Bank Liability for Forged Checks

ASSOCIATED BANK vs. HON. COURT OF APPEALS, and MERLE V.
REYES
G.R. No. 89802, May 7, 1992
Cruz, J.
Facts:
Respondent Reyes, owner of Melissa’s RTW, was issued checks by her
customers which were deposited with Associated Bank without her
knowledge. Said bank paid the checks to Rafael Sayson who was not
authorized by Reyes to deposit and encash the checks.
The subject checks were accepted for deposit by the Bank for the
account of Rafael Sayson although they were “crossed checks” or “for
payee’s account only” as indicated by two parallel lines diagonally on the left
top portion of the checks.
Reyes filed a case at the RTC of Quezon City for recovery of the total
value of the checks plus damages. Both the RTC and the CA required
petitioners to pay Reyes total value of subject checks as well as damages;
however, the petitioner’s argue that Reyes had no cause of action and that
her customer companies, not the Associated Bank, are liable for not giving
clear instructions.
Issues:
1. Did Reyes have cause of action?
2. Is petitioner Bank liable and required to pay for the amount improperly
paid to Sayson?
Ruling:
1. Yes, Reyes did have cause of action.
2. Yes, the bank was liable for the amount.
The Bank, by accepting the checks had stamped thereon its guarantee that
"all prior endorsements and/or lack of endorsements (were) guaranteed.",
thus they made themselves liable for said checks.
The banks are also responsible for ascertaining he validity of the
checks they were presented, to inquire to the depositor’s authority and to
ensure that the signatures affixed therein were not forged; however,
petitioner bank failed to do all said responsibilities and thus bears the liability
for refunding the amount lost.
PHILIPPINE NATIONAL BANK vs. THE COURT OF APPEALS and
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK
G.R. No. L-26001, October 29, 1968
CONCEPCION, C.J.
FACTS
A GSIS check with petitioner PNB as the drawee bank was deposited by
a Augusto Lim in his current account with the private respondent PCIB. PCIB
stamped "All prior indorsements and/or Lack of Endorsement Guaranteed,
Philippine Commercial and Industrial Bank". PNB paid PCIB the amount in the
check without returning the same while clearing. PNB received a formal
notice from the GSIS that the check had been lost, with the request that
payment thereof be stopped, yet PNB still proceeded. The check was later
discovered to have forged signatures, yet despite the demand to re-credit
said checks because of the forgery they were denied.

ISSUE: May PNB recover from PCIB?

RULING
No. Despite PCIB stamping its guarantee at the back of the check, PNB
had been guilty of a greater degree of negligence, because it had a previous
and formal notice from the GSIS that the check had been lost, with the
request that payment thereof be stopped
By not returning the check to the PCIB, by thereby indicating that the
PNB had found nothing wrong with the check and would honor the same, and
by actually paying its amount to the PCIB, the PNB induced the latter, not
only to believe that the check was genuine and good in every respect, but,
also, to pay its amount to Augusto Lim. In other words, the PNB was the
primary or proximate cause of the loss, and, hence, may not recover from
the PCIB.
Section 62 of Act No. 2031 provides that the acceptor by accepting the
instrument engages that he will pay it according to the tenor of his
acceptance; and admits, the existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the instrument; and, the
existence of the payee and his then capacity to indorse.
When both parties are at fault the court leaves them as is.
PNB V. PICORNELL
46 PHIL 716
ROMUALDEZ, J.
FACTS:
Picornell followed the instructions of Hyndman, Tavera and
Venutra by buying bales of tobacco. He was able to obtain in National Bank
a sum of money together with his commission. He drafted a bill of exchange
against the firm and in favor of the bank. It was received by National Bank
and was accepted thereafter by the firm. However, on alleged conditions of
the tobacco, the bill of exchange was not paid.
ISSUE: Is Picornell liable for the amount in the instrument?
HELD:
Yes, the respondent is liable.
The firm accepted the bill unconditionally but did not pay it at
maturity, wherefore its responsibility to pay the same is clear. The question
whether tobacco was worth the value of the bill doesn’t concern the bank.
Such partial want of consideration, if it was, doesn’t exist with respect to the
bank which paid Picornell the full value of the said bill of exchange. The
bank was a holder in due course and was such for value full and complete.
The firm cannot escape liability.
SAMSUNG CONSTRUCTION COMPANY PHILIPPINES v. FAR EAST BANK

GR No. 129015, 2004-08-13
TINGA, J,
Facts:
Samsung Construction Company Philippines, Inc. maintained a current
account with defendant Far East Bank and Trust Company‘s ("FEBTC").
The sole signatory to Samsung Construction's account was Jong Kyu
Lee ("Jong"), its Project Manager, while the checks remained in the custody
of the company's accountant, Kyu Yong Lee ("Kyu").
A Samsung Employee presented for payment FEBTC Check to the
bank. The check, payable to cash and drawn against Samsung Construction's
current account. The bank teller verified their authenticity and the checks
were later encashed to Gonzaga.
Kyu discovered that a check in the amount of P999,500.00 had been
encashed. It was found that Jong’s signature had been forged.
Issues:
1. Was Samsung Construction negligent in keeping its checks?
2. Was Samsung Construction precluded from setting up the defense of
forgery under Section 23 of the Negotiable Instruments Law?
Ruling:
1. No, Samsung was not guilty of negligence in this case.
The bare fact that the forgery was committed by an employee of the
party whose signature was forged cannot necessarily imply that such party's
negligence was the cause for the forgery. Negligence is not presumed, but
must be proven by him who alleges it, yet, FEBTC was unable to do so.
2. No, Samsung Construction was not precluded from setting up the
defense of Forgery.
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.
Under Section 23 of the Negotiable Instruments Law, forgery is a real or
absolute defense by the party whose signature is forged but it cannot be
raised if said party had been negligent. Hence, if Jong's signature was indeed
forged, FEBTC is liable for the loss since it authorized the discharge of the
forged check. Such liability attaches even if the bank exerts due diligence
and care in preventing such faulty discharge.
WESTMONT BANK V. ONG
373 SCRA 212
QUISUMBING, J.
FACTS:
Ong was supposed to be the payee of the checks issued by Island
Securities. Ong has a current account with petitioner bank. He opted to sell
his shares of stock through Island Securities. The company issued checks in
favor of Ong but the latter wasn't able to receive any. Tamlinco, a friend of
Ong, got hold of the checks, forged Ong’s signatures and deposited the
checks in Tamlinco’s account with Westmont Bank. Ong then sought to
collect the money from Tamlinco’s family first before filing a complaint with
the Central Bank. As his efforts were futile to recover his money, he filed an
action against the petitioner. The trial and appellate court decided in favor of
Ong.
ISSUE:
1. Was the instrument valid and operative against Ong?
2. Can Ong collect the money he lost directly from the bank?
HELD:
1. Yes, since the signature of the payee was forged, such signature should
be deemed inoperative and ineffectual. Petitioner, as the collecting bank,
grossly erred in making payment by virtue of said forged signature.
2. Yes, the payee should be allowed to collect from the collecting bank as
Westmont Bank Grossly erred in making a payment because of said
forged signature
It should be liable for the loss because it is the bank’s legal duty to
ascertain that the payee’s endorsement was genuine before cashing the
check. As a general rule, a bank or corporation who has obtained possession
of a check with an unauthorized or forged indorsement of the payee’s
signature and who collects the amount of the check other from the drawee,
is liable for the proceeds thereof to the payee or the other owner,
notwithstanding that the amount has been paid to the person from whom the
check was obtained.
Ong act of directly collecting the loss from the Bank is also valid according
to the Doctrine of Desirable Short Cut.
Agro Conglomerates Inc. V. CA

G.R. No. 117660, December 18, 2000
QUISUMBING, J.
FACTS:
Agro Conglomerates, Inc. (Agro) sold 2 parcels of land to Wonderland
Food Industries, Inc (Wonderland). On July 19, 1982, Agro and Wonderland
and Regent Savings & Loan Bank (Regent) amended the arrangement. Now,
Agro would secure a loan in the name of Agro Conglomerates Inc. for the
total amount of the initial payments, while the settlement of loan would be
assumed by Wonderland
Agro made several promissory notes, payable to Regent in favor of
Wonderland; hence, a subsidiary contract of suretyship had taken effect
since Agro signed the promissory notes as maker and accommodation party
for the benefit of Wonderland. Regent then released the proceeds of the loan
to Agro who failed to meet their obligations as they fell due.
ISSUE: Is Agro liable to the instrument even as an accommodation party?
HELD: YES
There was no contract of sale that materialized. The original
agreement was changed through an addendum, that Agro would instead
secure a loan and the settlement of the same would be shouldered by
Wonderland; thus, the contract of surety was extinguished by the rescission
of the contract.
Accommodation party is a person who has signed the instrument as
maker, acceptor and, indorser without receiving value therefor for the
purpose of lending his name to some other person is liable on the instrument
to a holder for value, notwithstanding such holder at the time of taking the
instrument knew (the signatory) to be an accommodation party.
He has the right, after paying the holder, to obtain reimbursement
from the party accommodated, since the relation between them has in effect
become one of principal and surety, the accommodation party being the
surety. The surety’s liability to the creditor or promisee is directly and
equally bound with the principal and the creditor may proceed against any
one of the solidary debtors.
Agro had no legal or just ground to retain the proceeds of the loan at
the expense of Wonderland. Neither could Agro excuse themselves and hold
Wonderland still liable to pay the loan upon the rescission of their sales
contract and if Agro sustained damages as a result of the rescission, they
should have impleaded Wonderland and asked damages. Agro is duty-bound
under the law to pay the claims of Regent from whom they had obtained the
loan proceeds.
ALLIED BANKING CORPORATION vs. BANK OF THE PHILIPPINE ISLANDS
G.R. No. 188363, February 27, 2013
VILLARAMA, JR., J.
FACTS:
A P1,000,000.00 check payable to "Mateo Mgt. Group International"
(MMGI) was deposited to and accepted by petitioner. The check, post-dated
"Oct. 9, 2003", was drawn against Marciano Silva, Jr. (Silva)’s account with
respondent BPI. Upon receipt, petitioner sent the check for clearing to
respondent through the Philippine Clearing House Corporation (PCHC).
The check was cleared by respondent and petitioner credited the

