Development Bank of the Phils vs.

Sima Wei

Facts: In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the
latter executed and delivered to the former a promissory note. However, two checks were not
delivered to the petitioner or to any of its authorized representatives. Instead for these checks
came into the possession of respondent Lee Kian Huat, who deposited the checks without the
petitioner’s indorsement to the account of respondent Plastic Corporation in Producers Bank
which was afterwards credited to Plastic Corporation’s account.

Issue: Whether petitioner Bank can hold petitioner liable for the undelivered check.

Held: A negotiable instrument must be delivered to the payee in order to evidence its existence
as a binding contract. Delivery of an instrument means transfer of possession, actual or
constructive, from one person to another. Without the initial delivery of the instrument from the
drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must
be intended to give effect to the instrument. Without the delivery of said checks to petitioner-
payee, the former did not acquire any right or interest therein and cannot therefore assert any
cause of action, founded on said checks, whether against the drawer Sima Wei or against the
Producers Bank or any of the other respondents.

Philippine Bank of Commerce vs. Aruego

Facts: Plaintiff instituted an action against defendant Aruego for recovery of money signed by
the defendent. The latter interposes that he signed the drafts in a representative capacity, that
he signed only as an accommodation party and that he is not liable. The court denied the motion
and rendered judgement against the defendant. Hence this petition.

Issue: Whether or not defendant is liable by accepting the instrument?

Held: Yes, an inspection of the drafts accepted by the defendant shows that nowhere has he
disclosed that he was signing as representative of the Philippine Education Foundation
Company. For failure to disclose his principal as required under Section 20 of the NIL, he is
personally liable for the drafts he accepted.

Fransisco vs. Court of Appeals

FACTS: Sometime in 1979, Ong discovered that Diaz and Francisco had executed and signed
seven checks drawn against the Insular Bank of Asia & America (IBAA) and payable to Herby
Commercial & Construction Corporation (HCC) for completed and delivered work under the
contract. Ong, however, claims that these checks were never delivered to HCCC. Upon inquiry
with Diaz, Ong learned that the GSIS gave Francisco custody of the checks since she promised
that she would deliver the same to HCCC. Instead, Francisco forged the signature of Ong,
without his knowledge or consent, at the dorsal portion of the said checks to make it appear that
HCCC had indorsed the checks; Francisco then indorsed the checks for a second time by signing
her name at the back of the checks and deposited the checks in her IBAA savings account. IBAA
credited Francisco’s account with the amount of the checks and the latter withdrew the amount
so credited.
Petitioner claims that she was, in any event, authorized to sign Ong’s name on the checks by
virtue of the Certification executed by Ong in her favor giving her the authority to collect all the
receivables of HCCC from the GSIS, including the questioned checks.

ISSUE: Whether or not petitioner singing in a representative capacity is liable to the questioned
checks.

Held: The Negotiable Instruments Law provides that when a person is under obligation to
indorse in a representative capacity, he may indorse in such terms as to negative personal
liability. An agent, when so signing, should indicate that he is merely signing as an agent in
behalf of the principal and must disclose the name of his principal. Otherwise, he will be
held liable personally. If fransisco was indeed authorized, she didn't comply with the
requirements of the law. Instead of signing Ong’s name, she should have signed in her own
name as agent of HCCC. Hence, she is liable.

Jai-Alai Coporation vs. BPI

Facts: Petitioner deposited in its current account with respondent bank several checks acquired
from Antonio J. Ramirez, a regular bettor. The deposits were temporarily credited to petitioner’s
account. However, after the checks had been submitted to interbank clearing, it was discovered
that all indorsements made were forged. Hence, respondent Bank debited the petitioner’s
current account and forwarded to the latter the checks containing the forged indorsement,
which petitioner refused to accept. Thereafter, petitioner drew against its current account a
check which were latter dishonoured due to insufficiency of funds.

Issue: Whether or not the respondent bank had the right to debit the petitioner’s current
account.

Held: Yes, under Section 23 of the NIL, a forged signature is wholly inoperative and no right to
discharge it or enforce its payment can be acquired through or under the forged signature except
against a party who cannot invoke the forgery. As a collecting bank which indorsed the checks
should be liable to the drawee-bank for reimbursement because the checks had been forged
prior to their delivery to the petitioner. The petitioner must in turn shoulder the loss of the
amounts which the respondent, as its collecting agent, had to reimburse to the drawee-banks.

Republic Bank vs. Ebrada

Facts: A check was issued to Lorenzo who turned out to be dead for 11 years. The check was
indorsed to Lorenzo to Dominguez and to Ebrada. It was encashed by Ebrada at the Republic
Bank’s main office. Informing the bank that the indorsement of Lorenzo was forged, the Bureau
of Treasury requested the Bank to refund the amount. Thereafter, the Bank sued Ebrada to
return the money.

Issue: Whether or not Ebrada is liable to return the value of the check bearing a forged
signature.

