Banks liable for encashing forged checks

The Supreme Court has ruled that banks should be held liable for paying forged checks even if done in good faith.

In a 32-page decision penned by Justice Dante Tinga, the SC Second Division upheld a Manila Regional Trial Court ruling ordering the Far East Bank and Trust Co. to pay or credit back close to P1 million to a construction firm’s account.

The amount covered the forged check it encashed 12 years ago. FEBTC was also held liable for interest and for attorney’s fees.

The high court granted the petition of Samsung Construction Co. Philippines Inc. and held that banks could not charge to its depositors’ accounts any amount they paid due to a forged check, which should instead be paid out of the bank’s funds.

The SC reversed a decision dated Nov. 28, 1996 of the Court of Appeals that set aside the April 25, 1994 ruling of the Manila RTC Branch 9.

Court records showed that on March 9, 1992, FEBTC allowed a certain Roberto Gonzaga to encash a forged FEBTC check amounting to P999,500 payable to cash and drawn against Samsung’s current account.

Prior to the encashment, the teller and two FEBTC officers counterchecked the signature on the check against that on the signature card. Moreover, the assistant accountant of Samsung, who was well-known to the bank officers, vouched for the genuineness of the signature.

The Court said Samsung could put up the defense of forgery, stressing that "Section 23 of the Negotiable Instruments Law plainly states that no right to enforce the payment of a check can arise out of a forged signature."

It pointed out since the signature forged in the case was the drawer’s, the bank was in the position to verify it. It could also be concluded, the Court said, that there was negligence on Samsung’s part in the absence of evidence to the contrary.

The Court said the CA was "sadly remiss" when it failed to thoroughly evaluate the evidence before it, relying instead on haphazardly drawn presumptions.

The CA, in overturning the RTC decision, held at that contradictory findings of the National Bureau of Investigation and the Philippine National Police created doubt as to whether there was forgery.

The SC said the CA’s error in ruling "warrants special attention as it is absurd and even dangerous as a precedent" amounting to a "jurisprudential cop-out."

Upholding the findings of the RTC, the Court said there was no reason to doubt why the trial court gave credence to the testimony of the NBI examiner who said there was forgery and not that of the PNP expert’s.

It said NBI expert Rhoda Flores clearly qualified as an expert witness considering that she was a reputable document examiner for 15 years.