Title
Security Bank and Trust Company vs. Triumph Lumber and Construction Corporation
Case
G.R. No. 126696
Decision Date
Jan 21, 1999
Security Bank liable for checks encashed with forged signatures; CA ruling reversed by SC.
forgery
checks
negligence

Case Summary (G.R. No. 126696)

Procedural History and Lower Court Outcomes

The RTC of Makati, Branch presided by Judge Zosimo Z. Angeles, rendered a decision dated 14 November 1990 dismissing respondent’s complaint for lack of merit. On appeal, the Court of Appeals in CA-G.R. CV No. 33513 issued a decision on 28 December 1995 reversing the RTC. It ordered petitioner to reimburse respondent P300,000, with interest at the rate of 2 12% per month from 24 March 1987 until full payment, and attorneys fees equivalent to 25% of the principal obligation. The Court of Appeals later denied petitioner’s motion for reconsideration in a resolution dated 17 September 1996.

Factual Antecedents as Found by the Trial Court

Respondent’s case, as summarized by the RTC, rested on its claim that it was an account holder with petitioner’s Sucat, Paranaque branch. Respondent asserted that on March 23 and 24, 1987, the three checks payable to cash and drawn against its current account were presented for encashment by unauthorized persons, and that petitioner’s alleged gross negligence and inexcusable negligence in verifying withdrawals and determining whether the drawers’ signatures were forged caused the unauthorized encashments. Respondent also alleged that it demanded reimbursement and requested credit back and restoration of the P300,000 value of the checks, but petitioner allegedly failed to pay. Respondent further claimed that a PC Crime Laboratory finding established that the signatures of two authorized signatories—Co Yok Teng and Yu Chun Kit—were forged.

Petitioner’s defense, as recounted by the RTC, was anchored on the banking relationship and account operating procedures. Petitioner claimed that respondent opened savings account No. 3220-0529-79 and current account No. 3210-0053-60 with specimen signature cards that authorized petitioner to honor withdrawals based on any two of three signatures. Petitioner named Dee Kong, Co Yok Teng, and Chun Yun Kit as the officers whose specimen signatures appeared on the bank’s cards. Petitioner also asserted that respondent executed an automatic transfer agreement to transfer cleared funds from the savings account to the current account when balances were insufficient. Petitioner further claimed that respondent stored its savings pass book and check booklet in its filing cabinet, but that on March 23, 1987, respondent discovered that office doors and the filing cabinet were forced open. Petitioner stated that respondent did not report the burglary to the police and did not advise petitioner, even though respondent made deposits on the same day totaling P374,554.10. Petitioner also asserted that shortly after these deposits, the three allegedly forged cash-payable checks were successively presented for encashment and were paid after passing through the bank’s standard verification procedures for check signatures and the regularity of material particulars.

RTC Findings: Lack of Proof of Forgery and Allocation of Negligence

The RTC found no preponderance of evidence supporting respondent’s complaint. First, it held respondent failed to prove that the signatures were forged. Respondent allegedly did not present the original checks in court. The RTC further reasoned that respondent failed to explain its omission to present the originals, and it therefore presumed the original checks were willfully suppressed and would be adverse to respondent’s cause. Second, the RTC concluded that the signatures on the checks were not compared with the specimen signatures on respondent’s specimen signature cards furnished when the accounts were opened, which led it to discount the expert opinion. Third, the RTC noted that respondent did not present Co Yok Teng to deny the genuineness of the signatures. The RTC was convinced that petitioner exercised due care and diligence in determining authenticity before encashment.

On negligence, the RTC held respondent, not petitioner, was negligent in safeguarding corporate checks and related documents. It further held that once the incident occurred, respondent should have reported the matter to police and to petitioner so that stringent measures could be adopted to prevent unauthorized encashments. The RTC therefore concluded respondent should bear the loss and dismissed the complaint.

