Metropolitan Waterworks and Sewerage System vs Court of Appeals (July 1986)

G.R. No. L-62943 – 143 SCRA 20 – Mercantile Law – Negotiable Instruments Law – Liabilities of Parties – Forgery – 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 by Mesina Enterprises. These personalized checks were 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,. 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,. 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,. PNB refused. The trial court ruled in favor of MWSS but the Court of Appeals reversed the trial court’s 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 MWSS’s 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.

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