SIGNATURE

LIABILITY OF PERSONS WHOSE SIGNATURE DOES NOT APPEAR ON AN

INSTUREMENT

Section 18. Liability of person signing in trade or assumed name. - No person is

liable on the instrument whose signature does not appear thereon, except as herein
otherwise expressly provided. But one who signs in a trade or assumed name will
be liable to the same extent as if he had signed in his own name.

GR: A person whose signature does not appear on an instrument is not liable thereon.

RATIO: A person must sign the negotiable instrument before he can be made liable under
the same instrument.

XPNs:
1. Where a person signs under a trade name or assumed name;

Example
If Ian Carlo Bayang signs a promissory note he issues with “Bayang Entreprises,”
his trade name. he shall be liable on the instrument to the same extent as if he has
signed his own name.

2. Where an authorized agent signs for and on behalf of his principal, the latter is
liable (Sec. 20) although his signature does not appear thereon.

3. Where a person forges the signature of another, the forger is liable (Sec.23);

4. Where a person negotiates an instrument by mere delivery (Sec. 65);

5. Where the acceptor accepts the instrument on a paper other than the bill itself
(Sec. 134). The separate paper which must be attached to the instrument is called
allonge;

6. Where a person promises to accept in writing a bill before it is drawn (Sec. 135);

7. Where a person destroys a bill or refuses within 24 hours to return the bill accepted
or not accepted (constructive acceptance) (Sec. 137).

8. Incapacitated persons who sign through their legal guardians;

NEGOTIABLE INSTRUMENTS LAW

FORM OF AGENT’S AUTHORITY

Section 19. Signature by agent; authority; how shown. - The signature of any party
may be made by a duly authorized agent. No particular form of appointment is
necessary for this purpose; and the authority of the agent may be established as
in other cases of agency.

The signature of any party may be made by duly authorized agent. The authority may be
oral or written as no particular form is required by law. a written authority may be made
on a separate power of attorney or on the instrument itself although the latter is not
required for the regularity of the signature or the indorsement of the agent.

Jai-Alai Corp of the Philippines vs. Bank of the Philippine Islands

Any person who accepts for cash checks made payable to a corporation, which can act
only by its agents, without making any inquiry as to the authority of an individual to
exchange checks belonging to said payee-corporation, does so at his own peril if agent
is without authority.

LIABILITY OF AN AGENT

Section 20. Liability of person signing as agent, and so forth. - Where the
instrument contains or a person adds to his signature words indicating that he
signs for or on behalf of a principal or in a representative capacity, he is not liable
on the instrument if he was duly authorized; but the mere addition of words
describing him as an agent, or as filling a representative character, without
disclosing his principal, does not exempt him from personal liability.

A person signing an instrument as an agent is not liable thereon provided the following
requisites are present:
a. He must be duly authorized;
b. Must act within the scope of his authority;
c. Must disclose his principal;
d. Must add words to his signature describing himself as an agent or that he is acting
in a representative capacity.
Otherwise, the agent is deemed to be signing the instrument as his personal obligation
and not that of another.

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 SIGNATURE

Illustration

Kerstein Alcudia
By: Sgd. (Robert Balmes)
Agent

Sgd. Jonathan Bausing

As agent of Joco Bertumen

Sgd. Lenielyn Bondoc

For: Sharla Mae Bate

Where an officer of a corporation or other organization signs for the latter, his
representative capacity is sufficiently shown by his signature followed by the title of his
office and the name of the corporation or organization. Thus:

Sgd. Samantha Bron

President
Bron Enterprises, Inc.

SIGNED BY PROCURATION

Section 21. Signature by procuration; effect of. - A signature by "procuration"

operates as notice that the agent has but a limited authority to sign, and the
principal is bound only in case the agent in so signing acted within the actual limits
of his authority.

Q: What is procuration?
A: It is the act of appointing another as one’s agent or attorney. The appointment must
be made on the instrument itself or on a separate power of attorney.

