ASSOCIATED BANK and CONRADO CRUZ, vs. HON. COURT OF APPEALS, and MERLE V. REYES, doing business under the name and style "Melissa's RTW,".
- G.R. Number: G.R. No. 89802
- Promulgated: 1992-05-07
- Ponente: Cruz, J.
Doctrine
When a bank pays checks so endorsed even though title had not passed to the endorser, the bank does so at its peril and becomes liable to the payee for the value of the checks, whether or not the bank knew of the unauthorized endorsement.
A bank is liable to the payee where the endorser was not authorized to endorse the checks; the bank must verify an endorser's authority and is liable even if endorsements were forged.
To simplify proceedings, the payee of illegally encashed checks may recover directly from the bank responsible for encashment even if the checks were not actually delivered to the payee.
Facts
Private respondent operates a ready-to-wear garments business under the name "Melissa's RTW" and deals with various department stores and bazaars.
Certain crossed checks issued in the private respondent's favor were encashed and paid by the petitioning bank to another person, prompting the suit.
Before presenting the checks for clearing and payment, the Bank stamped the back: "All prior endorsements and/or lack of endorsements guaranteed," thereby assuring it had verified prior endorsements.
Issues
Whether the private respondent has a cause of action against the petitioners for their encashment and payment to another person of certain crossed checks issued in her favor.
Ruling
The Court affirmed the lower court's holding that the private respondent had a valid cause of action against the petitioners for unauthorized encashment of the subject checks.
The Court agreed with the reduction of exemplary damages for lack of sufficient evidence and denied the petition, with costs against the petitioner.
Keywords
G.R. No. 89802, crossed checks, cause of action, for payee's account only, banking practices, illegal, anomalous and irregular acts, Republic Planters Bank vs. Intermediate Appellate Court, 131 SCRA 631, Negotiable Instruments Law, Sec. 72 Negotiable Instruments Law, presentment for payment, holder in due course, State Investment House vs . IAC, conversion of the funds, unauthorized endorsement, damages, actual damages, exemplary damages, attorney's fees, private, checks