In this day and age, having your check or checkbooks stolen and then your signature forged by some individual with a golden arm doesn’t seem so far-fetched. It may even happen that the checks you have legitimately issued suddenly have a different payee and bear bigger amounts than the original. What rights to you have in such instances? With your bank balance suddenly depleted by unauthorized check withdrawals, what can you do?
If your signature is forged, the bank has no right to debit your account for the amount specified in the check. A forged check is totally invalid and confers no right against you. The law specifically provides thus:
“Sec. 23. FORGED SIGNATURE, EFFECT OF. — When a signature is forged or made without 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.” (Section 23 of the Negotiable Instruments Law (NIL))
However, one can be precluded from using forgery as a defense if one has warranted or admitted the genuineness of the signature in question and if one, by his acts, silence or negligence, is estopped (read: impeded) from setting up the defense of forgery. This simply means if by your conduct, which can consist of positive acts or failure to act, you have allowed others to believe the check is valid even if forged, then you cannot excuse yourself by claiming forgery.
And parties to the check subsequent to the forgery can be liable under the same. For example, if you indorse the check, you warrant the genuineness of the signatures on the instrument. So if it turns out to be a forgery, you as an indorser, can be held liable for the check anyway.
If the check amount itself is altered, the check becomes void except against those who assented to the alteration or authorized the alterations -
“Section 124. Alteration of instrument; effect of. – Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized or assented to the alteration and subsequent indorsers. xxx (NIL)” The bank cannot debit your account except to the extent of the original amount. [Agbayani, citing Chief of Staff vs. PNB NO. 16792-R, May 23, 1960 (CA)]
But the owner of the account has recourse against the drawee bank which must re-credit to his account the amount of the forged check if encashed -
“In cases involving a forged check, the drawer can recover from the drawee bank. No drawee bank has a right to pay a forged check. If it does, it shall have to re-credit the amount of the check to the account of the drawer. The liability chain ends with the drawee bank whose responsibility it is to know the drawer’s signature since the latter is its customer.” [Associated Bank vs. Court of Appeals, GR Nos. 107382 and 107612, January 31, 1996]
The institution of checks was made to facilitate commercial transactions and the purpose of the law is to insure that this does not result in the unauthorized depletion of your bank balances.