Samsung Construction Company Philippines, Inc. vs. FEBTC

Samsung Construction Corporation, Inc. v. Far East Bank and Trust Company G.R. No. 129015; August 13, 2004; Tinga, J. Digest prepared by Jackie Canlas FACTS:  Samsung Construction held an account with Far East Bank.  One day, a check worth P999,500 payable to case was presented by a certain Roberto Gonzaga to the Makati Branch of Far East Bank. The check was certified to be true by Jose Sempio, the assistant accountant of Samsung, who also happened to be present in the bank during the time that the check was presented.  Three bank personnel (teller, Assistant Cashier, and another bank officer) examined the check and compared the signature appearing on the check with the specimen signatures of Samsung’s President Jong. After ascertaining that the signature was genuine, and that the account had sufficient funds, Gonzaga was asked to submit 3 proof of his identity. Eventually, Gonzaga was able to encash the check.  When Samsung discovered the unauthorized withdrawal, it filed a complaint against FEBTC for violation of Sec 23 of the Negotiable Instruments Law.  During the trial, both parties presented their respective expert witnesses: o Samsung presented NBI Document Examiner Roda Flores. o FEBTC presented PNP Crime Laboratory document Examiner Rosario Perez.  RTC rendered judgment in favor of Samsung, holding FEBTC liable. It gave more credence to the testimony of NBI Examiner Flores.  CA reversed the RTC and absolved FEBTC from any liability. o The contradictory findings of NBI and PNP created doubt as to the whether there was forgery. o Assuming there was forgery, it was due to the negligence of Samsung. o As held in PNB v. National City Bank of NY, as between 2 innocent persons, loss would be borne by the negligent party.  Samsung – 45 to SC. ISSUES/HELD: WON the check was forged – YES WON Samsung could set up the defense of forgery in Sec. 23 – YES RULING: Petition granted. RATIO: WON the check was forged – YES (The details of the forgery are not really important to the lesson. The Court just needed to answer this issue before the 2 nd issue can be resolved.)  The testimony of the NBI Examiner was more credible because even the testimony of the PNP Examiner reveals that there are a lot of differences in the questioned signature as compared to the standard signature specimen. The PNP Examiner tried to excuse the “differences” by asserting that there were mere “variations”, but such conclusion was not supported by sufficient cogent reasons.

The most telling difference between the question and genuine signatures examined by the PNP is in the final upward stroke in the signature, or “the point to the short stroke of the terminal in the capital letter “L”. The difference was glaring, yet the PNP Examiners brushed this off as a mere variation. The NBI Examiner testified that there is a free rapid continuous execution or stroke as shown by the tampering terminal stroke of the signatures whereas the questioned signature is a hesitating slow drawn execution stroke. The Court also compared the qualifications of the NBI Examiner to that the PNP Examiner. The NBI Examiner was more experienced (15 years) and had examined more than 50,000-55,000 questioned documents, as opposed to the PNP Examiner who admitted to having examined only around 500 documents. o

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WON Samsung could set up the defense of forgery in Sec. 23 – YES  The general rule is to the effect that a forged signature is wholly inoperative, and payment made through or under such signature is ineffectual or does not discharge the instrument. If payment is made, the drawee cannot charge it to the drawer’s account. The traditional justification for the result is that the drawee is in a superior position to detect a forgery because he has the maker’s signature and is expected to know and compare it.  Under Sec 23 of the Negotiable Instruments Law, forgery is a real or absolute defense by the party whose signature is forged. Such liability attaches even if the bank exerts due diligence and care in preventing such faulty discharge.  Although the Court recognized that Sec 23 bars a party from setting up the defense of forgery if it is guilty of negligence, it was unable to conclude that Samsung was guilty of negligence. o The bare fact that the forgery was committed by an employee of the party whose signature was forged cannot necessarily imply that such party’s negligence was the cause for the forgery. o Admittedly, the record does not establish what measures Samsung employed to safeguard its blank checks. Jong’s testimony regarding the use of a safety box by Kyu was considered hearsay. But when CA ruled that Samsung was negligent, it did not really explain how and why. o In the absence of evidence to the contrary, the court concluded that there was no negligence, the presumption being that every person takes ordinary care of his concerns.  The CA Decision extensively discussed the FEBTC’s efforts in establishing that there no negligence on its part in the acceptance and payment of the forged check. However, the degree of diligence exercised by the bank would be irrelevant if the drawer is not precluded from setting up the defense of forgery under Sec 23 by his own negligence. WON FEBTC exercised extraordinary diligence required of it by the situation – NO (This is irrelevant but the Court nevertheless made a comment since it was brought up by FEBTC.)  The fact that the check was made out in the amount of nearly 1M is unusual enough ti require a higher degree of caution on the part of the bank. FEBTC confirmed this through its own internal procedures. As the amount increases, the number of officers who need to approve it also increases.

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Not only did the amount nearly total 1M, it was payable to cash. This should have aroused suspicion of the banks, as it is not ordinary business practice for a check for such large amount to be made payable to case or to bearer, instead of to the order of a specified person. Gonzaga did not carry any written proof that he was authorized by Samsung to encash the check. FEBTC Senior Assistant Cashier admitted that the bank tried, but failed, to contact Jong over the phone to verify. The bank just heavily relied on the say-so of Sempio. FEBTC Accountant Velez even admitted that she did not personally know Sempio, and had met Sempio for the 1 st time only on the day the check was enchased.