G.R. No. L-40796 July 31, 1975
Republic Bank, plaintiff-appellee, vs. Mauricia T. Ebrada, defendant-appellant.

FACTS

The Bureau of Treasury issued Back Pay Check No. 508060, dated January 15, 1963, payable to Martin Lorenzo. Mauricia T. Ebrada encashed this check at Republic Bank on February 27, 1963. The bank subsequently received advice from the Bureau that the indorsement of the payee, Martin Lorenzo, was a forgery, as he had died in 1952. The Bureau demanded a refund from the bank, which Republic Bank complied with. The bank then sought reimbursement from Ebrada, who refused, prompting the bank to file a suit. Ebrada, in defense, claimed she was a holder in due course or had acquired rights from one.
The parties submitted a partial stipulation of facts. It was admitted that the check bore successive indorsements, ending with Ebrada’s, and that she received the check from Adelaida Dominguez for encashment. Upon receiving the cash from the bank, Ebrada immediately turned the entire sum over to Dominguez, who then gave it to Justina Tinio. Ebrada argued she derived no personal benefit from the transaction.

ISSUE

Whether defendant-appellant Mauricia T. Ebrada, as the last indorser of the check, is liable to reimburse Republic Bank for the amount paid on the forged instrument.

RULING

Yes, the Supreme Court affirmed the lower court’s decision holding Ebrada liable. The legal logic is anchored on the warranties of an indorser under the Negotiable Instruments Law. As the last indorser, Ebrada warranted under Section 65 that she had good title to the instrument. However, the signature of the original payee was a forgery. Under Section 23, a forged signature is wholly inoperative, and no title can be derived from it. Consequently, Ebrada breached her warranty of good title.
The Court rejected Ebrada’s arguments. The fact that the drawer (the Bureau of Treasury) issued a check to a deceased payee did not negate the forgery or absolve the indorser. The bank, which paid in good faith, had the right to recover from the party who presented the check and received payment. Furthermore, Ebrada’s act of immediately turning over the proceeds to Dominguez did not exempt her from liability. This conduct established her as an accommodation party under Section 29 of the Negotiable Instruments Law, who signs to lend her name to another and is liable to a holder for value. Therefore, whether as a warranting indorser or an accommodation party, Ebrada was legally obligated to reimburse Republic Bank for the loss incurred due to the forged instrument.