Metropolitan Waterworks and Sewerage System vs Court of Appeals Negotiable Instruments Law Liabilities of Parties 143 SCRA 20 Forgery

ery Negligence of Drawer Metropolitan Waterworks and Sewerage System (MWSS) had an account with PNB. When it was still called NAWASA, MWSS made a special arrangement with PNB so that it may have personalized checks to be printed Mesina Enterprises. These personalized checks are the ones being used by MWSS in its business transactions. From March to May 1969, MWSS issued 23 checks to various payees in the aggregate amount of P320,636.26. During the same months, another set of 23 checks containing the same check numbers earlier issued were forged. The aggregate amount of the forged checks amounted to P3,457,903.00. This amount was distributed to the bank accounts of three persons: Arturo Sison, Antonio Mendoza, and Raul Dizon. MWSS then demanded PNB to restore the amount of P3,457,903.00. PNB refused. The trial court ruled in favor of MWSS but the Court of Appeals reversed the trial courts decision. ISSUE: Whether or not PNB should restore the said amount. HELD: No. MWSS is precluded from setting up the defense of forgery. It has been proven that MWSS has been negligent in supervising the printing of its personalized checks. It failed to provide security measures and coordinate the same with PNB. Further, the signatures in the forged checks appear to be genuine as reported by the National Bureau of Investigation so much so that the MWSS itself cannot tell the difference between the forged signature and the genuine one. The records likewise show that MWSS failed to provide appropriate security measures over its own records thereby laying confidential records open to unauthorized persons. Even if the twenty-three (23) checks in question are considered forgeries, considering the MWSSs gross negligence, it is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law. The Supreme Court further emphasized that forgery cannot be presumed. It must be established by clear, positive, and convincing evidence. This was not done in the present case.

FACTS: MWSS had an account from PNB. Its treasurer, auditor, and General Manager are the ones authorized to sign checks. During a period of time, 23 checks were

drawn and debited against the account of petitioner. Bearing the same check numbers, the amounts stated therein were again debited from the account of petitioner. The amounts drawn were deposited in the accounts of the payees in PCIB. It was found out though that the names stated in the drawn checks were all fictitious. Petitioner demanded the return of the amounts debited but the bank refused to do so. Thus, it filed a complaint.

HELD: There was no categorical finding that the 23 checks were signed by persons other than those authorized to sign. On the contrary, the NBI reports shows that the fraud was an inside job and that the delay in the reconciliation of the bank statements and the laxity and loss of records control in the printing of the personalized checks facilitated the fraud. It further doesnt provide that the signatures were forgeries. Forgery cannot be presumed. It should be proven by clear, convincing and positive evidence. This wasnt done in the present case. The petitioner cannot invoke Section 23 because it was guilty of negligence not only before the questioned checks but even after the same had already been negotiated.