account of MMGI with P1,000,000.00. Later, MMGI’s account was closed and
all the funds therein were withdrawn. A month later, Silva discovered the
debit of P1,000,000.00 from his account. In response to Silva’s complaint,
respondent credited his account with the aforesaid sum.
Petitioner filed a complaint before the Arbitration Committee, asserting

that respondent should solely bear the entire face value of the check due to
its negligence in failing to return the check to petitioner within the 24-hour
their own reglementary period. Respondent charged petitioner with gross
negligence for accepting the post-dated check in the first place claiming that
was the proximate cause.
ISSUE: Is the respondent liable for the instrument?
RULING: YES.
The evidence shows that the proximate cause of the unwarranted
encashment of the subject check was the negligence of respondent who
cleared a post-dated check without observing its own verification procedure.
If respondent exercised ordinary care in the clearing process, it could have
easily noticed the glaring defect upon seeing the date written on the face of
the check "Oct. 9, 2003" and then promptly dishonored it. Thus, petitioner
can seek reimbursement from respondent the amount credited to the
payee’s account .
The doctrine of last clear chance is that the negligence of the plaintiff
does not preclude a recovery for the negligence of the defendant where it
appears that the defendant, by exercising reasonable care and prudence,
might have avoided injurious consequences to the plaintiff notwithstanding
the plaintiff’s negligence.
Tiong V. Ang
G.R. No. L-26767, February 22, 1968
Castro, J.
Facts:
Ting issued a P4,000 Philippine Bank of Communications(PBC) check
payable to cash or bearer with Ang’s signature on the back as indorsement.
Tiong received said check and presented it to PBC which dishonored it. Tiong
then made written demands to Ting and Ang to make good with said check.
When defendants did not comply, a suit was filed. Both MTC and CA ruled in
favor of Tiong, thus this petition.
Issues:
1. Is the instrument negotiable?
2. Is he a general indorser?
3. Would being an accommodation party change Ang’s liability?
Ruling:
1. The genuineness and the due execution of the instrument was not
controverted and appellee is a holder for value; hence, the instrument is
negotiable as the presumption of negotiability was never overcome.
2. Yes, there is nothing in the instrument which states otherwise and
according to NIL section 66 ordains that "every indorser who indorses
without qualification, warrants to all subsequent holders in due course"
(a) that the instrument is genuine and in all respects what it purports to
be; (b) that he has a good title to it; (c) that all prior parties have capacity
to contract; and (d) that the instrument is at the time of his indorsement
valid and subsisting. In addition, "he engages that on due presentment, it
shall be accepted or paid, or both, as the case may be, and that if it be
dishonored, he will pay the amount thereof to the holder."
3. No, even as an accommodation party, he is still liable to the instrument
according to Sec. 29 of the NIL which states that an accommodation party
is one who has signed the instrument as maker, drawer, acceptor, or
indorser, without receiving value therefor, and for the purpose of lending
his name to some other person. Such a person is liable on the instrument
to a holder for value, notwithstanding such holder, at the time of taking
the instrument, knew him to be only an accommodation party.
TOMAS ANG v. ASSOCIATED BANK AND ANTONIO ANG ENG LIONG

G.R. No. 146511, September 5, 2007
AZCUNA, J.
FACTS:
Associated Bank filed a collection suit against Antonio Ang Eng Liong
(Liong)(principal debtor) and petitioner Tomas Ang (Ang)(co-maker) for the 2
promissory notes
On October 3 and 9, 1978, Liong and Ang obtained a loan of
P50,000 and P30,000 evidenced by promissory note payable, jointly and
severally, on January 31, 1979 and December 8, 1978, but despite repeated
demands for payment they failed to settle their obligations totaling
to P539,638.96 as of July 31, 1990
Liong only admitted to have secured a loan amounting to P80,000 while
Tomas Ang claimed that the bank is not the real party in interest as it is not
the a holder for value or a holder in due course; as the bank knew that he did
not receive any valuable consideration for affixing his signatures on the
notes but merely lent his name as an accommodation party
Liong was ordered to pay the principal amount of P80,000 plus 14% interest
per annum and 2% service charge per annum while it ruled in favor of Ang
and against the bank.
Ruling on Ang was reversed by the CA who ordered Ang to pay the bank.
ISSUE: Is Ang liable as accomodation party even without consideration?
HELD: Yes
Accommodation party as a person "who has signed the instrument as
maker, drawer, acceptor, or indorser, without receiving value therefor, and
for the purpose of lending his name to some other person." An
accommodation party requires that (1) he must be a party to the instrument,
signing as maker, drawer, acceptor, or indorser; (2) he must not receive
value therefor; and (3) he must sign for the purpose of lending his name or
credit to some other person
However, it is immaterial so far as the bank is concerned whether one of
the signers, particularly petitioner, has or has not received anything in
payment of the use of his name as the bank may hold the accommodation
party liable.
ASTRO ELECTRONICS CORP. and PETER ROXAS v. PHILIPPINE

EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION
411 SCRA 462
AUSTRIA-MARTINEZ, J.
FACTS:
Astro obtained loans from Philtrust Bank, secured by promissory notes
that were signed twice by Roxas, both as President of Astro Electronics and
in his personal capacity. Roxas also signed a continuing suretyship in favor of
Philtrust. Thereafter, PhilGuarantee bound itself as a guarantor. At default of
Astro, PhilGuarantee paid the obligation. It then filed an action for collection
of money from Astro and Roxas; however, Roxas contests this claiming that
if he wished to sign the instruments merely in his capacity as President of
Astro, then he should have signed only once.
ISSUE: Should Roxas be jointly and severally liable with Astro?
HELD:
Yes. Under the Negotiable Instruments Law, persons who write their
names on the face of promissory notes are makers, promising that they will
pay to the order of the payee or any holder according to its tenor.
Even without the phrase personal capacity, Roxas will still be primarily
liable as a joint and several debtor under the notes considering that his
intention to be liable as such is manifested by the fact that he affixed his
signature on each of the promissory notes twice which necessarily would
imply that he is undertaking the obligation in 2 different capacities, official
and personal.
BPI vs. Court of Appeals and Napiza

G.R. No. 112392. February 29, 2000
YNARES-SANTIAGO, J.
FACTS:
A certain Henry Chan owned a Continental Bank Manager’s Check
payable to "cash" in the amount of $2,500.00. Chan went to the office of
Napiza and requested him to deposit the check in his dollar account by way
of accommodation and for the purpose of clearing the same. Napiza agreed
to deliver to Chan a signed blank withdrawal slip, with the understanding
that as soon as the check is cleared, they would go to the bank to withdraw
the amount of the check. Napiza endorsed the check and deposited it in a
Foreign Currency Deposit Unit (FCDU) Savings Account he maintained with
BPI. Using the blank withdrawal slip given by private respondent to Chan,
one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67 from
Napiza's FCDU account. It turned out that said check deposited by private
respondent was a counterfeit check.
When BPI demanded the return of $2,500.00, private respondent

claimed that he deposited the check only to accommodate Chan but BPI
claims that Napiza, having affixed his signature at the dorsal side of the
check, should be liable for the amount stated therein in accordance with the
provision of the Negotiable Instruments Law on the liability of a general
indorser (Sec. 66).
ISSUE: Is private respondent obliged to return the money paid out by BPI on
a counterfeit check even if he deposited the check "for clearing purposes"
only to accommodate Chan?

RULING:
Ordinarily private respondent may be held liable as an indorser of the
check or even as an accommodation party. However, petitioner BPI, in
allowing the withdrawal of private respondent’s deposit, failed to exercise
the diligence of a good father of a family. BPI violated its own rules by
allowing the withdrawal of an amount that is over and above the aggregate
amount of private respondent’s dollar deposits that had yet to be
cleared. The proximate cause of the eventual loss of the amount of
$2,500.00 on BPI's part was its personnel’s negligence in allowing such
withdrawal in disregard of its own rules and the clearing requirement in the
banking system. In so doing, BPI assumed the risk of incurring a loss on
account of a forged or counterfeit foreign check and hence, it should suffer
the resulting damage.
ERNESTINA CRISOLOGO-JOSE v. COURT OF APPEALS.

