Samsung Construction Company Philippines, Inc. v. Far East Bank and Trust Company
REITERATIONFacts
The Antecedents: Samsung Construction Company Philippines, Inc. (Samsung Construction) maintained a current account with Far East Bank and Trust Company (FEBTC). The sole signatory was Jong Kyu Lee (Jong). On March 19, 1992, a check for P999,500.00, payable to cash, was presented for payment. FEBTC's teller and officers verified the signature against the specimen card and obtained assurances from Jose Sempio III, Samsung Construction's assistant accountant, that the check was genuine and for equipment purchase. The check was encashed. The following day, Samsung Construction's accountant discovered the encashment and that the check was missing. Jong realized his signature was forged. Procedural History: Samsung Construction demanded reimbursement from FEBTC. FEBTC initially conducted an investigation. Samsung Construction then filed a complaint for violation of Section 23 of the Negotiable Instruments Law, seeking reimbursement of the debited amount plus interest and attorney's fees. The Regional Trial Court (RTC) ruled in favor of Samsung Construction, finding the signature forged based on the NBI expert's testimony. FEBTC appealed to the Court of Appeals (CA), which reversed the RTC decision, holding that the conflicting expert testimonies created doubt and that Samsung Construction was negligent in safekeeping its checks. Samsung Construction then filed a petition for review with the Supreme Court. The Petition: Samsung Construction argued that the CA erred in overturning the RTC's finding of forgery, in finding Samsung Construction negligent, and in applying the equity principle from PNB v. National City Bank of New York.
Issue(s)
Whether the signature on the check was forged. Whether Samsung Construction was negligent in the safekeeping of its checks, thereby precluding it from setting up the defense of forgery. Whether FEBTC exercised the required degree of diligence in paying the forged check.
Ruling
The Supreme Court granted the petition, reversed the Court of Appeals' decision, and reinstated the Regional Trial Court's decision, holding FEBTC liable for the amount debited from Samsung Construction's account.
Ratio Decidendi
On the issue of forgery: The Court found that the RTC correctly gave credence to the NBI expert's testimony over the PNP expert's. The NBI expert, with extensive experience and training, identified significant differences in handwriting characteristics, including the hesitant and slow execution of the questioned signature compared to the free and rapid execution of genuine signatures. The Court noted the glaring difference in the final upward stroke of the signature, which was unique to the questioned signature and absent in genuine samples. The Court found the PNP expert's explanation of these differences as mere 'variations' unconvincing and insufficient to overcome the evidence of forgery. The Court also considered Jong's testimony that the signature was not his and the unusual practice of issuing a check for nearly a million pesos payable to cash as corroborating circumstances. On the issue of Samsung Construction's negligence: The Court disagreed with the CA's finding of negligence. The CA failed to specify how the Korean accountant's alleged lack of care in keeping the checks led to the forgery or how greater prudence would have prevented it. The Court held that the mere fact that a forgery was committed by an employee does not automatically imply negligence on the part of the employer. Employers do not possess the ability to foresee the malicious intentions of their employees. The Court reiterated that negligence must be proven by the party alleging it, and FEBTC failed to present evidence to overcome the presumption that Samsung Construction exercised ordinary care. The Court also noted that Samsung Construction reported the forgery almost immediately upon discovery, which is contrary to negligence. On the issue of FEBTC's diligence and liability: The Court emphasized that under Section 23 of the Negotiable Instruments Law, a forged signature is wholly inoperative, and no right can be acquired through it unless the party against whom it is enforced is precluded from setting up the forgery. The general rule is that a drawee bank is liable for paying a forged check, as it is obligated to know its depositor's signature. This liability attaches even if the bank exercised due diligence. The Court found that FEBTC's payment of the nearly million-peso check payable to cash, presented by an unknown individual, without sufficient verification, fell short of the highest degree of care required of banks. While FEBTC claimed to have attempted to contact Jong, this was considered an 'extra effort' and not standard procedure. The bank relied heavily on the assurance of Sempio, whose relationship with the bank was not sufficiently proven by competent evidence. The Court concluded that FEBTC, as the drawee bank, must bear the loss because Samsung Construction was not precluded by negligence from setting up the defense of forgery.
Main Doctrine
A drawee bank is liable to its depositor for paying a check with a forged drawer's signature, even if the bank exercised due diligence, unless the depositor is precluded from setting up the forgery due to their own negligence. The burden of proving the depositor's negligence rests on the bank.