Commercial Law

Republic Bank vs Mauricia Ebrada

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G.R. No. L-40796 Р65 SCRA 680 РMercantile Law РNegotiable Instruments Law РConsideration РForgery РLiability of Accommodation Party 

On January 15, 1963, the Bureau of Treasury issued a back paycheck to Martin Lorenzo in the amount of P1,246.08. The drawee named therein was Republic Bank. The check was subsequently indorsed to Ramon Lorenzo, then to Delia Dominguez and then to Mauricia Ebrada. Ebrada encashed the check with the Republic Bank. Republic Bank paid the amount of the check to Ebrada. Ebrada, upon receiving the cash, gave it to Dominguez; Dominguez in turn gave the cash to Ramon Lorenzo.

Later, the Bureau of Treasury notified that the check was a forgery because the payee named therein (Martin Lorenzo) was actually dead 11 years ago before the check was issued. Republic Bank refunded the amount to the Bureau of Treasury. The bank then demanded Ebrada to refund them.

ISSUE: Whether or not Republic Bank may recover from Ebrada.

HELD: Yes. Ebrada, being the last indorser, warranted the genuineness of the signatures of the payee and the previous indorsers. The drawee bank is not duty bound to ascertain whether or not the signatures of the payee and 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 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 Bank) who has paid the forged check, without actual negligence on his part, may recover the money paid from such negligent purchasers.

But Ebrada did not profit from this because she, upon receiving the encashment, gave the same to Dominguez?

She is still liable because she is considered as an accommodation party – pursuant to Section 29 of the Negotiable Instruments Law. 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.

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