G.R. No. 80599, September 15, 1989.
REGALADO, J.
FACTS:
Oscar Benares and Ricardo Santos are the president and vice-
president, respectively, of Mover Enterprises, Inc. In accommodation of their
clients the Ongs, the company issued a check payable to Jose. Since the
check was under the account of the Enterprise, it was signed by Benares and
Santos.
The check was to be encashed after the approval of a compromise
agreement which was disapproved. The checks were then replaced and were
signed by both. When Jose encashed the checks, it was dishonored for
insufficiency of funds.
Jose filed a complaint in the lower court citing that respondents were in
violation of Art. 1256 of the Civil Code. It was dismissed thus the petition to
the SC where Jose points out that the accommodation party in the case is the
enterprise and not Santos.
ISSUE: Was Mover Enterprises an accommodation party?
RULING:
The SC ruled that a corporation cannot be an accommodation party.
The law on accommodation parties does not include corporation because it is
ultra vires on their part.
Thus, if one knows and takes an instrument that was accommodated
by a corporation cannot recover against the corporation.
Far East Bank & Trust Co. V. Gold Palace Jewelry Co.
G.R. No. 168274 August 20, 2008
NACHURA, J.
FACTS:
Tagoe, a foreigner, purchased from Gold Palace Jewellery Co.'s (Gold
Palace) store at SM-North EDSA several pieces of jewelry valued at P258,000
paying such with a Foreign Draft issued by the United Overseas Bank
(Malaysia) to Land Bank of the Philippines, Manila (LBP) for P380,000
A Gold Palace Employee, issued Cash Invoice so the jewelries can be
released and deposited the draft in the company's account with the
petitioner. Far East then presented the draft for clearing, LBP cleared it and
Gold Palace's account with Far East was credited. Tagoe eventually returned
to claim the goods and after ascertaining that the draft had been cleared,
Yang released the pieces of jewelry and his change, Far East Check of
P122,000 paid by the bank.
LBP notified Far East that the Foreign Draft had been altered from P300
to P380,000. Far East debited only P168,053.36 of the amount left in Gold
Palace' account to LBP. Far East demanded the payment of balance and
upon refusal filed in the RTC. RTC ruled in favor of Far East but the CA
reversed the decision.
ISSUE: Should Gold Palace be liable for the altered Foreign Draft?
HELD: NO, since according to the NIL the acceptor, by accepting the
instrument, engages that he will pay it according to the tenor of his
acceptance. Court applied the principle that where one of two innocent
parties must suffer a loss, the law will leave the loss where it finds it.
Gold Palace was a non-negligent, holder in due course. Since the
transaction in this case had been closed and the principal-agent relationship
already ceased, the latter in returning the amount to the drawee bank was
already acting on its own and should now be responsible for its own actions.
Petitioner cannot be considered to have acted as the representative of the
drawee bank when it debited respondent's account, because the drawee
bank had no right to recover what it paid. Neither can Far East invoke the
warranty of the payee/depositor who indorsed the instrument for collection
to shift the burden because the said indorsement is only for purposes of
collection which, under Section 36 of the NIL, is a restrictive indorsement. It
did not transfer the title of the instrument to the collecting bank. Far East did
not own the draft, it merely presented it for payment. Considering that the
warranties of a general indorser as provided in Section 66 of the NIL are
based upon a transfer of title and are available only to holders in due course,
these warranties did not attach to the indorsement for deposit and collection
made by Gold Palace to Far East. Without any legal right to do so, the
collecting bank could not debit respondent's account for the amount it
refunded to the drawee bank.
ROMEO GARCIA V. DIONISIO LLAMAS
GR 154127
PANGANIBAN, J.
FACTS:
Garcia and de Jesus borrowed P400,000 from Llamas, executing a promissory
note, binding themselves solidarily to pay on or before 1997 Jan. The loan had long
been overdue and despite repeated demands, they failed to pay.
Garcia replied that he assumed no liability because he merely signed as an
accommodation party for de Jesus. Alternatively, he is relieved from any liability
inasmuch as de Jesus already paid the loan through a check. Llamas , on the other
hand, said that the check de Jesus gave bounced
RTC ruled against Garcia and de Jesus but CA favored de Jesus.
ISSUES:
1. Was Garcia liable as an accommodation party?
2. Did the acceptance of the check by the co-debtor novate the agreement?
HELD:
1. NO, he is not liable as an accommodation party, as defined under the Negotiable
Instruments Law. The Promissory Note was not a Negotiable Instrument under
Section 1 of the NIL.
By its terms, the note was made payable to a specific person rather than to
bearer or to order—a requisite for negotiability under Act 2031, the NIL. Hence,
petitioner cannot avail himself of the NIL’s provisions on the liabilities and defenses
of an accommodation party.
A non-negotiable note is merely a simple contract in writing and is evidence
of such intangible rights as may have been created by the assent of the parties
covered by Civil Code, not by the NIL. Even granting arguendo that the NIL was
applicable, still, petitioner would be liable for the promissory note. Under Art 29of
NIL, an accommodation party is liable for the instrument to a holder for value even
if, at the time of its taking, the latter knew the former to be only an accommodation
party. Accommodation party—creates a surety-principal relationship. Surety is
bound equally and absolutely with the principal. Effect is, he cannot escape his
solidary liability with de Jesus
2. No it did not. While Garcia is not liable as an accommodation party, a novation
did not take place as no equivocal declaration that old obligation had been
extinguished by acceptance of check nor that check would take place of note
neither was there incompatibility.
Novation cannot be presumed. It must be clearly shown either by the express
assent of the parties or by the complete incompatibility between the old and the
new agreements. Petitioner herein fails to show either requirement convincingly;
hence, the summary judgment holding him liable as a joint and solidary debtor
stands.
Melva Theresa Alviar Gonzales vs. Rizal Commercial Banking Corporation
G.R. No. 156294. November 29, 2006
GARCIA, J.
Facts:
Gonzales was an employee of Rizal Commercial Banking Corporation
(RCBC) as New Accounts Clerk in the Retail Banking Department at its Head
Office. A foreign check in the amount of $7,500 was drawn by Dr. Don
Zapanta against the drawee bank Wilshire Center Bank(WCB), payable to
Gonzales’ mother, defendant Eva Alviar (or Alviar) then endorsed this check
to RCBC
Gonzales got the check encashed and received its peso equivalent.
RCBC then tried to collect the check amount from First Interstate Bank of
California but the check was dishonored on 2 occasions because of irregular
indorsement before finally getting returned because the account had been
closed. Unable to collect, RCBC demanded from Gonzales the payment of the
peso equivalent of the check that she received. Gonzales agreed to have the
amount deducted from her salary.
RCBC demanded for the payment of Alviar’s obligation but did not
receive any response. RCBC sent a letter to Gonzales reminding her of her
liability as an indorser of the subject check; but, Gonzales resigned from
RCBC.
Issue: Is Alviar Gonzales liable for the instrument?
Ruling:
No. WCB dishonored the check because of a defect and it is undeniable
that only the signature of Olivia Gomez, an RCBC employee, was a qualified
endorsement because of the phrase "up to ₱17,500.00 only." There can be
no other acceptable explanation for the dishonor of the foreign check than
this signature of Olivia Gomez with the phrase "up to ₱17,500.00 only"
accompanying it. The foreign drawee bank would not have dishonored the
check had it not been for this signature of Gomez; thus, WCB refused to pay
the bearer because of a defect introduced by the RCBC employee. The Check
is therefore a useless piece of paper if returned in that state to its original
payee, Eva Alviar.
A subsequent party which caused the defect in the instrument cannot
have any recourse against any of the prior endorsers in good faith as
according to Sec. 66 of NIL, every indorser who indorses without
qualification, warrants to all subsequent holders in due course, that the
instrument is, at the time of his indorsement, valid and subsisting.
Maralit V. Imperial
G.R. No. 130756. January 21, 1999
Mendoza, J.
Facts:
In two separate occasions Jesusa Imperial deposited in her savings
account at the PNB, 3 United States treasury warrants and withdrew their
peso equivalent of P59,216.86, P130,743.60, and P130,326 on the same day.
The treasury warrants were subsequently returned one after the other by the
United States Treasury, through Citibank, on the ground that the amounts
thereof had been altered. Maralit, an employee of the PNB and the one who
accepted the checks, claimed that she was held personally liable by the PNB
for the total amount of P320, 287. 30.
Imperial, in her defence, alleged that she merely helped a relative
encash the treasury warrants and that she did not know the alterations on
the treasury warrants and that she did not represent to petitioner that the
treasury warrants were genuine. Three estafa cases were filed against
Imperial. MCT acquitted Imperial of criminal liability but held that she is
civilly liable as indorser of the checks.
Issue: Is Imperial civilly liable?
Ruling:
Yes, while there is no criminal liability; petitioner is civilly liable.
The established procedure of banks is that US Treasury Warrants
should first be cleared before the same is to be paid. More so if the holder is
a second indorser; but, because Maralit knew Imperial is working in the same
building and a depositor, she took the risk of approving the withdrawal of the
peso equivalent, without the check being cleared and if the same is
dishonored she should be responsible. She took the risk; therefore, she
should be responsible for the outcome of the risk she has taken. There was
negligence on both Maralit and Ismael but greater responsibility should be
borne by Maralit as the accused could not have encashed and deposited the
checks without her approval.
For Ismael’s civil liability, the loss is chargeable to the accused who
upon her indorsements warrant that the instrument is genuine in all respect
what it purports to be and that she will pay the amount thereof in case of
dishonor. (Sec. 66 Negotiable Instrument Law); thus, while petitioner is
responsible for the encashment of the altered checks, respondent is civilly
liable because of her indorsements of the treasury warrants.
METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION vs.

SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO.,
LTD.
G.R. No. L-39641 February 28, 1983
De Castro, J.
FACTS:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok,
which states that in case on non-payment of any of the installments, the
total principal sum then remaining unpaid shall become due and payable
with additional interest.
Sambok Motors Company indorsed the note in favor of plaintiff
Metropol with recourse. However, Dr. Villaruel defaulted in the payment of
his installments when they became due, and failed to pay the promissory
note as demanded, hence plaintiff notified Sambok as indorsee of the note of
the fact dishonor. Sambok also failed to pay, hence plaintiff filed a complaint
for collection of a sum of money. Sambok did not deny its liability but
contended that it could not be obliged to pay until after its co-defendant Dr.
Villaruel has been declared insolvent but during the pendency of the case,
Dr. Villaruel died.
Sambok argues that adding the word “with recourse” makes the
indorsement a qualified one.
ISSUE: Is Sambok a qualified indorser?
RULING: NO, Sambok is not and the appeal is without merit.
A qualified indorsement constitutes the indorser a mere assignor of the
title to the instrument. It may be made by adding to the indorser’s signature
the words “without recourse” or any words of similar import. Such an
indorsement relieves the indorser of the general obligation to pay if the
instrument is dishonored but not of the liability arising from warranties on
the instrument.
However, appellant Sambok indorsed the note “with recourse” and
even waived the notice of demand, dishonor, protest and presentment.
“Recourse” means resort to a person who is secondarily liable after the
default of the person who is primarily liable. This does not make itself a
qualified indorser but a general indorser who is secondarily liable.
A person who indorses without qualification engages that on due
presentment, the note shall be accepted or paid, or both, and that if it be
dishonored, he will pay the amount thereof to the holder.
The words added by said appellant do not limit his liability, but rather
confirm his obligation as a general indorser.
ALVIN PATRIMONIO v. NAPOLEON GUTIERREZ
G.R. No. 187769, June 4, 2014
BRION, J.
Facts:
The petitioner (Patrimonio) and the respondent (Gutierrez) entered a
business venture under the name of Slam Dunk Corporation (Slum Dunk) a
basketball event company.
The petitioner pre-signed several checks to answer for the expenses of
Slam Dunk. Although signed, these checks had no payee's name, date or
amount. Said blank checks were entrusted to Gutierrez with the specific
instruction not to fill them out without previous notification to and approval
by the petitioner. However, without the petitioner's knowledge and consent,
Gutierrez went to Marasigan (the petitioner's former teammate), to secure a
loan in the amount of P200,000.00 on the excuse that the petitioner 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 from March to
May 1994. On May 24, 1994, Marasigan deposited the check but it was
dishonored for the reason "ACCOUNT CLOSED." It was later revealed that
petitioner's account with the bank had been closed since May 28, 1993.
Petitioner filed before the Regional Trial Court (RTC) a Complaint for
Declaration of Nullity of Loan and Recovery of Damages against Gutierrez
and co-respondent Marasigan.
Issues: Can Marasigan validly enforce the instrument against Patrimonio?
Ruling: No as the petitioner can raise personal defenses against him.
Section 14 NIL applies to an incomplete but delivered instrument.
Here, 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.
If a holder is not one in due course wishes to enforce the instrument
against the maker then (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 these do not exist the maker can set this up as a personal
defense and avoid liability. Marasigan is not a holder in due course and failed
to fulfill the first requirement as the instrument was filled outside given
authority thus petitioner can validly set up the personal defense that the
blanks were not filled up in accordance with the authority he gave.
Consequently, Marasigan has no right to enforce payment against the
petitioner and the latter cannot be obliged to pay the face value of the
check.
PEOPLE OF THE PHILIPPINES vs. Julia Maniego
G.R. No. L-30910. | February 27, 1987
Narvasa, J.
FACTS:
Accused-appellant Maniego was an indorser of several checks drawn
by her sister, which were dishonored after they have been exchanged with
cash belonging to the Government. Maniego was charged with malversation
of funds but was acquitted of the criminal charge. Maniego contends that her
civil liabilities should also be extinguished claiming that since she is a mere
indorser she cannot be held liable for the instrument.

