Republic Bank Vs. Mauricia T. Ebrada

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


Mauricia Ebrada encashed a check issued by the Bureau of Treasury for the sum of P1246.08 at Republic Bank in 1963.

Then, the Bureau of Treasury informed Republic Bank that the alleged indorsement on the reverse side of the check by the payee named Martin Lorenzo was forged because the latter had died last 1952. As a result, the Bureau of Treasury requested Republic Bank to refund the proceeds of the check.

After, Republic Bank made verbal demands to Ebrada to account for the sum of P1246.08 in order for the bank to receive a refund of the amount, but she refused to do so.

Republic Bank filed a complaint against Mauricia Ebrada before the City Court of Manila. Then, Ebrada filed an answer denying the allegations of Republic Bank claiming that she is entitled to the proceeds of the check issued by the Bureau of Treasury because she is a holder in due course. In addition, Ebrada filed a third party complaint against Adelaida Dominquez who filed a fourth party complaint against Justina Tinio.

After, the City Court ruled that Ebrada has to reimburse the proceeds of the check to Republic Bank. Then, Ebrada filed an appeal before the Court of First Instance of Manila. Ebrada and the other parties provided a partial stipulation of facts as follows:

The Bureau of Treasury issued a check payable to the order of Martin Lorenzo in the sum of P1246.08 and it was drawn on the Republic Bank. The back side of the check provided the following signatures according to this order: first, the signature of Martin Lorenzo, second, the signature of Ramon Lorenzo, third, the signature of Adelaida Dominguez, and lastly, the signature of Mauricia Ebrada.

Adelaida Dominquez had delivered the check to Ebrada for the purpose of encashment. Then, Ebrada went to Republic Bank and she affixed her signature on the check when she encashed it to said bank. After, Ebrada received the proceeds of the check and immediately turned over the amount to Adelaida Dominguez who in turn handed the check to Justina Tinio.

As a result, the CFI of Manila ruled that Ebrada is liable to pay the sum of P1246.08 with legal interest to Republic Bank based on the partial stipulation of facts.


Whether or not Republic Bank is entitled to recover the proceeds of the check from Mauricia Ebrada?


Yes. Republic Bank is entitled to recover the proceeds of the check from Mauricia Ebrada. Based on Section 65 of NIL, the indorser is supposed to have warranted that she has good title to the check. However, the case shows that the signature of the original payee is forged which makes his signature inoperative under Section 23 of NIL. However, the persons who are involved with the negotiation of the instrument subsequent to the forgery are still liable over the instrument and are precluded from using forgery as a defense.

The Supreme Court discussed that the drawee can recover from the holder the money paid to him on the forged instrument because it does not have the duty to ascertain the genuineness of the signatures of the payees or the indorsers. It is the duty of the indorser to warrant to the drawee that the signatures of the payee or the previous indorsers are genuine. Despite that the bank may be negligent in detecting that the check is forged, the encasher of the check should have performed his duty to ascertain the genuineness of the check in order to easily detect the forgery. 

In Ebrada’s case, she is liable to reimburse the proceeds of the check to Republic Bank because she was the last indorser indicated at the back of the check who should have warranted that she has good title to the check. When Ebrada received the check from Dominguez, she was duty-bound to ascertain whether the check was genuine before presenting it to Republic Bank for payment. However, she has failed to do her duty, but instead warrant that she has a good title of the check even though the payee of the check was already dead 11 years before the check was issued. In addition, she is not exempted from liability over the check when she immediately turns over the proceeds of the check to Dominguez because she is an accommodation party in accordance with Section 29 of NIL. Therefore, Ebrada is liable to pay the proceeds of the check to Republic bank.

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