Republic Bank vs.

Ebrada
G.R. No. L-40796
July 31, 1975

Martin, J.:

Facts:
Respondent Ebrada encashed a backpay check with Republic Bank.  The Bureau of
Treasury then advised the bank that the alleged indorsement of the check by one
“Martin Lorenzo” was a forged because the same has already been dead long ago. The
former requested that it be refunded with the sum debited from its account. The bank
refunded the amount to the Bureau and demanded upon Ebrada the sum in question.
The respondent, however, refused to pay.

Issue:
1. Whether the bank can recover from Ebrada as the last indorser of the check with
the forged indorsement

2. Whether the existence of one forged signature in the check will render void all
the other negotiations of the check with respect to the other parties whose
signature are genuine

Held:
1. Republic 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 latter the amount it
paid to her because as last indorser of the check, she has warranted that she
has good title to it even if in fact she did not because the payee of the check was
already dead 11 years before the check was issued.

2. The negotiation of the check in question from Martin Lorenzo, the original payee
whose indorsement was forged, to the second indorser, should be declared of no
affect, but the negotiation of the aforesaid check from the second indorser to the
third indorser, and from the third indorser to Ebrada who did not know of the
forgery, should be considered valid and enforceable, barring any claim of forgery.