ISSUE: Is Maniego liable for the instrument?

RULING:
Yes. Appellant’s contention that as mere indorser, she may not be
made liable on account of the dishonor of the checks indorsed by her is
untenable. Under the law, the holder or last indorsee of a negotiable
instrument has the right to “enforce payment of the instrument for the full
amount thereof against all parties liable thereon.”
PHILIPPINE NATIONAL BANK vs. THE COURT OF APPEALS and
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK
G.R. No. L-26001, October 29, 1968
CONCEPCION, C.J.
FACTS
A GSIS check with petitioner PNB as the drawee bank was deposited by
a Augusto Lim in his current account with the private respondent PCIB. PCIB
stamped "All prior indorsements and/or Lack of Endorsement Guaranteed,
Philippine Commercial and Industrial Bank". PNB paid PCIB the amount in the
check without returning the same while clearing. PNB received a formal
notice from the GSIS that the check had been lost, with the request that
payment thereof be stopped, yet PNB still proceeded. The check was later
discovered to have forged signatures, yet despite the demand to re-credit
said checks because of the forgery they were denied.

ISSUE: May PNB recover from PCIB?

RULING
No. Despite PCIB stamping its guarantee at the back of the check, PNB
had been guilty of a greater degree of negligence, because it had a previous
and formal notice from the GSIS that the check had been lost, with the
request that payment thereof be stopped
By not returning the check to the PCIB, by thereby indicating that the
PNB had found nothing wrong with the check and would honor the same, and
by actually paying its amount to the PCIB, the PNB induced the latter, not
only to believe that the check was genuine and good in every respect, but,
also, to pay its amount to Augusto Lim. In other words, the PNB was the
primary or proximate cause of the loss, and, hence, may not recover from
the PCIB.
Section 62 of Act No. 2031 provides that the acceptor by accepting the
instrument engages that he will pay it according to the tenor of his
acceptance; and admits, the existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the instrument; and, the
existence of the payee and his then capacity to indorse.
When both parties are at fault the court leaves them as it finds them.
INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA vs.
FRANCISCO SEVILLA
G.R. No. L-17845, April 27, 1967
Sanchez, J.
Facts:
Sadaya, Sevilla and Varona executed jointly or severally a promissory
note worth P15,000 in favor of the bank. Varona was the only one who
received the proceeds of the note. Sadaya and Sevilla both signed as co-
makers to accommodate Varona. Thereafter, the bank collected the
remaining balance and interest of P5,416.12 from Sadaya. Varona failed to
reimburse.

Consequently, Sevilla died and intestate estate proceedings were
established. Sadaya filed a creditor’s claim on his estate for the payment he
made on the note. The administrator resisted the claim on the ground that
Sevilla didn't receive any proceeds of the loan. The trial court admitted the
claim of Sadaya though tis was reversed by the CA.

Issue:
Should the administrator pay half of what Sadaya paid to the bank
using any available funds belonging to the estate of the deceased Sevilla?
HELD:
NO, Sadaya did not have the right to demand payment from his
co-accomodator when the bank had made no judicial demand and
Varona had not been proven insolvent.
Sadaya could have sought reimbursement from Varona as the latter

was the only one who received value for the note executed.
The court postulated the following rules regarding collection from a co-
accommodation party:
1. A joint and several accommodation maker of a negotiable promissory
note may demand from the principal debtor reimbursement for the
amount that he paid to the payee.
2. A joint and several accommodation maker who pays on the said

