SECOND DIVISION
G.R. No. 92244 February 9, 1993
NATIVIDAD GEMPESAW, Petitioner, vs. THE HONORABLE
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, Respondents.
CAMPOS, JR., J.:
From the adverse decision * of the Court of Appeals (CA-G.R.
CV No. 16447), petitioner, Natividad Gempesaw, appealed to this Court in a
Petition for Review, 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.
The records show that on January 23, 1985, petitioner filed
a Complaint against the private respondent Philippine Bank of Communications
(respondent drawee Bank) for recovery of the money value of eighty-two (82)
checks charged against the petitioner's account with the respondent drawee Bank
on the ground that the payees' indorsements were forgeries. The Regional Trial
Court, Branch CXXVIII of Caloocan City, which tried the case, rendered a
decision on November 17, 1987 dismissing the complaint as well as the
respondent drawee Bank's counterclaim. On appeal, the Court of Appeals in a
decision rendered on February 22, 1990, affirmed the decision of the RTC on two
grounds, namely (1) 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. On March 5, 1990, the
petitioner filed this petition under Rule 45 of the Rules of Court setting
forth the following as the alleged errors of the respondent Court: 1
I
THE RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE
NEGLIGENCE OF THE DRAWER IS THE PROXIMATE CAUSE OF THE RESULTING INJURY TO THE
DRAWEE BANK, AND THE DRAWER IS PRECLUDED FROM SETTING UP THE FORGERY OR WANT OF
AUTHORITY.
II
THE RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT FINDING
AND RULING THAT IT IS THE GROSS AND INEXCUSABLE NEGLIGENCE AND FRAUDULENT ACTS
OF THE OFFICIALS AND EMPLOYEES OF THE RESPONDENT BANK IN FORGING THE SIGNATURE
OF THE PAYEES AND THE WRONG AND/OR ILLEGAL PAYMENTS MADE TO PERSONS, OTHER THAN
TO THE INTENDED PAYEES SPECIFIED IN THE CHECKS, IS THE DIRECT AND PROXIMATE
CAUSE OF THE DAMAGE TO PETITIONER WHOSE SAVING (SIC) ACCOUNT WAS
DEBITED.
III
THE RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT ORDERING
THE RESPONDENT BANK TO RESTORE OR RE-CREDIT THE CHECKING ACCOUNT OF THE PETITIONER
IN THE CALOOCAN CITY BRANCH BY THE VALUE OF THE EIGHTY-TWO (82) CHECKS WHICH IS
IN THE AMOUNT OF P1,208,606.89 WITH LEGAL INTEREST.
From the records, the relevant facts are as follows:
Petitioner Natividad O. Gempesaw (petitioner) owns and
operates four grocery stores located at Rizal Avenue Extension and at Second
Avenue, Caloocan City. Among these groceries are D.G. Shopper's Mart and D.G.
Whole Sale Mart. Petitioner maintains a checking account numbered 13-00038-1
with the Caloocan City Branch of the respondent drawee Bank. To facilitate
payment of debts to her suppliers, petitioner draws checks against her checking
account with the respondent bank as drawee. Her customary practice of issuing
checks in payment of her suppliers was as follows: the checks were prepared and
filled up as to all material particulars by her trusted bookkeeper, Alicia
Galang, an employee for more than eight (8) years. After the bookkeeper
prepared the checks, the completed checks were submitted to the petitioner for
her signature, together with the corresponding invoice receipts which indicate
the correct obligations due and payable to her suppliers. Petitioner signed
each and every check without bothering to verify the accuracy of the checks
against the corresponding invoices because she reposed full and implicit trust
and confidence on her bookkeeper. The issuance and delivery of the checks to
the payees named therein were left to the bookkeeper. Petitioner admitted that
she did not make any verification as to whether or not the checks were
delivered to their respective payees. Although the respondent drawee Bank
notified her of all checks presented to and paid by the bank, petitioner did
not verify he correctness of the returned checks, much less check if the payees
actually received the checks in payment for the supplies she received. In the
course of her business operations covering a period of two years, petitioner
issued, following her usual practice stated above, a total of eighty-two (82)
checks in favor of several suppliers. These checks were all presented by the
indorsees as holders thereof to, and honored by, the respondent drawee Bank.
