Defenses; Forgery (2004)

CX maintained a checking account with UBANK, Makati Branch.

One of his checks in a stub of fifty was missing. Later, he
discovered that Ms. DY forged his signature and succeeded to
encash P15,000 from another branch of the bank. DY was able to
encash the check when ET, a friend,
guaranteed due execution, saying that she was a holder in due
course. Can CX recover the money from the bank? Reason
briefly. (5%)
SUGGESTED ANSWER:
Yes, CX can recover from the bank. Under Section 23 of the
Negotiable Instruments Law, forgery is a real defense. The forged
check is wholly inoperative in relation to CX. CX cannot be held
liable thereon by anyone, not even by a holder in due course.
Under a forged signature of the drawer, there is no valid
instrument that would give rise to a contract which can be the
basis or source of liability on the part of the drawer. The drawee
bank has no right or authority to touch the drawer's funds
deposited with the drawee bank.

Forgery; Liabilities; Prior & Subsequent Parties (1990)

Jose loaned Mario some money and, to evidence his indebtedness, Mario
executed and delivered to Jose a promissory note payable to his order. Jose
endorsed the note to Pablo. Bert fraudulently obtained the note from Pablo
and endorsed it to Julian by forging Pablos signature. Julian endorsed the
note to Camilo.
a) May Camilo enforce the said promissory note against Mario and Jose?
b) May Camilo go against Pablo?
c) May Camilo enforce said note against Julian?
d) Against whom can Julian have the right of recourse?
e) May Pablo recover from either Mario or Jose?
SUGGESTED ANSWER:
a) Camilo may not enforce said promissory note against Mario and Jose. The
promissory note at the time of forgery being payable to order, the signature of
Pablo was essential
for the instrument to pass title to subsequent parties. A forged signature was
inoperative (Sec 23 NIL).

Accordingly, the parties before the forgery are not juridically related to parties
after the forgery to allow such enforcement.
b) Camilo may not go against Pablo, the latter not having indorsed the
instrument.
c) Camilo may enforce the instrument against Julian because of his special
indorsement to Camilo, thereby making him secondarily liable, both being
parties after the
Forgery.
d) Julian, in turn, may enforce the instrument against Bert who, by his forgery,
has rendered himself primarily liable.
e) Pablo preserves his right to recover from either Mario or Jose who remain
parties juridically related to him. Mario is still considered primarily liable to
Pablo. Pablo may, in
case of dishonor, go after Jose who, by his special indorsement, is secondarily
liable.
Note: It is possible that an answer might distinguish between blank and
special indorsements of prior parties which can thereby materially alter the
above suggested answers. The problem did not clearly indicate the kind of
indorsements made.

Forgery; Liabilities; Prior & Subsequent Parties (1995)

Alex issued a negotiable PN (promissory note) payable to Benito or order in
payment of certain goods. Benito indorsed the PN to Celso in payment of an
existing obligation. Later Alex found the goods to be defective. While in Celsos
possession the PN was stolen by Dennis who forged Celsos signature and
discounted it with Edgar, a money lender who did not make inquiries about the
PN. Edgar indorsed the PN to Felix, a holder in due course. When Felix
demanded payment of the PN from Alex the latter refused to pay. Dennis could
no longer be located.
1. What are the rights of Felix, if any, against Alex, Benito, Celso and Edgar?
Explain
2. Does Celso have any right against Alex, Benito and Felix? Explain.
SUGGESTED ANSWER:
1. Felix has no right to claim against Alex, Benito and Celso who are
parties prior to the forgery of Celsos signature by Dennis. Parties to
an instrument who are such prior to the forgery cannot be held liable
by any party who became such at or subsequent to the forgery.
However, Edgar, who became a party to the instrument subsequent to the
forgery and who indorsed the same to Felix, can be held liable by the latter.