ASSOCIATED BANK V. CA
208 SCRA 465
Reyes was engaged in the RTW business and held transactions with different department stores. She was about to collect payments from the department stores when she was informed that the payments had already been made, through crossed checks issued in her business’ name and the same were deposited with the bank. The bank consequently allowed its transfer to Sayson who later encashed the checks. This prompted Reyes to sue the bank and its manager for the return of the money. The trial and appellate court ruled in her favor. ISSUE:
Has Reyes the right to recover the money allowed by the bank to be transferred and encashed by Sayson? Ruling:
The checks were crossed checks and it means that the check can only be deposited directly into a bank account and cannot be immediately cashed by a bank or any other credit institution. The check was for payee’s account only. Reyes was able to prove that she has never authorized Sayson to deposit the checks nor to encash them but the bank allowed the checks to be deposited, cleared and paid to Sayson.
Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally on the top left 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 the company. The crossing is general where the words written in between are “And Co.” and “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 payee of crossed checks issued with the notation "for payee's account only" can sue a collecting bank which allowed an unauthorized third person to deposit the checks in his own account and to withdraw the proceeds of the checks, because the proceeds of the...
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