1

NEGO 1
st
Week Cases: Sections 1-13

Traders Royal Bank v. CA
Facts:
Filriters Guaranty Assurance Corporation (Private Respondent) is the
registered owner of Central Bank Certificates of Indebtedness (CBCI) No.
D891, with a face value of P500,000.00.
Alfredo Banaria, the Senior Vice-President Treasury of Filriters, executed
a detached assignment, transferring CBCI No. 891 to the Philippine
Underwriters Finance Corporation (Philfinance).
Philfinance then transferred CBCI No. D891, still registered under Filriters
name, to Traders Royal Bank (Petitioner) under a repurchase agreement.
When Philfinance failed to buy back CBCI No. D891, Philfinance executed
a deed of assignment coveying all its rights and title to Traders.
When Traders sought to transfer the registration of CBCI No. D891 to its
name before the Security and Servicing Department of the Central Bank,
the Central Bank refused, causing Traders to file a suit against Central
Bank and eventually, Filriters was also a called as a respondent.
o Filriters argued that Banaria execution of the detached
assignment of CBCI No. D891 was void, since he did so without
any board resolution, knowledge or consent of the board of
directors of Filriters, and without any clearance or authorization
from the insurance commissioner.
The RTC ruled in favor of Filriters, hence the appeal.
o Traders argues that the CBCI no. D891 was a negotiable
instrument, and having acquired the said certificate from
Philfinance as a holder in due course, its possession of the same
is thus free from any defect or title prior parties and from any
defense available to prior parties among themselves, and it may
thus, enforce payment of the instrument for the full amount
thereof against all parties liable thereon.

Issue: Whether CBCI No. D891 is a negotiable instrument?

Ruling: No. CBCI No. D891 is not a negotiable instrument because of the absence
of negotiability within the meaning of the negotiable instruments law.
Pertinent portions of CBCI provide:
o The Central Bank of the Philippines (the Bank) for value
received, hereby promises to pay bearer, or if this Certificate of
indebtedness be registered, to FILRITERS GUARANTY
ASSURANCE CORPORATION, the registered owner hereof, the
principal sum of FIVE HUNDRED THOUSAND PESOS.
A reading of the certificate indicates the same is payable to Filriters, the
registered owner, discounting Traders submission that the certificate is a
negotiable instrument and that it is a holder in due course.
The language of negotiability which characterizes a negotiable paper as a
credit instrument is its freedom to circulate as a substitute for money.
o Freedom of negotiability is the touchstone relating to the
protection of holders in due course, and is the foundation for the
protection which the law throws around in a holder in due course.
o This freedom of negotiability is totally absent in a certificate of
indebtedness as it merely pays a sum of money to a specified
person.












































2



CALTEX (PHILIPPINES), INC., petitioner,
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Facts:
On various dates, defendant (Security Bank), through its Sucat Branch
issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz
with thetotal amount of P1,120,000.00,
Subsequently, Angel dela Cruz delivered the (CTDs) to the plaintiff
(Caltex)in connection with his purchased of fuel products.
Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco,
the Sucat Branch Manger, that he lost all the certificates of time deposit in
dispute.
o Angel Dela Cruz followed Mr. Tiangcos advise to execute and
submit a notarized Affidavit of Loss, so that the CTDs will be
replaced
Thereafter, Angel dela Cruz negotiated and obtained a loan from
defendant bank amounting to P875,000.00 where he executed a notarized
Deed of Assignment of Time Deposit which states that he (Dela Cruz)
surrenders to defendant bank "full control of the indicated time deposits
from and after date" of the assignment and further authorizes said bank to
pre-terminate, set-off and "apply the said time deposits to the payment of
whatever amount or amounts may be due" on the loan upon its maturity
However, in November, 1982, Mr. Aranas, Credit Manager of Caltex went
to the defendant bank's Sucat branch and presented the CTDs declared
lost by Angel dela Cruz alleging that the same CTDs were delivered to
them as security for purchases made with Caltex
Defendant bank ask the petitioner to produce any document evidencing
any contract of pledge or guarantee b/w them and Dela Cruz but the
plaintiff failed to provide.
Plaintiff filed a complaint, praying that defendant bank be ordered to pay it
the value of the certificates of time deposit of P1,120,000.00 plus accrued
interest and compounded interest therein at 16% per annum, moral and
exemplary damages as well as attorney's fees.
After trial, the court dismissed the complaint and ruled that the CTDs are
not negotiable. Hence, this appeal.
Petitionerclaims that the court erred in ruling (1) that the subject certificates
of deposit are non-negotiable despite being clearly negotiable instruments;
(2) that petitioner did not become a holder in due course of the said
certificates of deposit; and (3) in disregarding the pertinent provisions of
the Code of Commerce relating to lost instruments payable to bearer.
A sample text of the certificates of time deposit:
SECURITY BANK
AND TRUST COMPANY
xxx
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982,
19____
This is to Certify that B E A R E R has deposited in this Bank the
sum of PESOS: FOUR THOUSAND ONLY, SECURITY BANK
SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Currency,
repayable to said depositor 731 days. after date, upon
presentation and surrender of this certificate, with interest at the
rate of 16% per cent per annum.

Ruling:
SC held that the CTDs are negotiable instruments. Section 1 NIL enumerates
the requisites for an instrument to become negotiable:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a
sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable
future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
The CTDs in question undoubtedly meet the requirements of the law for
negotiability.

The negotiability or non-negotiability of an instrument is determined from the writing,
that is, from the face of the instrument itself.

In the construction of a bill or note, the
intention of the parties is to control, if it can be legally ascertained.

On the issue whether petitioner can rightfully recover on the CTDs.
Unfortunately for petitioner, although the CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and agreement between it and De la Cruz,
requires both delivery and indorsement. And since the CTDs were only delivered
but not indorsed (wherein the petitioner failed to produce any document evidencing
any contract of pledge or guarantee agreement between it and Angel de la Cruz),
the mere delivery of the CTDs did not legally vest in petitioner any right effective
against and binding upon respondent bank.












