A:Yes, since the signature of the payee wasforged to make it appear that he had made anindorsement in favor of the forger, such signatureshouldbedeemedasinoperativeandineffectual. The collecting bank grossly erred inmakingpaymentbyvirtueofsaidforgedsignature. The collecting bank is liable to thepayee and must bear the loss because it is itslegaldutytoascertainthatthepayee sendorsement was genuine before cashing thecheck.(Westmont Bank v. Ong, G.R. No. 132560,Jan. 30, 2002)Q:Who areprecludedfromsetting up thedefense of forgery?A:1.Thosewhoadmit/warrantthegenuineness of the signature: indorsers,personsnegotiatingbydeliveryandacceptor;(Sec 56)2.Those who by their acts, silence, ornegligence, are estopped from claimingforgery;3.A holder of a bearer instrument whosubsequentlynegotiatessuchinstrumentwithapriorforgedindorsement (forged indorsement is notnecessary to his title it being a bearerinstrument).Q: What are the rights of the parties in cases offorged instruments?A:1.Where note payable to order:1.Party whose signature was forgedis not liable to a holder, even aHIDC2.Indorsement is wholly inoperative.2.Where note payable to bearer:a.The party whose indorsement isforged is liable to a HIDC, but notto one who is not a HIDCReason: it can be negotiated bymere deliveryb.The only defense available is wantof delivery but this defense can beraised only against a holder not indue course.3.Where bill payable to order:The partywhoseindorsementisforgedisnotliable to any holder even a HIDC.Theforgedindorsementiswhollyinoperative.Q:A client indorsed a check with a forgedindorsement.The collecting bank indorsed thecheck with the drawee bank. What are theliabilities of the parties?A:The collecting bank is bound by its warrantiesas an indorser and cannot set up the defense offorgery as against the drawee bank.The drawee bank is under strict liability to pay thecheck to the order of the payee. Payment under aforged indorsement is not to the drawer's order.Since the drawee bank did not pay a holder orother person entitled to receive payment, it hasno right to reimbursement from the drawer.(Associated Bank v. CA, G.R. No. 107382, Jan. 31,1996)Q: What is the remedy of the drawee bank?A:The drawee bank may not debit the account ofthe drawer but may generally pass liability backthrough the collection chain to the party whotook from the forger and, of course, to the forgerhimself, if available. If the forgery is that of thepayee's or holder's indorsement, the collectingbank is held liable, without prejudice to the latterproceeding against the forger. Since a forgedindorsement is inoperative, the collecting bankhad no right to be paid by the drawee bank. Theformer must necessarily return the money paidby the latter because it was paid wrongfully.
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- james reyes