Respondent drawee Bank correspondingly debited the amounts thereof against
petitioner's checking account numbered 30-00038-1. Most of the aforementioned
checks were for amounts in excess of her actual obligations to the various
payees as shown in their corresponding invoices. To mention a few:
. . . 1) in Check No. 621127, dated June 27, 1984 in the
amount of P11,895.23 in favor of Kawsek Inc. (Exh. A-60), appellant's actual
obligation to said payee was only P895.33 (Exh. A-83); (2) in Check No. 652282
issued on September 18, 1984 in favor of Senson Enterprises in the amount of
P11,041.20 (Exh. A-67) appellant's actual obligation to said payee was only
P1,041.20 (Exh. 7); (3) in Check No. 589092 dated April 7, 1984 for the amount
of P11,672.47 in favor of Marchem (Exh. A-61) appellant's obligation was only
P1,672.47 (Exh. B); (4) in Check No. 620450 dated May 10, 1984 in favor of
Knotberry for P11,677.10 (Exh. A-31) her actual obligation was only P677.10
(Exhs. C and C-1); (5) in Check No. 651862 dated August 9, 1984 in favor of
Malinta Exchange Mart for P11,107.16 (Exh. A-62), her obligation was only
P1,107.16 (Exh. D-2); (6) in Check No. 651863 dated August 11, 1984 in favor of
Grocer's International Food Corp. in the amount of P11,335.60 (Exh. A-66), her
obligation was only P1,335.60 (Exh. E and E-1); (7) in Check No. 589019 dated
March 17, 1984 in favor of Sophy Products in the amount of P11,648.00 (Exh.
A-78), her obligation was only P648.00 (Exh. G); (8) in Check No. 589028 dated
March 10, 1984 for the amount of P11,520.00 in favor of the Yakult Philippines
(Exh. A-73), the latter's invoice was only P520.00 (Exh. H-2); (9) in Check No.
62033 dated May 23, 1984 in the amount of P11,504.00 in favor of Monde Denmark
Biscuit (Exh. A-34), her obligation was only P504.00 (Exhs. I-1 and I-2).
2
Practically, all the checks issued and honored by the
respondent drawee bank were crossed checks. 3Aside from the
daily notice given to the petitioner by the respondent drawee Bank, the latter
also furnished her with a monthly statement of her transactions, attaching
thereto all the cancelled checks she had issued and which were debited against
her current account. It was only after the lapse of more two (2) years that
petitioner found out about the fraudulent manipulations of her bookkeeper.
All the eighty-two (82) checks with forged signatures of the
payees were brought to Ernest L. Boon, Chief Accountant of respondent drawee
Bank at the Buendia branch, who, without authority therefor, accepted them all
for deposit at the Buendia branch to the credit and/or in the accounts of
Alfredo Y. Romero and Benito Lam. Ernest L. Boon was a very close friend of
Alfredo Y. Romero. Sixty-three (63) out of the eighty-two (82) checks were
deposited in Savings Account No. 00844-5 of Alfredo Y. Romero at the respondent
drawee Bank's Buendia branch, and four (4) checks in his Savings Account No.
32-81-9 at its Ongpin branch. The rest of the checks were deposited in Account
No. 0443-4, under the name of Benito Lam at the Elcaño branch of the respondent
drawee Bank.
About thirty (30) of the payees whose names were
specifically written on the checks testified that they did not receive nor even
see the subject checks and that the indorsements appearing at the back of the
checks were not theirs.
The team of auditors from the main office of the respondent
drawee Bank which conducted periodic inspection of the branches' operations
failed to discover, check or stop the unauthorized acts of Ernest L. Boon.
Under the rules of the respondent drawee Bank, only a Branch Manager and no
other official of the respondent drawee bank, may accept a second indorsement
on a check for deposit. In the case at bar, all the deposit slips of the
eighty-two (82) checks in question were initialed and/or approved for deposit
by Ernest L. Boon. The Branch Managers of the Ongpin and Elcaño branches
accepted the deposits made in the Buendia branch and credited the accounts of
Alfredo Y. Romero and Benito Lam in their respective branches.