3




METROBANK VS CA
G.R. No. 88866 February 18, 1991
Lessons Applicable: Forgery (Negotiable Instruments Law)


FACTS:
January 1979: Eduardo Gomez opened an account with Golden Savings and
deposited over a period of 2 months 38 treasury warrants totalling
P1,755,228.37.
all drawn by the Philippine Fish Marketing Authority and purportedly signed by
its General Manager and countersigned by its Auditor:
6 - directly payable to Gomez
32 - indorsed by their respective payees, followed by Gomez as second
indorser
June 25 - July 16, 1979: all warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to its Savings in the
Metrobank branch
They were then sent for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury for special
clearing
More than 2 weeks after the deposits, Castillo asked if the warrants were
cleared.
She was told to wait.
Gomez was also not allowed to withdraw from his account
exasperated over Gloria's repeated inquiries and also as
an accommodation for a "valued client," Metrobank allowed Golden Savings to
make the following withdrawals:

July 9, 1979 - P508,000.00

July 13, 1979 - P310,000.00

July 16, 1979 - P150,000.00

Gomez was also allowed to withdraw a total amount of P1,167,500 (latest
on July 16, 1979)
July 21, 1979: Metrobank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury on July 19, 1979, and demanded
the refund by Golden Savings of the amount it had previously withdrawn, to
make up the deficit in its account. - refused
CA affirmed RTC: favored Golden Savings

ISSUE: W/N Metrobank can claim a refund from Golden Savings


HELD: NO. Affirmed. withdrawn must be charged not to Golden Savings but to
Metrobank, which must bear the consequences of its own negligence. But
the balance of P586,589.00 should be debited to Golden Savings, as obviously
Gomez can no longer be permitted to withdraw this amount from his deposit
because of the dishonor of the warrants
Metrobank was negligent in giving Golden Savings the impression that the
treasury warrants had been cleared and that, consequently, it was safe to allow
Gomez to withdraw

It "presumed" that the warrants had been cleared simply because of "the lapse
of one week."

There was no reason why it should not have waited until the treasury warrants
had been cleared

Art. 1909. The agent is responsible not only for fraud, but also for negligence,
which shall be judged 'with more or less rigor by the courts, according to whether
the agency was or was not for a compensation.
Golden Savings acted with due care and diligence

Forgery cannot be presumed. It must be established by clear, positive and
convincing evidence. -here not proven

treasury warrants in question are not negotiable instruments

stamped on their face is the word "non-negotiable"

indicated that they are payable from a particular fund

Sec. 1. Form of negotiable instruments. An instrument to be negotiable must
conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
xxxxxxxxx
Sec. 3. When promise is unconditional. An unqualified order or promise to pay is
unconditional within the meaning of this Act though coupled with
(a) An indication of a particular fund out of which reimbursement is to be made or a
particular account to be debited with the amount; or
(b) A statement of the transaction which gives rise to the instrument judgment.
But an order or promise to pay out of a particular fund is not unconditional.





4




PNB v. Concepcion Mining

FACTS: A case for collection of a sum of money was filled against defendant in
connection with a promissory note they issued with others. The
defendants move that since their co-makers (Legarda) have died, claim should
be also against the estates of such. This was denied by the court.

Promisory Note:
NINETY DAYS after date, for value received, I promise to pay to the order of the
Philippine National Bank . . . .
In case it is necessary to collect this note by or through an attorney-at-law, the
makers and indorsers shall pay ten percent (10%) of the amount due on the note as
attorney's fees, which in no case shall be less than P100.00 exclusive of all costs
and fees allowed by law as stipulated in the contract of real estate
mortgage. Demand and Dishonor Waived. Holder may accept partial payment
reserving his right of recourse again each and all indorsers.
(Purpose mining industry)
CONCEPCION MINING COMPANY, INC.,
By:
(Sgd.) VICENTE LEGARDA
President
(Sgd.) VICENTE LEGARDA
(Sgd.) JOSE S SARTE
"Please issue check to
Mr. Jose S. Sarte"
Issue: Is the contention of the defendants correct?

HELD: No. Where an instrument containing the words I promise to pay is signed
by two or more persons, they are deemed to be jointly and severally liable thereon.
By virtue of this provision found in Section 17(g) of the Negotiable Instrument
Law and Art. 1216 of the Civil Code, where the promissory note was executed
jointly and severally by two or more persons, the payee of the promissory note had
the right to hold any one or any two of the signers of the promissory note
responsible for the payment of the amount of the note.























































5



2
nd
Week: Sections 14-23
1) Development Bank of Rizal v. Sima Wei
Sima Wei acquired a loan from Development Bank of Rizal. He executed and
delivered to the former a promissory note, engaging to pay the petitioner Bank or
order the amount of P1,820,000.00 on or before June 24, 1983 with interest at 32%
per annum.
Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02.
On November 18, 1983, Sima Wei issued two crossed checks payable to petitioner
Bank drawn against China Banking Corporation, bearing respectively the serial
numbers 384934, for the amount of P550,000.00 and 384935, for the amount of
P500K. The said checks were allegedly issued in full settlement of the drawers
account evidenced by the promissory note.
These two checks were not delivered to the Development Bank. For reasons not
shown, these checks came into the possession of respondent Lee KianHuat, who
deposited the checks without the Developments indorsement (forged or otherwise)
to the account of respondent Plastic Corporation, at the Balintawak branch,
Caloocan City, of the Producers Bank. The Branch Manager of the Balintawak
branch of Producers Bank, relying on the assurance of respondent Samson Tung,
President of Plastic Corporation, that the transaction was legal and regular,
instructed the cashier of Producers Bank to accept the checks for deposit and to
credit them to the account of said Plastic Corporation, inspite of the fact that the
checks were crossed and payable to petitioner Bank and bore no indorsement of
the latter. Hence, Development filed the complaint for sum of money against Wei
and/or KianHuat, Uy, Tung, Plastic Corporation and the Producers Bank.
Bank alleged that its cause of action was not based on collecting the sum of money
evidenced by the negotiable instruments stated but on quasi-delict a claim for
damages on the ground of fraudulent acts and evident bad faith of the alternative
respondents.
ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered
checks.