promissory note may directly demand reimbursement from his co-
accommodation maker without first directing his action against the
principal debtor provided that he made the payment by virtue of a judicial
demand and principal debtor is insolvent.
The bank did not make a judicial demand and nothing shows that Varona
was insolvent. Thus, Sadaya cannot proceed against Sevilla for
reimbursement.
REMEDIOS NOTA SAPIERA vs. COURT OF APPEALS and RAMON SUA
G.R. No. 128927. September 14, 1999
BELLOSILLO, J.
FACTS:
Petitioner Sapiera was issued by Arturo de Guzman checks as payment
for purchases he made at her store. She used these checks to pay for the
items she bought from Ramon Sua’s store. These checks were signed at the
back by petitioner. When presented for payment the checks were
dishonored because the drawer’s account was already closed. Sua informed
Arturo de Guzman and petitioner about the dishonor but both failed to pay
the value of the checks. Petitioner was acquitted for the charge of estafa by
the RTC, but she was found liable for the value of the checks by the Court of
Appeals. Thus, this petition.
ISSUE:
Is petitioner liable for the value of the checks despite signing the
subject checks only for the identification of the signature of Arturo de
Guzman?
RULING:
Yes, despite being acquitted from her criminal liabilities, petitioner is
still liable for the value of the checks as she has made herself an unqualified
endorser. As Sapiera signed the subject checks on the reverse side without
any indication as to how she should be bound thereby, she is deemed to be
an indorser thereof according to Sec. 17 of the NIL which tackles
construction when instrument is ambiguous.
According to Sec. 66 of the NIL, every indorser who indorses without
qualification, warrants to all subsequent holders in due course that, on due
presentment, it shall be accepted or paid or both, according to its tenor, and
that if it be dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder or to any subsequent
indorser who may be compelled to pay it.
Travel-On V. CA
G.R. No. L-56169, June 26, 1992
FELICIANO, J.
FACTS:
Arturo S. Miranda had a revolving credit line with Travel-On and
procured tickets from Travel-On on behalf of airline passengers and derived
commissions therefrom. Travel-On, then filed before the Court of First
Instance to collect 6 checks issued by Miranda
Travel-On further sold and delivered airline tickets to Miranda. Miranda
paid in cash and through 6 checks; however, the checks all got dishonored
by the drawee banks. Miranda then reduced the owed amount but P105,000
was left.
Miranda claimed that the checks were issued for to "accommodate"
Travel-On's General Manager to show the BOD of Travel-On that their
receivables were still good
CA ordered Travel-On to pay Miranda P8,894.91 for Miranda’s net
overpayments and an additional 15,000 for moral damages and attorney’s
fees. Said decision was because Travel-On did not show that Miranda had an
outstanding balance of P115,000.00
ISSUE: Is Miranda Liable for the 6 dishonored checks?
HELD: YES.
A check which is regular on its face is deemed prima facie to have
been issued for a valuable consideration and every person whose signature
appears thereon is deemed to have become a party thereto for value.
A negotiable instrument is presumed to have been given or indorsed
for enough consideration unless otherwise contradicted and overcome by
other competent evidence. Those checks in themselves constituted evidence
of indebtedness of Miranda, evidence not successfully overturned.
While the Negotiable Instruments Law does refer to accommodation
transactions, no such transaction was shown. Having issued or indorsed the
check, the accommodating party has warranted to the holder in due course
that he will pay the same according to its tenor.
Travel-On was not an accommodated party; it realized no value on the
checks which bounced.
REYES
G.R. No. 89802, May 7, 1992
Cruz, J.
Facts:
clear instructions.
Issues:
1. Did Reyes have cause of action?
2. Is petitioner Bank liable and required to pay for the amount improperly
paid to Sayson?
Ruling:
1. Yes, Reyes did have cause of action.
2. Yes, the bank was liable for the amount.
ASSOCIATED BANK vs. HON. COURT OF APPEALS, PROVINCE OF
TARLAC and PNB
G.R. No. 107382, January 31, 1996
ROMERO, J.
Facts:
The Province of Tarlac has a current account with the PNB where the
provincial funds are deposited. A portion of these funds is allocated to the
Concepcion Emergency Hospital. The checks are received for the hospital by
its administrative officer and cashier. It was later discovered that the hospital
did not receive several allotment checks. 30 checks totaling P203,300 were
encashed by Fausto Pangilinan, former administrative officer and cashier of
payee hospital, with the Associated Bank acting as collecting bank.
Pangilinan was able to withdraw the money when the check was
cleared and paid by PNB, but PNB returned the checks after several days.
After forging the signature of Dr. Adena Canlas, Pangilinan did the same for
the other checks. All the checks bore the stamp of Associated Bank which
reads "All prior endorsements guaranteed ASSOCIATED BANK”. Thus, a
petition was filed by the province. RTC ordered Associated Bank to reimburse
PNB and ordering PNB to pay Province of Tarlac. CA affirmed.
Issues:
 What are the effects of the forged signature?
 Who are liable for the loss and why?
Ruling:
 A forged signature is inoperative and no one can gain title to the
instrument through it; but parties who warrant or admit the genuineness
of the signature in question and those who, by their acts, silence or
negligence are estopped from setting up the defense of forgery, are
precluded from using this defense. Finally, only the one whose signature
was forged can raise this defense.
 Both PNB and AB are liable for the losses.
In cases involving checks with forged indorsements, the drawee bank
can seek reimbursement from the presentor bank or person; however, a
drawee bank has the duty to promptly inform the presentor of the forgery
upon discovery. If the drawee bank delays in informing the presentor of
the forgery, the former is deemed negligent and can no longer recover
from the presentor.
PNB did not return the questioned checks within twenty-four hours, but
several days later, Associated Bank alleges that PNB should be considered
negligent and not entitled to reimbursement of the amount it paid on the
checks; while AB stamped its guarantee on the checks; hence, they are
equally liable for the amount in the checks.
Atrium Management Corporation v. Court of Appeals E.T. Henry and
Co., Lourdes Victoria De Leon, Rafael De Leon Jr., and Hi-Cement
Corporation
G.R. No. 109491, February 28, 2001.
PARDO, J.
Facts:
Hi-Cement Corporation through its corporate signatories, petitioner
Lourdes M. de Leon, treasurer, and the late Antonio de las Alas, Chairman,
issued checks in favor of E.T. Henry and Co. Inc., as payee. E.T. Henry and
Co., Inc., endorsed the four crossed checks to petitioner (Atrium) as financial
aid not as payment. Upon presentment for payment, the bank dishonored all
four checks because "payment stopped". Atrium, thus, instituted this action
after its demand for payment of the value of the checks (P2,000,000) was
denied. In this petition Hi-Cement claims that it did not authorize the checks
and even if it did, there was a failure of consideration.
Issue:
1. Was the issuance of the questioned checks an ultra vires act?
2. Can Lourdes be held personally liable for the checks?
3. Was Atrium a holder in due course and for value?
Ruling:
1. No, the issuance of the checks was not an ultra vires act. An ultra vires
act is one committed outside the object for which a corporation is created as
defined by the law of its organization and therefore beyond the power
conferred upon it by law. Lourdes had the authority to issue said checks as
treasurer of the company; thus, it is not ulta vires.
2. Yes, Lourdes M. de Leon was negligent when she signed the
confirmation letter requested for the rediscounting of the crossed checks
issued in favor of E.T. Henry. She was aware that the checks were strictly
endorsed for deposit only to the payee’s account and not to be further
negotiated. Her negligence resulted in damage to the corporation. Hence,
Ms. de Leon may be held personally liable therefor.
3. No, as Atrium knew that there was a defect in the instrument when
they accepted it as the checks were crossed checks and specifically indorsed
for deposit to payee's account only. According to Sec. 52 of the NIL, a holder
in due course, among others, is a holder who has taken the instrument that it
is complete and regular upon its face. Therefore, he defense of lack of
consideration can be raised.
Bank of America NT & SA v. Philippine Racing Club
G.R. No. 150228, 20 July 2009
Leonardo-De Castro, J
FACTS:
The President and Vice President of Philippine Racing Club Inc. pre-
signed several checks to have available cash to settle obligations that might
become due. The checks were entrusted to the accountant. A certain John
Doe presented a 2 of the pre signed checks to the bank for encashment.
The checks had similar infirmities and irregularities but the bank did
not verify and confirm the legitimacy of the checks and immediately
encashed them.
It was later found that here was no transaction involving the payment
out of the subject checks and that one Clarita Mesina completed without
authority the entries on the pre-signed checks.
ISSUE:
What is the proximate cause of the wrongful encashment and who
should be liable for the damages?
RULING:
Both the bank’s failure to make a verification and the pre-signing of
blank checks were the proximate cause and both parties are liable to a
degree.
While Sections 14 and 16 of the NIL states that the bank could validly
presume, upon presentation of the checks, that the party who filled up the
blanks had authority and that a valid and intentional delivery to the party
presenting the checks had taken place it would only be applicable if the
subject checks were correctly and properly filled out by the thief and
presented to the bank in good order; however, said checks had irregularities.
At the same time, the practice of pre-signing of blank checks is a
seriously negligent behavior and a highly risky means of ensuring the
efficient operation of businesses. It should be foreseen that the pre-signed
blank checks could fall into the wrong hands.
Following established jurisprudence, the allocation of sixty percent
(60%) of the actual damages involved in this case to the bank is proper. The
corporation also bears forty percent (40%) of the loss.
ERNESTINA CRISOLOGO-JOSE v. COURT OF APPEALS.
G.R. No. 80599, September 15, 1989.
REGALADO, J.
FACTS:
Oscar Benares and Ricardo Santos are the president and vice-
president, respectively, of Mover Enterprises, Inc. In accommodation of their
clients the Ongs, the company issued a check payable to Jose. Since the
check was under the account of the Enterprise, it was signed by Benares and
Santos.
The check was to be encashed after the approval of a compromise
agreement which was disapproved. The checks were then replaced and were
signed by both. When Jose encashed the checks, it was dishonored for
insufficiency of funds.
Jose filed a complaint in the lower court citing that respondents were in
violation of Art. 1256 of the Civil Code. It was dismissed thus the petition to
the SC where Jose points out that the accommodation party in the case is the
enterprise and not Santos.
ISSUE: Was Mover Enterprises an accommodation party?
RULING:
The SC ruled that a corporation cannot be an accommodation party.
The law on accommodation parties does not include corporation because it is
ultra vires on their part.
Thus, if one knows and takes an instrument that was accommodated
by a corporation cannot recover against the corporation.
NATIVIDAD GEMPESAW vs. CA and PHILIPPINE BANK OF
COMMUNICATIONS
G.R. No. 92244, February 9, 1993
CAMPOS, JR., J.
Facts:
Petitioner, Gempesaw, issued 82 checks, prepared by her bookkeeper,
in favor of several supplies. Most of the checks for amounts in excess of
actual obligations as shown in their corresponding invoices. After the lapse of
more than 2 years, Gempesaw discovered the fraudulent manipulations of
her bookkeeper. It was also learned that the indorsements of the payee were
forged, and the checks were brought to the chief accountant of respondent
bank (PBC), who deposited them in the accounts of Alfredo Romero and
Benito Lam. Gempesaw demanded that the bank to credit the amount
charged due the checks. The bank refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the forged indorsements?
Held:
Both Gempesaw and PNC should bear the loss as the former was
negligent and the latter was unable to detect the fraud.
As a rule, a drawee bank who has paid a check on which an
indorsement has been forged cannot charge the drawer’s account for said
check except where the drawer is guilty of such negligence which causes the
bank to honor such checks. Gempesaw’s negligence by not exercising steps
that a careful and prudent businessman would take in circumstances to
discover discrepancies in her account was the proximate cause of her loss,
and under Section 23 of the Negotiable Instruments Law. Hence, she is
precluded from using forgery as a defense.
In light of any case not provided for in the Act that is to be governed by
the provisions of existing legislation, pursuant to Section 196 of the
Negotiable Instruments Law, the bank may be held liable for damages in
accordance with Article 1170 of the Civil Code. The drawee bank, in its
failure to discover the fraud committed by its employee and in contravention
banking rules in allowing a chief accountant to deposit the checks bearing
second indorsements, was adjudged liable to share the loss with Gempesaw
on a 50:50 ratio.
The Great Eastern Life Insurance Co. vs. Hongkong & Shanghai
Banking Corporation and PNB, G.R. No. L-18657, August 23, 1922
JOHNS, J.
FACTS:
The petitioner insurance corporation drew a check in favor of Melicor
which was stolen by Maasim. Maasim then forged the signature of Melicor
and deposited the check to his account in PNB. PNB then endorsed the
check to HSBC who later debited the account of plaintiff. Plaintiff believed all
along that Melicor received the payment. Upon knowledge of the debit HSBC
did on its account, it demanded that the same amount be credited.
Issues: Who is liable for the loss?

HELD:
The banks are liable. The money was on deposit with the Sanghai
bank and it had no legal right to pay it out to anyone except the plaintiff or
its order. Petitioner ordered the Shanghai Bank to pay the P2,000 to Melicor
but instead it was paid to Maasim,
Section 23 of the Negotiable Instruments Law, says:
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 therefor, 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 only remedy of the bank paying a check to a person who has forged the
name of the payee is against the forger.
RAMON K. ILUSORIO vs. HON. COURT OF APPEALS and THE MANILA
BANKING CO.
G.R. No. 139130, November 27, 2002
QUISUMBING, J.
FACTS:
Ramon Ilusorio entrusted his credit cards and checkbooks and blank
checks to his secretary. Apparently, Eugenio, his secretary, was able to
encash and deposit to her personal account 17 checks drawn against his
account totaling P119,634.34.
Ilusorio requested to restore to his account the value of the checks that
were wrongfully encashed but the bank refused, hence the case.
In their defense, the bank testified that they made sure that the
signature on the check was not forged by verifying the signature in the
check with the specimen signature cards on file with the bank.
ISSUE:
1. Does Ilusorio have a cause of action against the bank?
2. Is petitioner barred from raising the defense of forgery?
RULING:
1. No, Ilusorio does not have a cause of action. Ilusorio failed to prove
that the bank was negligent on their part, as he has the burden of proof this
leaves him with no cause of action.
2. Yes, petitioner is barred from raising the defense of Forgery.

