31.

Ilusorio vs CA, 393 SCRA 89

Petitioner: RAMON K. ILUSORIO Session: 2
Respondent: HON. COURT OF APPEALS, and THE MANILATopic:
BANKING CORPORATION
FACTS: RULING:
Ilusorio was a prominent businessman who was in charge of 20 or
so corporations and usually out of the country for business. He was 1. No
a depositor in good standing of Manila Banking Corporation. He
then entrusted his credit cards, checkbook, blank checks,
passbooks, etc to his secretary, Katherine Eugenio. Eugenio was 2. No
also in charge of verifying and reconciling the statements of
Ilusorio’s checking account. Eugenio was able to encash and
deposit to her personal account checks drawn against Ilusorio’s
account with an aggregate amount of 119K. Ilusorio didn’t bother to
check his statement of account until a business partner informed
him that he saw Eugenio using his credit cards. Ilusorio then fired
her and instituted criminal case of Estafa thru falsification against
Eugenio. Manila Banking Corp. also instituted a complaint of estafa
against Eugenio based on the affidavit of Dante Razon, an
employee. Razon stated that he personally examined and
scrutinized the encashed checks in accordance with their
verification procedures. Thereafter, petitioner Ilusorio requested the
bank to restore its money but Manila Banking Corporation refused to
do so.

INSTRUMENT USED: Check

ISSUE:
1. Whether or not Manila Bank is liable for damages for failing to detect a forged check

2. Whether or not the CA erred in not applying SEC. 23, NEGOTIABLE INSTRUMENTS LAW.
RATIONALE:
1. The petitioner does not have a course of action against the bank. To be entitled to damages,
petitioner has the burden of proving negligence on the part of the bank for failure to detect the
discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the fact
of forgery. Curiously though, petitioner failed to supply additional signature specimens as
requested by the NBI. The bank was not also remiss in performance of its duties, it practices
due diligence in encashing checks. The bank didn’t have any hint of the modus operandi of
Eugenio as she was a regular customer, designated by the petitioner himself to transact on his
behalf.

It was petitioner who was negligent in this case. He failed to examine his bank statements and this was
the proximate cause of his own damage. Because of this negligence, he is precluded from setting up
the defense of forgery with regard the checks.

2. Sec. 23 of the Negotiable Instruments law provides that a forged check is inoperative, meaning
there was no right to enforce payment against any party. But it also provides an exception:
“unless the party against whom it is sought enforce such right is precluded from setting up the
forgery or want of authority”. This case falls under the exception since Ilusorio is precluded from
setting up forgery due to his own negligence considering that he allowed his secretary access to
 his credit cards, checkbook, and allowed his secretary to verify his statements of account.

In view of Article 2179 of the New Civil Code,22 when the plaintiff’s own negligence was the
immediate and proximate cause of his injury, no recovery could be had for damages.

As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the
omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would do.

DISPOSITION:
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the
Court of Appeals dated January 28, 1999 in CA-G.R. CV No. 47942, is AFFIRMED.

ADDITIONAL NOTES:
Can a drawer-depositor who entrusted his check books, credit cards, passbooks, bank
statements and cancelled checks to his secretary and who had introduced the secretary to the
bank for purposes of reconciliation of his accounts hold the drawee bank liable for the amounts
withdrawn by the secretary by forging his signature on the checks?

No, he is precluded from setting up the forgery due to his own negligence in entrusting to his
secretary his credit cards and check book including the verification of his statements of
account. (Ilusorio v. CA, G.R. No. 139130, Nov. 27, 2002)

G.R. No. 139130             November 27, 2002

RAMON K. ILUSORIO, petitioner,
vs.
HON. COURT OF APPEALS, and THE MANILA BANKING CORPORATION, respondents.

DECISION

QUISUMBING, J.:

This petition for review seeks to reverse the decision1 promulgated on January 28, 1999 by the Court
of Appeals in CA-G.R. CV No. 47942, affirming the decision of the then Court of First Instance of
Rizal, Branch XV (now the Regional Trial Court of Makati, Branch 138) dismissing Civil Case No.
43907, for damages.