RULING:
No. A negotiable instrument must be delivered to the payee in order to evidence its
existence as a binding contract. Section 16 of the NIL provides that every contract
on a negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. Thus, the payee of a negotiable
instrument acquires no interest with respect thereto until its delivery to him. Without
the initial delivery of the instrument from the drawer to the payee, there can be no
liability on the instrument. Petitioner however has a right of action against Sima Wei
for the balance due on the promissory note.
Unless respondent Sima Wei proves that she has been relieved from liability on the
promissory note by some other cause, petitioner Bank has a right of action against
her for the balance due thereon.
The normal parties to a check are the drawer, the payee and the drawee bank.
Courts have long recognized the business custom of using printed checks where
blanks are provided for the date of issuance, the name of the payee, the amount
payable and the drawers signature. All the drawer has to do when he wishes to
issue a check is to properly fill up the blanks and sign it. However, the mere fact that
he has done these does not give rise to any liability on his part, until and unless the
check is delivered to the payee or his representative.
A negotiable instrument, of which a check is, is not only a written evidence of a
contract right but is also a species of property. Just as a deed to a piece of land
must be delivered in order to convey title to the grantee, so must a negotiable
instrument be delivered to the payee in order to evidence its existence as a binding
contract.
Thus, the payee of a negotiable instrument acquires no interest with respect thereto
until its delivery to him. Delivery of an instrument means transfer of possession,
actual or constructive, from one person to another. Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the instrument.
Moreover, such delivery must be intended to give effect to the instrument. Without
the delivery of said checks to petitioner-payee, the former did not acquire any right
or interest therein and cannot therefore assert any cause of action, founded on said
checks, whether against the drawer Sima Wei or against the Producers Bank or any
of the other respondents.
However, insofar as the other respondents are concerned, petitioner Bank has no
privity with them. Since petitioner Bank never received the checks on which it based
its action against said respondents, it never owned them (the checks) nor did it
acquire any interest therein












6


Lim v. CA
Facts:
Manuel Lim and Rosita Lim (Petitioners) are the president and treasurer,
respectively, of RigiBilt Industries, Inc.
Rigi had been transacting business with Linton Commercial Company, Inc.
for years, with Linton supplying Rigi with steel plates, steel bars, flat bars,
and purlin sticks which it uses in the fabrication, installation and building of
steel structures.
a) May 27, 1983: The Lims ordered 100 pieces of mild steel
plates worth P51,815.
Delivered on the Lims place of business in
Kalookan City.
The Lims issued Solidbank Check No. 027700
as payment.
b) May 30,1983: The Lims ordered another 65 pieces of
mild steel plates worth P63,455.
Delivered on the Lims place of business in
Kalookan City.
The Lims issued Solidbank Check No. 027699
as payment.
c) The Lims also ordered 2,600 Z purlins worth P241,800.
Delivered on the Lims place of business in
Kalookan City, on various dates.
The Lims issued 7 Solidbank checks as
payment.
When the last 7 checks were deposited, they were dishonored for
insufficiency of funds.
Despite demands, the Lims refused to make good the checks or pay the
value of the deliveries.
Linton filed with the RTC of Malabon a case against the Lims, charging
them with estafa and violation of BP22.
The RTC found the Lims guilty of both estafa and having violated BP22.
CA acquitted them of estafa but affirmed the finding that they were guilty of
having violated BP22.
The Lims question the ruling of the lower courts, asserting:
o That the prosecution failed to prove that any of the essential
elements of the crime punishable under BP22 was committed
within the jurisdiction of the RTC of Malabon.
o That what was proved was that all the elements of the offense
were committed in Kalookan City.
o That considering that the checks were all issued, delivered and
dishonored in Kalookan City, the trial court of Malabon exceeded
its jurisdiction when it tried the case and rendered the judgment.
Issue: Whether the RTC of Malabon had jurisdiction?
Ruling: Yes. Jurisdiction lies either in the RTC of Kalookan City or Malabon.
Sec. 14, Rule 110: Place where action is to be instituted. (a) In all
criminal prosecutions the action shall be instituted and tried in the court of
the municipality or province wherein the offense was committed or any one
of the essential ingredients thereof took place.
o There are certain crimes in which some acts material and
essential to the crimes and requisite to their consummation occur
in one municipality or territory and some in another, in which
event, the court of either has jurisdiction to try the cases.
These are the so-called Transitory or continuing crimes
under which violation of BP22 is categorized.
A person charged with a transitory crime may be validly
tried in any municipality or territory where the offense
was in part committed.
In determining proper venue in these cases, the following acts material and
essential to each crime and requisite to its consummation must be
considered: (a) the seven (7) checks were issued to LINTON at its place of
business in Balut, Navotas; b) they were delivered to LINTON at the same
place; (c) they were dishonored in Kalookan City; and, (d) petitioners had
knowledge of the insufficiency of their funds in SOLIDBANK at the time the
checks were issued. Since there is no dispute that the checks were
dishonored in Kalookan City, it is no longer necessary to discuss where the
checks were dishonored.
Under Sec. 191 of the Negotiable Instruments Law the term "issue" means
the first delivery of the instrument complete in form to a person who takes
it as a holder. On the other hand, the term "holder" refers to the payee or
indorsee of a bill or note who is in possession of it or the bearer thereof.
o People v. Yabut:
. . . The place where the bills were written, signed, or
dated does not necessarily fix or determine the place
where they were executed. What is of decisive
importance is the delivery thereof. The delivery of the
instrument is the final act essential to
its consummation as an obligation. An undelivered bill or
note is inoperative. Until delivery, the contract is
revocable. And the issuance as well as the delivery of
the check must be to a person who takes it as a holder,
which means "(t)he payee or indorsee of a bill or note,
who is in possession of it, or the bearer thereof."
Delivery of the check signifies transfer of possession,
whether actual or constructive, from one person to
another with intent to transfer titlethereto . . .
o Although LINTON sent a collector who received the checks from
petitioners at their place of business in Kalookan City, they were
actually issued and delivered to LINTON at its place of business
in Balut, Navotas. The receipt of the checks by the collector of
LINTON is not the issuance and delivery to the payee in
contemplation of law. The collector was not the person who could
take the checks as a holder, i.e., as a payee or indorsee thereof,
with the intent to transfer title thereto. Neither could the collector
be deemed an agent of LINTON with respect to the checks
because he was a mere employee.
7
Delivery of the checks therefore took place in Navotas,
of which the RTC of Malabon has jurisdiction.
REPUBLIC PLANTERS BANK, petitioner,
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.
Facts:
Defendant Shozo Yamaguchi and private respondent Fermin Canlas were
President/Chief Operating Officer and Treasurer respectively, of Worldwide
Garment Manufacturing, Inc.. and by virtue of Board Resolution, defendant
Shozo Yamaguchi and private respondent Fermin Canlas were authorized
to apply for credit facilities with the petitioner Republic Planters Bank in the
forms of export advances and letters of credit/trust receipts
accommodations.
Petitioner bank issued nine promissory notes where each of which were
uniformly worded in the following manner:
___________, after date, for value received, I/we, jointly and
severaIly promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(....) Philippine Currency...
On the right bottom margin of the promissory notes
appeared the signatures of Shozo Yamaguchi and Fermin Canlas
above their printed names with the phrase "and (in) his personal
capacity" typewritten below. At the bottom of the promissory
notes appeared: "Please credit proceeds of this note to:
________ Savings Account ______XX Current AccountNo. 1372-
00257-6
of WORLDWIDE GARMENT MFG. CORP.
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to
change its corporate name to Pinch Manufacturing Corporation.
On February 5, 1982, Petitioner bank filed a complaint for the recovery of
sums of money covered by the nine promissory notes
Private respondent Fermin Canlas filed an Answer wherein he denied
having issued the promissory notes in question since according to him, he
was not an officer of Pinch Manufacturing Corporation, but instead of
Worldwide Garment Manufacturing, Inc., and he signed it in behalf of the
company and lastly when he issued said promissory notes the same were
in blank, the typewritten entries not appearing therein prior to the time he
affixed his signature.

