Petitioner:

Respondent:

Negotiable Instrument involved:

RTC Ruling:

CA Ruling:

SC Contentions:

SC Ruling:

1. Republic Planters Case

Plaintiff: Republic Planters Bank

Respondent: Shozo Yamaguchi and Fermin Canlas; Pinch Manufacturing Corp (formerly Worldwide Garment
Manufacturing Inc.)

Negotiable Instrument involved: PN

RTC Ruling:

CA Ruling: Judgment is hereby rendered in favor of the plaintiff Republic Planters Bank, ordering defendant Pinch
Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and defendants Shozo Yamaguchi
and Fermin Canlas to pay, jointly and severally, the plaintiff bank the following sums with interest thereon at 16%
per annum from the dates indicated, to wit:

Contentions in the SC: Whether or not Canlas, the corporate treasurer, is liable for the amounts in the promissory
notes

He contends that he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment
Manufacturing, Inc, he should not be held personally liable for such authorized corporate acts that he performed. It
is now the contention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9)
promissory notes with Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable with
Shozo Yamaguchi on each of the nine notes

Ruling of the SC:

Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers
and are liable as such.3 By signing the notes, the maker promises to pay to the order of the payee or any
holder 4 according to the tenor thereof. Canlas is a co-maker of the promissory notes, under the law, and cannot
escape liability arising therefrom. Inasmuch as the instrument contained the words “I promise to pay” and is signed
by two or more persons, said persons are deemed to be jointly and severally liable thereon. 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

2. Francisco vs CA

Plaintiff: ADALIA FRANCISCO

Respondent: HERBY COMMERCIAL & CONSTRUCTION CORPORATION AND JAIME C. ONG
Negotiable Instrument involved: Check
RTC Ruling:
In favor of private respondents
Petitioner:

Respondent:

Negotiable Instrument involved:

RTC Ruling:

CA Ruling:

SC Contentions:

SC Ruling:

Judgment is hereby rendered in favor of the plaintiffs (now private respondents) and against the defendants
INSULAR BANK OF ASIA & AMERICA and ATTY. ADALIA FRANCISCO, to jointly and severally pay the
plaintiffs the amount of P370.475.00 plus interest thereon at the rate of 12% per annum from the date of the
filing of the complaint until the full amount is paid;
CA Ruling: Affirmed RTC
SC Contentions:
a) Whether or not Francisco forged the signature of Ong on the seven checks;
b) Francisco contends that she was authorized to sign Ong's name on the checks by virtue of the Certification
executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS,
including the questioned checks

SC Ruling:
a) Yes. Francisco forged the signature of Ong on the checks to make it appear as if Ong had indorsed said
checks and that, after indorsing the checks for a second time by signing her name at the back of the checks,
Francisco deposited said checks in her savings account with IBAA. The forgery was satisfactorily
established in the trial court upon the strength of the findings of the NBI handwriting expert.
b) Contention is untenable. The Negotiable Instruments Law provides that where any person is under
obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal
liability.   An agent, when so signing, should indicate that he is merely signing in behalf of the principal and
13

must disclose the name of his principal; otherwise he shall be held personally liable.   Even assuming that
14

Francisco was authorized by HCCC to sign Ong's name, still, Francisco did not indorse the instrument in
accordance with law. Instead of signing Ong's name, Francisco should have signed her own name and
expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by
Francisco to validate her act of forgery.

3. Jai-alai

Petitioner: Jai-alai

Respondent: BPI

Negotiable Instrument involved: Check

RTC Ruling: Filed but was dismissed after due trial

CA Ruling: in favor of BPI

SC Contentions:

SC Ruling: affirmed CA
Petitioner:

Respondent:

Negotiable Instrument involved:

RTC Ruling:

CA Ruling:

SC Contentions:

SC Ruling:

When the petitioner deposited the checks with the respondent, the nature of the relationship created at that
stage was one of agency, that is, the bank was to collect from the drawees of the checks the corresponding
proceeds. It is our view nonetheless that no creditor-debtor relationship was created between the parties

Section 23 of the 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."

A forged signature in a negotiable instrument is wholly inoperative and no right to discharge it or enforce its
payment can be acquired through or under the forged signature except against a party who cannot invoke the
forgery. The respondent, as a collecting bank which indorsed the checks to the drawee-banks for clearing, should
be liable to the latter for reimbursement, for, the indorsements on the checks had been forged prior to their delivery
to the petitioner. In legal contemplation, therefore, the payments made by the drawee-banks to the respondent on
account of the said checks were ineffective; and, such being the case, the relationship of creditor and debtor
between the petitioner and the respondent had not been validly effected, the checks not having been properly and
legitimately converted into cash

Section 67 of the Negotiable Instruments Law,

"Where a person places his indorsement on an instrument negotiable by delivery he incurs all the liability of
an indorser," and under Section 66 of the same statute a general indorser warrants that the instrument "is
genuine and in all respects what it purports to be."

Petitioner indorsed the said checks when it deposited them with the respondent, the petitioner as an
indorser guaranteed the genuineness of all prior indorsements thereon. The respondent which relied upon the
petitioner’s warranty should not be held liable for the resulting loss.

4. MWSS vs. CA

Petitioner: MWSS

Respondent: CA and PNB

Negotiable Instrument involved: Check

RTC Ruling: in favor of MWSS

The Court hereby renders judgment in favor of the plaintiff Metropolitan Waterworks and Sewerage System
(MWSS) by ordering the defendant Philippine National Bank (PNB) to restore the total sum of THREE
MILLION FOUR HUNDRED FIFTY SEVEN THOUSAND NINE HUNDRED THREE PESOS (P3,457,903.00)

CA Ruling: Reversed RTC, rendered judgment in favor of PNB

Petitioner:

Respondent:

Negotiable Instrument involved:

RTC Ruling:

CA Ruling:

SC Contentions:

SC Ruling:

SC Contentions: Who shall bear the loss?