The facts as summarized by the Court of Appeals are as follows:

Petitioner is a prominent businessman who, at the time material to this case, was the Managing
Director of Multinational Investment Bancorporation and the Chairman and/or President of several
other corporations. He was a depositor in good standing of respondent bank, the Manila Banking
Corporation, under current Checking Account No. 06-09037-0. As he was then running about 20
corporations, and was going out of the country a number of times, petitioner entrusted to his
secretary, Katherine2 E. Eugenio, his credit cards and his checkbook with blank checks. It was also
Eugenio who verified and reconciled the statements of said checking account. 3

Between the dates September 5, 1980 and January 23, 1981, Eugenio was able to encash and
deposit to her personal account about seventeen (17) checks drawn against the account of the
petitioner at the respondent bank, with an aggregate amount of P119,634.34. Petitioner did not
bother to check his statement of account until a business partner apprised him that he saw Eugenio
use his credit cards. Petitioner fired Eugenio immediately, and instituted a criminal action against her
for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. Private respondent,
through an affidavit executed by its employee, Mr. Dante Razon, also lodged a complaint for estafa
thru falsification of commercial documents against Eugenio on the basis of petitioner’s statement
that his signatures in the checks were forged. 4 Mr. Razon’s affidavit states:

That I have examined and scrutinized the following checks in accordance with prescribed verification
procedures with utmost care and diligence by comparing the signatures affixed thereat against the
specimen signatures of Mr. Ramon K. Ilusorio which we have on file at our said office on such dates,

xxx

That the aforementioned checks were among those issued by Manilabank in favor of its client MR.
RAMON K. ILUSORIO,…

That the same were personally encashed by KATHERINE E. ESTEBAN, an executive secretary of
MR. RAMON K. ILUSORIO in said Investment Corporation;

That I have met and known her as KATHERINE E. ESTEBAN the attending verifier when she
personally encashed the above-mentioned checks at our said office;

That MR. RAMON K. ILUSORIO executed an affidavit expressly disowning his signature appearing
on the checks further alleged to have not authorized the issuance and encashment of the same.… 5

Petitioner then requested the respondent bank to credit back and restore to its account the value of
the checks which were wrongfully encashed but respondent bank refused. Hence, petitioner filed the
instant case.6

At the trial, petitioner testified on his own behalf, attesting to the truth of the circumstances as
narrated above, and how he discovered the alleged forgeries. Several employees of Manila Bank
were also called to the witness stand as hostile witnesses. They testified that it is the bank’s
standard operating procedure that whenever a check is presented for encashment or clearing, the
signature on the check is first verified against the specimen signature cards on file with the bank.

Manila Bank also sought the expertise of the National Bureau of Investigation (NBI) in determining
the genuineness of the signatures appearing on the checks. However, in a letter dated March 25,
1987, the NBI informed the trial court that they could not conduct the desired examination for the
reason that the standard specimens submitted were not sufficient for purposes of rendering a
definitive opinion. The NBI then suggested that petitioner be asked to submit seven (7) or more
additional standard signatures executed before or about, and immediately after the dates of the
questioned checks. Petitioner, however, failed to comply with this request.
After evaluating the evidence on both sides, the court a quo rendered judgment on May 12, 1994
with the following dispositive portion:

WHEREFORE, finding no sufficient basis for plaintiff's cause herein against defendant bank, in the
light of the foregoing considerations and established facts, this case would have to be, as it is hereby
DISMISSED.

Defendant’s counterclaim is likewise DISMISSED for lack of sufficient basis.

SO ORDERED.7

Aggrieved, petitioner elevated the case to the Court of Appeals by way of a petition for review but
without success. The appellate court held that petitioner’s own negligence was the proximate cause
of his loss. The appellate court disposed as follows:

WHEREFORE, the judgment appealed from is AFFIRMED. Costs against the appellant.

SO ORDERED.8

Before us, petitioner ascribes the following errors to the Court of Appeals:

A. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE RESPONDENT BANK IS
ESTOPPED FROM RAISING THE DEFENSE THAT THERE WAS NO FORGERY OF THE
SIGNATURES OF THE PETITIONER IN THE CHECK BECAUSE THE RESPONDENT FILED A
CRIMINAL COMPLAINT FOR ESTAFA THRU FALSIFICATION OF COMMERCIAL DOCUMENTS
AGAINST KATHERINE EUGENIO USING THE AFFIDAVIT OF PETITIONER STATING THAT HIS
SIGNATURES WERE FORGED AS PART OF THE AFFIDAVIT-COMPLAINT. 9