Held: Yes, as last indorser, Ebrada was supposed to have warranted that she has good title to
said check. The drawee of a check can recover from the holder the money paid to him on a
forged instrument. This is because the indorser is supposed to warrant to the drawee that the
signatures of the payee and previous indorser are genuine.

MWSS vs. CA

Facts: MWSS issued 23 personalized checks against its account with PNB. During the same
month, a second batch of 23 checks bearing the same numbers were issued. Both were paid and
cleared by PNB and debited against the account of MWSS. Investigation was conducted by NBI
showed that all the payees for the 2nd batch were all fictitious persons. Thereafter, MWSS
demanded from PNB to restore the amount of the 2nd batch payments which were claimed as
forged.

Issue: Whether or not the drawee bank PNB is liable.

Held: No. Forgery cannot be presumed. It must be established by clear, positive and convincing
evidence which is lacking in the case at bar. Further, petitioner was using its own personalized
checks, instead of the official PNB Commercial blank checks. The Drawee bank PNB cannot be
faulted for not having detected the fraudulent encashment of the checks because the printin was
not done under the supervision and control of the Bank. The petitioner was in a better position
to detect and prevent the fraudulent encashment of its checks.

Banco de Oro vs. Equitable Banking Corporation

Facts: Banco De Oro drew six crossed manager’s check payable to certain member
establishments of Visa Card. The checks were deposited with Equitable Bank. After stamping at
the bank the usual endorsements, the checks were sent for clearing through the PCHC. Banco De
Oro paid the checks. Thereafter, Banco De Oro discovered that the endorsements appearing at
the back of the Checks were forged and/or unauthorized, hence he claimed reimbursement from
Equitable bank.

Issue: Whether or not Banco de Oro could collect reimbursement from Equitable Bank.

Held: Yes. The petitioner having stamped its guarantee and indorsed is estopped from claiming
that the checks under consideration are not negotiable instruments. The collecting bank or last
endorser generally suffers the loss because it has the duty to ascertain the genuineness of all
prior indorsements.

Gempesaw vs. Court of Appeals

FACTS: In the signing of the checks prepared by Galang, Gempensaw didn't bother herself in
verifying to whom the checks were being paid and if the issuances were necessary. She
didn't verify the returned checks of the bank when the latter notifies her of the same. During
her two years in business, there were incidents shown that the amounts paid for were in
excess of what should have been paid. It was also shown that even if the checks were crossed,
the intended payees didn't receive the amount of the checks. This prompted Gempesaw to
demand the bank to credit her account for the amount of the forged checks. The bank refused
to do so and this prompted her to file the case against the bank.
Issue: Whether or not the bank Gempesaw has the right to demand the credit of the amount
forged.

HELD: Forgery is a real defense by the party whose signature was forged. As a rule, a drawee
bank who has paid a check on which an indorsement has been forged cannot debit the
account of a drawer for the amount of said check. An exception to this rule is when the
drawer is guilty of negligence which causes the bank to honor such checks. Petitioner in this
case has relied solely on the honesty and loyalty of her bookkeeper and never bothered to
verify the accuracy of the amounts of the checks she signed the invoices attached thereto.
And though she received her bank statements, she didn't carefully examine the same to
double-check her payments. Petitioner didn't exercise reasonable diligence which eventually
led to the fruition of her bookkeeper’s fraudulent schemes.

Associated Bank v. Court of Appeals

Facts: The Province of Tarlac maintains a current account with PNB. Checks were issued and
received by the hospital’s administrative officer and cashier, Pangilinan. Panilinan, through the
help of Associated Bank but after forging the signature of the hospital’s chief was able to deposit
the checks in his personal account. The province discovered that the hospital did not receive
several allotted checks, and sought the restoration of the debited amounts from PNB. In turn,
PNB demanded reimbursement from Associated Bank. Both banks resisted payment. Hence,
this present action.

Issue: Whether or not Associated Bank should bear the loss.

Held: Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as
genuine, valid and subsisting at the time of indorsement pursuant to Section 66 of the NIL. The
stamp guaranteeing prior indorsement is not an empty rubric; the collecting bank is held
accountable for checks deposited by its customers.

Metrobank vs. First National City Bank

Facts: A check was drawn by Joaquin Cunanan & Company on First National City Bank (FNCB)
which was deposited in Metrobank by Salvador Sales. The check was cleared the same day and
the latter withdrew it and closed his account. Thereafter, upon return of the cancelled check,
Joaquin Cunanan & Company notified the bank that the check was altered from actual amount
of P50 raised to P50,000 and over the name superimpose the word Cash. FNCB notified and
reiterated the request to Metrobank for the reimbursement but the latter was adamant in its
refusal, hence, this action.

Issue: Wether or not Metrobank should bear the loss from a materially altered check?

