Monday, February 20, 2012

Republic v. Ebrada (July 31, 1975)

Facts: Mauricia T. Ebrada (defendant) encashed a check at the Republic Bank. The check was issued by the Bureau of Treasury and was indorsed several times before falling into the hands of the defendant. Defendant managed to cash the check (worth around 1200 pesos). It was however discovered that the original payee, Martin Lorenzo, was already dead for more than a decade. Therefore the initial endorsement must have been a forgery.

(1) Whether or not Ebrada is liable to return the amount that she cashed.

(2) Whether or not a drawee of a check (bank) can recover from the holder (Ebrada) the money paid from a forged instrument.

Held: Sec. 23 of the Negotiable Instruments Law dictates that where the signature on the negotiable instrument is forged then the negotiation of 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 responsibility of the bank to ascertain if the signatures of the previous endorsements were genuine or not. It was the responsibility of the holder of 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 even the least experience in business knows that no business man would accept a check in exchange for money or goods unless he is satisfied that the check is genuine. If he is deceived he has suffered a loss of his cash or goods through his own mistake.” Ebrada, upon receiving the check in question, was duty bound to ascertain if it was genuine or not before presenting it to plaintiff Bank. The Bank may recover from Ebrada the amount she received for the check.

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