G.R. No.

149454             May 28, 2004 be acquired through or under such signature, unless the party against whom it is
sought to enforce such right is precluded from setting up the forgery or want of
BANK OF THE PHILIPPINE ISLANDS, petitioner,  authority.
vs.
CASA MONTESSORI INTERNATIONALE LEONARDO T. YABUT, respondents. Under this provision, 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
FACTS: become a party thereto and to have never consented to the contract that allegedly
gave rise to it.

CASA Montessori International opened Current Account with BPI, with CASA’s President The counterfeiting of any writing, consisting in the signing of another’s name
Ms. Ma. Carina C. Lebron as one of its authorized signatories. with intent to defraud, is forgery.

In 1991, after conducting an investigation, CASA discovered that nine (9) of its checks In the present case, there was forgery of the drawer’s signature on the check.
had been encashed by a certain Sonny D. Santos in the total amount of ₱782,000.00.
2. YES.
It turned out that ‘Sonny D. Santos’ was a fictitious name used by third party defendant
Leonardo T. Yabut who worked as external auditor of CASA. Third party defendant Having established the forgery of the drawer’s signature, BPI, the drawee, erred
voluntarily admitted that he forged the signature of Ms. Lebron and encashed the checks. in making payments by virtue thereof. The forged signatures are wholly
inoperative, and CASA -- the drawer whose authorized signatures do not appear
CASA filed the herein Complaint for Collection with Damages against BPI praying that on the negotiable instruments -- cannot be held liable thereon. Neither is the latter
the latter be ordered to reinstate the amount of ₱782,500.00 in the current and savings precluded from setting up forgery as a real defense.
accounts of CASA with interest at 6% per annum.
Since the banking business is impressed with public interest, of paramount
importance thereto is the trust and confidence of the public in general.
The RTC rendered the appealed decision in favor of CASA. On appeal, the CA Consequently, the highest degree of diligence is expected, and high standards of
apportioned the loss between BPI and CASA. The appellate court took into account integrity and performance are even required, of it. By the nature of its functions, a
CASA’s contributory negligence that resulted in the undetected forgery. bank is "under obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their relationship."
ISSUES:
3. YES.
1. WON there is forgery under the Negotiable Instruments Law.
2. WON BPI is negligent. For allowing payment on the checks to a wrongful and fictitious payee, BPI -- the
3. WON BPI should bear the loss. drawee bank -- becomes liable to its depositor-drawer. Since the encashing bank
4. WON there is waiver or estoppel on the part of CASA from failure to report error is one of its branches, BPI can easily go after it and hold it liable for
in bank statement. reimbursement. It "may not debit the drawer’s account103 and is not entitled to
5. WON CASA is entitled to damages. 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
HELD: 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."
1. YES. Pursuant to its prime duty to ascertain well the genuineness of the signatures of its
client-depositors on checks being encashed, BPI is "expected to use reasonable
Section 23 of the NIL provides that when a signature is forged or made without business prudence." In the performance of that obligation, it is bound by its
the authority of the person whose signature it purports to be, it is wholly
inoperative, and no right to enforce payment thereof against any party thereto, can
 internal banking rules and regulations that form part of the contract it enters into
with its depositors.

4. NO.

The monthly statements issued by BPI to its clients contain a notice worded as
follows: "If no error is reported in ten (10) days, account will be correct." Such
notice cannot be considered a waiver, even if CASA failed to report the error.
Neither is it estopped from questioning the mistake after the lapse of the ten-day
period.

This notice is a simple confirmation or "circularization" -- in accounting parlance

-- that requests client-depositors to affirm the accuracy of items recorded by the
banks. Its purpose is to obtain from the depositors a direct corroboration of the
correctness of their account balances with their respective banks. Internal or
external auditors of a bank use it as a basic audit procedure -- the results of which
its client-depositors are neither interested in nor privy to -- to test the details of
transactions and balances in the bank’s records. Evidential matter obtained from
independent sources outside a bank only serves to provide greater assurance of
reliability than that obtained solely within it for purposes of an audit of its own
financial statements, not those of its client-depositors.

5. NO.

CASA was unable to identify the particular instance -- enumerated in the Civil
Code -- upon which its claim for moral damages is predicated. Neither bad faith
nor negligence so gross that it amounts to malice can be imputed to BPI. Bad
faith, under the law, "does not simply connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and conscious doing of a
wrong, a breach of a known duty through some motive or interest or ill will that
partakes of the nature of fraud."

Imposed by way of correction for the public good, exemplary damages cannot be

recovered as a matter of right. There is no bad faith on the part of BPI for paying
the checks of CASA upon forged signatures. Therefore, the former cannot be said
to have acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
The latter, having no right to moral damages, cannot demand exemplary damages.