Republic Bank v.

Ebrada
G.R. No. L-40796, July 31, 1975
FACTS: Defendant Mauricia Ebrada (Ebrada) encashed a Back Pay Check for 1, 246 pesos at the main office of the
plaintiff Republic Bank. Such check was delivered to Ebrada by Adelaida Dominguez (Dominguez) for the purpose
of encashement and that her Dominguezs signature was affixed on the check when she encashed it with Republic
Bank. The check was issued by the Bureau of Treasury (Bureau). However, Republic Bank was later advised by said
bureau that the alleged indorsement on the reverse side of the aforesaid check by the payee, Martin Lorenzo was a
forgery since the latter had already been dead for 11 years. Republic Bank was then requested the Bureau to refund
the amount. Republic Bank then made demands upon Ebrada, but the latter refused to heed to such demands.
Ebrada alleged that she was a holder in due course of the check or at least acquired her rights from a holder in due
course (Dominguez).
ISSUE: W/N Ebrada must pay Republic Bank the face value of the check after finding that the drawer issued the
subject check to a person already deceased for 11 years and that Ebrada did not benefit from enchashing said
check.
HELD: YES. The Court ruled that although the plaintiff Bank should suffer the loss when it paid the amount of the
check in question to defendant-appellant, it has the remedy to recover from the latter the amount it paid to her.
The existence of one forged signature in the check will not render void all other negotiations of the check with
respect to the other parties whose signatures are genuine. In the case at hand, the check was issued by Martin
Lorenzo to Ramon Lorenzo, and then it was indorsed to Dominguez and then indorsed to Ebrada, who had no
knowledge of the forgery. Since the forged signature was of Martin Lorenzos, only the issuance from the latter to
Ramon Lorenzo was of no effect, but the negotiation from Ramon Lorenzo to Dominguez then to Ebrada are valid
and enforceable.
If the discovery of the signature being forged happened only after the bank has paid the amount of the check to the
holder, then 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.
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. Her failure to do so makes her
liable for the loss and the plaintiff Bank may recover from her the money she received for the check.