Alvin Patrimonio v. Napoleon Gutierrez , et. al. G.R. No.

187769 June 04, 2014

FACTS: The Patrimonio and the respondent Gutierrez entered into a business venture under the
name of Slam Dunk Corporation, a production outfit that produced mini-concerts and shows related
to basketball.

Patrimonio pre-signed several checks to answer for the expenses of Slam Dunk. Although signed,
these checks had no payee’s name, date or amount. The blank checks were entrusted to Gutierrez
with the specific instruction not to fill them out without previous notification to and approval by the
Patrimonio.

Without the Patrimonio’s knowledge and consent, Gutierrez went to Marasigan to secure a loan in
the amount of P200,000.00 on the excuse that the Patrimonio needed the money for the
construction of his house. In addition to the payment of the principal, Gutierrez assured Marasigan
that he would be paid an interest of 5% per month.

Marasigan acceded to Gutierrez’ request and gave him P200,000.00. Gutierrez simultaneously
delivered to Marasigan one of the blank checks the Patrimonio pre-signed with Pilipinas Bank with
the blank portions filled out with the words “Cash” “Two Hundred Thousand Pesos Only”, and the
amount of “P200,000.00.”

Marasigan deposited the check but it was dishonored for the reason “ACCOUNT CLOSED.” It was later
revealed that Patrimonio’s account with the bank had been closed.

Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand letters to
the Patrimonio asking for the payment of P200,000.00, but his demands likewise went unheeded.
Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner.

RTC— in favor of Marasigan. It found that the Patrimonio, in issuing the pre-signed blank checks, had
the intention of issuing a negotiable instrument, albeit with specific instructions to Gutierrez not to
negotiate or issue the check without his approval. RTC declared Marasigan as a holder in due course
and accordingly dismissed the Patrimonio’s complaint for declaration of nullity of the loan. It ordered
the Patrimonio to pay Marasigan the face value of the check with a right to claim reimbursement
from Gutierrez. CA— affirmed the RTC ruling.

ISSUE: Whether or not Marasigan is a holder in due course thus may hold Patrimonio liable
HELD: No. Section 14 of the Negotiable Instruments Law provides for when blanks may be filled. This
provision applies to an incomplete but delivered instrument. Under this rule, if the maker or drawer
delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable
instrument, that person is deemed to have prima facie authority to fill it up. It merely requires that
the instrument be in the possession of a person other than the drawer or maker and from such
possession, together with the fact that the instrument is wanting in a material particular, the law
presumes agency to fill up the blanks.

In order however that one who is not a holder in due course can enforce the instrument against a
party prior to the instrument’s completion, two requisites must exist: (1) that the blank must be filled
strictly in accordance with the authority given; and (2) it must be filled up within a reasonable time. If
it was proven that the instrument had not been filled up strictly in accordance with the authority
given and within a reasonable time, the maker can set this up as a personal defense and avoid
liability.

Section 52(c) of the NIL states that a holder in due course is one who takes the instrument “in good
faith and for value.” It also provides in Section 52(d) that in order that one may be a holder in due
course, it is necessary that at the time it was negotiated to him he had no notice of any infirmity in
the instrument or defect in the title of the person negotiating it.

Acquisition in good faith means taking without knowledge or notice of equities of any sort which
could beset up against a prior holder of the instrument. It means that he does not have any
knowledge of fact which would render it dishonest for him to take a negotiable paper. The absence
of the defense, when the instrument was taken, is the essential element of good faith.

In order to show that the defendant had “knowledge of such facts that his action in taking the
instrument amounted to bad faith,” it is not necessary to prove that the defendant knew the exact
fraud that was practiced upon the plaintiff by the defendant’s assignor, it being sufficient to show
that the defendant had notice that there was something wrong about his assignor’s acquisition of
title, although he did not have notice of the particular wrong that was committed. In the present
case, Marasigan’s knowledge that the petitioner is not a party or a privy to the contract of loan, and
correspondingly had no obligation or liability to him, renders him dishonest, hence, in bad faith.

Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already
totally barred from recovery.

Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the
authority when he used the check to pay the loan he supposedly contracted for the construction of
petitioner’s house. This is a clear violation of the petitioner’s instruction to use the checks for the
expenses of Slam Dunk. It cannot therefore be validly concluded that the check was completed
strictly in accordance with the authority given by the petitioner.
 Jai-Alai Corp. of the Phil. vs. Bank of the Phil. Islands
G.R. No. L-29432 August 6, 1975 66 SCRA 29
-forgery

FACTS:
Petitioner deposited 10 checks in its current account with BPI. The checks which were acquired by
petitioner from Ramirez, a sales agent of the Inter-Island Gas were all payable to Inter-Island Gas
Service, Inc. or order. After the checks had been submitted to Inter-bank clearing, Inter-Island Gas
discovered that all the indorsements made on the checks purportedly by its cashiers were forgeries.
BPI thus debited the value of the checks against petitioner's current account and forwarded to the
latter the checks containing the forged indorsements which petitioner refused to accept.

ISSUE:
Whether BPI had the right to debit from petitioner's current account the value of the checks with the
forged indorsements.

RULING:
BPI acted within legal bounds when it debited the petitioner's account. Having indorsed the checks
to respondent bank, petitioner is deemed to have given the warranty prescribed in Section 66 of the
NIL that every single one of those checks "is genuine and in all respects what it purports to be."
Respondent which relied upon the petitioner's warranty should not be held liable for the resulting
loss.

**The depositor of a check as indorser warrants that it is genuine and in all respects what it purports
to be. Having indorsed the checks to respondent bank, petitioner is deemed to have given the
warranty prescribed in Section 66 of the NIL that every single one of those checks " is genuine and in
all respects what it purports to be."

GEMPESAW V. CA
218 SCRA 682

FACTS:
Gempensaw was the owner of many grocery stores. She paid her suppliers through the issuance of
checks drawn against her checking account with respondent bank. The checks were prepared
by her bookkeeper Galang. 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 even 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 Gempensaw
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.

HELD:
Forgery is a real defense by the party whose signature was forged. A party whose signature was
forged was never a party and never gave his consent to the instrument. Since his signature
doesn’t appear in the instrument, the same cannot be enforced against him even by a holder in
due course. The drawee bank cannot charge the account of the drawer whose signature was forged
because he never gave the bank the order to pay.

In the case at bar the checks were filled up by petitioner’s employee Galang and were later
given to her for signature. Her signing the checks made the negotiable instruments complete. Prior
to signing of the checks, there was no valid contract yet. Petitioner completed the checks by
signing them and thereafter authorized Galang to deliver the same to their respective payees. The
checks were then indorsed, forged indorsements thereon.

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. CA
252 SCRA 620

FACTS:
The province of Tarlac maintains an account with PNB-Tarlac. Part of its funds is
appropriated for the benefit of Concepcion Emergency Hospital. During a post-audit done by the
province, it was found out that 30 of its checks weren’t received by the hospital. Upon further
investigation, it was found out that the checks were encashed by Pangilinan who was a former
cashier and administrative officer of the hospital through forged indorsements. This
prompted the provincial treasurer to ask for reimbursement from PNB and thereafter, PNB
from Associated Bank. As the two banks didn't want to reimburse, an action was filed against
them.

HELD:
There is a distinction on forged indorsements with regard bearer instruments and
instruments payable to order.

With instruments payable to bearer, the signature of the payee or holder is unnecessary to pass title
to the instrument. Hence, when the indorsement is a forgery, only the person whose signature
is forged can raise the defense of forgery against holder in due course.

In instruments payable to order, the signature of the rightful holder is essential to transfer
title to the same instrument. When the holder’s signature is forged, all parties prior to the
forgery may raise the real defense of forgery against all parties subsequent thereto. In connection
to this, an indorser warrants that the instrument is genuine. A collecting bank is such an
indorser. So even if the indorsement is forged, the collecting bank is bound by his warranties as
an indorser and cannot set up the defense of forgery as against the drawee bank.

Furthermore, in cases involving checks with forged indorsements, such as the case at bar, the
chain of liability doesn't end with the drawee bank. The drawee bank may not debit the
account of the drawer but may generally pass liability back through the collection chain to the
party who took from the forger and of course, the forger himself, if available. In other words,
the drawee bank can seek reimbursement or a return of the amount it paid from the collecting
bank or person. The collecting bank generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements 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 of the indorsements.

With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it
of the opportunity to go after the forger, signifies negligence on the part of the drawee bank and
will preclude it from claiming reimbursement. In this case, PNB wasn't guilty of any negligent delay.
Its delay hasn't prejudiced Associated Bank in any way because even if there wasn't delay, the
fact that there was nothing left of the account of Pangilinan, there couldn't be anymore
reimbursement.