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Gempesaw vs.

CA account since all of the issued


G.R. No. 92244. February 9, 1993. checks were honored by the drawee
bank. These checks were all crossed
Facts: checks.

Natividad O. Gempesaw owns and It was only after the lapse of more
operates four grocery stores and that than 2 years that Gempesaw found
she maintains a checking account out about the fraudulent
with the Philippine Bank of manipulations of her bookkeeper.
Communications (drawee Bank) for Gempesaw made a written demand
easier payment of debts to her on respondent drawee Bank to credit
suppliers. her account with the money value of
the 82 checks totalling
Her customary practice were as P1,208,606.89 for having been
follows: wrongfully charged against her
account. Drawee Bank refused to
Checks were prepared by her trusted grant her demand.
bookkeeper, Alicia Galang; Checks,
together with the invoice receipts About 30 of the payees whose
reflecting her obligations with the names were specifically written on
suppliers, were submitted to her for the checks testified that they did not
signature; That she signs all the receive nor even see the subject
checks without bothering to verify the checks and that the indorsements
accuracy of the checks against the appearing at the back of the checks
corresponding invoices considering were not theirs.
the trust and confidence she reposed
upon her bookkeeper; Issuance and It was learned that all the 82 checks
delivery of the checks to the payees with forged signatures of the payees
were left to the bookkeeper; that she were brought to Ernest L. Boon,
did not verify whether checks were Chief Accountant of drawee who,
actually delivered to their respective without authority therefor, accepted
payees. them all for deposit to the credit
and/or in the accounts of Alfredo Y.
Although the drawee Bank notified Romero and Benito Lam.
her of all checks presented to and
paid by the bank, Gempesaw did not The Regional Trial Court, tried the
verify the correctness of the returned case and rendered a decision
checks nor if the payees actually dismissing the complaint as well as
received the checks in payment for the drawee Bank's counterclaim. On
the supplies she received. appeal, the Court of Appeals in a
decision affirmed the decision of the
Gempesaw issued 82 checks in RTC on two grounds, namely (1) that
favor of several suppliers for the Gempesaw’s gross negligence in
span of 2 years and the drawee bank issuing the checks was the
debited the total amount of proximate cause of the loss and (2)
P1,208,606.89 against her checking assuming that the bank was also
negligent, the loss must nevertheless her account with the amount of such
be borne by the party whose checks. Under Section 23 of the NIL,
negligence was the proximate cause she is now precluded from using the
of the loss. Hence, a petition for forgery to prevent the bank's debiting
review was filed before SC. of her account.

Issue: Whether or not the petitioner Section 23 of the NIL provides that
can raise the defense of forgery, "when a signature is forged or made
therefore the drawee bank alone without the authority of the person
shall bear the loss. whose signature it purports to be, it
is wholly inoperative, and no right to
Ruling: retain the instrument, or to give a
discharge therefor, or to enforce
Gempesaw precluded from using payment thereof against any party
forgery as a defense; Gempesaw’s thereto, can be acquired through or
negligence was proximate cause under such signature, unless the
of her loss. party against whom it is sought to
enforce such right is precluded from
Had Gempesaw examined her setting up the forgery or want of
records more carefully, she would authority."
have noticed discrepancies. Had
Gempesaw been more vigilant in Two types of cases of problems
going over her current account by arising from forged indorsements
taking careful note of the daily of checks
reports made by the drawee Bank on Problems arising from forged
her issued checks, or at least made indorsements of checks may
random scrutiny of her cancelled generally be broken into two types of
checks returned by drawee Bank at cases: (1) where forgery was
the close of each month, she could accomplished by a person not
have easily discovered the fraud associated with the drawer [for
being perpetrated by Alicia Galang, example a mail robbery]; and (2)
and could have reported the matter where the indorsement was forged
to the drawee Bank. by an agent of the drawer. This
difference in situations would
The drawee Bank then could have determine the effect of the drawer's
taken immediate steps to prevent negligence with respect to forged
further commission of such fraud. indorsements.
Thus, Gempesaw's negligence was
the proximate cause of her loss. And Duty of drawer; Effect of
since it was her negligence which negligence
caused the drawee Bank to honor
the forged checks or prevented it A depositor is under a duty to set up
from recovering the amount it had an accounting system and a
already paid on the checks, business procedure as are
Gempesaw cannot now complain reasonably calculated to prevent or
should the bank refuse to recredit render difficult the forgery of
indorsements, particularly by the performance of every kind
depositor's own employees. And if of obligation is also
demandable, but such
the drawer (depositor) learns that a liability may be regulated by
check drawn by him has been paid the courts according to the
under a forged indorsement, the circumstances.
drawer is under duty promptly to
report such fact to the drawee bank.
For his negligence or failure either to
discover or to report promptly the
fact of such forgery to the drawee,
the drawer loses his right against the
drawee who has debited his account
under the forged indorsement. In
other words, he is precluded from
using forgery as a basis for his claim
for recrediting of his account.

Banking business impressed with


public interest; Utmost diligence
required
The 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, drawee Bank
cannot claim it exercised such a
degree of diligence that is required of
it. There is no way that it be allowed
to escape liability for such
negligence. Its liability as obligor is
not merely vicarious but primary
wherein the defense of exercise of
due diligence in the selection and
supervision of its employees is of no
moment.

Premises considered, respondent


drawee Bank is adjudged liable to
share the loss with the petitioner on
a fifty-fifty ratio in accordance with
Article 172 which provides:

Responsibility arising from


negligence in the

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