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SEC 63 On January 15, 1963, the Bureau of Treasury issued a back pay check to

Martin Lorenzo in the amount of P1,246.08. The drawee named therein was
ANG TIONG v TING Republic Bank. The check was subsequently indorsed to Ramon Lorenzo,
then to Delia Dominguez and then to Mauricia Ebrada. Ebrada encashed the
22 SCRA 713 Commercial Law Negotiable Instruments Law check with the Republic Bank. Republic Bank paid the amount of the check
Accommodation Party General Indorser to Ebrada. Ebrada, upon receiving the cash, gave it to Dominguez;
Dominguez in turn gave the cash to Ramon Lorenzo.
FACTS:
Later, the Bureau of Treasury notified that the check was a forgery because
In August 1960, Lorenzo Ting issued a check in the amount of P4,000.00 the payee named therein (Martin Lorenzo) was actually dead 11 years ago
payable to cash or bearer. At the back of the check, Felipe Ang affixed his before the check was issued. Republic Bank refunded the amount to the
signature. The check later on ended up in the hands of Ang Tiong. When Bureau of Treasury. The bank then demanded Ebrada to refund them.
Tiong presented the check with the bank, it was dishonored. Tiong then sued
Lorenzo and Felipe. Tiong won the collection suit. Felipe appealed on the ISSUE: Whether or not Republic Bank may recover from Ebrada.
ground that he should be allowed to recover from Lorenzo because Felipe is
a guarantor and not an indorser. Felipe also avers, in the alternative, that he HELD: Yes. Ebrada, being the last indorser, warranted the genuineness of
is a mere accommodation party and that fact is known by Tiong. As such, the signatures of the payee and the previous indorsers. The drawee bank is
Tiong should make Lorenzo the person directly and primarily liable, not not duty bound to ascertain whether or not the signatures of the payee and
Felipe. the indorsers are genuine. One who purchases a check or draft is bound to
satisfy himself that the paper is genuine and that by indorsing it or presenting
ISSUE: Whether or not Felipes arguments are correct. it for payment or putting it into circulation before presentation he impliedly
asserts that he has performed his duty and the drawee (in this case Republic
HELD: No. The check is a negotiable instrument. What governs the Bank) who has paid the forged check, without actual negligence on his part,
transaction is the Negotiable Instruments Law (NIL) and not the Civil Code may recover the money paid from such negligent purchasers.
provisions on guaranty. Felipe is not a guarantor. Under Section 63 of the
NIL a person signing in blank a negotiable instrument, such as the check in But Ebrada did not profit from this because she, upon receiving the
this case, is considered as a general indorser. All Felipe did is to affix his encashment, gave the same to Dominguez?
signature at the back of the check such already qualifies as a blank
indorsement. She is still liable because she is considered as an accommodation party
pursuant to Section 29 of the Negotiable Instruments Law. An
A person placing his signature upon an instrument otherwise than as maker, accommodation party is one who has signed the instrument as maker,
drawer or acceptor is a general indorser, unless he clearly indicates drawer, acceptor, or indorser, without receiving value therefor, and for the
plaintiff appropriate words his intention to be bound in some other capacity, purpose of lending his name to some other person. Such a person is liable
which he did not do. And section 66 ordains that every indorser who on the instrument to a holder for value, notwithstanding such holder at the
indorses without qualification, warrants to all subsequent holders in due time of taking the instrument knew him to be only an accommodation party.
course (a) that the instrument is genuine and in all respects what it purports
to be; (b) that he has a good title to it; (c) that all prior parties have capacity Republic Bank vs. Ebrada
to contract; and (d) that the instrument is at the time of his indorsement valid
and subsisting. In addition, he engages that on due presentment, it shall be GR L-40796, 31 July 1975
accepted or paid, or both, as the case may be, and that if it be dishonored, -forgery
he will pay the amount thereof to the holder.
FACTS:
Anent Felipes alternative allegation that he is exempt as an accommodation Respondent Ebrada encashed a back pay check dated January 15, 1963 at
Republic Bank. The Bureau of Treasury, which issued the check advised the
party, the same is not tenable. Section 29 of the NIL is clear when it states bank that the alleged indorsement of the check by one Martin Lorenzo was
that an accommodation party is liable on the instrument to a holder for a forgery as the latter has been dead since 14 July 1952; and requested that
value, notwithstanding that such holder at the time of taking the instrument it be refunded he sum deducted from its account. The bank refunded the
knew him to be only an accommodation party. amount to the Bureau and demanded upon Ebrada the sum in question, who
refused.
Further, whether or not Felipe should be allowed to recover from the maker,
ISSUES:
Lorenzo, does not affect Tiongs right to recover from any of them (Lorenzo 1) Whether the bank can recover from Ebrada who was the last
the maker, or Felipe the indorser). 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
SEC 65 REPUBLIC v EBRADA parties whose signature are genuine.

