2015 BAR

I.

A. Nadine has a checking account with Fair & Square Bank. One day, she lost her
checkbook and the finder was able to forge her signature and encash the forged check. Will
Nadine be able to recover the amount debited from her checking account from Fair &
Square Bank? Justify your answer. (3%)

ANSWER:
Yes, Nadine can recover the amount debited from her checking account from Fair & Square
Bank.

Under Section 23 of the Negotiable Instruments Law, 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.

In the case at bar, Nadine can raise the real defense of forgery which makes the instrument
inoperative and as a result payment cannot be enforced thereto. Furthermore, the Fair & Square
Bank being a banking institution should have exercised extraordinary diligence in determining
the genuineness of the signature in the instrument because failure to do so would make them
liable for their own negligence. Thus, Nadine can recover the amount debited from her checking
account.

B. Is a manager's check as good as cash? Why or why not? (2%)

ANSWER:
Yes. In a line of jurisprudence, the Supreme Court has held that a manager's check is one
drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to
effect and use. A cashier's check is a check of the bank's cashier on his own or another check. In
effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted
in advance by the act of its issuance. It is really the bank's own check and may be treated as a
promissory note with the bank as a maker. The check becomes the primary obligation of the bank
which issues it and constitutes its written promise to pay upon demand. The mere issuance of it is
considered an acceptance thereof. Hence, it is as good as cash when it comes to payment.

C. When can you treat a bill of exchange as a promissory note? (3%)

ANSWER:

A bill of exchange can be treated as a promissory note when it has been presented for
acceptance and the drawee bank has accepted the same. The Law on Negotiable Instruments
provides that acceptance has an effect which converts the bill of exchange into an unconditional
promise to pay the sum of money represented by the check, which in turn becomes a binding
contract between the parties, the holder of the instrument and the drawee bank.