Negotiable Instruments Case Digest: Assoc. Bank and Conrado Cruz v. CA (1992)

G.R. No. 89802 May 7, 1992

Lessons Applicable: Presentment for Payment (Negotiable Instruments)

FACTS:

Merle Reyes is the owner of "Melissa's RTW" ready-to-wear garments
She deals with customers such as Robinson's Department Store, Payless Department Store, Rempson Department Store, and the Corona Bazaar.
These companies issued in payment of their respective accounts crossed checks payable to Melissa's RTW in the amounts and on the dates indicated below:

PAYOR BANK AMOUNT DATE

Payless Solid Bank P3,960.00 January 19, 1982

Robinson's FEBTC 4,140.00 December 18, 1981
Robinson's FEBTC 1,650.00 December 24, 1981
Robinson's FEBTC 1,980.00 January 12, 1982
Rempson TRB 1,575.00 January 9, 1982
Corona RCBC 2,500.00 December 22, 1981

Reyes was unaware of the issuance of the checks until she went to the companies for collection and was informed thereof.
She soon found out that it was deposited with Associated Bank and subsequently paid to one of the bank's trusted depositors,Rafael Sayson, the check being indorsed by Eddie Reyes
Reyes sued in the RTC for the recovery of the checks plus damages.
CA affirmed RTC: favored Reyes

ISSUE: W/N Reyes has the right for recovery of the cross checks

HELD: YES. petition DENIED.

Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally on the left top portion of the checks. The crossing is special where the name of a bank or a business institution is written between the two parallel lines, which means that the drawee should pay only with the intervention of that company.
The crossing is general where the words written between the two parallel lines are "and Co." or "for payee's account only," as in the case at bar. This means that the drawee bank should not encash the check but merely accept it for deposit.
The effects therefore of crossing a check relate to the mode of its presentment for payment
Under Sec. 72 of the Negotiable Instruments Law, presentment for payment, to be sufficient, must be made by the holder or by some person authorized to receive payment on his behalf. Who the holder or authorized person is depends on the instruction stated on the face of the check.

The 6 checks had been crossed and issued "for payee's account only.

signify that the drawers had intended the same for deposit only by the person indicated, to wit, Melissa's RTW.

The position of the bank taking the check on the forged or unauthorized indorsement is the same as if it had taken the check and collected without indorsement at all. The act of the bank amounts to conversion of the check.
The Bank should have first verified his right to endorse the crossed checks, of which he was not the payee, and to deposit the proceeds of the checks to his own account.

Its failure to inquire into Sayson's authority was a breach of a duty it owed to Reyes

There is no substantial difference between an actual forging of a name to a check as an endorsement by a person not authorized to make the signature and the affixing of a name to a check as an endorsement by a person not authorized to endorse it.

Assuming that Eddie Reyes did endorse the crossed checks, we hold that the Bank would still be liable to the private respondent because he was not authorized to make the endorsements.

Before presenting the checks for clearing and for payment, the Bank had stamped on the back thereof the words: "All prior endorsements and/or lack of endorsements guaranteed," and thus made the assurance that it had ascertained the genuineness of all prior endorsements.