C.

ISSUANCE
1. Delivery
[C 01] DBP vs. Sima Wei, 219 SCRA 736, March 9, 1993
PETITIONER: DEVELOPMENT BANK OF RIZAL
RESPONDENTS: SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN
INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES

DOCTRINE:
-
The PAYEE of a negotiable instrument acquires no interest with respect thereto until its
delivery to him.
- Delivery of an instrument means  transfer of possession, actual or constructive, from
one person to another.
- Without the initial delivery of the instrument from the drawer to the payee, there can be
no liability on the instrument. Moreover, such delivery must be intended to give effect to
the instrument.

FACTS:
1. In consideration of a loan extended by DBP to SIMA WEI, the latter (Wei) executed and
delivered to DBP a promissory note, engaging to pay DBP or order, the amount of
Php1.820M, on or before June 24, 1983 at 32% per annum.
2. SIMA WEI made partial payments on the note, and left a balance of P1,032,450.02. On
NOV. 18, 1983, SIMA WEI issued two crossed checks payable to DBP, drawn against
China Banking Corp. (CHINA BANK).
 Check # 1 for Php 550k had serial number 384934, while
 Check #2  for Php 500k had serial no. 384935.
3. Said checks were allegedly issued for the full settlement of drawer’s (SIMA WEI’s) account
evidenced by the promissory note to DBP.
4. The two checks were NOT delivered to petitioner-payee DBP or any of its authorized reps.
5. For reasons not shown, the check came to the possession of LEE KIAN HUAT, who
deposited the checks without petitioner-payee DBP’s indorsement (forged or otherwise)
to the account of respondent PLASTIC CORP at the Balintawak branch, Caloocan City,
of PRODUCERS BANK.
6. CHENG UY, Branch Manager of said branch of PRODUCERS BANK, relying on the
assurance of SAMSON TUNG (President of PLASTIC CORP) that the transaction was
legal and regular, instructed the cashier of PRODUCERS BANK to accept the check for
deposit, and credit them to PLASTIC CORP’s account, despite the fact that the checks
are crossed and payable to DBP and bore no indorsement of the latter.
7. Hence, on July 6, 1986, DBP filed a complaint for a sum of money against herein
RESPONDENTS on two causes of action:
(1) To enforce payment of the balance of P1,032,450.02 on a promissory note
executed by respondent SIMA WEI on June 9, 1983; and
(2) To enforce payment of 2 checks executed by SIMA WEI payable to
DBP, and drawn against the CHINA BANKing Corporation, to pay the balance due
on the promissory note.
8. SIMA WEI et al. (except Lee Kian Huat) filed their separate Motions to Dismiss (MTD)
alleging a common ground that the complaint states no cause of action.
 9. RTC: granted the defendants MTD.
10. CA: affirmed this decision, * to which DBP, represented by its Legal Liquidator, filed this
Petition for Review by Certiorari, assigning the ff. alleged CA errors: (1) When it held that
DBP has no cause of action against SIMA WEI et al.; (2) When it held that Sec. 13, Rule
of of the Revised Rules of Court on Alternative Defendants is not applicable to herein
defendants-respondents (SIMA WEI et al.)

ISSUE: W/N DBP has any right or interest (cause of action) founded on the two (2) checks
issued by SIMA WEI.

HELD: NO.
 The checks were not delivered to the payee DBP, so it did not acquire any right or
interest founded on such checks. However, SC held that SIMA WEI is still liable to pay
the balance, as the checks, undelivered to the payee, did not constitute as payment of her
balance.
 The normal parties to a check are the drawer, the payee and the drawee bank. Courts
have long recognized the business custom of using printed checks where blanks are
provided for the date of issuance, the name of the payee, the amount payable and the
drawer's signature.
 IN ISSUING A CHECK: All the drawer has to do is to properly fill up the blanks and sign
it. However, the mere fact that he has done these DOES NOT give rise to any liability on
his part, until and unless the check is delivered to the payee or his representative.
 A negotiable instrument, of which a check is, is not only a written evidence of a contract
right but is also a species of property. Just as a deed to a piece of land must be
delivered in order to convey title to the grantee, so must a negotiable instrument be
delivered to the payee in order to evidence its existence as a binding contract.
 Section 16 of the Negotiable Instruments Law, which governs checks, provides in
part: Every contract on a negotiable instrument is incomplete and revocable until delivery
of the instrument for the purpose of giving effect thereto. . . .
 Thus, the payee of a negotiable instrument acquires no interest with respect thereto
until its delivery to him. 3Delivery of an instrument means transfer of possession, actual
or constructive, from one person to another.
 Without the initial delivery of the instrument from the drawer to the payee, there can
be no liability on the instrument. Moreover, such delivery must be intended to give effect
to the instrument. The allegations of the petitioner in the original complaint show that the
two (2) China Bank checks, numbered 384934 and 384935, were not delivered to the
payee, the petitioner herein. Without the delivery of said checks to petitioner-payee,
the former did not acquire any right or interest therein and cannot therefore assert
any cause of action, founded on said checks, whether against the drawer Sima Wei or
against the Producers Bank or any of the other respondents.

