REPUBLIC BANK, plaintiff-appellee, vs. MAURICIA T. EBRADA, defendant-appellant.

PARTIES

REPUBLIC BANK, plaintiff-appellee, 
vs.
MAURICIA T. EBRADA, defendant-appellant.

CASE NUMBER

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

LAWYERS

Sabino de Leon, Jr. for plaintiff-appellee.

Julio Baldonado for defendant-appellant.

PONENTE

MARTIN, J.:

FACTS

Petition

Appeal on a question of law of the decision of the Court of First Instance of Manila, Branch XXIII in Civil Case No. 69288, entitled "Republic Bank vs. Mauricia T. Ebrada."

Simplified

            Drawer                             Bureau of Treasury

          Drawee –Bank                  Republic Bank at Escolta

          Payee                               Died Already

          1^st Indorser                       Martin Lorenzo (Forger)

          2^nd Indorser                      Ramon Lorenzo

          3^rd Indorser                       Delia Dominguez

          Last Indorser                    Mauricia T. Ebrada

          Collecting Bank                 No Collecting Bank, Directly encashed

Short Story

Plaintiff Bank ask for refund against Drawer, Drawer ask from last indorser but refused hence Drawee Bank sued Last Indorser under Warranty, as a defence the last indorser has acquired her rights from a holder in due course and therefore entitled to the proceeds, and filed third party complaint to 3^rd Indorser, Supreme Court held the Last Indorser Liable and the 3^rd Indorser liable as an accommodation Party.

FACTS AS FOLLOWS

On or about February 27, 1963 defendant Mauricia T. Ebrada, encashed Back Pay Check No. 508060 dated January 15, 1963 for P1,246.08 at the main office of the plaintiff Republic Bank at Escolta, Manila. The check was issued by the Bureau of Treasury. ¹ Plaintiff Bank was later advised by the said bureau that the alleged indorsement on the reverse side of the aforesaid check by the payee, "Martin Lorenzo" was a forgery ² since the latter had allegedly died as of July 14, 1952. ³ Plaintiff Bank was then requested by the Bureau of Treasury to refund the amount of P1,246.08. ⁴ To recover what it had refunded to the Bureau of Treasury, plaintiff Bank made verbal and formal demands upon defendant Ebrada to account for the sum of P1,246.08, but said defendant refused to do so. So plaintiff Bank sued defendant Ebrada before the City Court of Manila.

On July 11, 1966, defendant Ebrada filed her answer denying the material allegations of the complaint and as affirmative defenses alleged that she was a holder in due course of the check in question, or at the very least, has acquired her rights from a holder in due course and therefore entitled to the proceeds thereof. She also alleged that the plaintiff Bank has no cause of action against her; that it is in estoppel, or so negligent as not to be entitled to recover anything from her. ⁵

About the same day, July 11, 1966 defendant Ebrada filed a Third-Party complaint against Adelaida Dominguez who, in turn, filed on September 14, 1966 a Fourth-Party complaint against Justina Tinio.

COURT OF FIRST INSTANCE

On March 21, 1967, the City Court of Manila rendered judgment for the plaintiff Bank against defendant Ebrada; for Third-Party plaintiff against Third-Party defendant, Adelaida Dominguez, and for Fourth-Party plaintiff against Fourth-Party defendant, Justina Tinio.

WHEREFORE, the Court renders judgment ordering the defendant Mauricia T. Ebrada to pay the plaintiff the amount of ONE THOUSAND TWO FORTY-SIX 08/100 (P1,246.08), with interest at the legal rate from the filing of the complaint on June 16, 1966, until fully paid, plus the costs in both instances against Mauricia T. Ebrada.

SUPREME COURT

IN VIEW OF THE FOREGOING, the judgment appealed from is hereby affirmed in toto with costs against defendant-appellant.

Adelaida Dominguez is also liable under Section 29 of the Negotiable Instruments Law as 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.

ISSUE

Whether or Not the Last Indorser is liable under Section 65

HELD

Yes, for under Section 65 of the Negotiable Instruments Law: ⁶

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

and under Section 65 of the same Act:

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.

NOTE

This means that the negotiation of the check in question from Martin Lorenzo, the original payee, to Ramon R. Lorenzo, the second indorser, should be declared of no affect, but the negotiation of the aforesaid check from Ramon R. Lorenzo to Adelaida Dominguez, the third indorser, and from Adelaida Dominguez to the defendant-appellant who did not know of the forgery, should be considered valid and enforceable, barring any claim of forgery.

What happens then, if, after the drawee bank has paid the amount of the check to the holder thereof, it was discovered that the signature of the payee was forged? Can the drawee bank recover from the one who encashed the check?

In the case of State v. Broadway Mut. Bank, 282 S.W. 196, 197, it was held that the drawee of a check can recover from the holder the money paid to him on a forged instrument. It is not supposed to be its duty to ascertain whether the signatures of the payee or indorsers are genuine or not. This is because the indorser is supposed to warrant to the drawee that the signatures of the payee and previous indorsers are genuine, warranty not extending only to holders in due course. One who purchases a check or draft is bound to satisfy himself that the paper is genuine and that by indorsing it or presenting it for payment or putting it into circulation before presentation he impliedly asserts that he has performed his duty and the drawee who has paid the forged check, without actual negligence on his part, may recover the money paid from such negligent purchasers. In such cases the recovery is permitted because although the drawee was in a way negligent in failing to detect the forgery, yet if the encasher of the check had performed his duty, the forgery would in all probability, have been detected and the fraud defeated. The reason for allowing the drawee bank to recover from the encasher.