REPUBLIC BANK vs. EBRADA - G.R. No. L-40796
Ebrada (1975)
REPUBLIC BANK vs. MAURICIA T. EBRADA
G.R. No. L-40796         July 31, 1975
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 14 July 1952; and
requested that it be refunded he 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, 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, 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.
Republic V.
G.R. No. L-40796 July 31, 1975
Lessons Applicable: Forgery (Negotiable Instruments Law)
FACTS:
February 27, 1963: Mauricia T. Ebrada, encashed Back Pay
Check dated January 15, 1963 for P1,246.08 at Republic
Bank check was issued by the Bureau of Treasury
Bureau advised Republic Bank that the indorsement on the
reverse side of the check by the payee, "Martin Lorenzo"
was a forgery because he died as of July 14, 1952 and
requested a refund
July 11, 1966: Ebrada filed a Third-Party complaint against
Adelaida Dominguez who, in turn, filed on September 14,
1966 a Fourth-Party complaint against Justina Tinio.
March 21, 1967: City Court of Manila favored Republic
against Ebrada, for Third-Party plaintiff against Adelaida
Dominguez, and for Fourth-Party plaintiff against Justina
Tinio
CA: reversed Mauricia T. Ebrada claim against Adelaida
Dominguez and Domiguez against Justina Tinio
W/N: Ebrada should be held liable.
HELD: YES. Affirmed in toto.
under Section 65 of the Negotiable Instruments Law: 
Every person negotiating an instrument by delivery or by
qualified indorsement, warrants:
(a) That the instrument is genuine and in all respects what
it purports to be.
(b) That she has good title to it.
xxx xxx xxx
Every indorser who indorses without qualification
warrants to all subsequent holders in due course:
(a) The matters and things mentioned in subdivisions (a),
(b), and (c) of the next preceding sections;
(b) That the instrument is at the time of his indorsement
valid and subsisting.
Under action 23 of the Negotiable Instruments Law (Act
2031):
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 instruments,
or to give a discharge 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.

Martin Lorenzo (forged as original payee) > Ramon R.

Lorenzo (2nd indorser) = NO EFFECT

Ramon R. Lorenzo(2nd indorser)> Adelaida Dominguez

(third indorser)>Adelaida Dominguez to Ebrada who did
not know of the forgery = valid and enforceable barring
any claim of forgery drawee of a check can recover from
the holder the money paid to him on a forged instrument

not its duty to ascertain whether the signatures of the

payee or indorsers are genuine or not
indorser is supposed to warrant to the drawee that the
signatures of the payee and previous indorsers (NOT only
holders in due course) are genuine.

RATIONALE: . indorsers own credulity or recklessness, or

misplaced confidence was the sole cause of the loss. Why
should he be permitted to shift the loss due to his own
fault in assuming the risk, upon the drawee, simply
because of the accidental circumstance that the drawee
afterwards failed to detect the forgery when the check
was presented

Ebrada , upon receiving the check in question from

Adelaida Dominguez, was duty-bound to ascertain
whether the check in question was genuine before
presenting it to plaintiff Bank for payment

Based on the doctrine from Great Eastern Life Ins. Co. v.

Hongkong Shanghai Bank (1922) , bank should suffer the
loss when it paid the amount of the check in question to
Ebrada, but it has the remedy to recover from the Ebrada
the amount it paid

Ebrada immediately turning over to Adelaida Dominguez

(Third-Party defendant and the Fourth-Party plaintiff) who
in turn handed the amount to Justina Tinio on the same
date would not exempt her from liability because by doing
so, she acted as an accommodation party in the check for
which she is also liable under Section 29 of the Negotiable
Instruments Law (Act 2031):

An accommodation party is one who has signed the

instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of
lending his name to some other person. Such a person is
liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the
instrument knew him to be only an accommodation party.