Associated Bank vs Court of Appeals (1992)

written by Howard

G.R. No. 89802 – 208 SCRA 465 – Mercantile Law – Negotiable Instruments Law – Crossed Checks – Effects of Crossing Checks 

Merle Reyes is a businesswoman who was issued 6 checks by her customers as payments for her services. The 6 checks are crossed checks which on their faces are written: “Payee’s account only”. The checks never reached the hands of Reyes. Instead, a certain Rafael Sayson got hold of the checks and had them deposited, and subsequently encashed, from his deposit account with Associated Bank.

Reyes demanded refund from Associated Bank as she averred that those checks are crossed checks and should have only be deposited with Reyes’ account which is with Prudential Bank. Associated Bank argued that the checks were indorsed to Sayson by Reyes’ husband, Eddie Reyes.

ISSUE: Whether or not Associated Bank should refund the 6 checks.

HELD: Yes. The six checks in the case at bar had been crossed and issued “for payee’s account only.” This could only signify that the drawers (Reyes’ clients) had intended the same for deposit only by the person indicated, to wit, Merle Reyes.

The court also elucidated the effects of crossing a check namely:

1. that the check may not be encashed but only deposited in the bank;

2. that the check may be negotiated only once – to one who has an account with a bank; and

3. that the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose.

On the other hand, even if indeed Eddie Reyes indorsed the checks, Associated Bank is still liable because in the first place, the husband is not authorized to make indrosements. And even if the endorsements were forged, as alleged, Associated Bank would still be liable to Reyes for not verifying the endorser’s authority. 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.

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