Samsung Construction Corporation, Inc. v.

Far East Bank and Trust Company

FACTS:
Samsung Construction held an account with Far East Bank. One day, a check worth P999,500 payable to cash 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.

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.

ISSUES: WON Samsung could set up the defense of forgery in Sec. 23

RULING:
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.