Issue:
1.Whether private respondent Fermin Canlas is solidarily liable with the other
defendants?YES
2. W/N he signed it only as an agent of the company hence should not be liable?NO
3. W/N when he issued the promissory note, it was in blank hence Sec14 is
applicable?NO
Ruling: SC held that private respondent Fermin Canlas is solidarily liable on each of
the promissory notes bearing his signature for the following reasons:
Under the Negotiable lnstruments Law, persons who write their names on
the face of promissory notes are makers and are liable as such.

By signing
the notes, the maker promises to pay to the order of the payee or any
holder
o Private respondent Fermin Canlas is one of the co-makers of the
promissory notes.Hence, he cannot escape liability arising
therefrom.
Where an instrument containing the words "I promise to pay" is signed by
two or more persons, they are deemed to be jointly and severally liable.
o The solidary liability of private respondent Fermin Canlas is made
clearer and certain, without reason for ambiguity, by the presence
of the phrase "joint and several" as describing the unconditional
promise to pay to the order of Republic Planters Bank. A joint and
several note is one in which the makers bind themselves both
jointly and individually to the payee so that all may be sued
together for its enforcement, or the creditor may select one or
more as the object of the suit.
o By making a joint and several promise to pay to the order of
Republic Planters Bank, private respondent Fermin Canlas
assumed the solidary liability of a debtor and the payee may
choose to enforce the notes against him alone or jointly with
Yamaguchi and Pinch Manufacturing Corporation as solidary
debtors.
With regard to private respondents contention that he only signed as an agent of
the company
Sec. 20. Liability of a person signing as agent and so forth. Where the
instrument contains or a person adds to his signature words indicating that
he signs for or on behalf of a principal , or in a representative capacity, he
is not liable on the instrument if he was duly authorized; but the mere
addition of words describing him as an agent, or as filling a representative
character, without disclosing his principal, does not exempt him from
personal liability.
Where the agent signs his name but nowhere in the instrument has he
disclosed the fact that he is acting in a representative capacity or the name
of the third party for whom he might have acted as agent, the agent is
personally liable to take holder of the instrument and cannot be permitted
to prove that he was merely acting as agent of another and parol or
extrinsic evidence is not admissible to avoid the agent's personal liability.
8
Lastly, on the private respondent's contention that the promissory notes were
delivered to him in blank for his signature.
It shows that they are the stereotype printed form of promissory notes
generally used by commercial banking institutions to be signed by their
clients in obtaining loans. Such printed notes are incomplete because
there are blank spaces to be filled up on material particulars such as
payee's name, amount of the loan, rate of interest, date of issue and the
maturity date. An incomplete instrument which has been delivered to the
borrower for his signature is governed by Section 14 of the Negotiable
Instruments Law which provides, in so far as relevant to this case, thus:
Sec. 14. Blanks: when may be filled. Where the instrument is
wanting in any material particular, the person in possesion thereof
has a prima facie authority to complete it by filling up the blanks
therein. ... In order, however, that any such instrument when
completed may be enforced against any person who became a
party thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable
time...
SC believed the bank's testimony that the notes were filled up before they were
given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for
their signatures as joint and several promissors. For signing the notes above their
typewritten names, they bound themselves as unconditional makers. When the
notes were given to private respondent Fermin Canlas for his signature, the notes
were complete in the sense that the spaces for the material particular had been
filled up by the bank as per agreement. The notes were not incomplete instruments;
neither were they given to private respondent Fermin Canlas in blank as he claims.
Thus, Section 14 of the NegotiabIe Instruments Law is not applicable




































9


ASTRO ELECTRONICS VS PHILEXPORT

Lessons Applicable: Promissory notes and checks (Negotiable Instruments Law)

FACTS:

Astro was granted several loans by the Philippine Trust Company (Philtrust)
amounting P3M w/ interest and secured by 3 promissory notes:

December 14, 1981: P600,000.00

December 14, 1981: P400,000.00

August 27, 1981: P2,000,000.00

Roxas signed twice the promissory notes

as President of Astro

in his personal capacity

Roxas also signed a Continuing Surety ship Agreement in favor of Philtrust
Bank, as President of Astro and as surety

Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust the
payment of 70% of Astros loan, subject to the condition that upon payment by
Philguanrantee, it shall be proportionally subrogated to the rights of Philtrust
against Astro

Upon Astros failure to pay, Philguarantee paid 70% of the guaranteed loan to
Philtrust.