Held: In this case, the check was not returned to Metro Bank in accordance with the 24-hour
clearing house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the attention
of Metro Bank to the alteration of the check in question until after the lapse of nine days,
negates whatever right it might have had against Metro Bank in the light of the said Central
Bank Circular. Its remedy lies not against Metro Bank, but against the party responsible for the
changing the name of the payee and the amount on the face of the check.

Republic Bank vs. Court of Appeals

FACTS: San Miguel Corporation (SMC) drew a check amounting to P240.00 on its account in
First National City Bank (FNCB) in favor of Delgado, a stockholder. Delgado fraudulently
altered the amount of the check to P9,240 after which he endorsed and deposited it with
Republic Bank. Republic Bank endorsed the check to First National City Bank (FNCB), the
drawee bank, by stamping on the back of the check “all prior and / or lack of indorsement
guaranteed". Based on such endorsement, FNCB paid the amount to Republic Bank. Later on,
San Miguel informed FNCB of the material alteration of the amount. FNCB recredited the
amount to San Miguel’s account, and demanded refund from Republic Bank. Republic Bank
refused, claiming there was delay in giving it notice of the alteration.

ISSUE: Whether petitioner Republic Bank as the collecting bank should bear the loss resulting
from the altered check.

RULING: When an indorsement is forged, the collecting bank or last indorser, as a general rule,
bears the loss. But the unqualified indorsement of the collecting bank on the check should be
read together with the 24-hour regulation on clearing house operation. Hence, when a drawee
bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing
period, the collecting bank is absolved from liability.

Philippine Commercial International Bank vs. Court of Appeals

FACTS: Ford Philippines filed actions to recover from the drawee bank Citibank and collecting
bank PCIB the value of several checks payable to the Commissioner of Internal
Revenue which were embezzled allegedly by an organized syndicate. What prompted this
action was the drawing of a check by Ford, which it deposited to PCIB as payment and
was debited from their Citibank account. It later on found out that the payment wasn’t received
by the Commissioner. Meanwhile, according to the NBI report, one of the checks issued by
petitioner was withdrawn from PCIB for alleged mistake in the amount to be paid. This was
replaced with manager’s check by PCIB, which were allegedly stolen by the syndicate and
deposited in their own account. The trial court decided in favor of Ford.

ISSUE: Has Ford the right to recover the value of the checks intended as payment to CIR?

HELD: The checks were drawn against the drawee bank but the title of the person negotiating
the same was allegedly defective because the instrument was obtained by fraud and unlawful
means, and the proceeds of the checks were not remitted to the payee. The mere fact that
the forgery was committed by a drawer-payor’s confidential employee or agent, who by virtue
of his position had unusual facilities for perpetrating the fraud and imposing the forged paper
upon the bank, doesn’t entitle the bank to shift the loss to the drawer-payor, in the absence of
some circumstance raising estoppel against the drawer.
Ramon Ilusorio vs. Court of Appeals

FACTS: Petitioner was a prominent businessman who, because of different business

commitments, entrusted to his then secretary the handling of his credit cards and
checkbooks. For a material period of time, the secretary was able to encash and deposit
in her personal account money from the account of petitioner. Upon knowledge of her
acts, she was fired immediately and criminal actions were filed against her. Thereafter,
petitioner requested the bank to restore its money but the bank refused to do so.

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

HELD: The petitioner doesn’t have a course of action against the bank. To be entitled to
damages, petitioner has the burden of proving negligence on the part of the bank for failure to
detect the discrepancy in the signatures on the checks. It is incumbent upon petitioner to
establish the fact of forgery. It was petitioner who was negligent in this case. He failed to
examine his bank statements and this was the proximate cause of his own damage.
Because of this negligence, he is precluded from setting up the defense of forgery with regard the
checks.

Samsung Construction Company Phils., Inc vs FEBTC

Facts: Petitioner maintains a current account with the respondent bank and authorized Jong to
sign checks in behalf of the company. The checks are in the custody of an accountant Kyu. On
one occasion, a certain Gonzaga presented a check to FEBTC purportedly drawn by the
Company in the amount of P999,500. The check was payable to cash and appeared to be signed
by Jong. FEBTC upon ascertaining that there are sufficient fund to cover the check and finding
the signature of Jong appears to be genuine paid Gonzaga. Later, the forgery was discovered.
Samsung demanded that the amount paid to Gonzaga be credited back to its account because
they have not authorized the encashment of the check. On the other hand, the respondent bank
claimed negligence on the part of the petitioner in protecting its check.

Issue: Whether or not FEBTC should bear the loss.

Held: The SC held that the FEBTC should bear the loss. Under Sec. 62 of NIL, among the
warranties to be assumed by the acceptor is it admits the existence of the drawer, the
genuineness of his signature, and his capacity and authority to draw the instrument. It is
incumbent upon the drawee bank to ascertain the genuineness of the signature of its depositor.
The respondent bank in this case did not exercise the degree of diligence required to enable it to
detect the forgery.