EFFECT OF SIGNATURE BY PROCURATION

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NEGOTIABLE INSTRUMENTS LAW

It operates as a notice that the agent has but limited authority to sign and the principal is
bound only in case the agent so signing acted within the actual limits of his authority.
Accordingly, it is incumbent upon the person dealing with an agent to inquire into the
agent’s authority since the principal is liable only if the agent by procuration acted within
the scope of his authority.

CAPACITY OF INFANT (MINOR) OR CORPORATION

Section 22. Effect of indorsement by infant or corporation.- The indorsement or

assignment of the instrument by a corporation or by an infant passes the property
therein, notwithstanding that from want of capacity, the corporation or infant may
incur no liability thereon.

A minor is incapable of giving consent to a contract (Art. 1327, NCC). Any contract
entered into by him is voidable (Art. 1390). On the other hand, it is unenforceable if both
parties are minors.

Under the NIL, the transfer of title by a minor is effective although he is incapacitated.
However, the minor can still use as a defense that he is a minor. Thus, the minor can still
refuse to pay on the ground of minority.

Example
DR, issued a negotiable BOE to the payee, P. The instrument is payable to the order of
P who in turn negotiated the instrument by indorsing and delivering it to A who is a minor.
A then negotiated the instrument by indorsement and delivery to B who in turn negotiated
the instrument to C in the same manner. There is an effective transfer to B and C but A
can invoke minority as a defense. P, B and C cannot invoke the defense of minority of A.

In case of corporations, they cannot perform acts beyond those that they can lawfully
exercise. Such acts are ultra vires (Sec. 45, Corporation Code) which are deemed
voidable.

EFFECT OF INDORSEMENT OR ASSIGNMENT OF MINOR OR CORPORATIONS

PERFORMING ULTRA VIRES ACT

a. Minor

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 SIGNATURE

The indorsement made by a minor passes title to the instrument. Yet, the minor does
not incur any liability on the instrument even to a holder in due course because the
lack of capacity is a real or complete defense.

b. Corporation

Where the indorsement or assignment made by a corporation is ultra vires, title to the
instrument likewise passes although the corporation may incur no liability thereon.

Negotiation by a corporation through its officer effectively transfers title but the
corporation itself may invoke the absence of capacity.

Examples:
1. M makes a PN payable to the order of P. M issues the same to P who indorses
it to A, a minor. A indorses the note to B, Robles to C, C to D, and D to H,
holder.

a. Q: May H collect from M and P, parties before A?

A: Em, whether a holder in due course or not may collect from Ei and Jemae
who cannot raise the defense that Vins is a minor because Vins’ indorsement
passes title.

b. Q: May H collect from B, C and D, parties after A?

A: M, whether a holder in due course or not, may collect from B, C, and D
because as indorsers, they warrant “that all prior parties had capacity to
contract (Sec. 65 and 66);

c. Q: May H collect from A?

A: H, whether a holder in due course or not may not collect from A because A’s
minority is a real defense.

2. M makes a promissory note payable to the order of P,a minor. M issues the
note to P who indorses it to A, A to B. B to C, C to D, D to H.

a. Q: May H collect from M?

A: Yes. First, M, by making the instrument admits the existence of the payee
and his then capacity to indorse (Sec. 60). Second, the indorsement of P
although he is a minor passes title (Sec. 22).

b. Q: May H collect from A, B, C and D?

A: Yes. They are are indorsers who are liable on their warranty that all prior
parties had the capacity to contract.

c. Q: May H collect from P?

A: No. P is not liable because minority is a real defense.

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NEGOTIABLE INSTRUMENTS LAW

FORGERY

It is the counterfeit making or fraudulent alteration of any writing and may consist in the
signing of another’s name, or the alteration of an instrument in the name, amount,
description of the person and the like, with the intent to defraud.

Section 23. Forged signature; effect of. - When a signature is forged or made
without the authority of the person whose signature it purports to be, it is wholly
inoperative, and no right to retain the instrument, or to give a discharge therefor,
or to enforce payment thereof against any party thereto, can be acquired through
or under such signature, unless the party against whom it is sought to enforce
such right is precluded from setting up the forgery or want of authority.

