#1 [G.R. No. L-29432. August 6, 1975.

]
JAI-ALAI CORPORATION OF THE PHILIPPINES, petitioner, vs.
BANK
OF THE PHILIPPINE ISLANDS, respondent
DOCTRINE:
Holders of checks may obtain payment from the drawee bank by
presenting it for payment directly with the bank or by depositing it in his
account in another bank known as the collecting bank or depositary
bank. When the holder deposits his check with the collecting bank, the
nature of the relationship created at that stage is one of agency, that is
the bank is to collect from the drawee of the check the corresponding
proceeds.
FACTS:

Petitioner deposited in its current account with respondent bank

several checks with a total face value of P8,030.58, all acquired
from Antonio J. Ramirez, a regular bettor at the jai-alai games
and a sale agent of the Inter-Island Gas Service, Inc., the payee
of the checks. The deposits were all temporarily credited to
petitioner's account in accordance with the clause printed on the
bank's deposit slip.
Subsequently, Ramirez resigned and after the checks had been
submitted to inter-bank clearing, the Inter-Island Gas discovered
that all the indorsement made on the cheeks purportedly by its
cashiers, as well as the rubber stamp impression thereon
reading "Inter-Island Gas Service, Inc.", were forgeries.
It informed petitioner, the respondent, the drawers and the
drawee banks of the said checks and forgeries and filed a
criminal complaint against its former employee.
In view of these circumstances, the respondent Bank debited the
petitioner's current account and forwarded to the latter the
checks containing the forged indorsements, which petitioner
refused to accept. Later, petitioner drew against its current

account a check forP135,000.00. This check was dishonored by

respondent as its records showed that petitioner's balance after
netting out the value of the checks with the forged indorsement,
was insufficient to cover the value of the check drawn.
A complaint was filed by petitioner with the Court of First
Instance of Manila. The same was dismissed by the said court
after due trial, as well as by the Court of Appeals, on appeal.
Hence, this petition for review.
ISSUE:
1) WON THE FORGE INDORSEMENT IS IN EFFECT
2) WON COLLECTING BANKS HAS DUTY TO REIMBURSE TO
DRAWEE-BANKSTHE VALUE OF CHECKS CONTAINING
FORGED INDORSEMENT
HELD:
1) The Court ruled that the forged signature in a negotiable
instrument makes it wholly inoperative and no right to
discharge it or enforce its payment can be acquired through
or under the forged signature except against a party who
cannot invoke the forgery.
2) The Court ruled that it is the obligation of the collecting bank
to reimburse the drawee-bank the value of the checks
subsequently found to contain the forged indorsement of the
payee. The reason is that the bank with which the check was
deposited has no right to pay the sum stated therein to the
forger "or to anyone else upon a forged signature." "It was
its duty to know," said the Court, "that (the payee's)
endorsement was genuine before cashing the check. " The
depositor must in turn shoulder the loss of the amounts
which the respondent, as its collecting agent, had no
reimburse to the drawee-banks.
#2 [G.R. No. L-40796. July 31, 1975.]

REPUBLIC BANK, plaintiff-appellee, vs . MAURICIA T.

EBRADA,

ISSUE:
1.
2.

Doctrine
Where the signature on a negotiable instrument is forged, the
negotiation of the check is without force or effect. However, where a
check has several indorsersment on it, it is only the negotiation based
on the forged or unauthorized signature is inoperative. It will not render
void all the other negotiations of the check with respect to other parties
whose signatures are genuine.

FACTS

A check with a face value of P1,246.08 was issued to one Martin

Lorenzo who turned out to have been dead almost eleven years
before it was issued. It was encashed by MauriciaEbrada at the
Republic Bank's main office at the Escolta.
Informing the Bank that the payee's (Lorenzo) indorsement on
the reverse side of the check was a forgery, the Bureau of
Treasury requested the Bank to refund the amount.
The Bank sued Mauricia Ebrada before the city court when she
refused to return the money. The court ruled for the Bank, so the
case was elevated to the Court of First Instance which likewise
rendered an adverse decision against Mauricia Ebrada.
An appeal was filed.

1.

WON OR NOT THE FORGED INDORSEMENT IS WITHOUT EFFECT

WON THE DRAWEE BANK CAN STILL RECOVER FROM THE ONE
WHO ENCASH THE CHECK

HELD:
Where the signature on a negotiable instrument is forged, the
negotiation of the check is without force of effect. But the
existence of the forged signature therein will not render void all
the other negotiations of the check with respect to the other
parties whose signatures are genuine. It is only the negotiation
predicated on the forged indorsement that should be declared
inoperative.

2. Where after the drawee bank has paid the amount of the check
to the holder thereof, it was discovered that the signature of the
payee was forged, the bank can still recover from the one who
encashed the check. In the case of Great Eastern Life Insurance
Company vs. Hongkong and Shanghai Banking Corporation, 43
Phil. 678, it was held "where a check is drawn payable to the
order of one person and is presented to a bank by another and
purports upon its face to have been duly indorsed by the payee
of the check, it is the duty of the bank to know that the check
wasduly indorsed by the original payee, and where the Bank
pays the amount of the check to third person, who has forged
the signature of the payee, the loss falls upon the bank who
cashed the check, and its only remedy is against the person to
whom it paid the money."