SC Ruling:

Section 23 of the NIL

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.

There was no express and categorical finding that the 23 checks were forged or signed by persons other
than the authorized MWSS signatories. Forgery is not presumed but should be established by clear, positive and
convincing evidence. MWSS is barred from setting up defense of forgery under Section 23 of the Negotiable
Instruments Law as MWSS committed gross negligence in the printing of its personalized checks, failed to reconcile
its bank statements with its own records, and failed to provide appropriate security measures over its own record.
PNB, the drawee bank, had taken necessary measures in the detection of forged checks and the prevention of their
fraudulent encashment through constant reminders to all its current account bookkeepers informing them of the
activities of forgery syndicates. MWSS’ gross negligence was the proximate cause of the loss (P3 million), and
should bear the loss.

5. Gempesaw vs CA

Petitioner: Gempesaw

Respondent: CA and PBC

Negotiable Instrument involved: Check

RTC Ruling: dismissed the complaint

CA Ruling: affirmed RTC on two grounds: that the plaintiff's (petitioner herein) gross negligence in issuing the
checks was the proximate cause of the loss and (2) assuming that the bank was also negligent, the loss must
nevertheless be borne by the party whose negligence was the proximate cause of the loss

SC Contentions: Gempesaw contends on the issue of the right of the drawer to recover from the drawee bank who
pays a check with a forged indorsement of the payee, debiting the same against the drawer's account

SC Ruling:

Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument to the payee
for the purpose of giving effect thereto.  The first delivery of the instrument, complete in form, to the payee who
7

takes it as a holder, is called issuance of the instrument.  Without the initial delivery of the instrument from the
8

drawer of the check to the payee, there can be no valid and binding contract and no liability on the instrument.
Petitioner:

Respondent:

Negotiable Instrument involved:

RTC Ruling:

CA Ruling:

SC Contentions:

SC 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 the rule is where the drawer is guilty of such
negligence which causes the bank to honor such checks.

Gempesaw did not exercise prudence in taking steps that a careful and prudent businessman would take in
circumstances to discover discrepancies in her account. Her negligence was the proximate cause of her loss, and
under Section 23 of the Negotiable Instruments Law, is precluded from using forgery as a defense.

On the other hand, the banking rule banning acceptance of checks for deposit or cash payment with more than one
indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it invalidate the
negotiation or transfer of said checks. The only kind of indorsement which stops the further negotiation of an
instrument is a restrictive indorsement which prohibits the further negotiation thereof, pursuant to Section 36 of the
Negotiable Instruments Law. 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.

6. Associated Bank vs CA

Petitioner: Province of Tarlac

Respondent: PNB (drawee bank); Associated Bank (collecting bank)

Negotiable Instrument involved: Check

RTC Ruling: in favor of Province of Tarlac

On the basic complaint, in favor of plaintiff Province of Tarlac and against defendant Philippine National
Bank (PNB), ordering the latter to pay to the former, the sum of Two Hundred Three Thousand Three
Hundred (P203,300.00) Pesos with legal interest thereon from March 20, 1981 until fully paid

CA Ruling: affirmed RTC

SC Contentions: Who shall bear the loss resulting from the forged checks?

SC Ruling:

PNB is not negligent as it is not required to return the check to the collecting bank within 24 hours as the
banks involved are covered by Central Bank Circular 580 and not the rules of the Philippine Clearing House.
Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as genuine, valid and subsisting at
the time of indorsement pursuant to Section 66 of the Negotiable Instruments Law. The stamp guaranteeing prior
indorsement is not an empty rubric; the collecting bank is held accountable for checks deposited by its customers.
However, due to the fact that the Province of Tarlac is equally negligent in permitting Pangilinan to collect the
checks when he was no longer connected with the hospital, it shares the burden of loss from the checks bearing a
Petitioner:

Respondent:

Negotiable Instrument involved:

RTC Ruling:

CA Ruling:

SC Contentions:

SC Ruling:

forged indorsement. Therefore, the Province can only recover 50% of the amount from the drawee bank
(PNB), and the collecting bank (Associated Bank) is liable to PNB for 50% of the same amount.

Section 23 of the Negotiable Instruments Law (NIL) provides:

Sec. 23. FORGED SIGNATURE, EFFECT OF. — When a 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.

A forged signature, whether it be that of the drawer or the payee, is wholly inoperative and no one can gain title to
the instrument through it. A person whose signature to an instrument was forged was never a party and never
consented to the contract which allegedly gave rise to such instrument.  Section 23 does not avoid the instrument
18 

but only the forged signature.  Thus, a forged indorsement does not operate as the payee's indorsement except
19 

where "a party against whom it is sought to enforce a right is precluded from setting up the forgery or want of
authority." 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.
Indorsers, persons negotiating by delivery and acceptors are warrantors of the genuineness of the signatures on the
instrument

7. PCIB vs Court of Appeals

Petitioner: PCIB

Respondent: Ford Philippines, Inc. and Citibank

Negotiable Instrument involved: Check

RTC Ruling:

Ordering the defendants Citibank and IBAA (now PCI Bank), jointly and severally, to pay the plaintiff the amount of
P4,746,114.41 representing the face value of plaintiff's Citibank Check No. SN-04867, with interest thereon at the
legal rate starting January 20, 1983, the date when the original complaint was filed until the amount is fully paid

CA Ruling: Affirmed RTC

SC Contentions:

SC Ruling: