G.R. No.

149454 May 28, 2004

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs.
CASA MONTESSORI INTERNATIONALE LEONARDO T. YABUT, respondents.

FACTS:
On November 8, 1982, CASA Montessori International opened Current AccouNT with BPI with CASAs President Lebron
as one of its authorized signatories. In 1991, after conducting an investigation, plaintiff discovered that nine of its checks
had been encashed by a certain Sonny D. Santos since 1990 in the total amount of P782,000.00. It turned out that
Santos with account at BPI Greenbelt Branch was a fictitious name used by third party defendant Leonardo T. Yabut who
worked as external auditor of CASA. Third party defendant voluntarily admitted that he forged the signature of Lebron
and encashed the checks. In 1991, plaintiff filed Complaint for Collection with Damages against defendant bank praying
that the latter be ordered to reinstate the amount of P782,500.00 with interest. RTC rendered decision in favor of the
plaintiff. CA modified decision holding CASA as contributory negligent hence ordered Yabut to reimburse BPI half the
total amount claimed and CASA, the other half. It also disallowed attorneys fees and moral and exemplary damages.

ISSUES:
First, was there forgery under the Negotiable Instruments Law (NIL)?
Second, were any of the parties negligent and therefore precluded from setting up forgery as a defense?
Third, should moral and exemplary damages, attorneys fees, and interest be awarded?

HELD:
In the present case, we hold that there was forgery of the drawers signature on the check. The counterfeiting of
any writing, consisting in the signing of anothers name with intent to defraud, is forgery. A forged signature is a
real13 or absolute defense, and a person whose signature on a negotiable instrument is forged is deemed to
have never become a party thereto and to have never consented to the contract that allegedly gave rise to it.
Negligence Attributable to BPI Alone. Having established the forgery of the drawers signature, BPI -- the drawee
-- erred in making payments by virtue thereof. The forged signatures are wholly inoperative, and CASA -- the
drawer whose authorized signatures do not appear on the negotiable instruments -- cannot be held liable
thereon. Neither is the latter precluded from setting up forgery as a real defense.
Moral Damages Denied-- In the absence of a wrongful act or omission, or of fraud or bad faith, moral damages
cannot be awarded. The adverse result of an action does not per se make the action wrongful, or the party liable
for it. One may err, but error alone is not a ground for granting such damages.

Exemplary Damages Also Denied Imposed by way of correction for the public good, exemplary damages
cannot be recovered as a matter of right. As we have said earlier, there is no bad faith on the part of BPI for
paying the checks of CASA upon forged signatures. Therefore, the former cannot be said to have acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. The latter, having no right to moral damages,
cannot demand exemplary damages.

Attorneys Fees Granted-- In the present case, BPI persistently denied the claim of CASA under the NIL to
recredit the latters account for the value of the forged checks. This denial constrained CASA to incur expenses
and exert effort for more than ten years in order to protect its corporate interest in its bank account. When the
act or omission of the defendant has compelled the plaintiff to incur expenses to protect the latters interest or
where the court deems it just and equitable, attorneys fees may be recovered.