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China Banking Corp. Vs Welbuilt Constru. Corp.

This case involved 84 checks from Welbuilt Construction Corp's account with China Banking Corporation that were encashed over two years. Welbuilt's president claimed the amounts and signatures had been altered without authorization. China Banking argued the secretary was an authorized representative so the alterations were valid. Both lower courts found in favor of Welbuilt. The Supreme Court upheld this, finding the signatures were forged based on NBI analysis. It also found China Banking negligent for repeatedly accepting altered checks without suspicion, given the quantity and circumstances, as a bank should have been able to identify forgeries through its trained check verifier. China Banking was thus held liable to reimburse Welbuilt for the unauthorized and altered checks.

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317 views1 page

China Banking Corp. Vs Welbuilt Constru. Corp.

This case involved 84 checks from Welbuilt Construction Corp's account with China Banking Corporation that were encashed over two years. Welbuilt's president claimed the amounts and signatures had been altered without authorization. China Banking argued the secretary was an authorized representative so the alterations were valid. Both lower courts found in favor of Welbuilt. The Supreme Court upheld this, finding the signatures were forged based on NBI analysis. It also found China Banking negligent for repeatedly accepting altered checks without suspicion, given the quantity and circumstances, as a bank should have been able to identify forgeries through its trained check verifier. China Banking was thus held liable to reimburse Welbuilt for the unauthorized and altered checks.

Uploaded by

Jude Iklamo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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3. China Banking Corporation vs Welbuilt Construction Corp.

(GR No. 163990, July 23, 2018)

Facts: Respondent Corp had an existing account with China Banking Corp, whose branch office was
located adjacent to that of the former’s.

An action was filed with RTC by respondent, through its president Eugenio Gonzalez, against China
Banking Corp for its alleged negligence in honoring 84 checks in a span of about two years presented for
encashment by respondent corp’s secretary. Accordingly, amounts and figures in said checks were either
altered, signatures forged, and unauthorized by Gonzalez—an authorized signatory thereof.

Respondent insisted that the visible alterations, erasures, superimpositions and other irregularities
immediately noticeable on the faces of those checks, the unreasonable frequency of encashment, as
well as the huge amount involved in each check, should have made petitioner suspicious of their validity
and genuineness, and that it should have even reported the same to respondent, considering the office
was just close by.

On the contrary, petitioner argued, among others, that the alterations in those checks, assuming
arguendo, were duly authenticated by respondent corp’s authorized representative, and that it never
had any suspicion of infirmities on said checks considering the fiduciary relationship between
respondent corp’s secretary and Gonzalez.

In its decision, RTC ruled in favor or respondent; CA, similarly, found the same. Thus, this petition.

Issue: WON petitioner is liable to reimburse respondent for the encashed unauthorized and altered
checks.

Held: Yes.

The Court, in deciding on the issue of forged signatures on the checks, cited Sec. 23 of NIL, that says
“When a signature is forged or made without authority of the person whose signature it purports to be,
it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to
enforce payment thereof against any party thereto, can 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 authority”; and as supported by the conclusive findings of the NBI that those signatures were
not made by the same person, the Court was irresistibly led to a belief of fraud/forgery. Petitioner, for
years of its operation, and through its check verifier who had undergone training, should have been able
to tell whether or not the instruments were forged.

As for those checks that bore the authentic signatures of authorized signatory, but were obtained
through deception by the guise of validating the alterations made therein, the Court opined that, in
ordinary circumstances, petitioner cannot be faulted for honoring one or two altered checks. However,
with the peculiarity surrounding the “encashment/honoring” of those instruments, taking into
consideration the quantity of altered checks being accepted and encashed by it, and as what could be
inferred from the judicial testimonies of witnesses, the court held that indeed negligence on the part of
petitioner was blatant, and that such repeated mistake of incompetence is impermissible for a bank to
commit; and therefore, cannot be tolerated.

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