65 SCRA 680 Mercantile Law Negotiable Instruments Law RULING:


Consideration Forgery Liability of Accommodation Party 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 against whom it is sought to enforce such right is precluded from setting up
issued. the forgery or want of authority.
2) The negotiation of the check in question from Martin Lorenzo, the Martin Lorenzo (forged as original payee) > Ramon R. Lorenzo
original payee whose indorsement was forged, to the second indorser, (2nd indorser) = NO EFFECT
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 Ramon R. Lorenzo(2nd indorser)> Adelaida Dominguez (third
enforceable, barring any claim of forgery. indorser)>Adelaida Dominguez to Ebrada who did not know of the
forgery = valid and enforceable barring any claim of forgery
**The existence of one forged signature in the check will not render void all
the other negotiations of the check with respect to the other parties whose
signature are genuine. As last indorser of the check, petitioner warranted
that she has good title to it even if in fact she did not because the payee of drawee of a check can recover from the holder the money paid to
the check was already dead 11 years before the check was issued. him on a forged instrument

DIGEST #2
FACTS: not its duty to ascertain whether the signatures of the
February 27, 1963: Mauricia T. Ebrada, encashed Back Pay payee or indorsers are genuine or not
Check dated January 15, 1963 for P1,246.08 at Republic Bank

indorser is supposed to warrant to the


check was issued by the Bureau of Treasury drawee that the signatures of the payee and previous indorsers (NOT
only holders in due course) are genuine

Bureau advised Republic Bank that the indorsement on the


reverse side of the check by the payee, "Martin Lorenzo" was a RATIONALE: . indorsers own credulity or
forgery because he died as of July 14, 1952 and requested a refund 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
July 11, 1966: Ebrada filed a Third-Party complaint against Adelaida assuming the risk, upon the drawee, simply because of the accidental
Dominguez who, in turn, filed on September 14, 1966 a Fourth-Party circumstance that the drawee afterwards failed to detect the forgery
complaint against Justina Tinio. when the check was presented

March 21, 1967: City Court of Manila favored Republic against Ebrada , upon receiving the check in question from Adelaida
Ebrada, for Third-Party plaintiff against Adelaida Dominguez, and for Dominguez, was duty-bound to ascertain whether the check in
Fourth-Party plaintiff against Justina Tinio question was genuine before presenting it to plaintiff Bank for payment

CA: reversed Mauricia T. Ebrada claim against Adelaida Based on the doctrine from Great Eastern Life Ins. Co. v.
Dominguez and Domiguez against Justina Tinio 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
W/N: Ebrada should be held liable.

Ebrada immediately turning over to Adelaida Dominguez (Third-


HELD: YES. Affirmed in toto. Party defendant and the Fourth-Party plaintiff) who in turn handed the
under Section 65 of the Negotiable Instruments Law: 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):
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. An accommodation party is one who has signed the instrument as maker,
xxx xxx xxx drawer, acceptor, or indorser, without receiving value therefor, and for the
Every indorser who indorses without qualification warrants to all subsequent purpose of lending his name to some other person. Such a person is liable
holders in due course: on the instrument to a holder for value, notwithstanding such holder at the
(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the time of taking the instrument knew him to be only an accommodation party.
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): REPUBLIC v EBRADA

Facts: Mauricia T. Ebrada (defendant) encashed a check at the Republic


When a signature is forged or made without the authority of the person Bank. The check was issued by the Bureau of Treasury and was indorsed
whose signature it purports to be, it is wholly inoperative, and no right to several times before falling into the hands of the defendant. Defendant
retain the instruments, or to give a discharge thereof against any party managed to cash the check (worth around 1200 pesos). It was however
thereto, can be acquired through or under such signature unless the party
discovered that the original payee, Martin Lorenzo, was already dead for
more than a decade. Therefore the initial endorsement must have been a America as drawee bank honored the checks and paid the proceeds to
forgery. Associated Bank as the collecting bank. When Miller failed to deliver to BA-
Finance the proceeds of the assigned trade receivables, BA-Finance filed a
collection suit against Miller and impleaded the three representative of the
Issues:
latter.
(1) Whether or not Ebrada is liable to return the amount that shecashed.

