Petitioner’s checks were drawn and deposited to respondent CBC. It was discovered that the signature of payee was forged.
Whether or not a drawee bank could claim reimbursement from collecting bank in case of forgery.
YES. Both banks were negligent in the selection and supervision of their employees resulting in the encashment of the forged checks by an impostor. Both banks were not able to overcome the presumption of negligence in the selection and supervision of their employees. Considering the comparative negligence of the two (2) banks, court ruled that the demands of substantial justice are satisfied by allocating the loss and the costs of the arbitration proceeding and the cost of litigation on a 60-40 ratio.