FACTS:

The petitioner and the private respondent were parties to a civil case before the RTC of Makati involving the alleged encashment of three checks that were claimed to have been forged. The plaintiff corporation argued that the bank was negligent in verifying the encashment and detecting the forgery, resulting in the wrongful encashment of the checks. The plaintiff requested reimbursement from the bank, but the bank failed to fulfill this obligation. The plaintiff presented evidence that the signatures on the checks were forged. The defendant bank, however, argued that the plaintiff's office was burglarized and that the checks went through standard bank procedures before being encashed. The trial court ruled in favor of the bank, finding no preponderance of evidence to support the plaintiff's claim of forgery.

In another proceeding, the Court of Appeals reversed the trial court's decision and ordered the petitioner bank to reimburse the private respondent. The court held that the private respondent did not need to prove the forgery of the signatures on the checks and that the bank was negligent in detecting the forgery and following its arrangements with the private respondent. The petitioner bank filed a petition for review, arguing that the Court of Appeals erred in its findings.

The petitioner contended that it exercised due care and diligence in verifying the signatures on the checks and claimed that it was the private respondent who was negligent in the care and custody of the checks. It argued that the private respondent failed to inform the bank of the alleged burglary and reconcile its account balances. The petitioner also requested that it should not be compelled to pay the amount awarded to the private respondent and to be awarded attorney's fees.

The respondent argued that the petitioner should have filed a petition for review by certiorari instead of a mere petition for review. It maintained that the Court of Appeals' finding of negligence was a question of fact that cannot be disturbed on appeal. The respondent also argued that the issue of forgery was sufficiently proven.

The court, acknowledging that the findings of fact by the Court of Appeals are usually conclusive and binding, found inconsistencies between the factual findings of the trial court and the appellate court, leading to the merit of the appeal.

ISSUES:

1. Whether the signatures on the checks in question were forged.

2. Whether the signatures were deemed forgery given the affirmative defenses set forth in petitioner's answer.

3. Whether the petitioner (bank) or the respondent (corporation) was negligent in the handling of the checks.

4. Whether the respondent is entitled to reimbursement of P300,000, plus interest and attorney's fees.

RULING:

1. No sufficient proof of forgery The Supreme Court found that the Court of Appeals erred in holding that forgery was established. The private respondent failed to produce the originals of the checks, and the proper procedure in the investigation of the disputed handwriting was not observed. Furthermore, the opinion of the expert witness, who relied on presumptions rather than verified genuine signatures, could not be given weight.

2. Best Evidence Rule not complied with The Supreme Court noted a violation of Section 3, Rule 130 of the Rules of Court, which demands the production of the original document unless an exception applies. None of the exceptions were proven in this case.

3. Petitioner not negligent The Supreme Court held that the private respondent was negligent in failing to report the burglary and not taking steps to prevent unauthorized use of the checks immediately.

4. Petitioner's entitlement The Court found that the petitioner exercised due diligence in processing the checks. The payment of checks was regular on their face, and any irregularities were due to the respondent's own negligence. Therefore, the respondent was not entitled to reimbursement.

PRINCIPLES:

• Best Evidence Rule Section 3, Rule 130 of the Rules of Court requires the original document to be produced to prove its contents unless an exception applies.

• Forgery Must be established using genuine specimens for comparison, which must be authenticated. Expert testimony alone, without the proper procedure and basis, holds no weight.

• Negligence Parties must exercise due diligence in handling financial instruments. Failure to take reasonable care can transfer the burden of loss.

• Genuineness of Handwriting Established by direct testimony, prior acknowledgment by the person, or by documents recognized in ordinary business transactions.