G.R. No. 129015 - Samsung Construction Co. Phil. vs. Far East Bank and Trust Company

Case Summary (G.R. No. 129015)

Petitioner’s Claim and Procedural Posture

Samsung sued FEBTC for reimbursement of P999,500.00 debited from its account after a check bearing a forged signature purportedly signed by Jong was encashed. Samsung sought credit/payment of the amount plus interest and attorneys’ fees. The Regional Trial Court (RTC) found the signature forged and ordered reimbursement; the Court of Appeals (CA) reversed; the Supreme Court reviewed and granted Samsung’s petition, reversing the CA and reinstating the RTC decision.

Key Dates

Presentation and encashment of the questioned check: 19 March 1992.
Demand letter from Samsung through counsel: 6 May 1992.
Complaint filed (Violation of Sec. 23, Negotiable Instruments Law): 10 June 1992.
RTC Decision (finding forgery, awarding reimbursement): 25 April 1994.
Court of Appeals Decision (reversing RTC): 28 November 1996.
Supreme Court Decision (granting petition, reversing CA): 13 August 2004.

Applicable Law and Constitutional Basis

Primary statutory provision: Section 23, Negotiable Instruments Law (Act No. 2031) — a forged signature is wholly inoperative and a party whose signature is forged may set up forgery as a defense unless precluded (e.g., by negligence).
Applicable constitutional framework for decision: 1987 Philippine Constitution (decision date post‑1990 requires using the 1987 Constitution as the basis for the decision per instruction).

Facts on Presentation and Bank’s Handling

On 19 March 1992 Roberto Gonzaga presented a bearer/cash check for P999,500.00 drawn on Samsung’s account. Teller Justiani checked the account balance and compared the signature on the check to the specimen signature card and was satisfied. Gonzaga produced three IDs. Per bank policy for amounts over P100,000, two branch officers approved: Velez likewise compared signatures and forwarded the check to Shirley Syfu, who observed Jose Sempio III at the bank. Sempio vouched for the genuineness of Jong’s signature and stated the check was for equipment purchase. Syfu authorized encashment. The next day Samsung’s accountant discovered the encashment and reported the missing blank check; Jong learned his signature had been forged and filed a criminal complaint against Sempio. Samsung demanded reimbursement; FEBTC investigated and then denied liability, prompting civil suit.

Trial Evidence and Conflict of Expert Opinions

Samsung presented NBI Senior Document Examiner Roda B. Flores, who testified that Jong’s signature on the check was forged based on comparative examination and use of magnification, microscopes, photographic enlargements, and analysis of execution, linking strokes, proportions and other characteristics. FEBTC presented PNP document examiner Rosario C. Perez, who testified that the signature was genuine and attributed observed differences to normal variations. The RTC evaluated the experts, found the NBI examiner more credible (noting substantive differences in stroke, manner of execution, and the NBI examiner’s qualifications and extensive experience), and concluded forgery was proven.

RTC Disposition

The RTC held the signature forged, ordered FEBTC to pay/credit Samsung P999,500.00 with interest from the filing of the complaint, and awarded attorneys’ fees of P15,000.00.

Court of Appeals Reasoning and Reversal

The CA reversed the RTC, relying primarily on (1) the conflicting expert findings from two government forensic agencies (NBI and PNP), which it treated as creating reasonable doubt on forgery, and (2) an equity/comparative‑negligence principle (citing PNB v. National City Bank of New York) to impute negligence to Samsung through its accountant Kyu for insufficient safeguarding of the checkbook, thereby precluding Samsung from asserting forgery under Section 23.

Issues on Appeal to the Supreme Court

(1) Whether the questioned signature was forged (sufficiency and credibility of evidence).
(2) Whether Samsung was precluded from asserting forgery because of its own negligence in safeguarding blank checks, thus shifting loss to the drawer.

Supreme Court Analysis — Forgery and Bank Liability (Section 23)

The Court reiterated the general rule under Section 23: a forged signature is wholly inoperative and payment on such forgery does not discharge the instrument nor may the drawee charge the drawer’s account, unless the drawer is precluded from asserting forgery (e.g., by negligence). The traditional justification is that the bank is in the superior position to detect forgery and to spread the risk (insurance/pricing). The Court emphasized longstanding doctrine: "a bank is bound to know its depositors’ signature" and is liable even if deceived by a clever forgery or a trusted employee of the drawer.

Supreme Court Evaluation of Expert Testimony and Credibility

The Court explained that conflicting expert testimony does not by itself defeat proof of forgery; the trier of fact must assess credibility and explain reasons. The RTC had done so: it found the NBI examiner more credible based on her qualifications (many years’ experience, specialized training, volume of examinations), the methodology employed (scientific comparative method, instruments, photographic enlargements), and specific demonstrable differences between samples and the questioned signature (hesitating strokes, terminal stroke differences). The PNP examiner’s characterization of differences as mere "variations" was found unconvincing because the PNP examiner could not adequately account for marked inconsistencies (notably the final upward stroke in the questioned signature). The Supreme Court deferred to and affirmed the RTC’s credibility determinations and the conclusion that forgery was proven.

Supreme Court Analysis — Negligence of Drawer and Burden of Proof

The Court rejected the CA’s attribution of negligence to Samsung. It reiterated that negligence of the drawer, sufficient to preclude the defense of forgery under Section 23, must be proven; negligence is not presumed. The presumption of regularity and ordinary care in business is in favor of the drawer, and the drawee (bank) bears the burden to prove the drawer’s negligence. The mere fact that an employee committed the theft/forgery does not, without more, establish drawer negligence or create an estoppel against the drawer (citing PCI Bank v. Court of Appeals). The record contained no direct evidence that Kyu negligently safeguarded the checks; Jong’s testimony that the checks were kept in a safety box was hearsay as to Kyu’s practices, but no contrary evidence was presented by the bank to rebut the presumption of ordinary care. Consequently the Court found

Case Syllabus (G.R. No. 129015)

Case Citation and Panel

Reported in 480 Phil. 39, Second Division, G.R. No. 129015, August 13, 2004.
Decision authored by Justice Tinga.
Decision concurred in by Justices Puno (Chairman), Austria‑Martinez, Callejo, Sr., and Chico‑Nazario.