B. THE COURT OF APPEALS ERRED IN NOT APPLYING SEC. 23, NEGOTIABLE

INSTRUMENTS LAW.10

C. THE COURT OF APPEALS ERRED IN NOT HOLDING THE BURDEN OF PROOF IS WITH THE
RESPONDENT BANK TO PROVE THE DUE DILIGENCE TO PREVENT DAMAGE, TO THE
PETITIONER, AND THAT IT WAS NOT NEGLIGENT IN THE SELECTION AND SUPERVISION OF
ITS EMPLOYEES.11

D. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT BANK SHOULD
BEAR THE LOSS, AND SHOULD BE MADE TO PAY PETITIONER, WITH RECOURSE AGAINST
KATHERINE EUGENIO ESTEBAN.12

Essentially the issues in this case are: (1) whether or not petitioner has a cause of action against
private respondent; and (2) whether or not private respondent, in filing an estafa case against
petitioner’s secretary, is barred from raising the defense that the fact of forgery was not established.

Petitioner contends that Manila Bank is liable for damages for its negligence in failing to detect the
discrepant checks. He adds that as a general rule a bank which has obtained possession of a check
upon an unauthorized or forged endorsement of the payee’s signature and which collects the
amount of the check from the drawee is liable for the proceeds thereof to the payee. Petitioner
invokes the doctrine of estoppel, saying that having itself instituted a forgery case against Eugenio,
Manila Bank is now estopped from asserting that the fact of forgery was never proven.
For its part, Manila Bank contends that respondent appellate court did not depart from the accepted
and usual course of judicial proceedings, hence there is no reason for the reversal of its ruling.
Manila Bank additionally points out that Section 2313 of the Negotiable Instruments Law is
inapplicable, considering that the fact of forgery was never proven. Lastly, the bank negates
petitioner’s claim of estoppel. 14

On the first issue, we find that petitioner has no cause of action against Manila Bank. To be entitled
to damages, petitioner has the burden of proving negligence on the part of the bank for failure to
detect the discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish
the fact of forgery, 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 National Bureau of Investigation from which to draw a conclusive finding regarding
forgery. The Court of Appeals found that petitioner, by his own inaction, was precluded from setting
up forgery. Said the appellate court:

We cannot fault the court a quo for such declaration, considering that the plaintiff’s evidence on the
alleged forgery is not convincing enough. The burden to prove forgery was upon the plaintiff, which
burden he failed to discharge. Aside from his own testimony, the appellant presented no other
evidence to prove the fact of forgery. He did not even submit his own specimen signatures, taken on
or about the date of the questioned checks, for examination and comparison with those of the
subject checks. On the other hand, the appellee presented specimen signature cards of the
appellant, taken at various years, namely, in 1976, 1979 and 1981 (Exhibits "1", "2", "3" and "7"),
showing variances in the appellant’s unquestioned signatures. The evidence further shows that the
appellee, as soon as it was informed by the appellant about his questioned signatures, sought to
borrow the questioned checks from the appellant for purposes of analysis and examination (Exhibit
"9"), but the same was denied by the appellant. It was also the former which sought the assistance
of the NBI for an expert analysis of the signatures on the questioned checks, but the same was
unsuccessful for lack of sufficient specimen signatures. 15

Moreover, petitioner’s contention that Manila Bank was remiss in the exercise of its duty as drawee
lacks factual basis. Consistently, the CA and the RTC found that Manila Bank employees exercised
due diligence in cashing the checks. The bank’s employees in the present case did not have a hint
as to Eugenio’s modus operandi because she was a regular customer of the bank, having been
designated by petitioner himself to transact in his behalf. According to the appellate court, the
employees of the bank exercised due diligence in the performance of their duties. Thus, it found that:

The evidence on both sides indicates that TMBC’s employees exercised due diligence before
encashing the checks. Its verifiers first verified the drawer’s signatures thereon as against his
specimen signature cards, and when in doubt, the verifier went further, such as by referring to a
more experienced verifier for further verification. In some instances the verifier made a confirmation
by calling the depositor by phone. It is only after taking such precautionary measures that the subject
checks were given to the teller for payment.

