Sec. 67. Liability of indorser where paper negotiable by delivery. — Where   a   person   places   his   indorsement   on   an   instrument negotiable by delivery, he incurs all the liability of an indorser.


66 SCRA 29



Checks were deposited by petitioner in its current account with the bank.  These  checks  were  from  a  certain  Ramirez,  a  consistent  better  in  its games,  who  was  a  sales  agent  from  Inter-Island  Gas.    Inter-Island  later found  out  that  of  the  forgeries  committed  in  the  checks  and  thus,  it informed all the parties concerned.  Upon the demands on the bank as the collecting bank, it debited the account of petitioner.  Thereafter, petitioner tried  to  issue  a  check  for  payment  of  shares  of  stock  but  such  was dishonored for insufficient funds.  It filed a complaint against the bank.


Considering that the petitioner indorsed the said checks when it deposited them  with  the  respondent,  the  petitioner  as  an  indorser  guaranteed  the genuineness  of  all  prior  indorsements  thereon.    The  respondent  which relied  upon  the  petitioner’s  warranty  should  not  be  held  liable  for  the resulting loss.   
Furthermore, the provision in the deposit slip on the right of reservation by the  bank  applies  only  when  there  is  actual  receipt  of  current  funds  or solvent credits.  But as earlier on indicated, the transfer on account of the checks were ineffectual because it was made under the mistaken and valid assumption that the indorsements of the payee thereon were genuine.