Sec. 23 of the NIL states that a drawee bank who has paid a check on
which an indorsement has been forged cannot charge the drawer’s account
for said check, except where the party against whom it is sought to enforce
such right is precluded from setting up the forgery. In this case, the drawer is
guilty of such negligence as he trusted his secretary in an unusual degree
with his accounts; he is thus precluded from raising forgery as a defense
International Corporate Bank, Inc. vs. CA and Philippine National
Bank
G.R. No. 129910, September 5, 2006
CARPIO, J.
FACTS:
The Ministry of Education and Culture issued checks drawn against
Philippine National Bank (PNB). Petitioner International Corporate Bank, Inc.
(ICB) accepted the checks for deposit.
After 24 hours from submission of the checks to respondent for
clearing, petitioner paid the value of the checks and allowed the withdrawals
of the deposits. However, PNB returned all the checks to petitioner without
clearing them because the serial number of the checks were allegedly
materially altered. In response, ICB instituted an action for collection of sums
of money against PNB to recover the value of the checks.
RTC ruled in favor of PNB because the ICB failed to inquire on the
status of the checks before paying their value while the CA reversed said
decision.
ISSUES: Were checks were materially altered?

RULING:
1. No, only the serial numbers were altered and alterations on the serial
numbers of checks is not a material alteration.
According to Sec. 124 of the NIL, if a material alteration happens
without the consent of all parties then the instrument is avoided except as
against a party who has himself made, authorized, or assented to the
alteration and subsequent indorsers. But when an instrument has been
materially altered and is in the hands of a holder in due course not a party to
the alteration, he may enforce payment thereof according to its original
tenor.
According to Sec. 125 of NIL, an alteration is said to be material if it
changes the date, the sum payable, either for principal or interest; the time
or place of payment; the number or the relations of the parties; the medium
or currency in which payment is to be made; or which adds a place of
payment where no place of payment is specified, or any other change or
addition which alters the effect of the instrument in any respect.
The Court held that since there were no material alterations on the
checks, respondent Philippine National Bank is liable to petitioner
International Corporate Bank, Inc. for the value of the checks amounting to
P1,447,920, with legal interest from 16 March 1982 until full payment.
JAI-ALAI CORPORATION OF THE PHILIPPINES v. BANK OF THE
PHILIPPINE ISLAND
66 SCRA 29
CASTRO, J.
FACTS:
Jai-Alai deposited checks in its current account with BPI. These checks
were from a certain Ramirez a bettor at Jai-Alai Games and a sales agent of
the Inter-Island Gas. Inter-Island found out the forgeries committed in the
checks and thus, it informed petitioner, respondent and drawee-banks. When
the drawee-banks returned the checks to the respondent, the latter paid
their value which the former in turn paid to the Inter-Island Gas. The
respondent, for its part, debited the petitioner's current account and
forwarded to the latter the checks containing the forged indorsements, which
the petitioner, however, refused to accept. Petitioner drew a check for
payment of shares of stock, but it was dishonored for insufficient funds.
Hence, this petition.
Issue: Does BPI have the right to debit the petitioner's current account
in the amount corresponding to the total value of the checks in question?
HELD:
Yes, BPI acted within legal bounds when it debited the account of
petitioner. When the petitioner deposited the checks to its account, the
relationship created was one of agency still and not of creditor-debtor. The
bank was to collect from the drawees of the checks with the corresponding
proceeds.
While BPI may have already collected the proceeds when it debited the
account of petitioner, the court held that no creditor-debtor relationship was
created.
According to Section 23 of NIL, when a signature is forged or made
without the authority of the person whose signature it purports to be, it is
inoperative, and no right 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.
It stands to reason that the respondent, as a collecting bank which
indorsed the checks to the drawee-banks, should be liable to the latter for
reimbursement, for the indorsements on the checks had been forged prior to
their delivery to the petitioner
METROPOLITAN BANK AND TRUST COMPANY vs. RENATO D. CABILZO
G.R. No. 154469, December 6, 2006
CHICO-NAZARIO, J.
FACTS:
Cablizo maintained an account with petitioner (MBTC). It drew a check
payable to cash payable worth P1,000 and post-dated to 24 Nov. 1994 to a
certain Marquez. The check was subsequently deposited in Westmont bank
and the latter submitted it with Metrobank for clearing. The check was
cleared.

Cablizo later found that the amount had been altered to P91,000 and
the date to 14 Nov. 1994. Respondent requested that petitioner recredit the
P90,000 but petitioner refused. Cablizo filed an action against MBTC.
Issue:
1. Was there material alteration to the instrument?
2. Who should be held responsible?

HELD:
1. Yes, an alteration is said to be material if it alters the effect of the
instrument. It means an unauthorized change in the instrument that
purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of the party. Hence, material alteration
is one which changes the items which are required to be stated under
Section 1 of the NIL.

The check in issue was materially altered when its amount was
increased from P1,000 to P91,000, the date changed, and Cablizo did not
authorized, makes or allow said alterations.
2. Metrobank is to be held responsible as it was remiss in its duties. The
doctrine of equitable estoppel is inapplicable against Cablizo. This states that
when one of the two innocent persons, each guilty of an intentional or moral
wrong, must suffer a loss, it must be borne by the one whose erroneous
conduct, either by omission or commission, was the cause of the injury.
Negligence is never presumed and there is no showing that respondent was
negligent in exercising what was due in a prudent man which could have
otherwise prevented the loss.
Metrobank, on the other hand, was the one remiss in its duties. The
alterations were visible in the eye and yet the bank allowed someone not
acquainted with the examination of checks to do the same. Petitioner should
have exercised meticulous care in handling the affairs of its clients especially
if the client’s money is involved.
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM vs. COURT

OF APPEALS and THE PHILIPPINE NATIONAL BANK
G.R. No. L-62943 July 14, 1986
GUTIERREZ, JR., J.
FACTS:
MWSS and its’s predecessor-in-interest NWSA shared an account from
Philippine National Bank. Only MWSS’s treasurer, auditor, and General
Manager were authorized to sign checks. NWSA released 23 checks which
were cleared debited against the account of petitioner. In the same months,
another 23 checks bearing the same check numbers, were again cleared and
debited by PNB from the account of petitioner.
The amounts drawn were deposited the payees in their accounts in
Philippine Commercial Industrial Bank and Philippine Bank of Commerce. The
names in said accounts were fictitious. Petitioner requested the restoration
of the amounts debited claiming said checks were forged. PNB’s refusal led
to this complaint.
PNB, in their defense, claims that the instruments were regular on its
face.
ISSUE: Is PNB liable for the checks because they did not hold that the
signatures were forged?
HELD:
No, PNB is not liable as it was MWSS’s negligence which was the
proximate cause of the loss. There is no express and categorical that the 23
questioned checks were indeed signed by persons other than the authorized
MWSS signatories. The findings of the National Bureau of Investigation show
that the MWSS fraud was an "inside job" and that the petitioner's delay in the
reconciliation of bank statements and the laxity and loose records control in
the printing of its personalized checks facilitated the fraud.
According to Siasat, et al. v. Intermediate Appellate Court, forgery
cannot be presumed. It must be established by clear, positive, and
convincing evidence. This was not done in the present case.
Petitioner is barred from setting up the defense of forgery under
Section 23 of the NIL due to its negligence before and after the questioned
checks were negotiated. This paired with the petitioner’s inability to
reconcile it’s bank records displays MWSS’s gross negligence.
Petitioner cannot claim that respondent was also guilty of negligence
as PNB had taken the necessary measures in the detection of forged checks
and the prevention of their fraudulent encashment.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIB) vs. Court of