DISPOSITIVE PORTION: In the light of the foregoing, the judgment of the Court of Appeals
dismissing the petitioner's complaint is AFFIRMED insofar as the second cause of action is
concerned. On the first cause of action, the case is REMANDED to the trial court for a trial on the
merits, consistent with this decision, in order to determine whether respondent Sima Wei is liable
to the Development Bank of Rizal for any amount under the promissory note allegedly signed by
her. SO ORDERED.
 2. Signatures
[C 02] Solidbank vs. Mindanao Ferroalloy Corp., 464 SCRA 403 (2005)

FACTS:
1. Mindanao Ferroalloy Corporation is the fruit of a joint venture agreement between a
Filipino corporation and Korean Corporation.
2. In its operations, its liabilities ballooned over its assets that it had to secure loans from
petitioner Solidbank.
3. The loans were later consolidated and restructured, evidenced by a promissory note. The
promissory note was signed by Cu and Hong, BOTH officers of the corporation.
4. The CORPORATION, through the same officers also executed a deed of assignment.
5. Thereafter, the corporation stopped its operations and the loan was left unpaid. The BANK
was prompted to file a complaint against the corporation, and with it, impleading the
officers who signed the agreement & promissory notes.
6. The RTC held in favor of the bank and ordered the respondent corporation to pay the
amount of loan plus interest (but didn't adjudge liability of the officers).
7. Both the RTC & CA held that there was no solidary liability on the part of the officers
impleaded by the bank.

ISSUE: W/N principal officers can be held personally liable upon signing the contract of loan
under the name of the corporation?

RULING: NO
 Basic is the principle that a corporation is vested by law with a personality separate and
distinct from that of each person composing or representing it.
 Equally fundamental is the general rule that corporate officers CANNOT be held
personally liable for the consequences of their acts, for as long as these are for and on
behalf of the corporation, within the scope of their authority and in good faith.
 Moreover, it is axiomatic that solidary liability cannot be lightly inferred. Since solidary
liability is not clearly expressed in the Promissory Note and is not required by law or the
nature of the obligation in this case, no conclusion of solidary liability can be made.
 Furthermore, nothing supports the alleged joint liability of the individual petitioners
because, as correctly pointed out by the two lower courts, the evidence shows that there
is only one debtor: the corporation.
 Though Hong and Cu signed above the “maker/borrower” and the printed name of the
corporation, without the word “by” preceding their signatures, the fact that they signed in
their personal capacities is negated by the facts that the name & address of the
corporation also appeared on the space provided for in the “maker/borrower” and
their signatures only appeared once when it should be twice if indeed it was in their
personal capacities.
 Further, they didn't sign on the portion allocated for the co-maker, and there was
also no indication of it being signed as authorized representatives.
 a. Forged Signature
[C 03] BPI vs. Casa Montessori Internationale, 430 SCRA 261 (2004)  2 petitions for review

Doctrine: By the nature of its functions, a bank is required to take meticulous care of the deposits
of its clients, who have the right to expect high standards of integrity and performance from it.
Among its obligations in furtherance thereof is knowing the signatures of its clients. Depositors
are not estopped from questioning wrongful withdrawals, even if they have failed to question those
errors in the statements sent by the bank to them for verification.