Subsequently, Philguarantee filed against Astro and Roxas a complaint for sum
of money with the RTC

Roxas: alleged that he merely signed the same in blank and the phrases in
his personal capacity and in his official capacity were fraudulently inserted
without his knowledge

RTC: favored Philguarantee holding Astro and Roxas jointly and severally
liable

ifRoxas really intended to sign the instruments merely in his capacity as
President of Astro, then he should have signed only once

CA affirmed RTC

ISSUE: W/N Roxas should be jointly and severally liable with Astro


HELD: YES. CA affirmed
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.

3 promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly,
severally and solidarily, promise to pay to PHILTRUST BANK or order...

begins with I, We, or Either of us promise to pay, when signed by two or more
persons = solidarily liable

Subrogation is the transfer of all the rights of the creditor to a third person, who
substitutes him in all his rights

Philguarantee has all the right to proceed against petitioner, it is subrogated to
the rights of Philtrust to demand for and collect payment from both Roxas and
Astro since it already paid the value of 70% of roxas and Astro Electronics
Corp.s loan obligation

Roxas acquiescence is not necessary for subrogation to take place because
the instant case is one of the legal subrogation that occurs by operation of law,
and without need of the debtors knowledge

10
Philguarantee, as guarantor, became the transferee of all the rights of Philtrust
as against Roxas and Astro because the guarantor who pays is subrogated by
virtue thereof to all the rights which the creditor had against the debtor



SAN CARLOS MILLING CO., LTD vs. BANK OF THE PHILIPPINE ISLANDS
AND CHINABANKING CORPORATION. G.R. No. L-37467December 11, 1933.
Source: http://www.scribd.com/doc/47027645/San-Carlos-Milling-vs-BPI
FACTS: San Carlos milling, organized under the laws
of the Territory of Hawaii was authorized to
engage in business in the Philippines. The business in the Philippines was
in the hands of Alfred Cooper, its agent under general power
of attorney with authority of substitution. The
principal employee in the Manila Office was Joseph Wilson who had
a general power of attorney but without power of substitution. Cooper went
on a vacation and gave a general
power of attorney to Newland Baldwin and revoked the power
of Wilson relative to the dealings with BPI. After a year, Wilson conspired
with Dolores, a messenger-clerk and sent a cable gram in code
to the company in Honolulu requesting a
telegraphic transfer to the China Banking Corporation of Manila for
$100,000. The money was transferred by cable to Chinabank and
upon receipt, sent to San Carlos Milling an
exchange contract for P201,000 (exchange
rate then). Such contract was forged in the
name of Newland Baldwin. It further asked China
bank to send a certified check in SanCarlos Millings favor, payable for
deposit only with BPI. The endorsement to which the name of Newland
Baldwin was affixed was spurious.BPI credited the current account of
plaintiff in the sum of P201, 000 and after it was cleared, it was paid by
China Banking Corporation the next day, BPI received a letter purported to
be signed by Newland Baldwin, directing that the money be
paid in certain denominations. The quoting and packing of the money was
witnessed by Dolores who in turn returned with a check purporting to be
signed by NewlandBaldwin as agent. . Dolores also returned with
a forged check for P1 covering the cost of packing the money. Shortly ther
eafter, the crime was discovered but BPI refused to credits an Carlos
Milling with the amount withdrawn by the two forged checks and brought
the case to the Trial Court. Upon the petition of BPI, Chinabank was
also impleaded as defendant. The trial court held that the deposit of P201,
000 in the BPI being the result of a forged endorsement, the relation of the
depositor and banker did not exist, but the bank was only a gratuitous
bailee; that BPI acted in good faith in the ordinary course of business and
was not guilty of negligence and that San Carlos Milling could not recover
since the loss was due to the criminal actions of its employees. San Carlos
appealed its case to the Supreme Court.
ISSUE:
WON BPI is guilty of negligence and is liable to pay San Carlos Milling for
the amount it had cashed out
HELD: Judgment absolving BPI was reversed.
BPI is guilty of negligence because it should have taken care in
ensuring that the signatures were not forged; China Bank is not liable
since the responsibility of verifying all endorsements on the check is
with the bank that cashes the check, in this case, BPI.
A bank that cashes a check must know to whom it pays. In connection with
the cashiers check, this duty was therefore
upon the BPI and the CBC was not bound to inspect and verify all
endorsements of the check, even if some of them were also those of the
depositors in that bank. It had a right to rely upon the endorsement of BPI
when it gave the latter bank credit for its own cashiers check. Since the
money was in fact paid by CBC to BPI, CBC is not indebted to San Carlos
Milling or BPI.
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 charge the amount so paid to the
account of the depositor whose name was forged. (7 C.J. 683)
No act of San Carlos Milling ledBPI to go astray. The bank paid out its
money because it relied upon the genuiness of the
purported signatures of Baldwin. Its employees should have used care.
Therefore, the proximate cause of loss was due to the negligence
of type in honouring and cashing two forged checks (P201, 000 and
P1).











