METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM vs. CA - G.R. No. L-62943

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM vs. CA

and THE PHILIPPINE NATIONAL BANK

G.R. No. L-62943         July 14, 1986

By special arrangement with PNB, MWSS used personalized checks in drawing from its account. The checks were printed by its printer, F. Mesina Enterprises. 23 checks were paid and cleared by PNB, and debited against MWSS’ account from March to May 1969. The checks were deposited by payees Raul Dizon, Arturo Sison, and Antonio Mendoza in their account with PCIBank. Said persons were later found to be fictitious. MWSS requested PNB to restore the amount debited due to the 23 checks, allegedly forged, to its account. The bank refused. Hence, the present action.

Issue: Whether or not the bank shall bear the loss resulting from the alleged forged checks.

Held: No. There was no express and categorical finding that the 23 checks were forged or signed by persons other than the authorized MWSS signatories. Forgery is not presumed but should be established by clear, positive and convincing evidence. MWSS is barred from setting up defense of forgery under Section 23 of the Negotiable Instruments Law as MWSS committed gross negligence in the printing of its personalized checks, failed to reconcile its bank statements with its own records, and failed to provide appropriate security measures over its own record. PNB, the drawee bank, had taken necessary measures in the detection of forged checks and the prevention of their fraudulent encashment through constant reminders to all its current account bookkeepers informing them of the activities of forgery syndicates. MWSS’ gross negligence was the proximate cause of the loss (P3 million), and should bear the loss.