Section 23 Effect of FORGED signature

FORGERY counterfeit-making or fraudulent alteration of any writing w/ INTENT TO DEFRAUD (eg.

Signing of anothers name; alteration of an instrument in the name,a mount, description of person and
the like)

- a REAL DEFENSE even against HDC

(2) Cases where SIGNATURE is wholly INOPERATIVE and NO RIGHT can be acquired through the FORGED
SIGNATURE:

1. Where signature on instrument is affixed by one who DOES NOT claim to act as an agent and who has
NO AUTHORITY to bind the person whose signature he has forged; and

2. Where signature is affixed by one who purports to be an AGENT BUT NO AUTHORITY to bind the
ALLEGED principal.

(2) CASES OF FORGERY IN GENERAL

1. Forgery of PROMISSORY NOTES

- indorsement of the note

- MAKERs signature

2. Forgery of BILLS OF EXCHANGE

- indorsement of the bill

- DRAWERs signature (either w/ acceptance by DRAWEE; or w/o such acceptance but the bill is paid by
DRAWEE)

*Section 23 DOES NOT purport to declare the instrument TOTALLY VOID nor the GENUINE signatures
thereon INOPERATIVE. IT IS ONLY THE FORGED/UNAUTHORIZED SIGANTURE that is declared to be
INOPERATIVE.

In other words, RIGHTS MAY STILL EXIST and be enforced by virtue of such instrument as to those whose
signature thereto are found to be genuine.
M P A, X (obtains possession of note and forged As signature) B C

C cannot enforce the instrument against M and P because Cs rights against them are CUT OFF by the
FORGED SIGNATURE of A w/c is WHOLLY INOPERATIVE.

Neither can C enforce the note against A because As signature is wholly inoperative. C has NO RIGHT to
retain, discharge, or ENFORCE PAYMENT OF, the note UNDER the forged signature of A.

But C may go against B whose signature is GENUINE and therefore, OPERATIVE. B is a GENERAL
INDORSER who warranted to C that the instrument is GENUINE and was VALID and SUBSISTING (existing)
at the time of Bs indorsement.

Of course, B or C has a right of recourse against X, the forger.

A can recover from M and P because his rights against them WERE NOT affected by forgery. The
signature of M and P are genuine and they are liable to A on their contract.

2 EXCEPTIONS TO THE GENERAL RULE THAT NO RIGHT/TITLE CAN BE ACQUIRED TO AN NI THROUGH OR

UNDER A FORGED/UNAUTHORIZED SIGNATURE

1. If the party against whom it is sought to enforce such right is PRECLUDED (stopped) from setting up
forgery or want of authority; and

2. Where forged signature is NOT necessary to the HOLDERS TITLE in w/c case the forgery may be
DISREGARDED.

(2) PERSONS PRECLUDED FROM SETTING UP THE DEFENSE OF FORGERY

1. Those who by their acts, silence, or negligence are estopped from setting up the defense of forgery;
and

2. Those who warrant/admit the genuineness of the signatures in question, namely:

a. indorsers
 b. acceptors

c. persons negotiating by delivery

READ pp.76-77

(4) RIGHTS OF PARTIES IN CASES OF FORGED INSTRUMENTS

1. Where note payable to order

- Where the note is payable to ORDER, the party whose indorsement (inoperative) is forged IS NOT
LIABLE to any holder even HDC.

- The other parties (including the MAKER) prior to the party whose signature is forged ARE NOT ALSO
LIABLE to ANY HOLDER. The instrument being payable to order, can be negotiated ONLY BY
INDORSEMENT COMPLETED BY DELIVERY. But since the indorsement is forged, it is INOPERATIVE, and
therefore, cannot operate to transfer ANY RIGHT/TITLE over the instrument.

2. Where note payable to bearer

- Where the note, mechanically complete, is originally payable to bearer, the party whose indorsement is
forged is LIABLE to HDC but NOT to one who IS NOT HDC.

- The other parties (including the MAKER) prior to the party whose signature is forged, MAY ALSO BE
HELD LIABLE by one who is NOT HDC.

The reason is that the instrument being originally payable to bearer, it can be negotiated by MERE
DELIVERY even w/o indorsement. Hence, even if the indorsement is forged, the FORGERY MAY B