Application of Sec. 23
1. Where the signature on the instrument is forged; and
2. Where the signature is made without the authority of the person whose signature
it purports to be.
3. It can also be applied in cases involving irregularities that amount to forgery. These
include the presence of:
i. Duress amounting to forgery;
ii. Alteration amounting to forgery; and
iii. Fraud in factum.

NOTE: In these cases, the persons involved do not have the intention to be bound or to
sign a negotiable instrument.

FORGERY

a. The signature that is forged or made without authority is wholly inoperative;

b. GR: No right to retain the instrument or to give a discharge therefor or to enforce
payment thereof against any party thereto, can be acquired through or under such
signature.
XPNs:
1. When the party against whom it is sought to enforce such right is precluded
from setting up the forgery or want of authority, including the following:
i. Those who by their acts, silence, inaction or negligence are stopped from
setting up the defense of forgery;
ii. Those who warrant or admit the genuineness of the signature in question:
a. The acceptor (Sec. 62);
b. Indorsers (Sec. 65 and 66);

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 SIGNATURE

c. Those negotiating by mere delivery, who warrant that the instrument

is genuine and in all respects what it purports to be (Sec. 65).

2. Where the forged signature is not necessary to the title of the holder (Sec, 48).

Examples:
1. Forgery
Gian Vergara prepares a PN specifying Beida Santos as the maker and then
copies the signature of Nina Pascual without the latter’s knowledge and consent
to make it appear that he signed the PN.

2. Signature without authority

Gian Vergara signed a bill of exchange for and in behalf of the drawer Beida Santos
without the knowledge and consent of Nina Pascual.

3. Duress amounting to forgery

Gian Vergara through force made Beida Santos, the maker, sign the PN by holding
her hand and by forcing Nina Pascual to sign the instrument.

4. Alteration amounting to forgery

The instrument is payable to Gian Vergara or her order but Beida Santos stole the
instrument and replaced the name of Gian with her name as the payee and then
thereafter indorse the instrument. The altered instrument now shows Beida as the
payee although the real payee is Gian.

5. Fraud in factum
Gian asked Beida, a singer-actress, for an autograph on a piece of paper. Later,
without the knowledge of Beida, Gian converted the paper into a BOE.

ILLUSTRATIONS OF FORGERY

1. Forgery of maker’s signature in a promissory note payable to order

Ronaldo (P) makes a PN payable to her own order placing the name of Raven (M)
as maker and forging the signature of Raven. Thereafter Ronaldo indorses the
note to Andrea (A), Andrea to Bernardo (B), Bernardo to Cesiah (C), and Cesiah
to Anabel (holder).

a. Anabel cannot hold Raven liable because the forged signature of Raven is
wholly inoperative as to him. This is true whether he is a HDC or nor
because forgery is a real defense.
b. Anabel can hold Ronaldo criminally liable for forging the signature of Raven.
He can also hold Ronaldo liable as indorser on his warranty.

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NEGOTIABLE INSTRUMENTS LAW

c. Anabel can hold Andrea, Bernardo and Cesiah liable on their warranty that
the instrument is genuine and in all respects what it purports to be.

PARTY BEFORE THE FOREGERY PARTY AFTER THE FORGERY

Forgery is a real defense which is Cannot use the forgery as a defense
available even against a holder-in-due-
course

2. Forgery of an indorsement in a PN payable to order

Mae (M) makes a note payable to the order of Princess (P). Princess indorses the
note to Andrea (A). The note is stolen from Andrea by Jien (F) who negotiates the
same to Bernardo (B) by forging Andrea’s signature. Bernardo then indorses the
note to Cesiah (C), Cesiah to Elena (D), and Elena to Jonell (H).

a. Jonell, whether he is a HDC or not cannot hold Mae, Princess and Andrea
(whose indorsement was forged) liable because the forged indorsement
cuts them off from the claim of parties subsequent to the forgery. Since the
instrument is payable to order, an indorsement is necessary for its
negotiation. Yet, since such indorsemnt is forged, it is wholly inoperative
against Andrea and prior parties.
b. Jonell can hold Dominic criminally and civilly liable for the forgery.
c. Jonell can hold Bernardo, Cesiah, and Elena liable in their warranty. They
cannot thus raise the defense of forgery even if they were not aware of it.