Appeals and FORD PHILIPPINES, INC. and CITIBANK, N.A.
G.R. No. 121413, January 29, 2001
QUISUMBING, J.
FACTS:
Ford, allegedly drew a check in favor of Commissioner of Internal
Revenue (CIR), which it deposited to PCIB as payment, cleared by Central
Bank and was debited from their Citibank account. Amount was not received
by the Commissioner; hence, Ford had to issue another payment. An NBI
investigation showed that one of the checks issued by Ford was withdrawn
from PCIB by Ford’s accountant for an alleged computation error. PCIB
replaced it with 2 of its manager’s checks, which were allegedly stolen by
the syndicate and deposited in their own account.
Ford Philippines filed actions to recover from the drawee bank,
Citibank, and collecting bank, PCIB, the value of subject checks payable to
the CIR which were embezzled allegedly by an organized syndicate.
The trial court decided in favor of Ford; thus, this petition.
ISSUE: Did Ford have the right to recover the value of the checks intended
for CIR from PCIB and Citibank?
HELD:
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 remitted to the syndicate instead of CIR.
Pursuant Sec. 55 of the NIL, it is vital to show that the negotiation is
made by the perpetrator in breach of faith amounting to fraud. The person
negotiating the checks must have gone beyond the authority given by his
principal. If the principal could prove that there was no negligence in the
performance of his duties, he may set up the personal defense to escape
liability and recover from other parties who, through their own negligence,
allowed the commission of the crime.
The actions of Ford’s employees were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford's negligence, if
any, could not be characterized as the proximate cause of the injury to the
parties.
PCIB and Citibank were negligent. PCIB it failed to verify the authority
of depositor to negotiate the checks; while, Citibank failed to establish that
its payment of Ford's checks were made in due course and legally in order.
Hence, Ford had a right to recover and PCIB and Citibank are equally liable.
PHILIPPINE NATIONAL BANK vs. COURT OF APPEALS, CAPITOL CITY
DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS, and
F. ABANTE MARKETING
256 SCRA 491
KAPUNAN, J.
FACTS:
Department of Education, Culture, and Sports (DECS) issued a check
payable to respondent, Abante Marketing, drawn against PNB. The check was
deposited by Abante in its account with Capitol. Capitol then deposited the
same with its account with Philippine Bank of Communications (PBCom).
PBCom deposited said check with petitioner who cleared it. However, PNB
returned the check due to supposed material alteration. Subsequent debits
were made but Capitol cannot debit the account of Abante any longer for the
latter had withdrawn all the money already from the account. Capitol sought
reclarification from PBCom and demanded the recrediting of its account.
PBCom did the same against PNB and was rejected. Hence, PNB filed an
action against PBCCom and the latter filed a third-party complaint against
petitioner.
The trial courts ordered PNB to recredit the amount to PBCom and
PBCom to do the same to Capitol,
Issue: Was there material alteration to the check?
HELD:
No, since an alteration on the serial number is not considered material
alteration according to NIL. An alteration is said to be material if it alters the
effect of the instrument. It means an unauthorized change in the instrument
that purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of the party. In other words, a material
alteration is one which changes the items which are required to be stated
under Section 1 of the NIL. In this case, it was the serial number which was
changed; ergo, no material alteration.
Therefore, there being no material alteration in the check committed,
the trial court’s ruling is sustained
PHILIPPINE NATIONAL BANK vs. HON. ROMULO S. QUIMPO and
FRANCISCO S. GOZON II
G.R. No. L-53194 March 14, 1988
GANCAYCO, J.
FACTS:
Santos took respondent Gozon’s passbook without the latter’s
knowledge and proceeded to fill it up for P5,000. Santos also forged Gozon’s
signature. Santos then encashed the check and the amount was debited to
Gozon’s account; Gozon then requested from the bank that the amount be
returned to his account. The bank refused thus Gozon filed a petition which
the court ruled in favor of. Hence, this petition
ISSUE: Was Gozon negligent in leaving his passbook in the car with Santos?
RULING:
No, a bank is bound to know the signatures of its customers; and if it
pays a forged check, it must be considered as making the payment out of its
own funds, and cannot ordinarily change the amount so paid to the account
of the depositor whose name was forged.
There were marked differences in Santos’s forgery and Gozon’s actual
signature and PNB was negligent in encashing said forged check without
carefully examining the signature which shows marked variation from the
genuine signature of private respondent.
The court ruled that the act of plaintiff in leaving his checkbook in the
car while he went out for a short while cannot be considered negligence
sufficient to excuse the defendant bank from its own negligence. Defendant
had trust in his classmate and friend. He had no reason to suspect that the
latter would breach that trust.
QUIRINO GONZALES Logging Concessionaire, QUIRINO GONZALES
and EUFEMIA GONZALES vs. THE COURT OF APPEALS (CA) and
REPUBLIC PLANTERS BANK
G. R. No. 126568 - April 30, 2003
CARPIO MORALES, J.
FACTS:
Petitioner Quirino Gonzales Logging Concessionaire (QGLC) applied for
credit accommodation which the respondent bank, RPB, approved.
Petitioner’s obligation under the credit line was secured by a real estate
mortgage of parcels of land. To secure advances, QGLC executed a
promissory note in favor of the bank. QGLC failed to pay both the credit line
and the promissory notes; thus, RPB foreclosed and auctioned the property.
Being the highest bidder, the property was owned by the RPB. The Bank then
filed a complaint for a sum of money regarding the unpaid notes despite
repeated demands; while, petitioners, in their defense, deny having received
the value of the promissory notes.
RTC ruled in favor of petitioners but this was reversed by the CA; thus,
this petition.
ISSUE: Were the promissory notes valid?
RULING:
Yes, it is valid as no proof showing otherwise has been adduced by
petitioners.
Petitioner’s raised the lack of consideration as defense; however, the
promissory notes appear to be negotiable as they meet the requirements of
Section 1of the Negotiable Instruments Law. Such being the case, the notes
are prima facie deemed to have been issued for consideration and the
petitioners have failed to prove otherwise.
REPUBLIC BANK vs. MAURICIA T. EBRADA
G.R. No. L-40796, July 31, 1975
MARTIN, J.
Facts:
A check worth P1,246.08 was issued to one Martin Lorenzo who has
been dead almost eleven years before it was issued was encashed by
Mauricia Ebrada at the Republic Bank. The Bureau of Treasury informed the
bank that Lorenzo’s indorsement was forged and requested a refund. The
Bank then sued Ebrada when she refused to return the amount.
Issue: Can the bank recover from the last endorser despite the Lorenzo’s
indorsement being forged?
Held:
Yes. Under Sec. 65 of NIL, Ebrada, despite not being the forger,
warranted a good title to the instrument as the last indorser of the check.
The negotiation from Martin Lorenzo, the original payee, to Ramon Lorenzo is
of no effect but the negotiation from Ramon Lorenzo to Adelaida Dominguez
and from her to Mauricia Ebrada who did not know of the forgery is valid and
enforceable. The bank can recover from her the money paid on the forged
check.
JUANITA SALAS vs. HON. COURT OF APPEALS and FIRST FINANCE &
LEASING CORPORATION,
G.R. No. 76788, January 22, 1990
FERNAN, C.J.
FACTS:
Petitioner, Salas, bought a car from Viologo Motor Sales Company
(VMS), evidenced by a promissory note. Said note was later indorsed to
Filinvest, which financed the purchase. However, petitioner defaulted in her
installments allegedly due to a discrepancy between what was written in the
sales invoice and what was sold. This led to respondent filing a petition
against her which the RTC ruled in favor of. Questioning this decision, Salas
claims that VMS had defrauded her by selling her a different vehicle; but the
CA ruled against her case. Thus, this current petition.
Issue: Was the promissory note negotiable?
HELD:
Yes, it is negotiable. Petitioner's liability on the promissory note, the
due execution and genuineness of which she never denied under oath is as
inevitable as it is clearly established.
The records reveal that involved herein is not a simple case of
assignment of credit as petitioner would have it appear, where the assignee
merely steps into the shoes of, is open to all defenses available against and
can enforce payment only to the same extent as, the assignor-vendor.
The promissory note in question bears all the earmarks of negotiability
as it fulfills all the requisites under NIL; moreover, Filinvest is a holder in due
course as it took the instrument under the following conditions: [a] it is
complete and regular upon its face; [b] it became the holder thereof before it
was overdue, and without notice that it had previously been dishonored; [c]
it took the same in good faith and for value; and [d] when it was negotiated
to Filinvest, the latter had no notice of any infirmity in the instrument or
defect in the title of VMS Corporation.
As Filinvest is a holder in due course petitioner cannot set up against
respondent the defense of nullity of the contract of sale between her and
VMS and if the a different vehicle was delivered to her, petitioner must
resolve it in a breach of contract case.
SAMSUNG CONSTRUCTION COMPANY PHILIPPINES v. FAR EAST BANK

GR No. 129015, 2004-08-13
TINGA, J,
Facts:
Samsung Construction Company Philippines, Inc. maintained a current
account with defendant Far East Bank and Trust Company‘s ("FEBTC").
The sole signatory to Samsung Construction's account was Jong Kyu
Lee ("Jong"), its Project Manager, while the checks remained in the custody
of the company's accountant, Kyu Yong Lee ("Kyu").
A Samsung Employee presented for payment FEBTC Check to the
bank. The check, payable to cash and drawn against Samsung Construction's
current account. The bank teller verified their authenticity and the checks
were later encashed to Gonzaga.
Kyu discovered that a check in the amount of P999,500.00 had been
encashed. It was found that Jong’s signature had been forged.
Issues:
3. Was Samsung Construction negligent in keeping its checks?
4. Was Samsung Construction precluded from setting up the defense of
forgery under Section 23 of the Negotiable Instruments Law?
Ruling:
3. No, Samsung was not guilty of negligence in this case.
The bare fact that the forgery was committed by an employee of the
party whose signature was forged cannot necessarily imply that such party's
negligence was the cause for the forgery. Negligence is not presumed, but
must be proven by him who alleges it, yet, FEBTC was unable to do so.
4. No, Samsung Construction was not precluded from setting up the
defense of Forgery.
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.
Under Section 23 of the Negotiable Instruments Law, forgery is a real or
absolute defense by the party whose signature is forged but it cannot be
raised if said party had been negligent. Hence, if Jong's signature was indeed
forged, FEBTC is liable for the loss since it authorized the discharge of the
forged check. Such liability attaches even if the bank exerts due diligence
and care in preventing such faulty discharge.
THE INTERNATIONAL CORPORATE BANK vs. SPS. FRANCIS S. GUECO
and MA. LUZ E. GUECO
G.R. No. 141968 February 12, 2001
KAPUNAN, J.
FACTS:
Gueco spouses obtained a loan from petitioner (ICB) to purchase a car.
In consideration thereof, spouses issued promissory notes payable in
monthly chattel mortgages. The spouses defaulted in payment of
installations prompting ICB to file a case for collection of money against
spouses. Multiple negotiations resulted in the lowering of the outstanding
balance of the spouses. Finally, Francis Gueco issued a P150,000 to settle
the debt but refused to sign the joint motion to dismiss, resulting in the non-
release of the car.
ICB refused to release the car even after several demand letters,
claiming that the joint motion to dismiss is a requirement. Spouses filed a
case which the RTC and CA both ruled in favor of; thus, this petition.
ISSUE: Should the manager’s check be replaced as it had already gone
stale, before the car is released?
HELD:
Yes, as not only has the check not been encashed but the obligation to
pay had not been erased.
A check must be presented within a reasonable time and 10 years is
enough to make a check stale and is beyond the reasonable time of
presentment required by the law. However, manager’s check can be treated
as a promissory note and as a promissory note, the drawer would be the
maker and in which case the holder need not prove presentment for
payment or present the bill to the drawee for acceptance.
Failure to present for payment within a reasonable time will result to
the discharge of the drawer only to the extent of the loss caused by the
delay. Failure to present on time, thus, does not totally wipe out all liability.
In fact, the legal situation amounts to an acknowledgment of liability in the
sum stated in the check. In this case, the Gueco spouses have not alleged,
much less shown that they or the bank which issued the manager's check
has suffered damage or loss caused by the delay or non-presentment. The
original obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it becomes
imperative that the circumstances that caused its non-presentment be
determined. In the case at bar, there is no doubt that the ICB refused to
encash the same because of the controversy surrounding the signing of the
joint motion to dismiss. There is no bad faith or negligence in this position
taken by the Bank.
REYES
G.R. No. 89802, May 7, 1992
Cruz, J.
Facts:
clear instructions.
Issues:
 Did Reyes have cause of action?
 Is petitioner Bank liable and required to pay for the amount improperly
paid to Sayson?
Ruling:
 Yes, Reyes did have cause of action.
 Yes, the bank was liable for the amount.
PRUDENTIAL BANK vs. INTERMEDIATE APPELLATE COURT,

