)u0ar is app0i)a+0e. :in)e PN% did not return t(e <uestioned )(e)*s /it(in t/enty6-our (ours, +ut severa0 days 0ater, "sso)iated %an* a00e,es t(at PN% s(ou0d +e )onsidered ne,0i,ent and not entit0ed to rei.+urse.ent o- t(e a.ount it paid on t(e )(e)*s. #(e 2ourt dee.s it unne)essary to dis)uss "sso)iated %an*As assertions t(at 2% 2ir)u0ar No. ?;0 is an ad.inistrative re,u0ation issued pursuant to 0a/ and as su)(, .ust prevai0 over t(e P2H2 ru0e. #(e 2entra0 %an* )ir)u0ar /as in -or)e -or a00 +an*s unti0 June 19;0 /(en t(e P(i0ippine 20earin, House 2orporation 5P2H28 /as set up and )o..en)ed operations. %an*s in Betro Bani0a /ere )overed +y t(e P2H2 /(i0e +an*s 0o)ated e0se/(ere sti00 (ad to ,o t(rou,( 2entra0 %an* 20earin,. In any event, t(e t/enty6-our6(our return ru0e /as adopted +y t(e P2H2 unti0 it /as )(an,ed in 19;2. #(e )ontendin, +an*s (erein, /(i)( are +ot( +ran)(es in #ar0a) provin)e, are t(ere-ore not )overed +y P2H2 Ru0es +ut +y 2% 2ir)u0ar No. ?;0. 20ear0y t(en, t(e 2% )ir)u0ar /as app0i)a+0e /(en t(e -or,ery o- t(e )(e)*s /as dis)overed in 19;1. #(e ru0e .andates t(at t(e )(e)*s +e returned /it(in t/enty6-our (ours a-ter dis)overy o- t(e -or,ery +ut in no event +eyond t(e period -ixed +y 0a/ -or -i0in, a 0e,a0 a)tion. #(e rationa0e ot(e ru0e is to ,ive t(e )o00e)tin, +an* 5/(i)( indorsed t(e )(e)*8 ade<uate opportunity to

pro)eed a,ainst t(e -or,er. I- pro.pt noti)e is not ,iven, t(e )o00e)tin, +an* .ay+e pre@udi)ed and 0ose t(e opportunity to ,o a-ter its depositor. #(e 2ourt -inds t(at even i- PN% did not return t(e <uestioned )(e)*s to "sso)iated %an* /it(in t/enty6-our (ours, as .andated +y t(e ru0e, PN% did not )o..it ne,0i,ent de0ay. Ender t(e )ir)u.stan)es, PN% ,ave pro.pt noti)e to "sso)iated %an* and t(e 0atter +an* /as not pre@udi)ed in ,oin, a-ter 4austo Pan,i0inan. "-ter t(e Provin)e o- #ar0a) in-or.ed PN% o- t(e -or,eries, PN% ne)essari0y (ad to inspe)t t(e )(e)*s and )ondu)t its o/n investi,ation. #(erea-ter, it re<uested t(e Provin)ia0 #reasurerAs o--i)e on Bar)( 31, 19;1 to return t(e )(e)*s -or veri-i)ation. #(e Provin)e o- #ar0a) returned t(e )(e)*s on0y on "pri0 22, 19;1. #/o days 0ater, "sso)iated %an* re)eived t(e )(e)*s -ro. PN%. 36 "sso)iated %an* /as a0so -urnis(ed a )opy o- t(e Provin)eAs 0etter o- de.and to PN% dated Bar)( 20, 19;1, t(us ,ivin, it noti)e o- t(e -or,eries. "t t(is ti.e, (o/ever, Pan,i0inanAs a))ount /it( "sso)iated (ad on0y P2=.63 in it. 37 Had "sso)iated %an* de)ided to de+it Pan,i0inanAs a))ount, it )ou0d not (ave re)overed t(e a.ounts paid on t(e <uestioned )(e)*s. In addition, /(i0e "sso)iated %an* -i0ed a -ourt(6party )o.p0aint a,ainst 4austo Pan,i0inan, it did not present eviden)e a,ainst Pan,i0inan and even presented (i. as its re+utta0 /itness. 3; Hen)e, "sso)iated %an* /as not pre@udi)ed +y PN%As -ai0ure to )o.p0y /it( t(e t/enty6-our6(our return ru0e. Next, "sso)iated %an* )ontends t(at PN% is estopped -ro. re<uirin, rei.+urse.ent +e)ause t(e 0atter paid and )0eared t(e )(e)*s. #(e 2ourt -inds t(is )ontention un.eritorious. !ven i- PN% )0eared and paid t(e )(e)*s, it )an sti00 re)over -ro. "sso)iated %an*. #(is is true even i- t(e payeeAs 2(ie- $--i)er /(o /as supposed to (ave indorsed t(e )(e)*s is a0so a )usto.er o- t(e dra/ee +an*. 