State Investment House Inc. vs.

CA
State Investment House Inc. vs. CA

GR No. 101163 January 11, 1993

Bellosillo, J.:

Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on commission,
two postdated checks in the amount of fifty thousand each. Thereafter, Victoriano negotiated the checks to State
Investment House, Inc. When Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity
of the checks. However, the checks cannot be retrieved as they have been negotiated. Before the maturity date
Moulic withdrew her funds from the bank contesting that she incurred no obligation on the checks because the
jewellery was never sold and the checks are negotiated without her knowledge and consent. Upon presentment
of for payment, the checks were dishonoured for insufficiency of funds.

Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of
consideration

Held:

Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows that: on the
faces of the post dated checks were complete and regular; that State Investment House Inc. bought the checks
from Victoriano before the due dates; that it was taken in good faith and for value; and there was no knowledge
with regard that the checks were issued as security and not for value. A prima facie presumption exists that a
holder of a negotiable instrument is a holder in due course. Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which they
were issued and therefore is not a holder in due course.

No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke paragraphs c and d
as possible grounds for the discharge of the instruments. Since Moulic failed to get back the possession of the
checks as provided by paragraph c, intentional cancellation of instrument is impossible. As provided by
paragraph d, the acts which will discharge a simple contract of payment of money will discharge the instrument.
Correlating Article 1231 of the Civil Code which enumerates the modes of extinguishing obligation, none of
those modes outlined therein is applicable in the instant case. Thus, Moulic may not unilaterally discharge
herself from her liability by mere expediency of withdrawing her funds from the drawee bank. She is thus liable
as she has no legal basis to excuse herself from liability on her check to a holder in due course. Moreover, the
fact that the petitioner failed to give notice of dishonor is of no moment. The need for such notice is not
absolute; there are exceptions provided by Sec 114 of NIL.
SAME
Negotiable Instruments Digest: BPI FAMILY BANK v. EDGARDO BUENAVENTURA et al.
BPI FAMILY BANK v. EDGARDO BUENAVENTURA et al.

[G.R. No. 148196, September 30, 2005] (471 SCRA 431)

FACTS:

            A complaint for Reinstatement of Current Account/Release of Money plus Damages was filed by the Buenaventuras against BPI Family Bank

(BPI-FB) in the RTC. Buenaventura, et al. opened a Current account with the BPI-FB Branch in Caloocan City. They deposited a check from Amado

Franco which was purportedly issued by Eladio Teves and Joseph Teves. The check was subsequently cleared and the amount of P500, 000.00 was

credited to their Current Account.

            Petitioners then drew a check amounting to P91, 270.00 which was dishonored upon presentment for payment for the reason that the account

was already closed in spite of the balance in their current account. They subsequently learned that the Bank of the Philippine Islands unilaterally freeze

their Current account on the ground that the source of fund was illegal or unauthorized.

            BPI-FB refused to reinstate the account even after demand from the petitioners. It asserted  that the freezing of the account was triggered by the

forgery claim of FMIC and the unauthorized fund transfer to Tevesteco. The check received by Buenaventura, et al. from Amado Franco was drawn by

Eladio Teves  and Joseph Teves against the Current Account of the Tevesteco Arrastre Stevedoring Co., Inc. (Tevesteco) by means of forgery.

ISSUE:

            WON BPI-FB is liable for the loss due to its negligence to detect forgery prior to clearing the check?

 HELD:

            YES. Every bank that issues checks for the use of its customers should know whether or not the drawer's signature thereon is genuine, whether

there are sufficient funds in the drawers account to cover checks issued, and it should be able to detect alterations, erasures, superimpositions or

intercalations thereon, for these instruments are prepared, printed and issued by itself, it has control of the drawer's account, and it is supposed to be

familiar with the drawer's signature. It should possess appropriate detecting devices for uncovering forgeries and/or alterations on these instruments.

Unless a forgery or alteration is attributable to the fault or negligence of the drawer himself, the remedy of the drawee bank that negligently clears a

forged and/or altered check for payment is against the party responsible for the forgery or alteration, otherwise, it bears the loss.

            Having been negligent in detecting the forgery prior to clearing the check, BPI-FB should bear the loss and can’t shift the blame to

Buenaventura, et al. having failed to show any participation on their part in the forgery. BPI-FB fails to point any circumstance which should have put

Buenaventura, et al. on inquiry as to the why and wherefore of the possession of the check by Amado Franco. Buenaventura, et al. were not privies to

any transaction involving FMIC, Tevesteco or Franco. They thus had no obligation to ascertain from Franco what the nature of the latter’s title to the

checks was, if any, or the nature of his possession. They cannot be guilty of gross neglect amounting to legal absence of good faith, absent any showing

that there was something amiss about Franco’s acquisition or possession of the check, which was payable to bearer.