3. Forgery of maker’s signature in a promissory note payable to bearer

Princess (P) makes a PN payable to bearer by placing the name of Mae (M) as
maker and forging the signature of Mae. Thereafter, Princess delivers the note to
Andrea (A), Andrea to Bernardo (B), Bernardo to Cesiah (C), and Cesiah to Jonell
(H), holder.

a. Jonell whether a HDC or not cannot hold Mae liable because the forged
signature of Mae is wholly inoperative as to her.
b. Jonell can hold Princess criminally and civilly liable for forging the signature
of Mae.
c. Jonell can hold Cesiah liable on her warranty as a person negotiating by
mere delivery. Jonell cannot hold Andrea and Bernardo liable since the
liability of a person negotiating by mere delivery is only to the immediate
transferee. Thus, Andrea is liable to Bernardo but not to Cesiah and Jonell.
Bernardo is liabe to Cesiah but not to Jonell (Sec. 65)

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 SIGNATURE

4. Forgery of an indorsement in PN payable to bearer

Mae (M) makes a note payable to bearer and delivers it to Princess (P).Princess
indorses the note to Andrea (A). The note is stolen from Andrea by Nephi (F) who
negotiates the same to Bernardo (B) by forging Andrea’s signature. Bernardo,
thereafter indirses the note to Cesiah (C), Cesiah to Elena (D), and Elena to Jonell
(H), holder.

a. Jonell can collect from Mae, Princess, and Andrea if Jonell is a HDC. Mae,
Princess and Andrea cannot raise the defense of forgery because the
forged indorsement is not necessary for the negotiation of the instrument
payable to bearer since an instrument payable to bearer on its face remains
a bearer instrument even if specially indorsed, and thus may be negotiated
by mere delivery.
b. Jonell cannot collect from Mae, Princess, and Andrea if she is not a HDC.
Yet, the defense that may be raised by Mae, Princess and Andrea is not
forgery but “want or lack of delivery of complete instrument since the note
was taken away from Andrea by theft.
c. Jonell can hold Nephi criminally and civilly liable.
d. Jonell can collect from Bernardo, Cesiah and Elena who cannot raised the
defense of forgery since they are liable on their warranty.

5. Forgery of the DR’s signature

Princess (P) executes a BOE payable to his own order placing thereon the name
of Robert (R) as drawer and forging the latter’s signature. Princess presents the
bill to Naz (W), drawee, who accepts the same. Thereafter Princess indorses the
bill to Angela (A), Angela to Bernardo (B), Bernardo to Cesiah (C), and Cesiah to
Jonell (H), holder.
a. Jonell can hold Naz liable because by accepting the bill. Naz admitted the
genuineness of Roberts’s signature.
b. Naz can hold Princess criminally and civilly liable for the forgery.
c. Naz cannot debit the account of Robert because the signature of R is wholly
inoperative against him. Besides, Naz owes Robert the contractual duty of
knowing the latter’s signature.
d. Should Naz dishonor the bill by non-payment, Jonell can go after Andrea,
Bernardo, and Cesiah who are liable on their warranty. Jonell can also hold
Princess criminally and civilly liable for the forgery. In addition to Princess’
liability on his warranty as indorser.

Q: Suppose Naz did not accept the bill but paid the same, what are the
liabilities of the parties?
A:

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NEGOTIABLE INSTRUMENTS LAW

1. Nazcannot collect from Robert or charge the latter’s account. As drawee, he

owes Robert the contractual duty of knowing the latter’s signature.
2. Naz can hold Princess criminally and civilly liable for the forgery.

6. Forgery of indorser’s signature in a BOE (check)

Great Eastern Life Insurance Co. v. HSBC (1922)

Dimayuga Insurance Co. is the DR of check for ₱2,000.00 payable to the order of Art
(P). Divina Bank is the drawee with whom Dimayuga Insurance had an account. Thomas
(F), forger, fraudulently obtained possession of the check, forged Art’s signature as an
indorser, and then personally indorsed and presented it to Jaysan Bank (collecting bank)
where the amount of the check was placed to his credit. Jaysan Bank paid the check and
on the next day, it indorsed the check to Ryan Bank, which paid it, and charged the
amount of the check to the account of Dimayuga Insurance Co.
Q: What are the rights and liabilities of the parties?
A:
a. Drawer (Dimayuga Insurance)

It is not liable on the check. It drew the check payable to the order of Art (P). It did
not authorize or direct Ryan Bank to pay the check to any other person than Art or
his order.

b. Drawee Bank (Ryan Bank)

i. DE is liable to the drawer for the amount of the check that it charged to the
latter’s account. The DE has the contractual duty to pay the check only to
the person to whom it was made payable or upon his genuine indorsement.
Thus, the DE has to credit back the amount of the check to the account of
the DR. A DE should charge to the DR’s account only the payables
authorized by the latter; otherwise, the DE will be violating the instructions
of the DR and shall be liable for the amount charged to the DR’s account.

ii. The DE may recover from Jaysan Bank, against whom it may hold liable
under the warranties of an indorser.

c. Payee (Art)
i. Art can demand payment from Dimayuga Insurance (DR) since he has not
been paid of his claim;
ii. He cannot be held liable on the check since his signature was forged. The
forged signature is wholly inoperative against him.

d. Collecting Bank (Jaysan Bank)

i. Collecting bank is liable to the DE. As indorser, he warranted that the check
was “genuine and in all respects what it purported to be” (Sec. 65 and 66).

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 SIGNATURE

As collecting bank, it had the duty to know that the check was duly indorsed
by the original payee. Having cashed the check despite the forged
indorsement, the loss must fall upon him.

A collecting bank where a check is deposited and which indorses the check
upon presentment with the DE bank, is an indorser. The collecting bank or
last indorser generally suffers the loss because it has the duty to ascertain
the genuineness of all prior indorsements considering that the act of
presenting the check for payment to the DE is an assertion that the party
making the presentment has done its duty to ascertain the genuineness of
the indorsements.

ii. Whatever loss it suffers, the collecting bank can recover from the forger
Thomas, whom it may hold criminally and civilly liable.

e. Forger (Thomas)

The forger is criminally and civilly liable for the forgery.

PERSONS WHO CANNOT INVOKE FORGERY

Q: Who are the persons who cannot invoke forgery?

A:
1. Persons who extend warranties – those who warrant and admit the genuineness
of signatures

Example:
the acceptor admits the genuineness of the signature of the drawer

2. Persons who were negligent

Example:
The drawer’s negligence facilitated the commission of the forgery and the drawer
did not immediately call the attention of the drawee to the forgery despite
knowledge thereof and the chance to stop payment by drawee

3. Persons who ratified forgery

Example

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NEGOTIABLE INSTRUMENTS LAW

The indorser was informed that his signature was forged but either expressly
approved it thereafter or he did not bother to do anything about it.

Q: Vincent, a bank depositor, left his checkbook on his desk at his house.
Unknown to him, a visitor at the time, noticing the same, took a check
therefrom, filled it up in the amount of P3,000.00 and succeeded in encashing
the check on the same day. Vincent’s account was thereby debited in the
same amount. Discovering the erroneous debit, Vincent demanded that the
bank credit him with a like amount. The bank refused on the ground that
Vincent was negligent in leaving his checkbook on his desk so that he could
not put up the defense of forgery or want of authority under the NIL. The
Facts disclose that even to the naked eye, there were marked differences
between Vincent’s signature and the one in the check forged by the visitor.
As between Vincent and the bank, who should bear the loss? Explain.

A: The bank should bear the loss. A drawee bank must exercise the highest
diligence in safeguarding the accounts of its client depositors. The bank is also
charged with genuineness of the signatures of its current account holders. But
what can be more striking is that there were marked differences between Vincent’s
signature and the one in the check forged by the visitor. Certainly, Vincent was not
negligent in leaving his checkbook in his own desk.

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