REPUBLIC BANK vs. MAURICIA T. EBRADA

​REPUBLIC BANK vs. MAURICIA T. EBRADA
G.R. No. L-40796         July 31, 1975

Facts:
Respondent, Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank -Escolta Branch. The Bureau of Treasury, which issued the check advised the bank that the alleged indorsement of the check by one “Martin Lorenzo” was a forgery as the latter has been dead since July 14, 1952; and requested that it be refunded the sum deducted from its account. The bank refunded the amount to the Bureau and demanded upon Ebrada the sum in question, who refused.

Hence, the present action.

Issue:
Whether or not the bank can recover from the last indorser.

Held:
According to Section 23 of the Negotiable Instruments Law (NIL), where the signature on a negotiable instrument is forged, the negotiation of the check is without force or effect. However, following the ruling in Beam vs. Farrel (US case), where a check has several indorsements on it, only the negotiation based on the forged or unauthorized signature which is inoperative. The last indorser, Mauricia Ebrada, was duty-bound to ascertain whether the check was genuine before presenting it to the bank for payment. Her failure to do so makes her liable for the loss and the Bank may recover from her the money she received for the check. Had she performed her duty, the forgery would have been detected and fraud defeated. Even if she turned over the amount to Dominguez immediately after receiving the cash proceeds of the check, she is liable as an accommodation party under Section 29 of the Negotiable Instruments Law.