Court of Appeals Reversal: Forgeries Considered Established and Bank Accountability Affirmed

The Court of Appeals reversed and ordered reimbursement. It held that it was unnecessary for respondent to prove forgery of signatures because petitioner, in its answer, allegedly admitted matters that established negligence and forgery. The Court of Appeals quoted petitioner’s admissions that respondent was guilty of negligence substantially contributing to unauthorized signatures or forgery, that the alleged forged signatures were sufficiently adroit to escape detection under officers’ scrutiny, and that certain persons—Anna P. Naval and Roberto N. Gabutao—verbally admitted that the checks were forged. The Court of Appeals further noted that charges for estafa through falsification of commercial documents were pending against these individuals. It also concluded that the expert witness examined the signatures on the original checks, compared them with standard signatures, and that the photographic enlargements were taken from the original checks. Relying on petitioner’s admissions and unrebutted expert and testimonial evidence, the Court of Appeals concluded that the signatures were forged and that petitioner must bear the consequences of its failure to detect the forgery. It also faulted petitioner for allegedly not following an arrangement to inform respondent whenever checks above P10,000 were presented and for supposedly not requiring identification from the payee.

The Parties’ Contentions in the Supreme Court

Petitioner asserted that the Court of Appeals erred in holding that the signatures were forged. It argued that the best evidence rule required the original checks as the best evidence of forgery, and that respondent’s use of photocopies after timely objection was fatal. Petitioner also maintained that respondent’s alleged willful suppression of originals justified an adverse presumption. Petitioner further argued that the forgery issue should be treated as no longer in dispute because its answer raised affirmative defenses on diligence and negligence rather than a concession of forgery. It also contended that the bank exercised due care by verifying the genuineness of signatures and endorsements according to standard practices, while respondent was negligent in failing to advise petitioner of the burglary, failing to reconcile accounts, and not taking precautions. Finally, petitioner argued that it should not be liable for attorneys fees because respondent’s complaint was not only baseless but insincere and meant to harass and defame the bank.

Respondent countered that petitioner should have filed a petition for certiorari rather than a petition for review, and that the Court of Appeals’ negligence findings involved questions of fact beyond Supreme Court review. Respondent also maintained that, even assuming an exception, forgery was established by a preponderance of evidence.

The Supreme Court’s Resolution of Issues

The Supreme Court granted the petition and reinstated the RTC decision. It recognized the general rule that findings of fact by the Court of Appeals are conclusive, but it treated the conflicting factual findings of the RTC and Court of Appeals on forgery and negligence as a recognized exception warranting re-examination of evidence.

On the key question of forgery, the Court held it could not agree with the Court of Appeals’ conclusion that petitioner admitted forgery. The Court stated that petitioner categorically denied that the signatures on the questioned checks were forgeries, though petitioner alternatively raised diligence as an affirmative defense. Even assuming forgery existed, the Court ruled that petitioner could not be held liable because the checks were complete and regular on their face and the alleged forged signatures were sufficiently adroit to escape detection even by bank officers exercising scrutiny.

The Court also rejected the Court of Appeals’ conclusion that forgery was duly established. It held that the best evidence rule under Section 3, Rule 130 was violated when respondent offered photocopies of the checks rather than the original checks. The Court explained that no exceptions to the rule were shown to be applicable. It noted that respondent did not explain why the original checks could not be produced. The Supreme Court also relied on testimony indicating that the originals were withdrawn by an investigating policeman, but the policeman was not presented to produce the originals. Consequently, while the photocopies might have been admitted due to the nature of petitioner’s objections at offer, the Supreme Court held their probative value was nil.

Evidentiary Deficiencies in Handwriting Comparison

The Supreme Court further held that the proper procedure for disputed handwriting was not followed. It emphasized that an initial step in handwriting investigation is the introduction of genuine handwriting as the standard of comparison. It applied Section 22, Rule 132 and the guidelines in BA Finance v. Court of Appeals for establishing genuineness of standards. The Supreme Court found that the record showed only photocopies of purported specimen signatures contained in long bond papers, and that no witness was presented to prove that the specimen signatures were indeed affixed by Yu Chun Kit and Co Yok Teng.

The Court also found no adequate showing that the specimen signatures were genuinely written by the persons whose signatures were disputed. It observed that the expert witness Crispina V. Tabo testified that the questioned documents and specimen signatures were submitted through branches of the PC Crime Laboratory and that she did not personally see the parties write the

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