11



Great Eastern Life v. HSBC

Plaintiff drew its check on HSBC with whom it had an account, payable to the
order of Melicor. Maasim fraudulently obtained possession of the check, forged
Melicor's signature, as an endorser, and then personally endorsed and presented it
to PNB where the amount of the check was placed to his credit.
After having paid the check, PNB endorsed the check to HSBC, which paid
it, and charged the amount of the check to the account of the plaintiff. HSBC
rendered a bank statement to the plaintiff showing that the amount of the check was
charged to its account, and no objection was then made to the statement.
About four months after the check was charged to the account of the plaintiff,
it discovered that Melicor, to whom the check was made payable, had never
received it, and that his signature, as an endorser, was forged by Maasim.
Plaintiff promptly made a demand upon HSBC that it should be given credit
for the amount of the forged check.
The bank refused to do, and thus the plaintiff commenced this action to
recover the amount paid on the forged check.
Issue:
Whether HSBC is responsible for the refund to the drawer of the amount of the
check drawn and payable to order, when its value was collected by a third person
by means of forgery of the signature of the payee.

Ruling:
Yes. Plaintiff (GELIC) authorized and directed HSBC to pay Melicor, or his order
and not to any other person. Neither is the plaintiff estopped or bound by the bank
statement, which was made to it by the HSBC. This is not a case where the
plaintiff's own signature was forged to one of its checks. In such a case, the plaintiff
would have known of the forgery, and it would have been its duty to have promptly
notified the bank of any forged signature, and any failure on its part would have
released the bank from any liability. Plaintiff had a right to assume that Melicor had
personally endorsed the check, and that, otherwise, the bank would not have paid it.
HSBC is liable to plaintiff and PNB is in turn liable to HSBC as it had no license or
authority to pay the money to Maasim or anyone else upon a forged signature. It
was its legal duty to know that Melicor's endorsement was genuine before cashing
the check. PNBs remedy is against Maasim to whom it paid the money.

ISSUES: W/N Eastern has the right to recover the amount of the forged check


HELD: YES. lower court is reversed. Eastern against HSBC who can claim against
PNB
Forgery was that of Melicor (payees and NOT the maker)
Eastern received it banks statement, it had a right to assume that Melicor had
personally endorsed the check, and that, otherwise, the bank would not have
paid it
Section 23 of Negotiable Instruments Law: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 Philippine National Bank had no license or authority to pay the money to
Maasim or anyone else upon a forge signature.
Its remedy is against Maasim to whom it paid the money.






















12







Republic Bank v. Ebrada
Facts:
January 15, 1963: The Treasury of the Philippines issued its Check No.
BP-508060, payable to the order of Martin Lorenzo, in sum of P1,246.08,
and drawn on the Repbulic Bank (Petitioner).
February 27, 1963: Mauricia T. Ebrada (Respondent) encashed the check
at Republic Bank for P1,246.08.
o The back side of the check bears the following signatures:
1) Martin Lorenzo;
2) Ramon Lorenzo;
3) Delia Dominguez; and
4) Mauricia T. Ebrada.
Republic Bank was later advised by the Bureau of Treasury that the
alleged indorsement on the reverse side of the check by the payee, Martin
Lorenzo, was a forgery since Lorenzo had died as of July 14, 1952.
Republic Bank refunded the Bureau and filed a complaint against Ebrada
to recover the amount it had refunded.
The trial court rendered in favor of Republic Bank, hence the appeal by
Ebrada.

Issues:
1) Does the existence of one forged signature on the check render void all
the other negotiations of the check with respect to other parties whose
signatures are genuine?
2) If the drawee bank has paid the amount of the check to the holder and it
was discovered that the signature of the payee was forged, can the
drawee bank recover from the one who encashed the check?

