FACTS:
By special arrangement with respondent bank (PNB), Metropolitan Waterworks and Sewerage System (MWSS) used personalize checks in drawing from one of its accounts with PNB. MWSS released twenty-three checks which were deposited in the respective accounts of Raul Dizon, Arturo Sison and Antonio Mendoza with different banks. It was later found that the three depositors were all fictitious persons.
ISSUE(S):
Whether or not petitioner is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law.
HELD:
YES. The petitioner was using its own personalized checks, instead of the official PNB Commercial blank checks. In the exercise of this special privilege, however, the petitioner failed to provide the needed security measures. Moreover, petitioner also did not furnish the respondent bank with samples of checks, pens, and inks or took other precautionary measures with the latter to safeguard its interests. The petitioner’s failure to reconcile its bank statements with its own records facilitated the fraudulent encashment. Even if the twenty-three (23) checks in question are considered forgeries, considering the petitioner’s gross negligence, it is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law.
