G.R. No. 129015, 13 August 2004


Plaintiff Samsung Construction Company Philippines, Inc. (“Samsung Construction”), maintained a current account with defendant Far East Bank and Trust Company (“FEBTC”). The sole signatory to Samsung Construction’s account was Jong Kyu Lee (“Jong”), its Project Manager, while the checks remained in the custody of the company’s accountant, Kyu Yong Lee (“Kyu”).

A certain Roberto Gonzaga presented for payment FEBTC Check No. 432100 to the bank. The check, payable to cash and drawn against Samsung Construction’s current account, was in the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00). The bank teller observed the bank’s policy in encashing checks. Satisfied with the genuineness of the signature of Jong, the bank authorized the encashment of the check to Gonzaga.

The following day, Kyu, examined the balance of the bank account and discovered that a check in the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00) had been encashed. Aware that he had not prepared such a check for Jong’s signature, Kyu perused the checkbook and found that the last blank check was missing. He reported the matter to Jong, who then proceeded to the bank. Jong learned of the encashment of the check, and realized that his signature had been forged. The Bank Manager reputedly told Jong that he would be reimbursed for the amount of the check.

Samsung Construction, through counsel, demanded that FEBTC credit to it the said amount with interest. In response, FEBTC said that it was still conducting an investigation on the matter. Unsatisfied, Samsung Construction filed a Complaint for violation of Section 23 of the Negotiable Instruments Law, and prayed for the payment of the amount debited as a result of the questioned check plus interest, and attorney’s fees.


1. Whether Samsung Construction was precluded from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law.
2. Whether FEBTC is bound to credit the said amount to Samsung Construction’s Account.


1. No, Samsung Construction is not precluded to set up the defense of Forgery.

Section 23 of the Negotiable Instruments Law bars a party from setting up the defense of forgery if it is guilty of negligence.

Admittedly, the record does not clearly establish what measures Samsung Construction employed to safeguard its blank checks. Jong did testify that his accountant, Kyu, kept the checks inside a “safety box,” and no contrary version was presented by FEBTC. The presumption remains that every person takes ordinary care of his concerns, and that the ordinary course of business has been followed. Negligence is not presumed, but must be proven by him who alleges it.

The drawee who has paid upon the forged signature is held to bear the loss, because he has been negligent in failing to recognize that the handwriting is not that of his customer. But it follows obviously that if the payee, holder, or presenter of the forged paper has himself been in default, if he has himself been guilty of a negligence prior to that of the banker, or if by any act of his own he has at all contributed to induce the banker’s negligence, then he may lose his right to cast the loss upon the banker. Yet, we are unable to conclude that Samsung Construction was guilty of negligence in this case.

2. Yes, FEBTC is liable in paying a forged check.

As provided in Sec.23 of the Negotiable Instruments Law, the general rule is that a forged signature is wholly inoperative, and payment made through or under such signature is ineffectual or does not discharge the instrument. If payment is made, the drawee cannot charge it to the drawer’s account. The traditional justification for the result is that the drawee is in a superior position to detect a forgery because he has the maker’s signature and is expected to know and compare it.

Banks are engaged in a business impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact business with them. They have the obligation to treat their client’s account meticulously and with the highest degree of care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a family.

Since the drawer, Samsung Construction, is not precluded by negligence from setting up the forgery, the general rule should apply. Consequently, if a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor. A bank is liable, irrespective of its good faith, in paying a forged check.

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