Ruling:
1) No.
Where the signature on the negotiable instrument is forged, the
negotiation of the check is without force.
o Sec. 23, Negotiable Instruments Law: 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 thereof, or to enforce payment thereof from
any party thereto, can be acquired through or under
such signature, unless the person to whom it is sought to
enforce such right is precluded from setting up the
forgery or want of authority.
However, Only the negotiation based on the forged or
unauthorized signature is inoperative.
o This means that the negotiation of the check in question
from Martin Lorenzo, the original payee, to Ramon R.
Lorenzo, the second indorser, should be declared of no
effect, but the negotiation from Ramon R. Lorenzo to
Adelaida Dominguez, the third indorser, and from
Adelaida Dominguez to Ebrada who did not know of the
forgery, should be considered valid and enforceable,
barring any claim of forgery.
2) Yes.
State v. Broadway Mut. Bank:
o The drawee of a check can recover from the holder the
money paid to him on a forged instrument.
o It is not supposed to be its duty to ascertain whether the
signatures of the payee or indorsers are genuine or not
since the indorser is supposed to warrant to the drawee
that the signatures of the payee and previous indorsers
are genuine, warranty not extending only to holders in
due course.
o On who purchases a check or draft is bound to satisfy
himself that the paper is genuine and that by indorsing it
or presenting it for payment or putting it into circulation
before presentation he impliedly asserts that he has
performed his duty and the drawee who has paid the
forged check, without actual negligence on his part may
recover the money paid from such negligent purchasers.
o Although the drawee bank was in a way negligent in
failing to detect the forgery, yet if the encasher of the
check had performed his duty, the forgery would in all
probability, have been detected and the fraud defeated.
Ebrada upon receiving the check from Dominguez was duty-
bound to ascertain whether the check was genuine before
presenting it to the Bank for payment.
o Her failure to do so makes her liable for the loss and the
Bank may recover from her the money she received for
the check.
Great Eastern Life Insurance v. Hongkong and Shanghai Banking
Corporation:
o Where a check is drawn payable to the order of one
person and is presented to a bank by another and
purports upon its face to have been duly indorsed by the
payee of the check, it is the duty of the bank to know that
the check was duly indorsed by the original payee, and
where the Bank pays the amount of the check to a third
person, who has forged the signature of the payee, the
loss falls upon the bank who cashed the check, and its
only remedy is against the person whom it paid the
money.
13
True, the bank should suffer the loss when it paid the amount of
the check to Ebrada, but is has the remedy to recover from
Ebrada the amount it paid.
o Although Ebrada was not proven to be the author of the
supposed forgery, yet as last indorser of the check, she
has warranted that she has good title to it even if in fact
she did not have it because the payee of the check was
already dead 11 years before the check was issued.
NATIVIDAD GEMPESAW, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and PHILIPPINE BANK OF
COMMUNICATIONS, respondents.
Facts:
Petitioner Natividad O. Gempesaw (petitioner) owns and operates four
grocery stores located at Rizal Avenue Extension and at Second Avenue,
Caloocan City.
Petitioner maintains a checking account with the Caloocan City Branch of
the respondent drawee Bank and to facilitate payment of debts to her
suppliers, petitioner draws checks against her checking account with the
respondent bank as drawee.
o The checks are usually prepared and filled up by her trusted
bookkeeper, Alicia Galang, an employee for more than eight (8)
years.
o Petitioner completes the checks by signing them as drawer and
her employee Alicia Galang deliver them to the respective
payees.
It was only after 2 years that petitioner discovered that instead of issuing
the checks to the payees as named in the checks, Alicia Galang delivered
them to the Chief Accountant of the Buendia branch of the respondent
drawee Bank (Ernest L. Boon). It was established that the signatures of the
payees as first indorsers were forged. Then the checks were then indorsed
for the second time with the names of Alfredo Y. Romero and Benito Lam,
and were deposited in the latter's accounts. The second indorsements
were all genuine signatures of the alleged holders.
A total amount of P1,208,606.89, represented by eighty-two (82) checks,
were credited and paid out by respondent drawee Bank to Alfredo Y.
Romero and Benito Lam, and debited against petitioner's checking
account.
On November 7, 1984, petitioner made a written demand on respondent
drawee Bank to credit her account but respondent drawee Bank refused to
grant petitioner's demand.
Petitioner filed a complaint but it was dismissed by RTC and affirmed by
CA on the grounds that the plaintiffs gross negligence was the proximate
cause of the loss
Issue: W/N the drawer (petitioner) has the right to recover from drawee bank?
Ruling:
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 the amount of said check. An
exception to this rule is where the drawer is guilty of such negligence which causes
the bank to honor such a check or checks.
o Petitioner failed to examine her records with reasonable diligence whether
before she signed the checks or after receiving her bank statements. Had
the petitioner examined her records more carefully, particularly the invoice
receipts, cancelled checks, check book stubs, and had she compared the
sums written as amounts payable in the eighty-two (82) checks with the
pertinent sales invoices, she would have easily discovered that in some
checks, the amounts did not tally with those appearing in the sales
invoices.
o Had petitioner been more vigilant in going over her current account by
taking careful note of the daily reports made by respondent drawee Bank
in her issued checks, or at least made random scrutiny of cancelled checks
returned by respondent drawee Bank at the close of each month, she
could have easily discovered the fraud being perpetrated by Alicia Galang,
and could have reported the matter to the respondent drawee Bank. The
respondent drawee Bank then could have taken immediate steps to
prevent further commission of such fraud.
o Hence, the petitioner's negligence was the proximate cause of her loss.
And since it was her negligence which caused the respondent drawee
Bank to honor the forged checks or prevented it from recovering the
amount it had already paid on the checks, petitioner cannot now
complain should the bank refuse to recredit her account with the
amount of such checks. Under Section 23 of the NIL, she is now
precluded from using the forgery to prevent the bank's debiting of her
account.
Section 23 of the NIL provides:
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.
However, even if petitioner's negligence was found to be the proximate cause of her
loss does not preclude her from recovering damages.Under Article 1170 of the Civil
Code the respondent drawee Bank may be held liable for damage for there is no
question that there is a contractual relation between petitioner as depositor (obligee)
14
and the respondent drawee bank as the obligor. In the performance of its obligation,
the drawee bank is bound by its internal banking rules and regulations which form
part of any contract it enters into with any of its depositors. When it violated its
internal rules that second endorsements are not to be accepted without the
approval of its branch managers and it did accept the same upon the mere approval
of Boon, a chief accountant, it contravened the tenor of its obligation at the very
least, if it were not actually guilty of fraud or negligence.

The fact that the respondent drawee Bank did not discover the irregularity with
respect to the acceptance of checks with second indorsement for deposit even
without the approval of the branch manager despite periodic inspection conducted
by a team of auditors from the main office constitutes negligence on the part of the
bank in carrying out its obligations to its depositors.

Hence, SC ruled that respondent drawee Bank is adjudged liable to share the
loss with the petitioner on a fifty-fifty ratio in accordance with Article 172 which
provides:
Responsibility arising from negligence in the performance of
every kind of obligation is also demandable, but such liability may
be regulated by the courts according to the circumstances.









































15




MWSS VS CA
FACTS:
Metropolitan Waterworks and Sewerage System (MWSS) is a GOCC and
successor-in- interest of the defunct NWSA.

The authorized signature for PNB Account No. 6 were those of MWSS
treasurer Jose Sanchez, its auditor Pedro Aguilar, and its acting General
Manager Victor L. Recio.

Specimen signatures were submitted by the MWSS to and on file with the PNB

By special arrangement with the PNB, the MWSS used personalized checks in
drawing from this account.

printed for MWSS by its printer, F. Mesina Enterprises

March, April and May 1969: 23 checks were prepared, processed, issued and
released by NWSA, all of which were paid and cleared by PNB and debited by
PNB against NWSA Account No. 6

deposited by the fictitious payees Raul Dizon, Arturo Sison and Antonio
Mendoza in their respective current accounts with the Philippine Commercial
and Industrial Bank (PCIB) and Philippine Bank of Commerce (PBC)

At the time of their presentation to PNB these checks bear the standard
indorsement which reads 'all prior indorsement and/or lack
of endorsement guaranteed'

NWSA filed against PNB before the CFI

PNB also filed a 3rd party complaint against the negotiating banks PBC and
PCIB on the ground that they failed to ascertain the Identity of the payees and
their title to the checks which were deposited in the respective new accounts of
the payees with them

February 6, 1976: CFI favored MWSS

CA: reversed and favored PNB

applied Section 24 of the Negotiable Instruments Law

ISSUE: W/N MWSS can can claim against PNB
HELD: NO. CA reversed.