Of course it is possible that the verifiers of TMBC might have made a mistake in failing to detect any
forgery -- if indeed there was. However, a mistake is not equivalent to negligence if they were honest
mistakes. In the instant case, we believe and so hold that if there were mistakes, the same were not
deliberate, since the bank took all the precautions. 16

As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the
omission to do something which a reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would do.17 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.
Said the Court of Appeals on this matter:

Moreover, the appellant had introduced his secretary to the bank for purposes of reconciliation of his
account, through a letter dated July 14, 1980 (Exhibit "8"). Thus, the said secretary became a
familiar figure in the bank. What is worse, whenever the bank verifiers call the office of the appellant,
it is the same secretary who answers and confirms the checks.

The trouble is, the appellant had put so much trust and confidence in the said secretary, by
entrusting not only his credit cards with her but also his checkbook with blank checks. He also
entrusted to her the verification and reconciliation of his account. Further adding to his injury was the
fact that while the bank was sending him the monthly Statements of Accounts, he was not personally
checking the same. His testimony did not indicate that he was out of the country during the period
covered by the checks. Thus, he had all the opportunities to verify his account as well as the
cancelled checks issued thereunder -- month after month. But he did not, until his partner asked him
whether he had entrusted his credit card to his secretary because the said partner had seen her use
the same. It was only then that he was minded to verify the records of his account. 18

The abovecited findings are binding upon the reviewing court. We stress the rule that the factual
findings of a trial court, especially when affirmed by the appellate court, are binding upon us 19 and
entitled to utmost respect20 and even finality. We find no palpable error that would warrant a reversal
of the appellate court’s assessment of facts anchored upon the evidence on record.

Petitioner’s failure to examine his bank statements appears as the proximate cause of his own
damage. Proximate cause is that cause, which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury, and without which the result would not have
occurred.21 In the instant case, the bank was not shown to be remiss in its duty of sending monthly
bank statements to petitioner so that any error or discrepancy in the entries therein could be brought
to the bank’s attention at the earliest opportunity. But, petitioner failed to examine these bank
statements not because he was prevented by some cause in not doing so, but because he did not
pay sufficient attention to the matter. Had he done so, he could have been alerted to any anomaly
committed against him. In other words, petitioner had sufficient opportunity to prevent or detect any
misappropriation by his secretary had he only reviewed the status of his accounts based on the bank
statements sent to him regularly. In view of Article 2179 of the New Civil Code, 22 when the plaintiff’s
own negligence was the immediate and proximate cause of his injury, no recovery could be had for
damages.

Petitioner further contends that under Section 23 of the Negotiable Instruments Law a forged check
is inoperative, and that Manila Bank had no authority to pay the forged checks. 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. No right to retain the instrument, or to give a discharge therefor,
or to enforce payment thereof against any party, can be acquired through or under such signature.
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. In our view, 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.

Petitioner’s reliance on Associated Bank vs. Court of Appeals 23 and Philippine Bank of Commerce
vs. CA24 to buttress his contention that respondent Manila Bank as the collecting or last endorser
generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements is misplaced. In the cited cases, the fact of forgery was not in issue. In the present
case, the fact of forgery was not established with certainty. In those cited cases, the collecting banks
were held to be negligent for failing to observe precautionary measures to detect the forgery. In the
case before us, both courts below uniformly found that Manila Bank’s personnel diligently performed
their duties, having compared the signature in the checks from the specimen signatures on record
and satisfied themselves that it was petitioner’s.

On the second issue, the fact that Manila Bank had filed a case for estafa against Eugenio would not
estop it from asserting the fact that forgery has not been clearly established. Petitioner cannot hold
private respondent in estoppel for the latter is not the actual party to the criminal action. In a criminal
action, the State is the plaintiff, for the commission of a felony is an offense against the State. 25 Thus,
under Section 2, Rule 110 of the Rules of Court the complaint or information filed in court is required
to be brought in the name of the "People of the Philippines." 26

Further, as petitioner himself stated in his petition, respondent bank filed the estafa case against
Eugenio on the basis of petitioner’s own affidavit, 27 but without admitting that he had any personal
knowledge of the alleged forgery. It is, therefore, easy to understand that the filing of the estafa case
by respondent bank was a last ditch effort to salvage its ties with the petitioner as a valuable client,
by bolstering the estafa case which he filed against his secretary.

All told, we find no reversible error that can be ascribed to the Court of Appeals.

WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court of
Appeals dated January 28, 1999 in CA-G.R. CV No. 47942, is AFFIRMED.

Costs against petitioner.

SO ORDERED.