PHILIPPINE RAYON MILLS, INC. and ANACLETO R. CHI
G.R. No. 74886 December 8, 1992
DAVIDE, JR., J.
FACTS:
Respondent, Philippine Rayon Mills, Inc. entered a contract with Nissho
Co., Ltd. for the importation of textile machineries. To pay for said
machineries, respondent opened a commercial letter of credit with the
Prudential Bank in favor of Nissho. Nissho drew drafts against this letter of
credit which were all paid by the Prudential Bank. Only two of these drafts
were accepted by respondent. Respondent company ceased operation and
was purchased by AIC Development Corporation, yet the credit was still
unpaid. In response, petitioner instituted an action for the recovery of
P956,384.95 from respondent representing the amount respondent failed to
pay Prudential Bank. Respondent court ruled that the lack of presentment
meant that no valid demand was made.
ISSUE: Is the presentment for acceptance of the drafts indispensable to
make Philippine Rayon liable?
RULING:
No, as presentment for acceptance is not necessary in sight drafts.
A letter of credit is defined as an engagement by a bank or other
person made at the request of a customer that the issuer will honor drafts or
other demands for payment upon compliance with the conditions specified in
the credit. Through a letter of credit, the bank merely substitutes its own
promise to pay for one of its customers who in return promises to pay the
bank the amount of funds mentioned in the letter of credit plus credit or
commitment fees mutually agreed upon. In the instant case then, the
drawee was necessarily the herein petitioner. It was to the latter that the
drafts were presented for payment. In fact, there was no need for
acceptance as the issued drafts are sight drafts, as agreed upon by both
parties. According to Section 143 of NIL presentment for acceptance is
necessary exclusively (a) where the bill is payable after sight, or in any other
case, where presentment for acceptance is necessary in order to fix the
maturity of the instrument; or (b) where the bill expressly stipulates that it
shall be presented for acceptance; or (c) Where the bill is drawn payable
elsewhere than at the residence or place of business of the drawee.
Therefore, sight drafts do not need presentment for acceptance.
THE INTERNATIONAL CORPORATE BANK vs. SPS. FRANCIS S. GUECO
and MA. LUZ E. GUECO
G.R. No. 141968 February 12, 2001
KAPUNAN, J.
FACTS:
Gueco spouses obtained a loan from petitioner (ICB) to purchase a car.
In consideration thereof, spouses issued promissory notes payable in
monthly chattel mortgages. The spouses defaulted in payment of
installations prompting ICB to file a case for collection of money against
spouses. Multiple negotiations resulted in the lowering of the outstanding
balance of the spouses. Finally, Francis Gueco issued a P150,000 to settle
the debt but refused to sign the joint motion to dismiss, resulting in the non-
release of the car.
ICB refused to release the car even after several demand letters,
claiming that the joint motion to dismiss is a requirement. Spouses filed a
case which the RTC and CA both ruled in favor of; thus, this petition.
ISSUE: Should the manager’s check be replaced as it had already gone
stale, before the car is released?
HELD:
Yes, as not only has the check not been encashed but the obligation to
pay had not been erased.
A check must be presented within a reasonable time and 10 years is
enough to make a check stale and is beyond the reasonable time of
presentment required by the law. However, manager’s check can be treated
as a promissory note and as a promissory note, the drawer would be the
maker and in which case the holder need not prove presentment for
payment or present the bill to the drawee for acceptance.
Failure to present for payment within a reasonable time will result to
the discharge of the drawer only to the extent of the loss caused by the
delay. Failure to present on time, thus, does not totally wipe out all liability.
In fact, the legal situation amounts to an acknowledgment of liability in the
sum stated in the check. In this case, the Gueco spouses have not alleged,
much less shown that they or the bank which issued the manager's check
has suffered damage or loss caused by the delay or non-presentment. The
original obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it becomes
imperative that the circumstances that caused its non-presentment be
determined. In the case at bar, there is no doubt that the ICB refused to
encash the same because of the controversy surrounding the signing of the
joint motion to dismiss. There is no bad faith or negligence in this position
taken by the Bank.
LUIS S. WONG vs. COURT OF APPEALS and PEOPLE OF THE

PHILIPPINES
G.R. No. 117857, February 2, 2001
QUISUMBING, J.
Facts:
Petitioner Wong, an agent of Limtong Press. Inc. (LPI) in charge of

collecting payments, issued 6 postdated checks totaling P18,025.00 in early
Dec. 1985. These were intended to guarantee the calendar orders of
customers who failed to issue post-dated checks. However, following
company policy, LPI refused to accept the checks as guarantees. Instead, the
parties agreed to apply the checks to the payment of petitioner’s unremitted
collections.
Before the maturity of the checks, petitioner prevailed upon LPI not to
deposit the checks and promised to replace them within 30 days. However,
petitioner reneged on his promise. Hence, on June 5, 1986, LPI deposited the
checks with Rizal Commercial Banking Corporation (RCBC). The checks were
returned for the reason "account closed." Petitioner failed to account for for
payment within 5 banking days despite being notified by LPI of the dishonor.
Petitioner was charged with 3 counts of violation of B.P. Blg. 22 and was
found guilty by the trial court and later CA.
Issues:
1. Is LPI a holder for value?

2. Did LPI deposit the checks within a reasonable time?
Held:
1. Yes, as although initially intended to be used as guarantee for the

purchase orders of customers, the checks were eventually used to settle the
remaining obligations of petitioner with LPI.
2. Yes. Under Section 186 of the NIL, "a check must be presented for
payment within a reasonable time after its issue or the drawer will be
discharged from liability thereon to the extent of the loss caused by the
delay." A check becomes stale after more 180 days. Private respondent
herein deposited the checks 157 days after the date; hence, it’s not stale.
The presumption of knowledge of insufficiency of funds was lost, but it can
be proven by direct or circumstantial evidence. LPI did not deposit the
checks because of the reassurance of petitioner. But his failure left LPI
constrained to deposit the said checks. After the checks were dishonored,
petitioner was duly notified of such fact but failed to account for full payment
within five (5) banking days thereof. There is, on record, sufficient evidence
that petitioner had knowledge of the insufficiency of his funds in or credit
with the drawee bank at the time of issuance of the checks.
JAIME DICO v. HON. COURT OF APPEALS and PEOPLE OF THE

PHILIPPINES
G.R. NO. 141669, February 28, 2005
CHICO-NAZARIO, J.
Facts:
Dino, accused, is a credit card holder of the Equitable Card Network.
He’s accused of 3 violations of B.P. Blg. 22, because the three (3) checks
which the accused issued in its favor, and in payment of his obligation to the
complainant card network all bounced, for reason "Account Closed". The
complainant sent a letter to the accused to redeem or pay the amounts of
the checks, but the accused refused to comply, hence, the filing of these
cases in Court.
Issue: Were the requirements under B.P. BLG. 22 met?
Ruling:
1. No, as the notice of dishonor was not properly made as it was issued
before the check in question became due and before it was deposited.
To hold a person liable under B.P. Blg. 22, the prosecution must not
only establish that a check was issued and that the same was subsequently
dishonored, it must further be shown that accused knew at the time of the
issuance of the check that he did not have sufficient funds or credit with the
drawee bank for the payment of such check in full upon its presentment.
This knowledge of insufficiency of funds or credit at the time of the
issuance of the check is the second element of the offense. Inasmuch as this
element involves a state of mind of the person making, drawing or issuing
the check, which is difficult to prove, Section 2 of B.P. Blg. 22 creates
a prima facie presumption of such knowledge.
The presumption is brought into existence only after it is proved that
the issuer had received a notice of dishonor and that within five days from
receipt thereof, he failed to pay the amount of the check or to make
arrangements for its payment. The presumption or prima facie evidence
cannot arise, if such notice of nonpayment by the drawee bank is not sent to
the maker or drawer, or if there is no proof as to when such notice was
received by the drawer, since there would simply be no way of reckoning the
crucial 5-day period. It is indispensable, must be sent by either the offended
party or the drawee bank, and, must be in writing.
The notice of dishonor, in this case was not one contemplated by law
as “notice of dishonor” denotes that a check had already been presented to
the bank; however, the check had not yet been presented when said notice
was sent to Dino.
Great Asian Sales Center Corporation v. Court of Appeals

G.R. No.105774, 25 April 2002
CARPIO, J.
FACTS:
Great Asian bought and sold household appliances. Its board of
approved a resolutions authorizing its Treasurer and GM, Arsenio Lim Piat, Jr.
to secure a 1,000,000 loan from Bancasia and a 2,000,000 a discounting line
with Bancasia, to sign all notes necessary to secure the loan. Tan Chong Lin
then signed 2 Surety Agreements in favor of Bancasia to guarantee,
solidarily, the debts of Great Asian to Bancasia.
Great Asian, through Piat, signed 4 Deeds of Assignment of
Receivables, assigning to Bancasia 15 postdated checks issued by various
customers in payment for appliances and other merchandise.
The drawee banks dishonored the fifteen checks due to “account
closed”, “payment stopped”, “account under garnishment”, and
“insufficiency of funds”. After notice, Bancasia notified Tan Chong Lin and
demanded payment. Neither Great Asian nor Tan Chong Lin paid Bancasia
the dishonored checks. GA filed for insolvency but Bancasia still persued a
suit against them.
RTC ruled in favor of Bancasia and CA later sustained.
ISSUE: Is Great Asian still liable to Bancasia despite not receiving a notice
of dishonor from the later?
HELD:
Yes, the explicit with recourse stipulation which states that the
dishonored checks were sold to Bancasia with recourse against Great Asian
effectively enlarges, by agreement of the parties, the liability of Great Asian
beyond that of a mere endorser of a negotiable instrument. Thus, whether
Bancasia gives notice of dishonor to Great Asian, the latter remains liable to
Bancasia because of the with recourse stipulation which is independent of
the warranties of an endorser under the Negotiable Instruments Law.

Bank Liability for Forged Checks

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Bank Liability for Forged Checks

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