G.R. No. 149454, 28 May 2004


“On November 8, 1982, plaintiff CASA Montessori International opened Current Account with defendant BPI[,] with CASA’s President Ms. Ma. Carina C. Lebron as one of its authorized signatories.

“In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its checks had been encashed by a certain Sonny D. Santos since 1990 in the total amount of ₱782,000.00.

“It turned out that ‘Sonny D. Santos’ with account at BPI’s Greenbelt Branch [was] a fictitious name used by third party defendant Leonardo T. Yabut who worked as external auditor of CASA. Third party defendant voluntarily admitted that he forged the signature of Ms. Lebron and encashed the checks. “The PNP Crime Laboratory conducted an examination of the nine (9) checks and concluded that the handwritings thereon compared to the standard signature of Ms. Lebron were not written by the latter.

“On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages against defendant bank praying that the latter be ordered to reinstate the amount of ₱782,500.007 in the current and savings accounts of the plaintiff with interest at 6% per annum.

“On February 16, 1999, the RTC rendered the appealed decision in favor of the plaintiff.”

Ruling of the Court of Appeals

Modifying the Decision of the Regional Trial Court (RTC), the CA apportioned the loss between BPI and CASA. The appellate court took into account CASA’s contributory negligence that resulted in the undetected forgery. It then ordered Leonardo T. Yabut to reimburse BPI half the total amount claimed; and CASA, the other half. It also disallowed attorney’s fees and moral and exemplary damages.


First, was there forgery under the Negotiable Instruments Law (NIL)?
Second, were any of the parties negligent and therefore precluded from setting up forgery as a defense?
Third, should moral and exemplary damages, attorney’s fees, and interest be awarded?


First Issue: Forged Signature Wholly Inoperative (Section 23 of the NIL provides:)

“Section 23. Forged signature; effect of. — 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 x x x 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 this provision,a forged signature is a real or absolute defense, and a person whose signature on a negotiable instrument is forged is deemed to have never become a party thereto and to have never consented to the contract that allegedly gave rise to it. The counterfeiting of any writing, consisting in the signing of another’s name with intent to defraud, is forgery.

In the present case, we hold that there was forgery of the drawer’s signature on the check.

First, both the CA and the RTC found that Respondent Yabut himself had voluntarily admitted, through an Affidavit, that he had forged the drawer’s signature and encashed the checks. He never refuted these findings. That he had been coerced into admission was not corroborated by any evidence on record.

Second, the appellate and the trial courts also ruled that the PNP Crime Laboratory, after its examination of the said checks, had concluded that the handwritings thereon — compared to the standard signature of the drawer — were not hers. This conclusion was the same as that in the Report that the PNP Crime Laboratory had earlier issued to BPI — the drawee bank — upon the latter’s request.

Second IssueNegligence Attributable to BPI Alone

Having established the forgery of the drawer’s signature, BPI — the drawee — erred in making payments by virtue thereof. The forged signatures are wholly inoperative, and CASA — the drawer whose authorized signatures do not appear on the negotiable instruments — cannot be held liable thereon. Neither is the latter precluded from setting up forgery as a real defense.

Clear Negligence in Allowing Payment Under a Forged Signature

We have repeatedly emphasized that, since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required, of it. By the nature of its functions, a bank is “under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.”

BPI contends that it has a signature verification procedure, in which checks are honored only when the signatures therein are verified to be the same with or similar to the specimen signatures on the signature cards. Nonetheless, it still failed to detect the eight instances of forgery. Its negligence consisted in the omission of that degree of diligence required of a bank. It cannot now feign ignorance, for very early on we have already ruled that a bank is “bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged.” Despite the examination procedures it conducted, the Central Verification Unit of the bank even passed off these evidently different signatures as genuine. Without exercising the required prudence on its part, BPI accepted and encashed the eight checks presented to it. As a result, it proximately contributed to the fraud and should be held primarily liable for the “negligence of its officers or agents when acting within the course and scope of their employment.”It must bear the loss.

Third Issue: Award of Monetary Claims

We deny CASA’s claim for moral damages.

As a general rule, a corporation — being an artificial person without feelings, emotions and senses, and having existence only in legal contemplation — is not entitled to moral damages, because it cannot experience physical suffering and mental anguish. However, for breach of the fiduciary duty required of a bank, a corporate client may claim such damages when its good reputation is besmirched by such breach, and social humiliation results therefrom. CASA was unable to prove that BPI had debased the good reputation of, and consequently caused incalculable embarrassment to, the former. CASA’s mere allegation or supposition thereof, without any sufficient evidence on record, is not enough.

We also deny CASA’s claim for exemplary damages. But Attorney’s Fees Granted and Interest Allowed.

WHEREFORE, the assailed Decision of the Court of Appeals is AFFIRMED with modification: BPI is held liable for ₱547,115, the total value of the forged checks less the amount already recovered by CASA from Leonardo T. Yabut, plus interest at the legal rate of six percent (6%) per annum — compounded annually, from the filing of the complaint until paid in full; and attorney’s fees of ten percent (10%) thereof, subject to reimbursement from Respondent Yabut for the entire amount, excepting attorney’s fees. Let a copy of this Decision be furnished the Board of Accountancy of the Professional Regulation Commission for such action as it may deem appropriate against Respondent Yabut. No costs.

*Case Digest by Paul C. Gandola, JD – 4, Andres Bonifacio College, SY 2019 – 2020