Parties

Petitioner: Samsung Construction Company Philippines, Inc. (referred to as "Samsung Construction"), a corporation based in Biñan, Laguna.
Respondent bank: Far East Bank and Trust Company (referred to as "FEBTC"), Bel‑Air, Makati branch (later acquired by or merged with Bank of the Philippine Islands).
Respondent: Court of Appeals (appellate decision challenged).

Underlying Question Presented

Whether a drawee bank that pays out on a check bearing a forged signature is liable to reimburse the drawer (depositor) whose account was charged by reason of the payment of the forged check.

Relevant Statute

Section 23, Negotiable Instruments Law (Act No. 2031): When a signature is forged or made without authority, it is wholly inoperative; no right to retain, discharge, or enforce payment can be acquired through such signature unless the party against whom it is sought to enforce it is precluded from setting up the forgery or want of authority.

Factual Background — Account and Check Custody

Samsung Construction maintained a current account at FEBTC’s Bel‑Air, Makati branch.
Jong Kyu Lee ("Jong"), Project Manager, was the sole signatory on Samsung Construction’s account.
Blank checks were kept in the custody of Samsung Construction’s accountant, Kyu Yong Lee ("Kyu").

Factual Background — Presentation and Payment of the Questioned Check

On 19 March 1992, a person named Roberto Gonzaga presented FEBTC Check No. 432100, payable to cash, drawn on Samsung Construction’s account for P999,500.00.
Teller Cleofe Justiani checked the account balance, found sufficient funds, and compared the signature on the check to the specimen signature card for Jong; she was satisfied as to authenticity.
Gonzaga presented three (3) identification cards when asked for proof of identity.
By bank policy, checks exceeding P100,000 required approval of two bank branch officers. Senior Assistant Cashier Gemma Velez also compared the signature and concluded it matched Jong’s specimen.
The check was further forwarded to Shirley Syfu for approval. Syfu noticed Jose Sempio III ("Sempio"), Samsung Construction’s assistant accountant, in the bank; Sempio vouched for Jong’s signature, confirmed Gonzaga’s identity, and stated the check was for equipment purchase.
Syfu authorized encashment. The bank paid Gonzaga; the check was encashed.

Discovery of Forgery and Criminal Proceedings

The following day, accountant Kyu discovered that the P999,500.00 check had been encashed and that the last blank check in the checkbook was missing.
Kyu reported the matter to Jong, who proceeded to the bank and learned his signature had been forged. The Bank Manager reportedly told Jong he would be reimbursed.
Jong reported to police and consulted lawyers; criminal charges for qualified theft were later filed against Sempio before the Laguna court.

Demand and Civil Complaint

By letter dated 6 May 1992, Samsung Construction, through counsel, demanded FEBTC to credit P999,500.00 with interest.
FEBTC replied it was conducting an investigation.
Samsung Construction filed a civil complaint on 10 June 1992 for violation of Section 23 of the Negotiable Instruments Law, seeking payment of the debited amount plus interest and attorney’s fees. Docketed as Civil Case No. 92‑61506, RTC Manila, Branch 9 (pres. Judge E.G. Sandoval).

Trial — Evidence on Forgery

Samsung Construction referred the check for investigation to the NBI and presented Senior NBI Document Examiner Roda B. Flores. Flores testified the signature was forged.
FEBTC sought assistance of the PNP and presented Rosario C. Perez, PNP Crime Laboratory document examiner, who testified the signature was genuine.
The trial court (RTC) confronted conflicting expert testimonies and chose to believe the NBI expert (Flores), finding the signature forged.

RTC Decision (25 April 1994)

RTC held Jong’s signature on the check was forged.
Directed the bank to pay or credit to Samsung Construction’s account P999,500.00, with interest tolled from filing of the complaint.
Awarded attorney’s fees of P15,000.00.

Court of Appeals Decision (28 November 1996)

The Special Fourteenth Division of the Court of Appeals reversed the RTC and absolved FEBTC of liability.
Two bases for reversal:
- The conflicting conclusions of handwriting experts from the NBI and the PNP created doubt as to forgery; contradictory official expert opinions meant forgery was not shown beyond doubt.
- Alternatively, assuming forgery occurred, the Court of Appeals found Samsung Construction negligent in safekeeping blank checks, imputing blame to accountant Kyu for lack of care that permitted Sempio access; relied on equitable principle in PNB v. National City Bank of New York that when loss can be attributed to the neglect of either of two innocent persons, the negligent party should bear it.

Issues on Appeal to the Supreme Court

Whether the Court of Appeals erred in overturning the RTC’s factual finding that the signature was forged.
Whether Samsung Construction was negligent and thereby precluded from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law.
Whether FEBTC, having paid on a forged signature, may be absolved despite payment when the drawer is not precluded from asserting forgery.

Governing Legal Principles Cited

Under Section 23 of the Negotiable Instruments Law, a forged signature is wholly inoperative; payment on a forged signature is ineffectual and the drawee cannot charge it to the drawer’s account unless the drawer is precluded from asserting forgery.
The drawee bank is generally in a superior position to detect forgery because it has the maker’s specimen signatu