Great Eastern Insurance vs Hongkong Shanghai Bank Corp. (GR No 18657, 23 Aug 1922)

Great Eastern Insurance vs Hongkong Shanghai Bank Corp. (GR No 18657, 23 Aug 1922)

Facts:
The plaintiff is an insurance corporation, which drew a check in favor of Melicor. This was stolen by Maasim, forged the signature of Melicor and deposited the check to his account in PNB. Thereafter, PNB endorsed the check to HSBC who later debited the account of plaintiff. Plaintiff believed all along that Melicor received the payment. Upon knowledge of the debit HSBC did on its account, it demanded that the same amount be credited.
May 3, 1920: Great Eastern Life Ins. Co. (Eastern) drew its check for P2,000 on the Hongkong and Shanghai Banking Corporation (HSBC) payable to the order of Lazaro Melicor.
E. M. Maasim fraudulently obtained possession of the check, forged Melicor's signature, as an endorser, and then personally endorsed and presented it to the Philippine National Bank (PNB) and it was placed to his credit.
Next day, PNB endorsed the check to the HSBC who paid it HSBC sent a bank statement to the Eastern showing the amount of the check was charged to its account, and no objection was made 4 months after the check was charged, it developed that Lazaro Melicor, to whom the check was made payable, had never received it, and that his signature, as an endorser, was forged by Maasim, Eastern promptly made a demand upon the HSBC to credit the amount of the forged check Eastern filed against HSBC and PNB
RTC: dismissed the case

Issue:
Whether the delivery of a check produces the effect of payment only when it is cashed.

Issue:
Yes, Lower court is reversed. Eastern against HSBC who can claim against PNB forgery was that of Melicor (payees and NOT the maker) Eastern received it banks statement, it had a right to assume that Melicor had personally endorsed the check, and that, otherwise, the bank would not have paid it Section 23 of Negotiable Instruments Law:
When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
The Philippine National Bank had no license or authority to pay the money to Maasim or anyone else upon a forge signature.
Its remedy is against Maasim to whom it paid the money.​