Facts:
1. CASA Montessori International opened a current account with BPI with CASAs
President Ms. Ma. Carina C. Lebron as one of its authorized signatories.
2. 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
P782,000.00.
3. It turned out that Sonny D. Santos with account at BPIs Greenbelt Branch [was] a fictitious
name used by 3rd party defendant Leonardo T. Yabut who worked as external auditor of
CASA.
4. 3rd party defendant voluntarily admitted that he forged the signature of Ms. Lebron and
encashed the checks.
5. 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.
6. On March 4, 1991, plaintiff filed the herein (CASA M) Complaint for Collection with
Damages against defendant bank. (BPI)
7. RTC rendered the appealed decision in favor of the plaintiff

8. Modifying the Decision of the RTC, the CA apportioned the loss between BPI and CASA.

- The appellate court took into account CASAs contributory negligence that resulted in the
undetected forgery.
- It then ordered Leonardo T. Yabut to reimburse BPI half the total amount claimed

Issue 1:
Was there forgery under the Negotiable Instruments Law (NIL)?

Held: YES.

 There was forgery of the drawer’s signature on the check. Forged signature wholly
inoperative (Sec. 23) Yabut (auditor) voluntarily admitted through an affidavit that he
forged the drawer’s signature and encashed the checks. The PNP Crime Laboratory, after
examination of said checks, had concluded that the handwritings thereon were not hers.

 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.
  Forgery cannot be presumed. It must be established by clear, positive and convincing
evidence. Under the best evidence rule as applied to documentary evidence like the
checks in question, no secondary or substitutionary evidence may inceptively be
introduced, as the original writing itself must be produced in court.

Issue 2: Is BPI liable as the drawee bank for allowing payment on the checks to a wrongful and
fictitious payee?

Held: YES.

 Negligence is attributable to BPI alone. BPI, the drawee, erred in making payments by
virtue thereof. the forged signature are wholly inoperative, and CASA, the drawer, whose
authorized signatures do not appear on the negotiable instruments cannot be held liable
thereon. neither is latter precluded from setting up forgery as a real defense.

 BPI -- the drawee bank -- becomes liable to its depositor-drawer for allowing payment on
the checks to a wrongful and fictitious payee.

 Since the encashing bank is one of its branches, BPI can easily go after it and hold it liable
for reimbursement. It may not debit the drawers account and is not entitled to
indemnification from the drawer. In both law and equity, when one of two innocent persons
must suffer by the wrongful act of a third person, the loss must be borne by the one
whose negligence was the proximate cause of the loss or who put it into the power of
the third person to perpetrate the wrong.

 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.

DISPOSITIVE: WHEREFORE, the Petition in GR No. 149454 (BPI v Yabut) is hereby DENIED,
and that in GR No. 149507 (Casa v BPI) PARTLY GRANTED. The assailed Decision of the Court
of Appeals is AFFIRMED with modification: BPI is held liable for P547,115, 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 attorneys fees of ten percent (10%) thereof, subject to
reimbursement from Respondent Yabut for the entire amount, excepting attorneys 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.

[C 04] Gempesaw vs. CA, 218 SCRA 682 (1993)

DOCTRINE: 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

FACTS:
1. Natividad Gempesaw operates four grocery store & she has a checking account with PNB

2. Galang her trusted book keeper prepared her checks for her which she would use to pay
suppliers when the checks are prepared
3. Galang submits it to petitioner for signing together with the corresponding invoice receipts
which show obligations due to suppliers.
 4. Petitioner signs the checks without verifying the accuracy of the information stated in the
invoice because she trusts Galang.
5. PNB notified her of all the checks but Gempesaw does not verify w/n payees received
them.
6. In 2 years 82 checks have been issued all checks are crossed checks.

7. There were checks with forged signature of the payees and these were brought to Boon
the Chief Accountant of PNB who without authority accepted the said checks to be
deposited at the accounts of Alfredo Romero and Benito Lam.
8. 30 of the payees named in the checks testified that they DID NOT receive the said checks
and that the indorsements appearing at the back of the checks were not theirs.
9. The team of auditors of the main branch of PNB failed to discover and stop the
unauthorized acts of Boon. Since under their rules, only the branch manager may accept
a second indorsement of checks for deposit.
10. More than 2 years passed until the petitioner found out about the fraudulent manipulations
of her book keeper.
11. Gempesaw filed a complaint against PNB for recovery of the money-value of 82 checks
charged against her account on the ground that the payee’s indorsements were forgeries.
12. RTC: DISMISSED.

13. CA: AFFIRMED, checks were credited to her account due to her own negligence.

ISSUE: W/N Gempesaw may rightfully recover from the drawee bank who pays a check with a
forged indorsement of the payee?

