FACTS:

A certain Roberto Gonzaga presented for payment FEBTC Check No. 432100 to the bank’s branch in Bel-Air, Makati. The check, payable to cash and drawn against Samsung Construction’s current account, was in the amount of P999,500.00. The bank teller, Cleofe Justiani, checked the balance of the account. After ascertaining there were enough funds, and after comparing the signature in the check and that of the specimen on record, Justiani was satisfied as to the authenticity of the signature on the check.

Gonzaga presented 3 identification cards to the bank officers.

Justiani forwarded the check to the branch Senior Assistant Cashier Gemma Velez for approval. Velez too concluded that the check was indeed signed by the company’s  Project Manager Jong Kyu Lee.

The check was also forwarded to Shirley Syfu, another bank officer for approval. Syfu then noticed that Jose Sempio III (Sempio), the assistant accountant of Samsung Construction, was also in the bank. Syfu showed the check to Sempio, who vouched for the genuineness of Jong’s signature.

Satisfied with the genuineness of the signature of Jong, Syfu authorized the banks encashment of the check to Gonzaga.

The following day, the company’s accountant, Kyu Yong Lee discovered that a check had been encashed. Aware that he had not prepared such a check for Jong’s signature, Kyu found that the last blank check was missing.

Jong learned of the encashment of the check, and realized that his signature had been forged.

Samsung Construction filed a Complaint for violation of Section 23 of the NIL, and prayed for the payment of the amount debited as a result of the questioned check plus interest, and attorneys fees.

The RTC held that Jong’s signature on the check was forged and accordingly directed the bank to pay or credit back to Samsung Constructions account the said amount.

On appeal, the CA reversed the RTC Decision and absolved FEBTC from any liability.

 

ISSUE:

Whether or not FEBTC is liable to Samsung Construction in paying the forged check.

 

RULING:

Section 23 of the Negotiable Instruments Law states:

When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefore, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.

The general rule is to the effect that a forged signature is wholly inoperative, and payment made through or under such signature is ineffectual or does not discharge the instrument. If payment is made, the drawee cannot charge it to the drawers account. The traditional justification for the result is that the drawee is in a superior position to detect a forgery because he has the makers signature and is expected to know and compare it. The rule has a healthy cautionary effect on banks by encouraging care in the comparison of the signatures against those on the signature cards they have on file.

Quite palpably, the general rule remains that the drawee who has paid upon the forged signature bears the loss. The exception to this rule arises only when negligence can be traced on the part of the drawer whose signature was forged, and the need arises to weigh the comparative negligence between the drawer and the drawee to determine who should bear the burden of loss. 

We recognize that Section 23 of the Negotiable Instruments Law bars a party from setting up the defense of forgery if it is guilty of negligence. Yet, we are unable to conclude that Samsung Construction was guilty of negligence in this case.

Given the circumstances, extraordinary diligence dictates that FEBTC should have ascertained from Jong personally that the signature in the questionable check was his.

Still, even if the bank performed with utmost diligence, the drawer whose signature was forged may still recover from the bank as long as he or she is not precluded from setting up the defense of forgery. After all, Section 23 of the Negotiable Instruments Law plainly states that no right to enforce the payment of a check can arise out of a forged signature. Since the drawer, Samsung Construction, is not precluded by negligence from setting up the forgery, the general rule should apply. Consequently, if a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor. A bank is liable, irrespective of its good faith, in paying a forged check.