(2) Whether or not a drawee of a check (bank) can recover from the holder Bank of America filed a third party complaint against Associated Bank. In its
(Ebrada) the money paid from a forged instrument. answer to the third party complaint, Associated Bank admitted having
received the four checks for deposit in the joint account of Ching Uy Seng
and Uy Chung Guan Seng, but alleged that Ching Uy Seng, being one of the
Held: Sec. 23 of the Negotiable Instruments Law dictates that wherethe corporate officers of Miller, was duly authorized to act for and on behalf of
signature on the negotiable instrument is forged then the negotiation of Miller.
the check is without force or effect. In this specific case the court held that
since the check was endorsed multiple times already it was not the
Issues: Whether or not Bank of America is liable to pay BA-Finance and
responsibility of the bank to ascertain if the signatures of the previous
whether or not Associated Bank should reimburse Bank of America the
endorsements were genuine or not. It was the responsibility of the holder of amount of the four checks.
the check to satisfy himself that the paper is genuine. The acts of presenting
the check for payment or putting it into circulation asserts that the holder has
performed his duty to ascertain the validity of the instrument. Everyone with Held: The bank on which a check is drawn, known as the drawee bank, is
under strict liability, based on the contract between the bank and its customer
even the least experience in business knows that no business man would
(drawer), to pay the check only to the payee or the payees order. The
accept a check in exchange for money or goods unless he is satisfied that drawers instructions are reflected on the face and by the terms of the check.
the check is genuine. If he is deceived he has suffered a loss of his cash or When the drawee bank pays a person other than the payee named on the
goods through his own mistake. Ebrada, upon receiving the check in check, it does not comply with the terms of the check and violates its duty to
question, was duty bound to ascertain if it was genuine or not before charge the drawers account only for properly payable items. On the part of
presenting it to plaintiff Bank. The Bank may recover from Ebrada the Associated Bank, the law imposes a duty of diligence on the collecting bank
amount shereceived for the check. to scrutinize checks deposited with it for the purpose of determining their
genuineness and regularity. The collecting bank being primarily engaged in
banking holds itself out to the public as the expert and the law holds it to a
high standard of conduct. In presenting the checks for clearing and for
payment, the defendant [collecting bank] made an express guarantee on the
validity of all prior endorsements. Thus, stamped at the back of the checks
are the defendants clear warranty. As the warranty has proven to be false
BANK OF AMERICA v ASSOCIATED CITIZENS BANK and inaccurate, Associated Bank is liable for any damage arising out of the
falsity of its representation.
he Bank is under strict liability, based on the contract between the
bank and its customer (drawer), to pay the check only to the payee or
the payees order. The drawers instructions are reflected on the face Held: A bank that regularly processes checks that are neither payable to
and by the terms of the check. When the drawee bank pays a person the customer nor duly indorsed by the payee is apparently grossly negligent
other than the payee named on the check, it does not comply with the in its operations. This Court has recognized the unique public interest
terms of the check and violates its duty to charge the drawers account possessed by the banking industry and the need for the people to have full
only for properly payable items. trust and confidence in their banks. For this reason, banks are minded to
Facts: BA-Finance Corporation (BA Finance) and Miller Offset Press, Inc. treat their customers accounts with utmost care, confidence, and honesty. In
(Miller) entered into a credit line facility agreement whereby Miller can a checking transaction, the drawee bank has the duty to verify the
discount and assign its trade receivables with the BA Finance. At the same genuineness of the signature of the drawer and to pay the check strictly in
time, Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng, acting for accordance with the drawers instructions, i.e., to the named payee in the
Miller, executed a Continuing Suretyship Agreement with BA-Finance. Under check. It should charge to the drawers accounts only the payables
the agreement, they jointly and severally guaranteed the full and prompt authorized by the latter. Otherwise, the drawee will be violating the
payment of any and all indebtedness which Miller may incur with BA- instructions of the drawer and it shall be liable for the amount charged to the
Finance. drawers account. Rodriguez checks are payable to order since the bank
failed to prove that the named payees therein are fictitious.

Miller discounted and assigned several trade receivables to BA-Finance by


executing Deeds of Assignment in favor of the latter. In consideration thereof, Hence, the fictitious-payee rule which will make the instrument payable to
BA-Finance issued four checks payable to the order of Miller with the bearer does not apply. PNB accepted the 69 checks for deposit to the
notation For Payees Account Only. These checks were drawn against PEMSLA account even without any indorsement from the named payees. It
Bank of America. The four checks were deposited by Ching Uy Seng in bears stressing that order instruments can only be negotiated with a valid
Associated Citizens Bank with his joint account with Uy Chung Seng. indorsement.
Associated Bank stamped the checks and guaranteed all prior endorsements
and/or lack of endorsements and sent them through clearing. Later, Bank of