39 PN%As duty /as to veri-y t(e ,enuineness o- t(e dra/erAs si,nature and not t(e ,enuineness o- payeeAs indorse.ent. "sso)iated %an*, as t(e )o00e)tin, +an*, is t(e entity /it( t(e duty to veri-y t(e ,enuineness o- t(e payeeAs indorse.ent. PN% a0so avers t(at respondent )ourt erred in ad@ud,in, )ir)uitous 0ia+i0ity +y dire)tin, PN% to return to t(e Provin)e o- #ar0a) t(e a.ount o- t(e )(e)*s and t(en dire)tin, "sso)iated %an* to rei.+urse PN%. #(e 2ourt -inds not(in, /ron, /it( t(e .ode o- t(e a/ard. #(e dra/er, Provin)e o- #ar0a), is a )0ientor )usto.er o- t(e PN%, not o- "sso)iated %an*. #(ere is no privity o- )ontra)t +et/een t(e dra/er and t(e )o00e)tin, +an*. #(e tria0 )ourt .ade PN% and "sso)iated %an* 0ia+0e /it( 0e,a0 interest -ro. Bar)( 20, 19;1, t(e date o- extra@udi)ia0 de.and .ade +y t(e Provin)e o- #ar0a) on PN%. #(e pay.ents to +e .ade in t(is )ase ste. -ro. t(e deposits o- t(e Provin)e o- #ar0a) in its )urrent a))ount /it( t(e PN%. %an* deposits are )onsidered under t(e 0a/ as 0oans. =0 2entra0 %an* 2ir)u0ar No. =16 pres)ri+es a t/e0ve per)ent 512J8 interest per annu. -or 0oans, -ore+earan)e o- .oney, ,oods or )redits in t(e a+sen)e o- express stipu0ation. Nor.a00y, )urrent a))ounts are 0i*e/ise interest6 +earin,, +y express )ontra)t, t(us ex)0udin, t(e. -ro. t(e )overa,e o- 2% 2ir)u0ar No. =16. In t(is )ase, (o/ever, t(e a)tua0 interest rate, i- any, -or t(e )urrent a))ount opened +y t(e Provin)e o- #ar0a) /it( PN% /as not ,iven in eviden)e. Hen)e, t(e 2ourt dee.s it /ise to a--ir. t(e tria0 )ourtAs use o- t(e 0e,a0 interest rate, or six per)ent 56J8 per annu.. #(e interest rate s(a00 +e

)o.puted -ro. t(e date o- de-au0t, or t(e date o- @udi)ia0 or extra@udi)ia0 de.and. =1 #(e tria0 )ourt did not err in ,rantin, 0e,a0 interest -ro. Bar)( 20, 19;1, t(e date o- extra@udi)ia0 de.and. #(e 2ourt -inds as reasona+0e, t(e proportionate s(arin, o- -i-ty per)ent 6 -i-ty per)ent 5?0J6 ?0J8. >ue to t(e ne,0i,en)e o- t(e Provin)e o- #ar0a) in re0easin, t(e )(e)*s to an unaut(oriGed person 54austo Pan,i0inan8, in a00o/in, t(e retired (ospita0 )as(ier to re)eive t(e )(e)*s -or t(e payee (ospita0 -or a period )0ose to t(ree years and in not proper0y as)ertainin, /(y t(e retired (ospita0 )as(ier /as )o00e)tin, )(e)*s -or t(e payee (ospita0 in addition to t(e (ospita0As rea0 )as(ier, respondent Provin)e )ontri+uted to t(e 0oss a.ountin, to P203,300.00 and s(a00 +e 0ia+0e to t(e PN% -or -i-ty 5?0J8 per)ent t(ereo-. In e--e)t, t(e Provin)e o- #ar0a) )an on0y re)over -i-ty per)ent 5?0J8 o- P203,300.00 -ro. PN%. #(e )o00e)tin, +an*, "sso)iated %an*, s(a00 +e 0ia+0e to PN% -or -i-ty 5?0J8 per)ent oP203,300.00. It is 0ia+0e on its /arranties as indorser o- t(e )(e)*s /(i)( /ere deposited +y 4austo Pan,i0inan, (avin, ,uaranteed t(e ,enuineness o- a00 prior indorse.ents, in)0udin, t(at ot(e )(ie- o- t(e payee (ospita0, >r. "dena 2an0as. "sso)iated %an* /as a0so re.iss in its duty to as)ertain t(e ,enuineness o- t(e payeeAs indorse.ent. IN 7I!' $4 #H! 4$R!G$ING, t(e petition -or revie/ -i0ed +y t(e P(i0ippine Nationa0 %an* 5G.R. No. 1076128 is (ere+y P"R#I" H GR"N#!>. #(e petition -or revie/ -i0ed +y t(e "sso)iated %an* 5G.R. No. 1073;28 is (ere+y >!NI!>. #(e de)ision o- t(e tria0 )ourt is B$>I4I!>. #(e P(i0ippine Nationa0 %an* s(a00 pay -i-ty per)ent 5?0J8 o- P203,300.00 to t(e Provin)e o- #ar0a), /it( 0e,a0 interest -ro. Bar)( 20, 19;1 unti0 t(e pay.ent t(ereo-. "sso)iated %an* s(a00 pay -i-ty per)ent 5?0J8 o- P203,300.00 to t(e P(i0ippine Nationa0 %an*, 0i*e/ise, /it( 0e,a0 interest -ro. Bar)( 20, 19;1 unti0 pay.ent is .ade. :$ $R>!R!>.