On November 7, 1984, petitioner made a written demand on
respondent drawee Bank to credit her account with the money value of the
eighty-two (82) checks totalling P1,208.606.89 for having been wrongfully
charged against her account. Respondent drawee Bank refused to grant
petitioner's demand. On January 23, 1985, petitioner filed the complaint with
the Regional Trial Court.
This is not a suit by the party whose signature was forged
on a check drawn against the drawee bank. The payees are not parties to the
case. Rather, it is the drawer, whose signature is genuine, who instituted this
action to recover from the drawee bank the money value of eighty-two (82)
checks paid out by the drawee bank to holders of those checks where the
indorsements of the payees were forged. How and by whom the forgeries were committed
are not established on the record, but the respective payees admitted that they
did not receive those checks and therefore never indorsed the same. The
applicable law is the Negotiable Instruments Law 4(heretofore
referred to as the NIL). 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.
Under the aforecited provision, forgery is a real or
absolute defense by the party whose signature is forged. A party whose
signature to an instrument was forged was never a party and never gave his
consent to the contract which gave rise to the instrument. Since his signature
does not appear in the instrument, he cannot be held liable thereon by anyone,
not even by a holder in due course. Thus, if a person's signature is forged as
a maker of a promissory note, he cannot be made to pay because he never made
the promise to pay. Or where a person's signature as a drawer of a check is
forged, the drawee bank cannot charge the amount thereof against the drawer's
account because he never gave the bank the order to pay. And said section does
not refer only to the forged signature of the maker of a promissory note and of
the drawer of a check. It covers also a forged indorsement, i.e.,
the forged signature of the payee or indorsee of a note or check. Since under
said provision a forged signature is "wholly inoperative", no one can
gain title to the instrument through such forged indorsement. Such an
indorsement prevents any subsequent party from acquiring any right as against
any party whose name appears prior to the forgery. Although rights may exist
between and among parties subsequent to the forged indorsement, not one of them
can acquire rights against parties prior to the forgery. Such forged
indorsement cuts off the rights of all subsequent parties as against parties
prior to the forgery. However, the law makes an exception to these rules where
a party is precluded from setting up forgery as a defense.
As a matter of practical significance, problems arising from
forged indorsements of checks may generally be broken into two types of cases:
(1) where forgery was accomplished by a person not associated with the drawer -
for example a mail robbery; and (2) where the indorsement was forged by an
agent of the drawer. This difference in situations would determine the effect
of the drawer's negligence with respect to forged indorsements. While there is
no duty resting on the depositor to look for forged indorsements on his
cancelled checks in contrast to a duty imposed upon him to look for forgeries
of his own name, a depositor is under a duty to set up an accounting system and
a business procedure as are reasonably calculated to prevent or render
difficult the forgery of indorsements, particularly by the depositor's own
employees. And if the drawer (depositor) learns that a check drawn by him has
been paid under a forged indorsement, the drawer is under duty promptly to
report such fact to the drawee bank. 5For his negligence or
failure either to discover or to report promptly the fact of such forgery to
the drawee, the drawer loses his right against the drawee who has debited his
account under a forged indorsement. 6In other words, he is
precluded from using forgery as a basis for his claim for re-crediting of his
account.
In the case at bar, petitioner admitted that the checks were
filled up and completed by her trusted employee, Alicia Galang, and were given
to her for her signature. Her signing the checks made the negotiable instrument
complete. Prior to signing the checks, there was no valid contract yet.
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. 7The first delivery of the instrument,
complete in form, to the payee who takes it as a holder, is called issuance of
the instrument. 8Without the initial delivery of the
instrument from the drawer of the check to the payee, there can be no valid and
binding contract and no liability on the instrument.
Petitioner completed the checks by signing them as drawer
and thereafter authorized her employee Alicia Galang to deliver the eighty-two
(82) checks to their respective payees. 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, a certain
Ernest L. Boon. It was established that the signatures of the payees as first
indorsers were forged. The record fails to show the identity of the party who
made the forged signatures. 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 as earlier noted. The second indorsements were all genuine
signatures of the alleged holders. All the eighty-two (82) checks bearing the
forged indorsements of the payees and the genuine second indorsements of
Alfredo Y. Romero and Benito Lam were accepted for deposit at the Buendia branch
of respondent drawee Bank to the credit of their respective savings accounts in
the Buendia, Ongpin and Elcaño branches of the same bank. The 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 No. 13-00038-1, Caloocan branch.