HELD: YES but not fully

 The SC held that in the case at bar, petitioner admitted that the checks were filled up and
completed by her trusted employee, Alicia Galang, and were later 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.

 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 the 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 sales invoices.

 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. Under Section 23 of the NIL, she is now precluded from using
the forgery to prevent the bank's debiting of her account.
  Furthermore, the fact that the PNB 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 PNB in carrying out its
obligations to its depositors.

 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.
Premises considered, respondent drawee Bank is adjudged liable to share the loss with
the petitioner on a fifty-fifty ratio in accordance with Article 1172.

The SC held that there is negligence on part of both Gempesaw and PNB. Hence, both were held
liable on a 50-50 basis. The case was remanded to the RTC

DISPOSITIVE: The SC hereby ordered the case 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.

[C 05] Ilusorio vs. CA, 393 SCRA 89 (2002) - ELLA

Petitioner: Ramon K. Ilusorio
Respondents: Hon. Court Of Appeals, and The Manila Banking Corporation

Doctrine: GR: when a signature is forged or made without the authority of the person whose
signature it purports to be, the check is wholly inoperative. No right to retain the instrument, or to
give a discharge therefor, or to enforce payment thereof against any party, can be acquired
through or under such signature. XPN: unless the party against whom it is sought to enforce such
right is precluded from setting up the forgery or want of authority.

FACTS:
1. Petitioner Ilusorio was a depositor in good standing of the Manila Banking Corp. (MBC)

2. As he was then running about 20 corporations, and was going out of the country a number
of times, he entrusted to his secretary, Katherine E. Eugenio, his credit cards and
his checkbook with blank checks. It was also Eugenio who verified and reconciled the
statements of said checking account.
3. Between the dates September 5, 1980 and January 23, 1981, Eugenio was able to
encash and deposit to her personal account about seventeen (17) checks drawn against
Ilusorio’s account at MBC.
4. Ilusorio DID NOT bother to check his statement of account until a business partner
apprised him that he saw Eugenio use his credit cards.
5. Ilusorio fired Eugenio immediately, and instituted a criminal action against her for
Estafa Thru Falsification.
 6. Manila Banking Corp, through an affidavit executed by its employee, Mr. Dante Razon,
also lodged a complaint for estafa thru falsification of commercial documents against
Eugenio on the basis of Ilusorio’s statement that his signatures in the checks were forged.
7. Ilusorio then requested MBC to credit back and restore to its account the value of the
checks which were wrongfully encashed but MBC refused.
8. Hence, petitioner filed the instant case.

9. RTC: dismissed in favor of MBC, no sufficient basis for plaintiff’s cause against defendant

10. CA: affirmed, petitioner’s own negligence was the proximate cause of his loss

ISSUE: W/N Sec 23 of the Negotiable Instruments Law applies.

HELD: NO.
 Under Section 23 of the Negotiable Instruments Law a forged check is inoperative. It
is a rule that when a signature is forged or made without the authority of the person whose
signature it purports to be, the check is wholly inoperative.
 No right to retain the instrument, or to give a discharge therefor, or to enforce
payment thereof against any party, can be acquired through or under such signature.
 However, the rule does provide for an exception, namely: "unless the party against whom
it is sought to enforce such right is precluded from setting up the forgery or want of
authority."
 In the instant case, it is the exception that applies.
 The Court held that Ilusorio is precluded from setting up the forgery, assuming there
is forgery, due to his own negligence in entrusting to his secretary his credit cards and
checkbook including the verification of his statements of account.
ALSO...
 Ilusorio’s reliance on Associated Bank vs. Court of Appeals and Philippine Bank of
Commerce vs. CA to buttress his contention that MBC as the collecting or last endorser
generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements is misplaced.
o In the cited cases, the fact of forgery was not in issue. In the present case, the fact
of forgery was not established with certainty.
o In those cited cases, the collecting banks were held to be negligent for failing to
observe precautionary measures to detect the forgery. In the case before us, both
courts below uniformly found that Manila Bank’s personnel diligently performed
their duties, having compared the signature in the checks from the specimen
signatures on record and satisfied themselves that it was petitioner’s.

WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court
of Appeals dated January 28, 1999 in CA-G.R. CV No. 47942, is AFFIRMED.