Every negotiable instrument is deemed prima facie to have been issued for valuable
consideration and every person whose signature appears thereon to have become
a party thereto for value

A bank is bound to know the signatures of its customers; and if it pays a
forged check itmust be considered as making the payment out of its obligation
funds, and cannot ordinarily charge the amount so paid to the account of the
depositor whose name was forged.

NBI showed that the MWSS fraud was an "inside job" and that the MWSS'
delay in the reconciliation of bank statements and the laxity and loose records
control in the printing of its personalized checks facilitated the fraud. These
reports did not touch on the inherent qualities of the signatures which are
indispensable in the determination of the existence of forgery. There must be
conclusive findings that there is a variance in the inherent characteristics of the
signatures and that they were written by 2 or more different persons.

Forgery cannot be presumed. It must be established by clear, positive, and
convincing evidence. This was not done in the present case.

SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is forged or
made without 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.
Gross negligence in the printing of its personalized checks - MWSS failed to

1. give its printer, Mesina Enterprises, specific instructions relative to the
safekeeping and disposition of excess forms, check vouchers, and safety
papers

2. retrieve from its printer all spoiled check forms

16
3. provide any control regarding the paper used in the printing of said checks

4. furnish the respondent drawee bank with samples of typewriting, cheek
writing, and print used by its printer in the printing of its checks and of the
inks and pens used in signing the same

5. send a representative to the printing office during the printing of said checks

6. to reconcile the bank statements with its own records

MWSS requested the PNB to discontinue the practice of mailing the bank
statements, but instead to deliver it to Mr. EmilianoZaporteza. However, he
was unreasonably delayed in taking prompt deliveries of the bank statements
and credit and debit memos. As a consequence, Mr. Zaporteza failed to
reconcile the bank statements. If Mr. Zaporteza had not been remiss in his
duty of taking the bank statements and reconciling them with the petitioner's
records, the fraudulent encashments of the first checks should have been
discovered, and further frauds prevented. This negligence was, therefore, the
proximate cause of the failure to discover the fraud.

One factor which facilitate this fraud was the delay in the reconciliation of PNB
statements with the NAWASA bank accounts. xxx. Had the NAWASA
representative come to the PNB early for the statements and had the bank
been advised promptly of the reported bogus check, the negotiation of
practically all of the remaining checks on May, 1969 could have been
prevented.

The records likewise show that the petitioner failed to provide appropriate
security measures over its own records thereby laying confidential records
open to unauthorized persons. The petitioner's own Fact Finding Committee, in
its report submitted to their General manager underscored this laxity of records
control. It observed that the "office of Mr. Ongtengco (Cashier No. VI of the
Treasury Department at the NAWASA) is quite open to any person known to
him or his staff members and that the check writer is merely on top of his table

Even if the 23 checks in question are considered forgeries, considering the
petitioner's gross negligence, it is barred from setting up the defense of forgery
under Section 23 of the Negotiable Instruments Law

PNB had taken the necessary measures in the detection of forged checks and
the prevention of their fraudulent encashment. In fact, long before the
encashment of the 23 checks in question, the it had issued constant reminders
to all Current Account Bookkeepers informing them of the activities of forgery
syndicates.

Under the circumstances, MWSS was in a better position to detect and prevent
the fraudulent encashment of its checks.






















17





Ilusorio v. CA and Manila Banking Corporation, 2002
Source: http://www.scribd.com/archive/plans?doc=39812569
Facts:
Petitioner entrusted to his secretary his credit cards and his checkbook with blank
checks. His secretary, thru falsification, encashed and deposited to her personal
account seventeen checks drawn against the account of the petitioner at
respondent bank. Petitioner then requested the respondent bank to credit back
and restore to his account the value of the checks which were wrongfully encashed,
but respondent bank refused. Hence, petitioner filed the instant case. Manila
Bank sought the expertise of the NBI in determining the genuineness of the
signatures appearing on the checks. However, petitioner failed to submit his
specimen signatures for purposes of comparison with those on the questioned
checks. Consequently, the trial court dismissed the case. On appeal, the Court of
Appeals held that petitioner's own negligence was the proximate cause of his loss.
Hence, this petition.
Issue: Whether that Manila Bank is liable for damages for its negligence in failing to
detect the discrepant checks.
Ruling:
No. To be entitled to damages, petitioner has the burden of proving negligence on
the part of the bank for failure to detect the discrepancy in the signatures on the
checks. It is incumbent upon petitioner to establish the fact of forgery, i.e., by
submitting his specimen signatures and comparing them with those on the
questioned checks. Curiously though, petitioner failed to submit additional specimen
signatures as requested by the NBI from which to draw a conclusive finding
regarding forgery.
Further, the bank's employees in the present case did not have a hint as to the
secretarys modus operandi because she was a regular customer of the bank,
having been designated by petitioner himself to transact in his behalf. It was
petitioner, not the bank, who was negligent. In the present case, it appears that
petitioner accorded his secretary unusual degree of trust and unrestricted access to
his credit cards, passbooks, check books, bank statements, including custody and
possession of cancelled checks and reconciliation of accounts. Petitioner's failure to
examine his bank statements appears as the proximate cause of his own damage.
True, it is a rule that when a signature is forged or made without the authority
of the person whose signature it purports to be, the check is wholly
inoperative. However, the rule does provide for an exception, namely: "unless
the party against whom it is sought to enforce such right is precluded from
setting up the forgery or want of authority." In the instant case, it is the
exception that applies. Petitioner is precluded from setting up the forgery, assuming
there is forgery, due to his own negligence in entrusting to his secretary his credit
cards and checkbook including the verification of his statements of account.