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. If a check is
stolen from the payee, it is quite obvious that the drawer cannot possibly
discover the forged indorsement by mere examination of his cancelled check.
This accounts for the rule that although a depositor owes a duty to his drawee
bank to examine his cancelled checks for forgery of his own signature, he has
no similar duty as to forged indorsements. A different situation arises where
the indorsement was forged by an employee or agent of the drawer, or done with
the active participation of the latter. Most of the cases involving forgery by
an agent or employee deal with the payee's indorsement. The drawer and the
payee often time shave business relations of long standing. The continued
occurrence of business transactions of the same nature provides the opportunity
for the agent/employee to commit the fraud after having developed familiarity
with the signatures of the parties. However, sooner or later, some leak will
show on the drawer's books. It will then be just a question of time until the
fraud is discovered. This is specially true when the agent perpetrates a series
of forgeries as in the case at bar.
The negligence of a depositor which will prevent recovery of
an unauthorized payment is based on failure of the depositor to act as a
prudent businessman would under the circumstances. In the case at bar, the
petitioner relied implicitly upon the honesty and loyalty of her bookkeeper,
and did not even verify the accuracy of amounts of the checks she signed
against the invoices attached thereto. Furthermore, although she regularly
received her bank statements, she apparently did not carefully examine the same
nor the check stubs and the returned checks, and did not compare them with the
same invoices. Otherwise, she could have easily discovered the discrepancies
between the checks and the documents serving as bases for the checks. With such
discovery, the subsequent forgeries would not have been accomplished. It was
not until two years after the bookkeeper commenced her fraudulent scheme that
petitioner discovered that eighty-two (82) checks were wrongfully charged to
her account, at which she notified the respondent drawee bank.
It is highly improbable that in a period of two years, not
one of Petitioner's suppliers complained of non-payment. Assuming that even one
single complaint had been made, petitioner would have been duty-bound, as far
as the respondent drawee Bank was concerned, to make an adequate investigation
on the matter. Had this been done, the discrepancies would have been
discovered, sooner or later. Petitioner's failure to make such adequate inquiry
constituted negligence which resulted in the bank's honoring of the subsequent
checks with forged indorsements. On the other hand, since the record mentions
nothing about such a complaint, the possibility exists that the checks in
question covered inexistent sales. But even in such a case, considering the
length of a period of two (2) years, it is hard to believe that petitioner did
not know or realize that she was paying more than she should for the supplies
she was actually getting. A depositor may not sit idly by, after knowledge has
come to her that her funds seem to be disappearing or that there may be a leak
in her business, and refrain from taking the steps that a careful and prudent
businessman would take in such circumstances and if taken, would result in
stopping the continuance of the fraudulent scheme. If she fails to take steps,
the facts may establish her negligence, and in that event, she would be
estopped from recovering from the bank. 9
One thing is clear from the records - that the 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. Had she noticed these
discrepancies, she should not have signed those checks, and should have
conducted an inquiry as to the reason for the irregular entries. Likewise 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. Thus, 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. 10Under
Section 23 of the NIL, she is now precluded from using the forgery to prevent
the bank's debiting of her account.
The doctrine in the case of Great Eastern Life Insurance
Co. vs. Hongkong & Shanghai Bank 11is
not applicable to the case at bar because in said case, the check was
fraudulently taken and the signature of the payee was forged not by an agent or
employee of the drawer. The drawer was not found to be negligent in the
handling of its business affairs and the theft of the check by a total stranger
was not attributable to negligence of the drawer; neither was the forging of
the payee's indorsement due to the drawer's negligence. Since the drawer was
not negligent, the drawee was duty-bound to restore to the drawer's account the
amount theretofore paid under the check with a forged payee's indorsement
because the drawee did not pay as ordered by the drawer.