          Thus, BPI-FB has no unilateral right to freeze the current account of Buenaventura, et al. based on the suspicion that the funds in the latter’s

account are illegal or unauthorized having been sourced from the unlawful transfer of funds from the account of FMIC to Tevesteco and disallow any

withdrawal therefrom to allegedly protect its interest.

            Needless to stress, the contract between a bank and its depositor is governed by the provisions of the Civil Code on simple loan. Thus, there is a

debtor-creditor relationship between a bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank

money and the bank agrees to pay the depositor on demand. The savings or current deposit agreement between the bank and the depositor is the

contract that determines the rights and obligations of the parties.

       Thus, the fact that the funds in deposit with BPI-FB under the name of Buenaventura, et al. were allegedly derived exclusively from the

alleged P80,000,000.00 unlawfully transferred from the funds of FMIC or that the deposit under the name of Tevesteco consisted allegedly exclusively of

the said P80,000,000.00 debited from FMIC’s account is immaterial. These circumstances cannot be used against a party not privy to the forgery. xxx 
SAME
 METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM vs. CA
and THE PHILIPPINE NATIONAL BANK
G.R. No. L-62943         July 14, 1986

By special arrangement with PNB, MWSS used personalized checks in drawing from its account. The checks were printed by
its printer, F. Mesina Enterprises. 23 checks were paid and cleared by PNB, and debited against MWSS’ account from March to May
1969. The checks were deposited by payees Raul Dizon, Arturo Sison, and Antonio Mendoza in their account with PCIBank. Said
persons were later found to be fictitious. MWSS requested PNB to restore the amount debited due to the 23 checks, allegedly forged,
to its account. The bank refused. Hence, the present action.

Issue: Whether or not the bank shall bear the loss resulting from the alleged forged checks.

Held: No. 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.
 GEMPESAW V. CA
218 SCRA 682
 

FACTS:
Gempensaw was the owner of many grocery stores.  She paid her suppliers through  the  issuance  of  checks  drawn 
against  her  checking  account  with respondent  bank.    The  checks  were  prepared  by  her  bookkeeper  Galang.  In
the signing of the checks prepared by Galang, Gempensaw didn't bother
herself  in  verifying  to  whom  the  checks  were  being  paid  and  if  the issuances  were  necessary.    She didn't  even
verify  the  returned  checks  of the bank when the latter notifies her of the same.  During her two years in business, 
there  were  incidents  shown  that  the  amounts  paid  for  were  in excess of what should have been paid.  It was also
shown that even if the checks were crossed, the intended payees didn't receive the amount of the checks.    This 
prompted  Gempensaw  to  demand  the  bank  to  credit  her account for the amount of the forged checks.  The bank
refused to do so and this prompted her to file the case against the bank.     
 

HELD:
Forgery is a real defense by the party whose signature was forged.  A party whose signature was forged was never a
party and never gave his consent to  the  instrument.    Since  his  signature  doesn’t  appear  in  the  instrument, the
same cannot be enforced against him even by a holder in due course.  The drawee bank cannot charge the account of
the drawer whose signature was forged because he never gave the bank the order to pay.
 
In  the  case  at  bar  the  checks  were  filled  up  by  petitioner’s  employee Galang and were later given to her for
signature.  Her signing the checks made the negotiable instruments complete.  Prior to signing of the checks, there  was 
no  valid  contract  yet.    Petitioner  completed  the  checks  by signing them and thereafter authorized Galang to deliver
the same to their respective  payees.    The  checks  were  then  indorsed,  forged  indorsements thereon.   
 
As a rule, a drawee bank who has paid a check on which an indorsement has  been  forged  cannot  debit  the  account 
of  a  drawer  for  the  amount  of said  check.    An  exception  to  this  rule  is  when  the  drawer  is  guilty  of negligence
which causes the bank to honor such checks.  Petitioner in this case  has  relied  solely  on  the  honesty  and  loyalty  of 
her  bookkeeper  and never  bothered  to  verify  the  accuracy  of  the  amounts  of  the  checks  she signed  the 
invoices  attached  thereto.   And  though  she  received  her  bank statements,  she  didn't  carefully  examine  the  same 
to  double-check  her
payments.  Petitioner didn't exercise reasonable diligence which eventually led to the fruition of her bookkeeper’s
fraudulent schemes.