Petitioner argues that respondent drawee Bank should not
have honored the checks because they were crossed checks. Issuing a crossed
check imposes no legal obligation on the drawee not to honor such a check. It
is more of a warning to the holder that the check cannot be presented to the
drawee bank for payment in cash. Instead, the check can only be deposited with
the payee's bank which in turn must present it for payment against the drawee
bank in the course of normal banking transactions between banks. The crossed
check cannot be presented for payment but it can only be deposited and the
drawee bank may only pay to another bank in the payee's or indorser's account.
Petitioner likewise contends that banking rules prohibit the
drawee bank from having checks with more than one indorsement. 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 the said
check. In effect, this rule destroys the negotiability of bills/checks by
limiting their negotiation by indorsement of only the payee. Under the NIL, the
only kind of indorsement which stops the further negotiation of an instrument
is a restrictive indorsement which prohibits the further negotiation thereof.
Sec. 36. When indorsement restrictive. - An indorsement is
restrictive which either
(a) Prohibits further negotiation of the instrument; or
xxx xxx xxx
In this kind of restrictive indorsement, the prohibition to
transfer or negotiate must be written in express words at the back of the
instrument, so that any subsequent party may be forewarned that ceases to be
negotiable. However, the restrictive indorsee acquires the right to receive
payment and bring any action thereon as any indorser, but he can no longer
transfer his rights as such indorsee where the form of the indorsement does not
authorize him to do so. 12
Although the holder of a check cannot compel a drawee bank
to honor it because there is no privity between them, as far as the
drawer-depositor is concerned, such bank may not legally refuse to honor a
negotiable bill of exchange or a check drawn against it with more than one
indorsement if there is nothing irregular with the bill or check and the drawer
has sufficient funds. The drawee cannot be compelled to accept or pay the check
by the drawer or any holder because as a drawee, he incurs no liability on the
check unless he accepts it. But the drawee will make itself liable to a suit
for damages at the instance of the drawer for wrongful dishonor of the bill or
check.
Thus, it is clear that under the NIL, petitioner is
precluded from raising the defense of forgery by reason of her gross
negligence. But under Section 196 of the NIL, any case not provided for in the
Act shall be governed by the provisions of existing legislation. Under the laws
of quasi-delict, she cannot point to the negligence of the respondent
drawee Bank in the selection and supervision of its employees as being the
cause of the loss because negligence is the proximate cause thereof and under
Article 2179 of the Civil Code, she may not be awarded damages. However, under
Article 1170 of the same Code the respondent drawee Bank may be held liable for
damages. The article provides -
Those who in the performance of their obligations are guilty
of fraud, negligence or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.
There is no question that there is a contractual relation
between petitioner as depositor (obligee) 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.
Furthermore, 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. Article 1173 provides -
The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstance of the persons, of the time and of the
place. . . .
We hold that banking business is so impressed with public
interest where the trust and confidence of the public in general is of paramount
importance such that the appropriate standard of diligence must be a high
degree of diligence, if not the utmost diligence. Surely, respondent drawee
Bank cannot claim it exercised such a degree of diligence that is required of
it. There is no way We can allow it now to escape liability for such
negligence. Its liability as obligor is not merely vicarious but primary
wherein the defense of exercise of due diligence in the selection and
supervision of its employees is of no moment.
Premises considered, 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.
With the foregoing provisions of the Civil Code being relied
upon, it is being made clear that the decision to hold the drawee bank liable
is based on law and substantial justice and not on mere equity. And although
the case was brought before the court not on breach of contractual obligations,
the courts are not precluded from applying to the circumstances of the case the
laws pertinent thereto. Thus, the fact that petitioner's negligence was found
to be the proximate cause of her loss does not preclude her from recovering
damages. The reason why the decision dealt on a discussion on proximate cause
is due to the error pointed out by petitioner as allegedly committed by the
respondent court. And in breaches of contract under Article 1173, due diligence
on the part of the defendant is not a defense.
PREMISES CONSIDERED, the case is hereby ordered
REMANDED to the trial court for the reception of evidence to determine the
exact amount of loss suffered by the petitioner, considering that she partly
benefited from the issuance of the questioned checks since the obligation for
which she issued them were apparently extinguished, such that only the excess
amount over and above the total of these actual obligations must be considered
as loss of which one half must be paid by respondent drawee bank to herein
petitioner.
SO ORDERED.
Narvasa, C.J., Feliciano, Regalado and Nocon, JJ.,
concur.